Thursday, 6 April 2017
Statute of Limitations (Amendment) Bill 2017: Second Stage [Private Members]
I move: "That the Bill be now read a Second Time."
I am well aware that the Bill is far from perfect. There are some clerical errors in it and Deputies can see that we did not include amendments that have been made since the 1957 Act which was a mistake on our part. It was mentioned to me that I might have a conflict of interest with the Bill, but given that there are 158 Deputies in the Dáil and I am the only one who is bankrupt, I am the only Deputy who could not possibly benefit from the Bill. Therefore, I do not have a conflict of interest.
The law of limitations in Ireland is governed by the Statute of Limitations Act 1957. It contains seven different limitation periods of one, two, three, six, 12, 30 and 60 years, all applying to different types of civil actions. The law has been slightly amended on a number of occasions, but has never been subject to any type of general review, despite the fact that it is based on legislation dating back to the 17th and 18th centuries.
This Bill seeks to amend two categories of limitation period within the Statute of Limitations. Its aim is to reduce the current time limit from six years to two years in the case of a civil claim based on a contract debt such as a loan from a bank. The Bill also seeks to reduce the lifetime of High Court and Circuit Court judgments from 12 to two years, which would be in line with the most recent bankruptcy legislation.
The Bill is guided by a report produced by the Law Reform Commission in December 2011 on the limitation of actions which states that:
[T]he rationale for applying different limitation periods depending on the type of action is no longer clear. Nor is it apparent that it is advantageous to continue to follow this approach.
In fact, the Law Reform Commission holds that the multitude of limitation periods can lead to difficulties in categorisation, bringing about complex satellite litigation in order to ascertain whether a claim is statute-barred or not. This is a waste of time and resources in our already backlogged court system.
Common law actions, which include claims relating to contracts, including debt-related claims, and torts, including personal injury actions, make up a large portion of the civil cases taken in Irish courts, accounting for 45.5% of all civil claims in 2010. Reducing the limitation period would reduce litigation costs and the costs on the defendant and, given that the judicial process receives public subsidies, there would be a reduction in costs to the taxpayer.
Article 6 of the European Convention on Human Rights states that everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. This right is aimed at preventing the parties involved from living too long under the stress of uncertainty, and to ensure that justice is carried out without delays which could threaten its effectiveness.
With regard to the question of what length of time is reasonable, the Law Reform Commission in its 2011 report cites legal analysis relating to Ireland, the UK, Canada and New Zealand, indicating that a two-year uniform limitation period would he the most appropriate in order to satisfy the rights of both parties to a dispute. The plaintiff must have enough time to consider his or her position, take legal advice, investigate the claim and prepare his or her case, but not so much time that it could put him or her in a position to delay unreasonably.
Civil limitation periods are a common feature of the legal systems of the state parties to the European Convention on Human Rights, although the European Court has noted a lack of uniformity in their duration across member states. According to the case law of the European Court of Human Rights, namely Stubbings v. United Kingdom (1997):
They serve ... important purposes, namely to ensure legal certainty and finality, protect potential defendants from stale claims which might be difficult to counter and prevent the injustice which might arise if courts were required to decide upon events which took place in the distant past on the basis of evidence which might have become unreliable and incomplete because of the passage of time.
According to the Law Reform Commission, a fair limitations period would take into account the rights and interests of both the plaintiff and the defendant, while also acting in the public interest. As we are talking about debt, the reality is that a vulture fund, with seemingly unlimited resources, could take up to six years to decide to take a case against an individual who generally has considerably fewer resources at his or her disposal. The vulture fund has the resources to prepare its case quickly, but the defendant could be forced to live in fear of the financial and reputational repercussions of the legal action for six years. Small businesses and home owners could be particularly vulnerable.
The Law Reform Commission of Western Australia has found that the "the adverse economic effects on defendants of having potential claims lying around too long can harm the health of the commercial sector generally." Every day, families in Ireland are living under a cloud. They are waiting for a knock on the door, a summons to arrive in the letter box or a call from their solicitor to say that the debt from the past has come back to haunt them and that this will possibly to result in them losing their home. That could be a debt incurred six years ago and in some cases even longer. Solicitors have mentioned to me some problems they have encountered in this area, for example, school and college tuition fees for children and pension savings are swallowed up by six and ten-year old debts and families are unable to save, invest or plan for their futures because of the overhang of historical debt and not knowing when the risk will end.
