Analysis: The cheque is in the post

Service

First, Holland J was satisfied that both defendants had been served all papers. Each iteration of proceedings, such as the serving of a notice of motion for summary judgment, should have an affidavit of service. The affidavit of service can be sworn by a legal clerk and must be accompanied by proof of delivery, i.e. a certificate of postage. Most papers should be served by registered post. A letter notifying a defendant of when a matter is next listed can be sent by ordinary, pre-paid post.

Kharwar was adjourned on several occasions. For each adjournment, the bank exhibited affidavits of service and proof of service by ordinary post, to prove that each defendant had been sent a separate letter informing them of when the matter was next listed to be heard. On one such date, Kelly J made an order allowing the bank to correct an error on its notice of motion. When the bank wrote to the defendants informing them of the amended notice of motion and the next date for hearing, the bank explicitly advised the defendants that the bank intended to seek judgment on that date and that any defence should be set out by affidavit in advance. All of the bank’s cards were face up on the table.

In Kharwar, the defendants had entered an appearance (Holland J described it as having “appeared to the summons”), but Holland J still wanted to ensure that there was ample proof of service and delivery. The loans in question began to be drawn down in 2007. A summary summons was issued in 2020, so legal proceedings proper ran on for two years.

Proof one was that the plaintiff was able to show that the defendants were fully appraised of every step of the proceedings.

Debt

Second, Holland J was satisfied that the bank proved the debt. The sum being sought was stated in the summary summons and in the notice of motion for judgment, and the figures matched. It was clear how the sum was calculated, by way of statements of accounts and letters sent to the defendants.

In Kharwar, there were multiple loans; the balance of each account was set out separately and a separate statement of account for each account was exhibited, with each account stating an opening balance of €0. This “proof of debt” documentation was mentioned within the special indorsement of claim in the summary summons and was exhibited to the summons’ grounding affidavit.

The grounding affidavit was sworn by a bank official who had direct knowledge of the loan history. Holland J was satisfied that the bank official had sufficient means of knowledge to meaningfully give evidence. In his affidavit, the bank official exhibited loan facility letters, letters of demand, and intermittent updated statements of accounts that had been sent to the defendants.

Proof two was that Holland J was satisfied that the defendants were in possession of the particulars of their indebtedness prior to the summary summons being issued.

Pay or Resist?

In Walker v Hicks [1877] 3 Q.B.D. 8, at paragraph 9, Cockburn CJ said “a party, who is placed in the predicament of being liable to have a judgment signed against him summarily, is entitled to have sufficient particulars to enable him to satisfy his mind whether he ought to pay or resist”.

To benefit from the summary judgment procedure, a plaintiff cannot simply assert that a sum is owed. He must specify it. He must provide a breakdown of the principle owed and interest owed, and how this was calculated. It is not sufficient to expect borrowers or defendants to infer interest rate changes based on changing sums. A statement of account should show when and by how much an interest rate changed, and it should set out a formula by which the sum owed was calculated. There have been cases of mistaken calculation, so this transparency is warranted; the defendant has a right to check if the numbers are correct.

In BOI v O’Malley [2019] IESC 84, Clarke CJ said that “in order that the bank be entitled to judgment, there must be a sufficient calculation set out as to how the amount claimed is said to be due”. In Allied Irish Banks v Marino Motor Works Ltd [2017] IEHC 522, summary judgment was remitted to plenary hearing because the judge said “neither the defendant nor the court is in a position to check, on the information available, that the figures are correct”.

If a bank does not prove the debt, the court does not have to automatically send the matter for plenary hearing. It can remit the matter, allowing time for the bank to amend the summons to adequately particularise the debt, and come before the court again to see if the threshold is met to grant summary judgment.

On 28th March 2022 – in AIB v Loughlin – Holland J granted summary judgment on the principal sum owing, but adjourned summary judgment for the interest accrued. He queried the use of the phrase “interest applied but not debited” in the bank’s statement of account and expressed a strong preference instead for setting out interest accrued over time.

Holland J asked of “interest applied but not debited” – “what does that mean?”. It amounted to €45,000. “On what basis can the defendant figure out how it has been charged and calculated?”. “It’s very opaque”, he said. “It is clearly not of advantage to the defendant, because the bank will ask for the interest as part of its summary judgment anyway.”

Counsel for the bank admitted that he didn’t know what the phrase “interest applied but not debited” means exactly. He proffered that a qualified accountant would be able to use the aggregate accrued balance and applicable interest rates to work backwards and deduce how the figure was calculated. Counsel for the bank pointed out that the O’Malley decision in 2019 stated that line by line, absolute detail must be provided. He pointed out that the statement of account in question pre-dated O’Malley; “that is how statements were done at that time”. He said that AIB would have to reverse engineer or generate new statements to comply with the new level of detail required.

Holland J asked: “What is the point? Why is this done at all? Why adopt this process of ‘interest applied, not debited’? It seems to make it as difficult as possible for defendants to discern how interest accrued.” The learned judge went on to say that “one could, I suppose, by subtraction, figure out the absolute amount of interest that may have accrued. But I wouldn’t be confident that that would necessarily tell a defendant, who wishes to interrogate the accuracy of an amount, the level of detail needed in order to interrogate it.”

