Bank of Scotland Plc v Fergus

• Jurisdiction: Ireland
• Judgment Date: 18 December 2019
• Neutral Citation: [2019] IESC 91
• Docket Number: [S.C. No. 212 of 2012]
• Court: Supreme Court

Bank of Scotland PLC,

Plaintiff

and

Charles Fergus,

Defendant

[2019] IESC 91

[S.C. No. 212 of 2012]

Supreme Court

Evidence — Admissibility — Hearsay — Banking — Admissibility of banking records — Whether bank entitled to call evidence from former official of bank records relating to indebtedness — Whether rule against hearsay engaged — Bankers' Books Evidence Act 1879 (42 & 43 Vict., c. 11), ss. 3, 4, 5, 6 and 9.

Practice and procedure — Commercial list — Evidence — Evidence in absence of witness statement — Whether trial judge erred in allowing witness to give evidence at late stage and without witness statement — Rules of the Superior Courts 1986 (S.I. No. 15), Order 63A, r. 22.

Contract — Guarantee — Validity — Refinancing — Multiple guarantees — Error in name of company — Correcting of mistakes — Part of guarantee appearing after execution clause — Whether trial judge erred in correcting error in name of company — Whether trial judge erred in approach to part of guarantee appearing after execution clause — Whether prior guarantee discharged by same parties entering subsequent guarantee of same obligor's debts — Whether guarantee valid and enforceable.

The Bankers' Book Evidence Act 1879, as amended, provides as an exception to the rule against hearsay that, subject to compliance with certain conditions, a copy of an entry in a banker's book may be received in legal proceedings as prima facie evidence of such entry and of the matters, transactions and accounts therein recorded. Section 4 of the Act, as amended, provides that a copy of an entry in a banker's book shall not be received as prima facie evidence of such entry unless it is first proved, inter alia, that the book was at the time of the making of the entry one of the ordinary books of the bank, and that the entry was made in the usual and ordinary course of business. Section 4 further provides that such proof may be given by a partner or officer of the bank, orally or on affidavit.

The plaintiff initiated summary proceedings against the defendant seeking to enforce guarantees given by the defendant to secure debts incurred by the principal debtor. The defendant was at all relevant times heavily involved with the activities of the principal debtor, which was engaged in the business of property development. The plaintiff had advanced a number of loans to the principal debtor pursuant to a series of facility letters. With each facility letter, the guarantor was required to execute a new guarantee securing the past and future obligations of the principal debtor to the plaintiff.

At plenary trial in the commercial list of the High Court, the defendant put the plaintiff on proof of the debt owed by the principal debtor. For the purposes of the plenary trial, the plaintiff submitted the witness statement of the witness they proposed to call to prove the indebtedness of the principal debtor, but due to illness, he was unable to be called.

The plaintiff applied to the trial judge (Finlay Geoghegan J.) to permit the evidence as to debt to be given by a former manager of the plaintiff who had taken up employment in a company engaged by the plaintiff to administer the plaintiff's assets in Ireland and who thereby had authority to examine the books and records of the plaintiff relevant to the principal debtor's debt. The defendant objected to the admission of that evidence, inter alia, on the basis that a witness statement had not been provided by the witness and on the basis that since the witness was not an employee of the plaintiff at the time when he gave evidence, he was not an eligible person to give such evidence in accordance with the 1879 Act. The trial judge allowed the plaintiff's application to call the evidence, subject to certain conditions.

The defendant did not cross-examine the former employee and did not call any evidence to contest the former employee's evidence as to the principal debtor's liabilities. The defendant denied liability and submitted that the plaintiff had failed to discharge the onus of proving as a matter of probability that the claimed amount was due by the principal debtor to the plaintiff. The defendant also argued that the guarantees on which the plaintiff sought to rely, including the guarantee pursuant to which he was ultimately found liable to the plaintiff, were not valid or enforceable, inter alia, because they did not name the principal debtor correctly, because certain terms appeared after the execution clause and because the guarantees had been extinguished by the subsequent giving of an identical guarantee.

The High Court accepted the evidence of the former employee and granted judgment in favour of the plaintiff (see [2012] IEHC 131, [2014] 4 I.R. 428). The defendant appealed to the Supreme Court.

The defendant submitted, inter alia, that the trial judge erred in allowing the plaintiff to adduce further evidence to prove its debt, where that evidence was to be given by a former employee who had not provided a witness statement in advance of trial. The defendant further contended that the guarantees were not valid or enforceable.