Old judgments are often registered as a mortgage on a family home. In some cases the debt may have been incurred ten years previously and the court proceedings are issued just before the six-year limitation period expires. The court proceedings take a minimum of 12 months, heaping added cost and misery on a family and the judgment mortgage which follows survives as a legal burden for another 12 years. In total, one could be looking at a legal sentence on the family of 18 or 19 years. For many, that is a sentence on an entire generation.
The six-year period within which to bring court proceedings has resulted in families and relationships being broken up, has removed any chance of a planned future and has caused distress, illness and, in rare cases, even suicide. There is a growing market in what is known as bottom feeders who seek to buy up old debts that the banks and other concerns see little point in pursuing after two or three years. The unscrupulous outfits then take over the debt and threaten litigation within the six-year period and adopt the most aggressive moneylender-type tactics in seeking recovery on the historical debts. Justice delayed is justice denied. A six-year period is completely unnecessary as the vast majority of outstanding debts which are the subject of legal proceedings are commenced within two years. As the vulture funds that stalk this land are aware - and, indeed, as creditors all over the world will testify - old and stale claims that have been in existence for more than two years are very difficult to recover. Pursuing such old claims often results in no-win situations, as the debtor does not have the money to repay. And all that happens, therefore, is that the valuable time of the courts has been used up and distress is added to the hapless families.
James Treacy, managing director of StubbsGazette, recently statedthat recovery of outstanding contract debts is crucial to the efficient operation of our economy and that the key to recovering contract debts is good information and swift action. The current six-year period contradicts that approach. The 2011 value-for-money audit carried out by the Department of Public Expenditure and Reform on the legal debt collection process of the Revenue Commissioners arrived at a similar conclusion when it discovered that the most significant returns on court actions for outstanding tax debts were those taken in the early period after the liability is incurred. Waiting six years to commence action is lazy and oppressive and risks losing the State and creditors enormous sums of money. In addition, the longer the case is hanging about or delayed, the greater the risk of what is termed "satellite litigation" where other parties become involved and the costs and delays increase further.
Modern society and Irish business have instant communications and computerised accounts and do not need the snail's-pace inefficiency and delay of a six-year period. If the decision to enter into the contract and debt was the correct one at the outset and that debt remains unpaid, that can be acted upon within two years and a six-year period makes no sense. All citizens have a right to a speedy trial and it is a breach of their fundamental rights to have a cloud hanging over them for an extended period of six years or more.
Evidence deteriorates over time and memories dim, which means there is a risk of prejudice against the debtor with delay. The latter is all because of a laziness and inefficiency on the part of the creditor in not acting promptly to collect the debt. The cost to the courts and also to individuals and business of maintaining records for six or seven years instead of two years is enormous and unnecessary. It is phantom work and is completely unproductive. In many modem economies, the time limit is two or three years because everyone is entitled to have the slate wiped clean and be able to conduct a life that is not filled with the dread of a historical debt being resurrected several years later with little possibility of payment. In addition, judges find it difficult to imagine the context and circumstance of the original transaction several years previously and that adds to the uncertainty.
Exceptions to the proposed two-year rule would be latent or hidden defects that would enable purchasers or users of services or products to avail of a longer period. It would not be reasonable, for example, if a solicitor acted in the purchase of a home but did not secure proper title and was free of responsibility after a mere two years given that the person would be unlikely to find out until he or she tried to sell the house. He or she should have potential for redress. The main purpose of the Bill is that the core limitation period for legal actions on breach of contract should be reduced from six years to two years in the interest of fairness; to reflect modern best practice; to update an archaic but cruel law and to implement the recommendation of the Law Reform Commission.
