Court of Appeal allows appeal against discovery order, ruling confidential documents cannot be compelled without evidence.

THE COURT OF APPEAL

Approved

No Redaction Needed

Record Number: 2025/14

High Court Record Number: 2023/5148P

Neutral Citation Number [2025] IECA 232

Binchy J. Pilkington J. O’Moore J.

BETWEEN/

DARREN HENNESSEY AND EMER BARRETT

PLAINTIFFS/RESPONDENTS

-AND-

PEPPER FINANCE CORPORATION (IRELAND) DAC

DEFENDANT/APPELLANT

JUDGMENT of Mr. Justice Brian O’Moore delivered on the 21st day of November, 2025

1. The plaintiffs are a married couple. The defendant, Pepper, is a finance company which in May 2019 acquired the interest in a loan initially advanced to the plaintiffs by Permanent TSB in December 2005. That loan provided for the advancing of a capital sum to the plaintiffs for a 35-year term with an initial one-year fixed interest rate period. The fixed interest rate was 2.55%.

2. The original 2005 loan was supplemented by a top up facility provided in October 2007 for the purpose of home renovations. The interest rate applicable to that loan was the higher amount of 5.55%, again a fixed interest rate but this time for a two-year period. On the expiry of the fixed term periods, any sums owed by the plaintiffs to PTSB were subject to interest at a variable rate.

3. Subsequent financial arrangements were entered into by PTSB and the plaintiffs; it is unnecessary to set them out in this judgment. However, the current dispute arises from increases in the interest rates charged to the plaintiffs by Pepper which (the plaintiffs maintain) are unlawful. In the course of this dispute, the plaintiffs sought (and were granted) discovery of a category of documents relating to the price at which Pepper acquired the plaintiffs’ loans. Pepper have appealed that order. This is my judgment on that appeal.

4. Later in this judgment, I will set out in some greater detail why it is that it is asserted that these interest rate increases are not ones which the plaintiff should have to pay.

5. The plaintiffs commenced this claim against Pepper by plenary summons dated 23rd October 2023. The copy of the statement of claim contained in the papers for the appeal to this court is undated. The defence was delivered on the 6th September 2024. Again, I will consider the pleadings in some detail as they are significant for the purpose of the issues raised in this appeal. Before I do so, however, I should set out the history of events leading to the hearing before this court.

6. Extensive particulars were raised on behalf of Pepper, leading ultimately to an order of the High Court (Cregan J.) on the 26th July 2024 directing that some (but not all) of certain particulars sought on behalf of Pepper should be replied to.

7. In addition, interrogatories were raised on behalf of the plaintiffs (in January 2025) and responded to by Pepper (in March 2025).

8. By letter of the 23rd September 2024, the solicitors for the plaintiffs sought voluntary discovery from Pepper. The relevant category for the purpose of this appeal (Category 5)

sought by the plaintiffs reads as follows: -

“All documents evidencing the price paid by the defendant to acquire the plaintiffs’ loan and the price paid by the defendant to acquire the tranche of loans, including the plaintiffs’ loan and the full-face value of that tranche”

9. The reasons given for this category of discovery were: -

“These documents are relevant so that the “costs of funds” allegedly incurred by the defendant can be assessed. The very nature of the defendant’s business model is that its (sic) acquires loans for mortgage providers at a reduced rate. It is asserted at paragraph 33(g) of the statement of claim that the defendant does not have the same costs of a retail bank such as the predecessor in title and in particular does not have the same costs of borrowing. The sum paid by the defendant to acquire the plaintiffs’ loan and/or the sum paid by it to acquire the material book of loans will disclose the extent to which the rate of interest charged is unconscionable or excessive, as claimed by the plaintiffs. Further, the amount paid by it will be a factor in determining the actual costs of funds incurred by the defendant.”

10. Pepper did not agree to make discovery of this category, and a motion for discovery then issued on the 18th October 2024. The application was grounded on an affidavit of the first plaintiff, Darren Hennessey, which confusingly refers to two Category 5s. However, the relevant Category 5 (and the reasons for it) are set out in materially the same terms as the letter seeking voluntary discovery.

11. Strikingly, there is no affidavit delivered on behalf of Pepper in response to the motion. This is notable because there was therefore no evidence before the High Court to the effect that the documentation sought in Category 5 is in any way confidential, let alone is as sensitive and confidential as we were told during the course of the submissions on this appeal. This is a serious omission. In order for a court to accept that documentation is confidential, one would expect that in the ordinary course of events there would be affidavit evidence to that effect. While it might be thought the documentation of this sort would automatically be thought of as confidential, the fact is that even once confidential documentation can cease to be so with the passage of time. Information which might have been tremendously sensitive 10 or 20 years ago could well have lost that quality by now. This emphasises the need, in every case, for a body asserting that documents have a confidential character to do so by means of evidence, not by means of mere assertion or submission.

