Bank of Scotland Ltd v Fergus [2019] IESC 91 (18 December 2019)

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Judgment of Mr Justice Peter Charleton delivered Wednesday 18 December 2020

1. The answer to the plaintiff bank’s claim for summary judgment cannot be that their case

of indebtedness against the defendant Charles Fergus is not proven. This was a case

which started out as an application for summary judgment. On that coming before the

High Court, it was sent for plenary hearing. But as is the case with many such orders, in

the result the issues were identified from the affidavits and cross-examination was

allowed, the bank being required to prove their case by oral evidence. The matter then

came back before another judge for the hearing of the plenary issue and the bank gave

oral evidence but Charles Fergus did not. As of the date of the judgment entered on that

trial being resolved in the High Court in favour of the bank, 20 April 2012, Charles Fergus

was indebted to the bank in the sum of €9,211,764. On the analysis in this judgment, it

does not emerge that a breach of the hearsay rule is engaged by a relationship between a

bank and the customer of that bank, which is evidenced by the free exchange of records

of their relationship, through bank statements and statutory notification of charges, and

2. Central to this is that what are being admitted into evidence were statements of the

parties to the action, their correspondence, their records in the case of the bank as

notified to the other party who was the bank’s customers. We are not dealing with

statements of any third party. Charles Fergus gave no evidence. Instead, at this plenary

hearing of the summary summons, only a witness statement by Mr Craythorne was

adduced. Yet, the main point on which this judgment diverges from that of McKechnie J

relates to the application of the hearsay rule. Gratefully adopted is the full analysis of

McKechnie J as to procedural fairness, as to the Statute of Frauds 1695, and as to the

correct form of guarantee. Only some concurring observations are offered here on two of

3. In the background of this claim, there are multiple sums advanced by the bank by various

facility letters over a period from March 2003 to November 2007 to a company, with

which Charles Fergus was involved, namely Fergus Haynes Developments Ltd. All of these

sums were loaned for the purpose of developing various properties, many of which were

in the Donegal and Leitrim areas. These were backed by guarantees; his guarantees and

he is a party to this action. This is normal and ordinary banking procedure. By the time

the bank called in the loan on 4 September 2008, when the indebtedness was

€7,796,121.84, there had been multiple guarantees. To list these in a chart would show

that as each sum of money was advanced by the bank to the company, a guarantee was

required from Charles Fergus on the basis of a formula of words which required him to

cover the continuing and future debts of the company. There is nothing in this formula of

words which suggests that as each guarantee was subsequently entered into, it was

4. The general tendency of the documents reveals that as each of the 20 or more facility

letters was issued to the company, a guarantee was required from Charles Fergus.

Furthermore, each of the loans was drawn down either immediately or over time by the

company. The first such guarantee was signed on 30 March 2004. This was in respect of

both the bond facility in favour of Donegal County Council, related to the building of 35

houses at Bundoran, and the loan itself, which was evidenced in two facility letters of May

2003 for €275,000 and June 2003 for €450,000. There is nothing in that guarantee to

suggest that it was anything other than for past liabilities and future liabilities as they

might arise in respect of the company’s relationship to the bank. As the relationship

between the parties, namely the bank, Charles Fergus and the company, continued,

further loans were granted, for instance of €625,000 in May 2004, to build a further 14

houses up on Bundoran, and a loan in August 2004 of €200,000, in November 2004 of

€820,000 for a site in County Leitrim, a loan of €750,000 in June 2005 to commence

ground works in Bundoran, a loan of €2,300,000 in October 2005 to carry out site works

5. As these loans progressed, and were drawn down by the company immediately or in

tranches, various guarantees were entered into by Charles Fergus. There is a definite

claim that two of them, those dated 21 May 2004 and 20 August 2004, were forgeries.