In 2015, the Tánaiste and Minister for Justice and Equality, Deputy Frances Fitzgerald, addressed some core points relating to the Bill, when she stated:
The operation of the law in relation to the Statute of Limitations is a matter of ongoing review at my Department. This process also takes account of the Law Reform Commission Report on the Limitation of Actions published in December 2011 (LRC 104 -2011). In this Report, the Commission expressed the view that the principal legislation governing limitation of actions, the Statute of Limitations 1957 (as amended), is unnecessarily complex and in need of fundamental reform and simplification. The Commission made a series of recommendations in relation to enhancing the coherence of the broader limitation of actions regime including the introduction of a uniform two-year basic limitation period for common law actions.
As part of the ongoing review of the operation of the law in relation to the Statute of Limitations at my Department I will, therefore, continue to take account of the Commission’s recommendations and other relevant developments in the bringing forward of any future proposals for legislation in this area including, possibly, as part of any new programme of legislation.
It is good to see that the Government did not dismiss the proposal out of hand at the time. She also added that the Law Reform Commission had informed her:
Since the Commission was established in 1975, it has published 117 Reports, and about 70% of these Reports have either been implemented in Acts or are in the process of being implemented in Government Bills (which as you know are the most common way that legislation gets enacted). This compares very well with other similar law reform agencies around the world, where implementation rates are sometimes between 50%-60%.
It is not as if I picked the Bill from the sky; we followed as closely as we could the recommendations of the Law Reform Commission.
It sees a need for change, and we think that given the changing climate in Ireland, particularly following the economic crisis and the banking crisis, which had such a dramatic effect across the board in so many aspects of life in Ireland, business is not the same as before. I honestly believe it is time for the Government to address this issue. I admit our Bill is not perfect. We would be very happy for any of the parties to table amendments to improve it because we accept changes are required. However, we think in principle it needs to be addressed.
I am speaking on behalf of the Tánaiste and Minister for Justice and Equality, who regrets she cannot be present due to official commitments. I thank Deputy Mick Wallace for introducing the Statute of Limitations (Amendment) Bill 2017. I also appreciate that his introduction of the Bill draws on experience over the past six years of 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 affording the opportunity for a negotiated rather than an imposed outcome.
Very real concerns have arisen from the structure and varied scope of the Bill in its initial consideration by the Department of Justice and Equality and the Office of the Attorney General, 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 the limitation period, which is generally six 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 two 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 the current two years to three 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 two years.
From these examples, one can see the broad sweep of the 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 two years. It is also envisaged that interest may only be claimed on a judgment debt for a maximum of two 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 two 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 one 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 2009.
Fundamentally, it does not follow, as the Bill suggests, that because the bankruptcy period has been reduced from 12 years to one year 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 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 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 moneys owed to them, but also to those who owe such moneys.
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 the 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 backfire 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 judgment is concerned, this could, in certain circumstances, render a judgment potentially unenforceable. For example, it could take longer than two years to complete an order for sale on foot of a judgment 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, which 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 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 the Limitation Act 1980, and of Northern Ireland under the Limitation (Northern Ireland) Order 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 two year limitation period in personal injury cases in general. Similarly, the Consumer Protection (Regulation of Credit Servicing 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 with bankruptcy. We have reduced the normal bankruptcy period from 12 years down to one year, but it has to be remembered that a person who becomes bankrupt still loses all of his or her 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 the 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 have been falling steadily for 14 consecutive quarters. Some 121,000 home mortgages have been restructured. Numbers of repossession orders and of new repossession proceedings are falling significantly. Almost 6,000 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 1,000 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 his or her home, with another 7% choosing to rent instead.
Most recently, reforms have been made to the mortgage to rent scheme, which is 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 the legal process". 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 Mick 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 we do not contribute further to the ad hocrandom 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.
I will be brief because, unfortunately, I have approximately 700 pages of a report to read when I go back to the office. It is kind of ironic that I will be going from one justice issue to another one.
We will be supporting this Bill for a number of reasons. In fairness to Deputy Mick Wallace, he has been very honest in his opening contribution and said that there have been changes made in this area, which were not reflected in the Bill. He has also been very honest in saying that the Bill is not perfect and he is very open to amendments. It is for that reason we believe it should go to Committee Stage. Under the new arrangements, a Private Members' Bill which passes Second Stage and goes to Committee Stage must go through a pre-legislative process.
