Judgment
Title: | Ulster Bank Ireland Ltd -v- O'Brien & anor |
Neutral Citation: | [2015] IESC 96 |
Supreme Court Record Number: | 114/2014 |
High Court Record Number: | 2013 2746 S |
Date of Delivery: | 12/16/2015 |
Court: | Supreme Court |
Composition of Court: | MacMenamin J., Laffoy J., Charleton J. |
Judgment by: | Charleton J. |
Status: | Approved |
Result: | Appeal dismissed |
Details: | Judgment also by Judge Laffoy |
| Judgments by | Link to Judgment | Concurring | MacMenamin J. | | Laffoy J., Charleton J. | Laffoy J. | | MacMenamin J., Charleton J. | Charleton J. | | MacMenamin J., Laffoy J. | |
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An Chúirt Uachtarach
The Supreme Court
Record number: 2013/2746 S
Appeal number: 114/2014
MacMenamin J
Laffoy J
Charleton J
Ulster Bank Ireland Limited
Plaintiff/Respondent
And
Rory O’Brien, Danny O’Brien and Michael McDermott
Defendants/Appellants
Judgment of Mr Justice Charleton delivered on Wednesday the 16th day of December 2015
1. This appeal concerns the admissibility of hearsay evidence within the particular commercial context of default on a bank loan.
Background
2. By a summary summons issued on the 26th August 2013, the plaintiff/respondent Ulster Bank sought judgment against Rory O’Brien, Danny O’Brien and Michael McDermott, the defendants/appellants, in the sum of €888,920.89. An appearance was entered on behalf of the defendants apart from Michael McDermott on the 19th September 2013. Judgment was sought against Michael McDermott in the Central Office of the High Court. In accordance with the procedure chosen by Ulster Bank to pursue its claim, a notice of motion was issued on the 16th October 2013, returnable before the Master of the High Court, seeking judgment in that regard against the other two alleged debtors. The notice of motion was supported by an affidavit of Mary Murray, sworn on the 15th October 2013, describing herself as “Senior Relationship Manager with the Global Restructuring Group of Ulster Bank”. All quotes in this judgment are as written and uncorrected as to grammar including the clear misuse of lower or upper case letters. That affidavit purported to prove the loan to the defendants/appellants by exhibiting relevant correspondence, extracts from computer records and a letter of demand. Her affidavit was not replied to by the defendants/appellants, just as the letter of demand addressed to each of them prior to the issue of proceedings remained unanswered. On the 14th November 2013, the Master of the High Court refused to grant summary judgment for Ulster Bank, but he acceded to an argument on behalf of two of the defendants/appellants, Michael McDermott not then being represented, that the affidavit constituted inadmissible hearsay evidence. Consequently, it was ordered by the Master that “the said Motion be and the same is hereby dismissed” and that Ulster Bank pay the costs of Rory O’Brien and Danny O’Brien. That order was appealed by notice of motion, dated the 18th November 2013, and it came on for hearing before Hedigan J on the 3rd March 2014 in the High Court. The appeal was allowed and it was ordered that Ulster Bank should recover the sum claimed against the first and second named defendants/appellants, and it was further ordered that they should pay the costs of the plaintiff in the High Court and of the motion before the Master. The agreed note of the ex tempore judgment of Hedigan J reads:
The Affidavit of Ms Mary Murray sworn on the 15th day of October 2013 and the averments therein referring to entries in the books of the Plaintiff bank did not amount to inadmissible hearsay.
The Deponent’s averments were similar in form and content to those frequently appearing in Affidavits grounding such applications and they provide a sufficient evidential basis for granting the Plaintiff’s application for liberty to enter final judgment against the Defendants.
The error contained in the Deponent’s Affidavit highlighted by Defence Counsel did not amount to grounds for denying the relief sought. Affidavits are frequently presented to the Court which contain minor technical errors.
The Defendants were not denying that the sums claimed were owed by them.
There was little benefit to the Defendants in stringing things out further and in the circumstances the Court would grant the Plaintiff bank the relief sought. …[C]osts of the motion and of the earlier Master’s hearing [are awarded] to the plaintiff.