Despite that being asserted in the submissions before this Court, evidence was not given

about that at the trial. Even so, Charles Fergus complains about the bank using its

records for the purposes of proving the loans. The two loans which are important for the

purposes of this appeal were loans which refinanced the existing indebtedness. The first

was dated for April 2007 and was for €6,150,000 and covered the building costs at

Bundoran generally and sundry matters which, on the papers before the Court, seem

related. Then the bank gave the company an overdraft facility of €500,000 by letter dated

29 June 2007. This was followed by a further facility letter giving a loan of €1,012,000 for

the purpose of refinancing existing loans. Then a guarantee and indemnity was executed

by Charles Fergus on 10 December 2007. There was a further such document executed

on 29 May 2008. The calling in by the bank of the various loans in September 2008 was

an unsurprising correlation with the collapse of the Irish property market from that

month. This saw many development sites rendered only as valuable as the grazing of

livestock might profit, and which split houses in Dublin to about a third of their value and

with variable consequences on properties throughout the rest of Ireland. In increasing

state of collapse, the economy crawled on until in October 2010 the European Central

Bank, the International Monetary Fund and the European Union intervened.

6. The bank has submitted that it could rely on any one of the guarantees. It would seem

that from the point of view of prudence it had asked for many guarantees, four of them

being described in court as plenary guarantees. The one in respect of which judgment

was given was that dated 1 June 2006 and was in a standard form whereby Charles

Fergus promised to pay the existing and future debts of the company in the event of any

default or if called on to do so. He was called on to do so but claimed that the mode of

proof of the bank was defective. He did not say that the money was not drawn down by

the company. He did not claim that the two guarantees in question were not entered into

by him; the claim of forgery upon which, it may be assumed, the matter was sent to

plenary hearing, was not repeated. In any event, that claim related to much earlier

guarantees. After that so-called forgery he entered into several more guarantees with full

knowledge of the indebtedness of the company and of the consequences. In fact, in his

written submissions it is clear that all of the money was drawn down and that an amount

was due in interest, which would have continued to grow up to this day.

7. If a guarantee is given by A, B and C, the argument on behalf of Charles Fergus goes, but

later, A, B and D give another guarantee, then it would be accepted that the first

guarantee remains together with the second guarantee. If on the other hand there is a

second or third guarantee on behalf of exactly the same parties, the argument goes that

it would be inferred that the first guarantee was extinguished by the second guarantee.

That is not accepted. Fundamentally, this is a matter of statutory construction. As to the

meaning of a contract, that is construed in accordance with the standard cannons of

construction, and as to the intention of the parties that emerges from the document

viewed as against the background of all the necessary circumstances which inform it. All

the necessary circumstances which inform this series of events is that every time the

bank issued a facility letter to the company, it required a guarantee. This was

immediately afterwards furnished by Charles Fergus. Or else, on the chronology of

events, that guaranteed happened later on. Later, as the loans were rolled up, there were

proximate guarantees, in respect of which no claim of forgery was ever made, providing

8. In other words, what was happening was that the bank was fulfilling a standard practice

of ensuring that every loan was covered by a guarantee. If an officious bystander was

asked as to whether either of these parties imagined that by giving a new loan and

entering into a new guarantee for “all existing and future liabilities” any of the parties,

Charles Fergus, the bank or the company, the latter not privy to the guarantee contract,

intended to extinguish existing guarantees or to create a web of legal difficulty so that the

guarantee might not be enforced as between those privy to it, namely Charles Fergus the

9. Then, there is the invoking of the hearsay point. In the light of this Court’s decision in this

Ulster Bank Ireland Ltd v O’Brien & Others [2015] 2 IR 656, that point does not arise. At

page 673 of the decision, Laffoy J explained that the Bankers’ Books Evidence Act 1879

does not operate so as to constrict the kind of evidence that a bank may give. In no

different position to any other creditor, a bank may give evidence as to what its books

and records show as to loans afforded to another trading party or credit extended, on a

30 day or any other basis, to that party. The records of the company, or the trader, will

be made in the ordinary course of business and will, for that reason, be inherently

reliable. Furthermore, they are subject to dispute and to testing in any future plenary

hearing by way of the debtor denying, for example, the receipt of goods or, in the case of

a financial institution, dissenting from evidence that a loan was drawn down. As Laffoy J

states in her judgment in that case, it would be more than odd, even from the perspective

of 1879, when the Bankers’ Books Evidence Act was passed, if banks were given some

kind of exemption from the hearsay rule but ordinary commerce was excluded. According

to the leading criminal law text current on independence in 1922, 26th edition of

