In a further sign of increased business confidence, during Quarter 4 2013, businesses clamped down on the time they allowed customers to delay payment before threatening legal action.
The time from invoice to instructing a Letter Before Action (LBA) to be issued decreased by 12 days between Q3 2013 and Q4 2013, according to the latest debt recovery statistics from commercial debt recovery law firm, Lovetts Plc. Furthermore, the average debt being chased rose by 31% on the previous quarter.
Whether buoyed by more positive reports of economic recovery or simply a desire to end the year with all large debts paid, Lovetts figures show that businesses appeared to tighten the reins on late payers in the final quarter of 2013, focusing efforts on the biggest outstanding bills.
Charles Wilson, CEO of Lovetts said: “On the whole, these figures represent a marked and welcome shift in attitude and action by UK businesses during the final quarter of 2013. It would seem that increasingly positive reports of a recovery have instilled greater confidence amongst businesses to pursue outstanding commercial debts.
“It’s a change in the pattern we saw in the height of the recession when nervousness of upsetting customers prevented businesses taking firm action to deal with debt. Late payers were given the upper hand and got away with not paying their invoices for months on end. This is no way to get businesses back on a sound financial footing. Firms are now acting faster and demonstrating to customers that they won’t tolerate late payment. It is important these firms don’t simply ‘cry wolf’ and fail to proceed with legal action where it is needed. With new late payment legislation offering businesses the opportunity to recover reasonable costs there really is very little justification for letting late payers lie.”
Businesses troubled by late payment and bad debt but worried about the cost of taking legal action can now obtain an immediate indication of the money they could recover on top of the debt with the launch of an online Claim Calculator from Lovetts PLC – www.lovetts.co.uk – the Guildford based law firm specialising in commercial debt recovery.
The Lovetts Claim Calculator has been created to help firms take maximum advantage of new Late Payment legislation introduced in 2013. Along with the debt itself, the legislation entitles businesses to pursue all the reasonable costs of recovering a debt, including any administration or legal fees, to the extent that the fixed amounts of compensation do not cover their costs.
Found on the information page of the Lovetts website, firms simply enter the details of the debt and the Lovetts Claims Calculator will instantly return an itemised estimate of the fixed costs the business can claim from a debtor plus any interest and compensation.
Bringing clarity to the complexities of late payment legislation, the Claim Calculator has been designed by Lovetts to empower businesses with the confidence to pursue bad debts in the knowledge that any expense incurred pursuing the claim could be balanced by the recoverable costs to which they would be entitled.
Existing Lovetts clients can access the Claim Calculator via CaseManager, Lovetts’ online client portal. These costs are automatically added to any claims being processed providing full visibility for the client.
Charles Wilson, CEO of Lovetts, comments, “The Lovetts Claim Calculator is simple to use and gives an immediate indication of the different types and levels of costs that can be recharged against the debtor when making a claim. We believe that if businesses know the costs that can be recovered as a minimum, they will have greater confidence in pursuing a claim to recover outstanding debt. However, before proceeding, we recommend getting free advice from one of our legal team to ensure they can actually claim.
“This enhancement to our website is part of Lovetts’ commitment to helping businesses reduce their legal costs and get the best results when chasing debts.”
Lovetts enhances CaseManager to make cost recoveries part of Claims www.lovetts.co.uk
Lovetts PLC, the law firm specialising in commercial debt recovery, is making it easier for businesses to take advantage of new regulations introduced this year to recover reasonable costs in pursuit of a claim. The firm has enhanced CaseManager, its innovative online client portal, to allow reasonable costs to be added to Claims as an automatic part of the process – effectively making Claims cost free.
In March this year, the Late Payment of Commercial Debts Regulations 2013 was passed which allows creditors to include all reasonable costs of recovering a debt, including any administration or legal fees, not covered by fixed amounts of compensation. As creditors need to be able to quantify those costs Lovetts has calculated the appropriate amounts which in most cases will cover all the legal fees and costs of issuing a claim. Streamlining the whole recovery process, businesses using CaseManager will find these costs added as part of the claim being issued.
Charles Wilson, CEO of Lovetts said: “We know that our clients are always looking for ways to reduce their legal costs. That’s why we have made this important enhancement to CaseManager, our unique online case management system. Provided the debtor pays in full, clients should effectively get free debt recovery. Normally these costs would have been irrecoverable.
