I move: "That the Bill be now read a Second Time."
Cuirim fáilte roimh an Aire. This proposal arises from the need for ethics and transparency regarding overpayments which occur in the course of business transactions. The Bill does not seek radically to alter how business is done or essentially to create new rights where there is none. Rather, it seeks to address an issue which presents a real difficulty and potential injustice in regard to the question of overpayments. The background to the Bill is relatively simple. In a business transaction where one party, whether a private individual or a company, overpays another, there is no statutory obligation on the party receiving the overpayment to give notice of the fact to the payer or return the payment unasked. Statute law has been strangely silent on the matter. There are instances where the recipient will duly notify the person who overpaid or where the overpaying party discovers the error and promptly seeks a refund. However, there are many instances where there is not this beneficial outcome, either through a deliberate intention of the recipient to exploit the situation or for incidental reasons.
The common law terms an overpayment which is not returned or otherwise disposed of correctly between the parties as unjust enrichment and the description is apt. The party that receives the overpayment has certainly been enriched, but the enrichment is not one which can be justified. The common law allows in principle a claim for restitution based on moneys had and received . However, the route of a civil claim is hardly a desirable one and will be costly and protracted. It cannot even be embarked upon unless one knows of the overpayment and it may not be effective in terms of timeframe if delay means a greater risk of inability to repay on the part of the recipient. In short, dealing with the matter solely within the confines of the common law is inadequate. Statutory regulation focusing primarily on requirements of disclosure and a duty of co-operation is the preferred and necessary route. Such a path would provide a balance of rights for all parties and promote fair outcomes.
Overpayments in the course of business are common and occur for many reasons. Among the more obvious instances are inadvertently paying the same invoice twice or simple calculation errors. They also extend to situations where there is no physical transfer of cash but where credits due are not taken, resulting in loss to one party and unjust enrichment for the other. The multiplicity of trade transactions taking place daily, ranging from the complex electronic payment runs of large companies to a farmer paying his or her bills to a local co-operative, for example, contains innumerable possibilities for overpayment to occur. Legislative provision which affords protection to an overpaying party and instills confidence that the matter will not be exploited would be of real benefit to all who make payments for goods or services. The Bill, it should be noted, would extend to all overpayments made in the course of business transactions, irrespective of whether the payment was made by an individual or incorporated entity.
It is useful to consider an example of how an overpayment can be treated in a way that is grossly opportunistic. Let us say a small trader accidentally duplicates payment of an invoice for €5,000 to a supplier. He or she has not reconciled a statement from his or her largest supplier and makes the overpayment as he or she rushes to achieve a month-end payment deadline. The supplier has a policy of saying nothing about excess payments and of leaving them on the debtors ledger for six months, only refunding or otherwise affording value to the payer if requested to do so. To make matters worse, this supplier does not display the excess payments on a statement of account to the customer. At the end of the six-month period, it is the supplier's policy to treat any unclaimed payments or credits as unearned profits. In the situation just described, the supplier has broken no law and, amazingly, has not departed from the rules of accounting as interpreted in Ireland.
Unless our hypothetical small trader subsequently discovers his or her error — the chances are he or she may not — he or she has lost €5,000. Assuming a net profit is 6%, he or she would have to obtain additional new business of more than €83,000 merely to break even from this situation. He or she should not have to do this nor should the supplier have the gratuitous benefit of money for which he or she provided neither goods nor services. Under the Bill, this situation would not be allowed to arise because of duties of disclosure and prohibition of any form of concealment of the overpaid sum. As stated in its explanatory memorandum, this Bill closes avenues to a range of fraudulent and suspicious practices.
Are overpayments frequent and can they accumulate to large amounts? Let me give the answer to that question by reference to a topical first tier tax tribunal case in Britain in 2010 — the case of Pertemps Recruitment Partnership Limited v. HMRC. Although the question here was the taxable status of overpayments rather than issues as to how they were handled, the facts given in the case about the extent of such payments were staggering. In a five-year period from 1999 to 2003, the company received £1.6 million of unreconciled payments equating to 0.18% of the value of the company’s turnover. While by no means all of the payments were left unrefunded, it was noted that in one financial year, 990 individual payments amounting in total to £486,000 failed to be reconciled and were transferred to the profit and loss account. If the overpayment level evident in this case was replicated even partially in business in Ireland, then the problem must be very widespread indeed and the extent of the money involved must be very large.