Archbold’s Pleading, Evidence and Practice in Criminal Cases (London, 1922, Roome and

Ross editors) at 19-20, at page 448, this legislation was passed as a reaction to what was

then called the best evidence rule. An absurd example would be that a tombstone should

be produced in court rather than evidence of what was carved thereon; assuming for the

moment that what was inscribed on a tombstone could be anything other than hearsay,

but might be a public record. The Act “was passed in order to obviate the inconvenience

occasioned to bankers and their customers, by the removal of ledgers and other account

books from banks for the purpose of production in legal proceedings, and in order to

facilitate proof of transactions recorded in such ledgers and account books.” Section 6,

originally provided that a banker, in any case to which the bank was not a party, could

not be compelled to produce such originals. That was amended so that whether the bank

is a party or not, a bank cannot be compelled to produce the original ledgers. Section 3

provides that a copy of an entry suffices to “be received in evidence” and is prima facie

proof “of the matters, transactions, and accounts therein recorded.” Section 4 makes it

conditional that this was done in the ordinary course of business. Section 5 requires the

witness to have examined the original entry before a copy is received in court. The

witness has to be an officer of the bank. It would be wrong if, simply because of

retirement, a bank manager were forbidden to check entries as to the very client he or

she had dealt with over years and to testify as to the interrelatedness of entries and of

10. It used to be the case that if original documents were not produced, a sufficient

explanation for their not being proffered to the court had to be given before such copies

were admissible in evidence. That rule applied generally, and not just to cases involving

banks. As was fully explained in O’Brien, issues can arise which are not hearsay and some

records can be pure hearsay. These are cases, however, where multiple individuals in an

organisation record data with no one having a personal relationship with an individual

customer. What is absent from such cases, as well, is the interaction of the customer, as

defendant or plaintiff, with the other side as defendant or plaintiff. Of course, letters that

people write are admissions if directly addressing any such issue as to debt or the supply

of goods. In this respect, the supply of money, loans, is not different to the supply of

potatoes. As to records such as serial numbers on guns or car engines, where the

customer who buys a gun or a car does not write as this data, that may be hearsay unless

subject to an inherent reliability rule. The exclusion of such evidence was changed by s 30

(1) Where information contained in a document is admissible in evidence in criminal

proceedings, the information may be given in evidence, whether or not the

document is still in existence, by producing a copy of the document, or of the

material part of it, authenticated in such manner as the court may approve.

(2) It is immaterial for the purposes of subsection (1) how many removes there are

between the copy and the original, or by what means (which may include facsimile

transmission) the copy produced or any intermediate copy was made.

(3) In subsection (1) “document” includes a film, sound recording or videorecording.

11. The purpose of the legislation to allow business records to be admissible in criminal trials

against third parties, that is parties who were not the customers dealing with the goods,

calling guns goods for this purpose, and who were not notified of the numbers therefore.

That Act enlarges the scope of the exceptions to the rule against hearsay, while

preserving all other exceptions. It does not change the existing law as to admissions. It

does not affect privileges and nor does the legislation alter compellability. Simply because

a document is being supplied, or a videotape or record of an examination of an article or

dead body, does not exclude an attack being made on the credibility of the absent witness

or the making of a comparison with a prior or subsequent inconsistent statement. In civil

cases, the hearsay rule was never capable of being successfully raised in respect of the

kind of transaction where people were not distant and data was being recorded as to

serial numbers or non-personal transactions. Hence, there was not a need for a reform in

civil law. It surely would have been sensible to make if it had applied to such things as

people writing to each other as to the supply of potatoes or the loan of money. Such

documents are evidence because those people are the parties to the later action for loan

or for defective goods, for example. Were the 1879 legislation to be so applied, accepting

the argument of Charles Fergus for this purpose only, altering the hearsay rule and

providing that a retired official was not an officer of the bank on retirement, then a

purposive interpretation would recast such a rule in a commercially viable way. But, it is

not necessary to apply section 5 of the Interpretation Act 1995, which provides:

