Lack of Detail May Prove Costly

The O’Malley decision

There has been a lot of commentary about a 2019 Supreme Court decision in the area of debt collection, particularly debt claimed by lenders. This was the decision of Bank of Ireland Mortgage Bank v O'Malley [2019] IESC 84 (the O’Malley decision). The Supreme Court overturned a decision of the High Court granting summary judgment against Mr. O’Malley. It did so on the basis that the Bank had failed to adequately itemise and define its claim. In particular, the Court held that the summary summons and supporting affidavit evidence from the Bank should provide “at least some straightforward account of how the amount said to be due was calculated and whether it includes surcharges and/or penalties as well as interest”.

The O’Malley decision highlights the importance for lenders of thoroughly particularising any amounts claimed, and the manner of their computation, both in the pleadings and evidence put before the court in summary proceedings. The decision also emphasises the need for the particulars to be clearly and accurately referenced in any correspondence issued prior to commencing proceedings. This point around correspondence is key in light of the Supreme Court’s comment that the “more detail the borrower has been given in advance, the more it may be possible to justify a relatively shorthand way of describing how the amount due is calculated” in the pleadings.

Has it been a game-changer?

In a subsequent Court of Appeal case that followed the O’Malley decision, Ms. Justice Whelan described that case as representing “a recalibration in judicial thinking”[1] as to what is required of a creditor in summary proceedings. She went on to state that the O’Malley decision demanded “a higher standard than had hitherto been acknowledged to be the case”[2] if banks or other creditors were to get summary judgment for loans or similar debts.

What practical effects has the decision had?

There have been numerous cases in both the High Court and Court of Appeal since the O’Malley decision was handed down. Many of the judgments in the immediate wake of that decision found the particulars of the summary summons being used by lenders - especially the quantification of interest on any loan, in the body of those summonses – to be inadequately particularised. This had resulted in many applications by those creditors to amend their summary summonses and affidavits of debt in order to comply with the requirements laid down in the O’Malley decision. Indeed, a recent High Court case Cabot Financial (Ireland) Limited v Michael Kearney noted that these amendment applications “are a commonplace at present”[3].

Cases sent to full trial

Following the O’Malley decision, borrowers had challenged lenders’ pleadings and paperwork in several cases. In some of those cases, non-compliance with the O’Malley decision has been instrumental in the courts’ decisions to rule that the case must be then heard by way of a full trial – as opposed to being heard with affidavit evidence only[4].

Indeed, in March 2022, in Allied Irish Banks PLC and Everyday Finance DAC v Thomas Doran and Thomas Scanlon[5], the Court of Appeal was particularly critical of the fact that “there was no calculation of interest within [the relevant summary summons] or in any other document furnished to Mr. Doran.” The judge went on find that the order of summary judgment made by the High Court in July 2018 should be set aside, with the case to be remitted back to the High Court, with the lender under orders to rectify its position.

Is it all bad news for lenders?

On the other hand, there have been cases where despite pleas from borrowers that a plaintiff creditor’s summons does not comply with the O’Malley decision (and summary judgments should be set aside/claims sent to full trial), that courts have not ruled in their favour[6]. This is especially the case if sufficient detail is provided to the borrower in advance of the proceedings being commenced pertaining to the loan facility that includes the bank statements showing the calculation of interest and other charges.

And what about the costs of fixing inadequate descriptions?

Undoubtedly a feature of most decisions post the O’Malley decision has been that borrower is entitled to an award of costs for any relevant application brought by the lender to amend those proceedings. In addition, where borrowers have successfully overturned a summary judgment made against them, costs of doing so are invariably also awarded in their favour. Borrowers may even also be awarded the costs of the entire summary procedure if a court subsequently finds that the lender should have commenced proceedings by way of plenary summons leading to a full trial[7]. This could be despite the fact that the lender may ultimately win at the trial.

Advice to lenders commencing summary judgment proceedings

It is worth quoting from the recent Kearney judgment of Mr. Justice David Holland - “Typically in practice, O’Malley compliance is met by the plaintiff’s having provided to the defendant, prior to issue of the summary summons and then referring therein to, a statement of the account from drawdown of the loan, including detail of any interest rate changes and interest and other charges imposed from time to time. These statements are then exhibited to the affidavit grounding the application for summary judgment.”[8]

Accordingly, the obtaining and maintenance of bank statements, from the inception of a loan facility, all the way through to the date of demand/a date immediately prior to the lawsuit, is key for both lenders and those entities that acquire loan portfolios, if they are to use the summary judgment procedure. These should then be sent to the borrower/his legal representatives, prior to the commencement of a claim.

In legal proceedings, this is a much less cumbersome manner of adequately particularising a debt, such as a mortgage loan debt, than seeking to incorporate all of the data relating to the loan, including variably interest rates, that may change on given rest dates, etc., into the body of a summary summons itself.

Final comment

Lenders, loan portfolio purchasers and their lawyers should carefully consider whether they have the requisite detail to prove a bank debt before they issue summary judgment proceedings against a given borrower. The consequences of not doing this have been significantly raised over the past few years. The days of suing first and considering proofs later (if they ever existed) are truly at an end.

For more information and expert advice on successfully recovering debts on bank loans, contact a member of our Debt Recovery team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] KBC Bank Ireland plc v Hugh Corrigan & Anita Corrigan [2021] IECA 9 at paragraph 60

[2] [2021] IECA 9 at paragraph 60

[3] [2022] IEHC 247 at paragraph 23

[4][4] See for example Havbell DAC v David Harris and Rita Harris [2020] IEHC 147; Allied Irish Banks PLC v Martin McGowan and Patricia McGowan [2020] IEHC 148; Cabot Financial (Ireland) Limited v Andrew Wilson [2021] IEHC 443 [2022] IECA 78

[5] [2022] IECA 78 at paragraph 51

[6] See for example the Court of Appeal decision in ACC Loan Management DAC v Eugene McCool [2021] IECA 180 at paragraphs 120 to 122

[7] See the costs orders made in Cabot Financial (Ireland) Limited v Michael Kearney [2022] IEHC 247

[8] Cabot Financial (Ireland) Limited v Michael Kearney [2022] IEHC 247 at paragraph 24