High Court of Ireland Decisions

1. The Plaintiff is a substantial farmer residing and working outside Cashel in Co. Tipperary. In this action he has sued the Defendant bank for damages for alleged negligent advice given to him by the bank not to avail of the tax amnesty which came into being in August 1988. As to what precise advice was sought may be open to different interpretations and therefore the introductory summary which I am giving will be elaborated on considerably in the course of the judgment. As I will be attaching some significance to the pleadings I think it important to start by outlining how the Plaintiff's case was pleaded in the Statement of Claim. That Statement of Claim was delivered as far back as 3rd August, 1994 and insofar as it contains alleged facts it can be reasonably assumed that it represented the instructions given by the Plaintiff to his own Solicitors at the time.

2. The Statement of Claim sets out that since 1960 the Plaintiff had effectively been a customer of the bank or its predecessor and had from time to time deposited various sums of money with the bank. It is pleaded in paragraph 4 of the Statement of Claim as follows:-

3. At this stage I would just signpost the use of the word "informed" and the use of the word "eventually". What seems to be suggested in the Statement of Claim is that the bank was told the reason for what turned out to be substantial deposits, namely, that they would eventually be required for the education of the children and having regard to the evidence at the hearing I would accept that the bank was probably informed that the education being referred to was third level education. In paragraph 5 of the Statement of Claim there is simply a bald statement that in or about 1982 the bank requested the Plaintiff to supply a foreign address as this was required because of some new legislation. It is pleaded that the Plaintiff thereupon gave the bank the address of his sister in Birmingham. I think it important to cite paragraph 6 in full as it will prove helpful in interpreting the evidence adduced in Court. The paragraph reads as follows:-

4. The rest of the Statement of Claim is routine in that it pleads reliance on the advice, negligence in giving the advice and loss and damage suffered etc. I now therefore turn to the evidence itself.

5. In the Plaintiff's history the first matter of significance was a conversation which the Plaintiff had with the then manager of the bank in Cashel, Mr. Denis Murphy. That was in 1978. The Plaintiff explained that he and Mr. Murphy had a very good relationship and that Mr. Murphy used to give him advice of all sorts. He used to discuss the farm with him and various aspects of his business. In particular, Mr. Murphy used to advise him as to how to invest his money. In fact, according to the Plaintiff, he used to just leave it to Mr. Murphy and Mr. Murphy arranged for it to be placed in the appropriate account. But in 1978 Mr. Murphy suggested to the Plaintiff that he would earn a better rate of interest if the money was put into a subsidiary of the bank in Northern Ireland. About £70,000 was so deposited. No tax was ever paid on that money while it was in Northern Ireland and I am satisfied that the Plaintiff was well aware that no tax was paid on it. Of course it would have been for the Plaintiff himself to have returned it for tax purposes. He clearly did not do so and what is more his Accountant, Mr. Meade knew nothing about it, a point to which I will be returning. In connection with the 1978 discussions, however, the Plaintiff's Counsel, Mr. Keane, asked the Plaintiff whether the money which was sent to Northern Ireland had anything to do with his children. His reply at Q. 32 in Book 2 of the transcript was as follows:-

6. Having regard to the pleadings to which I have already referred, this was a surprising answer. I am absolutely certain that if the Plaintiff had instructed his Solicitors that a trust had been created for the children in connection with the monies deposited in the bank, that fact would never have been left out of the Statement of Claim. I do not believe he gave any such instructions. I accept the evidence of the bank witnesses that at no material time was the word "trust" ever used to their knowledge. I believe that it has been introduced into evidence by the Plaintiff to give some kind of spurious credence to his own evidence that he was quite unaware of any element of tax evasion in relation to this account and had understood from Mr. Murphy that because there was a trust for the children no tax was payable. Not only is it inherently unlikely that the Plaintiff had that belief but I am satisfied on the evidence that he never had it. It is the Statement of Claim in my view which gives away the true story. The children were only involved insofar as they formed the motive for the deposit deliberately hidden by the Plaintiff so as to evade tax, with no doubt the misguided good intention of benefiting his children. But I am satisfied that there was never any question of a trust in the legal sense.

7. The next event of significance occurred in 1982. The bank suggested to the Plaintiff that the money be brought back from Northern Ireland. As Mr. Hardiman successfully brought out in cross-examination there is a certain amount of confusion and as he would argue deliberate confusion, as to how the accounts were recorded and identified. A false address for the Plaintiff in the form of "The Glebe Hotel Epson Downs, Epson, England" was used. I am inclined to accept that this address was entirely invented by the manager of the bank, Mr. Murphy and that the Plaintiff was not even aware that it was used. As will become more and more clear, as I proceed with the judgment, the bank, in the form of Mr. Murphy, was not only heavily involved with the Plaintiff in the hiding of the Plaintiff's money from the Revenue Commissioners but was actively advising and encouraging him as to how this could be done. Given that what is at issue in this case is a fairly net question both as to its factual and legal aspects, it might seem surprising that the hearing took so many days but that was because Counsel for the Plaintiff slowly and skilfully brought to light both the bank's involvement in the tax evasion and to some extent the bank's own interest from a competitive point of view in maintaining a situation whereby the Plaintiff received the highest possible yield from his deposit, given that the Plaintiff's account was one of the biggest in the branch. But none of this evidence was of particular assistance to the Plaintiff unless it tended to support the credibility of the Plaintiff's own unlikely story. I think that it did not do so. All that has been established is that the bank was clearly implicated in the tax evasion as a consequence of its own activities, encouragement and advice but I am equally certain that at all material times the Plaintiff himself was well aware that the monies were being hidden for tax purposes and that they would in the ordinary way be subject to tax. It is significant that the Plaintiff never told his accountant, Mr. Meade at any stage about the monies he had on deposit in the bank.