3. A stay of five weeks was put on the consequential monetary judgment, by order of the High Court dated the 2nd April 2014. By notice of appeal dated the 13th March 2014, on behalf of the first and second named defendants/appellants, it is asserted that the trial judge erred in the admission of hearsay evidence and that he also erred in not finding that Ulster Bank had failed to comply with sections 4 and 5 “of the Bankers’ Books Evidence Act 1879 (as amended), proving that the book entry produced by the Bank is one of the ordinary book entries maintained during the activities of the Bank and is in the continuing custody of the Bank and the entry was made in the ordinary course of business and a copy of the entry sought to be adduced as evidence has been examined against the original in the custody of the Bank and is correct.” While other points are referenced in the notice of appeal, it is the hearsay point alone which has been argued.
The proofs offered by Ulster Bank
4. As the trial judge indicated, the proofs offered by Ulster Bank are similar to those which have apparently been accepted by the courts in thousands of other loan cases as establishing proof of debt and of default in payment. Be that as it may, if the form and content of the proofs are such that they are inadmissible hearsay and they must be excluded, the appeal must be allowed. Consequently, the averments in that affidavit and the correspondence exhibited should be closely examined.
5. Mary Murray averred that she made the affidavit “with the authority and consent of the Bank in order to ground its application for liberty to enter summary judgment” and that she made it “from facts within my own knowledge and from a perusal of the Bank’s books and records, save where otherwise appears and where so otherwise appearing I believe the same to be true and accurate.” The affidavit records that judgment was sought pursuant to two loan facilities agreed on the 23rd July 2004 and on the 14th December 2005. She does not say that she was personally present when those agreements were entered into and nor does she say that she is familiar with the signatures of the borrowers. Even if she had been present, some of the signatures do not amount to a signature at all but to an unidentifiable squiggle. The first letter exhibited is dated the 22nd July 2004 and it records an offer to the borrowers to assist with the purchase of ten acres of development land in County Offaly. The letter, as exhibited, shows the names of the defendants/appellants as borrowers, and it shows the loan as the sum of €329,000, for a term of two years, but repayable on demand. An examination of the exhibited letter shows a signature by Dave Kavanagh, apparently a manager in “Business Banking”, dated signatures from Danny O’Brien and Rory O’Brien, and a dated squiggle from Michael McDermott. Terms and conditions are appended. The second letter exhibited is dated the 8th December 2005 and it records an offer to the same borrowers in the sum of €471,000 to assist in the purchase of twelve acres of development land in County Offaly. An examination of the letter shows the same signatures as the previous letter. Conditions were as previously. The next exhibit to this grounding affidavit is a letter of demand from Ulster Bank to the defendants/respondents dated the 1st February 2013. That letter precisely references the facilities and loans and it continues:
We would advise you that the Facilities are in arrears and, in addition, you are in breach of the terms of the Facility Letters.
We now hereby demand immediate repayment of the Facilities together with accrued interest and all other amounts outstanding under the Facility Letters. The outstanding amount of each of the Facilities as at 1st February 2013 is as follows:-
2004 Facility - The outstanding amount of the Facility as at the date of this demand (including unpaid and accrued interest to the date of this letter of demand) is €353,053.91. Interest and charges as provided for in the 2004 Facility Letter will continue to accrue until all sums owing have been paid in full.
2005 facility - The outstanding amount of the Facility as at the date of this demand (including unpaid and accrued interest to the date of this letter of demand) is €500,431.49. Interest and charges as provided for in 2005 Facility Letter will continue to accrue until all sums owing have been paid in full.
The Facilities - Additional unpaid accrued interest in respect of the Facilities to the date of this letter of demand is €19,374.58.
We further give you notice that if the whole of the above sums are not paid forthwith we reserve the right to exercise, without further notice to you, all and any of the powers available to us by law or under the security provided to us in respect of or in connection with the Facilities.
6. That letter was signed by Mary Murray, as to facts of which she would have had personal knowledge, and by another bank manager. Additionally, there were three computer printouts as to the loans. Whereas before the High Court and before the Master some argument was made as to a small calculation error, this has not been pursued on appeal.
7. The affidavit of Mary Murray, as well as exhibiting the documents, precisely describes them and the relevant interest rates. The affidavit states that the loan facilities were accepted by each of the defendants and drawn down in full, and it states the relevant interest rates at the time. The affidavit also details the demand to repay the monies and that each of the defendants/appellants “have failed, neglected or refused to discharge the remains due and that there is no defence to the proceedings. All of this is standard fare in an affidavit seeking judgment for a liquidate amount in the High Court.