12. This singular gap in Pepper’s proofs has been largely filled by an acceptance on the part of the trial judge that this documentation is likely to contain information which is commercially sensitive. As we will see, that proposition runs through the judgment of the trial judge (Nolan J.) on this discovery motion.

13. Prior to the hearing of the motion, written submissions were delivered on behalf of the plaintiffs, and on behalf of Pepper. By the time the motion was issued, what had been Category 5 in the letter seeking voluntary discovery had become Category 6 in the motion. However, the wording of the category was the same.

14. In their written submissions with regard to Category 6 in the motion, counsel for the plaintiffs argued that: - “This category is crucial for testing the defendant’s assertions regarding its costs and commercial justifications. The defendant has directly raised these matters through its Defence (para. 19(d)(ix)) by requiring proof of its costs and expenses.”

The submission went on: -

“The purchase price documentation is necessary to assess whether the defendant’s claimed costs of funds represent genuine commercial considerations in its rate setting decisions. The defendant’s bare assertion that this class of documentation is “not relevant” is rejected. It is plainly material to the within proceedings. No assertion of confidentiality has been made by the defendant.”

15. At the hearing of the motion, counsel for the plaintiffs indicated that he would give an undertaking on behalf of his clients “in relation to restrictions and dissemination of the documents…”; p. 11 of the Transcript of the hearing. This was by reference to the judgment of Haughton J. in Wheelock v Promontoria (Arrow) Limited [2021] IECA 71 in which this court directed that documents provided on discovery would be available only to the relevant party, his solicitor and counsel. Indeed, the written submissions of counsel for the plaintiffs had earlier referred to this section of the Wheelock judgment, by way of indicating that the plaintiffs were agreeable to a similar form of confidentiality club being put in place with regard to the documentation to be disclosed in respect of Category 6. This offer is something to which I will return.

16. In his oral submissions to the High Court judge, counsel for Pepper made a range of arguments, some of which have now fallen away as they are not being prosecuted on this appeal. However, it is worth noting that counsel for Pepper put in the forefront of his oral presentation the argument that the documentation sought was not relevant to the pleaded case.

17. Before one considers the ruling of the trial judge, it is also worth noting the discovery that Pepper was prepared to provide. These were Category 2, Category 3 and Category 5 (as sought on the motion). These read: - “Category 2 All financial reports or analyses showing the costs of funds incurred by Pepper Finance Corporation in relation to the plaintiffs’ loans and any credit risk assessments carried out prior to the interest rate increases in 2023.

Category 3 All documents evidencing that Pepper is not a “High Street Bank” including documents where Pepper:

(a) Offers a standard variable rates (sic) to its customers;

(b) Offers loans to its customers;

(c) Has a “high street presence”;

(d) Is a “retail bank”;

(e) Provides new residential mortgage lending in the jurisdiction.”

“5 All documents evidencing or referring to how changes to the ECB Base rate impacts or is relevant to the variable rate set by the defendant. Any correspondence between Pepper Finance Corporation and third parties, including regulators, regarding the interest rate increases, particularly those citing market conditions or ECB rate changes.”

18. In addition, Pepper offered to make discovery of “all the material put before the

decision makers in coming to the decision…” with regard to the fixing of an interest rate; see p. 32 of the Transcript of the hearing of the 13th December 2024.

19. Given the emphasis placed both at the hearing before the trial judge and the hearing on this appeal in respect of the pleadings, it is notable that in his reply, counsel for the plaintiffs made a submission by reference to a judgment of Haughton J. (presumably in Wheelock) to the effect that when considering the discovery motion: - “You are not going into the forensics of the pleaded case. You are just saying ‘it’s been pleaded’. And what has been pleaded?”

20. In answering his own question, counsel referred to paragraph 28 of the statement of claim, at para. 21 of the defence, and para. 35 of the statement of claim. These, therefore, were the relevant pleadings emphasised in submissions to the trial judge in response to the argument on behalf of Pepper that Category 6 was not responsive to any dispute contained in the pleadings.

