Enforcement

Enforcement

Often Clients feel that once the case is heard and the order is made in their favour, the Debtor will pay immediately.  Unfortunately, this is not the case and the recovery process is currently proving to be very much a game of two halves.  The first step is issuing proceedings and securing judgment.  The second step involves the enforcement of that judgment where your Debtor fails to comply with it.  This second step requires a more strategic approach based on your knowledge of the Debtor and their financial position, the business they are in, the property they own, and whatever other information you can muster in relation to their business and financial affairs.

There are several different mechanisms by which a judgment can be enforced in Ireland:

Registration of the Judgment

If the judgment Debtor is engaged in carrying on a business or is a person of substantial local or national repute, the registration of the judgment can be a very effective recovery mechanism.  This is because various media and trade gazettes publish details of registered judgments each week.  This can be extremely detrimental to a business as other creditors of that business may immediately call in any debts due to them also.  In terms of a debtor who is a non-trading individual, the publication of your judgment can be a cause for extreme embarrassment for them also.

Care must be taken in registering a judgment.  If the debtor has satisfied the debt and the judgment is subsequently registered, be it by mistake or by lack of solicitor/client communication, you may be at risk of defamation proceedings.  Similarly, the registration of a judgment can cause unwanted eventualities in that it may serve as a warning to other creditors who may petition to have the debtor declared bankrupt or wound up in cases where the debtor is a private individual or corporate entity respectively.  Your claim would then be assessed according to the rules on priority, with preferential and secured creditors being discharged first.  This will often leave next to nothing for unsecured creditors to lay claim to.

Registration of a Judgment Mortgage

We cannot overstate the benefit of obtaining a judgment and securing that judgment against your Debtor’s property.  This provides you, the creditor, with the comfort that your debt is secured and can eventually be recovered.  Clients often overlook the fact that they can at this point choose to sit on their judgment and allow the Debtor time to pay off the debt.  Court interest at a rate of 8% per annum of the judgment debt continues to accrue.  When the debt is paid, the judgment is simply removed.  Of course, if no effort is made to pay off the debt, the judgment can be enforced against his or her property.  Application can be made for the sale of the property and your judgment mortgage will be discharged from the proceeds of sale.  The balance of proceeds will be returned to your Debtor less costs and expenses.

Execution

Once judgment has been obtained and served on your Debtor, you are free to apply to have the judgment executed in the event your Debtor does not comply with its terms.  In Dublin and Cork judgments are executed by the County Sheriff and in the rest of the country by the appropriate County Registrar.  The Sheriff or County Registrar, as the case may be, will proceed to seize any goods or personal property, growing crops, money or bank notes belonging to your Debtor.  Any goods collected from your Debtor will be sold and the proceeds, having deducted the fees and expenses of the Sheriff / County Registrar, will be paid to discharge the judgment debt owed to you.  Any surplus is then returned to your Debtor.

Examination

If you have secured judgment in the District, Circuit or High Court, we can issue a Summons for Attendance of Debtor which requires your Debtor to attend at a sitting of the District Court and explain why he or she has not paid the debt.  Your Debtor is also required, not less than one week prior to the Court attendance, to file a Statement of Means setting out their income, expenditure, assets and liabilities.  If the Court is satisfied that your Debtor cannot pay the entire debt immediately, it will make an Instalment Order, directing that he or she pay a fixed amount at specified intervals depending on their financial ability.

If, following the making of an Instalment Order, your Debtor fails to comply with its terms, the next step is to make an application for Attachment and Committal which, if successful, will result in the imprisonment of your Debtor until he or she pays the debt, for up to a maximum of three months.

The Examination procedure is efficient and, because it is run in the District Court, is not unduly costly for the Creditor.  However, if the Judge is satisfied that your Debtor simply does not have the ability to pay, their imprisonment will not be ordered.  Presently, the Courts will only imprison if there is an ability to pay all or part of the debt and a wilful neglect to do so.  Therefore, it is important to know your Debtor’s true financial position insofar as is practicable when choosing your enforcement strategy.

