Skeletons in the Closet: An Analysis of the recent case of Promontoria (GEM) DAC -v- The NORC Partnership

The recent decision of the Court of Appeal in Promontoria (GEM) DAC v Ciaran Redmond, Michael O’Neill, Clody Norton and Peter Crean T/A “The NORC Partnership”[1] demonstrates to loan purchasers the importance from a statute of limitations perspective of being aware (and disclosing to the Court) whether previous demands have been issued by the relevant loan purchaser’s predecessors in title. It also provides a useful analysis of the criteria adopted by the Court of Appeal in considering any application for the admission of new evidence on appeal.

Facts

The case involved an appeal by the Third and Fourth Named Defendants (“Mrs. Norton” and “Mr. Crean” respectively) of a decision of the Commercial Division of the High Court whereby judgment was entered against them in May 2018 in favour of Promontoria GEM Designated Activity Company (“Promontoria”) for the sum of €3.8 million with the balance of the claim (valued at €676,662.91) remitted to plenary hearing. The underlying loan facilities the subject of the proceedings were originally advanced to the Defendants by Irish Bank Resolution Corporation Limited (in liquidation)(“IBRC”) acting under its former name Anglo Irish Bank Corporation plc (“Anglo”). Subsequently, those loan facilities were acquired by NAMA and ultimately acquired by Promontoria by deed of transfer dated 27 January 2017. Pending the appeal, Mrs. Norton and Mr. Crean applied to the Court for leave pursuant to Order 86A Rule 4 of the Rules of the Superior Courts[2] to adduce new evidence, namely a letter of demand issued by Anglo Irish Bank Corporation Limited dated 14 December 2009 and a letter of demand issued by Anglo dated 1 February 2010. The demand relied upon by Promontoria in the substantive application was one issued by it on 15 June 2017 and none of the demands issued by its predecessors in title were referenced. Mrs. Norton’s solicitor swore an affidavit on her behalf opposing the application for summary judgment on the basis that she was seventy four years old and “not in great health” but he acknowledged that during discussions with NAMA, the debt was accepted as due and owing. However, he opposed the application for entry on the basis that there had been engagements with NAMA for a period of five years since 2011 and that given the age and health concerns of his client and the ongoing engagement, the application was not appropriate to be admitted into the Commercial List. Mr. Crean opposed the application for judgment on a number of grounds, including an assertion that there was a prior binding agreement between himself and Promontoria to compromise the claim against him.

Mrs. Norton’s application under Order 86A was supported by an affidavit sworn by her new solicitor, Mr. Cunningham who came on record for her in February 2020. He averred that she made a data access request to IBRC on 14 August 2019 and received a reply on 23 September 2019 (which included the December 2009 demand letter from Anglo) and that she only became aware of the February 2010 demand letter when Mr. Crean swore his affidavit grounding the current application. Mrs. Norton’s solicitor submitted Promontoria were under a duty to provide the correct evidence of demand and as a result, Mrs. Norton acted on legal advice which was based on the incorrect letter of demand. Mr. Crean’s application was based on his averment that he discovered the February 2010 letter on review of his files with regard to the loan facilities the subject of the proceedings which was prompted by Mrs. Norton’s discovery of the December 2009 letter. Although the letter was in his possession all along, Mr. Crean averred that he did not search his files prior to the High Court trial on the basis that he bona fide believed that the claim against him had been compromised up until February 2018. Some documents were also in storage and not readily accessible in the short time frame. In reply, an employee of Link ASI Limited (“Link”), being the servicer of the loan facilities for Promontoria, swore an affidavit confirming that he reviewed the central folder which contained all documentation originally provided by NAMA in the online dataroom when Promontoria acquired the facilities and that neither the December 2009 letter nor the February 2010 letter were included. Accordingly, he averred that there was no evidence to suggest that either demand had issued.

Decision

In considering the application, Costello J. took into account a number of authorities, beginning with the criteria set down by Finlay C.J. in Murphy v Minister for Defence[3] in relation to the provisions of the former Order 58 Rule 8 RSC (which previously governed the admission of new evidence by the Supreme Court) which are as follows:

• The evidence sought to be adduced must have been in existence at the time of the trial and must have been such that it could not have been obtained with reasonable diligence for use at the trial;
• The evidence must be such that if given it would probably have an important influence on the result of the case, though it need not be decisive;
• The evidence must be such as is presumably to be believed or, in other words, it must be apparently credible, though it need not be incontrovertible.