In construing a provision of any Act (other than a provision that relates to the

(b) that on a literal interpretation would be absurd or would fail to reflect the

(i) in the case of an Act to which paragraph (a) of the definition of “Act” in

(ii) in the case of an Act to which paragraph (b) of that definition relates,

the provision shall be given a construction that reflects the plain intention of the

Oireachtas or parliament concerned, as the case may be, where that intention can

12. But there is a further point in this case in relation to that kind of evidence. As the

documents put before this Court on this appeal, and even the submissions lodged on

behalf of Charles Fergus, demonstrate, these loans and these guarantees did not emerge

out of nothing but were instead affected in consequence of an ongoing and close

relationship between the company and the bank and Charles Fergus. As good banking

practice now dictates, and as has been the expectation of bank customers over

generations, periodic letters were sent to the company, with which Charles Fergus was

involved, indicating the indebtedness of the company, the rate of interest applicable and

the manner in which loans were being drawn down on an immediate or periodic basis

together with any repayments. This vast bulk of correspondence shows a deep

relationship between the parties of mutual trust whereby large sums of money were

advanced on the basis of carefully drafted documentation, all of which is exhibited, and

which preceded by the assent of the company and the willing entry into guarantee of the

debts by Charles Fergus. Whether that relationship was wise, involving huge loans for

property that can rise or fall dramatically in value, is another matter.

13. It is unnecessary, in those circumstances, to look for an exception to the rule against

hearsay because all of these documents, in terms of their acceptance by the company,

the involvement of Charles Fergus with that company, his entry into guarantees for the

purpose of furthering the business enterprise of the company, and the periodic

statements of the ongoing financial situation, together with the relevant letters of

demand, constitute a course of dealing between the parties which in other circumstances

would be called admissions. There is therefore no reason to have resort to any principle,

of very limited application in any event, that an inference can be drawn from the failure of

a person to answer a statement of fact in circumstances where a reasonable person who

knew the opposite to be the case would issue a form of denial. In other words, admission

by silence, through failure to deny, is not a necessary avenue for this case to take since

there is nothing to suggest anything other than the parties’ understanding is engaged by

the multiplicity of documents exchanged between them as to the true state of affairs.

14. As MacMenamin J stated in O’Brien what has been made out here is a case which is

sufficient to found a judgement and it is only if a defendant adduces any or any

meaningful evidence to rebut it, could it be said that there is any defect in the proofs

adduced in behalf of a plaintiff. There is no different view to be taken of a bank that is to

15. In any trading relationship of this kind, involving a major bank with many employees and

a development company with several directors and administrators, people will come and

go. The purpose of records is to show where matters stood at the particular time when a

record was made. In communicating with each other as to the state of those records,

these were made common as between the guarantor, the company and the bank. The

plain reality of this case is that there was no denial of those records, so shared, at the

time. Certainly, the records have to be proven whether the defendant is there or not. The

point is that transactions to which a party was engaged are provable without resort to any

legislation. A person defending a case, having claimed a defence and succeeded in

obtaining a plenary hearing, has to engage with the evidence. Further, when it came to

the hearing of this case in the High Court there was no evidence adduced that there were

no such loans. Further there was no evidence that there were not several existing

guarantees, conforming with the practice of backing up each loan by a further guarantee.

There is an obligation to engage with the evidence and there is an obligation to put to

witnesses any fact which undermines their testimony; McDonagh v Sunday Newspapers

Ltd [2017] IESC 59. Suppose, for the moment, the bank had not followed the practice of

backing up each loan, or each series of loans, with an individual guarantee, what then

16. What might be said on behalf of Charles Fergus in those circumstances was that the first

such guarantee, to take an example, from 30 March 2004, had nothing to do with the

refinancing of the very large debt that culminated in the two facility letters of 4 April 2007

and 20 November 2007. Of course it is not an answer to contract that someone has

forgotten the terms of the contract, or forgotten even that they have entered into a

contract. But in terms of human fairness, and commercial fair dealing as between a large

bank and a building company and the guarantor of that building company, it certainly

looks like better practice as each loan is entered into to remind the person who may

ultimately have to pay as guarantor of the obligations that he or she has entered into.