Attachment of Debt

Where you have secured judgment against your Debtor and are aware that some other person is indebted to your Debtor, application may be made to Court for an Order that all monies due by that third person to your Debtor shall be paid towards the satisfaction of your judgment.  This is an excellent recovery mechanism but obviously involves a special knowledge of your Debtor’s affairs in that you must be able to identify the third party who is indebted to your Debtor.  If the third party contests the Order to pay the monies he owes the Debtor to you, the third party will be brought before the Court or an officer of the Court to show cause as to why he should not pay those monies to you.

Bankruptcy

If your Debtor fails to comply with the judgment, then application can be made to Court to have your Debtor declared bankrupt.  The very serious property implications and financial constraints that follow a declaration of bankruptcy can act as a very strong incentive for your Debtor to comply with your judgment.  However, as with the registration of a judgment, a bankruptcy petition will put all other creditors on notice of your Debtor’s precarious position and, depending on whether your judgment has been secured against his or her property prior to making this application, you could well find your claim at the end of a long list of superior claims against your Debtor.  The fact that you presented the bankruptcy petition will not entitle you to the monies due to you above other creditors with priority.  There will very often be secured and preferential creditors such as lending institutions and the Revenue Commissioners respectively, whose claims will take priority over yours.  Accordingly, petitioning for your Debtor to be declared bankrupt is generally a last resort. The procedure is relatively expensive and can take a considerable time to complete.  It is only the most appropriate recovery mechanism in a minority of cases.

Winding Up by the Court

Where your judgment Debtor is a corporate entity, the Court can order the winding up of the company on your petition.  Similar advantages and disadvantages arise here as arise with the personal insolvency procedure of bankruptcy.  Winding up (liquidation) is effectively bankruptcy for a company, with the ultimate effect that the company ceases to exist.  The rules of priority in terms of the distribution of available funds, if any, apply similarly as they do in the bankruptcy procedure.  Again, it is a decision to be taken after careful consideration in each case and only where it is felt that the other enforcement options are not appropriate.  However, the threat of bringing a winding up petition is a very strong one and one which a company will often react to.

The Non-Resident Debtor

In a situation where your Debtor is not Irish resident or has left the country, whether it be to find a reliable source of income or to escape his or her domestic fiscal responsibilities, you may feel that the arm of the law is not long enough to reach their pocket.  Many Debtors have relocated to alternative jurisdictions to evade the wrath of the creditors they have left behind,  Some have simply travelled across the border to Northern Ireland, while others have flown as far afield as Dubai and Abu Dhabi.  Rest assured that the majority of foreign jurisdictions have mechanisms in place to allow for the recognition and enforcement of Irish judgments against Debtors now residing in their jurisdiction. 

For example, the Federal United Arab Emirates Code of Civil Procedures (No. 11 of 1992) provides a procedure by which foreign judgments can be enforced in the UAE Courts. The application is made to the court of first instance in whose jurisdiction the order is sought to be enforced.  We retain agents in several jurisdictions to act on our behalf in securing the recognition and enforcement of our Irish judgments in those jurisdictions.

The enforcement of an Irish judgment in Northern Ireland, or indeed any EU Member State, is much more straightforward and has been streamlined in recent years.  The disadvantages of pursuing a Debtor in any foreign jurisdiction are as follows:

1. The cost of service of documents can be increased as tracing is often required to ascertain the Debtor’s residential and/or workplace address.
2. The proceedings take longer to progress as longer time limits are prescribed for litigation involving a trans-frontier element.
3. Agents’ fees are incurred as Irish solicitors are not certified to practice in foreign jurisdictions.

Notwithstanding those obvious disadvantages, the fact that your Debtor has relocated should not be allowed to operate as a disincentive to pursue them for the debt due to you. If you are considering whether to proceed against such a Debtor, please contact us and we will be happy to provide you with an estimate of our agent’s costs, which will vary depending on the appropriate jurisdiction.