Proving Banks Debts: Clarity at Last
The Supreme Court judgments in Ulster Bank Ireland Limited v O'Brien (16 December 2015) bring long overdue common sense to the law relating to proof of bank debts. Until now there had been several High Court decisions which introduced undue complexity to the process. These decisions held that unless the plaintiff bank could show that it had complied with the Bankers' Books Evidence Act 1879 (as amended) (the "BBEA") its evidence would be hearsay. O'Brien establishes that focusing on BBEA procedures is inappropriate and unfair. Inappropriate, because a bank does not necessarily need to rely on "bankers' books" in order to prove a contract of loan, a breach by the borrower and the amount due. Unfair, because those decisions seem to preclude a bank proving its case in the same way as any other commercial creditor.
In O'Brien the bank claimed repayment of three loans totalling €888,000. It grounded its application for summary judgment on an affidavit of a relationship manager that the facilities were offered to the defendant borrowers who subsequently defaulted. The affidavit set out the amount due and exhibited a print-out of the relevant accounts. The relationship manager was not cross-examined by the defendants on her affidavit. Nor did the defendants lead any evidence in defence of the claim.
The Master of the High Court (an administrative judicial officer) agreed with the defendant's argument that the bank's evidence was hearsay because it had not complied with BBEA. BBEA sets out a process of proving entries in "bankers' books" whereby the witness, being a partner or officer in the bank, gives evidence of having compared the copy entries with the originals and that the entries were made in the ordinary course of business. That gives a flavour of how outmoded the BBEA is in this highly computerised age.
The High Court set aside the Master's decision on appeal by the bank. The borrower's appeal to the Supreme Court failed. Although different approaches were taken by each of the Supreme Court judges, the common theme in their judgements was that the bank had proved its case by adducing admissible evidence. It had proved the loan and the borrowers' default. The borrowers had adduced no evidence whatsoever, still less evidence that disproved or undermined the bank's claim.
Laffoy J held that the BBEA had no relevance to the case and the bank did not have to rely on the processes in that Act simply because it was a bank. It was entitled to prove its case like any other litigant. Laffoy J approved previous High Court decisions stating that a bank witness is entitled to give evidence of the bank's records showing the amount due by a customer of that bank. That evidence and those records provide prima facie evidence of the liability. Charleton J concluded that the absence of a denial of the loan and default was significant given the bank's evidence. MacMenamin J held that the contention that the witness' evidence was hearsay was wrong. The witness was the bank's main witness and had signed the letter of demand. Her evidence was first hand testimony of her own actions: this was not hearsay.
Legal commentaries on recent decisions often welcome them as providing "clarity" to difficult areas of the law. That observation is especially true of this decision. The next logical step is to ask whether the BBEA serves any useful purpose and on that basis should be repealed.
For further information, please speak with your usual Maples and Calder contact.