“The only limitation is that the costs and compensation together must be ‘reasonable’ and the contract terms must not provide another “substantial remedy” for the creditor’s compensation, costs or interest. Therefore as an important back up to the service, we are offering clients free preliminary advice on what their Terms of Business actually allow them to claim. A quick chat with our one of our legal team will soon determine whether the new regulations can be applied.
“This latest development is a further demonstration of Lovetts’ commitment to exploit technology to help deliver efficiencies and saves costs for businesses pursuing commercial debts.”
Debra King appointed Paralegal focused on boosting collection rate www.lovetts.co.uk
Debt recovery law firm, Lovetts, has expanded its Overseas Pre Legal Department with the appointment of Debra King as Paralegal. Bringing 15 years commercial debt recovery experience, Debra will focus on Lovetts’ services in overseas collections where her skills will be applied to enhance collection rates for clients. Beginning her career in Germany, Debra relocated to England in 1987 to study criminology, psychology, debt management and bankruptcy and insolvency. Following roles in debt recovery and legal assistance, Debra joined Abshot Finance Company Limited and spent 10 years as a Debt Recovery Manager prior to joining Lovetts. This experience will be invaluable in helping her to build Lovetts’ overseas pre legal services.
Debra comments on her new position, “Lovetts is a highly professional firm of debt recovery solicitors, offering me a fantastic opportunity to apply my expertise in this area. I am looking forward to working closely with the team to ensure we get the best result for our clients. At a time when businesses are focusing on bad debt, Lovetts is in a strong position to help them take swift, decisive action to chase late payments and get results.”
Charles Wilson, Chairman of Lovetts says, “Debra’s appointment forms part of our ongoing commitment to investing in talent to develop the strength of our overseas pre legal department. The current economic climate means our services are in high demand, offering businesses the legal advice and support they need to gain control of overdue debts. Debra’s expertise in this field makes her a key addition to the team, helping to enhance Lovetts’ position in the marketplace and build the service we provide to our clients.”
Latest analysis from Lovetts shows invoice payment still being neglected despite business improvement www.lovetts.co.uk
Following recent news from the FPB that business costs are rising 3.5% ahead of inflation,* data analysis from Lovetts PLC, the law firm specialising in commercial debt recovery, shows that businesses are also struggling to get back money owed to them by customers. The FPB research showed that late payments have had a detrimental effect on 81% of businesses, clearly demonstrating the size of this issue.
The latest analysis of Lovetts client transaction data shows that whilst trade appears to be improving for many, with evidence pointing to higher volumes of transactions, the number of overdue invoice payments being chased has also increased. The number of Letters Before Action Lovetts issued on behalf of its clients in Q3 2013 increased by a hugely significant 30.9% compared to the same period in 2012.
Charles Wilson, Chairman of Lovetts, comments: “It is encouraging to see that commerce is improving for many of our clients, but this improvement is being hindered by the failure to secure payment in a timely way, evidenced by the dramatic increase in number of debts we are chasing for our clients. Companies of all sizes are affected by late payment and this can force them into delaying making payments themselves. It’s a vicious circle of late payment which needs to be broken, and the best time to do this is at the outset of a new relationship or at the point of contract renewal when terms and conditions are reviewed.
“We always advise clients to stipulate clearly in their terms of business what will happen if and when an invoice becomes overdue, and to discuss this with their customers to ensure it is understood. This avoids any awkwardness and potential damage to the working relationship as all parties are clear on where they stand from the beginning. With times still tough for businesses, especially in light of the FPB research showing the increasing costs companies are facing for fuel, transport and marketing among other things, it is important that businesses do all they can to keep cash-flow moving efficiently.
“Implementing effective payment terms and enforcing these across the board is a relatively easy place to start and will also highlight any customers which are causing particular issues – remember if they’re not paying you for your goods or services, they’re not a customer!”
Lovetts’ Tips to Tackle Late Payment
- Make sure your customers know you want to get paid on time. Too many companies give wrong signals, by failing to check that their invoices have arrived safely and are on their customers’ ledgers. Keep the credit function properly resourced.
