Dermot Ahern (Louth, Fianna Fail)

I thank the House for agreeing to consider this legislation this afternoon. Members will be aware that the need for this short Bill results from the issues raised in the recent High Court judgment in the McCann case in which the applicant successfully challenged the constitutionality of section 6 of the Enforcement of Court Orders Act 1940. The High Court delivered its judgment on 18 June last and, following close consultation with the Attorney General, I decided not to appeal that decision but to move quickly to apply the principles contained in it to the existing legislation in order to provide a definite and reliable method of dealing with debt enforcement.

These short but important amendments will be of benefit not just to creditors but also to the individuals who are falling into debt. In these often distressing circumstances, delay and prevarication are the normal human reaction. However, these do not constitute a particularly useful approach. The earlier people can face up to their difficulties and engage positively with their creditors, the easier a manageable solution can be achieved for both parties.

The High Court found that the existing legislation lacked a number of necessary safeguards in circumstances where a person is at risk of imprisonment. The judgment states that while this process has traditionally been regarded as a civil matter, its effect was similar to a criminal process and that, as a result, the debtor was entitled to similar protections. The court expressed particular concern that the 1940 Act did not appear to require a person to be heard by a court before being imprisoned. Following default on an instalment order made by the District Court, the creditor could apply to the court for a committal order and even without appearance by a debtor. Committal orders could be, and were, granted by the District Court.

The absence of a means to ensure that the debtor attended the court gave rise to difficulty, particularly in view of the fact that in the legislation the obligation was on the debtor to show that his or her failure to pay was not simply because he or she chose not to do so. The court had to be satisfied the debtor - if he or she appeared - had proved that his or her failure to pay was not the result of wilful default. The High Court also found issue with the fact that no option was open to a court to grant legal aid to an indigent debtor at risk of imprisonment, although of course it should be remembered that it was open to a debtor to make application to the legal aid board for civil legal aid.

The provision I am now proposing will replace section 6 and amend sections 8 and 9 of the 1940 Act. Its effect will be to insert a number of key safeguards to the provisions under which a court may hear an application or grant an imprisonment order against a debtor who has failed to comply with an instalment order. The Bill will also provide that a debtor against whom an imprisonment order may be made will be entitled to apply for legal aid.

The Bill still allows for the possibility of imprisonment. I am aware there are those who will think this harsh. I have given detailed consideration to this issue, however, and I am of the view that we must live in the real world and consider the effect of abolishing imprisonment on the process of debt enforcement between two contracting parties. While in practice as a solicitor, I had experience of trying to obtain compensation for people who were awarded money by the courts and of trying in vain, through many different layers of process, to collect it.

Without detaining the House with statistics, the data made available by the Courts Service and the Irish Prison Service demonstrates eloquently the effect of the ultimate sanction of imprisonment in dealing with debt. The Courts Services estimates that in the first six months of this year there were approximately 4,300 applications to the District Court for enforcement orders. In the same period, 186 people, less than 5% of the total, were imprisoned. The average imprisonment period is 20 days. The simple fact is that the vast majority of people who may ignore every other step of the process find the means to pay their debts when faced with the threat of imprisonment. It should also be remembered that this process is always preceded by an instalment order granted by the court. It can be seen, therefore, that, even under the 1940 Act, only a very small percentage of debtors were subject to the sanction of imprisonment.

The aim of this Bill is to ensure that people who cannot afford to pay will not be subject to imprisonment but that those who can pay and who simply chose not to may still face prison. The Government's view is that this sanction is a necessary aid to creditors who are finding it increasingly difficult to collect moneys owed to them, particularly in the current challenging economic climate. This legislation is mainly utilised by small creditors - shops, businesses and credit unions, which are struggling to maintain their trade and their employees - as well as family law creditors. I would be loath to add to their troubles by abolishing the persuasive sanction that enables family members to recover debts owed to them by, for example, spouses from which they are separated.

Fine Gael has suggested that the imprisonment option should be abolished altogether and replaced with an attachment procedure. I had considered that option for this Bill and the Fines Bill, which is already before the Houses, but decided against it at this time. This is doubtless an area which will form a key part of the examination currently being undertaken by the Law Reform Commission. Most Deputies would agree it is more appropriate to await the commission's recommendations rather than to proceed in haste to construct an attachment process which may be reframed entirely within a relatively short period.

