When you can claim?

You can claim Late Payment Interest, Compensation and Costs if:

•  You have supplied goods and services

•  Your buyer bought for business purposes

•  The contract is not a consumer credit agreement

•  The contract does not contain a provision for interest on overdue invoices (or any other substantial remedy for non payment)

How much interest can you claim?

•  You can claim interest at 8% over Bank of England Base Rate (at the previous 31st December or 30th June).•  You can claim interest on invoices that were not paid within the credit period but have since been paid. Interest can be claimed for the period starting with the date the invoice should have been paid and ending with the date it was actually paid.

•  You have up to 6 years to claim the interest.

How much compensation can you claim?

You can claim compensation for every invoice that was not paid within the credit period. You can claim compensation even if the invoice has now been paid. Remember, you have up to 6 years to claim the compensation!The amount of compensation you can claim is:- 

Reasonable Costs

You can claim compensation whatever your collection costs are. However, if your reasonable costs of recovering the debt come to more than the compensation, you can claim this as well. It looks as if you can claim the cost to your business of your credit control procedures as well as claiming any costs incurred with Debt Collection Agencies or lawyers. It is highly likely that in small claims track cases the court will view reasonable legal costs as being the equivalent of the limited fixed costs which are allowed. You will have more chance of getting a reasonable level of costs if you have a contractual clause allowing you to recover indemnity costs. You should take advice on including this in your terms of business. 

Inform Your Customers You Will Be Claiming Late Payment Interest, Compensation And Costs

You don’t have to tell your customers that you will claim Late Payment interest, compensation or costs if they fail to pay on time before they have actually breached your payment terms. However, it may be beneficial for your cash flow to tell them in advance of your intentions, should payment be made late. You could put warnings to this effect on your invoices; your statements and in your terms of business. 

Change Your Terms Of Business To Claim Late Payment Interest, Compensation And Costs

You are not entitled to late payment interest, compensation or costs if your terms of business already provide for interest on overdue invoices. So, you may want to change your terms of business and rely on the Late Payment legislation. If you do, make sure your customers know.You should:-•  update all documents on which your Terms and Conditions appear.•  circulate your customers with the revised Terms and Conditions.•  advise your customers when the revised Terms and Conditions will come into effect. N.B. Existing contracts will continue to be governed by the Terms and Conditions which applied at the time they were entered into. Occasionally your customer’s terms of business may be incorporated into the contract and provide for a very low rate of interest on over due amounts. In this event, the court may take the view that the interest rate is not substantial enough and that the Late Payment legislation applies. In that case you would be able to claim interest, compensation and costs under the ACT, rather than just the low rate in the contract.

How To Claim Late Payment Interest, Compensation And Costs

As soon as a payment is overdue you can, if you wish, claim the compensation and, in due course, interest. You can claim the reasonable costs of recovering the debt as and when they are incurred. You don’t issue an invoice for the interest, compensation or costs. You just write and tell your customer the amount due. 

When you claim interest, compensation or costs, it would be helpful to tell your customer :

•  How much is due for interest, compensation and costs

•  What it is owed for e.g. give the invoice number for the principal debt

•  How payment should be made:

• To whom
• By what date
• To what address and
• By what method   

However, you don’t need to have sent any previous warning letter to your customer to claim interest, compensation or costs in an LPD or proceedings. If you can’t send an LPD because your contract contains a provision for interest, you could claim contractual interest in your LBA. 

What Happens If There’s An Argument Over What’s Due?

Sometimes there is genuine doubt about whether an invoice is for the correct amount. Where the customer admits that a certain amount is payable, the court expect them to pay the amount they agree is due and not wait until all the issues have been dealt with. You are entitled to late payment interest, compensation and costs on amounts the customer admitted were due but just didn’t pay until all queries were resolved. Sometimes an invoice depends on a calculation. For example, it may be based on timesheets and hourly or daily rates. If the invoice is wrong but the customer has the information to work out the correct amount, the customer is expected to do the calculation and pay accordingly. You will be entitled to late payment interest, compensation and costs if they don’t. If there is real doubt about the amount of the invoice, or a real dispute as to whether the money is due, you will not be entitled to late payment interest, compensation and costs until the position has been clarified.

What You Should Include And What You Should Avoid

Businesses in the UK should review their Trading Terms and Conditions on a regular basis as business legislation changes from time to time and the trading environment is continually evolving. Terms and Conditions can quickly become out of date. Reviewing the content of your Terms can not only help protect the business from bad debt but could significantly reduce the cost of extending credit.