I want to take up the Minister of State's last point. He spent the best part of his speech criticising what was wrong with the Bill. We all recognise that this is an area which needs to be reformed. The Law Reform Commission stated that in its own report in 2011. The Minister of State said that, "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." He then went on to acknowledge, as Deputy Wallace did, the Law Reform Commission report of 2011 and its own recommendations. However, he did not say when this area will be looked at. It could have been looked at on Committee Stage, or during the pre-legislative process, if this Bill had been supported on Second Stage. That would have been a very reasonable thing to do. This Bill may or may not be voted down - it will depend on the numbers. The Government is certainly opposing it. If it is voted down on Second Stage, then that is the end of it. The committee will not get an opportunity at the pre-legislative stage to look at the very important points which Deputy Wallace has outlined. He touched on Article 6 and some of the reports he has read internationally and how this can affect not only commercial businesses but also people's personal mental health. It is absolutely scandalous that a vulture fund could have six years to take an action. That is an awful thing for someone to have hanging over his or her head. We need to look at this area and I would have preferred for the Bill to progress. Hopefully, Fianna Fáil will support it. I am not aware yet what its position is. If it does support it, then it will go to Committee Stage and we will have the opportunity to look at it in the pre-legislative process. It is not good enough for the Minister of State to come in and list all the things wrong with the Bill and say he recognises change is needed and that the Law Reform Commission has made a number of recommendations but will not going to do anything about it or set out a timeframe of when the issue is going to be addressed. For that reason, we will support the Bill going to Committee Stage.
I am conscious that every Thursday evening, hundreds of thousands of Irish people tune into Oireachtas TV to see who is responsible for Private Members' business on Thursday evening. Many people watching will be surprised to see that, once again, Deputy Wallace has legislation which is taking up Private Members' business on a Thursday evening.
Indeed. Regular viewers may ask, however, how it is that Deputy Wallace has Private Members' business once again on a Thursday evening. Is he a Deputy of remarkable industry? Does he have his own Department? As the Chair said, the reason for it is that he is a remarkably lucky man. What the hundreds of thousands of viewers at home may not realise is that Private Members' business is chosen through lottery on a Thursday night. We were here two or three weeks ago, dealing with one of Deputy Wallace's Private Members' Bills, and here we are again. He is obviously very lucky when it comes to lotteries.
The issue Deputy Wallace has raised is interesting. The issue of limitation periods merits consideration and probably merits legislative intervention at some stage. It is important people understand what a limitation period is. In a way, a limitation period is a restriction on the rights of an individual or a company. It seeks to say that one may have a right in cause of action to sue another person, but must exercise that right within a certain period of time. One of the things Deputy Wallace has drawn attention to is that there are many different time periods for limitation actions in our law at present. For instance, if one of us goes out of here this evening and is knocked down by a car, one has to institute proceedings within a two-year period in order to sue the person responsible if he or she is negligent. However, if there is a breach of contract, the person or company has to be sued within a six-year period.
If a family member has been involved in a fatal injury proceedings must be instituted within two years. The trend in recent times in western democracies is to reduce limitation periods. We have to be cautious of that. For instance, in Ireland at present we have reduced the limitation period for defamation actions to one year. That means that one must institute a defamation action within a year. If that is not done, one has the opportunity to make an application to court in the second year but after that the cause of action is gone. I have pointed out in the Committee on Justice and Equality on a previous occasion that sometimes defamatory comments about an individual can be posted on an Internet site. The time period starts to run from the time it is initially posted. An individual may not become aware of that for a year or two. The website on which the defamatory comments are based may suddenly become much more popular, and then this material is left on it, with the individual having no cause of action to pursue the defamer because of the fact that their rights have been extinguished by the limitation period.
In respect of other causes of action, it should be noted that for an assault one has six years within which to sue. However, in maritime actions it must be done in two years. Children involved in personal injuries actions must take a case within two years of reaching the age of 18. In fairness to Deputy Wallace, he has identified that our limitation law probably does need to be examined more closely and perhaps should be more harmonised. I urge a point of caution, however, because individuals sometimes do not become aware when a contract to which they are a party has been breached. Under the law at present one has six years within which to initiate a breach of contract claim. However, we have seen in decisions of the Supreme Court that it can be the case that a person does not become aware of his or her cause of action for a time and that can result in an unfairness to an individual who wants to pursue an action. That happens and can happen particularly in areas of professional negligence where there may be a contract between an individual and their professional adviser or a duty of care in tort. However, if the cause of action and the breach of contract occurred six years previously, one cannot take an action after that.
