John Moloney (Laois-Offaly, Fianna Fail)

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann:

— welcoming the extensive measures already taken by the Government to ensure access to credit and support for small business generally;

— noting that the Department of Justice, Equality and Law Reform in consultation with the Department of Enterprise, Trade and Employment is engaged in a review of the limits and scope of the current small claims procedure;

— accepting the Government's intention to bring forward a measure, as soon as possible, to widen the scope of the current procedure;

resolves that the Small Claims (Protection of Small Businesses) Bill 2009 be read a second time this day six months.".

I wish to share time with the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Calleary.

At the outset, I genuinely welcome the Bill. As someone involved in a small business for years I wish to put on record my appreciation for the efforts involved in introducing the Bill. For the purpose of clarification, the issue of six months is not an attempt to reduce the importance of the Bill or to sideline it. It is simply to allow the working out of the detail and I trust Deputy Varadkar accepts this explanation. I refer to the issue raised concerning the reduction of council seats on local authorities. This is not an attempt to reduce grants and that suggestion is somewhat impossible to accept.

I appreciate the efforts made to introduce this proposal and I am pleased to respond to Deputy Varadkar's proposed Private Members' Bill on behalf of the Government. I have no doubt his motivation and objectives are sincere in terms of what he seeks to achieve and the Government is in broad agreement with his proposal. The Government has made clear that it is open to ideas and it will not vote against this Bill this evening. However, there are several concerns with the detail of the Bill and, therefore, the Government proposes that the second reading be postponed for six months to reconsider the issue in detail and to ensure the issues do not have any adverse effect on the operation of the current small claims procedure.

Before turning to the specific proposals contained in the Bill, I take this opportunity to remind the House that the Government fully appreciates that all businesses, especially small businesses, have been significantly affected by the very difficult economic situation the country is experiencing. Many Deputies have spoken during the course of the debate about the difficulties facing the banks and small businesses, especially legitimate small businesses, which have always operated within the constraints of their overdraft agreements. It now appears these businesses are being penalised. I understand the thinking behind the Bill and the comments made in support of it.

The Government is very aware that small and medium sized businesses are key to maintaining employment in the immediate future and to improving employment and the economy as we move through the current difficult international economic crisis. It is obvious that consumers and businesses have been severely impacted by the economic circumstances. This has manifested itself in difficulties on the part of both consumers and businesses in terms of making payment for goods and services, mortgages, rent on premises or fulfilling other contractual obligations. The point has been made by many Deputies also about small businesses being owed money by State organisations and companies. It is very important that the Government takes on board the proposals made in the Bill.

Recently, I heard an accountant on the radio discuss the fact that he was having difficulty obtaining payment from several long-standing small business clients. What the accountant had to say is very important in the context of what the Bill seeks to achieve. The accountant's clients were viable businesses but were, in the main, having difficulties trading due to cash flow and credit payments. I realise from my own experience that businesses require credit to allow them to continue to trade. I support the notion of this Bill. It is timely and I have no difficulty welcoming its contents and the thinking behind it.

Unfortunately, the very quick financial downturn, which could not reasonably have been anticipated by consumers and business, has resulted in cash flow and credit difficulties with a consequent debt problem. The Government is acutely aware of this problem and has very specific measures to address the serious issues that have arisen for small businesses as a result of the economic and banking crises. Our focus is very much on the needs of the wider economy and especially on the enterprise sector, including the small business element of that sector. We are very aware of the fact that one of the key drivers of our economic recovery is the provision of appropriate credit facilities to small businesses and enterprises.

There is a great deal of anecdotal material to suggest that banks are unwilling to lend in many cases, even to apparently viable businesses. Recently, I heard an interview on RTE Radio 1 with people working in a small family printing business comprising a husband, wife and their daughter-in-law. Traditionally the company always traded within an overdraft agreement. However, it could not renew its overdraft and those involved made the point that they had to modernise the computer back-up facilities. Unfortunately, the business was going to the wall because it could not secure the necessary ongoing finance.

All the main banks have said they remain open for business, are willing to lend where appropriate, and continue to approve a high percentage of credit applications. It is widely believed that demand for credit has fallen and that many businesses are unwilling to approach banks at present. I am pleased the Government has decided that an independent review of bank lending is required. As part of the banks recapitalisation programme, the banks agreed to fund this review. It is very important that people are aware of this and it is currently underway. The report of the review is expected by the end of June or early July.

It must be made very clear to the House that the Government is taking the necessary steps to address the problems faced by small businesses and that we will continue to take whatever action is required to overcome the current situation. The measures we have taken will go a significant way towards addressing the cash flow and credit facility problems facing small businesses.