As Deputies will be aware, the Law Reform Commission is considering this issue and will be commencing a consultation process in the coming weeks. While I have sympathy with the notion of an attachment procedure, we should not second guess the outcome of the Law Reform Commission's deliberations. What we are doing, on foot of the High Court judgment, is introducing the changes that are required in respect of the existing legislation. When the Law Reform Commission reports, we will re-examine the entire system. I accept that the commission may very well recommend removing the option of imprisonment. Deputy Charlie Flanagan, the Ceann Comhairle and I know, from our experience as practising lawyers, that the threat of imprisonment was always persuasive in encouraging people to eventually pay their debts.

Section 1 of the Bill is a standard provision containing definitions. Section 2 is the principal provision and inserts a new section 6 into the 1940 Act. The latter sets out the process by which the District Court will deal with the summons and the hearing. It also specifies various safeguards and criteria which will in future apply to the granting of a committal order.

The new section 6(1) sets out the circumstances in which a creditor may apply to a District Court clerk for a committal order. As already stated, this will follow on from an earlier court process in which an order for payment by instalment will have been granted. Where the debtor fails to pay these instalments, or one thereof, the creditor can make an application under section 6.

The new section 6(2) sets out the details that will be contained in the summons. These measures concentrate on making the debtor clearly aware of the consequences if he or she fails to attend, as well as the range of potentially less onerous options the court has available to it under this legislation, such as a variation order or mediation. It should be noted that the Bill provides for personal service of the summons and this will be a matter for the creditor.

The new section 6(3) provides that where a debtor fails, without reasonable excuse, to appear in answer to the summons, a judge can either issue an arrest warrant in order that the Garda will bring the debtor before the court at the earliest opportunity or adjourn the hearing. This provision effectively channels the court towards the provisions and protections in subsections (6), (7) and (8).

The new section 6(4) provides that where a debtor is arrested he or she should be brought before a court as soon as possible. The new section 6(5) provides that where a person is arrested and brought before a court under the bench warrant issued under subsection (3), a date shall then be fixed for a hearing and specifies that the judge shall make clear in ordinary language to the debtor his entitlement to apply for legal aid, the consequences, including imprisonment, of failing to comply with the instalment order or of failing to appear for the hearing on the date fixed.

The new section 6(6) deals with the judge's explanation in circumstances where the debtor attends on foot of a summons, that is, the entitlement to apply for legal aid and the consequences, including imprisonment, of failing to comply with the instalment order.

The new section 6(7) sets out the options open to the court if it is satisfied that the debtor has not complied with an instalment order. In the first instance, the proceedings on the summons may be treated as an application for a variation of the existing instalment order. This option exists at present but I understand that people seldom avail of it. This is clearly a good option for the creditor as well as the debtor because some payment is better than none. By setting matters out clearly in the new section 6, the take-up relating to may increase.

The new section 6(7)(b) provides that the court may request the parties to engage in mediation. This is aimed at increased use of the money advice and budgeting service, MABS, which provides such valuable assistance to those in difficulties. Government funding of MABS in 2009 is in the order of €18 million. MABS provides an extremely effective service to people in trouble, with over 90% of callers to the helpline finding that their money management and budgeting issues can be resolved with the assistance of the helpline adviser. When I served as Minister for Social and Family Affairs between 1997 and 2002, I was especially pleased to have at my disposal the resources required to increase the number of MABS offices throughout the country.

The other option open to the court is to make a committal order. This may be postponed until such time as the judge thinks is appropriate, thus giving the debtor a further opportunity to make payment, or come into effect immediately.

Subsection (8) sets out in detail the standard and the onus of proof, as well as the criteria that must be applied by a judge before making an order for imprisonment. Members will note that I have included the criminal standard of proof, that is, beyond reasonable doubt. This is to take account of the High Court's view that the potential effect on a debtor is that he or she may be imprisoned and, therefore, I have erred on the side of caution in requiring a criminal standard.

