In Governey v Financial Services Ombudsman (Respondent) and Irish Bank Resolution Corporation Limited (Notice Party), the Irish High Court considered whether the duty of utmost good faith applies to an investment structured in the form of a life assurance policy for tax purposes, and in particular whether such a contract is an insurance contract.
The case involved an appeal of a finding of the Financial Services Ombudsman to the High Court. The appellant was a retired insurance broker who made a €500,000 investment in a property-based fund promoted by Anglo Irish Assurance Company Limited (now IBRC). This was a highly geared investment scheme in the Kennet Shopping Centre in Newbury, England. The investment was unsuccessful, partly because the development of a new shopping centre in Newbury had attracted lucrative tenants away from the Kennet Centre.
The appellant argued that as the investment contract – which was tied up in a life assurance policy for tax purposes – was subject to full disclosure and utmost good faith, material non-disclosure and misrepresentations by IBRC in a fund brochure violated this principle, thus voiding the contract and entitling the appellant to a return of the premium paid by him into the fund. The appellant submitted that there had been a failure to inform him of the development of the nearby shopping centre, which ultimately posed a risk to his investment. He argued that had he known all the facts, he would never have invested in Kennet.
The original complaint was made to the Financial Services Ombudsman, who found that there had been no material non-disclosure or misrepresentation by IBRC. The High Court ultimately agreed, however, it also considered that it was questionable whether the contract was really one of assurance in any event. Rather, all of the evidence suggested to the court that it was a contract of investment dressed up as a contract of assurance for tax purposes and dealt with as an investment risk not an insurance risk.
There was no life risk covered and it was described as an investment bond. Further, the €500,000 was described as an amount to be invested and the investment bond was intended to mature after at least five years, and, following paying of certain costs and expenses, the balance of the value was to be distributed. In the event of the investor's death before maturity, the market value of the investment would be paid into the estate of the investor; subject to the right reserved to defer such a payment until the investment property was sold. On this basis, the court concluded that the contract was not one of assurance, but one of investment, and it was not a contract to which the principle of utmost good faith applied.
For further information on this topic please contact April McClements (neé Gilroy) at Matheson by telephone (+353 1 232 2000), fax (+353 1 232 3333) or email ([email protected]). The Matheson website can be accessed at www.matheson.com.