The Irish Institute of Credit Management, a professional body with more than 40 years experience at the coalface of debtor-creditor interaction, has responded to the problem of overpayments by issuing guidance notes for the treatment of trade overpayments in May 2011. In the foreword, it refers to the prevalence of the issue of overpayments and a lack of uniformity in how they are treated and how some businesses seek to reclassify such receipts as unearned profits without any reference to the customer and to how a substantial injustice could be done to the overpaying party. The IICM recommends a number of measures for the correct treatment of overpayments with the need for adequate disclosure being central to best practice.
In Britain the Auditing Practices Board has registered strong concern about retained overpayments in its 2010 practice note on money laundering. The APB states that the auditor considers whether the retention of the overpayments might amount to theft by the audit client from the customer and, if so, the client will be in possession of the proceeds of its crimes, a money laundering offence. That point drew particular support from the Association of Chartered Certified Accountants.
In Ireland, we already have an excellent system for dealing with abandoned balances in financial institutions, thanks to the Dormant Accounts Acts 2001 to 2005. The provisions of the Acts have generated a strong culture of due diligence and follow up with customers regarding inactive balances long ahead of the statutory dormancy period. The Business Undertakings (Disclosure of Overpayments) Bill 2012 would drive a similar culture of transparency in the business sector with little cost to the State. Aligning the two sectors, financial services and business activity, in regard to duties of disclosure would effect a welcome cohesion in supporting customers rights.
The United States has long recognised and dealt with the issue of overpayments in the context of its unclaimed property law. Each state is required to establish and administer a law on unclaimed intangible personal property in line with the general principles of the Federal Unclaimed Property Act 1995 which instances credit balances, customer overpayment, credit memorandum — another phrase for credit notes — and unidentified remittence. These are among the wide range of items governed by the Act. These are headings we now seek to include under rules of disclosure.
In the US, these balances must either be reunited with those entitled to receive them or, if not, they must be transferred to the custody of the local state treasury at the expiration of three years. I am sure that is not something to which the Minister would object in principle at a time when sources of income are hard to come by from the State's point of view. A rightful owner can, however, claim from the State fund in perpetuity. That is also a feature we find in the Dormant Accounts Acts.
As I have outlined, this Bill sets out to address a real and serious need for probity in these areas of financial transactions. It nonetheless avoids introducing onerous burdens which would only hinder the dynamics of business administration. Its real beneficiaries would be the paying public and business communities whose discharge of their debts makes an ongoing and absolutely necessary contribution to economic life. This Bill removes from them the danger that an inadvertent mistake on their part will ever be seized upon by an unscrupulous creditor availing of a gap in regulation.
This is a practical measure to enhance the standards of a more ethical Ireland where hopefully many types of inappropriate practices, and not just those which are the subject matter of this Bill, will soon become a thing of the past.
Mar sin, creidim go bhfuil sé an-tábhachtach go dtacódh an Rialtas leis an mBille seo. Tá ceachtanna deacra foghlamtha againn le blianta beaga anuas, maidir le mí-iompair de chineálacha éagsúla i gcúrsaí gnó. Tá deis anseo ag an Rialtas cabhrú, go háirithe le gnólachtaí agus le comhlachtaí beaga, mar is iad is mó a bhíonn thíos le haon ró-íocaíocht nuair nach gcuirtear ar a súile dóibh é.
D'fhéadfaimís dul níos faide agus struchtúr a chothú a thabharfadh deis don Stát roinnt airgid a bhailiú sa chás nach mbeadh comhlachtaí in ann foinsí an airgid a aimsiú. Is fiú a rá, freisin, gur minic gurb iad an Roinn Coimirce Sóisialaí agus na Coimisinéirí Ioncaim a bheadh ag tabhart ró-íocaíochta. Mar sin, ba chóir go mbeadh suim ag an Stát agus ag an Rialtas sa mhéid atá molta anseo.