In the subsequent case of Student Transport Scheme v The Minister for Education and Skills[4], Hogan J. held that the criteria in Murphy apply to appeals to the Court of Appeal, that they were cumulative and therefore all three criteria should be satisfied by an applicant. Costello J. also acknowledged that there could be a degree of flexibility in applying the Murphy principles. This follows from the decisions of Clarke J in Inland Fisheries Ireland v. O’Baoill [5], where he opined that “there may be unusual cases where somewhat different criteria may require to be applied to avoid injustice” and O’Donnell J. in Emerald Meats Limited v. Minister for Agriculture[6], where he stated that “where a trial takes an unexpected turn, the mere fact that some information was available and could have been obtained for the trial, should not mean that it should be excluded on an appeal, particularly when the issue may be decisive, the evidence cogent, and its potential relevance could not have been known in advance of the trial”.

Costello J. considered the three criteria in Murphy in reverse order. With regard to the third criterion, she held that both letters of demand had all the hallmarks of authenticity and therefore their credibility could not reasonably be at issue. However, she noted that they may be open to subsequent challenge by Promontoria. With regard to the second limb of the test, Costello J. considered Mrs. Norton’s and Mr. Crean’s position that in circumstances where the loan was repayable on demand, the cause of action accrued on the date that Anglo demanded repayment of the loan, namely December 2009 or February 2010, whichever is the latest. Their position was that the appeal was against a decision to grant summary judgment and a refusal to submit the entire claim to plenary hearing and therefore all they had to demonstrate was that they had an arguable defence to the claim so that the entire matter should be remitted to plenary hearing and the summary judgment vacated. Costello J. was satisfied that had there been any awareness of the existence of these letters on behalf of Mrs. Norton’s solicitors, then they would have undoubtedly recognised their significance from the point of view of the statute and advised her accordingly. For that reason, her acknowledgement of the debt did not preclude her from satisfying the second limb of the Murphy test. Finally, Promontoria argued that neither Mrs. Norton nor Mr. Crean satisfied the first limb of the Murphy test, on the basis that it was open to Mrs. Norton to make the data access request prior to the High Court trial and that Mr. Crean actually retrieved the February 2010 letter from his own possession. However, Costello J. was satisfied that the reasonable diligence test did not go as far as requiring “a defendant to make a data access request of a predecessor in title of an assignee of a debt in order to obtain copies of letters of demand issued by the predecessor in title where the assignee seeks summary judgment against the defendant”. Conversely, he held that “there is an obligation on a plaintiff who seeks summary judgment in respect of a sum payable on demand to place before the court all demands calling for repayment of the loan, and not merely the latest or the one issued by the assignee”. She noted that to hold otherwise would be to undermine the policy of the Statute of Limitations in circumstances where it could be avoided by either “inadvertently or indeed, unscrupulously” issuing a fresh demand in respect of a claim on which time was running or had already expired. While the Court accepted that Promontoria did not suppress the evidence in this case, it commented that it was not clear “how great an effort was made to ensure that the case was fairly presented to the High Court” and that all demands were before the Court.

As regards Mr. Crean, Costello J. acknowledged that his situation was somewhat different in that he had possession of the February 2010 letter at all times and that in such circumstances, the Court would not normally grant leave to adduce evidence on this basis. However, she noted that there were special circumstances such that she should exercise her discretion to allow Mr. Crean to adduce both demand letters as additional evidence. Firstly, the Court held that Mr. Crean was not aware of the December 2009 demand letter and he did not have a copy of it. Secondly, in circumstances where both defendants were sued jointly and severally, it would be an affront to justice if Mrs. Norton were permitted to adduce the letters as new evidence but Mr. Crean was not. Thirdly, Costello J. concluded that the primary obligation was on Promontoria to introduce these demand letters into evidence and that while it was possible that Promontoria had acted in good faith initially, once the letters came to light they should not have sought to benefit from their dereliction. The Court questioned the enquiries made by Promontoria before it proceeded with the matter and that it expected that this application should have been made on consent or at least unopposed. Finally, the Court noted that the trial judge accepted that Mr. Crean genuinely believed that the claim against him had been settled and therefore it is understandable that he did not try to recover his papers from storage to defend the claim.

Costello J. concluded that both Mrs. Norton and Mr. Crean had shown “special circumstances” which justified granting each of them leave to adduce the December 2009 letter and the February 2010 letter into evidence and was satisfied that both had met each of the three criteria set out in Murphy.

Comment

At first glance, the decision places an onerous burden on loan purchasers when seeking summary judgment to ensure that all relevant documents, in particular previous demands, are before the Court for consideration, particularly in circumstances where the loan purchaser is unlikely to have in-depth knowledge with respect to the history of the lending relationship prior to the occurrence of the loan sale or to indeed be familiar with all steps taken during that relationship. However, it is a useful reminder that plaintiffs seeking to avail of the summary judgment procedure must display candour in placing all relevant evidence before the Court for consideration. From the point of view of loan purchasers, this judgment may result in more extensive enquiries having to be made of the seller prior to completion of a loan sale including ascertaining whether any demand letters have issued and requiring copies of same to be provided as part of the suite of loan sale documents.