In this context it is important to understand what the small claims procedure is all about. It was put in place to facilitate consumers with an inexpensive method to resolve small claims without the need to employ legal representation. It operates very much as a consumer-friendly procedure in respect of issues such as faulty goods or bad workmanship in the main and all the evidence is that it operates very effectively at present. The procedure was originally introduced on a pilot basis in 1991 by the then Fianna Fáil-led Government and was extended nationwide some two years later. The procedure is provided for under the District Court rules.

From its inception the procedure was designed to handle consumer claims cheaply without involving a solicitor. The District Court clerk, who is called the small claims registrar, processes the claims. Where possible, the registrar will negotiate a settlement without the need for a court hearing. Nearly half of all current claims are settled in this way. If the matter cannot be settled, the registrar will bring the claim before the District Court.

Currently classes of claims are limited to a claim for goods or services bought for private use from someone selling them in the course of a business - consumer claims; claims for minor damage to property but excluding personal injuries; and claims for non-return of a rent deposit for certain kinds of rented properties, for example, holiday homes. Other matters relating to rented accommodation are dealt with by the Private Residential Tenancies Board. The current procedure excludes claims arising from a hire purchase agreement, a breach of a leasing agreement or debt. With the exception of the European small claims procedure which commenced on 1 January 2009, the procedure is not currently available for use by a business against a consumer or another business.

The procedure is designed to be simple and user-friendly without recourse to legal advice. Once the claim is lodged, the registrar will negotiate with the claimant and respondent to try to reach an agreement without the need for a court hearing. Where necessary, the registrar may arrange a meeting with the parties. However, the process is kept as informal as possible and is held in private. There is no need to engage the services of a solicitor or other legal representative, although the parties are free to do so should they wish. Such costs are not recoverable from the other party. If the registrar cannot settle the dispute, a time and date will be fixed for a District Court hearing.

The court hearing will be heard in public as part of the normal sitting of the District Court. Evidence will be given under oath or affirmation, witnesses may be called and cross-examination is allowed. Costs incurred by either party, whether through the engagement of legal representation or expert witnesses must be borne by the party calling them, regardless of in whose favour the court determines the dispute. If the matter is determined in the claimant's favour, the respondent will be given approximately four weeks to pay the amount awarded by the court. Both parties have the right to appeal the order of the District Court to the Circuit Court.

In recent years, in order to improve the delivery of electronic services to the public in accordance with Government policy on e-Government, an on-line small claims service has been introduced. Initially it was run on a pilot basis in 2004 in the Dublin Metropolitan District Court and in Cavan District Court. Over the intervening period the on-line system has been rolled out throughout the remaining District Court areas and, since May last year, the system is live in all District Court offices throughout the country. It facilitates the public in lodging claims over the Internet, in cases where this is convenient. Claimants can pay the court fee of €15 on-line and follow the application through the various stages of the process using a unique pin number. Some 45% of all small claims in 2008 were received on-line and this is a measure of its success.

I will give the House an idea of the volume involved. In 2008 there were just over 4,000 applications, an increase of 11% from 2007. The largest increase related to claims about dry cleaners, which more than doubled. Claims about minor building issues, such as painting and decorating, increased from 109 in 2007 to 213, while applications relating to cars, usually servicing and maintenance issues, increased by 48%. Claims about holidays accounted for 10% of the total. It should be noted that there was a considerable decrease in applications that could not be dealt with under the small claims procedure, from 589 in 2007 to 426.

In 2008, a total of 44% of all claims finalised were settled by the small claims registrar with only 26% referred to court. There was an 18% increase, from 294 in 2007 to 349, in decrees by default, where the person against whom the claim was made did not respond or take any part in the case. Last year there were 1,030 cases referred to court, an increase of 20% on the 2007 figure of 857. Of those cases, 587 were dismissed, struck out or withdrawn with decrees granted in the remaining 443. A European small claims procedure commenced operation on 1 January 2009. It provides an alternative method of commencing and dealing with civil and commercial matters in respect of a small claim in cross-border cases only. It is provided for in an EU regulation and in new District Court rules. A cross-border case is one where at least one of the parties lives in a member state of the European Union, excluding Denmark, other than the member state of the court dealing with the claim.

