knowledge 21 August 2019 |

Disputes - Further Clarification on Applications to Substitute a Plaintiff

This is an issue we have addressed in previous briefings on High Court¹ and Court of Appeal decisions² because it commonly arises in cases where the right to enforce a loan has passed to an acquirer of the interest of the original lender.

Issues

In Permanent TSB plc v Doheny,³ where the original lender’s interest in the loan sought to be enforced had been transferred to an acquirer, the court was asked to decide four issues:

(1) whether the application may be brought on an ex parte basis (i.e. without notice to the defendant borrower) under O17, r4 RSC, which provides: “Where by reason of death or bankruptcy, or any other event occurring after the commencement of a cause or matter and causing a change or transmission of interest…it becomes necessary or desirable that any person not already a party should be made a party…an order that the proceedings shall be carried on between the continuing parties, and such new party or parties, may be obtained ex parte on application to the Court”;

(2) the proofs required in such an application;

(3) in the context of a mortgage suit, whether the application can be made while registration of the transfer is pending but not complete at the Property Registration Authority ("PRA"); and

(4) if the order is granted, what steps should be taken to protect the interests of the defendant.

Answers

Having considered the legal provisions and authorities, Meenan J decided the issues as follows:

(1) the applicant was entitled to rely on O. 17, r. 4 RSC to substitute the transferee for the original plaintiff, and could apply ex parte, as this was merely a procedural step and did not in any way prejudice the entitlement of the defendant either to contest the validity of the transfer at the trial or to apply to have the ex parte order set aside if he could establish grounds for doing so; however, he noted that the practice in the Circuit Court is that such applications are made on notice to the defendant, and left open the question of whether the application can be made ex parte in an appeal from a Circuit Court order.

(2) As regards proofs, he referred to IBRC v Comer⁴ where it was held that in order to justify substitution of a plaintiff, the court has to be satisfied that there is prima facie evidence that there has been a “valid sale of the underlying assets, a valid assignment of the chose in action which is this action, and a valid notice⁵ given.”  In this case, the grounding affidavit exhibited the deed of transfer (redacted so that information relating to other borrowers or guarantors who were not parties to these proceedings was not identified); the “goodbye letter” sent by the original plaintiff to the defendant, which notified the defendant of the transfer; the “hello letter” from the transferee, and the PRA Form 56 under which the mortgage and charge was transferred.  The court was satisfied from these exhibits that the applicant established the prima facie evidence necessary for the court to grant the orders sought.  The court noted that it was desirable, as was done here, to exhibit a letter from the solicitors for the applicant to the defendant’s solicitors informing them that the substitution application would be made without further notice in accordance with O. 17, r. 4 RSC.

(3) As the application was procedural in nature, the court was satisfied that the transferee could be substituted as plaintiff notwithstanding that they had not yet been registered as owner of the mortgage and charge, because what was before the court was not a substantive application for the enforcement of statutory rights conferred on a charge under the Registration of Title Act 1964 or the Land and Conveyancing Law Reform Act 2013.

(4) While this was a procedural application which can be made ex parte, it is important that the rights of the defendant be safeguarded and this can usually sufficiently be done by:  (i) serving a copy of the substitution order on the defendant and (ii) notifying the defendant in writing: (a) that a copy of the affidavit and exhibits grounding the application are available on request; (b) that the defendant may make an application to court, on notice, to set aside the substitution order, and (c) that the defendant has an entitlement to contest the transfer at the hearing of the action.

Conclusion

Substitution applications are often fiercely contested as defendants mistakenly, or tactically, believe that the fact of the transfer must be proven to the requisite standard, and not just on a prima facie basis as is appropriate to a purely procedural application.  This further clarification may assist in moving such applications smoothly and leaving seriously disputed matters stand over to an occasion, such as the trial, when substantive issues of right are to be decided.

Our Disputes Group or your usual contact in McCann FitzGerald would be pleased to provide further information on this case or on other related matters.