8. Concisely put, the argument advanced on this appeal on behalf of the defendants/appellants is that this affidavit, with its exhibits, does not amount to any admissible proof that either the ostensible borrowers were loaned the money, drew down the money, ran interest up at the rate specified, had a demand made of them, did not answer that letter, or did not repay the money. It is said on their behalf that in the sphere of criminal law the Criminal Evidence Act 1992 reformed the law, making business records admissible at criminal trials, including maps, plans, graphs, photographs and information on computer or on microfilm, but puzzlingly, this reform was never extended to the proof of debts. On the other hand, banks had an exception to the hearsay rule which they were entitled to exercise, namely that mentioned in the notice of appeal, and as this particular bank did not use the Act of 1879, there was a total failure of proof.
The hearsay rule
9. A statement made by a person, other than one which is made by a witness while giving oral evidence in proceedings, is inadmissible as evidence of any facts stated. Hence, the witness cannot depose as evidence facts that are unknown to the witness but merely recounted by the witness from information from an absent individual. A witness cannot bolster their own testimony by calling other witnesses to depose that they had been told the same facts to which they testify; the rule against self-corroboration, as it is called, but which is part of the hearsay rule. Records made in the course of business are not, for that reason, an exception to the hearsay rule. Of course, if made in or around the time of events in question, whether in the course of a business or any other transaction, a witness may refresh memory by reference to such contemporary records. Despite apparent inherent reliability, no entitlement to overstep the hearsay rule is created simply because records were made by someone in the course of business. Thus, in England, in Myers v Director of Public Prosecutions [1965] AC 1001, the House of Lords ruled that the exceptions to the hearsay rule could not be expanded on the basis that the evidence sought to be given is peculiarly reliable or is the best available. While our courts have taken no such rigid position, there has been little sign that the principles as to the inadmissibility of hearsay evidence inherited in 1922 are subject to change on the basis of reliability. Indeed, in The People (DPP) v Prunty [1986] ILRM 716 it was held by the Court of Criminal Appeal that an official from the Department of Posts and Telegraphs was not entitled to give evidence that he had looked up the relevant internal records to discover that a particular telephone number was assigned to a particular public phone box from which ransom demands had been made in that kidnapping case. Inherent reliability as a ground for admission was not argued on that appeal, however. The hearsay rule, it must be noted, has limitations. In Cullen v Clarke [1963] IR 368, at page 378, Kingsmill Moore J indicated:
In view of some of the arguments addressed to the Court, it is necessary to emphasise that there is no general rule of evidence to the effect that a witness may not testify as to the words spoken by a person who is not produced as a witness. There is a general rule, subject to many exceptions, that evidence of the speaking of such words is inadmissible to prove the truth of the facts which they assert; .... This is the rule known as the rule against hearsay.
10. As he noted, hearsay is subject to a myriad of exceptions, many of which are discussed in the classic judgment just quoted, and which are also to be found in digestible form in Irish Cases on Evidence (2nd Edition, 1982) by JSR Cole and Evidence by McGrath (2nd Edition, 2014). The origins of the exceptions, while most often lost in time as to their justification, share certain characteristics. The edition of Archbold’s Criminal Pleading, Evidence and Practice (London, 1922), current on Irish independence, states the justification for the hearsay rule at page 370 as being: “(a) what the other person said was not put upon oath” and “(b) the party who is to be affected by it had no opportunity of cross-examining him.” Glanville Williams in his The Proof of Guilt: A Study of the English Criminal Trial (3rd Edition, 1963) offers a slightly different justification at page 196:
These, then, are the two principal justifications for the hearsay rule: the desirability of having the witness personally present in court, where his demeanour can be observed and his story can be tested by cross-examination by the other party or by trained counsel of that party’s choice, and the risk that a story when passed on may become garbled.
