Issuing Proceedings

Letter Before Action

Once you have instructed us to recover the debt due to you, we will issue a ‘Letter Before Action’ to the debtor setting out your claim against them.  Many debtors will discharge their debt on receipt of a solicitor’s letter demanding that it be paid and threatening proceedings in the alternative.  This can be an extremely efficient and cost-effective way to recover your debt.

Issuing Proceedings

In the event that both the clients and our own preliminary recovery attempts have been unsuccessful, it will be necessary to pursue the debtor further through the Courts.  Depending on the amount of the debt and/or the type of action being taken, proceedings will need to be initiated in the District Court, Circuit Court or High Court. Unfortunately, the Small Claims Court does not adjudicate on debt claims. The jurisdictional limits for each of the relevant Courts are as follows:-

 The District Court deals with debts up to €6,348.69.
 The Circuit Court deals with debts of more than €6,348.69 but no more than €38,092.14.
 The High Court deals with debts of more than €38,092.14. If the amount owed by the Debtor is below this figure, then proceedings must be issued in the appropriate lower Court.

Choose your forum wisely

If there is a debt due to you of €40,000 you would ordinarily proceed in the High Court.  However, it may be more efficient and cost effective to proceed in the Circuit Court.  This would involve limiting your claim to that Court’s jurisdiction, i.e., €38,092.14.  The benefit of proceeding in the lower court is that the cost of recovery is significantly reduced, and the case will progress at greater speed.  The obvious disadvantage is the capping of your claim, but it can often be the better long-term commercial decision.

The Commercial Court

The Commercial Court is a branch of the High Court which was established in 2004 to hear cases of a commercial nature involving disputes of more than €1,000,000 in value.  The Court also has the discretion to admit cases below that figure in certain circumstances.  Cases heard in the Commercial Court are dealt with much more efficiently than under the standard High Court procedure and a no-nonsense approach to commercial litigation is adopted.  The Commercial Court can hear a wide variety of commercial related cases, including debt recovery cases.  The Court has extensive experience of commercial litigation and uses costs as a sanction to discourage delay or the adoption of an unreasonable stance by the parties coming before it.

Your Interest Entitlements

It is important from the outset to ensure you claim for the full amount to which you are entitled.  The Late Payments in Commercial Transactions Regulations, 2002, entitle a creditor to interest on the debt at a rate of 7% above the ECB main refinancing operations rate.  Presently, this entitles a creditor to interest at a rate of 8% per annum or a daily rate of 0.022%.  This interest entitlement applies to both Irish and EU-wide debts.  This is an automatic statutory entitlement and so does not need to have been included in your contract with your Debtor.  Of course, parties are free to agree their own interest provisions by their contract.  Any penalty interest clause contained in the contract should not be so burdensome as to be categorised as an ‘unfair term’.  Certain debts are not covered by the Regulations.

This is an extremely useful mechanism to employ in ensuring that, in the event that you do decide to allow your Debtor time to pay, your money is not left idle.  It also acts as an incentive to your Debtor to discharge the debt.

The Regulations become effective once the relevant payment date, i.e., the date on which payment becomes due, has passed.  Interest is payable from that date to the date of judgment.  Once judgment is secured, court interest at 8% per annum is payable on the judgment debt.  Therefore, the well-advised creditor should be able to claim 8% interest per annum from the date on which the payment becomes due to the date of recovery of the principal sum.

For a guide to the application of the 2002 Regulations, click here.