BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just £1, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!

1. Mr. and Mrs. McCullagh, the Plaintiffs, now both in their fifties, were farming in Northern Ireland on a farm of 18-20 acres which Mrs. McCullagh inherited in 1972. Mr. McCullagh had left school at fourteen and worked as a farm labourer. Mrs. McCullagh was employed in the Civil Service as a Clerical Assistant but left in 1972. They have six children.

2. Mrs. McCullagh also worked for a while in a hotel in Cookstown in the catering department. In 1981 they decided to sell up and buy a business in the Republic such as a small licensed premises, hotel or guest house. Early that year they contacted the first Defendant, P B Gunne (Monaghan) Ltd, which in fact is the only remaining Defendant, and spoke to Mr. Farrell, the manager at the Monaghan office. They said to Mr. Farrell they had never bought property before and asked him to keep them straight. They explained the only monies they had would be the proceeds of sale of the farm and home. He said not to worry that he could arrange finance with the I.C.C. They looked at some places but Mr. Farrell told them that until they sold and had money in hand it was hard to talk business.

3. They asked him to sell their lands. He sold the farm for £35,000 sterling. Mr. Farrell got the deposit of IR£11,657 and kept it in the client's account. The McCullaghs left the money with Mr. Farrell so there would be money for a deposit when they came to purchase. Mr. Farrell also arranged to open an account in the I.P.B.S. Building Society for the balance of the purchase money of the farm in the name of the McCullaghs c/o Gunnes. The McCullaghs sold their home themselves for £19,000 to the same purchaser who bought their farm.

4. Towards the end of 1981 they were interested in a pub in Drogheda called "the Wagon Wheel". Mr. Farrell signed them up as purchasers at £100,000, "subject to contract" and took a deposit of £10,000 and then put them in touch with a Solicitor on the 23rd November, 1980. They made a loan application through Mr. Farrell to the I.C.C. They met an official of the I.C.C., Mr. Walsh. Mr. Walsh's note for the file (made end of November or beginning of December, 1981) shows that their borrowing requirements then were £125,000 being £100,000 for the premises, stamp duty £10,000 and stock £15,000 and showing the sources of money as £50,000 from the promoters (i.e. the Plaintiffs) and £75,000 from the I.C.C. As it happened the loan was not approved because the title was leasehold.

5. Mr. McCullagh was so informed by letter dated 1st February, 1982 but before that the McCullaghs themselves had decided against the purchase.

6. In February 1982 they heard from Mr. Farrell about the Pollard Arms at Castlepollard, Co. Westmeath. Mr. Farrell told them it was ideal for them. He said he was not going to advertise because if he did the phone would never stop ringing and they would not get a chance to buy. In fact Mr. Duggan, the owner, wrote to Mr. Farrell on the 1st February, 1982 to put the property on the market but to keep it very private. Mr. Farrell assured the McCullaghs of the necessary finance. They inspected the premises and decided they were happy with it. They asked him to buy it at the best price, as cheaply as possible. Later he rang them to say he had bought it at £125,000. He kept saying not to worry about money. He could get a loan of 60% to 65% from the I.C.C.

7. The person in the I.C.C. dealing with mortgages in the Westmeath area was Mr. Lawless, who did not give evidence. There was no new interview by him with the McCullaghs. I am satisfied on the balance of probabilities that Mr. Farrell dealt with the I.C.C. for the McCullaghs. Messrs. Oliver Freeney & Co., Accountants for Mr. Duggan, sent the gross turnover figures and profit and loss to the end of 1980 to Mr. Farrell on the 1st February, 1982. They sent him the gross turnover figures to the end of 1981 on the 17th February, 1982. Oliver Freeney & Co. also wrote direct to Mr. Lawless of the I.C.C. (received on the 22nd February, 1982) with the gross turnover figures to the end of 1980 and 1981.

