THE SUPREME COURT
[Appeal No. 43/2014]
IN THE MATTER OF SECTION 57CL OF THE CENTRAL BANK ACT 1942, AS INSERTED BY SECTION 16 OF THE CENTRAL BANK AND FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2004
FINANCIAL SERVICES OMBUDSMAN
IBRC ASSURANCE COMPANY LIMITED
Judgment of Ms. Justice Laffoy delivered on the 21st day of December, 2016
The process leading to this appeal in outline
1. The genesis of this appeal is an investment made by the appellant, Hugh Governey (Mr. Governey), in 2006. The investment opportunity was created by Anglo Irish Bank Private Bankers and Anglo Irish Assurance Company Limited and it related to what was described as “the Kennet Centre Geared Property Fund” (the Fund). In broad terms, the Fund was sold as a unit-linked fund managed by Anglo Irish Bank and the investment in the Fund was to be made through insurance policies issued by Anglo Irish Assurance Company Limited. The scheme was that the Fund was to acquire units in a Jersey Trust, which, in turn, was to acquire a shopping centre known as “the Kennet Centre” in Newbury in England at the price of Stg. £50m. Investors were to make their contributions to the Fund through an Investment Bond or a Pension Policy issued by Anglo Irish Assurance Company Limited. In January 2006 Mr. Governey made an investment of €500,000 in the Fund through a single premium Investment Bond issued by Anglo Irish Assurance Limited with a start date of 19th January, 2006 (the Investment Bond), the life assured being Mr. Governey. The acquisition of the Kennet Centre and the establishment of the Fund was implemented in due course.
2. In November 2010 Mr. Governey made a formal complaint to the respondent, the Financial Services Ombudsman (the Ombudsman), naming Anglo Irish Assurance Company Limited as the financial service provider to which the complaint related. In essence the complaint was that the contract entered into by Mr. Governey with Anglo Irish Assurance Company Limited was a contract to which the principle of utmost good faith applied, including a fundamental duty to disclose all material facts, and that such duty had been breached. On the basis that the Fund had performed extremely poorly and that it appeared likely that he would lose the entirety of the premium he had paid, Mr. Governey indicated that the manner in which he wished his complaint to be resolved was by reimbursement of the entire premium paid plus interest, damages and payment of his solicitors’ costs.
3. The complaint was thoroughly investigated by the Ombudsman over a period of in excess of eighteen months. During that period, with effect from 14th October, 2011, the name of Anglo Irish Bank Corporation Limited had changed to Irish Bank Resolution Corporation Limited and the registered name of Anglo Irish Assurance Company Limited had changed to IBRC Assurance Company Limited, being the notice party as currently named on this appeal. In the interests of clarity, as the events to which these proceedings relate occurred when “Anglo” was in the name of the predecessor of the notice party, I propose, in this judgment, to refer to the notice party as “Anglo” save that, in relation to involvement in the proceedings in the High Court and in this Court, Anglo or its successors, as the case may be, will be referred to as the Notice Party. In the course of the investigation, the Ombudsman obtained from Anglo, and made available to Mr. Governey, the policy documentation and other documentation in connection with the Fund, including a report dated 11th October, 2005 furnished by Savills, English Chartered Surveyors, to Anglo on the value of the Kennet Centre as at 11th October, 2005, which Anglo previously had refused to furnish to Mr. Governey and which refusal was raised as an issue on the complaint to the Ombudsman.
4. The Ombudsman issued what was described as his “Finding” (the Finding) on 23rd July, 2012. His conclusion was that the complaint had not been substantiated pursuant to the relevant statutory provision, that is to say, s. 57CI(2) of the Central Bank Act 1942 (the Act of 1942) as amended and inserted by the Central Bank and Financial Services Authority of Ireland Act 2004 (the Act of 2004).
5. Mr. Governey being dissatisfied with the Finding, in August 2012 he appealed to the High Court against the Finding invoking s. 57CL of the Act of 1942. The Ombudsman was the respondent on the appeal. There was joined and named as a notice party “Irish Bank Resolution Corporation Limited (Formerly Anglo Irish Bank/Anglo Irish Assurance Company)”. Specifically, on the appeal, Mr. Governey sought orders in the following terms:
As the High Court had jurisdiction to make such orders by virtue of s. 57CM (1) and (2)(b) and (c) of the Act of 1942, those two references to s. 57CL (2) in the notice of motion are obviously erroneous.
6. By order of the High Court made on 9th May, 2013 by Kearns P. it was ordered that the title of the proceedings be amended and that “Irish Bank Resolution Corporation Limited (Formerly Anglo Irish Bank/Anglo Irish Assurance Company)” be struck out as the Notice Party and that IBRC Assurance Company Limited be named as notice party in its stead. On the hearing of the appeal, the Court was informed by counsel for the Notice Party that the current name of the Notice Party is Harcourt Life Assurance Company Limited. That being the case, obviously an order requires to be made amending the title of the proceedings by the substitution of Harcourt Life Assurance Company Limited as the Notice Party.
7. The appeal to the High Court was heard by Hedigan J. (the trial judge). On this appeal, counsel for the Ombudsman emphasised that the hearing lasted “two and a half full Court days” and that the trial judge considered a large volume of documents, including documents in relation to the investment. Indeed, the trial judge in his comprehensive judgment, which was delivered on 26th August, 2013, observed that he had spent some considerable time reading and considering the “voluminous material” with which he had been furnished. His conclusion was that the appeal of Mr. Governey should be dismissed. That was reflected in the order of the High Court made on 1st November, 2013 and perfected on 4th November, 2013.
8. Subsequently, Mr. Governey applied to this Court for leave to apply to this Court to review the determination on a question of law in accordance with s. 57CM(4) of the Act of 1942. Following the hearing of the application by this Court (McKechnie, Clarke and Laffoy JJ), judgment was delivered by Clarke J. on 6th May, 2015. ( IESC 38). Applying the test of arguability or stateability, Clarke J. found that Mr. Governey had met that test on a number of grounds. It was held that the appellant should be given leave to appeal in accordance with s. 57CM(4).
9. Following the delivery of the decision of this Court, Mr. Governey served notice of appeal on 22nd May, 2015. It is the appellant’s application pursuant to s. 57CM(4) to review the determination of the High Court which is the subject of this judgment. The three parties, Mr. Governey, the Ombudsman and the Notice Party participated in the appeal.
10. Against the foregoing very broad outline of the process to date, I propose looking more closely at:
Before doing so, however, it is convenient to outline the provisions of the Act of 1942 as amended which define the respective functions of the Ombudsman, the High Court and the Supreme Court in the context of a complaint of the type made by Mr. Governey to the Ombudsman.
(a) Mr. Governey’s complaint to the Ombudsman and the Finding;
(b) the appeal to the High Court and the decision of the High Court;
(c) the judgment of Clarke J. on the application for leave to apply to this Court to review the determination of the High Court;
(d) the grounds of appeal; and
(e) the approach adopted by each of the participating parties on the appeal.
11. The functions and powers of the Ombudsman are set out in s. 57BK of the Act of 1942. Sub-section (1) provides that the principal function of the Ombudsman is to deal with complaints made under Part VIIB of the Act of 1942, which, in accordance with s. 57BB(a)(i), include complaints “about the conduct of regulated financial service providers involving the provision of a financial service”, by mediation and, where necessary, by investigation and adjudication. Sub-section (4) provides as follows:
12. The appeal which was before the High Court was an appeal governed by s. 57CM(4) of the Act of 1942. Section 57CL(1) of the Act of 1942 provides that, if dissatisfied with the finding of the Ombudsman, inter alia, the complainant may appeal to the High Court against the finding. Section 57CM deals with the jurisdiction of the High Court on such an appeal. Sub-section (1) provides that the High Court may make such orders as it thinks appropriate in the light of its determination. Sub-section (2) provides that the orders that may be made by the High Court include (but are not limited to) the following:
Sub-section (4) provides:
“The . . . Ombudsman is entitled to perform the functions imposed, and exercise the powers conferred, by this Act free from interference by any other person and, when dealing with a particular complaint, is required to act in an informal manner and according to equity, good conscience and the substantial merits of the complaint without regard to technicality or legal form.”
As is clear from subs. (4) the function of the Supreme Court, if leave to appeal is granted, is to review the determination of the High Court but only on a question of law. However, as counsel for the Ombudsman appropriately reminded this Court, if Mr. Governey is to succeed on the appeal, it is the Finding of the Ombudsman which must be overturned.
“The determination of the High Court on the hearing of such an appeal is final, except that a party to the appeal may apply to the Supreme Court to review the determination on a question of law (but only with the leave of either of those Courts).”
Mr. Governey’s complaint to the Ombudsman
13. The grounds on which Mr. Governey initially made the complaint to the Ombudsman were expanded on in the course of the process before the Ombudsman. His complaint, as initiated, was premised on his contract with Anglo, an investment structured as a life insurance policy, being a contract to which the principle of utmost good faith applied, including a fundamental duty to disclose all material facts. Indeed, as has been emphasised on his behalf throughout the process, he stated that, as an experienced professional in the insurance industry, he drew comfort from the fact that the investment was structured as a life insurance policy and he was confident, therefore, that he had been appraised of all risks and material facts before entering into the contract. Initially, the ground on which he contended that the duty of utmost good faith which he contended was owed by Anglo to him was breached arose from non-disclosure of alleged serious adverse consequences for the Kennet Centre of the development of a much larger shopping centre in Newbury, known as the Parkway Shopping Centre (Parkway). Mr. Governey’s complaint was that in his discussions and dealings with the representatives of Anglo it was not disclosed that the development of Parkway was a risk to the Kennet Centre, nor was it disclosed that its development was a material fact. The Fund Brochure furnished to him, which will be considered later, he contended, referred to Parkway as having a positive impact on rental levels in Newbury, including the Kennet Centre, when it was in fact a competing shopping centre. If he had been told of that, he would not have proceeded with the investment.
14. On 2nd August, 2011 the Ombudsman, having at that stage received, in addition to Mr. Governey’s complaint, further correspondence from Mr. Governey’s solicitors, who, on the direction of the Ombudsman, had been interacting with Anglo, sent a memorandum to Anglo outlining a schedule of questions which the Ombudsman required Anglo to answer and also a schedule of evidence, for example, a copy of the policy documentation and the advice received from Savills, which the Ombudsman required Anglo to submit to him. Subsequently, the Ombudsman furnished to Anglo preliminary submissions which had been submitted on behalf of Mr. Governey. The response of Anglo was contained in a comprehensive letter dated 30th September, 2011 to the Ombudsman, which was accompanied by the documentation requested in the schedule of evidence and additional correspondence referred to by Anglo. A replying submission was subsequently submitted to the Ombudsman on behalf of Mr. Governey. Further correspondence to the Ombudsman emanated from both parties to the complaint process, Mr. Governey and Anglo.