The Benefits Of Late Payment Interest And Compensation

An effective and strong statement by businesses chasing debts, is to use the Late Payment Interest and Compensation legislation introduced in 1998.

Few enough businesses are taking advantage of this legislation, despite being well within their rights to do just that. By including interest and compensation in your claim, you can offset your internal costs in recovering debts. Why not use this option to claim back such extra costs incurred? Utilising this legislation is a positive decision that will act as a deterrent to late payment as well as providing a new revenue stream.

Businesses should also state in their Terms of Business that they will add to their invoices the full cost of legal fees for any debt recovery activity necessary to secure overdue payments. Do not sit back and incur irrecoverable costs. You can stipulate in your terms a provision to claim realistic costs to offset your expenditure.

Lovetts’ Key Points On Effective Terms And Conditions:

DO:

• Make sure your terms apply to the contract, preferably by getting your customer to sign up to them. At the very least, send them, or refer to them, just before the contract is made.
• Check the other party’s terms in case they are found to apply. Be aware of what you may be letting yourself in for: for instance, will they allow the other party to offset sums they claim are due to them against money due to you, even if their claim relates to a totally separate contract? Make sure you don’t agree to that!
• Print your terms on the back of all quotations with a clear message on the front that they will apply to any order resulting. Alternatively put a clear statement in all quotations, order acknowledgements, invoices and delivery notes that all your supplies are subject to your Terms of Business which are available on request.
• Keep a copy on file of the letter or email sending the terms. We often find that clients cannot locate evidence that terms have been sent to a customer, simply because no one thought to keep details.
• Have a term that allows you to stop work/supplying if any invoice is not paid on time and allows any work in progress to be invoiced for immediate payment. This enables you to claim for everything in one go.
• If you do business internationally, consider if you need a clause making English Law apply to the contract and giving English courts jurisdiction.
• Ensure you have a clause allowing full recovery of legal costs – have this drafted by your lawyers – in addition to any Late Payment Act clauses which will include fixed compensation for your own time. The benefits of being able to recover costs and compensation go well beyond offsetting your costs of recovery; by making any debts owed to your business an expensive luxury, you push home the message that you expect to be paid on time, and that you are serious about recovering due debts and discourage serial late payers.

DON’T:

• Forget that you must be able to prove by telephone notes, emails or letters that your terms, rather than the other party’s terms, were incorporated in the contract.
• Think that sending the terms with your invoice will do – it’s post-contract and that’s too late to incorporate them.
• Neglect to have the terms checked regularly by competent solicitors: the law changes constantly and your terms will need to keep pace!

Looking to learn more about effective Terms and Conditions? Download our free guide on Terms and Conditions

Download our Free Debt Collection Clauses for T and Cs

If you trade internationally, there are many factors to consider, alongside the usual issues when you are trading with other businesses in the UK. One of the main areas that Lovetts advise their clients to consider is whether English law should govern the contract and should you give the English courts jurisdiction?

English law is often the law of choice in commercial contracts. Why is this?

• Firstly, English law gives the parties greater freedom than civil law systems to enter into contracts on terms of their choosing.
• Secondly, it is probably easier to predict the likely outcome of a case under English law than under civil law systems. English commercial law covers most issues having been built up from both statute and case law.
• Thirdly, where a point is not covered, a court will make a decision. That decision and particularly any decision by an appellate court will form a precedent. English law can therefore evolve more quickly and flexibly to the needs of the commercial community.

The English courts are also the courts of choice for many international disputes. London hosts the largest commercial court in the world and over 80% of the cases involve a foreign party. The English Commercial court and the Mercantile courts are specialist courts for business disputes with expert judges and procedures designed to deal efficiently with commercial disputes. 

Can You And Should You Choose English Law And The English Courts?

The Commercial and Mercantile courts are part of the High Court. Currently the amount owed must be more than £25,000. However, this will probably rise in 2013 to the more realistic level of £100,000. Even now, cases for less than £100,000 should probably not be brought in the Commercial and Mercantile Courts.However, there is nothing to stop the parties agreeing that English law will be the law of the contract and that the English courts will have jurisdiction whatever the size of the contract. London is also often chosen as the seat of international arbitrations. 

What Are The Advantages And Disadvantages?

