Insolvency Update: Proving the Transfer of Loans – Clarity for Acquirers
06 April 2018
In Ben Healy and Seamus Spillane v Robert McGreal, the Court of Appeal found there was no rule of law that required the Court to direct the production of an unredacted loan sale agreement.
The plaintiffs in the proceedings, whose loans and security had been acquired by Kenmare Property Finance Limited (Kenmare) in a loan sale from Irish Bank Resolution Corporation (IBRC) had claimed that the Court was obliged to apply the best evidence rule. This would require the Court to direct the production of unredacted documentation as evidence.
The Court rejected this submission. It cited with approval the judgment of Judge Charleton in Ulster Bank v O’Brien in which he stated that the best evidence rule had weakened and had ultimately ceased to exist in favour of a test as to whether the evidence offered is admissible or inadmissible.
The Court held that a deed of confirmation and acknowledgment of 14 July 2015 entered into between IBRC and Kenmare was sufficient evidence to prove that the plaintiffs’ loans had been transferred to Kenmare and, accordingly, a copy of the loan sale agreement was not required to be entered into evidence.
The Court further held that there would were good reasons for the loan sale agreement being redacted. It acknowledged that there was a commercial sensitivity attributed to the information contained in the agreement. As a result, the Court stated that it was entitled to be redacted in order to protect issues of confidentiality, provided the information was not relevant to the matters at issue in the proceedings.
This case follows on from the recent decision of Vitgeson Ltd & William Farrelly v Tom O'Brien & Promontoria (Arrow) Limited, where Mr Justice Haughton delivered an ex tempore judgment in favour of the defendants. In particular, he agreed with the receiver, Tom O’Brien, and the owner of the loans and security, Promontoria (Arrow) Limited (PARL), that notwithstanding redactions, the Global Deed of Transfer, ie the document evidencing the transfer of loans and security documentation, was sufficient to prove PARL’s acquisition and ownership of loans originally made to the plaintiffs, as well as the security provided for those loans.
These decisions should be welcomed by all stakeholders involved in the sale of non-performing loan portfolios as it should limit the number of disputes arising from the extent to which loan sale documentation must be produced and the extent to which redactions may be acceptable.
Furthermore, the acceptance by the Court that a deed of confirmation and acknowledgment was sufficient evidence to prove the transfer of the relevant loans is of assistance as, if properly drafted, it should avoid the necessity for any redactions thereby removing the requirement to demonstrate that any redactions have been made on justifiable grounds to protect confidential information.
For more information relating to the transfer of loans, contact a member for our Insolvency & Restructuring and Financial Services teams.
The content of this article is provided for information purposes only and does not constitute legal or other advice.