15. By the time both had requested the Ombudsman to make an adjudication, it was clear that Mr. Governey’s complaint was that Anglo had acted unlawfully in failing to comply with its legal obligation of uberrima fides, it being contended by Mr. Governey that his contract with Anglo was a contract of insurance. In particular, the complaint at that stage was that Anglo failed to disclose to Mr. Governey the following facts, which it was alleged were material facts and should have been disclosed:
The position consistently adopted by and on behalf of Mr. Governey has been that it was not disputed by Anglo before the Ombudsman that the contract entered into by Mr. Governey with Anglo was a contract of insurance which imposed a duty on the insurer to disclose all material facts; rather Anglo’s response had been that there was no non-disclosure of material facts.
(a) that Anglo had been advised by Savills that Parkway represented a risk to the Kennet Centre;
(b) that Anglo had been advised that Newbury was a town in long-term decline; and
(c) that a statement in Anglo’s brochure in relation to the Kennet Centre to the effect that 19% of the rental income therefrom was subject to a break or expiry within the next five years was incorrect, as the correct figure was in the region of 36%.
16. As has been recorded earlier, in his judgment (at para. 5.10) the trial judge referred to the “voluminous material” with which he had been furnished. It is clear that there was also voluminous material before the Ombudsman, not merely the investment documentation generated in 2006 but also correspondence which passed between the three parties involved in the complaint process, Mr. Governey, Anglo and the Ombudsman, in the course of the process and also submissions made to the Ombudsman. In his replying affidavit in the High Court, which was sworn on 14th December, 2012, the Ombudsman exhibited a booklet containing copies of all of the material he had before him when making the Finding.
17. In the Finding, which is a concise document, having outlined the background to the complaint and the case made by Mr. Governey and the case made by Anglo, and having referred to the questions he raised with, and the evidence he sought from, Anglo, which he stated had been fully responded to, and to the fact that a full exchange of documentation had taken place between the parties, the Ombudsman stated that he was satisfied that the submissions and evidence submitted did not disclose a conflict of fact such as would require an oral hearing to resolve the conflict. He was also satisfied that the submissions and evidence submitted were sufficient to enable the Finding to be made without the necessity of holding an oral hearing.
18. The Ombudsman then went on to outline the facts relevant to Mr. Governey’s complaint. He outlined Mr. Governey’s interaction with Anglo in relation to the investment in late December 2005 and early January 2006. On the basis of the documentation before him he stated that he was satisfied that Mr. Governey was “an experienced investor”, recording some of the investments held by him at that time.
19. In the Finding the Ombudsman referred to three of the documents which he had received from Anglo in relation to the Fund, namely:
The Ombudsman referred to certain statements in those documents.
(a) the brochure in relation to the Fund produced by Anglo which is dated January 2006 (the Fund Brochure);
(b) Savills’ Report dated 11th October, 2005 (Savills’ Report); and
(c) a document entitled “Newbury 2025 – A Vision for Newbury Town Centre”, which was obviously produced by West Berkshire Council in October 2003, and which, as was stated in the Foreword, set out long-term aspirations for Newbury Town Centre.
20. As regards the Fund Brochure, he referred to the statement therein that investors might lose all of their investment. In the same vein, he also noted that the section of the Fund Brochure headed “Risk Factors” commenced with a statement in the following terms:
He quoted the statement in the Fund Brochure in the following terms:
“A geared property investment is considered to be high-risk . . .”
Although not quoted in the Finding, that statement is explained in the Fund Brochure by a statement which follows to the effect that there was expected to be “substantial rental growth within a 4/5 year period”.
“The proposed Parkway Centre on Northbrook Street in Newbury, which is scheduled to open in 2008/2009 is expected to drive Zone A rents in the Town closer to Stg£150 per Sq foot . . .”
21. There is intermingled in the portion of the Finding which refers to the Fund Brochure certain references to submissions made on behalf of the parties to the Ombudsman. The Ombudsman recorded that Anglo had stated that the Fund performance had been adversely affected by a number of risk factors outlined in the Fund Brochure: property prices had fallen; and “income for (sic) shopping centres” had been reduced. Submissions made on behalf of Mr. Governey were then recorded. The first was that it was not disclosed that the plans to open Parkway represented a risk to the investment (i.e.to the Kennet Centre) and that “the fact that Anglo apparently received advice from Savills concerning the risk posed by . . . Parkway . . . was not disclosed to investors”. The second was that the fact that Newbury was declining and the risk of this continuing was known to Anglo, but it was not disclosed. The third was the fact “that a minimum of approximately 40% by income was subject to expiry or break clause within five years (not the 10% as represented) was known to Anglo but not disclosed”. In referring to those three factual matters, the Ombudsman recorded Mr. Governey’s submissions as to the material facts which he contended should have been, but were not, disclosed. As regards the third fact, what is quoted above is the only reference in the Finding to the implications of the expiry of, or break clauses in, the leases of units in Kennet Centre which were to take effect within five years. The reference to “10% as represented” was incorrect, in that the figure of 19% appeared in the Fund brochure (at p. 7). However, I surmise that the mistake may be due to a typographical error in the Finding.
22. As regards Savills’ Report, having identified it as a valuation report to provide “an opinion of value”, the Ombudsman recorded Anglo’s submission that “Savills assumed the impact of Parkway on the Kennet Centre would likely be positive rather than negative”. This was elaborated on by reference to a number of statements in Savills’ Report in relation to the Parkway scheme.
23. First, the Ombudsman noted the reference in Savills’ Report to the “Vision for Newbury Town Centre 2025” document, stating that “the main driver for this is Parkway”, and recorded that it was stated of Parkway that “when completed this will provide a significant boost to the town by attracting new retailers”. Secondly, he quoted the following passage, which is to be found under the heading “Future Outlook”:
While the Ombudsman did not set out the strategies suggested, Savills’ Report itself indicates that they related, in broad terms, to attracting the right tenant mix.
“Given the threat of the new [Parkway] scheme to ensure performance of the Kennet Centre in the medium term the following strategies will also need to be implemented to sustain future performance.”
24. Thirdly, the Ombudsman quoted a further passage from Savills’ Report which is to be found under the heading “Valuation” and under the sub-heading “Location”. The passage quoted, which comes after another reference to the “Vision for Newbury Town Centre 2025” document and a statement that the implementation by West Berkshire Council of their “Vision for 2025” would bring a substantial new investment into Newbury and attract new retailers, was in the following terms:
25. Finally, the Ombudsman referred to a statement in Savills’ Report, which again is to be found under the heading “Valuation”, but under the sub-heading “Future Performance/Rental Growth”, that the impact of the Parkway scheme also needed to be considered and that Savills noted that Parkway “could divert trade away from the Kennet Centre”. In the Finding the foregoing is immediately succeeded by the following statement:
“The key proposal in the Parkway scheme and its development will ensure the continued vitality of the town centre. In terms of the Kennet Centre, the biggest threat is that Debenhams and other key retailers are attracted to the scheme.”
That, I assume, was intended to reflect what was stated in Savills’ Report after the reference to the possibility that the Parkway scheme could divert trade from the Kennet Centre. The Savills’ Report went on to say:
“The impact could have been positive rather than negative.”
26. In the Finding the Ombudsman referred to one further document which he described as “a Strategy document of the Kennet Centre which was apparently sent to [Mr. Governey] in 2009” which he stated “appears to have focused [Mr. Governey’s] attention on Parkway”. The passage he quoted from the document disclosed that Debenhams (the then anchor tenant in the Kennet Centre) had signed “Heads of Terms” for a unit in Parkway, but went on to state that there would be “ample time to address the situation before their departure”, in that they would not “be vacating until late 2009 at the earliest”. Presumably, the Ombudsman made reference to that passage in support of his conclusion, which is quoted in the next paragraph, that there was not any sufficient evidentiary basis upon which he could make a finding that the principal reason for the failure of the Kennet Centre was the development of Parkway.
“Its impact may depend on if and which existing retailers of the Kennet Centre are attracted and the quality of the replacements. This is again difficult to quantify but developments in other towns suggests (sic) that over the longer term, assuming the new scheme enhances the trade draw of the town, the impact is positive rather than negative.”
27. Thus far, the Finding merely contained a record of factual matters, references to the contents of Fund Brochure, Savills’ Report and other documents, and a recitation of submissions made on behalf of the parties. The actual determinations in the Finding in relation to the grounds of complaint were set out in the following terms:
The fact of the proposed Parkway Development was disclosed in the Fund Brochure. [Mr. Governey] is an experienced investor, and was a high net-worth individual. He proceeded with this high risk investment. I am satisfied that there was no material non-disclosure of risk.
“I do not consider that it can fairly be said that Anglo misrepresented the nature of this investment.
I am satisfied that it was made clear to [Mr. Governey] that he was investing in an illiquid, high risk investment. The . . . Fund Brochure explicitly sets out the risk of total loss on this investment.
Whereas [Mr. Governey] has submitted in his complaint form that the principal reason for the failure of the Kennet Centre is the development of Parkway, I do not consider that there is any sufficient evidentiary basis upon which this office could make such a finding.
Furthermore, however, even if that was the position, it would not assist [Mr. Governey], in my view.
Whilst [Mr. Governey] claims that he never believed that there was any risk of losing his entire premium, there is no basis upon [which] this ground of complaint can be upheld. I note, for example that . . . the Fund [B]rochure specifically states that:
It was made explicitly clear to [Mr. Governey] that the investment was high risk. I have considered all of the grounds of complaint advanced herein, and I do not find any of them to be compelling.
‘The investment could be subject to sudden and large falls in value and an investor could lose the entire value of their investment.’
This complaint is not substantiated.”
The appeal to the High Court
28. The principal relief and the alternative relief sought by Mr. Governey in the notice of motion which initiated the appeal to the High Court has been set out earlier. The appeal was grounded on the affidavit of Mr. Governey sworn on 10th August, 2012. Referring to a response dated 26th January, 2011 from Anglo to a letter his solicitors wrote to Anglo on the direction of the Ombudsman, Mr. Governey averred that Anglo did not dispute that the contract entered into between the parties was a policy of life assurance and hence that it owed to him a duty of utmost faith in making disclosure of all material facts relating to the investment. Instead, in the response it was contended that Anglo made disclosure of all material facts.
29. A statement of opposition was filed on behalf of the Ombudsman in the High Court, in which, inter alia, the following grounds of opposition were set out:
The judgment of the High Court
30. Having outlined the submissions made in the High Court by the three participating parties, Mr. Governey, the Ombudsman and the Notice Party, the decision of the trial judge is set out in his judgment at paras. 5.1 to 5.13.