8. Even though the money had been returned from Northern Ireland no tax was paid by the Plaintiff in respect of it between 1982 and 1986 when the DIRT system came in. The Plaintiff's continued excuse for this is that the bank was administering some kind of internal trust for his children and that as he understood it from the advice given to him by the bank, no tax was payable in respect of such trust monies. For the reasons which I have indicated, I reject the Plaintiff's evidence insofar as he suggests that he was unaware of tax evasion.

9. In 1986 DIRT was introduced for the first time. A senior officer of the bank, Mrs. O'Sullivan, had a discussion with the Plaintiff. I should perhaps pause here to explain that in relation to these deposit monies the Plaintiff never had any dealings in the bank except with the manager, Mr. Murphy or with Mrs. O'Sullivan. Otherwise he would have dealt with any of the other officials of the branch. This fact lends further credence to my belief that the Plaintiff at all material times had full knowledge that he was evading tax.

10. Returning to the discussions, Mrs. O'Sullivan explained to the Plaintiff about the DIRT and suggested that the provision by him to the bank of a genuine overseas address such as the English address of his sister "would get us over the technicalities of the last budget". He then provided the bank with the address 124 Newbridge Road, Birmingham which was the address of his sister but of course the bank at all material times knew well that the Plaintiff was living in Racecourse Road near Cashel and was not in residence with his sister in England. All the bank was doing was substituting a pseudo genuine English address for a totally bogus one.

11. In case it is thought that I have overlooked it, I should perhaps mention that at some stage a major row broke out between the bank and Mr. Gayson over the return he was achieving on his money. The bank gave him very substantial compensation obviously with a view to preventing him taking his business elsewhere. The only relevance of this is that it is further proof that the bank was extremely anxious to retain the Plaintiff as a customer and that I fully accept. What I am not prepared to do, however, is to take the further quantum leap from that which Counsel for the Plaintiff has invited me to take that the Plaintiff was at all material times entirely innocent of any element of tax evasion and that insofar as evasion did occur it occurred at the behest of the bank looking after its own interest. There is of course some element of truth in relation to the bank's self interest but the reality is there was a combination of interest.

12. I now turn to the key events, the subject matter of this action. In August 1988 there had been announced a national tax amnesty. The Plaintiff's evidence is that while he was in the bank he spoke to Mrs. O'Sullivan and asked her the following question:-

13. Before I relay the answer I should perhaps explain that if his evidence is correct there could be an ambiguity in the word "us". The deposit was at all times in the joint names of the Plaintiff and his wife and that might be one context in which the word "us" would be used. But there is also the suggestion that the money was for the benefit of the children and therefore the word "us" might have been used as intended to embrace the entire family. At any rate Mrs. O'Sullivan is alleged to have given the following answer:-

14. The Plaintiff qualifies that evidence, however, by adding that he may have first asked her something else which he did not recall now in Court and that she replied:-

15. Mrs. O'Sullivan denies that any such conversation ever took place or that she was ever asked about the amnesty. This has troubled me because in other respects I found Mrs. O'Sullivan a reliable and truthful witness. She was extraordinarily frank about there having been at that time a "culture" in the bank of maintaining for customers bogus overseas accounts. I was particularly impressed by the fact that having given that evidence on one particular evening and having attracted considerable newspaper publicity which was naturally adverse to the bank, she repeated it equally frankly the next day. However, assessing the evidence as a whole, I have come to the conclusion that she is mistaken in her recollection that there was never any discussion about the amnesty. I do not think that she is giving untruthful evidence. I think that she simply does not remember. The Plaintiff's account is not in my view one that would be likely to be invented. Listening to him and watching him in the witness box I was inclined to accept it. If it was an invented story he would have almost certainly alleged that the conversation occurred with Mr. Murphy, the retired manager, and not with Mrs. O'Sullivan. I think that some sort of conversation of a kind in very broad terms similar to what is alleged did take place, though the precise nature of it must be quite uncertain, particularly having regard to the fact that the Plaintiff's own evidence does not accord with paragraph 6 of the Statement of Claim. Paragraph 6 makes it clear that at the time the Plaintiff sought the advice he was concerned that there was owing to the Revenue Commissioners unpaid tax in respect of the monies deposited. In the witness box the Plaintiff denies this altogether. It was not entirely clear what he was in fact alleging in the witness box but the impression came across that what he had in mind was that there might be some kind of benefit in availing of the amnesty if that had the effect of what he called "freeing the money" it being no longer needed for the higher education of his children. However, in the light of the pleadings and even if the pleadings did not exist, I would be satisfied that the Plaintiff was effectively saying to Mrs. O'Sullivan:-