The onus will be on the creditor to establish the case. The proofs required include establishing that the debtor has means but is wilfully refusing to pay. In addition, the court may require the creditor to establish that the debtor has no goods that could be attached in lieu of the debt. While this seems a potentially onerous provision, it is included specifically to establish that imprisonment really is the last resort.

Subsections (9), (10) and (11) are self-explanatory. Subsection (12) is designed to protect the proceedings from a debtor who fails to attend the court hearing. I accepted a helpful amendment tabled by the Labour Party in the Seanad. We had the same objective in mind, namely, to protect the integrity of the proceedings from the debtor who refuses to co-operate.

Section 2 also inserts a new section 6A, which grants power to the court to consider an application for legal aid. This will operate on a similar basis to the current criminal legal aid scheme. It makes provision for an entitlement to apply to the court for a debtor's legal aid certificate and sets out the circumstances in which it can be granted. Consideration was given to simply referring to the Legal Aid Board, as it is currently possible for persons to apply to it for assistance in such matters. However, again bearing in mind that the end result can be imprisonment, it was felt more appropriate to leave the granting of legal aid as a matter for the court to decide.

Deputies may be concerned at the financial implications in this regard. Obviously, there will be consequences resulting from extending legal aid in this way. It is not, however, my intention to provide for large fees. Regulations are being drafted and my officials have notified the Law Society that the scheme is being structured to restrict the cost to the State as much as possible, while allowing for a fair rate to be payable to solicitors for their work. This represents a new avenue of business for the profession, which I appreciate has been experiencing its own difficulties, and this will be very suitable work for recently qualified young solicitors. I intend that a rate will be struck on a per-case basis. The Department will monitor the impact of the provision and it is proposed that the arrangement be reviewed once it has been in operation for a period of two years.

Section 2(2) applies the provisions of the amended section 6 above to section 8 of the 1940 Act, which deals with applications for enforcement proceedings for default of payments due periodically, for example, maintenance orders. Section 2(3) amends section 9 of the 1940 Act to render more workable the power of the Minister to release debtors where that is necessary. Following advice from the Attorney General, this is being done to tidy up the existing archaic provision from the 1940 Act that requires the Minister to consult, where practicable, with the District Court judge who issued the committal order. I cannot envisage circumstances where such consultation would be appropriate and the minor change introduced here, which is to include consideration of whether such consultation is appropriate or proper in all the circumstances, is designed to take account of this.

Moreover, I do not envisage that this provision to release debtors will be used frequently as it has been very rarely used in the past. The issue of whether ordinary remission procedures should apply to debtors has been raised - traditionally it has not applied - and this will be examined further in due course.

As Deputies will be aware, the Law Reform Commission is currently engaged in a root and branch examination of the area of debt and will publish a discussion paper in September. This will be followed by the commission's annual conference in November, which will be centred on this topic. All this work will lead to the publication of a major paper next year in which it will make recommendations for any in-depth reform of this area, which undoubtedly is overdue. The commission has lengthy experience of broad consultation and produces excellent, workable solutions in complex areas. I have no doubt that it will take into account the jurisprudence, as well as the detailed and helpful research produced this week by FLAC. Any other issues arising in this area can and will be considered in that context.

In the aftermath of the recent court case, I decided to hone in on section 6 of the 1940 Act and amend it to take account of the High Court judgment, while leaving the wider examination of this issue to the Law Reform Commission. While the amendment tabled by Fine Gael in this respect is helpful, I do not consider it appropriate to accept it because were the Law Reform Commission to come up with another procedure, Members would be obliged to change this all over again. Consequently, it is better to leave this to the Law Reform Commission.

It also is necessary to emphasise that not only does this measure help creditors in respect of normal contract issues or debts, but the legislation is also required to ensure that an ultimate penalty exists in respect of unfulfilled family law maintenance orders. It is important not to lose sight of that fact. To a certain extent, there is a perception that this measure simply pertains to money in respect of contract debts and such issues. Moreover, I note that attachment applies in the area of family law in respect of maintenance orders and yet 50% of those who are subject to maintenance orders and who fail to pay actually end up in prison. In other words, the attachment procedure in that regard does not work as well as one might think.

I commend the Bill to the House.

See this speech in context