(a) that the finding by the Ombudsman was validly made within jurisdiction;
(b) that the Ombudsman was “entitled to reach the Finding that he reached” and, insofar as the appeal consisted of a challenge to the merits of that decision, it was denied that it was flawed;
(c) that the appellant had failed to establish that, taking the adjudicative process as a whole, the decision made by the Ombudsman was vitiated by a serious and significant error or a series of errors and, if any errors were made, which was fully denied, they fell short of that threshold; and
(d) that in defence of the Finding, the Ombudsman relied on the purpose and scheme of Part VII (B) of the Act of 1942, with particular reference being made to –
(i) the provision which states the object of dealing with complaints in an expeditious and informal manner, and
(j) the provision which requires the Ombudsman to “act in an informal manner, and according to equity, good conscience and the substantial merits of the complaint, without regard to technicality or legal form”.
31. The trial judge addressed the statutory role of the Ombudsman. He also addressed the role of the High Court on the type of appeal which was before him (at para. 5.2), which he noted was well established, referring to the judgment of Finnegan P. in Ulster Bank v. Financial Services Ombudsman & Ors.  IEHC 323 (the Ulster Bank case), where Finnegan P laid down the test as follows:
On the appeal to this Court there was consensus that the first sentence in that passage sets out the correct test to be applied in this case. The trial judge observed that a notable characteristic of the type of appeal before him, in common with judicial review, is the deference that the Court must accord to the Ombudsman as a specialist expert tribunal within its own area of professional expertise. The application of the final sentence of the passage quoted above and of that observation to this case was the subject of controversy on this appeal to this Court, in that the position of Mr. Governey is that the trial judge afforded an undue degree of deference to the finding of the Ombudsman on the question of law which arose.
“To succeed on this appeal the Plaintiff must establish as a matter of probability that, taking the adjudicative process as a whole, the decision reached was vitiated by a serious and significant error or a series of such errors. In applying the test the Court will have regard to the degree of expertise and specialist knowledge of the Defendant.”
32. The trial judge, insofar as is relevant for present purposes, considered the grounds of appeal relied on by Mr. Governey under two broad headings: the adequacy of the reasons given by the Ombudsman in the Finding; and what he characterised as the “main issue” on the appeal, which will be elaborated on later.
33. Although, as the trial judge acknowledged, the Ombudsman had objected to Mr. Governey pursuing before the High Court the ground that the reasons given by the Ombudsman in the Finding were inadequate, as it had not been raised in the papers grounding the appeal to the High Court, as the Ombudsman had dealt with those complaints in written and oral submissions in the High Court, the trial judge dealt with this ground. In the submissions on behalf of Mr. Governey in this Court there is some criticism of the manner in which the trial judge analysed the Finding and, in particular, the determinations of the Ombudsman, in his judgment (at para. 5.4). There is some justification for that criticism. The only part of the Finding which I consider may be properly interpreted as containing determinations by the Ombudsman on the grounds of complaint is the final part, which has been quoted in full earlier (at para. 27). Some aspects of the Finding, which precede the final part, were in reality merely recitation by the Ombudsman of the submissions made to him, as distinct from an analysis or reasoned conclusions in respect of those aspects, as counsel for Mr. Governey submit.
34. Earlier in his judgment (at para. 3.6), in outlining the submissions made in the High Court on behalf of the Ombudsman, the trial judge referred to the reliance placed by the Ombudsman on the decision of this Court in Faulkner v. Minister for Industry and Commerce  ELR 107 and the more recent decision of the High Court in Carr v. Financial Services Ombudsman  IEHC 182 (the Carr case). Later he embarked on an analysis of the Finding. In so doing, he stated (at para. 5.4) that the Ombudsman “notes that Savills’ report assumed that the effect of Parkway on Kennet would be positive” (emphasis added). This is mentioned because on this appeal Mr. Governey contends that the trial judge thereby misdirected himself in that what the Ombudsman stated was that “the impact of Parkway on the Kennet Centre could have been positive rather than negative” (emphasis added). Thereafter, in setting out his conclusion on the issue as to the adequacy of the reasons given by the Ombudsman, the trial judge stated (at para. 5.5):
“It seems to me that on any assessment of this written finding, it complies with the statutory requirement as judicially interpreted to give reasons because it considers the central complaints made and deals with them. It goes considerably further than just the ‘broad gist’ referred to in Faulkner and Carr.”
The trial judge then acknowledged that the Ombudsman did not deal with “the break clause issue”, but suggested that it was something that falls within what O’Malley J. in her judgment in the Carr case meant when she referred to there being no obligation to deal with every single point raised. The trial judge continued:
35. Before identifying what he considered to be the “main issue”, the trial judge (at para. 5.7) revisited the test which the Court has to apply on an appeal such as the appeal before him and, reflecting the passage from the judgment in the Ulster Bank case quoted earlier, he stated that the Court must decide whether there had been a serious and significant error or a series of such errors which vitiate the decision of the Ombudsman. Later (at para. 5.9) he identified the essential complaint made by Mr. Governey to the Ombudsman as that the contract entered into by the appellant “was a contract of assurance and was thus a contract [uberrima fides] which required disclosure of all material facts”. He summarised two of the bases on which Mr. Governey alleges that there was material non-disclosure: that Parkway represented a risk to the Kennet Centre; and that Newbury was a town in long-term decline. He then stated (at para. 5.9):
“The ultimate impact on the Kennet centre of this percentage miscalculation is at this stage very difficult, if not impossible, to judge. It could have been positive or negative but the extent of its negative impact in the light of the far greater impact on Kennett of Parkway and the general decline in the United Kingdom property market must be all but unknowable.”
The position of Mr. Governey on this appeal is that, in so identifying the question for determination, the trial judge did not properly apply the “serious error” test and substituted for it a “rationality test”.
“The [Ombudsman] decided there was no material disclosure and the question for this Court is whether there existed any relevant evidence upon which that decision could reasonably be based.”
36. Although he ultimately expressed the view (at para. 5.11) that it was not necessary for the High Court to resolve the issue as to whether the contract entered into by the appellant was “a contract of insurance”, that was preceded by what was an analysis by the trial judge of the nature of the contract (at para. 5.10). In the course of that analysis he stated that it seemed very questionable as to whether the contract was really one of insurance and he continued:
The basis on which the trial judge concluded that it was not necessary for him to resolve the issue was because, as he stated, it is clear from the Finding that the Ombudsman proceeded on the basis that it was a contract of insurance to which the requirement of full disclosure applied. The trial judge then went on (at para. 5.11) to record various matters outlined by the Ombudsman in the Finding: that the appellant had been warned that the investment was “high risk”; that the appellant was an experienced investor, which the trial judge considered to be correct; and some of the statements in the Fund Brochure recorded earlier. The trial judge also recorded other matters outlined by the Ombudsman, in particular, the statements in Savills’ Report recorded earlier. There followed (at para. 5.12 of the judgment) a summary of some of the conclusions of the Ombudsman in the Finding, as quoted earlier, although interspersed with statements made earlier in the Finding.
“Everything I have read and heard concerning it strongly suggests it was a contract of investment dressed up as a contract of assurance for tax purposes. It dealt with an investment risk not an insurance risk. There is no life risk covered. . . . This contract seems to be one not of assurance but of investment.”
37. The trial judge then (at para. 5.13) posed the following question: was there relevant evidence before the Ombudsman upon which he could reasonably come to the conclusion that there was no misrepresentation of the investment and there was no material non-disclosure of the risk? The trial judge stated that there was such evidence and he continued:
The trial judge concluded by saying that a consideration of the balance of all of the matters evidenced before the Ombudsman, which had been outlined, was an exercise by the Ombudsman of his expertise and his decision was “a judgment reasonably made and clearly based upon the evidence before him”. That led to the dismissal of the appeal to the High Court.
“The appellant was told it was a high risk investment with the possibility of losing all the investment. The existence of the Parkway development was made clear to him. [Anglo’s] information at the time was that the effect of Parkway was positive rather than negative. The report ‘Vision for Newbury 2025’ also, whilst describing a town in decline, saw a positive future due to, inter alia, the development of Parkway. The higher level of break clauses than that identified by Savills was an error but one firstly for which [Anglo] expressly renounced liability and secondly was a feature that would have benefited the investment had the rent levels gone up as predicted. Lastly, it is a matter for the [Ombudsman’s] expertise to determine if the appellant had satisfied him to the balance of probabilities that the failure of the investment was due principally to the development of Parkway. According to the [Ombudsman], as I must, the appropriate level of deference to his expertise in the area, I do not believe that I can go behind that finding. . . . On the evidence before him it was reasonably open to the [Ombudsman] to conclude that no material non-disclosure of risk was made in this case.”
38. The submission made on behalf of Mr. Governey in the High Court that the contract was a contract of insurance to which there applied the duty of uberrima fides on the part of the insurer, Anglo, which was not expressly addressed by the trial judge in outlining his decision, because he considered it unnecessary to do so having concluded that the Ombudsman proceeded on the basis that it was a contract which required full disclosure, was of significance on both the application to this Court for leave to appeal and on the hearing of the appeal and it is appropriate to record the manner in which it is addressed in the judgment of the High Court. In outlining the submissions made on behalf of Mr. Governey in the High Court, the trial judge recorded (at para. 2.11) that the final element of Mr. Governey’s application before him was that the Ombudsman “made an error of law, in not giving due consideration to the principle of uberrime (sic) fidei, which applies to contracts of life assurance such as this”. The trial judge recorded that in the High Court counsel for Mr. Governey had relied on the decision of the House of Lords in Banque Financière de la Cité S.A. ((Formerly Banque Keyser Ullmann S.A.) v Westgate Insurance Co. Ltd (Formerly Hodge General & Mercantile Co. Ltd)  2 A.C. 249 (the Banque Financière case), “where the House of Lords held that the pre-contractual duty of disclosure on an insurer arising from the obligation of utmost good faith would require him to disclose all material facts known to him with regard to the nature of the risk or the recoverability of a claim under the policy” (at para. 2.13).