As with the national small claims procedure, the service is provided in Ireland through the District Court offices. The service is not available on-line. The procedure will be mainly dealt with by correspondence although a hearing before a court can be held if the court thinks it is necessary. The service is available for civil and commercial disputes up to a value of €2,000. Where possible, the registrar will negotiate a settlement without the need for a court hearing. The parties do not need to involve a solicitor and the same application fee of €15 applies. The process operates in a similar manner to the national procedure and a judgment given under the European small claims procedure is recognised and can be enforced in another EU member state. Enforcement procedures are governed by the law of the member state where the judgment is being enforced.

The small claims procedure currently allows for claims up to a maximum of €2,000 rather than the €1,269 mentioned in this Bill. The current limit was introduced in 2006 in response to the report of the consumer strategy group which had recommended a move towards a maximum level of €3,000. The matter is kept under review and as the Minister informed the House last November, a review is being undertaken this year. The review being carried out by the Department is considering the resource impact of any increase as well as inflation.

I do not doubt the Deputy's motivation and objectives in putting forward this Bill. However, the Government has a duty to ensure that any legislative proposals are well founded and drafted. The Bill, as drafted, has a number of potentially negative consequences for consumers and small businesses alike which the Deputy may not have taken into account. For example, in the first instance, it may not be necessary to bring forward primary legislation. The current procedure was introduced by statutory instrument amending the District Court rules. It may be possible to achieve considerable widening of the scope of the procedure through an amendment of the District Court rules rather than an Act of the Oireachtas. However, a legal precedent prevents limited companies from being represented in domestic court proceedings by their directors or officials, in the absence of a statutory exception, and it may be necessary to make provision for this in primary legislation. The advice of the Attorney General will be necessary on this point as it would be desirable that the process can be conducted in so far as possible without recourse to expensive representation.

There is a danger that one of Deputy Varadkar's proposals could fundamentally alter the whole ethos of the small claims procedure. Rather than expanding it to act as an aid to business, as currently drafted, it has the potential to transform the focus of the process from an aid and assistance to the individual consumer to that of an anti-consumer measure. Such a move could have negative implications for the whole ethos of the small claims procedure. The measure as proposed, while promoted as one facilitating small business, has far wider implications, in that it would enable any business, irrespective of size, to prosecute claims against consumers and other businesses, large or small, with minimal formality. The measure could prove an advantage for large businesses, especially those with in-house law agents, collecting relatively small debts from large groups of consumers and small businesses. It could be argued that it would make consumers and small businesses more vulnerable. For that reason, this aspect requires very careful consideration and consultation and hence the six-month delay in the Second Reading of the Bill. The financial limit applying to the procedure was increased to €2,000 in 2006. The Minister already indicated to the House, in the context of the Arbitration Bill, that he has an open mind in respect of this limit. It is the subject of an ongoing review which will be brought to a conclusion in consultation with the Department of Enterprise, Trade and Employment as well as with the other stakeholders. The Minister will present proposals as soon as possible.

The majority of citizens will only ever have a short-term or once-off relationship with the courts, as victim, witness, juror, defendant, litigator or seeker of redress, etc. Since its establishment, the Courts Service has been extremely progressive in adapting to new methods and approaches and part of this is to try to ensure the experience is as positive as it can be in the circumstances by providing the necessary and appropriate information. Their dedicated information officer has implemented a wide-ranging and comprehensive strategy. The award-winning courts website has been developed continuously to ensure it meets the needs of its users.

As part of the customer service action plan, a number of user groups have been established to assist in developing a consumer-centred approach to service delivery. These groups help ensure that the views and suggestions of those involved in the courts system are taken into consideration in the development and operation of policy initiatives. Such groups assist greatly in improving the efficiency and effectiveness of the system. They include representatives from professional and representative bodies and provide a useful forum for the exchange of ideas and help to make users aware of each other's needs and concerns. There are also a number of tailored outreach programmes to provide information to groups interested in specific aspects of the work of the courts. This initiative gives the service an opportunity to provide information in a targeted way tailored to meet the needs of a variety of interest groups. I know the service would be happy to provide any assistance or information regarding access to the courts to groups representing business.

In the past 12 months, the Government has greatly increased the resources available to the courts, not least in the number of additional judges appointed. The Courts and Court Officers (Amendment) Act 2007 provided for an additional 14 judges, comprising six judges of the District Court, four of the Circuit Court and four judges of the High Court. The proposals have the potential to provide an inexpensive and speedy mechanism for small businesses to pursue small debts.

I hope the Deputy will appreciate the genuine concerns which give rise to the need for further consideration. The Government does not wish to put at risk the current system which is working well. Detailed analysis is required to identify a means to extend the scope and range of the system without disadvantaging individual consumers who are making good use of the current efficient model. This work will be done quickly and without delay, building upon the review already underway in my Department.

See this speech in context