On the one hand, if proceedings area brought here, the debtor will need to come to this jurisdiction to defend the proceedings. English proceedings (the needs for translation and service apart) are often more efficient that those abroad. On the other hand, proceedings will have to be translated into the debtor’s language if they are not English speaking and may well have to be served in the debtor’s country. All this adds delay and expense. Finally, before taking proceedings here, you need to know that an English judgment will be enforced in the debtor’s country. 

Conclusion

The best course may be to provide that English law is the law of the contract and to give the English courts non-exclusive jurisdiction. You would then have a choice as to where to start proceedings. In larger cases you would be free to start proceedings here but you would also be free in smaller cases to take proceedings locally to the debtor, if that would be more cost effective.

A UK creditor can usually claim Late Payment Interest and Compensation from a debtor outside the UK. 

• The Late Payment Act applies where the law of the contract is English. The law of the contract may be English either under normal rules or because the contract says so.

• The Act does not apply if the parties have chosen English law as the law of the contract but there is no “significant connection” between the contract and the UK.

•  “Significant connection” is not defined. We think a “significant connection” would include one of the parties being in the UK or that a good part of the contract was to be performed in the UK.

• Remember, that if you are in England and the debtor is outside the UK, you can’t always take proceedings in England. This is the case even where English law applies to the contract and you are claiming under the Late Payment Act. You need a clause giving the English courts jurisdiction to guarantee that you can take proceedings in England.

• The Act can apply to a contract where the parties have chosen a foreign law. In this situation the Act would apply if the law of the contract would have been English apart from the choice and the contract has no significant connection with any other country. This seems to limit the Act’s application to English parties choosing a foreign law for a contract to be performed in England.

• The Late Payment Act is the UK implementation of a European directive. If the law of the contract is not English, and the Act does not apply, then the creditor will be able to recover whatever late payment interest and compensation the law of the contract allows.

Credit control costs you money. Debt Collection can cost you money. Court action costs you money.

But there are steps you can take to minimise these costs. We explain how in this briefing paper.

The Main Options

The two most effective steps you can take are to:

1. Use the Late Payment Legislation to recover interest and compensation
2. Provide in your contract for payment of your collection costs

There are also several other useful terms that can be included e.g. payment to be made without any deduction, cancellation of credit periods, right to suspend work/supplies, retention of title etc.  See paragraph 5 below.

Remember : you must make sure your contracts are entered into correctly. If you are in doubt please consult your solicitors.

Here are the topics that we cover in this Briefing paper :

1. Contractual Interest
2. Statutory Interest
3. Late Payment Interest & Compensation
3.1 When you can claim
3.2 Non-UK debtors
3.3 Interest & Compensation
3.3.1 Interest
3.3.2 Compensation
3.4 Inform your customers
3.5 Don’t delay
3.6 Changing your terms of business
3.7 Making your claim
3.8 Case Studies
3.9 EU Directive
4. Contractual costs
5. Additional clauses

1. Contractual Interest

You could include a term in your contract for on overdue invoices. This used to be the smart thing to do but it isn’t any longer if the late payment legislation applies.

If you do have a term for contractual interest, the interest rate must not be too high. It must compensate you for the delay in being paid rather than penalise the debtor for paying late. In the past, the court has accepted 10% over base as an acceptable rate and that is a reasonable rule of thumb.

2. Statutory Interest

Your choice should normally be between charging contractual interest or using the late payment legislation. However, if you don’t claim either, the court can award you interest anyway. You are allowed to claim interest at 8% to start with and that is the rate you will get if you get judgment in default.

However, if the case goes to a hearing, the court is more likely to award interest at around 2% over base on the basis that this compensates you for not having the money earlier.

3. Late Payment Interest And Compensation

The late payment legislation is the most interesting and perhaps the most dramatic of your remedies.

The Late Payment Of Commercial Debts (Interest) Act 1998 had two purposes.  Firstly, to compensate creditors for the late payment of debts.  Secondly, to deter late payment. It is generally recognised that it has failed to change the late payment culture but there’s no reason why you can’t use it to change the payment culture of your customers!

3.1 When you can claim

You can claim Late Payment Interest and Compensation if:-

• You have supplied goods and/or services
• Your buyer bought for business purposes
• The contract is not a consumer credit agreement
• The contract does not contain a provision for interest on overdue invoices (or any other substantial remedy for non payment)

3.2 Non-UK Debtors

A UK creditor can usually claim Late Payment Interest and Compensation from a debtor outside the UK.