39. The trial judge also addressed the submissions made on behalf of the Ombudsman on the question of Anglo’s duty of disclosure on him (at para. 3.10 et seq.), recording first the Ombudsman’s submission that he dealt with the question in his Finding, where he stated that he had considered all the grounds of complaint advanced and that he did not find any of them compelling. He also summarised (at para. 3.11) the submissions made on behalf of the Ombudsman that the arrangement “was not a contract of insurance in the classic sense”. Specifically, the trial judge recorded (at para. 3.11) the response of counsel for the Ombudsman to Mr. Governey’s reliance on the decision of the House of Lords in the Banque Financière case, the contention of the Ombudsman being that it was incorrect, citing the commentary in Buckley on Insurance Law, 3rd Ed., (Dublin, 2012) at p. 163 (para. 3 – 144), where, in a passage quoted by the trial judge, it was stated:
As he stated elsewhere, the trial judge went on to state that the issue was not relevant to the case “because the Ombudsman found that there was in fact no material non-disclosure”. 40. Similarly, the trial judge recorded (at para. 4.6) the submission made on behalf of the Notice Party that Mr. Governey was incorrect in law as to his assertion that the investment attracted the effects of utmost good faith and he recorded the reliance of the Notice Party on the commentary in Buckley quoted in the next preceding paragraph. It was also noted that the Notice Party relied on the judgment of the Court of Appeal of England and Wales in Aldrich v. Norwich Union Life Insurance Society  Lloyd’s Rep I R 1 (the Aldrich case). The trial judge stated that the Notice Party contended that the life assurance policy model used by Anglo was a useful tax treatment for investment, but that the investment in issue bore none of the risk features associated with a contract of insurance that would attract the doctrine of utmost good faith and, it was thus, as in the Aldrich case, a composite transaction of which an insurance contract formed part.
“Where . . . an insurance agreement forms a distinct part of a wider agreement and operates as security for various obligations under that transaction, the insurer’s duty of disclosure does not extend to the wider transaction.”
41. However, as has been noted earlier, while the trial judge made some negative observations (at para. 5.10) as to whether the appellant had entered into a contract of assurance, he found it unnecessary to resolve that issue, as he stated (at para. 5.11), because his understanding was that the Ombudsman proceeded on the basis that it was a contract of insurance to which the requirement of full disclosure applied. In the light of those observations, it is convenient to give further consideration to what has been noted earlier (at para. 15) – that the position consistently adopted by and on behalf of Mr. Governey has been that it was not disputed by Anglo before the Ombudsman that the contract entered into by Mr. Governey with Anglo was a contract of insurance, which imposed a duty of disclosure on the insurer, Anglo, in accordance with the principle of uberrima fides. Having considered the documentation which was before the Ombudsman, it is appropriate to record the following matters:
In other words, the dispute between Mr. Governey and the Notice Party as to whether the contract entered into by Mr. Governey imposed a duty of uberrima fides on Anglo first materialised in the High Court, when Anglo contended for the first time that it did not.
(a) As recorded earlier (at para. 28), Mr. Governey averred in his grounding affidavit in the High Court that the position adopted by Anglo from the outset was that all material facts had been disclosed to Mr. Governey.
(b) In the preliminary submission made to the Ombudsman on behalf of Mr. Governey by his solicitors there was an express reliance on the decision in the Banque Financière case, albeit the decision of the Court of Appeal. It was contended that the arrangement between Mr. Governey and Anglo was a contract to which the principle of uberrima fides applied, requiring both parties to make disclosure to the other of all material facts, that Anglo had been in breach of its duty, and that Mr. Governey was entitled to cancel the policy and have the premium returned to him.
(c) In Anglo’s response dated 30th September, 2011 to the Ombudsman’s request of 2nd August, 2011 and also to Mr. Governey’s preliminary submissions, it was confirmed by Anglo that “the investment made by [Mr. Governey] was structured through a life assurance policy and that all material facts in relation to the investment were disclosed”. Further Anglo stated that “the investment was made through a life assurance contract is not in dispute”.
(d) Nonetheless, it was reiterated in replying submissions made to the Ombudsman on behalf of Mr. Governey that the fundamental complaint by Mr. Governey was that the principle of uberrima fides applied to the contract and that Anglo chose to present only material that was positive in respect of the Kennet Centre and failed to make disclosure of adverse information that was material to the risk in question.
Judgment of the Supreme Court on the application for leave to apply for review of the determination of the High Court
42. The High Court having refused an application by Mr. Governey for leave under subs. (4) of s. 57CM of the Act of 1942, Mr. Governey applied to this Court for leave. On the application, having analysed the relevant provisions which have been outlined, in his judgment Clarke J. (at para. 3.10) identified the sole question which this Court should ask itself on that application as whether Mr. Governey had made out a stateable basis for suggesting that he may have a valid appeal on a point of law against the decision of the High Court in the case.
43. Before identifying the aspects of the decision of the High Court in relation to which he was satisfied that Mr. Governey had made out a stateable case that he had a valid appeal on a point of law, Clarke J., having summarised the background facts and the law underlying Mr. Governey’s application but without going into the merits of the issues raised, analysed some of the provisions inserted into the Act of 1942 by virtue of the provisions of the Act of 2004 governing the system of complaints to the Ombudsman (at paras. 5.2 to 5.6), one of the provisions being s. 57BZ(1)(d), which permits the Ombudsman to decline to investigate a complaint where there is “an alternative and satisfactory means of redress in relation to the conduct complained of”. In explaining his reasons for doing so (at paras. 5.7 to 5.9), Clarke J. observed that it is at least arguable that the proper scope of a review by a court of a decision of the Ombudsman may depend, at least to some extent, on whether the issues raised are ones which fit into the category of a complaint which could easily have been brought in the form of legal proceedings, suggesting that it is at least arguable that in such cases, in relation to questions of either law or the application of the law to agreed or established facts, there may be less of a case for the courts affording any particular level of deference to the Ombudsman. He also noted that the Ombudsman is not obliged to take onto itself the task of resolving disputes which are, fundamentally, legal cases between a complainant and a financial institution. In the light of the manner in which Mr. Governey’s complaint has evolved and has been processed since it was initiated, I consider those observations to be very relevant and perceptive.
44. Clarke J. then identified five issues on which he considered Mr. Governey had met the admittedly low threshold that he had an arguable or stateable basis for appealing to this Court on a point of law.
45. First, reiterating a point he had made earlier, that the precise level of deference to be afforded by the High Court to the Ombudsman is at least arguably different in cases where the Ombudsman is concerned with the establishment of legal rights and obligations, he found (at para. 5.10) that it was arguable that the trial judge adopted an overly deferential attitude in relation to the determination of the Ombudsman in this case.
46. Secondly, he recorded that there were clearly issues both before the Ombudsman and before the High Court as to the precise effect on the legal rights and obligations which arise in the case of the form, as opposed to the substance, of the transaction entered into between Mr. Governey and Anglo, that form, which he regarded as being for tax reasons, being a single premium life assurance policy. He then alluded to the difficulties which arise in applying the doctrine of uberrima fides, which requires both parties to insurance or assurance contracts to make full disclosure in the utmost good faith, to a case such as this, contrasting it with the ordinary way in which policies of insurance or assurance provide for payment out, that is to say, on the occurrence of an adverse event. Clarke J. then stated (at para. 5.12):
Having regard to the manner in which the contractual arrangement between Mr. Governey and Anglo was implemented, the appealable issue is whether the issuing of the Investment Bond by Anglo to Mr. Governey gave rise to an obligation of uberrima fides on the part of Anglo and what was the extent of the obligation of disclosure on the part of Anglo in the circumstances. As Clarke J. pointed out (at para. 5.13), that is either a matter of law or at the very least a mixed question of law and fact. However, crucial to the resolution of those questions is establishing the nature and effect of that contractual arrangement in substance, as distinct from by description. Those questions fall to be answered in the context of the allegations of material non-disclosure on the part of Anglo advanced by Mr. Governey.
“Just how those concepts fit in with a case where the substance of the arrangement is an investment in the guise of a life assurance policy is certainly debateable. However, for present purposes I am satisfied that it is arguable or stateable that, by choosing to offer an investment product in the form of a life assurance policy, a financial institution takes onto itself a much greater degree of obligation of disclosure than might ordinarily be the case.”
47. Thirdly, following on from what is stated in the next preceding paragraph, as to Mr. Governey’s argument that the Ombudsman was wrong in his assessment of Anglo’s duty of disclosure, Clarke J. stated (at para. 5.13):
48. Fourthly, Clarke J. considered Mr. Governey’s argument that the High Court was obliged to examine the determinations of law by the Ombudsman and reverse them if they were wrong, so that, as was argued, the trial judge, by applying the test of rationality to the decision of the Ombudsman without examining the legal issues which Mr. Governey had raised, was in error. He set out his conclusion on this point as follows (at para. 5.14):
“. . . [Mr. Governey] wishes to argue that the [Ombudsman] was wrong in holding that a general disclosure of the overall level of risk was sufficient when there was not, it is argued, a disclosure of material facts which would allow that risk to be assessed. In that sense, [Mr. Governey] wishes to argue that the [Ombudsman’s] decision conflates disclosure of the degree of risk with disclosure of the facts on which an independent assessment of that degree of risk could be made. In my view, again, that proposition of law is arguable, as is its application to the facts of this case.”
49. Finally, Clarke J. stated that he was satisfied that Mr. Governey had met the threshold of arguability or stateability on the subsidiary question which he had raised concerning the adequacy of the reasons given by the Ombudsman, stating (at para. 5.15):
“In substance, it is said that the [Ombudsman] was wrong in law on the materiality question, that the High Court should not have afforded any deference to the [Ombudsman] on that legal issue, and that the High Court was, therefore, also wrong. I am satisfied that [Mr. Governey] has met the threshold of arguability or stateability in respect of those issues.”
Grounds of appeal
50. The notice of appeal filed on behalf of Mr. Governey following the delivery of the judgment and the order of this Court that Mr. Governey should have leave to appeal, understandably, reflected the stateable or arguable points of law identified in the judgment of Clarke J. in setting out the grounds of appeal, although not formulated in precisely the same terms. In summary, the grounds on which it is contended on behalf of Mr. Governey that the trial judge erred in law or in fact are the following:
“At a very general level reasons must be sufficient to enable a party affected to decide whether the decision made was legally correct and to assist such a person in being able to decide whether the decision concerned is capable of being challenged either by judicial review or in any appellate process available. If [Mr. Governey] is ultimately found to be correct on the submissions which he makes concerning the materiality issue, it is also arguable that the reasons set out by the [Ombudsman] fail to adequately state why, in the view of the [Ombudsman], the failure of disclosure alleged in this case did not meet a materiality test.”
Discussion on questions of law to be determined
51. There was some controversy between the parties as to the questions of law which the Court has to determine. While, at a superficial level, the grounds of appeal advanced on behalf of Mr. Governey appear more expansive than the arguable or stateable points of law identified in the judgment of Clarke J., in the written submissions filed on behalf of Mr. Governey the questions of law which arise for determination were formulated as follows:
(a) in adopting an incorrect approach or test to the statutory appeal, or applying such approach or test in an incorrect manner, in that –
(b) in conflating the disclosure of the nature of the risk (whether high, medium or low) with disclosure of material facts pertaining to that risk or failing to distinguish them;
(c) in failing to hold that the Ombudsman had been in serious and significant error, inter alia, –
(i) in conflating the disclosure of the nature of a risk with disclosure of material facts pertaining to the risk;
(ii) in failing to address the break clause issue;
(iii) in failing to have sufficient regard to the appellant’s submission that Anglo had been guilty of unlawful conduct, that is to say, breach of duty of disclosure in accordance with the principle of uberrima fides as opposed to unreasonable conduct; and
(iv) in failing to give sufficient reasons for the Finding;
(d) in holding that there was no obligation on the Ombudsman to deal with the break clause issue;
(e) in misdirecting himself as to parts of the Finding, a number of examples being given, including the failure to have regard to the fact that what the Ombudsman said was that “the impact of Parkway on the Kennet Centre could have been positive rather than negative” rather than “would be positive”; and
(f) in failing to give any sufficient weight to the fact that Anglo had specifically designed the product as an insurance policy and marketed it to consumers and so the Notice Party should not have been allowed to challenge the applicability of insurance law principles to the same.
