Francis McCullagh and Moira McCnllagh (plaintiffs) v P. B. Gunne (Monaghan) plc and the Industrial Credit Corporation plc (defendants).
Purchase of Property Arrangement of finance Advice - Reliance - Auctioneer - whether duty of care owed to purchaser - Voluntary assumption of responsibility - Whether direct responsibility owed to purchaser.
The High Court (before Miss Justice Carroll) judgment delivered 17 January 1997.
WHERE an auctioneer takes over the burden of assist in g clients to arrange adequate finance in their quest for a suitable business and does nothing to disabuse them of the reliance they place in him, he then owes them a duty of a care.
The High Court so held in finding that the first defendant owed a duty of care to the plaintiffs by virtue of the fact that he assumed direct responsibility to them through his words and actions and assurances to obtain for them adequate finance for the transaction. Proceedings against the second defendant had been discontinued before the commencement of the hearing of the action.
Joseph Finnegan SC and Una McGurk BL for the plaintiff Patrick Han rally SC and Monica Lawlor BL for the first defendant, John Farrell SC and Jacqueline Linnane BL for the second defendant.
MISS JUSTICE CARROLL said that in 1981 the plaintiffs decided to sell their house and farm and buy a small business in the Republic such as an hotel or licensed premises. They contacted Mr Farrell the manager at the Monaghan offices of the first defendant and explained to him that they had never bought property before and asked him to "keep them straight". The plaintiffs told him that their only finances would be the monies raised from the sale of their house and farm. He told them he could arrange the necessary finances with the ICC, the second named defendant.
The house and lands were sold, the plaintiffs became interested in a property in Drogheda and Mr Farrell of the first defendant made a loan application on their behalf to the ICC. The plaintiffs decided against the put chase and subsequently, in February 1982, heard from Mr Farrell about the Pollard Arms in County Westmeath which he said was ideal for them. He, told them he would not advertise the property, as the phone would not stop ringing if he did. He also told them not to worry about the finance as he assured them he could get a loan of 60 to 65 per cent from the ICC. He later rang them to say he had bought the property on their behalf for £125,000.
Miss Justice Carroll was satisfied that Mr Farrell of the first defendant, dealt with the ICC for, the plaintiffs. It was also accepted that the prepared projections for year one in the Pollard Arms were furnished to the ICC on behalf of the plaintiffs by Mr Farrell and it was he and not the plaintiffs who prepared them or had them prepared. The loan agreement, was signed by the plaintiffs without any independent legal advice and when they voiced their concerns. Mr Farrell assured the plaintiffs he could get them all the money they needed from the ICC.
On the closing date in April 082 the plaintiffs were approximately £4.000 short with no money for stamp duty or running costs. The £4.000 cash shortfall was met by further loan arrangements but the venture failed and in January 1983 the plaintiffs decided to sell the premises. Despite Mr Farrell's earlier assurances of a profit in the event of a resale, the highest offer received by the plaintiffs was £85,0000. They returned to Northern Ireland having delivered the key of the Pollard Arms to the ICC.
Miss Justice Carroll accepted the plaintiffs' contention that Mr Farrell was aware they were relying on him to advise them at all times and that they had put their trust in him. He did not tell them that because he was acting for the vendor he could not act for and advise them as well. The plaintiffs claimed that the first defendants through Mr Farrell held themselves out to find the plaintiffs premises at an affordable price and that they the first defendants would arrange the finance. Mr Farrell denied that he told the plaintiffs between the contract and the closing not to worry about the finances and to go ahead. However, Miss Justice Carroll accepted the plaintiffs had fully outlined their financial position to Mr Farrell and had asked Mr Farrell to purchase the Pollard Arms for them at the best possible price.
Miss Justice Carroll said that Mr Farrell had sold the plaintiffs' property and kept the deposit on client's account. He had not explained to them that he could not act for them or keep them straight" on things as they had asked him to. Mr Farrell had supplied information to the ICC and led the plaintiffs to believe he was on their side by telling them he was not advertising the property. While he had arranged a solicitor for the plaintiffs he had them sign the loan agreement without the benefit of advice. In short, he had done much more than would be expected from an auctioneer acting for a vendor.
Miss Justice Carroll said on consideration of the authorities that a duty of care was owed to the the plaintiffs by Mr Farrell representing the first defendant. In McAnarney v Hanrahan [1993] 3 IR 492 an auctioneer was held liable for negligent misrepresentation for information given to a purchaser where he should have known that the purchasers would place reliance on what he told them.
Miss Justice Carroll concluded that there was a voluntary assumption of responsiblity by Mr Farrell to obtain adequate finance for the plaintiffs and advise them. He did nothing to disabuse them of the obvious reliance the placed in him and while he had arranged two solicitors for the plaintiffs he did not refer them for independent advice on the loan application.
Miss Just ice Carroll was impressed by the plaintiffs and held they were entitled in all the circumstances to their claim for the £50,000, that they had lost, in the transaction together with interest accruing since 7 April 1982.
Solicitors: P. J. F. McDwyer & Co (Cavan) for the plaintiffs; Wells O'Carroll (Carrickmacross) for the first defendant, Egan O Reilly (Dublin) for the second defendant.