8. On the 19th February, 1982 Mr. Farrell wrote to Mr. Lawless of the I.C.C. (received 22nd February, 1982) saying he enclosed turnover figures as requested. The document appearing on the I.C.C. file is an undated projected trading and profit and loss account for Mr. Francis McCullagh for year one on paper headed Oliver Freaney & Co.

9. The I.C.C. made an internal decision on the 3rd March, 1982 approving a loan of £70,000. The internal report for decision shows the purchase price at £130,000, Oliver Freeney as the purchasers' auditor and refers to audited figures for the 12 months 1979 to 1981 and projections for 1982 and says that the purchasers have £65,000 available.

10. Mr. Farrell got the McCullaghs another Solicitor, Mr. Cormack Dunne, as they were not satisfied with the first Solicitor he had arranged for them for the Wagon Wheel sale. Mr. Dunne met the McCullaghs, Mr. Farrell, Mr. Duggan (the vendor) and Mr. Muldowney his Solicitor on the 5th March, 1982. No contract was signed that day. It was in fact signed in Mr. Dunne's office on the 8th March, 1982. The closing date was the 7th April, 1982. The two Solicitors, the Vendor, Mr. Duggan and the McCullaghs were present.

11. On the 8th March, 1982 Mr. Lawless of the I.C.C. sent Mr. Farrell the loan agreement for £70,000 for signing and return and asking for £350 commitment fee.

12. Mr. Farrell got the McCullaghs in to sign the agreement on the 11th March, 1982 which they did and he returned the signed agreement to Mr. Lawless on that date. The McCullaghs did not take the document away to read and in fact did not read the document. Mr. Muldowney, Solicitor, wrote to Mr. Farrell on the 9th March for a deposit of £9,000 which was paid. Mr. Lawless wrote a detailed letter directly to the McCullaghs on the

13. Mr. McCullagh said he phoned Mr. Farrell after the contract was signed and before closing to say they were afraid they would not have enough money. Mr. McCullagh said Mr. Farrell said he would get them all the money they needed from the I.C.C.

14. On the closing date Mr. and Mrs. McCullagh and their six children and furniture arrived in Castlepollard to close the sale. Nobody was expecting them. It is a measure of their inexperience and naivety that they thought the closing date was in fact the closing date. They brought a bank draft for about £24,000 which they gave to their Solicitor. Mr. Dunne arranged bridging finance of £69,437 with the I.C.C. The balance of the deposit of £11,757 held by Gunnes amounted to £534.40 after deduction of the deposit paid to Muldowney Solicitors of £9,000 and the fees charged by Gunnes. When all the funds available were added up they were nearly £4,000 short (£3,943). Mr. Dunne arranged a loan of £3,000 with the Ulster Bank and himself lent £1,000 to the McCullaghs. The sale was closed that day but there was no money for stamp duty or any running costs. The vendor,

15. Mr. Duggan, left stock on the premises on the basis that the McCullaghs would pay Cavan Mineral Waters £7,000. Their Solicitor, Mr. Dunne, tried to get a further £5,000 loan from the I.C.C. and while it was internally approved, it never came to fruition.

16. The business venture was a disaster. By January, 1983 they decided to sell the premises. In spite of Mr. Farrell's promise to them at the time of buying that he could get them a profit of £10,000 to £20,000 if they resold, the highest offer received was £85,000. The property was put up for auction on the 30th May, 1983 and was withdrawn. The I.C.C. issued proceedings. There were problems with the licence. Because there was no money to stamp the deed of conveyance it could not be produced at the annual licensing sessions.

17. When the premises did not sell, the McCullaghs left in October, 1983 and went back to Northern Ireland to live in a caravan. They left the key with Mr. Dunne to give to the I.C.C. Mr. McCullagh went back to work as a farm labourer and Mrs. McCullagh went back to work as well. In 1988, the premises were sold by the I.C.C.

18. After some time the McCullaghs got a site from Mr. McCullagh's father and raised a mortgage and built a house where they now live.

