Bank Debt/Summary Judgment Cases-Lessons from the Supreme Court in Bank of Scotland PLC v Jerry Beades

You may have heard of Mr. Jerry Beades, who is a well-known anti eviction activist and businessman.

The High Court in 2012 granted a judgment against him in favour of the Bank of Scotland plc in the sum of €9,684,987.04 together with costs. This judgment was in respect of a number of loans Mr. Beades had obtained from the bank.

Mr. Beades appealed this decision to the Court of Appeal and the case ended up in the Supreme Court who delivered a judgment on 29th July 2019. (Read the full decision here).

Mr. Beades represented himself in the High Court and Supreme Court and a review of the Supreme Court decision is worthwhile on a number of levels. Let’s take a look at the Supreme Court decision.

Supreme Court

The legal proceedings had originally commenced by way of a summary summons and Mr. Beades eventually filed a replying affidavit before the case was heard in the Commercial Court.

The claim by the bank was on foot of four facility letters and the application for judgment was grounded on sworn statements (affidavits) of Bank of Scotland and Certus employees.

Mr. Beades swore a replying affidavit in which he made a number of claims:

  • That one of the bank affidavits was ‘fraudulent’ by reason of being sworn in front of a person who Mr. Beades asserted was not a registered practicing solicitor in Ireland
  • The bank was in breach of its contract and its duty of care to him
  • There were delays with drawdown of facilities
  • The bank was in breach of its own terms and conditions by reason of its alleged failure to serve a demand letter on Mr. Beades at his Fairview address

The High Court found against Mr. Beades, however, because he had not denied in any of his affidavits signing the loan agreements or receiving the money from the lender. Accordingly, he had not demonstrated any arguable issued to prevent judgment being granted against him and judgment was granted to the bank. (Read the High Court decision here).

Even if he had a counterclaim it would not be a defence to the summary judgment application because Mr. Beades had put into evidence the following extract from the bank’s terms and conditions,

‘All sums payable in respect of principal interest or otherwise shall be payable gross without deduction on account of taxes, any set-off or counterclaim or on account of any charges, fees, deductions or withholdings of any nature . . .’

The substantive issue-did you receive the money?

The Judge in the High Court had asked Mr. Beades directly if he had received the money.

Mr. Beades viewed this as an inappropriate question but the Supreme Court agreed with Kelly J. of the High Court that this was the substantive issue in the case.

The Supreme Court went on to point out that when you are defending a debt claim such as this one you must pin your colours to some mast or other. That is to say, the defendant could claim he never made the agreement, or it is a case of mistaken identity, or an agreement was made but not performed, or that he did not receive the money.

He could also argue that he received the money but the agreement was breached by the lender, or that there was some issue of illegality, or undue influence, or unconscionability, or estoppel which prevents recovery.

This is a non-exhaustive list of issues which could have been advanced by Mr. Beades but he did not put any of these arguments forward and the Supreme Court went on to point to the old rule that the denial of a debt alone is not a defence.

Moreover Mr. Beades made a number of observations at the Supreme Court appeal which were entirely consistent with him having received the money-for example, ‘they gave me the wrong facility’ and ‘the bank continued to release funds for the building work. If the bank seriously thought it had no obligation to do so, they would have cut off the flow (especially when they had liquidity problems)’ and ‘the unfinished development at Fairview could be finished and the bank could get its money back, why this Mexican standoff?’

All of these statements were admissions that he had received the loan monies.

The Supreme Court also noted that notwithstanding that it was 7 years since the bank had obtained judgment against Mr. Beades he had never put forward the argument that the bank had not lent him the money.

Mr. Beades’ Arguments

The arguments put forward by Mr. Beades were based on technical matters relating to procedure, the admission of evidence, and the swearing of affidavits.

Mr. Beades had also put forward the argument that had the High Court case been heard by a different Judge there would have been a different outcome (Mr. Beades had claimed bias against him in the High Court although did not repeat this in the Supreme Court appeal).

The Supreme Court did not agree that a different judge would have arrived at a different decision and judgment would have been awarded against him based on the facts and evidence.

Inadmissible Evidence

Mr. Beades put forward the argument that the evidence to be offered by the bank must be sworn by a bank employee and the evidence of an employee of Certus, who provided support services to the Bank of Scotland, was insufficient and inadmissible. He was relying on 4 of the Bankers’ Books Evidence Act 1879.

This argument, held the Supreme Court, was misconceived as the section on which Mr. Beades relied referred to an entry in a book held by the bank. This did not cover a situation where someone was giving sworn evidence on affidavit as to facts within their knowledge.

