A recent Supreme Court decision focuses on lenders using the High Court summary summons procedure for debt recovery. Eadaoin Jackson looks at what this decision means for lenders going forward
In brief: In Bank of Ireland v O’Malley, the Supreme Court held that if a lender wishes to use the High Court summary summons procedure for debt recovery, it will be required to explain each of the component elements of the debt claimed.
In 2008, Bank of Ireland advanced a mortgage loan facility of €225,000 to Mr. O’Malley. Shortly thereafter, Mr. O’Malley encountered some financial difficulties which eventually led to the cessation of loan repayments in November 2011. In 2014, Bank of Ireland sought summary judgment for €221,795.53.
In the High Court, Mr. O’Malley argued that Bank of Ireland’s pleadings were defective due to a lack of detail. Specifically, Mr. O’Malley argued that Bank of Ireland’s special endorsement of claim did not comply with Order 4, Rule 4 of the Rules of the Superior Courts, which requires claimants to “state specifically and with all necessary particulars the relief claimed and the grounds thereof”. In their pleadings, Bank of Ireland had simply furnished a statement of account to the court as evidence to support their claim. Mr. O’Malley claimed that each of the component elements of the claimed debt (the principle debt amount, applicable interest rates and surcharges/penalties) needed to be specifically explained.
The High Court granted judgment against Mr. O’Malley, notwithstanding the fact that the plaintiffs had merely furnished a statement of accounts and did not particularise the principle and interest in the amount claimed.
Supreme Court Appeal
Mr. O’Malley appealed the High Court decision to the Supreme Court, arguing that Bank of Ireland’s special endorsement of claim did not comply with Order 4, Rule 4 of the Rules of the Superior Courts.
Clarke CJ allowed Mr. O’Malley’s appeal, holding that Bank of Ireland’s special endorsement of claim lacked the necessary detail required under the Rules of the Superior Courts. In his judgment, Clarke CJ noted that it was not possible that “a person receiving such a summons could have the ‘necessary’ details to decide whether they should concede or resist”. It was stated that financial institutions should provide a straightforward account of how the amount claimed is calculated and that Bank of Ireland’s special endorsement of claim in this case lacked sufficient detail. Thus, the court concluded that there was insufficient evidence to justify the High Court’s decision to grant summary judgment. The appeal was allowed and the matter was remitted back to the High Court so that Bank of Ireland could provide further evidence of the debt claimed.
The Impact of this Decision
This decision will impact the way financial institutions use the summary summons procedure for debt collection and will no doubt increase the level of evidence required to support a claim. As a consequence of the Supreme Court’s decision in O’Malley, many lenders are seeking to amend their pleadings to introduce supplementary evidence.
In his High Court decision in Havbell DAC v Harris, Humphreys J clarified how the law stands post-O’Malley. In this case, Humphreys J set out a four part test for parties seeking summary judgment:-
- The plaintiff’s case must be sufficiently pleaded and particularised;
- The plaintiff must adduce evidence that establishes a prima-facie case against the defendant;
- The court must inquire whether there is a fair and reasonable probability that the defendant will be able to put forward a bona fide or real defence to the plaintiff’s claim; and
- The defendant must show that they have a defence which goes beyond a mere assertion and is supported by evidence.
It is therefore clear that reconstituting a claim post-O’Malley will often be a logistical engagement. This may pose problems for debt acquisition companies who may have incomplete records from the original lender and no contractual leverage to compel the original lender to assist.