- Tell customers early on, as part of good relationships, that legal action will be taken against non-payers. It doesn’t need to get personal at this stage, just clear.
- Add up the costs of going legal early on i.e. interest, late payment compensation, indemnity costs under contract (make sure your T&Cs allow for this). Then tell the customer what that figure is. Explain your reluctance to escalate costs unnecessarily.
The Challenge
Lovetts Solicitors client is a renowned events organising company. It had entered into a contract to plan a wedding on behalf of a well known premier league footballer. It had negotiated contracts with a number of suppliers on behalf of the client. Just 8 days before the wedding day, the events organising company received notice that the wedding was to be cancelled. Under the contract made with the footballer by the events company, all outstanding balances would have to be paid in full unless cancellation was at least 28 days before the wedding. The footballer chose not to make payment as a result of the wedding not going ahead.
The Solution
Lovetts first step is always to give advice on the likelihood of recovering the monies due by reviewing all evidence and paperwork. The client was concerned about the defendant’s liability due to certain agreements only being signed by the fiancé and not the premier league footballer. Lovetts advised the client that the fiancé would have presumed authority under common law to bind both her and the premier league footballer to the contract. A Defence* was filed alleging that the client should have breached its contracts with its suppliers by cancelling its contracts with them. Lovetts advised that although in certain circumstances there is a requirement to mitigate losses, in this case the client had entered into terms which meant that cancellation would not mitigate any loss, and that the events organising company was under no obligation to breach contracts with its suppliers. This would have been severely detrimental to its own business and its relationships with its suppliers. What benefits will I get from receiving solicitor’s advice? Lovetts advised the client to make a Summary Judgment* application – a quicker and more cost effective solution than going to trial. The footballer opposed the application.
The Outcome
Due to our client having good paperwork supporting its case, the summary judgment application was successful. Lovetts’ client was awarded Judgment for a sum over £60,000. The premier league footballer made payment. Our client was very satisfied with this debt recovery end result.
FAQs
What is a Defence? | If your claim is disputed by the defendant, the defendant will fill a defence form detailing the nature of the dispute and file it with the Court. The Court will send you a copy of the defence and ask if you wish to proceed with your claim in light of the defence. |
What is Summary Judgment? | Summary Judgment is a means of short-cutting the normal Court process but, because of this, the Court only allows it where there is a clear paper-trail which proves each point in the Claimant’s case and disproves each point made by the Defendant. Because of this it is not suitable where: • There is a lack documents • There are quality disputes • Where what was said is in dispute • Where expert evidence is needed to prove some part of the claim • Where there are allegations tantamount to fraud. The hearing is purely to examine the documentary evidence to see whether it proves the Claimant’s case beyond doubt by showing that the Defendant has no reasonable prospect of successfully defending the matter at trial. The Court applies a higher degree of proof to Summary Judgment than at full trial when all the normal safeguards of disclosure of documents etc would have been completed. The defendant gets the benefit of any doubt. |
Don’t Get Bogged Down in Payment Disputes
When it comes to payment disputes it’s easy to take things personally. After all, you’ve kept your side of the bargain and the non-payment can feel like a slap in the face. At this moment it’s important to take a step back and look for the positives. Read more.
Is chasing late payments getting in the way of your other business priorities? Our handy free guide will provide you with 10 tips and insights to help you reduce those issues. DOWNLOAD FREE
The Challenge
Lovetts Solicitors client is a major property services company.
It had a debt owed by one of the largest heating manufacturers and suppliers of boilers. The client was contracted to fit boilers for a third party at a fixed price per boiler throughout the term of the contract. The client’s contract with the debtor likewise provided for supply at fixed prices. The debtor did not honor that agreement, raising the price each year, but the client had to honor its agreement with the third party to avoid a breach of contract and reluctantly paid for the boilers at the increased prices.
The Solution
We were asked to advise on whether it was possible to reclaim the sums overpaid which the client estimated to be around £66,000. It had attempted to recover these sums itself for over 2 years without any success. Following the advice given, it was agreed that Lovetts should negotiate with the debtor.
The Benefit
Lovetts wrote to the debtor setting out the basis of the claim and the law that applied. The debtor replied to Lovetts accepting liability. Lovetts subsequently obtained information from the debtor which helped the client reconcile its account, establishing that the actual amount due was in fact just over £80,000.00. In addition to the debt, Lovetts secured interest of around £4,000 resulting in the client receiving payment of just over £85,000 in settlement.