11. Nonetheless, experience over centuries has indicated that: in particular circumstances, declarations accompanying actions may explain the mind of the person doing the act; admissions against interest are unlikely to be false; entries in public registers will tend to be corrected if inaccurate; statements on the point of death may have a solemnity equal to or greater than the taking of an oath; and recordings in the course of duty of facts observed by deceased persons are not to be excluded simply because of the absence of the note taker from court. Analysing the exceptions tends towards the conclusion that the law has admitted them because the unreliability considered to haunt evidence by report, and that the taint of uncertainty over hearsay evidence, itself may be displaced where the reliability of the testimony is so obvious as to be unarguable. As Glanville Williams records at page 208-209, the 1945-1946 Nuremberg Trials satisfactorily dispensed with the rules of evidence in favour of a single rule that the tribunal should “admit any evidence which it deems to have probative value” leaving the weight to be attached to such evidence as a matter for the tribunal.
12. On this appeal, there has been no apparent request for the creation of any new exception to the rule against the admissibility of hearsay evidence. In this case, such is not necessary. The Bankers’ Books Evidence Act 1879 (as amended) provides at section 4 for the admissibility of a “copy of an entry” kept in the books of a bank, but it also provides that same should not be admissible:
A further condition is set out in section 5, which provides that the copy:
Section 131 of the Central Bank Act 1989 updates section 5 to enable reception in respect of non-legible formats – in other words, computer records. Section 191 of the National Asset Management Agency Act 2009 is among provisions extending this parent legislative privilege to the officials of the organisation which took over the disastrous debt burdens of our banks after 2008, operating in their stead as what has become known as a “bad bank”.
13. Banks, however, are not the only commercial organisations which lend money. Credit is the inescapable component of business. Trust that monies advanced, or goods delivered, will be honoured by repayment is essential to the relationships of honour, which keeps the wheels of commerce oiled. It would be extremely odd for there to be a rule in favour of banks and the admissibility of their records and further, but for there to be no assistance as to the proof of debt for any other organisation or person offering goods or services in the Irish market. It is to be remembered that in the 1870s, what was then known as the best evidence rule, to the effect that proof must be offered in accordance with the best evidence available, was then current. Hence, copies could not be made of gigantic banking ledgers but, rather, they had to be produced in court. The best evidence rule has, since that time, weakened and ultimately, it has ceased to exist in favour of a test as to whether the evidence offered is admissible or inadmissible Whether there might be better evidence of an event or transaction, merely goes to the weight that might be given particular testimony. No one now argues that because there is a video recording of a transaction that the participants so recorded cannot give evidence, whereas it was once argued that a note as to what tombstone read could not be admitted because the tombstone had not been physically produced.
14. Whereas case law from the High Court has been urged on both sides as establishing sound reasoning in favour of the admissibility of business records or against that proposition in banking cases, and where some of that case law seems to have been reasoned upon the nature of the proceedings being on affidavit, or the applications being interlocutory, or the records being at one remove from the organisation creating same, it is unnecessary to proceed to any analysis of those cases: see Mooreview Developments Ltd v First Active Plc [2010] IEHC 35, [2011] 1 IR 117 and Bank of Scotland v Fergus [2012] IEHC 131 and Governor and Company of Bank of Ireland v Keehan [2013] IEHC 631, which are cases in favour of the admissibility of such records, whereas Bank of Scotland Plc v Stapleton [2013] 3 IR 63 references the requirement to comply with the Bankers’ Books Evidence Act 1879 and Ulster Bank Ireland Ltd v Dermody [2014] IEHC 140 took a similar approach. No comment is made as to the reasoning of any of these cases. They are not now before this Court on appeal.
15. Since R v Christie [1914] AC 545, it has generally been held that statements made in the presence of an accused are always admissible in evidence. It follows that statements made in the presence of a party to civil proceedings may be admitted in evidence also. It would be facile to translate the French expression “Qui ne dit mot consent” into a rule that failure to deny an accusation amounts to an admission. The law does not say that in all circumstances. In fact, an ancestral adage comes closer “Is ionann toil ‘s éisteacht”, silence can be, not must be, acquiescence in a statement.
