Two weeks ago I wrote about the significance of the Supreme Court Judgment in the case of Bank of Ireland versus O’Malley. In summary, the Judgment has had the effect of at least pausing, if not stopping entirely, hundreds of High Court debt collection claims taken by banks and vulture funds.
But does the Judgment have wider implications? Is the Judgment for example applicable to repossession proceedings? Can the Judgment be relied on to pause or indeed stop repossession proceedings?
Let’s briefly summarise the core of the Supreme Court Judgment. First, there is the significant re-balancing of the respective positions of plaintiff and defendant in summary summons proceedings. The Supreme Court ruled that, before a defendant had to show that it had a genuine defence, the plaintiff first had to show that it had a prima facie case. It seems obvious. But that’s new.
Second, in order for the plaintiff to show that it had a prima facie case it had to give adequate particulars of the sum claimed. In O’Malley, Bank of Ireland said that the sole issue to be decided is whether the claim contained in the summary summons has been adequately particularised having regard to the requirements of Order. 4, r. 4 of the Rules of the Superior Courts. This rule says that the summary summons:-
“…shall state specifically and with all necessary particulars the relief claimed and the grounds thereof.”
The Supreme Court questioned, what particulars are “necessary” and answered by saying that the “rationale goes back at least 140 years, to the passage from the judgment of Cockburn C.J. in Walker v. Hicks, already cited above. The defendant to a summons is entitled to have sufficient particulars to enable him “to satisfy his mind whether he ought to pay or resist””.
The Supreme Court was dealing with a case in which a bank was seeking summary judgment. That is a fast track process where a case is dealt with on affidavit alone without the requirement for an oral (plenary) hearing. In those circumstances the Supreme Court went on to say: “A defendant who wishes to proceed to a plenary hearing has to do more than merely assert a defence. This obligation cuts both ways. The particularisation of the amount of the claim must also go beyond mere assertion on the part of a plaintiff if they are to benefit from the use of the summary procedure.”
That’s important: the position is that, before a defendant even must posit a defence, the plaintiff seeking the benefit of a summary process has to establish a prima facie case by detailing how the sum claimed was calculated. The implications of that for house repossession cases may be just as important as the implications the Judgment has on High Court debt collection proceedings. There are several reasons for this.
First, let’s look at what the equivalent Circuit Court Rules say is required to be provided in the indorsement of claim seeking repossession of a house: the Civil Bill for Possession “…shall state specifically and with all necessary particulars the relief claimed and the grounds thereof.” Those words are not just similar to the words used in the High Court Rules the subject of the Supreme Court Judgment: they are precisely the same words.
So, it seems that at a minimum, on the basis of this wording, the requirements for detail of the claim in the Circuit Court are analogous with those in the High Court. And again, as the Supreme Court said, those details must allow a defendant “to satisfy his mind whether he ought to pay or resist.” And the Supreme Court ruled that, where the summary summons didn’t show how the debt was calculated, or reference a document that did, then the summary summons was defective.
Now the Supreme Court allowed that a plaintiff could amend its summary summons to show how the debt was calculated. As I said previously, that's probably fine for a bank. But it’s a much bigger problem for a vulture fund that might have bought the debt but which does not have that evidence.
The second reason why the Judgment in O’Malley may have particular implications for house repossessions is that house repossession proceedings are themselves summary in nature. The claim and the reliefs requested (including possession) are set out in a Civil Bill for Possession. The claim is supported by affidavit evidence. The Judge at the first port of call (at least until now) only had to decide one issue: that is, does the defendant have a genuine defence? If the defendant does not have a genuine defence then possession is granted to the plaintiff. If the defendant does have a genuine defence then the matter is transferred out of the summary process into a plenary process for oral hearing of the evidence.
The Circuit Court has several detailed practice directions setting out what is required to be contained in a Civil Bill for Possession. I’m not going to repeat them here. But the following one is especially relevant:
"precise particulars of the arrears alleged to be owed or other default alleged by the defendant, or other matter on which the plaintiff relies in support of the claim in the proceedings, exhibiting relevant documents including relevant communications and letters of demand relied upon and up to date statement of mortgage arrears;”
None of the many dozens of Court Civil Bills for Possession that I have seen contain any calculation of the debt claimed and foot of which a demand was made prior to the issuing of proceedings. Well what of it? Let’s remind ourselves of another pertinent statement from the Supreme Court Judgment: “That quite a significant amount of money was likely to have been due can hardly be doubted, but a party claiming a liquidated sum gets the benefit of the summary procedure precisely because it is said that a specified amount of money is due. In those circumstances, it is not unreasonable to require the plaintiff to show some basis to explain the calculation and justify, on a prima facie basis, the sum claimed.”
Here's the rub: a Civil Bill for Possession is a summary application grounded on a demand for a liquidated sum of money. The Supreme Court has decided that before a defendant must show that it has a genuine defence, the plaintiff seeking what is just a sum of money must first show that it has genuine case. Surely, we can argue that that principle applies to an even greater extent where the plaintiff is seeking possession of the defendant’s house as opposed to merely a sum of money?
So what is the net effect of all this? For the banks, as I’ve said, if O'Malley is applicable to repossession proceedings, they now need to go and find the evidence showing they calculated the debt. It then it seems must apply to the Court to amend its Civil Bill for Possession.
But it is likely a very different story for the vulture funds. In many cases that we have seen, the vulture fund's claim is based in part on a bare statement of account produced by the bank shortly before the loan was transferred. In most cases, that bare statement of account makes no reference to the way the debt was calculated up to that date. The vulture funds it seems may have a very big problem here.
And that problem may have just become significantly worse.
Two days ago, the Court of Appeal delivered Judgment in a case involving debt collection by a vulture fund. It said that the evidence supporting the claimed debt that the vulture fund obtained from the bank when buying the loan was “classic hearsay evidence” of what it was told by somebody else. The Court of Appeal ruled that that evidence was inadmissible. We’ll produce a more detailed analysis of that Judgment later.
But in the meantime, I’ll leave you with this question: if the vulture fund can’t establish a prima facie case entitling it to summary judgment, either in debt proceedings or possession proceedings, and if the evidence that it got from the bank is also inadmissible at plenary hearing, is it entitled to judgment at all?
“A defendant who wishes to proceed to a plenary hearing has to do more than merely assert a defence. This obligation cuts both ways. The particularisation of the amount of the claim must also go beyond mere assertion on the part of a plaintiff if they are to benefit from the use of the summary procedure.”