Homer nodded; the “press release” from Bill Prasifka was in fact the Financial Services Ombudsman’s Annual Report for 2009.

Bill took the job in 2010, so he’s looking back to the long lost past.

Surprisingly for him (he’s self confident and apparently not self satisfied) he made no remark about the following in the report:

“In two instances the compensation awarded is being paid over a period of time in instalments as the providers’ professional indemnity insurance would not pay up the amounts in question – €50,000 and €15,000 respectively. In two other instances where High Court appeals went in the Ombudsman’s favour the provider concerned stated that it may not be able to pay the €60,000 awarded as it had no funds. Where large awards had been made and are under appeal to the High Court – €500,000, €700,000 and €100,000 – the professional indemnity insurer of the providers has indicated that it will not be willing to pay up that award if the appeal is unsuccessful.”

Subject to clarification as to the reasons for refusal of indemnity (Bill seems to be implying that the insurers are refusing payment to HIM. Well, yes they would. Because we in Ireland do not have UK legislation to allow injured third parties claim benefits of a policy taken out by a wrongdoer.

Will Bill mention this to Mathew Elderfield and Professor Holohan? Will they write a letter to the Taoiseach seeking urgent legislation to remedy the situation? Will the Taoiseach act? Will he, feck!

Proving a loss of profit is a common event in “business interruption” insurance. It will also arise as part of a claim against a wrongdoer where the damage complained of has closed or stymied the business.

However, it is not immediately obvious what the method of calculation should be. The claim is, inherently, speculative. The loss is the profit which would have been generated but for the wrongful act. The turnover for a prior relevant period would be a start, but not conclusively so; what if the turnover was in sharp decline? (As has happened in banking and construction in Ireland recently). Of course the turnover may have been accelerating (as is the current position with the business of lawyers practising in the field of professional negligence).

It is necessary therefore to find the trend.

It is also necessary to remember that a reduction in turnover will not reflect exactly the reduction in profit; many overheads remain while the business limps on; in short, the profit reduction percentage will exceed the reduction in turnover expressed as a percentage.

1. I have lost my savings in an investment with XXX Building Society. What can I do?

It depends on the facts. Deposits in a Building Society or a Bank are protected by the Government guarantee. Even with the collapse of Anglo Irish Bank and Irish Nationwide Building Society, the depositors with those institutions were secured and the deposits are available to be withdrawn. (In reality, all the deposits were lost in those institutions; it is the taxpayer who is replacing your lost deposit).

2. My savings were not a deposit when they lost their value. Can I still do something?

Other forms of “saving” are not as protected. If you purchased a bond it may be tied to general market values in say, the property market. The terms of the bond may govern your exposure to that risk.

3. I did not know of the risk when I bought the bond. Does that matter?

Yes, it matters a great deal. Only an unsophisticated investor would not have appreciated the risk; even so, the documentation given to you would have told you of the risk. However, if what you say is true, it shows you were an unsophisticated and vulnerable consumer. A consumer, at law, is not bound by unfair terms (or prohibited practices).

4. What is an unfair term or prohibited practice?

An unfair term is one falling into the definition of that phrase in SI 27/1995 as amended by SI 307/2000.

SI 27/1995 says:-

“…a contractual term shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer, taking into account the nature of the goods or services for which the contract was concluded and all circumstances attending the conclusion of the contract and all other terms of the contract or of another contract on which it is dependent.”

5. What does that mean?

It depends on the facts of the case. Pay particular attention to Paragraph 2 of the 3rd Schedule of Statutory Instrument 27/1995. Sub-paragraphs g), j) and l) of Paragraph 1 of the 3rd Schedule do not apply to:-

“…transactions in transferable securities, financial instruments and other products or services where the price is linked to fluctuations in a stock exchange quotation or index or a financial market rate that the seller or supplier does not control;”

6. Is that a reference to prevailing property market values?

It would appear not. (The Stock Exchanges do not maintain a direct “property index”). Furthermore, that limitation only applies to transactions “… where the price is linked…”. If the price of the transaction is not so linked, the limitation is not relevant.

7. What about prohibited practices. What are they?

They are listed in Section 55 of the Consumer Protection Act 2007. You should carefully read Section 55 (1) (t), which reads:-

“(t) making a representation to a consumer that is inaccurate to a material degree in respect of market conditions, or in respect of the possibility of finding a product, with the intention of inducing the consumer to purchase a product at conditions less favourable than normal market conditions;”

That indicates that any aggrieved “investor” should explore what were the normal market conditions at the time of “purchase” and compare them with the conditions represented to him/her. (All of this is a reference to misleading information given to the investor, not a reference to better terms being available elsewhere). So, if the consumer is misled into thinking that a bond is as safe as a deposit, that is a prohibited practice. Or if the consumer is misled into thinking that a bond is the same as a deposit but with a higher interest return, that is a prohibited practice.