The Supreme Court referred to Ulster Bank Ireland Ltd. v. O’Brien [2015] IESC 96, [2015] 2 I.R. 656 as authority for the proposition that “an affidavit sworn by a person other than the plaintiff who can swear positively to the relevant facts is sufficient”.(J. Laffoy)

The essential fact in this case was the Supreme Court was satisfied that Ms Tracy, who swore the affidavit, was capable of swearing positively to the facts showing that the Bank of Scotland was entitled to judgment.

In summary the Court held the contention that there was no admissible evidence of the arrangements between the bank, its predecessor, and the borrower, Mr. Beades, was misconceived.

No demand letter served

Mr. Beades also made the argument that a letter of demand was not properly served upon him.

However, the Supreme Court held that Mr. Beades had failed to explain why evidence of delivery of a demand letter was a necessary proof when the original loan was for a facility for a fixed term and repayment was to be made at the end of the facility term and the term was up.

Affidavit evidence inadmissible

Mr. Beades had also raised a question about a further affidavit by the Bank’s side by reason of an allegation of fraud as a consequence of the solicitor who witnessed it being allegedly not a solicitor practicing in Ireland. He withdrew the allegation of fraud in the Supreme Court and accepted the solicitor was a registered practicing solicitor.

The Supreme Court also held

“In any event, O. 40, r. 15 RSC provides that “the court may receive any affidavit sworn for the purpose of being used in any cause or matter notwithstanding any defect by misdescription of parties or otherwise in the title or jurat, or any other irregularity in the form thereof…”.

Decision

The appeal was dismissed.

Read the full Supreme Court decision here: Bank of Scotland PLC v Beades [2019] IESC 61

Read the High Court case here: Bank of Scotland PLC v Jerry Beades

Conclusion

If you are facing debt collection proceedings the substantive, fundamental issue is whether you received the money or not. If you did it is unlikely any technical defence or arguments based on alleged procedural deficiencies will save the day for you.

The Right to Cross Examine in Debt Cases is Not Absolute

In debt collection cases in the High Court evidence of the debt is adduced by affidavit-that is, a sworn statement by the creditor who claims the money is due. This affidavit will set out the facts of the debt, how it arose and will state that in the belief of the deponent there is no defence to the action.

The debtor then replies, also by affidavit.

The relevant High Court rules are set out in Orders 37 (summary summons procedure) and 38 (special summons procedure) in the Rules of the Superior Courts.

These rules also provide, however, that the debtor can serve a notice to cross examine the deponent of the creditor’s affidavit. To do this he must serve a notice to cross-examine.

If the deponent is not produced for cross-examination his evidence may not be relied on in Court, unless by special leave of the Master of the High Court or the High Court.

Debtors have been known to use this device to try to delay creditors in obtaining judgment against them and to increase creditor’s costs.

But this right to cross-examine is not absolute and Judges of the High Court are experienced enough to recognise when such a request to cross examine is for tactical reasons and to stymie and delay.

The right to cross-examine

The principles surrounding this right to cross-examine were reviewed in an April 2019 decision The Governor and Company of Bank of Ireland v Ward, [2019] IEHC 235. The Judge in this case ruled against the debtor’s application to cross-examine and held

12.          It is clear that in the exercise of its discretion in an application to permit cross examination on the contents of an affidavit, the court must be satisfied that there is a conflict of fact or evidence and that the resolution of that conflict is necessary to dispose of the issues which the court has to determine. Apart from repeating the wording of the rules of court and his interpretation thereof, no particular fact or piece of evidence sworn to by the deponents Mr. Buckley and Ms. Enright is contested.

Reliance was placed upon Irish Bank Resolution Corporation Limited (in special liquidation) and ors v. Sean Quinn and ors [2015] IEHC 134 in looking at the right to cross-examine and paragraph 10 of that judgment stated:

“The test for cross-examination of a witness on an affidavit is set out in the Director of Corporate Enforcement v. Seymour [2006] IEHC 369. In that case O’Donovan J. stated at page 5:

“In my view, it is axiomatic that, when, in the course of applications to the court which are required to be heard and determined on affidavit, as is the situation in this case, it becomes apparent from the affidavit sworn in those proceedings that there are material conflicts of fact between the deponents of those affidavits, the court must, if requested to do so, consider whether or not to direct a plenary hearing of the proceedings or that one or more of the deponents should be cross-examined on his or her affidavit. This is so because it is impossible for a judge to resolve a material conflict of fact disclosed in affidavit. However, while it seems to me, that where it is debatable as to whether or not the cross-examination of a deponent on his or her affidavit is either necessary or desirable, the court should tend towards permitting the cross-examination, at the end of the day it is within the discretion of the court as to whether such a cross-examination should be directed and that discretion should only be exercised in favour of such cross-examination if the court considers that it is necessary for the purpose of disposing of the issues which the court has to determine. That appears to me to be the import of a statement of Keane C.J. in the course of an unreported judgment of the Supreme Court delivered on the 15th December, 2003, in a case of Holland v. the Information Commissioner and represents the current jurisprudence in that behalf in this country.”