Deputy Wallace's intentions in this Bill are good. He seeks to protect the small man and woman when it comes to the actions of banks and vulture funds. However, it should be pointed out that internationally, those who really push for restriction on limitation actions and who want them to be reduced to smaller periods generally are businesses that do not want to be sued by individuals and the manner in which they can restrict that is by stating there is a certain period in which to sue and that is it. I note, however, that is not Deputy Wallace's intention. He has stated in the Long Title that he wants to change the Statute of Limitations in order that the time limit for causes of actions in respect of banks and vulture funds is changed from six years to two years. That may be his intention. My concern is that is not the effect of the Bill. Section 11 of the Statute of Limitations 1957, as amended in 1991 and other legislation, governs all causes of actions in contract and tort. Although Deputy Wallace wishes to limit it to actions being brought by vulture funds and banks, it will not be limited to them because it will apply to every person. It will apply to the small man as well as to the bank.
When it comes to the law, the large companies, banks and large corporations are fully aware of what are their legal rights. It is the smaller person who sometimes is not fully aware of it. It is not unusual that persons only become aware after a number of years that they have a cause of action or a legitimate claim. Sometimes people do not become aware of that until they get professional advice. One thing that banks and vulture funds are not short of is professional advice. Were this legislation to be introduced and were the limitation period to be subsequently reduced from six to two years for contract claims, it would not cause any problems for vulture funds or banks. They would simply institute their proceedings within two years.
An argument is made that people are better off having the claims initiated promptly. I disagree. Sometimes individuals are better off not having claims forced against them promptly. Their financial position can improve. Their property values can rise, and because of that - and we have seen it happen - sometimes they can get through their financial difficulties.
There are a number of other issues in respect of the proposed legislation, one of which is in the area of tort. The Bill proposes that the period for tort shall be reduced from six years to two years in section 11(2)(a) of the principal Act. Again, we have to be cautious of this. At present there are many financial institutions who are taking claims against individuals. All of those claims, I suspect, are claims in contract rather than tort. Tort is the great cause of action that gives the individual the right to state he or she is in a relationship and is owed a duty of care by an individual or company that has been breached. As the individual or company has been negligent, one is entitled to institute a claim for damages against that person or company. If we reduce the term from six years to two years, it will be of no disadvantage to banks or vulture funds. It will, however, be a disadvantage to the small man or woman Deputy Wallace is seeking to protect because they will find themselves in situations where they cannot bring their claim after two years. Any individual acquainted with claims made in tort or professional negligence is aware that on many occasions, it takes individuals a number of years to figure out that they have been the victim of negligence on the part of a professional adviser or of a person who owes them a duty of care.
Deputy Wallace has identified that the Law Reform Commission produced a report on limitation periods in 2011. It sought to harmonise limitation periods. It is an area that should be looked at. However, we should be cautious about limiting periods by too much. One should remember that limitation periods are restrictions on the rights of individuals. This is directed at banks and vulture funds but it will have an effect beyond that. I thank Deputy Wallace for introducing the Bill.
We will all benefit from the opportunity to discuss these issues here tonight. There is an acceptance on our part that the scope of the Bill is too broad and there is agreement with some of the points made by some of the other Deputies and an acknowledgement that there may be some mistakes in the drafting. It brings me back to the points made by Deputy Darragh O'Brien that should this progress, it will entail pre-legislative scrutiny at the justice committee. The points made by our colleagues demonstrate that we would be able to get it into much better shape and allow us to address the fundamental issues at the heart of this, which all of us agree need to be addressed, namely, the unbearable stress and nightmare situations faced by people who have debt hanging over them for a substantial period. It can be for decades in some instances with six years waiting for proceedings to start, a year or two of court action and then a judgment mortgage, which can sometimes last for 12 years. In the course of somebody's lifetime that is a huge chunk taken out of it. What is at stake here is not the discharging or writing off of debts. It is actually about allowing debts to be pursued promptly, efficiently and fairly. Deputy Wallace has already made the point that under Article 8 of the European Convention on Human Rights, which has been binding in Ireland since 2003, each citizen is entitled to a fair and public hearing within a reasonable time. From the comments we have heard there seems to be an acceptance that six years is not a reasonable time, particularly if there is scope for it to be dragged out many years longer than that. I note that the Minister of State, Deputy Finian McGrath, said that we have the commission. The point is that we have had it for six years and it made a very strong recommendation that the Statute of Limitations for a civil contract should be reduced to two years.
