John Curran (Dublin Mid West, Fianna Fail)

I thank the Senator for his comment. When I finished in the House on Friday afternoon I did not realise I would be back here so soon. The House will be aware that the Bill flows 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 the Minister, following close consultation with the Attorney General, decided not to appeal that decision but to move quickly to apply the principles contained in it to the old 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 not helpful approaches. The earlier a person faces up to his or her difficulties and engages positively with 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 stated that, while this process had traditionally been regarded as a civil matter, its effect was akin to a criminal one and the debtor was entitled to similar protections. There was particular concern that the 1940 Act did not appear to require a person to be heard by a court before being imprisoned. Following a default on an instalment order made by the District Court, a creditor could apply to the court for a committal order and even in the case of the non-appearance of a debtor, committal orders could be, and were, granted by the District Court.

The absence of an obligation to attend the court gave rise to difficulty, given 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. The court had to satisfy itself that the debtor, if he or she appeared, had proved that their failure to pay was not the result of wilful default.

The High Court also took issue with the fact that no option was open to a court to grant legal aid to a debtor at risk of imprisonment, although it should be remembered that it was open to a debtor to apply to the Legal Aid Board for civil legal aid. The provision I am now proposing will replace the existing section 6 and amend sections 8 and 9 of the 1940 Act. The effect will be to insert a number of 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. It 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, and there are those who will think this is harsh. The Minister gave detailed consideration to that issue. However, we have to live in the real world and consider the effect of abolishing imprisonment on the process of debt enforcement between two contracting parties. Without detaining the House with statistics, the data made available by the Courts Service and the Prison Service demonstrate eloquently the effect of the ultimate sanction of imprisonment in dealing with debt.

In the first six months of this year the Courts Service estimated that 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 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 be remembered that this process is always preceded by an instalment order granted by the court. It can be seen that, under the 1940 Act, only a very small percentage of debtors were subject to the sanction of imprisonment.

The aim of this Bill is ensure that people who cannot afford to pay will not be subject to imprisonment and that those who can, but simply choose not to, may face imprisonment. The Government view is that this sanction is a necessary aid to creditors who find it increasingly difficult to collect on moneys owed to them, in particular in this challenging economic climate. The legislation is mainly utilised by small creditors, including shops, businesses and credit unions which are struggling to maintain their trade and employees. I would be loath to add to their troubles by abolishing the persuasive sanction that enables them to recover their debts. I will now outline the provisions of the Bill to the House.

Section 1 is a standard provision regarding definitions. Section 2 is the principal provision which inserts into the 1940 Act a new section 6 setting out the process by which the District Court will deal with the summons and hearing and specifying various safeguards and criteria which will in future apply to the granting of a committal order. There is a minor typographical error in this section and Senators should by now have seen the amendment which will deal with it. Subsection (1) sets out the circumstances where a creditor may apply to a District Court clerk for a committal order. As I have pointed out, 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 of the instalments, the creditor can make an application under section 6.

Subsection (2) sets out the details that will be contained in the summons. These measures concentrate on making the debtor aware of the consequences if he or she fails to attend. It should be noted that the Bill provides for personal service of the summons, which will be a matter for the creditor. Subsection (3) provides that where a debtor fails, without reasonable excuse, to appear in answer to the summons, the judge can either issue an arrest warrant to enable the Garda to bring the debtor before the court at the earliest opportunity or may adjourn the hearing. Senators will note I have tabled a minor amendment to tighten this provision by substituting "shall" for "may". This will remove any doubt that there are two options open to the court and will effectively channel a court towards the provisions and protections in subsections (6), (7) and (8).

Subsection (4) provides that where a debtor is arrested he or she should be brought before a court as soon as possible. Subsection (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 plain English to the debtor his or her entitlement to apply for legal aid, the consequences, including imprisonment, of failing to comply with the instalment order or failing to appear for the hearing on the date fixed. Subsection (6) deals with the judge's explanation in circumstances where the debtor attends on foot of a summons, namely, the entitlement to apply for legal aid and the consequences, including imprisonment, of failing to comply with the instalment order.

Subsection (7) sets out the options open to the court if it is satisfied that the debtor has not complied with an instalment order. This may be treated as an application for a variation of the existing instalment order. While this option currently exists, I understand it is seldom availed of. Clearly, this is a good option for the creditor and the debtor as some payment is better than no payment. By setting it out clearly here, the take-up of this option may be increased. Subsection (7)(b) provides that the court may request the parties to engage in mediation. What we have in mind here is increased use of the money advice and budgeting service, MABS, which provides such a valuable service to those in difficulties. Government funding of MABS in 2009 is in the order of €18 million. The service provides an extremely effective service to people in trouble, with more than 90% of callers to the helpline finding that their money management and budgeting issues can be resolved with the assistance of the helpline adviser. Other options open to the court include the making of a committal order, which may be postponed until such time as the judge thinks is appropriate, thus giving the debtor a further opportunity to make payment, or may come into effect straight away.

Subsection (8) sets out in detail the standard and onus of proof and the criteria that must be applied by the judge before making an order for imprisonment. Senators will note that we have included the criminal standard of proof "beyond reasonable doubt." This is to take account of the High Court's view that the potential effect on the debtor is the same, namely, he or she may be imprisoned and therefore a high standard of proof is required. The onus will be on the creditor to establish the case. This may include showing the court that the debtor is wilfully refusing to pay and has no goods that may be attached in lieu of the debt. This 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 am grateful to the Labour Party for its suggested amendment on this point. I believe we are trying to achieve the same result and I am prepared to accept its suggested wording. We can deal with this when we reach Committee Stage.

Section 2 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 provides 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. It is not our intention to provide for large fees. Obviously there are financial implications for extending legal aid in this way. Regulations are being drafted and my officials are engaging with the Law Society to ensure that the scheme is 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. I believe this will be suitable work for recently qualified solicitors. The Minister's proposal is 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 will be reviewed once it has been in operation for two years.

Section 2(2) applies the provisions of the amended section 6 to section 8 of the 1940 Act which deals with applications for enforcement proceedings for default of payments due periodically - for example, maintenance orders. I am also bringing forward an amendment to section 9 of the 1940 Act to render more workable the power of the Minister to release debtors where necessary. I do not see this provision being used frequently as it has been rarely used in the past. The issue of whether remission should apply to debtors has been raised - traditionally it has not applied - and it will be examined further in due course.

Senators will be aware that the Law Reform Commission is engaged in a root and branch examination of the debt issue, on which it will publish a discussion paper in September. This will be followed by the commission's annual conference in November, which is also 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 an indepth reform of this area, which is undoubtedly overdue. The commission has lengthy experience of broad consultation and produces excellent workable solutions in complex areas. I have no doubt it will take into account the jurisprudence and research produced this week by FLAC. Any other issues arising in this area can be considered in that context, including necessary amendments to the District Court rules. I commend the Bill to the House.