19. Mr. McCullagh's complaint against Gunne's is that he explained to Mr. Farrell, their manager, many times he had never bought property before and was relying on him to keep them straight at all times. They claimed Gunnes held themselves out to find them premises at a price they could afford and that Gunnes would arrange finance. Mr. McCullagh said he was aware that Mr. Farrell was acting as an auctioneer and being paid commission by the vendor. But he said Mr. Farrell never told him that he could not act for them as well or advise them. He did not understand figures, he did not understand what turnover meant and they put their trust in Mr. Farrell. He wanted everything done right and above board. When he phoned Mr. Farrell in the interval between the contract and the closing, Mr. Farrell said not to worry about money and to go ahead. Mr. Farrell denied this phone conversation but I do not accept his denial. In my opinion the McCullaghs are very decent, honourable people who are commercially naive and lacking any business understanding. I do accept that they went to Mr. Farrell to find them a suitable business and that he knew how much money was available to them from their own resources. He said they told him they also had savings of £4,000 which they denied. I accept their denial. When they paid their debts before moving all they were left with were the proceeds of sale amounting roughly to IR£50,000. They had to clear a bank overdraft at Cookstown of between £5,000 and £6,000 out of the proceeds of sale before they came south.

20. At the time of the proposed sale of the Wagon Wheel, the I.C.C. were supplied with projected trading and profit and loss accounts for the first two years trading prepared by Oliver Freeney & Co. Mr. Farrell said he would have got that for the McCullaghs.

21. But there is a mystery in relation to the projected trading and profit and loss account for the Pollard Arms for year one for Mr. Francis McCullagh undated and unsigned but headed Oliver Freeney & Co. which was received by the I.C.C. Mr. Gerry Moore of Oliver Freeney & Co. acknowledged the letter sent to Mr. Lawless of the I.C.C. (received the 22nd March) enclosing the turnover figures to the end of 1980 and 1981. But he said the projected trading and profit and loss accounts were not prepared by them. He could get no information where they came from and denied it was on their note paper. He pointed out two items "consumables" and "entertainment expenses" and said they would never use those phrases. He did not deny Mr. McCullagh's evidence that he did not employ Oliver Freeney

22. & Co. until three to four weeks after closing. Yet, Oliver Freeney appears as Mr. McCullagh's accountant on the form of proposal for loan both for the Wagon Wheel and the Pollard Arms.

23. It seems to me, on the balance of probabilities, that Mr. Farrell told the I.C.C. that Oliver Freeney & Co. were Mr. McCullagh's accountants and that he prepared or had prepared projections for year one in the Pollard Arms and put the heading Oliver Freeney

24. & Co. on it. Mr. Farrell denies this but I do not accept his denial. In so far as it is relevant I accept Mr. McCullagh's evidence that he never had an accountant in Northern Ireland.

25. There is a straight conflict of evidence about the telephone call after the contract was signed from Mr. McCullagh to Mr. Farrell when Mr. Farrell said not to worry about the money. Both Mr. and Mrs. McCullagh say it took place and Mr. Farrell denies it but I do not accept his denial.

26. The picture which is built up by the evidence shows that Mr. Farrell did a lot more than would be expected from an auctioneer acting for a vendor than trying to get the best price for him. He did not explain to the McCullaghs, who are very open and honest people and who obviously had no business sense, that he could not act for them or "keep them straight" on things. He sold their property in Northern Ireland and kept the deposit on client's account. He also opened the account for them with the Irish Civil Service Building Society with an address c/o Gunnes.

27. He must have supplied information to the I.C.C. because there are details given on the form which the McCullaghs would not have been aware of.