It called our current law "inefficient" but this was six years ago and the problem is that the issue has not yet been addressed. The six-year limit was first set out in the limitation Act 1623, meaning it was plucked out of the air by 17th century merchants, which is not really a reason to hang onto it now.
The law and politics of debt in this country lag behind what is happening in reality. We still treat banks as if they are gentlemanly, honest brokers and upright 17th century merchants genuinely and earnestly entering into contracts with individuals with only the best of intentions to extend credit and everything else. Life is not like that and debt is not like that for citizens in this State who are experiencing enormous stress. It is not what banks do any more. The Minister of State, Deputy Finian McGrath, suggests that everything is grand now, that the mortgage situation is sorted out and that we are on the road to recovery but that is not what is being experienced by many of our citizens. We need to put supports in place which ensure people get solutions whereby they can remain in their homes when they have mortgage debt but it should be done efficiently and promptly, not dragged out over years so that the situation hangs over them as their children grow up, meaning they waste the best years of their lives.
A good Rolling Stonearticle in 2012 described the US investment bank, Goldman Sachs, as a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smelt like money. It focused on Goldman Sachs but it could be a description of many, if not most, banks and investment funds. Ireland is a particularly friendly place for banks and is one of the top five tax havens in the world for banks, which get a very good and handy deal here. We need to take these issues into account precisely because of what Deputy Wallace said, namely, that we have a growing market of bottom feeders who are coming into Ireland with only one purpose - to gather up outstanding debt. The vehicles buy up the old debts that banks and other concerns see little point in pursuing after two or three years. These little vampire squid take over the debt, wield the axe of threatened litigation over a debtor for six years and then, in a pincer movement, work to extract the debt by leaning heavily on the debtor without incurring the costs of litigation themselves.
We have to ask if the influx of these bottom feeders into Ireland goes some way to explain why there has not been any move by the Government to address the current Statute of Limitations. The Law Reform Commission recommended it over six years ago but the bottom feeders give the banks plenty of time to sell on their debts to the bottom feeders while the banks pose as great models of forbearance and ordinary householders are squeezed. It is that issue that this Bill is trying to address. We accept that it needs amendment to make it do that but the urgency is clear. Bottom feeders such as Liffey Acquisitions, a Goldman Sachs-owned special purpose vehicle, SPV, bought more than €200 million of Irish commercial property loans in 2014 from Anglo Irish Bank. These SPVs are basically vehicles for avoiding tax and Liffey Acquisitions collected €17.1 million in cash repayments on the loans in its first year. It paid no corporation tax and not a cent in PAYE tax because these companies do not have any employees in Ireland or create any jobs. It is an area that needs huge attention. If we do not address it, we are saying that it is acceptable to leave the axe of unprosecuted debt dangling over ordinary people's heads for six years or more.
There is an irony in this because we are quite happy to let debtors disappear down the memory hole if they are big enough. That, after all, is why NAMA exists. The State picked up the tab for €42 billion in developer debts when NAMA was established That is enough to establish, and fund for 50 years, a single tier public health service, free for everybody to use. The Government cannot bring itself to increase the paltry €35 million subvention to Bus Éireann but finds nothing wrong with handing over billions in public money to be wasted by NAMA. The people whose debts were happily written off have moved on with their lives, many of them carrying on in the same way as before. The Bill does not address all of those issues and it would take a lot more than one Private Members' Bill to halt that situation but we live in a world where debt is a currency and Governments operate the casino of global finance. Any finger on the scales that can balance things even slightly in favour of the ordinary person has to be explored and developed. That is what we are trying to do, albeit imperfectly, and we appeal to the Minister to reconsider getting it into prelegislative scrutiny on Committee Stage.