21. In his judgment, the trial judge referred (as had the parties) to the judgment of the UK Supreme Court in Braganza v BP Shipping Limited [2015] UKSC 17. He stated (at p. 44 of the Transcript) that: - “It is a pleaded issue in their case that the Defendant is bound by what is described as the Braganza principle…”

This, therefore, is the first reference by the trial judge to the relevant pleadings. The trial judge then went on to refer specifically to para. 33(j) in the statement of claim. This reads as follows: - “Further or in the alternative, it is expressly pleaded that the defendant has failed in its duty to the plaintiffs, commonly now referred to as the Braganza duty in exercising a unilateral discretion to increase the interest rates by:

(i) failing to take into account relevant matters and/or disregarding irrelevant matters when setting the interest rate; and

(ii) even if the correct actors (sic) were taken into consideration by the defendant in setting the interest rates, the result is unreasonable to the extent that it ought not to be allowed stand as a matter of justice in that no reasonable decision maker (and in particular a reasonable lender) would have made that decision;

(iii) failing to act with honesty, good faith and genuineness in arriving at a decision to increase the interest rate;

In establishing a Braganza duty the plaintiff will assert that the parties to this transaction are not at equal [bargaining] power to the extent that the plaintiffs is (sic) not free to switch mortgage provider having regard to their financial circumstances.”

The trial judge then noted that Pepper denies the claim in full.

22. The ex-tempore judgment then goes on to set out the dispute between the parties on the motion. It stated (at p. 47): - “…The Defendant has indicated its willingness to make discovery of the Defendant’s policy for setting the interest rate and the loan facilities, the documents recording any

decision by the Defendant to vary, whether by increase or reduction, the interest rate on the loan facility of the Plaintiffs, and the documents recording the reasons for which any variation was affected and applied to the loan facilities.”

23. The trial judge then set out the relevant authorities, beginning with a reference to his own involvement in Tobin v Minister for Justice [2020] 1 I.R. 211. Having mentioned the judgments in Tobin, in Ryanair Plc. v Aer Rianta and in Ryan v Dengrove DAC [2022] IECA 155, the trial judge then considered the question of confidentiality. Notwithstanding the absence of any evidence about the confidentiality of the relevant documentation, the hearing had proceeded on the basis that “documents have to be confidential”; the trial judge at p. 25 of the Transcript.

24. The trial judge expressed his agreement with the views of Roberts J. in O’Dwyer v Kenny Property Group [2023] IEHC 507 “where she said that the preservation of the confidentiality of banking documents is a matter of utmost public importance.”

25. Having accepted the confidentiality of the documents, and endorsed the view that the protection of this confidentiality was necessary, the trial judge continued: - “However, that in itself is not a prohibition to seeking discovery, since there are many ways in which the court can craft an order so as to ensure that the commercial sensitivity is maintained and cannot be used in other litigation on a willy nilly basis.”

26. I have earlier referred to the acceptance by the lawyers for the plaintiffs that some form of confidentiality club would be appropriate given the nature of the documents to be discovered in respect of Category 6. The detail of the proposed confidentiality ring was not fleshed out, as far as I am aware, and it appears to have included (as it did in Wheelock) the plaintiffs themselves. The inclusion of the parties in any confidentiality club can be matter of serious dispute; see, for example, my judgment in KSN v SEAI [2025] IECA 196. However, the terms of the confidentiality club are (in this case) of secondary importance. The primary issue is that no crafting of the order to maintain confidentiality occurred in this case. The order appealed against by Pepper makes no reference to any provision designed to restrict the circulation of the documents or otherwise to protect the accepted confidentiality which applied to them.

27. Having directed discovery of the agreed categories, the trial judge then returned specifically to Category 6. Noting the argument made on behalf of Pepper that the pleadings did not cover this category, the trial judge then recorded the reliance of the plaintiffs “particularly at paragraph 28 and paragraph 35 in relation to the statement of claim”; p.

51 of the Transcript. The trial judge went on: -

“[Counsel for the plaintiffs] says that the issue of the purchase price is actually very material in this matter and specifically brings me to the heading of ‘Costs of Funds’ and in the context of costs of funds, the purchase price is very much to the fore. However, at no stage did [counsel for Pepper] resile from his argument that this issue is not properly pleaded. However, I take the words of Haughton J. where he says ‘that it is not at this stage for the court to go into a forensic analysis of the pleadings.’”

28. It is with some regret that I must record my disagreement with the trial judge on this issue. It is precisely when discovery is being ordered that the pleadings must be parsed and analysed in a careful and thorough way. An order for discovery can have very significant consequences. It can require a party to devote enormous resources to the carrying out of the exercise of making discovery. It can give rise to the incurring of really significant legal costs. One cannot overlook the fact that we have for some years now lived in an era where the concept of the “discovery junior” has been widespread. It is worth reflecting on the fact that discovery can be so wide reaching and so onerous that whole teams of junior barristers are recruited for the specific purpose of making sure that a discovery exercise is carried out thoroughly and properly. Of course, this amount of effort and expense is required because the making of discovery is an exercise carried out on foot of a court order (or its equivalent, where voluntary discovery is agreed). The consequence of not making proper discovery could well be a finding that a party is in contempt of court. Apart altogether from the horrendous reputational consequences of such a finding, a party is exposed to the real likelihood of very serious legal consequences in such an event. The Rules of the Superior Courts permit the striking out of a claim (or a defence) where proper discovery has not been made.

