Thursday 5 December 2019

Banks exploiting broken legal system to get quick debt judgments, Master of High Court warns

Master of the High Court Edmund Honohan. Photo: David Conachy
Master of the High Court Edmund Honohan. Photo: David Conachy
Shane Phelan

Shane Phelan

THE Master of the High Court has said banks are exploiting dysfunction in the legal system to get fast track judgments against debtors.

Edmund Honohan also said barristers were not informing judges of legal precedents and that members of the judiciary were making “errors in law” as a result.

The comments were made in a scathing decision involving Allied Irish Bank Plc, where it was seeking a summary judgment against a woman called Trudy McDermott over an alleged €700,000 debt.

Mr Honohan said the bank filed affidavits filled with “irrelevant material” in the case. He said it appeared the bank “has some notion” it would win the case if its created a “sort of smokescreen to obscure the defendant’s defence”.

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The Master decided to forward the matter for a full hearing, rather than allowing the bank to seek summary judgement on the basis of affidavits. He also awarded the costs of the motion against AIB.

Delivering the decision on Tuesday, Mr Honohan made a range of general criticisms about the conduct of the banks, barristers and judges in debt cases.

He warned that lay litigant would have barristers for financial institutions up before disciplinary tribunals for failing to inform judges of the law.

Mr Honohan said there may be an information deficit affecting judges, where they appear to be giving fast track debt rulings as they are unaware of legal precedents requiring an oral hearing where the defendant has an arguable defence.

“This may be because, perhaps, unsurprisingly, counsel for the banks do not inform the judge that these cases mean that a defendant should usually be afforded a plenary hearing,” he said.

“It is not in the interests of the banks that the judges should be so informed, but it is the duty of counsel to do so, even if it is not in the client’s interests.”

Mr Honohan has long been an outspoken critic of the conduct of financial institutions in debt cases.

Although not a judge, he is a senior counsel with a quasi-judicial role.

In contested cases he ensures correct procedures are followed and paperwork is in order before sending a matter on to the High Court. He can also deal with applications for judgments in uncontested cases.

The AIB case involves an €1.5m loan facility for a property investment in 2008 where Ms McDermott’s father wanted €700,000 of the borrowings to be “in the name of his daughter”.

The Master said it was hard to see how the bank’s solicitors could have reached the view Ms McDermott had no defence to its claim.

He said internal paperwork was replete with references to her father and appeared to contemplate a single investment in a mezzanine fund.

Mr Honohan also queried why the bank would offer a loan of €700,000 to someone who was not a customer and who was only earning €45,000 per annum.

He described some parts of an affidavit filed by an AIB deponent as “scandalous”, saying that it offered as evidence “comment, derision and irrelevant fake evidence”.

In the decision, Mr Honohan commented generally on the practice of banks filing supplementary affidavits which “condition” judges to look with disfavour at a defendant’s affidavit evidence so the bank can secure a summary judgment.

“Judges fall into this fake evidence trap so very easily. They presume the bank’s paperwork must be accurate,” he said.

Mr Honohan said some banks had an “establishment viewpoint” which makes them think “they can say anything they like and demand judgment as a right”.

He said some judges were “noticeably slow to check the caustic and superior comments of bank deponents in summary judgment applications”.

The Master said “euphemisms abound” in such affidavits, which he described as “an exercise in signalling”.

"These are patronising ‘put down’ lines, born of arrogance which suggests an inside track, and no likelihood of judicial sanction,” he said.

“The level of condescension shown by bank deponents in these supplemental affidavits is toe-curling."

Mr Honohan said that if a judgment turns on the credibility of a defendant, the assessment must be on the balance of probability. He said that if this is the case, the defendant should be entitled to confront and cross-examine the witnesses disputing their evidence.

“He is entitled, in natural and constitutional justice, to a full plenary hearing. Some lawyers and some judges appear not to understand this,” he said.

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