16. He is effectively then alleging that Mrs. O'Sullivan advised him to continue hiding the money because although he would not have to pay penalties and interest he would still have to pay a great deal of money to the Revenue. If my interpretation of the dialogue between them is correct, that immediately leads to questions of law which are relevant to the liability issue in this case. If there could be a liability on the part of the bank arising out of Mrs. O'Sullivan's answers, that liability would arise under the principles originally laid down by the House of Lords in Hedley Byrne & Co. Limited -v- Heller & Partners Limited , 1964 AC 465. The effect of that decision is summarised in the 9th Edition of Charlesworth on Negligence at page 91 as follows:-

17. The editors of Charlesworth, however, go on to observe at page 93:-

18. In this connection, the first finding which I would make is one of fact. I am satisfied that any such conversation which the Plaintiff had with Mrs. O'Sullivan was of an "off the cuff" nature and that it would never have reasonably occurred to either of them that any answer given by her could have given rise to an action against the bank. If I am right in that finding of fact that is the end of the case. But I think there are alternative grounds on which the Plaintiff's action has to be defeated. In my view, as a matter of law, the bank could not be vicariously liable to the Plaintiff for the type of advice allegedly given by Mrs. O'Sullivan. It is quite true as I have already pointed out, that there is abundant evidence of the bank being actively involved in the Plaintiff's tax evasion and therefore in illegality. But as Mrs. O'Sullivan herself says it was part of the misguided "culture" at the time and indeed rather far-fetchedly she even suggested that it had not occurred to her that tax evasion was involved in the bogus overseas accounts. Even if I do not accept that, and I cannot really accept it, the kind of illegal advice given by the bank in connection with setting up particular types of deposit accounts is intimately connected with the banking business and is of a totally different order from direct advice given to the Plaintiff as to whether he should avail of the amnesty or not. The bank is in no sense in the business of advising customers as to whether they should avail of a tax amnesty or not. If, therefore, Mrs. O'Sullivan gave such advice in circumstances that went beyond a mere casual conversation as I have indicated, she was to use the traditional terminology "on a frolic of her own". The bank could not be vicariously liable for the advice. Thirdly, I am satisfied that the Plaintiff cannot be said to have relied on the advice. In Book 3 of the transcript, Question 107, the following question and answer in relation to the Plaintiff is to be found:-

19. I think that there is no clear evidence that the Plaintiff was necessarily and exclusively relying on the advice of Mrs. O'Sullivan. He was probably in two minds himself as to whether he would avail of the amnesty or not and he decided not to but I think that that was his own independent decision.

20. Fourthly, and perhaps most importantly, I think that as a matter of public policy the Courts would not hold that there was an actionable duty of care owed by Mrs. O'Sullivan even if she was acting as agent of the bank in these circumstances. Once she was being asked to advise on two possible options and one of those options was clearly illegal, I would take the view that an actionable duty of care does not arise. It might be a different matter if the Plaintiff was entirely innocent and never in any sense understood that he was evading tax or perhaps even what an amnesty was but none of that applies here. For all these reasons, therefore, I am of the view that the action must fail.

21. Although it is not strictly relevant, having regard to the findings which I have made, I think that in fairness to the Defendant I should make it clear that the evidence establishes that the Cashel branch of the Defendant bank acted perfectly properly from and after the time that Mr. Silke took over from Mr. Murphy as manager. In 1991 Mr. Silke made it clear to the Plaintiff that DIRT would have to be paid on the account. The Plaintiff was extremely annoyed about this but nevertheless Mr. Silke insisted. The Plaintiff of course believes that that led to a Revenue Commission and audit being imposed on him. This may be problematical in that apparently the system of DIRT was that each bank at a national level simply forwarded to the Revenue Commissioners the grand total of DIRT due from all their customers all over Ireland without names being given. Although DIRT was paid from 1991, arrears of DIRT were not paid because Mr. Silke had been instructed by his superiors that some arrangement had been arrived at whereby the arrears of DIRT would not have to be paid. As in the case of Mrs. O'Sullivan, I found Mr. Silke to be a reliable witness and I accept his evidence in all respects. While I was not impressed by the failure on the part of the bank to call Mr. Murphy as I do not for a moment believe that he was so unwell as to be completely incapable of giving evidence, even evidence on commission. I have formed the view that the inference I should draw from this is not that his evidence would have been favourable to the Plaintiff, except insofar as what was contained in a letter that was produced at the hearing, but rather that his evidence might have been embarrassing to the bank. These additional comments add nothing to the question of liability but I felt that I should make them in fairness to the bank. The action must be dismissed for the reasons which I have given.