52. The questions as thus formulated on behalf of Mr. Governey seem to envisage this Court pronouncing in general terms on the function of the High Court on the hearing of an appeal against a finding of the Ombudsman and the function of the Ombudsman on the hearing of a complaint under the Act of 1942. The function of this Court, where leave is granted, is to review the determination of the High Court in adjudicating on the appeal from the Ombudsman on a question of law, which question must relate to the determination by reference to the specific complaint on which the Ombudsman made a finding. It is to be inferred from the question at (b) posed on behalf of Mr. Governey that it is based on an assumption that the principle of uberrima fides applies to the transaction entered into by Anglo with Mr. Governey, which assumption is disputed by the Notice Party at this stage. Although formulated as a separate question, the question posed at (d) could be properly considered by the Court when addressing the adequacy of the reasons set out by the Ombudsman.
(a) When the High Court is determining an appeal from the Ombudsman is a test of rationality applicable to a question of law, namely, whether there was a breach of obligation of disclosure imposed by the principle of uberrima fides?
(b) As a matter of law is there a distinction to be drawn between disclosure of the degree of risk and disclosure of material facts pertaining to the risk indetermining whether the duty of disclosure pursuant to the principle of uberrima fides has been complied with?
(c) As a matter of law what is the extent of the obligation on the part of the Ombudsman to identify and address issues raised by the parties and to give a reasoned finding in respect thereof?
(d) What parameters apply to the dicta in the Carr case and the Faulkner case that an adjudicating body need not address an issue raised by a party?
(e) What degree of deference must be shown by the High Court to the decision of the Ombudsman on a question of law?
53. The position of the Ombudsman was that it was difficult to know what the precise parameters of the appeal are, having regard to the points of law and the numerous sub-points raised in the grounds of appeal and the assertion that the errors on the part of the trial judge and the consequential questions of law identified in Mr. Governey’s written submissions do not follow the format or expressly advert to the reasoning in the judgment of Clarke J. It was submitted on behalf of the Ombudsman that Clarke J. only identified two arguable points of law, namely:
The stateable or arguable points identified by Clarke J. are not limited to those two questions. However, the observation on behalf of the Ombudsman that uncertainty has been a feature of this case from the outset is unquestionably true. Moreover the complaint of Mr. Governey, which has evolved into the consideration of a very difficult question of law on a final appeal, has progressed to this stage in a less than satisfactory manner.
(a) whether the trial judge adopted an overly deferential attitude in relation to the determination of the Ombudsman in this case; and
(b) whether, by choosing to offer an investment product in the form of a life assurance policy, a financial institution takes onto itself a much greater degree of obligation of disclosure than might ordinarily be the case.
54. The difficulty is compounded by the position adopted on behalf of the Notice Party at this stage in the process. It was that, while the Notice Party supports and adopts the submissions made on behalf of the Ombudsman, it was considered appropriate to address this Court on two primary but related issues, namely:
It is convenient to defer outlining the Notice Party’s position as regards the issue raised at (a) until the contract documentation has been analysed. The issue raised at (b) flows from the first relief sought by Mr. Governey in the High Court, namely, an order directing the Notice Party to return to Mr. Governey the premium of €500,000 paid by him in respect of the Investment Bond. It was submitted on behalf of the Notice Party that such a remedy could only be granted in circumstances where the Court could positively determine all of the issues for determination positively in favour of Mr. Governey. Counsel for the Notice Party unequivocally acknowledged that Mr. Governey had submitted that the principle of uberrima fides applied to the contract between him and Anglo before the Ombudsman and in the High Court. Of course, there was no determination either by the Ombudsman or by the trial judge as to whether, in the circumstances prevailing, Anglo owed a duty of utmost good faith to Mr. Governey.
(a) the application of the utmost good faith principle to the particular contract between Mr. Governey and Anglo; and
(b) if this Court should find that there was failure on the part of the Ombudsman to articulate his views on that issue in clearer terms (or at all), whether it could be said to involve a “significant error . . . vitiating the decision making process as a whole” such that the underlying decision of the Ombudsman should be set aside.
55. One area on which there was consensus between the three parties, as recorded earlier in outlining the judgment of the High Court, was that the test to be applied on an appeal to the High Court under the Act of 1942 is the test laid down by Finnegan P. in the Ulster Bank case: whether as a matter of probability, taking the adjudicative process as a whole, the decision reached by the Ombudsman was vitiated by a serious and significant error or series of such errors.
56. Having regard to the respective positions adopted by the parties and, in particular, the position adopted by the Notice Party in this Court, I consider that, of the arguable or stateable points of law identified in the judgment of Clarke J., the core question of law is whether, given that the contract between Mr. Governey and Anglo whereby Mr. Governey’s investment in the Fund was given effect to is the Investment Bond, which is characterised as being in the form of a life assurance policy, in entering into that contract, Anglo owed a duty of utmost good faith to Mr. Governey or a much greater degree of obligation of disclosure than might otherwise have been the case. I consider that the appropriate course is first to address and answer that question in the context of the facts which Mr. Governey contends were material and should have been, but were not, disclosed, and, having done so, to consider the consequences of the conclusion and its implications, in particular, in the context of the other arguable or stateable questions of law identified by Clarke J. At that stage, the extent to which it is necessary to consider those other questions will be apparent.
57. In order to address the core question, it is necessary to consider the evidence in the form of the contract documentation which was before the Ombudsman and before the High Court as to the nature of the contract entered into by Mr. Governey with Anglo.
58. Aside from consideration of the Fund Brochure which will be addressed later, the starting point in identifying the relevant contractual obligations of Anglo and Mr. Governey to each other is that on 12th January, 2006 Mr. Governey completed and signed an application form for the Investment Bond. It was a very simple document. It disclosed that the life to be assured was to be Mr. Governey and that he wished to invest €500,000 in the Fund in his sole name. Prior to completing and signing the application form he had been furnished with the Fund Brochure, to which the application form referred him for further information in relation to the Fund. The investment was made shortly thereafter.
59. With its letter dated 4th May, 2006 to Mr. Governey, Anglo furnished to him “all relevant documentation for the above-mentioned policy”, that is to say, the Investment Bond, being itemised as –
The letter of 4th May, 2006 was accompanied by a so-called “Cooling Off Notice” from Anglo, which gave Mr. Governey an opportunity to review the Investment Bond and to withdraw within thirty days from 4th May, 2006. Mr. Governey did not avail of that opportunity. Each of the documents itemised as forming part of the contract will now be considered from the perspective of the investor.
(a) the Contract Schedule,
(b) policy documents comprising -
(i) a so-called Personal Investment Bond, and
(ii) a document entitled Investment Bond Supplementary Provisions (the Supplementary Provisions),
(c) the Fund Brochure, which it was stated described the Fund, its charges and the risks associated with it, and
(d) a document referred to as Disclosure Documentation, which it was stated contained important information to help Mr. Governey ensure that the policy met his specific requirements.
60. The Contract Schedule merely gives the particulars of the Investment Bond, such as the contract number (INB/0003229), the start date (19th January, 2006), the life assured (Mr. Governey), the contribution received (€500,000) and the investment details (the Fund).
61. The Personal Investment Bond contains provisions of general application to funds maintained by Anglo. Counsel for Anglo drew attention to section 2, which explains that the funds are maintained in order to determine benefits under certain policies issued by Anglo. Section 2 provides:
62. The document which gives the clearest understanding of the effect of the Investment Bond is the Supplementary Provisions, which, as it is specifically related to the Fund, it is necessary to consider in some detail.
“Reference to the Funds and to the units are made only for the purpose of calculating the benefits conferred under this Bond and neither you nor any other person entitled to benefit under the terms of this Bond has any legal or beneficial interest in the units or Funds or the underlying assets.”
63. In Clause 1 of the Supplementary Provisions, the Investment Bond is described. It is referred to as the “Bond” and is defined as meaning “the investment policy entered into between you and us, details of which are specified at the head of the Supplementary Provisions”, the Fund being detailed at the head of the document. The Investment Bond is described as consisting of Mr. Governey’s application and the documents which accompanied the letter of 4th May, 2006, with the exception of the Disclosure Documentation. The Fund is defined as meaning “the Fund maintained by us to determine benefits under certain policies issued by us”. It is stated that the Fund, “through the purchase of units in a Jersey Trust, acquires the Kennet Shopping Centre”. The expression “Linked Assets” is defined as meaning those assets to which units allocated in the Fund are linked.
64. Clause 3 of the Supplementary Provisions, to which the Notice Party attaches importance, contains provisions in relation to the Fund and states that the applicant investor, that is to say, Mr. Governey, must familiarise himself with the details thereof as set out in the Contract Schedule. There follows a wide range of matters which it is stated Mr. Governey accepts and acknowledges by signing the application and requesting that contributions should be paid into the Fund. Some of the matters relate to risk, for example, that the value of the contributions paid into the Fund “can fall as well as rise” and that the assets comprising the Fund are “highly illiquid”, with consequent restrictions on Anglo’s ability to realise them and, therefore, to pay benefits under the Investment Bond to Mr. Governey. The specific provisions to which the Notice Party attaches importance are:
65. Clauses 4, 5 and 7 deal with the operation and management of the Fund. For example, Clause 4 prohibits switching by Mr. Governey of his investment in the Fund into other funds and Clause 7 outlines deductions and charges which may be made from the Fund.
(a) Clause 3.3, which contains a representation by Mr. Governey that he had taken independent advice as to the suitability of the investment in the Fund and that he had personally familiarised himself with and was satisfied with the composition of the assets which were to form part of the Fund; and
(b) Clause 3.4, which contains a series of acknowledgments on the part of Mr. Governey, for instance, that Anglo had no responsibility to advise him as to the suitability of an investment in the Fund for his particular circumstances.
