CHECK AGAINST DELIVERY
Speech by Minister Finian McGrath on Private Members Business: Statute
of Limitations (Amendment) Bill
6 April 2017
Ceann Comhairle,
I am speaking on behalf of the Tánaiste and Minister for Justice and
Equality who regrets that she cannot be present due to other official
commitments.
I would like to thank Deputy Wallace for his introduction of the Statute of
Limitations (Amendment) Bill 2017. I also appreciate that his introduction
of this Bill draws on experience “over the past six years in dealing with
people throughout Ireland who are in debt or have a debt hanging over
them”. It thus has an overall context related to the management of
indebtedness and enforceability of debts. The key challenge for
policy-making in these areas is that of balancing the interests and rights
of the parties concerned while also affording the opportunity for a
negotiated rather than an imposed outcome.
Very real concerns have arisen from the structure and varied scope of this
Bill in its initial consideration both by the Department of Justice and
Equality and the Office of the Attorney General and on foot of which the
Government has decided to oppose the Bill. It makes proposals across
several fronts which do not necessarily hang well together. For example, it
is proposed that the limitation period, which is generally 6 years for
bringing a range of contract and tort claims and some other types of claims
including those based on quasi-contract or recognizances and seamen's
wages, be reduced to just 2 years. There is a proposed exception for
personal injuries cases based on negligence, nuisance or breach of
statutory duty where the limitation period would be increased from current
2 years to 3 years. The limitation period for enforcing liabilities arising
from a document under seal, an arbitration award or certain company related
debts is to be reduced from 12 to 2 years. From these examples, one can see
the broad sweep of this Bill’s revisions to the limitations regime, many of
which do not seem to relate to the key issue of contract debts which has
been highlighted.
A key proposal of Deputy Wallace’s Bill, which would have very broad
implications, is that the limitation period for enforcing a court judgment,
of any type, is reduced from the current 12 years to just 2 years. It is
also envisaged that interest may only be claimed on a judgment debt for a
maximum of 2 years from the date on which the interest became due. Apart
from fines for criminal offences, the limitation period for enforcing any
penalty or forfeiture sum recoverable by virtue of any enactment is to be
reduced to 2 years.
An apparent anomaly is that while the Bill cuts limitations periods
generally, it also provides an exception for slander where the limitation
period would be increased to three-years from the current 1-year period
albeit extendable by up to two years by the court. Nor is it clear why the
Bill proposes to extend the limitation period for slander but not for libel
– particularly given that the distinction between the two was abolished by
the Defamation Act of 2009. Fundamentally, it does not follow, as the Bill
suggests, that because the bankruptcy period has been reduced from 12 years
to 1 year that there should be commensurate reductions in the periods
following which actions in contract or tort law become statute barred. They
are different areas of law with largely different objectives, rights and
legal principles in play.
While it is appreciated that Deputy Wallace would wish to reduce the period
under which debtors and others are under the threat of an action, it is
considered that the Bill’s unilateral and sweeping approach to the
reduction of limitation periods on so many fronts at once has the very real
potential to have the very opposite effect for various reasons that I will
outline. The core of the Government’s concerns is that while the proposed
Bill would shorten the duration of a potential creditor’s action against a
debtor it would, by the same token, effectively deprive both creditors and
debtors of time and options. That is to say, deprive all parties of any
space or reasonable time for a negotiated resolution which can take better
account of personal, financial, family or business circumstances. Such
space and time can be to the benefit not only of those seeking payment of
monies owed to them but also to those who owe such monies.
If the Bill were implemented as proposed, it would potentially increase
pressures on debtors by compelling creditors to take earlier action, that
is to say within two years as opposed to six. It would render creditors
less amenable to reaching negotiated agreements with debtors. Indeed, we
would be incentivising the harshest and most immediate of debt-enforcement
or recovery options. Putting such pressure on creditors to sue, as would
undoubtedly arise, would not, therefore, be in ease of debtors. This
scenario could also have the effect of drastically increasing the number of
actions brought before the courts by creditors who would feel compelled to
act immediately. In short, in so far as debtors are concerned, the Bill as
put could well back-fire and risks provoking a rapid increase in
repossession actions on home mortgage arrears – just as those numbers are
falling.
As far as the proposed two-year limitation period proposed by the Bill for
the enforcement of a judgement is concerned, this could, in certain
circumstances, render a judgement potentially unenforceable. For example,
it could take longer than two years to complete an order for sale on foot
of a judgement mortgage of the High Court. By the same token, there would
be a concern as to the effect of such a radically foreshortened limitation
period on property rights. This could well arise where creditors may be
denied the time to access information on mortgage default and other
relevant issues before taking action. It is also considered that such a
reduction would conflict with the primary objective of the Central Bank’s
Code of Conduct for Mortgage Arrears - which is to assist indebted
borrowers in addressing their mortgage debt without the loss of the family
home - by reducing the time a creditor would have to act to secure the
asset.