Held by the Supreme Court (McKechnie, Charleton and McGovern, JJ.; McKechnie J. dissenting in part), in dismissing the appeal 1, that letters written by a party, documents signed by a party setting out that party's obligations, or admissions by a party as to the existence of a debt did not engage the hearsay rule, whether in banking or in commercial transactions, where those exchanging the relevant information were the parties to the proceedings, and transactions in which a party was engaged were provable without resort to any legislation.

Ulster Bank Ireland Ltd. v. O'Brien [2015] IESC 96, [2015] 2. I.R. 656 followed.

2. That the 1879 Act did not operate so as to constrict the kind of evidence that a bank might give. A bank was not in a different position to any other creditor seeking to prove debt regarding its ability to give evidence concerning the contents of its books and records and was not constricted to giving evidence in accordance with the provisions of the 1879 Act.

Ulster Bank Ireland Ltd. v. O'Brien [2015] IESC 96, [2015] 2. I.R. 656 followed.

Per McKechnie J. (dissenting): That evidence obtained from business records was inherently hearsay unless proved in court by the author of those records and their admission in evidence depended upon the availability of a recognised exception to the hearsay rule. Evidence of such records could be admitted pursuant to the 1879 Act, but only in compliance with its provisions and by a witness who was then an officer or employee of the bank.

Criminal Assets Bureau v. Hunt [2003] 2 I.R. 168 and Ulster Bank Ireland Limited v. Dermody[2014] IEHC 140 considered.

3. That where the documentary evidence of a plaintiff demonstrated an ongoing and close banking relationship and the parties' understanding of the true state of affairs, it was unnecessary to look for an exception to the rule against hearsay. Such documentary evidence could constitute a course of dealing between the parties that in other circumstances would be called admissions and there was therefore no reason to have resort to any principle that an inference could be drawn from the failure of a person to answer a statement of fact in circumstances where a reasonable person who knew the opposite to be the case would issue a form of denial.

Per McKechnie J. (dissenting): The simple fact that there was documentation that portrayed a lengthy business relationship between the parties could not have any bearing on admissibility of a witness's evidence. At all times there was an onus on a plaintiff to establish its claim and such onus could not possibly be shifted or be dispelled on the basis of correspondence establishing a course of business dealing or an absence of a denial by a defendant.

4. That where a case sufficient to found a judgment had been made out by a plaintiff, it was only if the defendant adduced any or any meaningful evidence to rebut it that it could be said there was a defect in the plaintiff's proofs. There was an obligation on the defendant to engage with the evidence and put to witnesses any fact that undermined their testimony.

Ulster Bank Ireland Ltd. v. O'Brien [2015] IESC 96, [2015] 2. I.R. 656 and McDonagh v. Sunday Newspapers Ltd.[2017] IESC 46, [2018] 2 I.R. 1 considered.

5. That the court had jurisdiction pursuant to O.63, r. 5 RSC to permit the giving of additional evidence by a witness who had not provided a witness statement in advance and a constitutional duty to ensure the fairness of a trial.

Moorview Developments Ltd. v. First Active plc [2008] IEHC 274, [2009] 2 I.R. 788 and Ryanair Limited v. Bravofly Limited[2016] IESC 53 distinguished.

6. That as part of the court's role in interpreting documents, it was empowered, by way of construction, to correct mistakes where (i) they were clear cut; and (ii) the appropriate correction was self-evident.

Moorview Developments Limited v. First Active PLC [2010] IEHC 275 applied.

7. That where a guarantor executed a series of guarantees in favour of the same lender in respect of the indebtedness of the same debtor, there was no rule of construction that a subsequent guarantee that guaranteed the debtor's previously incurred indebtedness operated to supersede or release prior guarantees that secured the same indebtedness.

Mahoney v. McManus (1981) 180 C.L.R. 370 considered.

Obiter dictum, per McKechnie J.: A bank could not be permitted to establish its debt by relying upon any inference drawn from a non-response or silence from a customer; the obligation was on the bank to adduce sufficient evidence to prove its claim.

Bessela v. Stern (1877) 2 C.P.D. 265, Wiedemann v. Walpole[1891] 2 Q.B. 534, Hollis v. Burton[1892] 3 Ch. 226 and Killick v. Pountney (Unreported, High Court of England and Wales, James Munby Q.C., 31 March 1999) considered.

Cases mentioned in this report:

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