• The Late Payment Act applies where the law of the contract is English.  The law of the contract may be English either under normal rules or because the contract says so.

• The Act does not apply if the parties have chosen English law as the law of the contract but there is no “significant connection” between the contract and the UK. 

• “Significant connection” is not defined by the Act.  However, a contract is likely to have a “significant connection” with the UK if one of the parties is in the UK or the contract is to be performed in the UK.

• Remember, if you are in England and the debtor is outside the UK, you can’t always take proceedings in England.  This is the case even where English law applies to the contract and you are claiming under the Late Payment Act.  You need a clause giving the English courts jurisdiction to guarantee that you can take proceedings in England.

• The Act can apply to a contract where the parties have chosen a foreign law.  In this situation the Act would apply if the law of the contract would have been English apart from the choice and the contract has no significant connection with any other country.  This seems to limit the Act’s application to English parties choosing a foreign law for a contract to be performed in England.

• The Late Payment Act is the UK implementation of a European directive.  If the law of the contract is not English, and the Act does not apply, then the creditor will be able to recover whatever late payment interest and compensation is allowed by the law of the contract. 

3.3 Interest and compensation

Both interest and compensation can be claimed.

3.3.1 Interest

You can claim interest at 8% over Bank of England Base Rate (at the previous 31st December or 30th June). 

You can claim interest on invoices that were not paid within the credit period but have since been paid.  Interest can be claimed for the period starting with the date the invoice should have been paid and ending with the date it was actually paid.

You have up to 6 years to claim the interest.

3.3.2 Compensation

You can claim compensation for every invoice that was not paid within the credit period.  You can claim compensation even if the invoice has now been paid.  You have up to 6 years to claim the compensation.

The compensation you can claim is:-

 3.4 Inform Your Customers You Will Be Claiming

You do not need to take any formal steps to claim either Late Payment interest or compensation.  However, you may want to let your customers know you intend to rely on the legislation.  This may encourage them to pay on time!  You could put statements to this effect on your invoices, statements and in your terms of business.

3.5 Don’t Delay

You have 6 years to claim compensation and interest. If you wait e.g. for several years before complaining about late payment and making a claim, you may be met by the argument that you have impliedly agreed to accept late payment. 

To avoid this, you could include wording on your invoices and statements to the effect that late payment is not acceptable and that you will exercise you rights under the late payment legislation. Where you have an on-going relationship with a customer who always pays late, it would be sensible to write every at least every 12 – 18 months to draw attention to this and ask them to pay within the credit period.

3.6 Changing Your Terms Of Business

You are not entitled to late payment interest and compensation if your terms of business already provide for interest on overdue invoices.

You may want to change your terms of business and rely on the Late Payment legislation.  If you do, make sure your customers know.  You should:

• update all documents on which your Terms and Conditions appear.  
• circulate your customers with the revised Terms and Conditions. 
• advise your customers when the revised Terms and Conditions will come into  effect.  
• make sure you can prove each customer has been told about the change in your Terms and Conditions.

N.B.  Existing contracts will continue to be governed by the Terms and Conditions which applied at the time they were entered into.

3.7 Making Your Claim

As soon as a payment is overdue you can, if you wish, claim compensation and, in due course, interest.  The following is the sort of information it would be helpful to show when claiming interest and compensation:-

• How much interest and compensation is owed
• What it is owed for i.e. give the invoice number for the principal debt
• To whom payment should be made
• By what date
• To what address and
• By what method

However, it is not necessary to have told your customer about the compensation or interest to be able to claim them in the Letter before Action (LBA) or in legal proceedings.

You can claim interest and compensation in your LBAs.  We call LBAs that include interest and compensation Late Payment Demands (LPDs). If you want Lovetts to claim interest and compensation in your letter before action, then you must give instructions to us  via our web site.  This is because we need precise details of each invoice to calculate the right interest and compensation.  You just enter the debtors details and the breakdown of the debt on CaseManager, our client web site. We then process  your instructions electronically.

If you are entitled to late payment interest and compensation, you will need to let us know (for example, our Action Report forms enable you to do this).  We will then claim them for you when starting proceedings.

3.8 Case Studies

Claims for late payment interest and particularly compensation can be dramatic. They illustrate the dangers of falling out with a supplier!

