The Shifting Sands of Summary Proceedings

Summary proceedings are a useful tool in the efficient recovery of a liquidated sum by a creditor. However, recent judgments delivered by the Supreme Court and Court of Appeal have altered the requirement with respect to the particularisation of summary proceedings and the admissibility of evidence previously relied upon by certain plaintiffs.

Bank of Ireland Mortgage Bank v Joseph O’Malley

In Bank of Ireland Mortgage Bank v O’Malley [2019] IESC 84 the Supreme Court considered whether the liquidated claim was sufficiently particularised in the indorsement of the summary summons.

The position prior to the O’Malley decision was that the particularisation of a liquidated sum could be done by reference to the principal and interest sums. The O’Malley decision has set out a requirement for greater detail when particularising a debt in summary proceedings.

The decision set out that in order for the level of particularity in the summary summons to be sufficient, the defendant must be in a position to know whether he should concede or resist the claim. The indorsement must not only identify the liquidated sum but also provide sufficient detail as to how the sum was arrived at in order for the defendant to be in a position to consider this. This needs to be directly set out in the indorsement and reference to a document wherein this was set out would be sufficient so long as the document was provided to the defendant prior to the commencement of the proceedings.[1]

Clarke C.J. stated in his conclusion that:

“A plaintiff, in order that a prima facie claim to be the precise debt can be established, must do more than merely assert. While the basis for there being a claim in general terms was fully set out by the Bank, it does not seem to me that the evidence as to why the precise sum claimed was said to be due amounted to anything much more than assertion”.[2]

In the recent case of Havbell DAC v Harris and Anor. [2020] IEHC 147, an application was brought by the plaintiff seeking to amend the indorsement following the O’Malley decision. The High Court took this opportunity to set out the test which a plaintiff must satisfy when seeking to amend a summary summons and furthermore the manner in which summary proceedings must be pleaded. In this case Humphreys J granted the application for the amendment of the indorsement but did not grant judgment and transferred the matter to plenary proceedings.

In the Harris case the plaintiff had sought to amend their summary summons following the O’Malley decision whilst also seeking judgement on foot of the pleadings.

When considering whether the amendment should be permitted, Humphreys J applied the threefold test for amendment – arguability, explanation and lack of irremediable prejudice.[3]

• In respect of arguability he considered an amendment of this manner clearly arguable;
• In terms of an explanation he considered this clear following the delivery of the O’Malley decision; and
• In respect of the irremediable prejudice he distinguished this from mere prejudice and believed that any prejudice visited on the defendant arising from this application could be addressed in terms of costs.[4]

As the plaintiff had met the threefold test Humphreys J felt it was appropriate to grant the application to amend the proceedings and was given further reinforcement by the fact that this was what happened in the O’Malley decision itself.

Having granted the application for the amendment Humphreys J then sought to use the opportunity to consider the voluminous body of caselaw surrounding the procedure involved in applications for summary judgment and further sought to cut through the complexity, albeit with the comment that it was perhaps optimistic, by summarising a four part test as follows:

“(i)        the plaintiff’s claim must be sufficiently pleaded and particularised;.

            (ii)        the plaintiff must adduce evidence establishing a prima facie case;

(iii)       if so, the court must inquire whether there is a fair and reasonable probability of the defendant having a real or bona fide defence; and

(iv)       if so, the defendant must show that this goes beyond mere assertion and is supported by evidence.”[5]

The first limb of the test addressed the question of particularisation as raised in the O’Malley decision and was addressed by Humphreys J who confirmed that “the particularisation may be done indirectly by referring to another identified document which provides the necessary information”[6], though any such document must be capable of showing the interest rate being applied from time to time so that the defendant is in a position to establish whether the interest charged is correct.

In summarising the requirements Humphreys J also considered the judgment in Bank of Scotland v Fergus [2019] IESC 91 which was delivered by the Supreme Court shortly after the O’Malley decision. In particular he referenced to the following passage from the judgment:

“The nature of these requirements is to put a debtor in a position where on an individualised bases he or she may see where perhaps a mistake has been made or where interest may have been overcharged or penalties may have been misapplied… it is also required of a plaintiff financial institution to make it clear as to the precise basis that a sum of money is owed.”[7]

It is clear from the two Supreme Court decisions that the particularisation of the liquidated sum must be done on a precise basis either directly or indirectly by reference to another identified document previously provided to the defendant.

In the Harris case, Humphreys J ultimately decided that whilst the application for the amendment was granted the application for summary judgment would not be granted as the plaintiff had not satisfied the four limb test as set out above. Notwithstanding the success of the application for the amendment, costs were awarded to the defendants as the unsuccessful object was distinguished from an unreasonable objection. It is unlikely however, that defendants who may choose to object to future applications by plaintiffs for an amendment in a similar manner will be successful in obtaining their costs should such an objection be unsuccessful, as their objection might now be considered unreasonable following the Harris judgment.

Promontoria (Aran) Limited v Gerry Burns and Anne Burns

In Promontoria (Aran) Ltd v Burns [2020] IECA 87 the Court of Appeal considered the admissibility of the evidence adduced by plaintiff. The High Court had held that the evidence adduced by the plaintiff in support of their application for summary judgment was hearsay and inadmissible.

In a normal set of circumstances the lender, a bank, in seeking summary judgment would seek to rely upon the Banker Books Evidence Act, 1879, as amended. However, in this case the plaintiff was not a bank as defined in the Act but was an assignee of the original lender.

