Independent TD Mick Wallace proposes reduced limitation period
13 April 2017
It is fair to say that years later a number of lives are still on hold as casualties of the property crash wait for their banks to take legal action. In the Republic of Ireland the law currently allows litigants a period of six years from the date of cause of action in which to issue proceedings for a claim based on a contract.
That may be about to change following the introduction of the Statute of Limitations (Amendment) Bill 2017 by independent TD Mick Wallace – a politician well known to those who have followed the NAMA saga. His private member’s bill seeks to reduce the statute of limitations from a period of six years to two years, and also proposes to reduce the timeframe to enforce judgments of the courts from twelve years to two years. In Northern Ireland this is currently six years, although it can be extended on application.
Mr Wallace cites a report of the Law Reform Commission in 2011 which reviewed limitation periods and made a recommendation that there should be a basic limitation period of two years for contract claims (and also tort claims).
It is also interesting to note that in the introduction to his bill, Mr Wallace specifically refers to situations “where the collection and enforcement of civil debt by banks and vulture funds are concerned”. It is clear from this statement that it is not the ordinary commercial plaintiff whom Wallace intends to restrict.
A casual observer of current affairs will be aware of Mr Wallace’s attitude to financial institutions. He is perhaps most noted for his scrutiny of the transactions of NAMA to date, in particular the controversial Project Eagle sale, which related to property loans in Northern Ireland.
Mr Wallace himself is a former property developer who was declared bankrupt after lenders secured an eight figure judgment against him because of personal guarantees. At one stage Mr Wallace stated to broadcaster RTE that the lender’s pursuit of him had more to do with “badness” than economics, demonstrating a perception that the bank were vindictive in pursuit of their claims against him.
Although the intentions of the bill seem well-placed, it remains to be seen if it will result in a more forgiving environment for borrowers. Lenders - now working against a more urgent deadline and fearful of their claim expiring - might decide to issue proceedings in cases they would otherwise have put on hold for strategic reasons.
It would likely lead to lenders pulling the trigger on litigation that they may previously have placed on hold, which would have the effect of causing more stress to borrowers. It also gives the borrowers less time to come to an agreement with the lender before they are forced to issue proceedings.
In terms of the bigger picture, under these changes, lenders could decide that these restricted timelines for enforcement will make lending riskier and therefore adjust their rates to reflect the increased level of risk. In cases of distressed debts purchased by so-called vulture funds whose sole purpose is to make recovery the pressure to litigate or enforce judgments may be greater than usual.
Deputy Wallace’s stipulation that the law apply only to banks and vulture funds may be problematic as this would create an inequality in the law as to rights of creditors.
A second reading of the bill in the Dáil shows that the Government now opposes the bill and in its current form, it is unlikely to ever be passed. Whether the bill can be sufficiently amended to obtain Government approval without changing the intentions of the bill remains to be seen.