Claim For Over £60,000 Against One Customer

A client traded with a customer for over 6 years. They then fell out. Our client went back over the previous 6 years and calculated late payment interest and compensation. The claim of over £60,000 was entirely made up of late payment interest and compensation, with the compensation being by far the largest part of the claim.

Claim For Over £50,000

As illustrated above, there is nothing to stop a creditor at the end of a trading relationship going back and claiming interest and compensation. One client dealt with slow paying, mainly public sector, customers. In each case, our client waited until they had been paid under the contracts and then claimed late payment interest and compensation of around £50,000 for 190 contracts.

Compensation And Interest Adds £15,000

In another case, a client claimed just over £50,000 for unpaid/late paid retentions. Late payment interest and compensation added a further £15,000 to the claim.

Compensation Can Add Dramatically To Small Invoices

Another client supplied motor parts and issued many invoices for relatively small amounts. In one case, it claimed £2800 for about 50 small unpaid invoices. Late payment compensation added over £1950 to that claim.

3.9 EU Directive

The EU is disappointed that existing legislation has not changed the culture of late payment. In 2011 a new Directive was passed and is due to come into effect in the UK in 2013. It is largely based on existing UK legislation. The main effects in the UK look as if they will be the right to recover reasonable collection costs (so you may not need a term in your contract) and an attempt to make 30 days the normal credit period with a long stop of 60 days. Credit periods over 60 days will normally be regarded as unreasonable.

4. Contractual Costs

You can include a term in your contracts providing that the costs you incur in chasing debts are payable on an indemnity basis.
The clause we suggest covers:
Legal fees
b. Commission payable to a debt collection agency
c. Your own administrative costs, normally time spent by your staff, in recovering a debt

If you are a client of Lovetts, and would like us to propose a clause to cover such costs, we will readily do so free of charge.  Please contact our Marketing team on 01483 557849

Costs Are In The Court’s Discretion

A contractual term for payment of your costs will improve your negotiating position and, if a case goes to trial, the likelihood of recovering more of your costs. However, we cannot guarantee the court will award you costs, especially in Small Claims Track cases. Costs are in the court’s discretion and some judges are reluctant to award more than the Small Claims Track fixed costs, even where there is a contractual clause. The arguments surrounding this topic are surprisingly complex and in some cases it may even be necessary to start a second action for your costs.

Claiming A Set, Contractual Amount

One possibility for clients who have a lot of small claims is to agree fixed charges to cover part or even all of the costs. These would be payable before the action starts either on the letter before action or when instructions to start proceedings are given. The fixed amounts then form part of the claim and may make it easier for a judge to decide that they are recoverable.

Administrative Costs

To claim your own administrative costs, you will need to keep good records of the time spent by staff. You would normally recover their time at their salary rate but it might also be possible to try and claim a proportion of overheads attributable to them and the work they’ve done.

5. Additional Clauses

In addition to the above you could also consider terms to cover:

a. the right to stop work if any payment is late
b. the right to charge for all work done even if not completed or invoiced
c. cancelling credit periods so you could sue on all invoices delivered at one time whether or not the credit period had expired
d. all payments to be due without any deductions
e. arbitration at your option (which you could use if in any case it looked a quicker less expensive option)
f. a clause relating to the Late Payment etc Act 1998 and also extending the interest payable beyond judgment

Online Resources
You can find a useful Government guide at :
http://www.bis.gov.uk/policies/enterprise-and-business-support/access-to-finance/payment-terms

How To React To A Defence

Defences should be carefully read and considered. Whilst the defendant must prove its defence you must have documentary evidence, or a credible witness who will attend court, to prove yours.

Time To Respond To Court

The court allows a short time to respond to notices informing us of defences and part admissions. If we do not reply to the court by that date, the claim will be stayed. If the case is stayed, no further steps can be taken without the court’s permission – which will not necessarily be given. If the court’s permission is required an application will have to be made and a court fee paid.

Limited Costs in Small Claims Cases

When a claim is for less than £10,000, the case will be allocated to the Small Claims Track and be dealt with at a Small Claims hearing. No legal costs are normally awarded to either side in Small Claims cases (apart from the fixed costs on the Claim Form, and any other court fees incurred, such as the fee payable with the Direction Questionnaire – formerly the Allocation Questionnaire, and the Hearing fee).

Paper Hearings

For very small cases it may be economic not to attend the hearing but to ask the court to consider papers filed at court and make a decision based on these. This is only recommended for extremely small debts where there is a full paper trail and your case can easily be proven by the witness statement and supporting documents filed. The court requires 7 days notice of non-attendance.