29. It is impossible to forget that the failure to comply with discovery obligations has (to give just some examples) led to the jailing of Deputy Liam Lawlor, the serious disruption of one of the lengthiest trials in Irish legal history (Hansfield v Lagan) and the making of costs orders of a swingeing nature (Geany v Elan [2005] IEHC 111).

30. Given the consequences which the making of an order for discovery might have, and given that discovery will only be ordered after consideration of what is relevant by reference to the pleaded case, it is incorrect to suggest that a detailed analysis of the pleadings is not required when such an order is being contemplated. Discovery should not be ordered on the basis of what the parties might have intended to plead, but have not actually pleaded. Discovery should not be directed on the basis of some nebulous perception of what the case may be about. Instead, the court must carry out a careful analysis of the pleaded case in order to decide what is actually at issue between the parties.

31. In making these observations, I should not be seen as being excessively critical of the trial judge. He had heard a difficult motion with regard to discovery, given himself a quarter of an hour to prepare his ruling, and delivered an ex-tempore judgment with commendable speed. His comment with regard to the lack of any need for “a forensic analysis of the pleadings” appears to have been derived from a misapprehension of what Haughton J. had said in a previous judgment about this issue. Notwithstanding these factors, however, the trial judge was mistaken in finding that a thorough consideration of the pleadings was not required.

32. The trial judge then concluded: -

“I am satisfied that the pleadings do cover the issue of [cost] of funds. An example which I gave in my dialogue with counsel, which I found to be most helpful in coming to my decision, was a situation where a loan might have been bought for 10% of its value and in those circumstances a 10% interest per year of its original value would, indeed, be manifestly unfair. If, on the other hand, the loan was bought for full value or close to full value, and the market conditions prevailing at the time reflected the increase rate of interest that would, indeed, be not unfair in any circumstance.

The truth lies somewhere in between, and it is a cornerstone of the Plaintiff’s pleaded case. I am satisfied that it is a category of documentation which, on the face of it, I should order discovery...”

33. The trial judge then considered an alternative method of dealing with the plaintiffs’ perceived need for this information, which was by way of an affidavit or certificate signed by a senior executive of Pepper. He was, however, correctly circumspect about the practicalities of such an approach and (while giving the parties an opportunity to come back to him on this point) expressed an “inclination” to grant discovery of Category 6. Ultimately, this alternative form of providing information to the plaintiffs came to nothing.

34. It should be noted that, in the order perfected on the 17th January 2025, Pepper was directed to make discovery within the exceptionally truncated period of two weeks, and a stay on the order directing discovery within this period was refused. Pepper appealed both the substantive decision to direct the discovery and the refusal to order a stay. In the context of this latter aspect of the appeal, a motion was brought before this court seeking a stay and (in the course of that motion) an affidavit was sworn by a Justin Nevin of Pepper giving evidence that the documentation to be disclosed in respect of Category 6 “contains commercially sensitive and confidential information”; para. 5 of the affidavit of Mr. Nevin. To that extent, albeit late in the day, some evidence has been provided about the confidential nature of the documents involved.

35. The question of what is, and is not, covered by the pleadings in this case is the prime issue to be determined on this appeal. It is therefore necessary to consider the statement of claim in some detail.

36. The statement of claim describes the arrangements entered into between the plaintiffs of the one part and Permanent TSB of the other in respect of the loans of 2005 and 2007. It is then pleaded that the contractual terms between those parties provided that, while the interest rate could vary over time, there was an obligation on the part of the lender not to change the interest rate in a way which was arbitrary, otherwise than in good faith, or dishonest. It is then pleaded that Pepper are bound by these terms, or alternatively that when setting the interest rate Pepper must: - “(a) only take relevant factors into account and which factors will be relevant to PTSB, a lender;

(b) have regard to how PTSB, as lender would set the rate, the term is limited to how a lender would exercise it and not otherwise, the provision expressly referring to a ‘lender’”; para. 11 of the statement of claim. These, then, are the contractual terms which the plaintiffs alleged bind Pepper with regard to any interest rate increase.

37. One portion of the statement of claim is headed: -

“Unlawful increases of interest rates.”

This important portion of the statement of claim recites a number of factual matters. For example, at para. 26 of the statement of claim it is alleged that Pepper, explaining the reason for an increase in interest rates, stated: - “Your standard variable interest rate is increasing as a result of the market conditions including the recent increases by the European Central Bank to the main refinancing operations rate (ECB Base Rate) to address high inflation.”