16. Silence as acceptance requires a nuanced analysis of particular circumstances before any instance of it can be admitted to the category of exception to the hearsay rule under the rubric of admissions. Nonetheless, the principle is supported by strong authority. In court cases, it must be remembered that the particular circumstances are dependent upon procedural safeguards. In the Rules of the Superior Courts 1986, particularly Order 2 and Order 26, and in the rules which have generally been applied to practice, indicate default of answer as a means to proceed to judgment for a plaintiff. Further, it would have become impossible for the courts to dispose of cases without a rule of pleading that what is not denied from an allegation in a statement of claim is accepted. Procedurally, the requirement that persons should be personally served with legal proceedings, absent an order of a court for substituted service, operates to ensure that there is proof of awareness that allegations are being made, which can result in such serious consequences as orders in damages or for injunctions. In the absence of an appearance, where liquidated debt is involved, the party issuing a summary summons may move to judgment in the Central Office of the High Court. When appearance is entered, the matter must become before the Master of the High Court. He has administrative, but no judicial, power. In the event of a contest of fact, the matter must go away from the Master and up before the High Court for decision. Where a credible defence is disclosed through an opposing affidavit, the matter must be remitted for plenary hearing. Here it is claimed on behalf of the defendants/appellants that it is enough to simply deal with sworn testimony, even that which has all the indications of being based in fact and in reason, by merely arguing that a party has an entitlement to make no denial.
17. Of themselves, the documents exhibited in the affidavit of Mary Murray carry indications of reliability. These are bolstered by her sworn evidence coming, as it does, from a position where she has had the means of knowledge to support what she says. Of those documents, perhaps the most important is the letter of demand. That letter was sent to the defendants/appellants and it was never replied to. The sworn affidavit was furnished to the legal representatives of the defendants/appellants and it was never replied to. Both the sworn and the unsworn documents amount to the same thing: a party is making an allegation that money has been borrowed and that a debt has not been repaid, which is now due for payment. Depending upon the particular circumstances, an inference can be drawn, where a reasonable person would feel compelled to issue some form of denial, whereby the absence of contradiction can amount to the acceptance of the contrary case; in other words, an admission against interest. This principle is based on sound authority. It is also one of the primary exceptions to the rule against hearsay.
18. In Bessela v Stern (1877) 2 CPD 265, a breach of promise to marry case, a response by the defendant that he would give the plaintiff money to go away, by reason of it not being a denial, was accepted as evidence where the allegation made was, “You always promised to marry me, and you don’t keep your word.” In the Court of Appeal, at page 272 Branwell LJ stated:
A claim is made on a man in respect of goods sold and delivered, and he does not deny it. If a statement is such that a denial of it is not to be expected, then silence is no admission of its truth; but if two persons have a conversation, in which one of them makes a statement to the disadvantage of the other, and the latter does not deny it, there is evidence of admission that the statement is correct.
Brett LJ agreed with this statement at page 272 thus:
The defendant by his silence admits what the plaintiff said, that the defendant always promised to marry her. It was not necessary that the evidence should show a mutual promise to marry. The evidence need not prove a promise; all that is wanted is corroborative evidence of it.
In Wiedemann v Walpole [1891] 2 QB 534, another action for breach of promise to marry, Lord Esher MR referenced, at pages 537 - 538, commercial usage stating:
[T]here are cases - business and mercantile cases - in which the Courts have taken notice that, in the ordinary course of business, if one man of business states in a letter to another that he has agreed to do certain things, the person who receives that letter must answer it if he means to dispute the fact that he did so agree. So, where merchants are in dispute one with the other in the course of carrying on some business negotiations, and one writes to the other, “but you promised me that you would do this or that,” if the other does not answer the letter, but proceeds with the negotiations, he must be taken to admit the truth of the statement. But such cases are those wholly unlike the case of a letter charging a man with some offence or meanness.
19. Thus, whether a failure to answer an allegation would make what otherwise might be hearsay into an admission is entirely dependent upon the factual circumstances. In R v Christie, at pages 563-565, Lord Reading reiterated the basic rule thus:
A statement made in the presence of one of the parties to a civil action may be given in evidence against him if it is relevant to any of the matters in issue. And equally such a statement made in the presence of the accused may be given in evidence against him at his trial.
…
In general, such evidence can have little or no value in its direct bearing on the case unless the accused, upon hearing the statement, by conduct and demeanour, or by the answer made by him, or in certain circumstances by the refraining from an answer, acknowledged the truth of the statement either in whole or in part, or did or said something from which the jury could infer such an acknowledgement, for if he acknowledged its truth, he accepted it as his own statement of the facts.
