Out-Law News 1 min. read
14 Mar 2022, 12:03 pm
The Irish commercial court has rejected an attempt to enforce a judgment that was awarded in 2010, in a decision that one legal expert warned could have a knock-on effect for banks and other lenders.
Zara West, litigation expert at Pinsent Masons, said Mr Justice McDonald’s refusal to allow Cabot Financial to execute a judgment against Niall O’Meachair outside of its initial six-year timeframe could “make it more challenging for lenders to collect outstanding debts in future.” Under Irish law, a judgment must generally be executed within six years of it being awarded, with parties forced to seek a court’s permission to enforce it after that date. An action on a judgment is statute barred after 12 years from the date of the judgment.
In November 2010, ACC Bank was granted a judgment for €271,637.31 owed to it by O’Meachair, together with the partial costs of the court proceedings. Beginning in 2014, Cabot took control of the debt from ACC through a series of transfers and assignments.
At a hearing in late 2021, Cabot explained that the delay had been caused by its attempt to seek a well-charging order to recover the debt by forcing the sale of one of O’Meachair’s properties. It also argued that O’Meachair’s declaration of bankruptcy in 2017, along with its own attempts to find alternative enforcement and recovery options, had delayed the execution of the judgment.
But handing down his decision, Mr Justice McDonald did not consider these reasons to be sufficient justification for Cabot’s inactivity. He said: “I am very conscious that…it is not necessary to give some unusual, exceptional or very special reason for obtaining permission…However, it is clear that some reason must be given.”
“In this case, Cabot has wholly failed to provide a reason that explains the long period of inactivity on its part or on the part of its predecessor in title, ACC Bank plc,” the judge added. Refusing Cabot’s application to execute the 2010 judgment, he noted that O’Meachair’s bankruptcy was not a reason to justify the firm’s inactivity – nor was the process of transferring control of his debts from ACC.
Stephen Tunstead, of Pinsent Masons, said: “A review of the case law in this area shows that the threshold for a successful application is usually not particularly high. But Mr Justice McDonald’s decision makes clear that courts will be reluctant to allow for the enforcement of a judgment outside of the initial six-year timeframe.”
“The decision is a significant one for banks and other lenders who will now be looking at this decision carefully - and considering whether they should act sooner rather than later on executing judgments that they might have held off on to avoid the difficulties faced by Cabot Financial,” he said.