38. Paragraph 28 is important. It reads: -

“28. The defendant has published on its website document entitled Residential Mortgage Variable Interest Rate Policy Statement which purports to set out the range of relevant considerations the defendant has regard to when setting interest rates for residential mortgages and which are said to include the following:

Interest rate at acquisition

We take into consideration the variable interest rate which applied to your loan when it was acquired by the beneficial owner of your loan.

Cost of Funds

These are the costs which the beneficial owner of your loan will incur as a result of the continued provision of your loan.

Your Terms and Conditions

The variable interest rate which will be applied to your loan will be in accordance with the terms and conditions which govern your loan. It may be set out in the terms and conditions applicable to your loan that the variable interest rate will be that of your original mortgage lender.

Credit Risk

With any loan there is a risk that a borrower may not repay their loan or the interest relating to their loan. If a loan is not repaid the owner of the loan will sustain a loss of income and incur expenses in seeking to recover the amount of the loan.

Market Conditions

We consider the external market conditions within which the beneficial owner of the loan operates. These include, for example, changes applied by the European Central Bank to the main refinancing operations rate (ECB base rate).

Commercial Strategy

We consider the competitive position of the beneficial owner of the loan in the market, aligning it to the objective of a sustainable profitable business and product offering. Changes to any of these factors could result in changes to the variable interest rates. Further, we may update the list of factors we consider when setting or changing our variable interest rates from time to time. You will be notified in writing of any changes to this Policy and the updated Policy will also be available on the Pepper website. In all circumstances the variable interest rate applicable to your loan will be a positive rate.”

39. At paragraph 31, another important part of the pleading appears: - “The predecessor in the title to the defendant, PTSB, states that it considers the following when determining its variable rates of interest:

Funding Costs

In order to lend to customers, the bank needs to source funding (money) from both the financial markets and customer deposits. The cost of getting this money into the bank represents the bank’s own cost of borrowing.

You could think of this as the cost of the bank bringing in money.

Operating Costs

There are a number of different costs associated with running a bank. These include administrative costs, staff costs, investment costs and other expenses such as regulatory and professional fees.

You could think of this as the day-to-day cost of running the bank.

Risk Costs

Every time the bank lends money it takes a risk that the loan may not be repaid, which could lead to the bank making losses. This cost is based on the likelihood of default (how many borrowers might not pay back their loan) and how much the bank could lose if this default occurred. When calculating interest rates the bank factors the risk cost in order to cover the overall cost of expected losses from lending.

You could think of this as the bank’s risk of unpaid loans.

Capital Costs and Business Profitability

The bank is required by regulators to set aside a specific amount of money as protection against any unexpected losses.

You could think of this as the bank’s contingency fund.

The bank asks its owners (shareholders) for this money; in exchange they ask for a return on their investment.

You could think of this as the bank’s need to make money as a business.

40. The conclusion of this portion of the pleading is to be found at para. 32, which says: - “32. Accordingly, the defendant purports to determine its interest rate having regard to different factors than those taken into consideration its (sic) predecessor in title.”

41. In other words, the pleading identifies the factors which Pepper says it takes into account in fixing an interest rate, identifies the factors which PTSB said that it considered in carrying out the same exercise, and concludes that different considerations are taken into account by the two different financial institutions.

42. Importantly, it is not stated or asserted that Pepper did not have regard to the cost of funds in fixing interest rates. This is significant because nowhere in the plaintiffs’ statement of claim do they refer directly to the acquisition cost of the plaintiffs’ debt and associated securities. The only way in which, at its height, it is submitted on behalf of the plaintiffs that the acquisition cost is relevant is that it would enable the plaintiffs to calculate the costs of funds as a factor to be taken into account in fixing the interest rates which Pepper charge.

43. Paragraph 33 of the statement of claim asserts that “the imposition by the defendant of a variable interest rate which is in excess of its predecessor in title is unlawful and impermissible.” This is a challenging proposition. It states, in clear terms, that Pepper cannot charge a variable interest rate which is higher than that charged by PTSB. Therefore, if Pepper sought to increase its interest rate but PTSB did not, Pepper could not do so. It may well be, at the trial of the action, that the plaintiffs establish that they have such a legal entitlement. It would, however, be surprising if customers of a bank were entitled to avoid an increase in a variable interest rate simply because their original bankers had sold on the loan and had not (for whatever reason) increased their own rates.

44. Paragraph 33 contains fifteen reasons why it is said that Pepper cannot increase interest rates above those charged by PTSB. As far as the costs of funds is concerned, the relevant particular is (f) which reads: - “Even if the ECB base rate is relevant to the costs of funds (which is denied) the defendant is bound by the same contractual obligations as its predecessor in title. To the extent that it may incur costs in excess of the predecessor in title to provide funds, that is not a material consideration and in essence means that the defendant ought not have purchased the material loans if it cannot afford to honour the commitments of PTSB.”

