Hearsay evidence correctly admitted in bank loan default case

About this case:

• Judgment:
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The affidavit purported to prove the loan to the defendants by exhibiting relevant correspondence, extracts from computer records and a letter of demand. Neither the letter, nor the affidavit, had been responded to by the defendants.

The affidavit was originally declared inadmissible hearsay evidence, but that order was overturned by the High Court, with an order being made that Ulster Bank should recover the sum of €888,920.89 from only the first and second defendants, Michael McDermott not being represented.

The first and second defendants appealed, holding that the affidavit had been incorrectly admitted as hearsay evidence.

While the affidavit was acknowledged to be “similar to those which have apparently been accepted by the courts in thousands of other loan cases as establishing proof of debt and of default in payment”, Mr Justice Charleton found that if the form and content amounted to inadmissible hearsay, they should still be excluded.

The affidavits were therefore closely examined for the purposes of the appeal.

The Senior Relationship Manager, Ms Mary Murray, averred that she made the affidavit “with the authority and consent of the Bank in order to ground its application for liberty to enter summary judgment.”

The affidavit was found to contain details of two loans, the names and signatures of the defendants, and a letter of demand for immediate repayment. It also outlined the relevant interest rates and a notice that each of the defendants had failed to repay the loan, with no defence to the proceedings.

The defendants argued that this did not amount to admissible proof, as the Criminal Evidence Act 1992 had not made proof of debts an admissible form of hearsay. While there was an exception that banks could use under the Bankers’ Books Evidence Act 1879, but as Ulster Bank had not used this, the affidavit was inadmissible.

The Judge then considered the rules on hearsay, noting that a statement made by a person, other than one which is made by a witness while giving oral evidence in proceedings, is inadmissible as evidence of any facts stated. Further, records made in the course of business, were not an exception to the hearsay rule.

The judge cited Cullen v Clarke IR 36 as the classic judgment in relation to hearsay, which both lays down the rule, but also contains a myriad of exceptions.

On this appeal however, it was found that no exception was sought.

Indeed, the Judge found that it was not necessary, as the Bankers’ Books Evidence Act 1879 provides at section 4 for the admissibility of a “copy of an entry” kept in the books of a bank, as long as the book was an ordinary book of the bank, and the entry was made in the usual and ordinary course of business, and the book was in the custody of the bank.

The Judge further noted that since R v Christie AC 545, it has generally been held that statements made in the presence of an accused are always admissible in evidence, and therefore statements made in the presence of a party to a civil proceedings would also be admissible.

The Judge found that the “documents exhibited in the affidavit of Mary Murray carry indications of reliability. These are bolstered by her sworn evidence coming, as it does, from a position where she has had the means of knowledge to support what she says.”

He found the most important document to be the letter of demand which, like the affidavit, received no response from the defendants. He noted that an inference can be drawn, where a reasonable person would feel compelled to issue a denial, that the absence of contradiction can amount to an acceptance.

He cited Bessela v Stern (1877) 2 CPD 265, Wiedemann v Walpole 2 QB 534 and Cross & Tapper on Evidence (11th Edition, 2007) as support for the finding that whether a failure to answer an allegation would make what otherwise might be hearsay into an admission is entirely dependent upon the factual circumstances.

These factual circumstances could include an analysis of the nature of the relationship between the parties, the circumstances under which an allegation is made, what is solemn, rather than social, jocular or mischievous, and whether the failure to respond was in circumstances in which a denial would clearly be required.

The Judge noted that “of this is to change or in any way alter the rule that accepting that which is said in the presence of a party to civil proceedings, or someone who is the accused in a criminal trial, is admissible as such”.

In the current case, he concluded that civil proceedings carried procedural solemnity, and that “he swearing of an affidavit and its service in court proceedings which make allegations that a sum is due, can be accepted in the absence of denial, where the form and the content of what is deposed to and the exhibits supporting it carry sufficient indications of reliability”.

As a matter of law, in circumstances where a reasonable person would have responded to an allegation in the context of an appropriate commercial relationship where money is due, but does not so respond, an admission may be set up. As this was the case in the present proceedings, the High Court judge had correctly determined the case, and the appeal was dismissed.