There is a risk the defendant will raise points not previously mentioned and if you are not at the hearing, or represented, then the court may find in the defendant’s favour and strike out your claim.

Summary Judgment

If the defence is weak, or your evidence in support of your claim compelling, we may recommend an application for summary judgment. Costs can be claimed, even for a Small Claim.

Fast Track

Claims for between £10,000 and £25,000 are allocated to this track. We suggest these are handled by our Commercial Department, although some may be suitable to remain in the Legal Department on a fixed fee. This can be determined by using our “Initial Assessment of Defence” service shown below.

Multi Track

Claims for over £25,000.00 are allocated to this track. We recommend you instruct our Commercial Department to handle these on your behalf.

What If There Is A Counterclaim?

If a defence includes a counterclaim it must be dealt with as a matter of priority and a defence to the counterclaim filed at court, usually within 14 days or with the Direction Questionnaire (formerly the Allocation Questionnaire). If this is not filed, the defendant will be able to enter judgment against you. A defence which includes a counterclaim need your urgent attention.

INITIAL ASSESSMENT OF DEFENCE (claims under £5,000) – £250

We offer a special service whereby you can get an initial assessment of the case from one of our solicitors for a fixed Assessment Fee of £200 (ex VAT).

As far as is possible at this stage, the assessment will give you advice on:

• your prospects of success
• further evidence required
• any further advice that may be required and an estimate for providing this
• likely costs and complexity
• what we would do and what you would do to prepare for a hearing
• when you could withdraw from the proceedings, and at what cost, if you wanted to continue the case but not go the full way
• if a summary judgment application is suitable

Once the case has been assessed, you can decide if you want us to continue conducting the case for you. If suitable this can be for a fixed price of £450.00 plus VAT.

Our assessment will be based on the information you supply and can only be as accurate as that information provided. Please provide a brief outline of the history of the debt and the dispute together with copies of the contract and any correspondence setting out the dispute.

INITIAL ASSESSMENT OF DEFENCE (claim over £5,000) – £500

This service will give advice as outlined for Small Claims Track cases, but it will also provide further information required for claims allocated to the Fast and Multi Track. As costs are recoverable if you win, or payable if you lose, it is vital to get the initial strategy right.

The Challenge

Lovetts’ client is a major operator of theatre venues in the UK. What do you do when a hirer causes substantial damage to your theatre, then goes bust?

The defendants hired a theatre in a major city for a live show involving a well-known troupe. During the act, the whole audience was invited on-stage to dance with the group, resulting in major damage to the stage costing over £15,000 in repairs. Unfortunately, the defendants went into liquidation before legal action could be taken to recovery the money. Could anything be done?

The Solution

Our client assumed the debt would have to be written off. However, we examined carefully the application of the Third Parties (Rights against Insurers) Act 1930 and whether our clients had a claim against the insurers of the liquidated company. They were represented by their loss adjusters, Cunningham Lindsey, who initially refused to make any payment because the defendant denied liability.

The Benefit

Despite this, after correspondence advocating our client’s legal entitlement, Lovetts secured a payment of over £7,500 in settlement which, in the circumstances, was beyond our client’s expectations.

The Challenge

Cleat Ltd are specialist sub-contractors in the construction industry. They had undertaken several projects for a particular customer over several years, but had now accumulated £85,000 of invoice arrears. Signs of financial distress were evident in the debtor, and they urgently needed Lovetts’ advice and guidance.

The Solution

Lovetts recommended sending a draft Winding Up Petition to the debtor company warning that if the debt wasn’t paid, then a Petition would be issued within 7 days. Their solicitors alleged that they had a valid set-off for £63,000 as Cleat had (rightly) refused to continue working for them as no payments were forthcoming.  They demanded withdrawal of the threat to Wind-Up.

Lovetts refused to withdraw for two good reasons.  Firstly, the debtor’s non-payment had repudiated the contract, so they could not expect Cleat to finish the work. Secondly, their alleged right of set-off didn’t exist because they’d failed to send it by fax when the orders were made. The ongoing possibility of liquidation acted as a ‘Sword of Damacles’ over the debtor company.

The Results

1. An open admission of liability so that the Petition could be issued if instalments were not met
2. Payment by instalments
3. The debtor disadvantaged itself by failing to include its terms of set-off on the faxed order, as the reverse side was not faxed with it.