I thank Deputies Jonathan O'Brien, Jim O'Callaghan and Clare Daly for their contributions. I also thank Deputy Wallace for his putting forward of today's Private Members' Bill, aimed at changing several aspects of the limitation of actions regime in this jurisdiction.
Notwithstanding the fact that the Government is opposing the Bill for the various reasons of policy stated, the Bill has, in its discussion, facilitated a greater consideration and reflection of the interaction between the Statute of Limitations and our policy responses to debt and insolvency. There is a shared ambition with Deputy Wallace to mitigate and reduce the pressures under which many people and families find themselves in addressing home mortgage debt and in personal debt resolution. There is undoubtedly a shadow of threatened enforcement proceedings which needs to be lifted from many people's lives. It should be of some reassurance, however, that Deputy Wallace's Bill has come up for discussion at a time when the extensive series of reforms and initiatives which have recently been put into operation by way of addressing personal debt issues have started to bear fruit. These are areas in which current Government policy, as expressed through our recently modernised insolvency and bankruptcy legislation, the Abhaile mortgage arrears resolutions service, the code of conduct for mortgage arrears, the Consumer Protections (Regulation of Credit Servicing Firms) Act 2015, enhancement of the mortgage-to-rent scheme and other related Government initiatives, are already operating. In combination, we must press on with them by way of achieving the necessary critical mass for them to have the desired lasting impact. The underlying intention of the Government in the position it has taken today is solely to safeguard that progress, including by avoiding any unintended consequences in relation to limitation periods, while giving balanced protections to debtors as has been set out in my opening statement.
While it may be for another time, it has to be recognised that the overall operation of the law in relation to the Statute of Limitations is a matter for reform. I accept the points made in this regard by Deputies Clare Daly and Jim O'Callaghan. The Law Reform Commission has recognised this. I agree that we need to engage in a co-ordinated process of taking account of the findings and recommendations of the relevant Law Reform Commission report of 2011 if we are to subject our limitations framework to coherent modernisation and structural reform. As it stands, for example, the Statute of Limitations contains seven different limitation periods, the justification for some of which goes back to 17th century legislation. The Law Reform Commission recommendations would greatly simplify this around a smaller number of core limitation periods with an overall expiry date. We have got a real sense from our exchanges this evening of the fact that limitation periods can, in their application to real cases, cut both ways - in this case between debtors and creditors - and therefore need to be balanced in their relationship with other aspects of Government policy.
We should, therefore, continue to be guided by the objectives of the Law Reform Commission as set out in its 2011 report, namely, that "a balance is struck between the competing rights of the plaintiff and the defendant, as well as having regard to the public interest; in particular the right of the plaintiff of access to the courts and the right to litigate, the right of the defendant to a speedy trail and to fair procedures, as well as the public interest in the avoidance of delayed claims and the timely administration of justice."
I thank the Minister of State, and Deputies Jonathan O'Brien, O'Callaghan and Clare Daly for their contributions. The Law Reform Commission thought we should address this problem six years ago. I would argue that we need it now more than ever. Ireland is a different place now than it was then. We borrowed over €60 billion to bail out the banks. We made the ordinary people foot the bill. People thought the banks would be very helpful to those who were in trouble with them because of the banking crisis and the collapse in the value of assets. However, many people are still in a very difficult place with them.
Many of the banks' assets that they could not sell went into NAMA. Some of them were sold by the banks at a fraction of what it cost to build them. They have been bought mainly by US vulture funds. These vulture funds have had a massive impact on Ireland, including companies such as Lone Star, Blackstone, Oaktree, Starwood, Carval, Deutsche Bank and Cerberus. They were facilitated by the then Fine Gael-Labour Party Government along with the banks and NAMA in acquiring a huge amount of property at fire-sale prices. They may have moved against some of the bigger developers at an early stage, but an awful lot of stuff has now ended up in the hands of vulture funds which have small and medium-sized businesses and families with mortgages at their mercy. These people are merciless; they do not care about people. They do not think in those terms.
