A solicitor who was one of several "high-net-worth" individuals who separately invested sums totalling £51 million in a redevelopment that never proceeded is entitled to damages over "seriously misleading" negligent misrepresentations by the former Anglo Irish Bank concerning that project, the Court of Appeal has ruled.
The amount of damages for John Spencer – whose equity from his £1 million investment of 2005 in the planned redevelopment of Whitgift Shopping Centre, Croydon, London, was zero by 2010 – will be assessed later by the High Court.
Mr Spencer, a Nenagh-based solicitor who in 2005 had a portfolio of about 15 properties in Ireland and England, anticipated a return of some 220 per cent on his Whitgift investment, the High Court had heard.
While this was a high-risk investment, even those who invest in such projects “are entitled to be protected by the law in respect of negligence and misrepresentation”, Mr Justice Gerard Hogan said.
The “sorry events” in this case – “a veritable Pelion of misrepresentations heaped upon an Ossa of negligence” – bring little credit to the bank whose conduct fell below the standards of responsibility the court has every right to expect and demand from the holder of a banking licence and its employees, he said.
Appeal
He was giving the three-judge court’s judgment allowing Mr Spencer’s appeal over the High Court’s dismissal of his claim for damages for negligent misstatement and misrepresentation in statements made to him by the bank in 2005 concerning a proposed redevelopment of the Whitgift centre by a joint venture involving the bank and Howard Holdings, an Irish and UK-based property development company.
Under that, the bank was to provide a £166 million debt facility and raise £51 from its client base of high-net-worth individuals.
Arising from the collapse and nationalisation of Anglo into State-owned IBRC, and the latter's sale of relevant loans to a fund, Stapleford Finance Ltd, Mr Spencer's case was against IBRC and Stapleford. The fund counter-claimed for judgment against Mr Spencer over loans taken out with Anglo to fund the investment.
While the High Court found there was misrepresentation by the bank, it ruled Mr Spencer was not entitled to damages based on findings including he would still have proceeded with what was a high-risk investment.
His appeal was concerned with a €1 million loan he personally invested in a life assurance bond offered by Anglo Irish Assurance Company Ltd, an Anglo subsidiary. It was not concerned with a separate €1 million borrowed by him so a partnership could also purchase a bond.
Negligence
In his judgment, Mr Justice Hogan found there was negligent misstatement by the bank concerning the investment and that certain of its written documents sent to Mr Spencer concerning the investment included a number of material misrepresentations.
The bank’s conduct had serious consequences for Mr Spencer whose equity, along with that of the other investors, had dropped to nil by 2010, he said. The loss was later crystallised by IBRC’s sale of the underlying asset, he noted.
Mr Spencer was entitled to say he would have avoided those losses were it not for the misrepresentations and negligence on the bank’s part, he held.
The support of the Whitgift Foundation, an educational charity holding an interest in the centre, for the proposed redevelopment was crucial, he said. A bank brochure had stated the foundation had confirmed it would support and fund plans to maximise the value of the centre but the available evidence suggested the foundation “would not have countenanced speculative development of this kind, much less funded it”.
The bank must have known its representations regarding the foundation’s support and funding “could not possibly have been true”, the judge said.