The Challenge
Lovetts’ client had supplied sleeves for covering water bottles to a drinks company. The drinks company then went into administration without paying their supplier’s debt. Administrators were appointed. After the drinks company went into administration, Lovetts’ client went to inspect its stock – under the control of the Administrator – in exercise of a retention of title (RoT) clause in its terms and conditions. Our client asserted its right to the goods under the RoT clause, as it had good records to support the claim. The administrators disputed the fact that the retention of title clause applied. Furthermore, it appeared that not all of the stock identified by the client at the inspection remained in the administrators possession – the administrator had clearly used some of our client’s stock.
The Solution
First of all, Lovetts argued successfully that the RoT clause did apply. Secondly, Lovetts’ identified a potential claim for conversion. If proven, this would include damages for the wrongful interference with the client’s goods, as the administrators had not obtained an order from the court giving it permission to sell the clients good. In any event, the administrators would have had to remit payment to the client for any of the clients goods sold even if the Administrators were given permission to sell them. So both arguments succeeded.
The Benefit
Although the debt was disputed, the administrators eventually conceded and the client received payment of around £42,000 when it appeared initially they would receive nothing.
To find an entry press Ctrl + F, enter the term and click the Find Now or Next button.
| Expression | Meaning |
|---|---|
Acknowledgement of Service | A document by which the defendant can acknowledge receipt of the Claim. The usual reason the defendant files this is to extend the time for defence by 14 days |
Administration | Administration is an insolvency procedure under which an Administrator is appointed to try and rescue an insolvent company |
Administrative Receivership | A lender who holds a floating charge dated before 15/9/2003 can appoint someone to take control of the company to recover the money due to the lender |
Admission | A document by which the defendant admits owing all or part of the debt |
Admission of Part | If a debtor admits part of the debt the Claimant must choose whether to accept that amount in full settlement. If he chooses not to do so he can pursue the rest of the claim and apply for summary judgment for the admitted amount |
Affidavit | A document in which a witness sets out their evidence and confirms it with an oath |
Allocation Questionnaire | See Direction Questionnaire |
Alternative dispute resolution | Methods of resolving disputes otherwise than through court action |
Arbitration | Arbitration is a method of resolving a dispute without going to court. The parties to a contract can agree that, if there is dispute, they won’t go to court but will appoint someone themselves to decide the case for them |
Bailiff | A bailiff is a county court officer who is employed mainly to enforce county court judgments by removing and selling a debtor’s goods |
Bankrupt | An individual becomes bankrupt when they cannot pay their debts and the court makes an order putting their assets under the control of the Official Receiver |
Bankruptcy petition | The document by which proceedings are started to make an individual bankrupt |
Base rate | The interest rate set by the Bank of England which is used as the basis for other banks’ rates |
Case management | The process by which the court manages cases before trial |
Charging order | An order securing a judgment debt on property – rather like a mortgage |
Claim Form (N1) | Document which starts court proceedings |
Claim Production Centre (CPC) | The automated centre in Northampton for issuing Claims electronically |
Claimant | Person who brings a Claim |
Consent Order | An order signed by all parties which demonstrates an agreement to the terms contained within it |
Counterclaim | A claim brought by the defendant against the claimant |
County Court Bulk Centre (CCBC) | The automated centre in Northampton for issuing Claims, entering judgment and issuing warrants electronically |
CPR | The Civil Procedure Rules 1998 |
CVA / Corporate Voluntary Agreement | A CVA is an arrangement agreed by at least 75% of a company’s creditors to enable the company to survive and trade its way out of difficulties |
Default judgment | Judgment obtained because the defendant has not filed a defence |
Defence | The document which sets out the defendants reasons for not paying |
Defendant | The person against whom an action in brought |
Direction Questionnaire | A document the court sends out when a defence has been filed. It seeks details of the case so the court can decide to which track to allocate the case. Formerly known as an Allocation Questionnaire |
Discontinue | To stop an action |
Fast Track Case | A claim for £10000 – £25000 |
Freezing Injunction | A freezing injunction is an order that stops someone moving their assets out of the country or prevents them dealing with their assets, wherever those assets are |
