Recent Irish case law has shown that a bank must take great care when considering the evidence needed to establish its claim in debt-recovery proceedings.
A feature of the recession in Ireland has been debtors resorting to disingenuous arguments in attempts to defeat routine claims by banks and other lenders. For the most part, Irish jurisprudence has been characterised by adherence to established legal principles – together with a healthy dose of common sense. That approach is, unfortunately, absent in a number of recent cases concerning the proof of routine (and essentially undisputed) statements of account in debt-recovery actions. Much of the confusion arises from a misunderstanding of the proper role of the Bankers' Books Evidence Act 1879 (as amended) (the "BBEA"). The issue is not only important for banks and other lenders, but also to companies engaged in servicing books of debt portfolios for banks ("Service Companies") and loan book purchasers.
In brief, the following objections have been made (and in a number of cases upheld):
- Where the debt has been proved by an employee of a group company (rather than the actual plaintiff) this has been held to be inadmissible as offending the rule against hearsay.
- Objection has been taken to evidence given by an employee of a Service Company. The basis for the objection here too has been that the evidence is hearsay.
- Objection has been taken that copy bank records are not "best evidence", do not comply with the BBEA or have been adduced without full compliance with the BBEA.
Many of these highly technical objections are, in themselves, inconsistent with existing authority. In Moorview Developments v First Active plc Clarke J (then a judge of the High Court and now a judge of the Supreme Court) held that the BBEA did not provide an exclusive basis for proof of a debt and that it was always open to a bank to prove it by way of direct evidence in the same way as would be available to any other class of litigant. In another, Bank of Scotland v Fergus, Finlay Geoghegan J (then a judge of the High Court and now a judge of the Court of Appeal) held that evidence was admissible from an employee of the Service Company who had first-hand knowledge of the bank's dealings with the borrower.
The decision of Cregan J in ACC Bank plc v Byrne once again throws these issues into sharp focus. In that case evidence was given by an employee of the plaintiff bank as to the defendant's liability on foot of a contract of guarantee. Cregan J subjected the BBEA to close analysis. He held that the purpose of the BBEA was to relax the "best evidence rule" (which requires original documents to be produced in court) and the rule against hearsay. However he held that the BBEA provided for certain safeguards to ensure the accuracy of the evidence adduced in reliance on the BBEA. He held that section 5 (which sets out a cumbersome procedure for proving entries which are "reproduced" from illegible form into legible form) was a "carbuncle" in terms of drafting.
On the facts Cregan J held that the bank's evidence was deficient. This was because in referring to copies of a statement of account and a spreadsheet detailing the total amount due, the deponent did not say;
- that at the time of "the making of the entry the banker's book was one of the ordinary books of the bank";
- that the entry was made in the usual and ordinary course of business; and
- the banker's book was in the custody or control of the bank.
He also held that the formal requirements of section 5 of the BBEA had not been complied with.
The law regarding proof of debt in Ireland is now of such complexity that one wonders whether it is fit for purpose in a modern, functioning economy. An important point to note here is that these issues affect not only banks, but also any undertaking (no matter how large or small) suing to recover unpaid bills for goods and services. What is remarkable is that in virtually all of the cases there was no suggestion that money was not borrowed, or guarantees not in fact executed.
What is a bank to do?
First, an employee or officer of the plaintiff must give evidence of the amount due and owing by the defendant. Second, an employee or officer must also formally prove the contractual basis for the defendant's liability (i.e. the facility letter, loan agreement, guarantee etc.). Third, in order to guard against the argument that this evidence is not "best evidence", the original documents should be available for court. Finally, in case an argument is made that the evidence of the bank's witness is (somehow) hearsay, the detailed evidential steps set out in BBEA should be followed if possible. In the meantime it seems inevitable that the newly constituted Court of Appeal will have occasion to address these issues in the near future.