A recent High Court decision, Ulster Bank v Dermody illustrates the strict proofs which Courts require banks to satisfy in enforcement actions. The decision also highlights the evidential difficulties which can arise within a group corporate structure. The court dismissed a claim on foot of guarantees because the grounding affidavit was sworn by an employee of the Bank's parent, rather than by an employee of the Bank itself. The Court concluded that the deponent was not an "officer" of the Bank (but of a separate legal entity). The Bank had not met the requirements of the Bankers' Books Evidence Acts 1879-1959 (the Acts).  Accordingly, the individual was not able to give evidence substantiating the claim (even though the Bank had authorised him, under a power of attorney, to do so).

As the outsourcing of debt collection and the sale and transfer of debt becomes more common this issue will continue to cause difficulties.  It is imperative that the party seeking to recover the debt is in a position to provide an affidavit supporting the claim from an appropriate employee of the entity who originally provided the facility. Otherwise there may be significant difficulties in recovering the debt.

The Defendant was being pursued by the Bank on foot of guarantees. The grounding affidavit was sworn by an employee of the Bank's ultimate parent company which was dealing with its debt collection processes. That affidavit duly exhibited the guarantees, letters of demand and statements of liabilities. A dispute arose as to whether the affidavit was admissible under the Acts. The Bank argued that the employee was authorised under a power of attorney to swear such an affidavit and that the debt collection was simply internal operational administration within the Bank's group structure. 

The Court considered the provisions of the Acts and held that the affidavit was not admissible to prove the bank records.  The Court rejected earlier decisions which suggested that such records were admissible and stated that the rule against hearsay continued save where modified by statute. The Court endorsed the decision in Bank of Scotland v Stapleton [2012] IEHC 549 which held that an employee of Certus (who manage Bank of Scotland's loan portfolio in Ireland) could not provide the evidence required under the Acts.  The Court in Stapleton concluded:

"Where a bank needs to prove by sworn testimony the amount it is due by a defendant customer, that evidence must be provided by an officer or partner of the bank – in other words an employee of the bank itself, and not some person employed by some other company to whom the task of a or collecting the debt has been outsourced for whatever reason. To allow otherwise would be akin to a foreign bank engaging a solicitor here to collect the debt, and that solicitor coming to court and giving evidence as to the amount due to the bank, having been authorised to do so by the bank. The evidence is necessarily hearsay and inadmissible. It offends first principles, and in my view there is no basis in law for permitting it."

The Court did hold that an employee can be an "officer" within the meaning of the Acts but in Dermody the deponent was an employee of a separate legal entity - the fact that the companies were closely related was not enough. Accordingly the evidence supporting the claim was hearsay and the claim was dismissed.