Courts facing €1bn 'wave of debt' as credit crisis worsens

By Dearbhail McDonald, Legal Editor

Irish Independent

Thursday October 29 2009

The figures, compiled by Business Pro, the monitoring agency that publishes 'Stubbs Gazette', show a huge surge in the value of personal debt actions, the vast majority of which are undefended as debtors do not turn up in court they underline the warning by High Court Master Ed Honohan earlier this week that the "whole system is going to break down" as distressed debtors and creditors, including banks, seek adjournments in proceedings.

James Treacy, managing director of Business Pro, said that based on current volumes and incoming cases, the amount of judgments could reach €1bn by the end of the calendar year.

"A huge wave of personal debt is about to hit the courts," said Mr Treacy, who gathered the data from over 70 District, Circuit and High Court offices throughout the country.

"Between January 1 and September 30, we recorded €516m worth of judgments, €315m of which came from the court registrars' list alone,'' he said
"And this did not take into account the amount of cases that had not yet reached the courts.

Property

"The value of defaults will also increase as banks pursue borrowers for personal guarantees," according to Mr Treacy.

"Irish banks are unique in their reliance on personal guarantees, which are now being called in. They are practically unheard of in Britain or America," he pointed out.

The figures reveal the extent of the burgeoning debt crisis, bringing pain to homeowners and businesses, especially companies in construction, hotels and general business.

But it is the level of personal debt actions, many fueled by soured property deals and related actions, that has alarmed debt advisers, who have campaigned for a reform of the personal insolvency laws.

In the first nine months of this year, almost 20,000 personal credit default cases involving €395m came before the courts.

This compares with 13,450 personal debt cases totaling €141m in the same period last year. Average debt in a personal default action has more than doubled, from €10,483 to €20,256.

Corporate credit debts have also escalated in the first nine months of 2009, the value of debt-related actions soared to €121m , it was €24m in the same period last year.

The figures do not include debts pursuant to home repossession proceedings, which are dealt with under a dedicated chancery summonses list.
 

They include a landmark €78m summary judgment order against Aifca Ltd, a company controlled by property developer Liam Carroll, over unpaid loans for the proposed development of The Square shopping centre in Tallaght.

The order was the largest of its kind to be leveled against a company here.