The Central Bank stated in December 2016, that vulture funds now own 45,678 residential mortgages and 38% of these mortgages are more than 720 days in arrears. It is hard to imagine what will happen to these people. The Central Bank does not maintain a record of the number of commercial loans sold on by the original underwriter to these vulture funds. We have been contacted by many small business owners who are being put under serious pressure by vulture funds. It is amazing that the Central Bank does not have data on it. Many people in small businesses must be really worried about what is coming down the tracks for them.
Research by the accountancy firm Baker Tilly Hughes Blake has shown a rise in Irish companies entering examinership in the first quarter of 2017. It attributes this to vulture funds which have bought up the debt of small businesses and are now pressurising debtors with more challenging repayment deadlines and interest rates. It points out that the majority of these vulture funds bought the debt during the recession, but did not begin to move on it until recently. This is an example of why we should move the limit from six years to two years.
Occasionally vulture funds or banks will move as quickly as possible because it suits them, but sometimes it suits them to wait. They will wait four or five years until it suits them better. It might suit the individual debtor they are going after. Not only do they have six years to go for a judgment against the debtor, but when they get the judgment, they can actually wait 12 more years before calling in that judgment. In other words if they get a judgment against people in the courts but realise they do not have a bob and there is no point in going after them for the moment, they can wait up to 12 years before going after them. What sort of life will such people live for those 12 years?
A vulture fund might get a judgment against a builder and decide to wait until the builder makes a few bob. What are the chances of that builder, who has the potential to contribute to the economy, going back into business and being a successful businessman again while there is a sword hanging over his head for another 12 years? The vulture fund will just pick its time to go after its carcass. It does not stack up and we should address it.
I admit there are huge problems with the Bill, but let us look at it and fix it. I am prepared to listen to everyone's point of view on it. I realise that we did not draft the Bill as well as we should have, but this topic needs to be addressed.
Deputy O'Callaghan said that something could happen and we might not find out about it until it is too late. It might take three years to find out that something happened. The Bill states that the action, "shall not be brought after the expiration of two years from the date on which the cause of action accrued or became known...". It has to become known to the creditor and the clock only starts then. It does not start from when it happened, but from when it becomes known to the creditor.
I am aware of a case where AIB recently threatened a family of four with judgment unless they sell their primary private residence. The father is a professional in his late 50s working not too far from here. Such a judgment would mean the father would lose his job because of the effect it would have on his career position. In this case AIB hopes to receive €100,000 or €150,000 from the equity - which is minimal against a net debt of €1.5 million already written off but much more than it would receive in an ISI scenario and causing personal havoc for the family.
Very often negotiations go on between individuals, banks and vulture funds, which is not going down on paper. They would not like to have a record that could allow someone to say, "Look what they said to me." I know of many cases where the banks are refusing to put these discussions and arguments on paper and are moving against people in a very aggressive fashion. I am sure it affects Government figures if it does not have clear black-and-white evidence of what these people are doing.
The current blight within the legislative system is totally inequitable from the perspective that no matter how big or how small the actual debt happens to be, the sentence is the same 12 years in purgatory - something that certainly has to be questioned in our modern age.
Members of the public have gotten into trouble, and bankruptcy could spell the end of their career, so they are left facing the barrel of the gun from the bank on one side or public humiliation on the other. Not everybody likes the idea of bankruptcy to escape the wrath of these vulture funds. There is a stigma associated with bankruptcy in Ireland. It would be treated differently in America, but we are where we are. I did not go into it voluntarily; Cerberus put me into it for exposing the fact that it paid a bribe to get Project Eagle across the line in Northern Ireland. That is my problem now.
The banks are well aware that many of these people do not see bankruptcy as an option for themselves because the humiliation can be difficult for them.
The banks are well aware of the predicament for thousands of their distressed clients, in particular those who are close to retirement. The banks are letting their debtors know that they, the banks, can take their retirement lump sum at any time within the six years or 12 years, if they wait, before they impose the judgment. Imagine such a scenario. It is scary. People are trapped in employment and, worse still, cannot retire for fear the banks will take their retirement lump sum. The two years instead of six would certainly put manners on the banks and the vulture funds. I plead with the Government to consider this now. It is a long time since 2011.