In essence, the right to cross-examine will only arise where there is a conflict of facts or evidence between the parties and that conflict must be resolved and Mr. Ward, the debtor in Governor and Company of Bank of Ireland v Ward, [2019] IEHC 235, had failed in his own affidavit to contest any fact or evidence in the creditor’s affidavit.

For this reason, his application to cross-examine the deponent of the creditor’s affidavit was refused.

Attorneys of Companies Can Sign Deeds as Individuals

Did you know that an individual can execute (sign) a deed with his signature alone but a company needs a seal to make a deed?

This fact has been the basis of some technical defences put forward by individuals who are being pursued by banks for outstanding loans, in repossession proceedings, for the appointment of receivers on foot of their mortgages and charges, and so forth.

Let’s take a look, first, and see what is a deed. The Land and Conveyancing Law Reform Act 2009, section 64 describes a deed as:

(2) An instrument executed after the commencement of this Chapter is a deed if it is—

(a) described at its head by words such as “Assignment”, “Conveyance”, “Charge”, “Deed”, “Indenture”, “Lease”, “Mortgage”, “Surrender” or other heading appropriate to the deed in question, or it is otherwise made clear on its face that it is intended by the person making it, or the parties to it, to be a deed, by expressing it to be executed or signed as a deed,

(b) executed in the following manner:

(i) if made by an individual—

(I) it is signed by the individual in the presence of a witness who attests the signature, or

(II) it is signed by a person at the individual’s direction given in the presence of a witness who attests the signature, or

(III) the individual’s signature is acknowledged by him or her in the presence of a witness who attests the signature;

(ii) if made by a company registered in the State, it is executed under the seal of the company in accordance with its Articles of Association;

(iii) if made by a body corporate registered in the State other than a company, it is executed in accordance with the legal requirements governing execution of deeds by such a body corporate;

(iv) if made by a foreign body corporate, it is executed in accordance with the legal requirements governing execution of the instrument in question by such a body corporate in the jurisdiction where it is incorporated,

and

(c) delivered as a deed by the person executing it or by a person authorised to do so on that person’s behalf.

You will see that a deed, to be properly executed, must be

  1. Signed by an individual in the presence of a witness
  2. Sealed with the company seal if executed by a company

This question arose in a case McGuinness & Mulligan v Ulster Bank Ireland Limited heard by the Supreme Court.

The argument by the borrowers was that the deed which appointed a receiver to their property was invalid because it was the bank’s deed and was not executed with the company seal, which they claimed was a legal obligation.

What happened was a bank official had appointed the receiver under a power of attorney granted by the bank.

The borrowers argued that it was the bank’s deed and it necessitated the bank’s company seal, which was absent.

The Court agreed that it was the bank’s deed but made on its behalf by an authorised individual who could execute the deed of appointment of receiver without the bank’s seal. The Court recognised that the parties to a deed may be different from those who execute or make the deed between the parties, which occurred in this case.

Read the Supreme Court decision in McGuinness & Anor v Ulster Bank Ltd [2019] IESC 20.

Interest on Judgment Debts-What You Need to Know

Are you concerned about interest accumulating on a judgment against you?

Or are you a creditor seeking to recover a reasonable amount of interest on money rightfully due and owing to you?

When a debtor obtains a judgment against a creditor he may also be entitled to interest on the judgment amount pursuant to section 22 of the Courts Act, 1981. This interest order is at the discretion of the Judge concerned.

Interest begins to run on the judgment amount (not costs) from the day the judgment is granted.

The discretion of the Court to award interest or not was raised in Reaney v Interlink Ireland Ltd [2016] IECA 238. Judge Finlay Geoghegan, in this Court of Appeal case, described the rationale behind Courts Act interest as follows:

“To put it another way: it is intended to compensate a person for being out of the money awarded from the time he ought to have received it to the date of judgment, provided, however, other facts make it just between the parties to make such an award.”

This Reaney v Interlink Ireland Ltd case is a good one to review to see what the considerations of a Court will be in deciding whether to award interest or not.

The rate of interest was set at 8% per annum from 1989 pursuant to section 26 of the Debtors (Ireland) act, 1840. This rate was reduced from 8% to 2% per annum in the Courts Act 1981 (Interest on Judgment Debts) Order 2016 (SI 624/2016) with effect from 1st January, 2017.

