13 February 2020
In this recent English case, borrowers were successful in challenging the validity of a transfer of a loan from one bank to another.
The facts of the case are as follows. The Emanuels had borrowed money from Clydesdale Bank for the purposes of their business. Clydesdale subsequently gave the Emanuels notice that, given loan repayments were not being made, it was making formal demand for repayment of the entire outstanding loan. The Emanuels did not repay the loan. Four years later, Clydesdale notified the Emanuels that their loan had been sold to Promontoria Holding 170 BV. Subsequently, Promontoria (Oak) Ltd, a different company, but in the same group of companies, brought legal proceedings against the Emanuels as the assignee of the debts owed to Clydesdale.
The claim succeeded before the first instance judge on the basis of secondary evidence regarding the assignment between Clydesdale and Promontoria. This evidence was adduced in the form of a significantly redacted assignment deed, despite the Emanuels' opposition on the ground that Promontoria had not established title to the debts.
The Emanuels were then granted permission to appeal.
A substantial part of the Judgment of Marcus Smith J is taken up with a review of the “best evidence” rule. The "best evidence" rule was once considered a key principle of the law of evidence, but that rule (that a party must produce the best evidence that the nature of the case allowed and that any less good evidence was to be excluded), is now considered to be obsolete. The modern position is that secondary evidence of the contents of a document is admissible. The weight that should be given to that secondary evidence (if any) is a matter for the court to decide, in the light of all circumstances of the case.
The Emanuels’ appeal was allowed. Marcus Smith J’s conclusions were as follows:-
This decision may open the door to a number of challenges to the transfer of customer debts by Clydesdale Bank (and other UK banks) to companies in the Cerberus Group.
Gordon Deane at Balfour+Manson has been advising a number of the firm’s clients regarding bank related claims. If you would like to discuss any such matter with Gordon, please contact him on 0131 200 1485 or at email@example.com