66. The probable lifetime of the Fund is dealt with in Clause 6 in general terms. First, Clause 6.1 entitles Anglo to decide to realise the Linked Assets forming part of the Fund at any time on such terms and subject to such conditions as it determines in its absolute discretion. Some examples are given of situations in which it might decide to realise the assets, one being where changes in any legislative, regulatory or taxation practice should make such realisation necessary or desirable. Clause 6.2 states that, subject to Clause 6.1, Anglo intends to maintain the Fund for a period of five years or for any further period as it may determine in its absolute discretion. It is also provided in Clause 6 that Anglo does not require Mr. Governey’s approval in any circumstances prior to realising Linked Assets.
67. The provision in Supplementary Provisions which is of most relevance to the issue the Court is now addressing is Clause 8, which is headed “Benefits”. Clause 8.1, which is under the sub-heading “Encashment”, states that Mr. Governey will not be permitted to fully or partially encash the Investment Bond at any time before the Fund matures. Clause 8.2, which is under the sub-heading “Death”, as it would have applied to Mr. Governey being the sole life assured, provides that, if he should die while the Investment Bond is still in force, Anglo would pay a death benefit to his personal representative subject to certain conditions, for example, that the Fund would have sufficient cash or other liquid assets to cover the death benefit payable. There is also a proviso that Anglo would be in a position, on the relevant date, to make a fair and accurate valuation of the unit price of the Fund as of that date. The value of the death benefit payable would be the value of the Investment Bond as determined by a fair and accurate valuation of the unit price of the Fund. There is further provision for deferral of payment of the death benefit where the Fund would not have sufficient cash or other liquid assets to cover it, the deferral being until Anglo would be in a position to realise all or a sufficient portion of the underlying assets of the Fund. 68. While the terminology in Clause 8 as to the timing of payment of benefit to the investor, in the case of encashment (“not . . . at any time before the . . . Fund matures”), and, in the case of payment of a death benefit (in the event of the death of the life assured while “the [Investment Bond] is still in force”) is not precise, it obviously must be construed by reference to the provisions of Clause 6 outlined above. In plain terms, what the Contract Schedule and the policy documents and, in particular, the Supplementary Provisions, told Mr. Governey about when he would get a return on his investment was that it would be either –
69. The Disclosure Documentation, which accompanied the letter of 4th May, 2006, is a document entitled “Investment Bond Disclosure Information”. As outlined earlier, it is expressly provided that it is not part of the contract between Anglo and Mr. Governey. The information contained in this document is of a general nature. As was submitted on behalf of the Notice Party, it contains many caveats. At its commencement, the applicant investor is warned to make sure that the policy meets his needs. It is explained that it is a single premium investment policy, the purpose of which is to invest a lump sum with the aim of building up a fund, which increases the value of the benefits of the investor over time. It is made clear that the proceeds from the product would depend on future investment returns on the underlying assets. It is emphasised that it is a long-term commitment. The option of cancelling the investment within a period of thirty days is reiterated. The document is also helpful in explaining the nature of the investment. Giving an illustrative example of projected benefits and expenses of the investment, it outlines certain assumptions. One is that the investment is for an open ended term and assumes a total of one contribution. It also assumes that the policy does not include life cover or other risk benefits. While those matters are expressed as assumptions, they do apply to Mr. Governey’s investment. It was for an open ended term, as Clause 6 of the Supplementary Provisions makes clear. There was one contribution, as the Contract Schedule makes clear. The Investment Bond merely provided for payment of the death benefit, which was based on the value of the investment as at the relevant date, in the event of the death of the assured before the Fund matured and it did not include life cover or other risk benefits. The document also gives information on taxation issues from which it is clear that, while the investor’s contribution would remain invested, the Fund would accumulate free of tax. Tax would, however, be payable on exit from the Investment Bond on the investment growth. Similar information was furnished in the Fund Brochure.
70. The Fund Brochure, as one of the documents which is itemised in the letter of 4th May, 2006, is part of the contract between Anglo and Mr. Governey. The Fund Brochure is a twenty four page document which was produced by Anglo Irish Bank Private Bankers and bears the date January 2006. The structure of the investment is fully explained and it is illustrated graphically. It is explained that contributions to the Fund are made where investors purchase either an Anglo Pension Policy or Investment Bond. In the segment on “Exit Strategy” the contents of Clauses 6 and 8 of the Supplementary Provisions are reflected. That is followed by the segment on “Risk Factors”, which draws attention to a wide range of risks, including property value risk in respect of which it is stated:
Income risk is also highlighted, it being stated that rental income levels are subject to market forces and may fall as well as rise.
“Property values are affected by factors such as interest rate movements, economic climate and tenant performance. On realisation of the investment there is no guarantee that policyholders will recover the full amount of their investment.”
71. Against the background of that analysis of the contractual relationship of Mr. Governey and Anglo arising from the Investment Bond, I will now address the core question by considering the law on the obligation on entering into a contract of insurance of uberrima fides and, thereafter, the application of the law to the substance of the contractual relationship of Mr. Governey and Anglo. It is worth recalling that what requires to be considered is the duty of disclosure imposed by law on the insurer, not on the insured.
72. Before embarking on that task, I will now set out the position adopted by the Notice Party in its submissions to this Court on the application of the utmost good faith principle to the particular contract between Mr. Governey and Anglo referred to earlier (at para. 54). The Notice Party’s starting point is that the life insurance aspect of the investment was structured in the manner it was to facilitate a tax efficient investment structure for investors such as Mr. Governey, with the relevant risk for the purpose of the insurance contract being the life of Mr. Governey. The Notice Party’s position is that the insurance policy did not, could not and did not purport to extend to the underlying commercial risks associated with the Fund or the Linked Assets. On that basis it was submitted that the Banque Financière case does not support the existence of an obligation of utmost good faith on Anglo in connection with the underlying investment. Reiterating that the risk insured was Mr. Governey’s life and that it was not the investment risk in the Kennet Centre or in the Fund, the position of the Notice Party is that the material facts which Mr. Governey contends should have been but were not disclosed to him did not relate to the risk insured, his life. If they related to anything, it was to the potential future value of the asset linked to the units allocated to Mr. Governey in the Fund. In this context, it is submitted, no duty of utmost good faith arises as a matter of law.
Principle of uberrima fides/extent of duty of disclosure – the law
73. As is obvious from the review of the judgment of the trial judge set out earlier, in the High Court two relatively recent authorities of the Courts of England and Wales were cited on the issue of the duty of disclosure in relation to a contract of insurance, which I will now consider, together with some academic commentary on them.
The Banque Financière case
74. The earliest in time was the Banque Financière case. Both the facts and the issues in that case were extremely complex and it involved long complicated proceedings at each level, which prompted Lord Templeman in his speech in the House of Lords (at page 280) to refer to “the excesses of Jarndyce v. Jarndyce”. In order to put the passages which will be quoted from the judgments into perspective, it is necessary to give a simplified outline of the nature of the proceedings and the underlying facts. The claim was a claim for damages by a bank which had lent money to a borrower, which had provided security to the bank in the form of insurance policies under which the bank was either a co-assured or an assignee of a policy, so that the bank would be indemnified by the insurer in the event of default by the borrower, except when the default was based on fraud. The borrower having defaulted, the bank claimed damages against the insurer, the claim being based on negligence and breach of duty at common law, which is not relevant for present purposes, as well as for breach of the insurer’s obligation of utmost good faith. In broad terms, the breach of good faith alleged was the failure of the insurer to disclose to the bank deception on the part of an employee of the broker which acted on behalf of the borrower in the lending process, which, to add to the complexity, involved three layers of advancement of the monies. Matters were further complicated by issues other than the application of the principle of uberrima fides issue: an issue of causation in relation to the bank’s losses; and an issue as to whether, if a breach of the duty of utmost good faith was established, the bank would be entitled to damages as distinct from merely the return of the premiums paid by it to the insurer.
75. The case was heard at first instance by Steyn J., as he then was. His decision in favour of the bank against the insurer was appealed to the Court of Appeal and the appeal was allowed. In the Court of Appeal, judgment was delivered by Slade L.J. ( 2 All E.R. 952). He identified eleven issues (at p. 975). The issue which is of relevance for present purposes was referred to as “Issue (4)”, which was framed as follows:
The role of “Hodge” (subsequently Westgate Insurance Company Limited) in the process was as insurer. In his judgment, Slade L.J. explained the context of Issue (4) as follows (at p. 989):
“It being common ground that the contracts between the banks and the insurers were contracts uberrime fidei, was Hodge in breach of its duty to the banks of the utmost good faith?”
Slade L.J. then quoted the manner in which the point was dealt with by Steyn J. in the High Court ( 2 All ER 923 at 944), although, having done so, he expressed the view that the test of materiality adumbrated by Steyn J. was not an entirely satisfactory one. Steyn J. had stated:
“In the context of Issue (4), the principal debate in this court has concerned the proper test of materiality when the court is considering the duty of disclosure falling upon the insurer, as opposed to the insured. Not surprisingly, counsel have been able to cite very little authority giving direct guidance on this point. The process of adapting the well-established principles relating to the duty of the insured to the obverse case of the insurer is not wholly easy.”
Slade L.J. stated (at p. 990) that, in the judgment of the Court of Appeal, it would be too broad a proposition to state that any fact is material if it is “calculated to influence the decision of the insured to conclude the contract of insurance”.
“In considering the ambit of the duty of the disclosure of the insurers, the starting point seems to me as follows: in a proper case it will cover matters peculiarly within the knowledge of the insurers, which the insurers know that the insured is ignorant of and unable to discover but which are material in the sense of being calculated to influence the decision of the insured to conclude the contract of insurance. In considering whether the duty of disclosure is activated in a given case a court ought, in my judgment, to test any provisional conclusion by asking the simple question: did good faith and fair dealing require a disclosure?”
76. The alternative basis on which the Court of Appeal formulated the test of materiality was as follows (at p. 990):
It was in reliance on the last sentence in that quotation, which deals with “the duty falling upon the insurer”, that Mr. Governey argued on the application for leave that he had an arguable or stateable case that the Notice Party, as successor of Anglo, was in breach of its duty of disclosure.
“In adapting the well-established principles relating to the duty of disclosure falling on the insured to the obverse case of the insurer himself, due account must be taken of the rather different reasons for which the insured and the insurer require the protection of full disclosure. In our judgment, the duty falling upon the insurer must at least extend to disclosing all facts known to him which are material either to the nature of the risk sought to be covered or the recoverability of a claim under the policy which a prudent insured would take into account in deciding whether or not to place the risk for which he seeks cover with that insurer.”
77. The decision of the Court of Appeal was appealed to the House of Lords and the appeal was dismissed for reasons which it is not necessary to address. Indeed the only aspect of the speeches of the Law Lords which is of relevance is the consideration given to the test in relation to the duty of disclosure on the part of the insurer outlined by Slade L.J. in the Court of Appeal. Having quoted the test, as quoted above, Lord Bridge stated (at p. 268):
78. Lord Jauncey took a somewhat different view on “the duty of disclosure incumbent upon a party to a contract uberrimae fidei”, stating (at p. 281):
“I do not dissent from this statement of the ambit of the duty.”
