The Court of Appeal has overturned an order requiring Pepper Finance Corporation to disclose documents showing the price it paid to acquire mortgage loans held by married couple Darren Hennessey and Emer Barrett.
The couple sued Pepper in October 2023, challenging increases in the variable interest rates applied to loans originally advanced by Permanent TSB in 2005 and 2007. Their case includes claims that Pepper acted unlawfully in exercising its contractual discretion to set rates.
During the proceedings, the couple sought discovery of documents showing both the price Pepper paid for their individual loans and the price and face value of the wider loan portfolio in which they were acquired. They argued the information was relevant to Pepper’s cost of funds and, in turn, whether the rates charged were excessive or unconscionable.
The High Court granted that discovery. Pepper appealed.
Mr Justice Brian O’Moore, with Mr Justice Binchy and Ms Justice Pilkington agreeing, held that the High Court had not scrutinised the pleadings sufficiently closely before making the order. Discovery, the court said, must be tied to issues actually pleaded rather than to matters a party might have intended to plead.
The Court of Appeal found that the statement of claim did refer repeatedly to Pepper’s costs of funds, but did not plead that the price paid to acquire the loans affected the interest rate Pepper was legally entitled to charge. Indeed, one part of the pleading stated that Pepper’s actual cost of funds was not a material consideration.
The court also noted that Pepper had already offered discovery concerning its interest-rate policies, decisions and material considered when setting rates. That documentation was sufficient for the pleaded challenge to its decision-making process.
O’Moore J said a differently formulated claim might potentially have made the acquisition price relevant, particularly if supported by banking expert evidence, but that was not the case presently before the court.
The appeal was allowed and the discovery order set aside. Pepper was provisionally awarded its appeal costs, with that costs order stayed pending the final High Court determination of the underlying claim.