Another fundamental concern is that the Bill, as it stands, would include
within the scope of its potential creditors not just banks or big
investment funds but also trade creditors ranging from large companies to
SMEs who provide goods or services on credit to other businesses or to
consumers. This could impact adversely on them, particularly from an
enforcement perspective. Similar enforcement concerns could also apply in
relation to revenue actions taken before the High Court by the Collector
General.
In the current context of Brexit negotiations it is also of concern that
the Bill would result in our jurisdiction having a limitation regime
markedly different from those of England and Wales under their Limitation
Act of 1980, and of Northern Ireland under the Limitation (Northern
Ireland) Order of 1989. These regimes have core limitation periods of six
years with 12 years for contracts under seal. By the same token,
introducing any unbalanced changes in creditors’ rights to enforce loans,
particularly ones that could end up being out of step with those applicable
in similar jurisdictions, also carries the risk of reducing the willingness
of banks to offer credit, particularly mortgages, and that of increasing
interest rates. The Bill also fails to acknowledge the relevant provisions
of the Statute of Limitations (Amendment) Act 1991 relating to personal
injury claims which, as amended by the Civil Liability and Courts Act 2004,
provides for a 2-year limitation period in personal injury cases in
general. Similarly, the Consumer Protection (Regulation of Credit Financing
Firms) Act 2015 which seeks to ensure that relevant borrowers such as
mortgage holders and SMEs whose loans are sold to third parties maintain
the regulatory protections that they enjoyed prior to sale.
In putting forward this Bill it is argued that reducing the periods after
which contract or tort claims become statute barred would reflect recent
changes made in personal insolvency and bankruptcy. However, this reflects
a misunderstanding. This is particularly so in relation to bankruptcy - we
have reduced the normal bankruptcy period from 12 years down to 1 year, but
it has to be remembered that a person who becomes bankrupt still loses all
their assets and surplus income in the process. The comparison with
personal insolvency is also amiss. Far from seeking to compress the period
for creditors to take legal action or to enforce debts, personal insolvency
provides a court-supervised protected period for negotiations during which
creditors cannot issue proceedings or pressurise the debtor. Personal
insolvency also enables courts to adjourn repossession proceedings to
facilitate a negotiated settlement.
Despite an unprecedented crisis in personal debt and particularly in home
mortgage debt, which still bears heavily on many families, the extensive
series of reforms and initiatives put in place by the Government is bearing
fruit. Home mortgage arrears are falling steadily now for 14 consecutive
quarters. 121,000 home mortgages have been restructured. Numbers of
repossession orders, and of new repossession proceedings are falling
significantly. Almost six thousand vouchers were issued under the Abhaile
mortgage arrears resolution service to borrowers still at risk of losing
their homes, for free, independent, expert financial and legal advice. We
have also seen the abolition of the so-called ‘bank veto’ in personal
insolvency. Almost a thousand applications for personal insolvency
arrangements were made in the last quarter of 2016. The latest sample of
concluded personal insolvency arrangements shows that 89% kept the person
in their home, with another 7% choosing to rent instead. Most recently,
reforms have been made to get Mortgage to Rent working on the ground. In a
recent assessment of solutions available to borrowers the Central Bank
found that “there is strong evidence that banks and non-banks are looking
to exhaust available options before moving into legal processes”. While we
still have work to do it is critically important that these advances and
reforms are not undermined by measures which could ramp up pressure on
creditors to litigate and enforce, rather than to adjourn and negotiate.
For the many reasons I have just outlined, the Government is opposing the
proposed Statute of Limitations (Amendment) Bill. It is also the view of
the Government, in opposing the Bill, that the various, fundamental,
cross-cutting and sweeping measures being proposed would need to be
considered coherently as part of an overall reform of our limitation of
actions regime. As acknowledged by Deputy Wallace, we have an instrument
for such reform in the Law Reform Commission Report number 104 of 2011 and
its recommendations. We need to take the kind of approach advocated by the
Commission, and look carefully at the potential interactions of measures
implemented since 2011. We must do this so as not to contribute further to
the ad hoc, random and haphazard nature of the current limitations regime
that the Law Reform Commission has criticised and is seeking to change by
the creation of a simpler and more intelligible “core limitations regime”.