That is what was done here and there is no basis for claiming invalidity.

17. It is claimed that the evidence of Bernard Raftery breached the Rules of the Superior

Courts and that allowing Julian Moroney to give evidence at a late stage, where you had

not been identified as a witness and had not then provided a witness statement,

constituted a breach of Order 66A Rule 22(1). This provides that there should be a written

statement in proceedings before the commercial list but Rule 5 thereof also provides that

a judge of the commercial list may give directions and make orders, including for the

fixing of time limits, in order to ensure that the conduct of proceedings “is just,

expeditious and likely to minimise the course of those proceedings.” Further, it is a

fundamental principle of the rules that time may be abridged or extended as the nature of

the case requires, bearing in mind that the purpose of the rules of court is to assist in the

administration of justice and not to wrongfoot parties; Order 122, Rule 7. McKechnie J’s

analysis of this makes it clear that the dispensation of justice is the ultimate test.

18. There is nothing to suggest that the High Court in considering this matter did not properly

apply relevant test or did not balance the requirements of justice as against the necessity

the parties coming to court should abide by the rules of court. Instead, the principles are

set out in Mooreview Developments Ltd & Others v First Active plc & Others [2009] 2 IR

19. Very recently, this Court in Bank of Ireland Mortgage v O’Malley [2019] IESC 84, required

banks to give sufficient particulars to enable an alleged debtor to know whether the debt

should be paid or not on any endorsement of claim in a summary summons. Furthermore,

Clarke CJ, in his judgement in that case, noted that for a claim in the liquidated amount

to be denied required a defendant to engage with the facts and to demonstrate a defence.

It was only if it was very clear that there was no defence that summary judgement should

be entered. The requirement for particularity, on a summary summons is necessary

because if no appearances entered to a liquidated claim, judgment may be marked in the

Central Office of the High Court, or in the Circuit Court by the country registrar. When an

affidavit explaining the nature of the debt is put in by a bank it is necessary for that bank

to indicate clearly what sum is capital, arising from what loan, what sum is interest and

charged on which account, if there are many, and how, if this arises, penalties are

calculated by way of increased interest charges on overdue loans or overdraft facilities

20. The nature of these requirements is to put a debtor in a position where on an

individualised basis he or she may see where perhaps a mistake has been made or where

interest may have been overcharged or penalties may have been misapplied. Thus, not

only is any proposed defendant in a claim for a liquidated sum required to engage with

the evidence and to demonstrate a defence and to be denied a plenary hearing unless

those steps are taken, but it is also required of a plaintiff financial institution to make it

clear as to the precise basis that a sum of money is owed. When it comes to a plenary

hearing, relevant questions should be asked. The application of the hearsay rule is

required in instances where it applies. But letters written by a party, documents signed by

a party as setting out that party’s obligations, or admissions by a party as to the

existence of a debt, do not engage the hearsay rule whether in banking or in commercial

transactions where those exchanging information are plaintiff and defendant.

21. There was no engagement by Charles Fergus as to the sums clearly delineated by the

bank in this case as having been borrowed by the company of which he was the guarantor

and in which he was involved. No evidence was called by him and instead several legal

points were raised. There is nothing wrong with that approach in principle, but it is more

than strange in terms of any expectation of proof in a case. The appellant was granted an

adjournment by the High Court judge to examine the bank statements and to call an

accountant to give evidence on his behalf. However he declined the opportunity either to

challenge the statements himself or call evidence from his accountant for that purpose.

Defendants in civil cases should be aware that an inference can be drawn, unlike in a

criminal case, from a failure to engage with the evidence, to test or to contradict it. Such

an inference is not necessary to the analysis on this appeal. In these circumstances the

High Court judgement should stand.

Result: Appeal dismissed

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