This pleading is significant for two reasons. Firstly, it sidelines the significance of the costs of funds in the litigation. Secondly, and more importantly, it pleads that, whatever the actual cost of funds to Pepper, this is not material to the setting of the interest rates that it is entitled to charge to the plaintiffs.

45. The irrelevance of the ECB base rate is further emphasised in the next particular, at (g): - “Further or in the alternative to the above, the defendant does not have the same costs as a retail bank. In particular, it does not have the same costs of borrowing as a retail bank and in particular any rise in the ECB base rate does not impact the defendant’s costs to the same extent as it does to the costs of a retail bank. Further, the defendant principally incurs the costs of investing rather than the costs of borrowing…”

46. I have already set out, at para. 21 of this judgment, the pleading at para. 33(j) of the statement of claim. This was singled out by the trial judge as significant in deciding to direct discovery of Category 6. However, not only is the acquisition cost of the plaintiffs’ debt not expressly referenced during the course of this portion of the pleading, it is difficult to see what documentation apart from that already offered on behalf of Pepper is either relevant or necessary for the purpose of determining whether this plea succeeds. In particular, the offer on behalf of Pepper (which I have described at para. 18 of this judgment) to provide the policy for setting interest rates, the documentation recording the setting of the relevant interest rates by Pepper, and the documentation taken in account in so doing provides all the discovery required for the purpose of advancing this plea.

47. Paragraph 35 of the statement of claim contains a bald plea to the effect that Pepper “has been justly (sic) enriched at the expense of the plaintiffs…”; I have no doubt that this refers to alleged unjust enrichment arising from the fixing of interest rates which were impermissible and unlawful (should the plaintiffs establish this). It is not a plea that Pepper has been unjustly enriched by reference to the price it paid for the loan.

48. The reliefs claimed are also of some significance. The first is: - “(1) A declaration that the mortgage interest rate currently being charged by [Pepper] is out of all proportion to any legitimate interest permissible under the loan contract(s) at issue.” The relief sought here refers back to what is allowed under the loan contract. It has not been suggested, nor do I believe, that the obtaining of this relief requires the purchase price of the loan to be disclosed.

49. The second and third reliefs referred to are rate of interest “commensurate” to the rate charged by PTSB. Again, these are reliefs which will succeed or fail by reference to the asserted legal obligation on the part of Pepper to charge a “commensurate” rate to that charge by PTSB. The price at which Pepper acquired the loan does not appear to be relevant to this issue, and has not been suggested in any convincing way that it is.

50. There are then consequential reliefs including the claiming of damages and declarations that the overpayment of interest made by the plaintiffs is held on trust by Pepper for their benefit.

51. Finally, relief 7 reads as follows: -

“A declaration that the defendant has been unjustly enriched at the expense of the defendant (sic) and consequent orders to include the taking of accounts and enquiries.”

This relief clearly arises from the plea at para. 35 in the body of the statement of claim. It does not relate to any unjust enrichment arising from the cost of acquiring the loan. Instead, the unjust enrichment pleaded appears to be the difference between the interest rate actually charged and the interest rate “commensurate” with that charged by PTSB (to which the plaintiffs claim they are entitled).

52. One struggles, having considered the statement of claim at this level of detail, to identify exactly where in the pleadings there is an issue about the price at which the loan was acquired. As already observed, the price at which Pepper purchased the plaintiff’s loans features nowhere in specific terms. The motion before the trial judge, and the appeal before this court, was run by the plaintiffs on the basis that the acquisition costs of the loan was relevant to the “costs of funds”. However, as I have observed, while the costs of funds are mentioned on a number of occasions in the statement of claim this does not appear in the context of setting up an issue as to (a) what the costs of funds were or (b) that the costs of funds on the part of Pepper affect the interest rates which Pepper can lawfully charge the plaintiffs.

53. It will be remembered that, in the letter seeking discovery with regard to this category, the only pleading to which there was reference was para. 33(g) of the statement of claim. The same is true of Mr. Hennessey’s grounding affidavit. Paragraph 33(g) refers to the costs of a retail bank. During the course of his oral submission, counsel for the plaintiffs was asked to confirm that the costs referred to in the first sentence of 33(g) were the costs of having a presence on the high street. Counsel replied (at p. 48-49 of the Transcript): - “Well, that’s one interpretation of it. It may also be that you don’t have the costs of it because you bought it at a discount. Because you’re not lending the 400,000 in my example, you’re in fact, having bought it at a discount and then having relied on changes in ECB rates to justify your increases in your interest rates, well, we need to know what you paid for that.”