You can read the full decision in the Court of Appeal in Reaney & ors -v- Interlink Ireland Limited (t/a D.P.D.) [2016] IECA 238.

The Quinn Children Consent to Judgments Totaling €440 Million

There was a large group of photographers outside the entrance to the Four Courts a few weeks ago as I walked out to the WRC in Ballsbridge for an employment hearing. As I walked past the building entrance the targets of their interest strolled down the street to enter the Round Hall and I guessed, correctly, who they were: “the Quinn children”.

When I say “the Quinn Children” I refer to the adult children of Ireland’s once wealthiest man, Seán Quinn.

Even if I never met them that morning on the quays by sheer coincidence I would have had an interest in their case.

Because their case was one in which they, the Plaintiffs in the action, were suing IBRC, formerly known as Anglo Irish Bank. Their claim was that €415 million guarantees they provided for loans to the Quinn Group in 2007 and 2008 were invalid and, therefore, unenforceable.

When I read that this was the basis of their claim-their cause of action-I was interested to see how they were going to win that argument. For it is an argument that has been made, for the last 10 years or so, by many small business owners, wives and girlfriends of small company directors, who argued that they could not be held to the guarantee they signed.

For all sorts of reasons-for example, signing a document in the kitchen of their home for their spouse who was a small business owner and discovering years later that this document was, in fact, a guarantee and the lender now wanted to be paid.

So, I kept an eye on the case as it was reported in the papers and on TV/radio.

It appeared to be the case that the Quinn children were claiming that they were put under undue influence by their father, Seán Quinn, into signing the guarantees. And what’s more, they claimed they were naïve, inexperienced, and unsophisticated and didn’t understand what they were doing or the significance of the papers they were signing.

This line of argument was, as you would expect, rejected by the bank’s lawyers who pointed out that these ‘children’ were experienced, well educated, professional adults and the notion that they did not understand what they were signing or what it meant was fanciful nonsense.

Significant ruling by Judge-game changer?

But the case took an unexpected turn last week leading to settlement talks which are ongoing. These talks commenced after the Judge, Justice Simons, made a significant ruling in the case.

This ruling hinged on the fact that the Quinn children sued the bank, IBRC, on the basis that the bank had unduly influenced them; but when it came to running the case and giving evidence the case put forward appeared to be that it was Sean Quinn who was the culprit in point of undue influence and overbearing their minds, not IBRC, the defendant.

And last week the children applied to Court to change their statements of claim to reflect this and wished to file supplementary written statements.

Justice Simons, however, refused to grant orders along these lines. He also stated that the argument that their pleadings in the case that Sean Quinn had unduly influenced them were “untenable”. He also said that they

“were unequivocal in stating that the entity against whom the allegation of undue influence was being made was Anglo…Not only is no claim of undue influence made against Sean Quinn Snr in the pleadings, the making of any such claim would, in any event, be entirely inconsistent with the manner in which the litigation has been conducted to date.”

Justice Simons also stated that if Sean Quinn was the ‘guilty’ party in respect of undue influence he should have been named as a defendant. When he asked counsel for the Quinn children why statements along their present course of argument were not included in their original witness statements counsel for the Quinn children admitted there was ‘’no good reason’’.

Significantly Justice Simons decided that if he allowed this change in approach by the Quinn children it would cause prejudice to the defendant, IBRC, as it would not now know what case it was expected to meet.

Moreover, IBRC had a counterclaim against the Quinn children and was entitled to bring that case along without further delays, especially having regard for the fact that this case commenced in 2011.

This ruling, I suspect, was a game changer and prompted the settlement talks.

What I find fascinating about this case, however, is why the claims of undue influence alleged against Sean Quinn were not included in the original statement of claim of the Quinn children.

If you never knew anything about the law, or how legal proceedings are conducted generally, you would probably be raising your eyebrows at a claim of wrongdoing against one party for 8 years and then, when the case is being heard and evidence is being adduced, somebody else is being fingered as the culprit.

You might also raise your eyebrows a little further, I believe, if you knew that all parties in the case had legal professionals who were at the top of their profession and as good as ready money could instruct.

As an outsider looking in I find it fascinating that the case took the turn it has taken as I was looking forward to seeing the final judgment in a high stakes, high profile case. If settlement talks are successful we will never know, although I had my own strongly held opinion which shall remain unventilated.

UPDATE 3rd April, 2019

I held off publishing this post for a couple of days as settlement negotiations were ongoing between the parties. The outcome of those talks were that the Quinn children consented to judgments totaling €440 million being entered against them. This is €88,157,351 against each of them.

They also accepted that IBRC (formerly Anglo Irish Bank) had valid and enforceable claims on the Quinn assets which were the subject of the securities.