Lord Jauncey went on to state (at p. 282) that there had been no reported cases involving the failure of an insurer to disclose material facts to an insured. However, he referred to the example given by Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905 of an insurer who insured a ship for a voyage knowing that she had already arrived. He suggested another example: insurance against fire of a house which the insurer knew had been demolished. In those examples the undisclosed information would have had a material and direct effect upon the risk against which the insured was seeking to protect himself. He observed that the insured would have said the risk no longer existed.
“The duty of disclosure arises because the facts relevant to the estimation of the risk are most likely to be within the knowledge of the insured and the insurer therefore has to rely upon him to disclose matters material to that risk. The duty extends to the insurer as well as to the insured . . .. The duty is, however, limited to facts which are material to the risk insured, that is to say, facts which would influence a prudent insurer in deciding whether to accept the risk and, if so, upon what terms and a prudent insured in entering into the contract on the terms proposed by the insurer. Thus any facts which would increase the risk should be disclosed by the insured and any facts known to the insurer but not to the insured, which would reduce the risk, should be disclosed by the insurer.”
79. An interesting feature of the decision of the House of Lords in the Banque Financière case, which, although not relevant to this appeal now, is worth recording. It was stated by Lord Templeman (at p.280) that he agreed with the Court of Appeal that a breach of the obligation of an insurer to disclose in accordance with the duty of utmost good faith does not sound in damages. Although, as recorded earlier (at para. 2), in his complaint to the Ombudsman Mr. Governey indicated that the manner in which he wished his complaint to be resolved was by reimbursement of the entire premium together with interest, damages and payment of his solicitor’s costs, the relief sought on the appeal to the High Court, as recorded earlier (at para. 5), expressly sought only the return of the premium of €500,000 paid by Mr. Governey to Anglo.
The Aldrich case
80. The more recent decision cited in the High Court was the decision of the Court of Appeal in the Aldrich case, which post-dated the decision of the House of Lords in the Banque Financière case. The facts in that case were also complex. In one of the two appeals under consideration the claimants, including Aldrich, had entered into an arrangement with Norwich Union to enable them to become names at Lloyd’s. There were three components of the arrangement between each name claimant and Norwich Union. First, Norwich Union provided a guarantee to Lloyd’s in respect of the liabilities of each name claimant at Lloyd’s. Secondly, each name claimant gave security to Norwich Union by charging certain of his assets. Thirdly, among the assets so charged in favour of Norwich Union was an endowment/life insurance policy taken out by the name claimant with Norwich Union and assigned to Norwich Union as security. Norwich Union knew, via a group of companies in the insurance market, that substantial losses were about to be incurred by Lloyd’s syndicates. One of the arguments made on behalf of the names claimants in support of their claims that they were entitled to be relieved of their obligations to Norwich Union and also to damages was that Norwich Union concealed that information in breach of a duty of utmost good faith. What had happened at first instance in the Aldrich case was that the claims by the names claimants were struck out as disclosing no cause of action. One of the issues in respect of which leave was given to appeal was whether Norwich Union owed a duty of utmost good faith, as provider of an endowment/life policy, to disclose its knowledge of impending Lloyd’s losses.
81. The first issue which Mummery L.J. addressed in his judgment was whether, as a result of the inclusion of the endowment/life policy as an integral element in the plan, Norwich Union was under a duty to act in the utmost good faith by disclosing every material fact to the names claimants. In addressing that issue, he quoted the passage from the judgment of Slade L.J. of the Court of Appeal in the Banque Financière case quoted earlier and subsequently approved of by Lord Bridge in the House of Lords. However, he also quoted the passage from the speech of Lord Jauncey in the House of Lords quoted earlier, but in truncated form so as to focus on the obligation of the insurer, thus emphasising that any facts known to the insurer but not to the insured, which reduce the risk, should be disclosed by the insurer. Mummery L. J. expressed the view that the judge at first instance was right to strike out the claims of Aldrich and the other names claimants as disclosing no reasonable cause of action. He then elaborated on the duty of good faith as follows (at p. 1970):
82. In his judgment in Aldrich, Evans L.J. stated that he found himself in reluctant agreement with Mummery L.J.’s conclusion that Norwich Union was under no duty to disclose what he colloquially described later as “inside knowledge of the pending disaster at Lloyd’s” (at p. 1794). Having stated that the meaning of “material fact” and the scope of the duty to disclose all material facts had been established in two recent judgments, one being the judgment of the House of Lords in Banque Financière, he went on to state (at p. 1974):
“The duty of utmost good faith applied only in respect of matters material to the risks to be covered by the endowment/life policy and which the prudent insured would take into account in deciding to place the risk for which he seeks cover from Norwich Union. The only matter material to the risk covered by the policy and to the recoverability of a claim under the policy was the name's life. The risk covered by the policy was not the risk of losses by the name at Lloyd's or of a draw down under the guarantee and loan facility provided to the name by Norwich Union. Nothing in the policy is conditioned on any event at Lloyd's. The risk of losses at Lloyd's is irrelevant to the risk insured against and the fact that the policy stands as security for the liability of the names to Norwich Union does not alter the risk covered by the policy. It is the risk which determines the scope of the duty to disclose. The duty of disclosure does not operate to require disclosure of any fact which would or might induce a person to enter into an insurance contract or into a composite transaction of which an insurance contract forms part as security.”
Evans L.J. made a number of observations which it is appropriate to record. He stated that the facts as to what Norwich Union knew were not relevant to the risk under the endowment policy which formed part of the plan; they were not material to the risk which was insured. Later, referring to the judgment of the Court of Appeal in the Banque Financière case, he stated that it was not sufficient, on the facts, for the names claimants to prove that they would not have embraced the plan if the alleged facts had been disclosed to them. He also held that it was not open to the Court to hold that the duty of disclosure went beyond facts relevant to the insurance contract, because of the limited meaning given to “material” in the Banque Financière case and also because he was of the view that the component parts of the plan must be regarded as separate contracts.
“‘Material’ means relevant to the risk which is the subject-matter of the insurance . . . or to the assessment of premium or the recoverability of claims. It includes facts relevant to what is termed the moral hazard, meaning ‘circumstances [which] would influence [the insurer's] judgment in determining whether he will take the risk’ . . .”.
83. In outlining the judgment of the trial judge earlier, it is recorded (at para. 39) that the trial judge quoted a passage from Buckley cited by counsel for the Ombudsman. In the commentary on an insurer’s duty of good faith in Buckley (op cit.) (at paras. 3 – 140 to 3 – 144), the author considered the decisions of the Court of Appeal and the House of Lords in the Banque Financière case. He also cited the decision of the Court of Appeal in the Aldrich case as authority for the passage (from para. 3 – 144) quoted by the trial judge.
84. This Court was referred to the commentary on the decisions in the Banque Financière case and in the Aldrich case in Good Faith and Insurance Contracts by Eggers, Picken and Foss, 3rd Ed., (London, 2010). Of relevance for present purposes is what the authors consider would be the ideal definition of materiality as regards the duty of disclosure of the insurer, if the problem was being considered afresh. In relation to the insurer’s duty, they suggest a definition along the following lines (at para. 12.13):
In that definition the authors omit the reference by the Court of Appeal in the Banque Financière case to facts which are material to “the recoverability of a claim”, rationalising the omission on the basis that those words are “redundant” as all of the facts which are pertinent to the risk will be pertinent to the claim. They suggest that, given the mutuality of the duty, it is preferable that the test of materiality is the same, mutatis mutandis, for the insurer as it is for the assured. They suggest that that was the point which was being made by Lord Jauncey in the passage from his judgment quoted earlier. The authors go on to state that the benefit of the Court of Appeal’s and Lord Jauncey’s definition of the test of materiality is that it limits the necessity of disclosure to circumstances which concern the risk to be insured.
“. . . a fact is material if it relates to the nature of the risk and would influence the judgment of a reasonable assured in deciding whether he will accept the terms of insurance offered by the insurer. There would of course be no duty of disclosure if the fact is known or ought, in the ordinary course of his business, to be known to the assured or if the fact withheld would render the bargain more advantageous to the assured.”
85. Finally, counsel for Mr. Governey referred to observations in Buckley (op cit.), when addressing an insurer’s duty of utmost good faith (at para. 3 – 141). Buckley observed that the reciprocal nature of the duty of utmost good faith has seldom been highlighted in court cases but was addressed in the High Court decision of McMahon J. in Manor Park Homebuilders Ltd.v. AIG Europe (Ireland) Ltd. IEHC 174, where McMahon J. quoted with approval from a decision of the Federal Court of Australia in AMP Financial Planning PTY Limited v. CGU Insurance Limited  FCAFC 185 (the AMP case). In the first paragraph of the passage quoted the Federal Court stated:
In his judgment McMahon J. adopted that passage as being very apt to the facts in the case before him, where, in considering, whether the defendant insurer was entitled to repudiate the contract of insurance after the plaintiff insured made a claim, he found that, in entering into a “fire only” policy of insurance on an unoccupied period house, the insurer departed from good business practice and was in breach of the duty of uberrima fides in failing to inform itself of the facts and in failing, for improper reasons, to deal fairly with the insured or consider his interest. The factual basis of that case is very far removed from the facts here and, in particular, it did not concern an issue of non-disclosure on the part of the insurer.
“The precise content of the concept of utmost good faith depends on the legal context in which it is used. In the context of insurance, the phrase encompasses notions of fairness, reasonableness and community standards of decency and fair dealing. While dishonest conduct will constitute a breach of the duty of utmost good faith, so will capricious or unreasonable conduct. While an essential element of honesty may be at the head of the concept of utmost good faith, dishonesty is not a prerequisite for a breach of the duty. . . .”
Application of law on obligation of uberrima fides/material disclosure to the contract
86. As has already been explained, in applying the foregoing legal principles to the contract entered into by Mr. Governey with Anglo, it is crucial to identify precisely what is the substance of the contractual arrangement between the parties. It is true, as counsel for Mr. Governey submitted, that there was a single contract, although the rights and obligations thereby created are to be found in the various contract documents considered earlier. Moreover, one could regard the contract as having been described as an “insurance contract”, or, as was also submitted on behalf of Mr. Governey, as having been held out by Anglo as an “insurance contract”. This is because the form of the investment in the Fund was variously described in the contract documentation by reference to “insurance” and “policies”, for example, in the Fund Brochure as “investment in the Fund . . . made through [Anglo] insurance policies”, and in the Supplementary Provisions in the definition of “Bond” quoted earlier, that is to say, that it means “the investment policy entered into” between Mr. Governey and Anglo, being the Investment Bond. However, taking into account the entirety of the contractual relationship between Anglo and Mr. Governey in substance it cannot be characterised simply as an insurance contract. Indeed, as has been recorded earlier, Clarke J. in his judgment (at para. 5.12) questioned the application of the concept underlying the doctrine of uberrima fides to “a case where the substance of the arrangement is an investment in the guise of a life assurance policy”.