Lord Moulton at page 559 was in agreement to the same effect:
There remains the second ground, namely, that it is evidence of a statement made in the presence of the accused, and of his behaviour on that occasion. Now, in a civil action evidence may always be given of any statement or communication made to the opposite party, provided it is relevant to the issues. The same is true of any act or behaviour of the party. The sole limitation is that the matter thus given in evidence must be relevant. I am of opinion that, as a strict matter of law, there is no difference in this respect between the rules of evidence in our civil and in our criminal procedure.
20. Analysing the various circumstances under which a failure to deny particular and detailed allegations, based upon a pre-existing commercial or other relationship, and backed up by correspondence, is a matter for the application of this principle to particular circumstances. Cross & Tapper on Evidence (11th Edition, 2007) at page 42 affirms the need for close analysis before admission through silence is accepted as testimony:
A thin stream of civil cases has adhered to the proposition that failure to answer an allegation is capable, depending upon the circumstances, of amounting to evidence against the silence party… The principle underlying the cases in which reliance has been placed on the maxim res ipsa loquitur is based on the importance of the absence of an explanation.
The necessity for close analysis is reaffirmed by Heydon and Ockelton in Cases and Materials on Evidence (4th Edition, 1996) at page 147-148:
In cases where the inference may be drawn, the test is whether a denial could reasonably be expected in the circumstances. The circumstances of a business relationship commonly permit the inference to be drawn; a defendant’s silence in the face of correspondence becomes much more relevant in business cases than in affiliation cases. …
Regard must be paid to the status of the accuser. …
Another factor is the situation of the party charged and the circumstances surrounding the charging…
When will an indignant reply be expected? One test is the seriousness of the accusation, e.g. a charge of incest by a daughter to her father (R v Power [1940] QSR 111), or a breach of promise of marriage (Bessela v Stern (1877) 2 CPD 265, CA) … Another is the solemnity of the form of the accusation; so an executor’s failure to dispute an affidavit alleging that he owes the estate money may be an admission (Freeman v Cox (1878) 8 ChD 148).
This principle is also referred to in Phipson on Evidence (18th Edition, 2013):
The mere failure to answer a letter or object to an account… will not necessarily imply an admission of its contents… But it is otherwise if the letter is sent under circumstances which entitle the writer to an answer; or where it is the ordinary practice of people to reply.
21. Thus, analysing whether a failure to respond in the face of an accusation can amount to a declaration against interest must depend upon a myriad of factors. What follows cannot be definitive but merely indicative: an analysis of the nature of the relationship between the parties is essential; the circumstances under which an allegation is made must be taken into account, what is solemn, being different from what is social and from what is jocular or mischievous; the nature of what is claimed may amount, on the one hand, to a bare allegation or, on the other, to an apparently definitive statement backed-up by documentary proof; but finally, the test must be that a failure to respond, in circumstances when a denial would clearly be required, would amount in terms of the conduct of reasonable people to an admission.
22. None of this is to change or in any way alter the rule that accepting that which is said in the presence of a party to civil proceedings, or someone who is the accused in a criminal trial, is admissible as such.
This case
23. Civil proceedings for the enforcement of debt are an exercise of the constitutional right to litigate. Such a case carries procedural solemnity and is attendant with safeguards as to service. Within that context, the swearing of an affidavit and its service in court proceedings which make allegations that a sum is due, can be accepted in the absence of denial, where the form and the content of what is deposed to and the exhibits supporting it carry sufficient indications of reliability. Part of the matrix of facts to be considered is whether the documentary evidence establishes a relationship whereby the obligation to pay for goods or services, or to repay a debt, are properly referenced and exhibited. In that regard, the procedural safeguards of court proceedings as to service, coupled with the ability to make an appearance and to formally deny the existence of a debt, that where otherwise to contest liability to pay by reference to a collateral contract or some defect in goods and services, or some other appropriate defence, may give rise to an ability in the court to act against the party failing to make any denial. As a matter of law, where circumstances indicate that a reasonable person would have responded to an allegation in the context of an appropriate commercial relationship where money is due, but does not so respond, an admission may be set up. The court may act in that situation.
24. In that context, it cannot be said that the judgment of Hedigan J is in any way at fault. In the circumstances, this appeal should be dismissed.