Goods and Services Claims | A Claim Form issued by a claimant where one party has provided goods and/or services to another party but the invoices remain unpaid. |
High Court Enforcement Officer | From 1st April 2004 High Court Enforcement Officers took over from the sheriff the enforcement of judgments |
Information Order | Formerly known as Oral Examination. An order requiring a debtor to attend court and give details of their means |
IVA / Individual Voluntary Agreement | An IVA is an arrangement agreed by an individual’s creditors to enable the individual to continue working without going bankrupt |
Judgment (N30) | Judgment is the formal confirmation from the court that the money is due to you. A judgment enables you to take steps to “force” the debtor to pay |
Late Payment Demand | A letter before action issued against a company where interest and compensation is being claimed under The Late Payment of Commercial Debt (Interest) Act 1998. The Act only applies to the late payment of trade to trade debts. |
Late Payment Interest and Compensation | Interest and Compensation payable under The Late Payment of Commercial Debt (Interest) Act 1998 |
Letter before Action (LBA) | A letter warning the debtor that court proceedings will be started if the debt is not paid |
Limitation period | The period within which a claim must be brought – usually six years in the case of a debt |
Listing Questionnaire | A questionnaire which the court uses to decide how to list the case for hearing |
Mediation | Process by which parties to a court case are helped to reach a settlement. The mediator is independent and cannot force the parties into settlement. |
Money Claims | A Claim Form issued for the recovery of money owed to a claimant – this could be for unpaid invoices, money lent but not returned, or for the overpayment of salary. |
Moratorium | When a CVA is being proposed, and before it is approved, papers can be lodged with the court and the company will be protected from hostile action for 28 days (can be extended by 2 months) |
Multi-Track Case | A claim for over £25000 |
Part 20 claims | Another name for a counterclaim. Alternatively the name for a connected claim against a third party. |
Part 36 offer/payment | A formal offer or payment into court under Part 36 of the Civil Procedure Rules. These are offers to settle a case. They can have severe cost consequences if rejected. |
Particulars of Claim | Document setting out details of what the Claimant claims. In debt recovery cases the particulars of claim are usually set out on the back of the Claim |
Pre-action protocol | A list of steps to be taken by the parties before they will be permitted to take Court proceedings |
Register of County Court Judgments | The register of county court judgments kept by Registry Trust Ltd |
Registered office | The address a company must register at Companies House at which documents can be served |
Registry Trust Ltd | The body that keeps the register of county court judgments |
Regulated Agreement under the Consumer Credit Act | Most types of credit and hire agreements are regulated by the Consumer Credit Act 1974 which gives a borrower some important rights (see below). An agreement covered by the Act is called a regulated agreement. An agreement will be regulated if:the borrower is an individual, not a company; andit is not an exempt agreementIf you signed a credit agreement before 6 April 2008, it could only be a regulated agreement if it was for credit under a certain amount. |
Search Order | An order giving someone access to premises for the purpose of preserving evidence |
Set aside | An order of the court cancelling a judgment or order or a step taken by a party in the proceedings |
Sheriff | Sheriffs used to be responsible for enforcing High Court judgments. They have now been replaced by High Court Enforcement Officers |
Small Claims Costs Rules | In Small Claims the court will normally only award the court fees, the solicitor’s fixed costs endorsed on the Claim Form and witnesses’ expenses by way of costs. If the Defendant has acted unreasonably the court can make a bigger costs order but this is unusual. Lovetts’ fixed price products for Small Claims often make litigation economic where it would otherwise not be |
Small Claims Track Case | A claim for under £10000 |
Statement of case | A general term for the documents that set out a party’s case. The particulars of claim and defence are both statements of case |
Statement of truth | A declaration in a Statement of Case or Witness Statement confirming that the person giving instructions has an honest belief in the truth of the document |
Statutory Demand | A formal demand for payment of a debt made under the Insolvency Act. A statutory demand must always be served before a bankruptcy petition can be presented |
Stay of Execution | An order made by the Court which will suspend the execution of a court order, i.e. enforcement of a Judgment Order |
Stay of Proceedings | In cases issued through the CCBC the court puts the case on ice if the Defendant admits part and the Claimant fails to tell the court that it wishes to proceed for the full amount. The Claimant can only proceed with the permission of the court which may not be granted |