In AIB v Loughlin, Holland J was satisfied to grant summary judgment on the principal sum, on the basis that no defence was raised. He qualified this by saying “my satisfaction is limited. A general course seems to have been adopted to – instead of setting out accrual of interest over time – at a certain point the bank adopts a position that interest is applied but not debited. It is really not clear why the bank does this.”. He granted summary judgment on the principal figures owed – circa €200,000 – and adjourned summary judgment on the balance of interest owed, pending proof of accurate calculation.

Fair procedures: defendants given every opportunity

When the matter of Kharwar came before Holland J in November 2021, the first named defendant intimated that he was due to come into monies of circa €700,000 from anticipated sales of properties. The defendant did not dispute the debt alleged by AIB. Holland J adjourned the matter, to allow the defendant to make good on his promise to clear the debt with the expected property sale proceeds. Holland J granted the bank liberty to apply for summary judgment again, in the event that the promise of payment did not materialise.

The defendant did not pay as expected and the bank availed of the liberty to apply. A solicitor for the bank swore an affidavit and exhibited to it emails and details of telephone conversations with the defendant regarding negotiations and promises to pay. The plaintiffs asserted that the defendant had acknowledged his indebtedness in full when he had spoken of selling the properties at the last court hearing of the matter. Holland J corrected the bank on this point, clarifying that not denying a debt is not the same as acknowledgement of the debt. The solicitor’s affidavit also exhibited emails where the defendant stated that he had already transferred the funds to the bank, but the solicitor averred that the funds had not been transferred.

Holland J was not satisfied that the solicitor had sufficient means of knowledge to swear the affidavit. Holland J wanted to make absolutely sure that AIB had not received any funds from the defendants since the matter had last been before him. He adjourned the matter. To assuage this concern, a bank official with full means of knowledge of the matter swore another affidavit, confirming that the bank had written to the first named defendant to provide him with bank account details into which payments should be lodged. The bank official averred that neither defendant had made any payments. This affidavit was accompanied with an affidavit of service and proof of service (certificate of postage) to demonstrate that each defendant had received a copy of this affidavit. Holland J was satisfied that the bank official had sufficient means of knowledge to give this evidence.

Defence

On 31st January 2022, the Kharwar matter came before Holland J again. The defendants were called but did not appear. Counsel for the bank moved the motion and went through all documents and proofs required (proof of service, proof of debt, particulars of debt, absence of defence).

Holland J noted that the defendants had never “intimated a defence or delivered any replying affidavit intimating a defence to the claim of the plaintiff”. Holland J particularly bore in mind the principle set out in BOI v O’Malley [2019] IESC 84 whereby the plaintiff must prove a prima facie debt before the court can consider whether the defendant has a partial or full bona fide defence.

If the bank does not fully prove the debt, there is no requirement for a defence because, technically there is nothing to defend. If a partial defence is raised, judgment might be granted for the sum of the debt not covered by the defence.

Just as a plaintiff cannot merely assert a sum owed (they must particularise it), a defendant cannot merely assert that there is a defence. In Harrisrange v Duncan [2002] IEHC 14, McKechnie J confirmed that a defendant does not have to show the defence would probably succeed. It only needs to be a bona fide defence. At paragraph 9 of his Harrisrange judgment, McKechnie J said “leave to defend should be granted unless it is very clear that there is no defence”.

In Aer Rianta v Ryanair [2001] IESC 6, McGuinness J’s judgment cited examples of defences proffered in that case as being fraud by the plaintiff, forgery of the loan guarantee by the plaintiff, the defence of non est factum (in other words, “I didn’t know what I was signing”), absence of legal advice for the defendant as to the effect of the guarantee, and that the transaction was an improvident one.

If a prima facie debt is proven and the defendant can state a bona fide defence, jurisprudence shows that the court will move the matter to plenary hearing, so that issues at dispute between the parties can be fully aired and resolved. This is because everyone has a constitutional right to access justice.

In Aer Rianta, an alleged discount agreement was in dispute. It was alleged to have been an oral agreement; there was no paper trail or detail. The parties were so at odds that McGuinness J said “in my view matters which are so acutely at issue between the parties require to be resolved in a full hearing”. She remitted the action for plenary hearing.

Plenary hearing is not a “get out of jail” option for summary judgment proceedings. Defendants should be made very aware that plenary hearings take longer and substantially increase costs, which defendants run the risk of having to pay should their defence be unsuccessful.

Conclusion

In Kharwar, Holland J granted summary judgment for three reasons, because (i) AIB proved service of all relevant documents on both defendants, (ii) AIB proved the defendants’ indebtedness, and (iii) the defendants never raised any defence.

The defendants were aware of all detail at all stages. When there was any doubt, the matter was adjourned, giving either the defendants time to pay the debt or affording the bank time to rectify procedural shortcomings. Although the word “summary” is suggestive of a quick “open goal”, it is not a shallow solution. The courts insist on thorough proof of service and forensic calculation of debt. If a prima facie debt is proven and there is no defence, summary judgment will be granted. If a prima facie debt is proven and there is a bona fide defence, the matter will be transferred to be heard plenarily.