54. It is plain from the balance of para. 33(g) that costs of borrowing are included in the costs mentioned at the start of para. 33(g). However, what is not mentioned in the pleading at all is the costs of acquisition of the loan. It could be that, somewhere buried in this paragraph, one would find an aspect of the claim that leads one back to the cost of which the loans were acquired. However, that is by no means clear from the wording used in the pleading. The concession by counsel that the pleading “may” involve the discounted cost at which the loan was acquired speaks volumes.

55. Towards the end of his oral submissions, counsel was asked not just about this subparagraph but about the pleadings as a whole. At p. 58 of the Transcript, counsel was asked: - “… nowhere do you say, having recited the quote from the letter at paragraph 26, nowhere do you say this is wrong, the ECB rate increase has no relevance to the interest rate on this loan, because it was bought at an undervalue. Counsel: No, but we do say, respectfully, Judge like our whole case is that the interest rate you are charging us is an unlawful interest rate.’… And implicit in that and explicit in terms of our pleadings is, well, firstly we don’t know what level of discount there was, so we’re in the dark. So, like, we’re talking about figures of 50% discount; we don’t know.”

56. It was then put to counsel that there was no pleading about any discounted price. There followed this exchange: - “You have never said in the pleadings that they bought the loan at a discounted rate, have you?

Counsel: Sorry, Judge, our pleaded case is that their rate is unlawful.

Judge: I know that.

Counsel: Yes.

Judge: Why is it unlawful? You say in part because they bought it at a discounted rate. Where do you plead they bought it at a discounted rate?

[short pause]

I don’t think you do… that’s why we got involved in this discussion about the costs involved.

Counsel: You might be right. Sorry, Judge, I was just looking at the reply. The Court might be right in relation to that. But I don’t think that’s in any way fatal to the application in terms of the interest rate and what we have pleaded in terms of the communication we’ve had from Pepper to say this is the basis on which they have … in terms of pleading that it was at a discounted rate…”

The reference to the communication from Pepper is the quote at para. 26 and/or the quote at para. 28 of the statement of claim. As I have already commented, while these communications from Pepper are set out, nowhere do the plaintiffs plead that the interest rate levied by Pepper was not in accordance with these communications.

57. It will also be remembered that, in their written submissions to the High Court, counsel for the plaintiffs did not refer at all to paragraph 33(g) of the statement of claim - the sole pleading which both the letter seeking voluntary discovery and the affidavit of Mr. Hennessey suggested justified discovery of this category - but instead referred solely to a paragraph of the defence. That was para. 19(d)(ix) of the defence, which reads: - “The Defendant makes no admission in respect of its costs and expenses and requires full proof of the particulars thereof…”

58. However, in the written submissions to this court the reliance on this pleading has been jettisoned. In his oral submission, counsel for the plaintiffs confirmed that there was no plea in the defence which made the discovery sought relevant; p. 53 of the Transcript of the appeal hearing.

59. During the course of the same exchange, counsel for the plaintiffs was asked to identify every paragraph in the pleadings relevant to this discovery application. He identified paras. 28, 33, 34 and 35 of the statement of claim. I will return to those shortly. When asked specifically which paragraphs constituted a claim that the costs of funds were not taken into account by Pepper in fixing the interest rate, counsel helpfully pointed to para. 33(k). However, that paragraph relates to the procedures and processes on foot of which decisions were made fixing interest rates by Pepper. As I have already noted, the plaintiffs are already getting documentation in respect of the processes by which the impugned interest rates were fixed.

60. To return, then, to the suite of paragraphs in the statement of claim identified by counsel, para. 28 is (as I have said more than once) merely a recital of the factors which Pepper’s website say are taken into account in fixing interest rates. Nowhere is it denied that Pepper in fact follow that process.

61. Paragraph 33 sets out a large range of factors about which complaint is made which (the plaintiffs say) support their claim that Pepper cannot charge a higher interest rate than was charged by PTSB. None of these factors justify the discovery sought. Paragraph 34 is a claim of estoppel against Pepper in respect of representations allegedly made by PTSB to the plaintiffs as to how interest rates would be amended by a lender. The price at which Pepper bought the loans cannot be relevant to the representation, so I take it that the alleged relevance of para. 34 is as to how the interest rates were fixed. Again, the discovery offered by Pepper is the relevant discovery in respect of this plea.

62. With regard to para. 35, I have already concluded that this relates not to the price at which the loan was acquired but rather the excessive interest rate which the plaintiffs claim they have been charged. That view is confirmed by replies to particulars provided by the solicitors for the plaintiffs to the effect that: - “The unjust enrichment is the profit the defendant has obtained from imposing an unlawfully high interest rate.”

