Out-Law Legal Update
High Court guidance will reassure banks acting to freeze accounts suspected of holding proceeds of crime
Out-Law Legal Update | 06 Feb 2018 | 12:13 pm | 2 min. read
A Mr and Mrs Thompson had entered into loan agreements and guarantees with the Bank of Scotland (Ireland) Ltd. The Thompsons' loan was part of a wider loan portfolio sale to Ennis Property Finance. The Thompsons defaulted on the loans and guarantees and Ennis sued the Thompsons for the amounts owed.
The Thompsons asked the High Court to force Ennis to disclose unredacted versions of documents relating to the contract of sale and the assignment from Bank of Scotland to Ennis. Ennis had redacted commercially sensitive and, in its view, irrelevant information in the copies disclosed. The Thompsons claimed that the redacted material may include conditions for the assignment which, if not complied with, would render the assignment invalid and strip Ennis of its right to sue them.
The Thompsons based their application for unredacted disclosure on three grounds:
The Thompsons acknowledged that the redaction of irrelevant material was standard practice before the CPR. The judge said that because case-law continued to permit redaction and there was no authority indicating that this practice had changed after the introduction of the CPR, the practice of redaction survived the coming into force of the CPR. The judge said that it applied equally to the right to inspect and to the requirement of disclosure, thereby finding against the Thompsons on the first and second grounds of their application.
On the third ground, the judge found that the conduct and dealings of Bank of Scotland would have effectively waived any procedural irregularities or outstanding conditions that would have invalidated the assignment and on which the Thompsons sought to rely. On that basis the judge also found against the Thompsons on the third ground. This was an interim application by the Thompsons and the judge's ruling leaves it to the trial judge to determine whether Ennis had title to sue.
Guidance on redacting debt purchase agreements or assignments
In light of increasing litigation in the secondary debt market, the judgment provides some comfort to those who have been assigned bank debt. They often face challenges to their right to sue when seeking to bring claims against defaulting debtors, as has been seen in a raft of Irish debt dispute cases including Dowling v Promontoria (Arrow) Ltd  and English v Promontoria (Aran) Limited .
The judgment supports redaction of the following types of commercially sensitive information, provided they are not relevant to the issues in the action:
What the courts are unlikely to permit however is the redaction of key operative provisions.
Tom Withyman and Manpreet Khehra are restructuring experts at Pinsent Masons, the law firm behind Out-Law.com
Out-Law Legal Update