87. Looking more closely at the provisions of the contract between Mr. Governey and Anglo in its overall context than it was appropriate for this Court to do on the hearing of the application to this Court for leave, the substance of the contract was that it was an investment arrangement. Mr. Governey invested €500,000 with Anglo on the terms contained in the contract documentation, including the Supplementary Provisions. In accordance with the terms of the Supplementary Provisions recorded earlier, it was agreed that the ultimate result of the investment would be that Mr. Governey would be entitled to encash the Investment Bond once the Fund matured. Alternatively, in the event of the death of Mr. Governey while the Investment Bond was still in force, his estate would be entitled to the payment of a death benefit. In either situation, the value of the return to Mr. Governey or to his estate was to be determined in accordance with the provisions of the contract. Although described as an insurance policy, the contract between Anglo and Mr. Governey not being in substance an insurance policy, unlike the contracts under consideration in the Banque Financière case and in the Aldrich case, in my view, it was not a contract to which the duty of utmost good faith applied on the part of either or both parties. However, even if it was an insurance contract, applying the test laid down in the Banque Financière case, the facts which Mr. Governey contends were non-disclosed material facts were not “material” on the application of that test.
88. Getting to the nub of Mr. Governey’s complaint to the Ombudsman, the facts which he contended were not, but should have been, disclosed to him were facts from which an investor might have predicted that the sole asset underlying the Fund, the Kennet Centre, would over the period of the Investment Bond diminish in value. Assuming for present purposes that the test formulated by the Court of Appeal and approved by the House of Lords in the Banque Financière case applies in this jurisdiction, the question which arises is how those facts, assuming that they were known to Anglo, could be found to be “material either to the nature of the risk sought to be covered or the recoverability of a claim under the policy”. The only risk covered by the Investment Bond was that Mr. Governey might die while the Investment Bond was still in force. Fortunately, that event did not occur, so that encashment was the only means of return of benefit to Mr. Governey which was operable under the contract. But even if that event had occurred, having regard to the provisions of the contract as a whole, it would not have been the case that what Mr. Governey contends Anglo knew about the potential value of the Kennet Centre, but did not disclose, was material either to the nature of the risk sought to be covered or the recoverability of the claim under the Investment Bond. The death benefit would have been payable in accordance with the terms of the contract and would have been recoverable by the estate of the investor in the event of the death of the life covered, while the Investment Bond was in force.
89. The potential problem which might have ensued on the death of the life assured while the Investment Bond was still in force, which counsel for Mr. Governey identified and was the nub of his complaint to the Ombudsman in 2010, was that the quantum of the death benefit might have been diminished or, indeed, it might have been wiped out altogether because of the depreciation of the value of the Kennet Centre over the years. However, that was not a risk which was covered by the contract, or, in other words, a risk for which Anglo assumed responsibility under the contract. On the contrary, it was a risk which Mr. Governey expressly agreed under the terms of the contract that Anglo would not have responsibility for. The provisions of Clauses 3.3 and 3.4 of the Supplementary Provisions, on which counsel for the Notice Party relied have been summarised earlier and, as counsel for the Notice Party submitted, they are wholly inconsistent with the complaint made by Mr. Governey to the Ombudsman at the core of the subsequent appeal. That is true, but Clause 3.4, in part, is even more significant.
90. That part of Clause 3.4 provides:
In reality, Mr. Governey was, by the representations and acknowledgements made in Clauses 3.3 and 3.4 and, in particular, in that provision, waiving responsibility to him on the part of Anglo in relation to the future performance of, and by implication disclosure by Anglo to him of facts relating to, the potential future value of the asset linked to the units in the Fund allocated to him, that is to say, the Kennet Centre.
91. The invocation of the decision of the Federal Court of Australia in the AMP case by counsel for Mr. Governey does not advance his case on the core question. Even if, as was submitted, the concept of utmost good faith in the context of insurance encompasses notions of fairness, reasonableness and community standards of decency and fair dealing as well as honesty, for the reasons outlined, the contract between Mr. Governey and Anglo in substance was not a contract of insurance which gave rise to the obligation of utmost good faith. Apart from that, the sole basis of Mr. Governey’s complaint is non-disclosure. No allegation of bad practise or lack of fair dealing has been, or could have been, made against Anglo in relation to the provision of the investment opportunities of which Mr. Governey availed.
Conclusion on core question of law on which leave was given
92. I am satisfied that the contract entered into by Mr. Governey with Anglo was not, in substance, a contract of insurance. In substance it was a contract under the terms of which Mr. Governey was to invest a sum of money in the Fund managed by Anglo and to receive a return on the investment in accordance with the terms of the contract documents. Apart from that, the facts which Mr. Governey contends were material facts which were known to Anglo and which he contends should have been, but were not, disclosed to him, which related to the potential future value of the Kennet Centre, were not material to the risk covered by the Investment Bond, the death of Mr. Governey while the Investment Bond was in force. Ignoring its suggested redundancy by Eggers et al. as outlined earlier (at para. 84), nor were they material to the “recoverability of a claim” under the Investment Bond in accordance with its terms by the personal representative in the event of the death of the life assured. The obligations of Anglo in relation to the return on the investment to Mr. Governey or to his personal representative under the contract were governed solely by the terms and the provisions of the contract documents and there was no greater degree of obligation of disclosure upon Anglo than was provided for in the contract documents. In fact, under the terms and provisions of the contract documents, Mr. Governey expressly waived responsibility to him on the part of Anglo in relation to the potential future value of the Kennet Centre and by implication disclosure of the facts which he alleges should have been disclosed. The limited life assurance component of the contractual relationship created by the Investment Bond was subject to the same absence of responsibility on the part of Anglo in relation to the potential future value of the Kennet Centre and, accordingly, was not subject to the duty of disclosure contended for by Mr. Governey.
93. In responding to the submissions made on behalf of the Notice Party in this Court on the core question, counsel for Mr. Governey submitted that the Notice Party was not entitled to adopt a position which was contradictory to the position adopted before the Ombudsman, in that, before the Ombudsman, the Notice Party did not dispute that the contract was a contract of insurance or that the principle of uberrima fides applied to it. Further, it was submitted that it had been acknowledged by the Notice Party that, if Parkway did pose a risk to the Kennet Centre, the relevant facts which formed the basis of the risk should have been, and would have been, disclosed by Anglo to Mr. Governey. It is understandable that Mr. Governey should feel aggrieved that the Notice Party should be allowed dispute his argument on the core question on the second stage of the process in this Court, leave having been granted by this Court, when –
Having said that, notwithstanding the position adopted on behalf of the Notice Party before the Ombudsman, leave was sought on behalf of Mr. Governey to argue the question as to the duty of disclosure of Anglo to Mr. Governey on the review in this Court and such leave was granted. This Court in the circumstances could not preclude the Notice Party from disputing the argument made on behalf of Mr. Governey and, in any event, the argument did not stand up. It may be that the unsatisfactory nature of the process will have a bearing on where liability for costs of the proceedings lies. That is something the Court will hear further submissions on.
(a) the Notice Party did not dispute Mr. Governey’s position before the Ombudsman but defended the complaint on the basis merely that there had been no material non-disclosure, and
(b) the Ombudsman made the Finding without addressing the question, on the basis that there had been no material non-disclosure by Anglo, and
(c) on the appeal to the High Court from the Finding, although the uberrima fides point was argued on behalf of Mr. Governey and disputed on behalf of the Notice Party, no finding was made on the core question in the High Court, on the basis that it was not necessary to do so.
Consequences of decision on core question
This Court having wholly rejected Mr. Governey’s argument on the core question, the answer to which, when contextualised, is that there was no duty of disclosure on the part of Anglo to Mr. Governey in relation to the potential future value of the underlying asset of the Fund, the Kennet Centre, there is no basis for Mr. Governey’s claim that he is entitled, on the grounds of the alleged material non-disclosures, to repudiate the contract and to recover the sum of €500,000 invested by him on the appeal. Nor, as a matter of law, would there be any such entitlement if the matter was remitted to the Ombudsman for review. In the circumstances, even if it were the case that Mr. Governey could satisfy this Court that he is in a position to sustain the other questions of law identified by Clarke J., in reality, he would not be in a position to obtain the relief which he seeks, which is the return of the investment of €500,000.
94. On the application to the High Court, what Mr. Governey was seeking, in addition to an order setting aside the Finding of the Ombudsman, was either –
95. Accordingly, it is unnecessary, and I consider that it would be inappropriate, to address those questions of law given that neither the decision of the Ombudsman nor the decision of the High Court addressed the core question. Insofar as there is an assumption underlying the decision of the Ombudsman that the contract between Anglo and Mr. Governey was a contract of insurance to which the duty of utmost good faith applied and the duty of disclosure in relation to the potential value of the Kennet Centre, which assumption was not questioned by the trial judge, the assumption was wrong. More fundamentally, having regard to the decision on the core question, the complaint by Mr. Governey could not have been found to be substantiated by the Ombudsman irrespective of the view of this Court on the other questions. In those circumstances, consideration of the other questions identified in the judgment of Clarke J. would be entirely theoretical.
96. The only additional observation I would make is that it would have been open to the Ombudsman, in accordance with s. 57BZ(1)(d) of the Act of 1942 to decline to investigate Mr. Governey’s complaint if Anglo, in addressing the complaint before the Ombudsman, had adopted the position which it adopted in this Court. The core question as identified in this judgment has raised a difficult mixed question of law and fact, which has not previously been considered by this Court. Moreover, there was an alternative and satisfactory means of redress which could have been pursued by Mr. Governey in relation to the conduct on the part of Anglo complained of. He could have brought legal proceedings in the High Court against Anglo at the time he initiated his complaint to the Ombudsman.
97. It is proposed that there should be an order of this Court that, on the review of the determination of the High Court, Mr. Governey has not established that there was a duty of disclosure on the part of Anglo to him in relation to the potential future value of the underlying asset of the Fund, that is to say, the Kennet Centre, and that, for the reasons outlined earlier, the other arguable or stateable questions identified in the judgment of 6th May, 2015 do not arise for consideration. Further, there will be an order affirming the order of the High Court that Mr. Governey’s application to the High Court was refused. It is proposed that the Court should hear further submissions from the parties in relation to the costs of the proceedings in the High Court and in this Court, other than the costs of the application to this Court pursuant to s. 57CM(4) of the Act of 1942 as determined by the order of this Court dated 6th May, 2015.