Following news that SMEs are using alternative funding methods to grow their businesses, Lovetts Plc, the debt recovery law firm, is urging small businesses to think just as carefully about who they use to recover their debts to support business growth over the coming year. “With business credit still hard to come by, we’re seeing businesses take legal action on late payments earlier than ever,” says Charles Wilson, Chairman of Lovetts. “Payment periods of up to 180 days continue to put the financial squeeze on SMEs, as large companies sit on an estimated £36.5bn owed to small firms in late payments. It’s therefore essential that businesses get the legal support and advice they need to recover their overdue debts in the most effective way.

“For a start, the latest SME Finance Monitor shows SMEs looking beyond the banks for their financing. We would suggest the same approach is taken when choosing a law firm to pursue claims for debts. Don’t just ask your usual Solicitor to take on this role, look outside the high street for dedicated and expert support.

“A good debt specialist firm will provide online access to the debts being chased, and their status, offering clear costs and reporting through online case management facilities. At Lovetts, for example, each client has a dedicated paralegal, this means there is one contact and they know that case – saving clients both time and stress. We have also just launched a new annual subscription service which means clients can get all the legal advice they need for a fixed cost, rather than watching the clock and racking up large bills.”

A specialist firm can help businesses with every aspect of late payments and credit management. Only with expert advice can SMEs make informed decisions regarding Letters Before Action and when to move a case forward to the claims court. But with ongoing support from paralegals and highly experienced solicitors, businesses can implement the best strategies on persistent late payers.

Charles Wilson concludes, “It’s great to see a more positive economic landscape emerging, and smaller businesses are a key part of this. Their growth is excellent news for the economy, but it must be backed up by strong credit management and cash-flow procedures in order to remain financially secure and provide the best chance at success in the future. Ensuring they have the best legal support in chasing up overdue payments is the first of many important steps to secure their future.”

What to look for in your legal eagles:

• Online visibility of debts being chased and their status with 24/7 access to documents
• Clear cost versus benefits reporting
• A dedicated contact for each client
• Ongoing support with credit management strategies from paralegals and in-depth advice from solicitors
• Advice on payment terms and conditions
• Application of Late Payment Interest and compensation where necessary
• Management of claims going to court
• Clear, strong strategies on persistent late payers
• A fixed price list for related expenses, offering clarity on fees and how they are charged, including packaged services, for effective budgeting
• Legal advice when you need it, at a fixed annual cost

* Source:http://www.sme-finance-monitor.co.uk 

** Source: http://www.telegraph.co.uk/finance/businessclub/9782988/Government-going-to-war-over-37bn-late-payments-to-small-companies.html

STOP THE CLOCK.
LOVETTS SOLICITORS OFFERS UNLIMITED ACCESS TO LEGAL ADVICE
With new, annual contract arrangement
www.lovetts.co.uk

In a significant move that once again challenges the usual conventions of legal practices, Lovetts Solicitors, the leading debt recovery law firm is offering customer access to legal advice, ‘on tap’ without the worry of a ticking clock through a new Annual Subscription service. To mark the launch, new and existing Clients who sign up for the service on or before 31st October 2013 will benefit from the Lovetts Annual Subscription contract for free until 1st December 2013. The usual cost will be £1,500 for SMEs and £3,000 for larger companies – over £20 million turnover.

Lovetts Annual Subscription service provides access to unlimited advice via telephone or email from experienced solicitors who specialise in commercial debt collection, litigation and dispute resolution. This allows clients to estimate their chance of success, set out their legal position and agree a strategy for collecting the debt. They can also use the advice to determine the likely costs involved if they decide to proceed with legal action.

Charles Wilson, Chairman of Lovetts, explains “At Lovetts, we have always challenged convention and looked at ways to make our business as open and accessible as possible to our clients. In some cases hourly charging is right and appropriate, but we also know through feedback from our clients that it can be a real bugbear and many would prefer an annual fixed cost, so we have introduced this subscription to provide a choice.

By subscribing to the annual advice subscription service our clients can simply pick up the phone to a solicitor and talk through any issues they may have with a debt, without being charged for the time. If it does not make commercial sense to pursue a debt through legal action, we will advise the client accordingly so they can take alternative action. This provides an invaluable opportunity to reduce costs by ensuring they take the most effective action for each and every case.

We believe this service will offer real value while allowing Lovetts to build stronger bonds with our clients by delivering quality services that become an extension of their business.”