The plaintiff had initially grounded the application for summary judgment on an affidavit sworn by an employee of a debt servicer who were acting on behalf of the plaintiff in administering the debt collection. The deponent sought out the details of the facilities and exhibited several documents in support of the claim. The defendants took the position that the evidence was hearsay as the deponent of the affidavit was not an employee of the plaintiff. The High Court trial judge had agreed with the defendants and found that the evidence before the Court was inadmissible as hearsay but gave the plaintiff an opportunity to put further evidence before him as the defendants had made nothing more than a bare denial of the debt.

In response to this the plaintiff filed a further two affidavits before the Court, one of which was sworn by an employee of the plaintiff regarding the source of knowledge of the first deponent. The further affidavit sworn by the employee of the debt service averred to having access “at all material time” to the books and records of the plaintiff “having relevance to these proceedings” and having made the affidavit from facts within his own knowledge and from a perusal of those books and records.[8] This was again contested by the defendants, who averred that neither party had first-hand knowledge of any the events and were relying on hearsay.

The trial judge agreed with the defendants and the plaintiffs appealed the matter.

As the plaintiff was unable to rely upon the Bankers Books Evidence Act, they had sought to rely on the “course of dealings” common law exception to hearsay derived the caselaw of several cases.[9] The Court of Appeal commented that there was no clear line of authority on this exception and one was awaiting and needed from a full Supreme Court.[10]

Baker J in her judgment concluded that:

“…in order to rely on evidence which does not come within the Act of 1879 because the plaintiff if not a bank, a claim in debt can be established by credible evidence emanating from a course of dealing, from the nature of business records that show that dealing which carry indications of reliability, especially if those records are in the form of statements of account sent from time to time in the course of a lending transaction, which, taken together with evidence from an authorised person of an analysis and inspection of books and records, whether documentary or electronic, can in the absence of a denial or challenge which more than a mere bald assertion, be sufficient to establish a claim.”[11]

The Court of Appeal held that the deponents’ source of knowledge was not sufficiently identified and the exhibited statements of account appeared to have been prepared solely for the purpose of the litigation with there being no averment that the statements were sent to the defendants. It appears that the Court placed significant weigh on the type of statements of account being put before the course as proof of the debt and Baker J states:

“There are no bank statements of the type sent on a regular basis from a bank to a customer which carry indications of reliability and can be seen as part of a course of dealings…”

The Court assumed based on the evidence before it that the deponents had not examine books and accounts from the original lender but only those created since the transfer of the loan. This had been based on the fact that the opening balance shown on the statements was the amount of the debt outstanding on the date of the transfer from the original lender to the plaintiff.

The Court rejected the appeal and held that the evidence before it was hearsay and was inadmissible.

Conclusion

In both the O’Malley and Burns cases the Courts placed weight on the statements of account provided to the borrowers, and care should be taken to ensure that the borrowers are provided with regular statements of account prior to the particularisation of a debt and issuing of proceedings. These statements of account must provide the borrower with the adequate information required to allow the calculation of the principal and interest of the debt.

The Harris decision further provides some clarity in respect of the requirements for the amendment of summary proceedings following the O’Malley decision and further direction as to the requirements for those seeking summary judgment.

The Burns decision identifies that it is not sufficient for a creditor to simply rely upon a letter of demand and lack of payment on foot of the demand. The creditor must set out the link between the facility letters, the amount claimed in the demand and the documents on which the creditor relies to show that the debt it owed. The evidence must show a reliable and credible chain of evidence obtained from a perusal of the relevant books and records of the companies whose debts were guaranteed or of the personal accounts of the borrowers. [12] The debt must be particularised from its inception not from any point in time thereafter.

For further information please contact Brian O’Neill or Emmet Martin

[1] Bank of Ireland Mortgage Bank v O’Malley [2019] IESC 84, Paragraphs 5.5, 5.6, 6.4 & 6.7.

[2] Bank of Ireland Mortgage Bank v O’Malley [2019] IESC 84, Paragraph 8.3.

[3] Havbell DAC v Harris and Anor. [2020] IEHC 147, Paragraph 8.

[4] Havbell DAC v Harris and Anor. [2020] IEHC 147, Paragraphs 9, 10 & 15.

[5] Havbell DAC v Harris and Anor. [2020] IEHC 147, Paragraph 20.

[6] Havbell DAC v Harris and Anor. [2020] IEHC 147, Paragraph 21.

[7] Bank of Scotland v Fergus [2019] IESC 91, Paragraph 20

[8] Promontoria (Aran) Ltd v Burns [2020] IECA 87, Paragraph 30.

[9] Mooreview Developments Limited v First Active plc [2010] IEHC 275, Bank of Scotland v Stapleton [2012] IEHC 683, Bank of Scotland v Fergus [2012] IEHC 428, Bank of Ireland v Keehan [2013] IEHC 631 and Ulster Bank Ireland Limited v Dermody [2014] IEHC 140.

[10] Promontoria (Aran) Ltd v Burns [2020] IECA 87, Paragraph 53.

[11] Promontoria (Aran) Ltd v Burns [2020] IECA 87, Paragraph 86.

[12] Promontoria (Aran) Ltd v Burns [2020] IECA 87, Paragraph 114 and 115.