Personal Guarantees Given to Bank – Corporate Law, Ireland
The net point in this recent High Court judgment concerned the legal status of the bank’s employee – whether he was the correct person to swear the bank’s grounding affidavit.
Ulster Bank sought to get judgment in the Master’s Court on foot of guarantees given for credit facilities given to two companies. The Master of the High Court rejected the bank’s application and the bank appealed his decision to the High Court.
The central issue of the appeal was whether the employee of the bank, who swore the affidavit grounding their application, could give admissible evidence to substantiate their claim. This brought into consideration for the court the provisions of the Bankers’ Books Evidence Acts. This person worked in the collections and recoveries department in Belfast and was believed to be the authorized person to swear the bank’s affidavit. This brought into consideration the different sections of the plaintiff’s group; Ulster Bank Ltd; Ulster Bank Holdings (ROI) Ltd; Hume Street Ltd; Royal Bank of Scotland and Hume Street Nominees Ltd. The plaintiff contended as Collections and Recoveries Dept., based in Belfast operated for all the divisions of the group that the employee was the correct person to make the affidavit.
The defendants contented that that person was not the correct person to swear it and accordingly it was hearsay evidence and consequently not admissible.
The bank contented that the evidence sworn was within the knowledge of the employee from his examination of the files. Case law was cited in support of their argument. They submitted the onus was on the defendants to show that the records were incorrect.
On behalf of the defendant, counsel submitted that the fundamental issue in the case was the same as in the Stapleton case, in that the plaintiff was
seeking to prove its case without adducing evidence from any person employed by it. Specifically, he argued that no-one had proved that the material examined by the bank’s deponent related to the defendant’s account with the plaintiff. It was stressed that the point being made was not the same as in Moorview, where the defendants (in that case) had sought to argue that the official who signed the documentation had to be called in evidence.
The court considered the extensive case law opened to it by both sides.
The court concluded that issues to be determined were, firstly, whether the records in this case were admissible by way of a common law exception to the rule against hearsay and secondly, if they were not, whether there has been compliance with the statutory formulation of the Bankers’ Books Evidence Acts, 1879-1959.
The court acknowledged that the judgments cited were of the view that business records of this nature are admissible as prima facie evidence of the truth of their contents, without reference to statute. However, the trial judge Ms Justice O’Malley was unable to reconcile this with the decision of the Supreme Court in Hunt and without been referred to any other authority which includes such records as exceptions to the rule at common law.
In banking cases specific provision was made by the Bankers’ Books Evidence Acts as amended. It is the case that the original Act in 1876 (repealed and replaced by the 1879 Act) was intended to relieve banks of the inconvenience associated with litigation between third parties. However, it is clear since, at least, the 1989 amendment (referred to in paragraph 18 above) the provisions of the Acts may also be availed of in proceedings to which a bank is itself a party. Both s.3 and s.6 are now applicable to all legal proceedings.
The High Court judge following the Supreme Court decision in Hunt, ruled that, in the instant case, the evidence of the bank’s deponent was not admissible to prove the truth of the contents of the records unless it came within the provisions of the Bankers’ Books Evidence Acts.
The issue that arose was whether their deponent can be said to be an “officer” of the plaintiff bank within the meaning of the Acts. In the view of the court, he cannot. However, the deponent was not an employee of the plaintiff, but of a separate legal entity. The plaintiff accepts that this is not a case in which the principles relating to lifting or piercing the corporate veil are relevant, but relies on the closeness of the corporate structure of the Ulster Bank Group. In my view the fact that the two companies are closely related does not alter their separate legal existence. The judge could see no legal or factual difference between the service that Ulster Bank Limited provided to Ulster Bank Ireland Limited in debt collection cases and that provided by Certus to Bank of Scotland, as considered by Peart J. in Stapleton.
In the circumstances the appeal by the bank was not be allowed. (Ulster Bank Ireland Ltd v Dermody & Dermody [2014] IEHC 140)