8. I thought only consumers who bought “goods” as opposed to “services” were protected by the Consumer Protection Act?

You were mistaken. It applies to the supply of goods and services. The Act says:-

“” product ” means goods or services;”

9. If I can prove I was misled do I escape from the loss?

Possibly. Read Section 43 of the Consumer Protection Act 2007. Section 43 (1) provides:-

“43.- (1) A commercial practice is misleading if it includes the provision of false information in relation to any matter set out in subsection (3) and that information would be likely to cause the average consumer to make a transactional decision that the average consumer would not otherwise make.”

Sub-section (3) (iv) refers to “…its benefits or fitness for purpose;” In short, if the consumer informs the trader of his or her purpose, the trader will be misleading the consumer if the product is sold avowedly for that purpose and it does not serve the purpose. Needless to say, if the consumer is misled as to the fitness for purpose of the investment, the consumer cannot make an appropriate transactional decision. There are many instances of misleading practices in the Section. The more instances that apply to any case, the greater the chance of prevailing in the struggle to get compensation.

10. What about the obligations on financial services practitioners to comply with SI 60/2007. Surely that is of assistance to consumers?

Possibly it is. To be sure, a consumer should always insist that the trader confirm, in writing, that it subscribes to, and complies with, the provisions of that Statutory Instrument (SI 60/2007). The Statutory Instrument embodies the regulations to which banks etc. are obliquely referring when they say in their advertisements that they “… are regulated by the Financial Regulator”. (We now know that the Financial Regulator was not regulating them). By procuring the reference in writing, the consumer will, without the possibility of contradiction or denial, get the benefit of the provisions of SI 60/2007 through the application of Section 45 (1) (c) of the Consumer Protection Act 2007.That Section reads:-

“45.- (1) A commercial practice is misleading if-
(a) it involves a representation that the trader abides, or is bound, by a code of practice,
(b) the representation referred to in paragraph (a) would be likely to cause the average consumer to make a transactional decision that the average consumer would not otherwise make, and
(c) the trader fails to comply with a firm commitment in that code of practice.”

11. Surely the Financial Regulator will look after me?

No. He may prosecute the offender, but he will not look after a consumer.

12. What about the Financial Services Ombudsman? Will he look after me?

He may, but be ready to urgently apply to the High Court in the event he makes a finding adverse to your interests. Under Section 57CI of the Central Bank Act 1942 as inserted by Section 16 of the Central Bank and Financial Services Authority of Ireland Act 2004, the adjudication of the Ombudsman is binding on a complainant. There is, according to the Ombudsman’s office, only 21 days from the date of the decision (not the date the Complainant learns of it) to lodge the appeal in the High Court. This is very inadequate and calculatedly so. See the substantial review of the Ombudsman process in the High Court JR decision relating to Enfield Credit Union and J & E Davy HERE.

13. Do I have to go through the Financial Services Ombudsman’s procedure?

No. You can litigate directly with the financial services provider in the appropriate court.

14. Is there an advantage in going to the court directly?

Yes. As noted by the High Court judge in the Enfield v Davy case, the court will not substitute its judgment for the decision of the Ombudsman. Consequently, if that High Court view of the legislation is correct (it may not be), a Complainant will lose the control over the complaint that litigation will give and will cede control to the Ombudsman, whose procedures may turn out to be cavalierly informal.

15. Is there a disadvantage in going to court directly?

Yes. It is much more expensive than the Ombudsman’s process. However, that disadvantage may be offset by the fact that the case will be heard in open court. The Ombudsman’s procedure is dealt with in private. It will often be well worth the extra expense to control the procedure and have the case heard in public. Furthermore, the application of consumer legislation is likely to be more rigourous in a court than in the Ombudsman’s process.