Strike out | An order that the whole, or part of a party’s case be deleted so that it can no longer be relied upon. If the Defence is struck out the Claimant is entitled to default judgment. |
Summary judgment | An application made by one party to get judgment against the other party before the full trial on the basis that the other party’s case is very weak |
Third party debt order | Formerly known as a garnishee order. An order requiring someone who owes the defendant money to pay the claimant instead |
Transferring judgment | The process of transferring a court judgment to the High Court so it can be enforced by a High Court Enforcement Officer |
“Unless” Order | Typically issued against a party which has failed to comply with a previous order of the court. It says that unless the party complies by a particular time and date his case will be struck out automatically. Breaching an “unless order” is usually fatal to a party’s case. |
Warrant of execution | Document issued to a county court bailiff directing him to enforce a judgment |
Winding up petition | The document by which proceedings are started to wind up a company |
Without prejudice | Negotiations are usually conducted “without prejudice”. This means that, if the negotiations fail, neither party can refer to them at trial |
Witness statement | A document in which a witness sets out their evidence. A witness statement is broadly the same as an affidavit except that the maker has not confirmed it with an oath |
Writ of fi-fa/Writ of execution | Document issued by the court directing the High Court Enforcement Officer to enforce a judgment |
Glossary of Scottish Terms
| Expression | English Equivalent |
|---|---|
Action | Claim |
Defender | Defendant |
Diligence | Judgment |
Poinding | Instructions to High Court Enforcement Officer or bailiff |
Pursuer | Claimant |
Sheriff | Judge |
Take advantage of the new Late Payment of Commercial Debts Regulations 2013 to recover all your legal costs, giving you virtually cost-free debt recovery.
How Come?
Many people have heard of the Late Payment Act, which was introduced in 1998 to encourage businesses to pay their invoices on time. This Act allowed creditors to charge interest at a rate of 8% above base on overdue invoices as well as adding a sum of between £40 – £100 per invoice as compensation for the creditor’s costs of recovery. In 2011 the European Union passed a Late Payment Directive. This required all member states to harmonise their respective late payment legislation to ensure a consistent playing field across the whole of Europe. As a result, in March 2013, the Late Payment of Commercial Debts Regulations 2013 were passed, which updated the original 1998 Act to ensure it was compliant with the 2011 EU Directive.
The Vital Clause
The Regulations contain one clause in particular that is highly significant for creditors. From March 2013 onwards, if a creditor has to chase a debtor for an unpaid invoice they are now allowed to claim their ‘reasonable costs of recovering the debt’ rather than being restricted to a fixed sum of compensation as under the original Act. Government guidance indicates that this is intended to cover the reasonable costs of using a third party, such as solicitors or agents, to collect the debt.
So?
What does this mean for you? Putting it simply, when you are pursuing an overdue invoice, you are now allowed to include all your reasonable costs of recovering a debt, including any administration or legal fees, to the extent that the fixed amounts of compensation do not cover your costs. It is important to be able to quantify those costs, and using a third party makes this much easier.
The only limitation is that the costs and compensation together must be ‘reasonable’ and the contract terms must not provide another “substantial remedy” for the creditor’s compensation, costs or interest.
Simple To Claim
Here at Lovetts we know that our clients are always looking for ways to reduce their legal costs. That’s why we have updated our software to automatically add reasonable costs of recovery to the debt whenever a claim is issued through CaseManager, our unique online case management system. We have calculated appropriate costs which in most cases will cover all the legal fees and costs of issuing a claim – normally these would have been irrecoverable. Provided your debtor pays in full this means you effectively get free debt recovery!
What Else?
That’s not all. If your terms of business already include a clause allowing you to charge an administration fee from your debtors, then although this means you won’t be allowed to take advantage of the new Late Payment Regulations, we can now update our system to automatically make your own contractual costs part of any claim you issue through CaseManager.
More?
If you’d like to know more about how to claim your costs of recovery, or you are unsure on what your Terms of Business actually allow you to claim and want advice from one of our solicitors, don’t hesitate to give us a ring on 01483 457500. Clients will not be charged for such preliminary advice.