63. As I have already observed, the plaintiffs claim to be entitled to be charged the “commensurate rate of interest” which its solicitors have defined (in a letter of the 8th August 2024) as “the rate of interest PTSB Bank would be charging the plaintiffs had the defendant not acquired the facility.”

64. The unjust enrichment, therefore, is the difference between the PTSB rate and the rates charged by Pepper. The plaintiffs do not need to know the purchase price of the loans in order to make that calculation or to bring home this part of their claim.

65. Considering, therefore, all of the elements of the pleadings which counsel has identified to us there is no dispute which requires the purchase price for the loans to be disclosed. While the plaintiffs rely upon the standard of review by this court, and argue that the decision of the trial judge was one which was within the scope of his discretion, I do not agree. The trial judge did not carry out the necessary scrutiny of the pleadings required in order to determine whether or not the discovery of this category of documentation was relevant to the matters in issue between the parties.

66. It is noteworthy that, in preparing this case, banking experts have yet to be consulted by the plaintiffs. The reason given for this by counsel was that the discovery documents were needed first before the banking experts could be briefed. On one view, that is an understandable approach to take. However, it may have been preferable that banking experts were engaged at the very start of this process in order to advise as to the appropriate way in which interest rates should be calculated. Had that been done, it may well be that the claim would have been differently pleaded. It could well be that an express plea would have been made that Pepper cannot have followed its own criteria for the fixing of interest rates (as the loan had been acquired at some unspecified discount) and that the appropriate interest rate should be less than those actually levied. Other formulations of the claim might have been advanced, having taken expert advice. However, that is simply speculation on my part. The fact is that there is no input from a banking expert that would assist the plaintiffs either in crafting the pleadings in a way which made the acquisition cost of the loan relevant or in persuading the court that the disclosure of this documentation was relevant and necessary for the purpose of advancing some or all of the plaintiffs’ claim.

67. I will therefore allow the appeal. I am not satisfied that the category of documents sought fall within the issues as defined by the pleadings. Were it necessary to rely upon the ambiguity of certain aspects of the claim, I would follow the principle set out by Collins J.

in Ryan v Dengrove [2022] IECA 155 at para. 67, where he says: -

“Where the document at issue is confidential, its discovery should be directed only where it is ‘clear’ that the interests of justice in ensuring the fair disposal of the proceedings makes such an order necessary.”

68. Where the pleadings themselves are equivocal, and the relevance of the document (at the very best) debatable, I do not think it would be appropriate to direct the discovery of documentation which contains confidential information. In that regard, while it was correctly submitted to us that there was no evidence as to the confidentiality of the relevant documentation, it remains the fact that the trial judge dealt with the motion on the basis that the documentation was confidential, and in their respondent’s notice the plaintiffs have not asked us to approach the motion on the basis that this confidentiality was not established.

69. For the sake of completeness, I will now deal with the second major argument made on behalf of Pepper. This is that (to quote its counsel at page 32 of the transcript of the appeal): - “… there is no evidence, there is no suggestion that it’s even possible to identify the amount paid for the plaintiffs’ loans from a portfolio that is the subject of a bid of one figure obviously to acquire the portfolio. So, in any event, it is not something that’d be done.”

70. In addressing this argument, counsel for the plaintiffs put it that this is a problem that could be addressed when the discovery was made; it was not, he argued, a reason to refuse discovery in the first place.

71. I would be reluctant to decide the appeal on the basis of this second string to Pepper’s bow. It was for Pepper to put in evidence that the making of a discovery order would not produce any documents as there was no single document (or collection of documents) that identified the price paid for the plaintiffs’ loan. While we may all be wearingly familiar at this stage with the format in which entities such as Pepper acquires a portfolio of loans, it is not satisfactory for a financial institution like Pepper to make this argument without leading some form of evidence about the manner in which this particular loan was acquired. It is not for the plaintiffs in seeking discovery to provide evidence that there is likely to be documentation which discloses the acquisition cost. It is, rather, for Pepper in resisting the discovery application to lay an evidential basis for this ground of opposition. They have not done so. Had it come to it, I would have baulked at allowing the appeal on this basis.

72. I would therefore allow the appeal and set aside the order of the trial judge.

73. My provisional view as to the costs of the appeal is that they should be awarded in favour of Pepper, as it has succeeded entirely. I would put a stay on the order for costs pending the final determination by the High Court of the plaintiffs’ claim. If either side wishes to argue for a different provision with regard to costs, they should notify the Court of Appeal office by 5 pm on the 3rd of December 2025. In the event of any such notification being received, appropriate directions will then be given as to submissions.

74. Binchy and Pilkington JJ. agree with this judgment, and with the orders which I propose.