Michael O’Leary, presumably, finally sought or was given proper legal advice. We can presume this from his craven back-pedaling we saw in the last few days.
He firstly refused to comply with Ryanair’s obligations, to compensate his customers for cancelled flights, under Council Regulation 261/2004, stating his obligations in terms of contract obligations only.
The next day he, cack-handedly said Ryanair would meet its obligations. He was cack-handed because the manner in which he made the concession was misleading; it suggested he had not changed his position and that customers were not entitled to any of the benefits he should have given to them.
If it were not for the fact that he referred to the Regulation obligations as “absurd” one would think he did not know of the Regulation, but he clearly did. What, then, changed his mind? What did he not know?
Despite the shameful failure of the Irish Government to introduce the possibility of conducting “class actions” in Ireland, O’Leary may have finally realized that he was going to be plunged into class actions in the UK.
Without exception, Ryanair travelers are “consumers” under EU law. Consequently, they are entitled to litigate disputes with Ryanair in the consumer’s place of residence.
Many of Ryanair’s customers were UK residents; they were going to issue proceedings in the UK. There, they could, and surely would, band together and litigate their claims as a class action. By this means they would off-set the advantage of size that Ryanair has over any single consumer, a circumstance perpetuated in Ireland by the sullen laziness of successive Irish Governments. (All that is required is to amend the Rules of the Superior Courts; something the Minister for Justice etc. could do in a flash).
As a measure of the power and benefit consumers would get from a class action, O’Leary folded just at the possibility of being at the receiving end of one, not waiting to find out what the experience would be like, an experience Brian Cowen will deny to Irish consumers even as he is driven from office.

Here are some issues not addressed so far (in the papers I read).

(A) Quinn Insurance has a board of Directors. Sean Quinn is not on that board. The board has said nothing about the seizure of the company by the Provisional Administrators. Sean Quinn never stops talking about it and issuing press releases and public statements, including TV interviews.

Is he in fact in charge of Quinn Insurance?

This is possible. Under Section 27 of the Companies Act 1990:-

“…a person in accordance with whose directions or instructions the directors of a company are accustomed to act (in this Act referred to as “a shadow director”) shall be treated for the purposes of this Part as a director of the company…”

Does the Financial Regulator know anything about this that we don’t?

(B) Quinn Insurance has been accepting professional indemnity business from British solicitors. The mind boggles. Every now and again a wave of mortgage fraud sweeps Britain. Irrespective of whether the solicitors are complicit, the claims are numerous and large. It is very difficult to calculate the proper premium to match the risk. It is not easy, either, to refuse indemnity; the insured solicitors can fight.

Remarkably, the builder of the Courts of Justice in the Strand, in London, became insolvent during and as a consequence of the work.
Many Irish builders are now becoming insolvent. That’s inevitable in circumstances where their employers, developers, are now insolvent and heading into NAMA.
Whatever the reason, this kind of difficulty is endemic for builders. In Marlborough v Strong [1721] 1 Bro. (P.C.) 175 the builder of Blenheim Palace was shortchanged by the Duke of Marlborough to the tune of £7,300 (an enormous sum).
The Duke refused to pay the shortfall on the grounds that his alleged agent, the Earl of Godolphin was not his agent. In fact the Duke had engaged the services of the Earl precisely to act for him in relation to the building; to employ people (including the architect, Sir John Vanbrough); and to enter contracts for the purpose. The Duke claimed that the Earl was acting as Lord High Treasurer of England and not as his private personal agent. The court thought otherwise and gave judgment for the builders.
(The Duke resembled some of Ireland’s developers; the Duchess reported him as not bothering, on one occasion, to remove his high riding boots in going to the task of “pleasuring” her.)

Many professionals (doctors, solicitors, dentists, architects, surveyors etc.) provide services to “consumers”.
Section 2 (1) of the Consumer Protection Act 2007 defines a consumer:

“” consumer ” means a natural person (whether in the State or not) who is acting for purposes unrelated to the person’s trade, business or profession;”

Services are covered by the Act of 2007 explicitly and under the definition of “product” which “means goods or services”.
The Act prohibits misleading commercial practices and provides:

“46.- (1) A commercial practice is misleading if the trader omits or conceals material information that the average consumer would need, in the context, to make an informed transactional decision…”

The Act defines “transactional decision” as:

” transactional decision ” means, in relation to a consumer transaction, any decision by the consumer concerning whether, how or on what terms to do, or refrain from doing, any of the following:
…(e) exercise a contractual right in relation to the product;”

Section 46 transposes the terms of Article 7 of the Unfair Commercial Practices Directive into Irish law. The section prohibits the omission or concealment of information and/or the provision of such information if it is… “unclear”… etc. Prior to Section 46 it was not statutorily misleading to withhold relevant information from a consumer. “Contractual right” includes the right to issue proceedings and to know the factual basis of that right. In short, Section 46 of the Act of 2007 appears to require of a “trader” that he/she/it disclose to a consumer facts necessary to ground a claim of negligence against the professional.
Previously, the nearest pertinent law on this was seen applied in Gough v Neary & Anor. [2003] IESC

Judge Goeghegan said in that case:

“The plaintiff did not know that contrary to the false information given to her the hysterectomy was unnecessary until late 1998 or, indeed, some time after that when as a consequence of media coverage in relation to Dr. Neary and hysterectomies which he had carried out on a number of patients in connection with birth deliveries, she acquired the knowledge that the operation was unnecessary. That being so and in the absence of authorities, I would be of opinion that the plea of statute bar must fail.”