28. When it came to the sale of the Pollard Arms, he told them he was not advertising the property and if he did the phone would not stop ringing. This gave the impression that he was on the McCullaghs' side and that they were on some kind of inside track compared to other prospective purchasers. This may be a ploy of auctioneers but if it is, it is wholly unjustified. An auctioneer is employed by a vendor to get the best price and should always make it clear that the vendor is his only client not the purchaser as well. Auctioneers cannot be all things to all men. After Mr. Farrell had arranged for

29. Mr. Dunne to act as the McCullagh's Solicitor, the loan agreement was sent by Mr. Lawless to Mr. Farrell to get the McCullaghs to sign. He did not send it to Mr. Dunne. He got the McCullaghs to sign it and he sent it off to Mr. Lawless himself without the McCullagh's getting any advice.

30. The principle at issue here is whether Gunnes owe a duty of care to the McCullaghs or in other words whether there was a voluntary assumption of responsibility by Mr. Farrell representing Gunnes to get the McCullaghs adequate finance and "to keep them straight". This follows a line of cases commencing with Hedley Byrne and Co. Ltd -v- Heller and Partners Limited (1963) 2 AER 575 in which Devlin L.J. said at page 610:-

31. There are then a number of cases where the contract was not with the person making the representation. Yianni -v- Edwin Edmonds & Son , (1981) 3 AER 592 and

32. Sir Donald Nicholls V.C. said at page 871:-

33. In another English case McCullagh -v- Lane Fox & Partners Limited [(1994) 1 EGLR 48] there was an oral representation by the vendor's estate agent saying the gardens of a house were nearly one acre. After exchange of contracts the purchaser discovered the area was 0.48 acres. The purchaser sued the estate agents and it was held that the necessary ingredients of a duty of care owed by the defendant existed but on the evidence the purchase of the property was not at a price in excess of its market value and therefore the plaintiff suffered no loss.

34. A relevant Irish case is McAnarney & Another -v- Hanrahan & Another (1993) 3 IR 492 which dealt with the duty of an auctioneer to a prospective purchaser. In that case the auctioneer and the firm employing him were held liable for a negligent misrepresentation made by the auctioneer to the purchaser concerning the purchase of the freehold. It was held by Costello J. following the Hedley Byrne case that in the particular circumstances the auctioneer owed a duty of care to the purchasers. He said at page 497:-

35. In the circumstances of this case it seems to me that Mr. Farrell did indeed take over the burden of assisting the McCullaghs to arrange adequate finance in their quest for a suitable business. He sold the farm for them; he opened an account for them in the I.P.B.S.; he did not demur when they said they wanted him "to keep them straight"; he did not demur when they asked him to buy the Pollard Arms at the best price. He arranged the meeting with Mr. Walsh of the I.C.C. He supplied the turnover and projections to the I.C.C. He must have supplied any new and additional information to the I.C.C. concerning the purchase of the Pollard Arms since the McCullaghs had no second interview with I.C.C. representative. He found them not one but two Solicitors. When they sent him the letter from Mr. Lawless on the 19th March he did not reply. In fact he encouraged them by telephone to believe they would get as much money as they needed for the purchase. He got them to sign the loan approval form without Solicitor's advice.

36. It must have been obvious to him that they were depending on him and his expertise to get them adequate finance. He did nothing to disabuse them of the reliance which they obviously placed in him. Even after he got them Mr. Dunne as Solicitor, he did not send them off to him for advice on the loan application which showed the purchase price inaccurately at £130,000 and the promoters' input at £65,000. Even at the stage of post contract/preclosing, he promised them as much as they needed. Ironically even at that stage they probably could have refused to close. As it turned out the title was not clear and ultimately required a policy of indemnity insurance to be taken out.

37. The McCullaghs themselves are naive but they impressed me as very straight honest people. They did not deserve the treatment they got from Mr. Farrell and this is certainly a case where it is fair, just, equitable and reasonable that a duty of care be recognised by the Court. The McCullaghs are entitled to succeed and as they are simply claiming their money back, I award them damages in the sum of £50,000 increased by reference to the Consumer Price Index taking 7th April, 1982 as the base date.