The Consumer Protection Act 2007 appears to have moved the focus from the positive action of the Defendant to the deprived (of knowledge) state of the Plaintiff.
Concomitant rights of discovery would seem to follow in any litigation where the Plaintiff is a “consumer”. Current rules of court do not appear to recognize this.

Where the professional is in the building business (or is a builder), Section 46 of the Act of 2007 will affect the “contractual” duty on such a professional of making disclosure of defects in, say, design, even after the completion of the contract.
See New Islington New Islington and Hackney Housing Association Ltd v. Pollard Thomas and Edwards Ltd [2000] EWHC Technology 43.

See HERE for a post on the possibility of difficulties with insurance companies. Readers might like to know of the provisions of Section 55 (3) (f) of the Consumer Protection Act 2007.

It reads:

“55.- (3) A trader shall not engage in any of the following commercial practices:

… (d) in relation to a consumer’s claim on an insurance policy, doing either or both of the following:
(i) requiring the consumer to produce documents irrelevant to the validity of the claim;
(ii) persistently failing to respond to the consumer’s correspondence on the matter, in order to dissuade the consumer from exercising contractual rights in respect of that claim;…”

Practically, when you get this kind of run-around, phone your solicitor.

Receivers of stolen property do not pay full value for the property. A receiver is a person who buys the property from the thief or someone deriving, consciously, possession from the thief. Anyone in possession after the theft derives possession from the thief, whether they know it or not. The knowledge of the person decides the point as to whether they are a receiver or an innocent person in possession. (That knowledge can be inferred; if the property is bought for a considerable discount on its true value there is an implication that the purchaser knows the goods are stolen. To be suspicious is to know, for these purposes).

In the world of commerce, possession alone is insufficient to transact business; title or ownership is indispensable. (There are very rare exceptions).

Consequently, purchasers of stolen property are at risk of losing the money they pay for the property. We see this in Mallett & Son [Antiques] Ltd -v- Rogers [2005] IEHC 131.

The Plaintiff purchased a piece of furniture from the Defendant. It was an antique piece and of very high value. It had been stolen ten years previously. When the property was located by its true owner as the Plaintiff put it up for sale in London it was returned to the owner and the Plaintiff claimed for its loss against the Defendant.

Amusingly, as recorded by the judge,

“The defendant claims that the plaintiff was guilty of negligence and breach of the duty of care which it owed inter alia to the defendant, by failing to take any or any reasonable steps to carry out appropriate checks on the authenticity of the bookcase (notwithstanding considerable experience and expertise in the buying, selling and restoration of antique furniture).
The defendant claims that if the plaintiff had exercised reasonable care it would have discovered that the bookcase had in fact been stolen and was the property of Lord Roden and would have to be returned to him.”

This was an absurd proposition. On the facts, the Defendant was in the antiques business himself. As a practical matter he was in at least as good a position, as the Plaintiff, to make inquiries.

More importantly, the issue is dealt with in the Sale of Goods Act 1893 (as amended). Section 12 reads:

“(1) In every contract of sale, other than one to which subs. (2) applies, there is
(a) an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods and, in the case of an agreement to sell, he will have a right to sell the goods at a time when the property is to pass,
(b) an implied warranty that the goods are free, and will remain free until the time when the property is to pass, of any charge or encumbrance not disclosed by the buyer before the contract is made and that the buyer will enjoy quite possession of the goods except insofar as it may be disturbed by the owner or other person entitled to the benefit of any charge or encumbrance so disclosed.”

The contract between the parties was governed by the terms of the 1893 Act and the Defendant was in breach of the contract. That breach resulted in a claim for £111,533 and judgment in that amount.

When we insure our property, we conclude a contract of insurance with the insurance company.

The terms of the contract will generally be expressed as a “policy”, a particular name for an insurance contract. Sometimes it is not. There may be no actual policy. There may be a “cover note”. This may or may not refer to standard terms. If it does it is a matter of interpretation whether those “standard terms” form part of the contract.

This can cause difficulty for the insured person, but more often than not, it causes profound difficulties for the insurance company.

In Manor Park Homebuilders v AIG Europe (Ireland) Ltd. [2008] IEHC 174, the court heard evidence that the contract of insurance consisted of one word in an email.

This is good news for lawyers, deo gratias.