We can apply to the court for an order that the debtor attends before a court official to be examined about his/her/their assets and means.

These applications can be useful but are not common. They are time-consuming because you have to wait for an appointment, which may be given weeks or, normally, months ahead. The information given is of limited use and there may be difficulty serving the debtor. In addition the costs you incur are not recoverable from the debtor.

Who Is Questioned?

• In the case of an individual defendant, you will examine them.
• In the case of a company defendant you can examine any director, the company secretary or any other person in the company who should have a good working knowledge of the company’s financial status.

Style Of Examination

• The examination will normally take place before a court official, in which case it will be reasonably relaxed.
• If you feel the cost is worth it, we can instruct a solicitor or barrister to attend the examination and conduct a more rigorous cross examination. In exceptional cases, the examination can be held before a judge. In this case we would have to arrange someone to attend for you and conduct the examination.
• There is a standard form of questionnaire and the debtor will be asked to bring along the more obvious financial documents, such as payslips etc. If you want additional questions asked, or for the debtor to bring additional documents, we can ask for this in the application.
• If the debtor does not attend, the Court will make a further order against him compelling him to attend and he will be arrested if he does not. Again, we would need to instruct a process server to serve this order.

This is the most expensive enforcement option but sometimes the most effective. The first step, in the case of an individual, is to serve a statutory demand on the debtor personally. If he does not pay, or dispute the debt, within 21 days a bankruptcy petition can be presented. The real expense starts at this stage.

In the case of a company you can proceed straight to the winding up petition based on the unsatisfied Judgment. You can also present a Winding up Petition based on an undisputed debt without obtaining judgment or serving a statutory demand. This is very quick and can be very effective indeed.  

Winding up Petitions presented against a company are advertised in the London Gazette. After advertising the Petition, other creditors may become involved. These may include HMRC or other creditors. If other creditors do become involved, and the debtor wants to settle this petition, it may have to satisfy them as well, otherwise they may wish to take over the Petition. 

The important point to realise is that if the debtor makes payment after the date of issue of the Petition and the creditor informs the court that it does not wish to continue with the Petition, another creditor may take over the Petition. If a winding up order were subsequently made on behalf of a supporting creditor, you the creditor would have to repay to the liquidator the money recovered. This is because the Winding up Order dates back to the date of presentation of the Petition. This does not apply to payments made by a third party e.g. a director. 

The court fee and receiver’s deposit for a bankruptcy petition are £970.00. The court fee and receiver’s deposit for a winding up petition are £1477.00. In view of the size of these disbursements, we may ask for these to be paid before we present the petition. 

However, if the debtor lives in London, much of the work has to be done by personal attendance at the court rather than by post. If the debtor is unco-operative and evades service at all points, this can cause the costs to rise beyond this. Such proceedings are the most costly option but can have great advantages with certain types of debtor.

Preparation And Alternative Strategies

We always encourage our clients to use the full range of the legal recovery options available to them if they need to. The effectiveness of a letter before action that has been sent, or any deadlines you have given a debtor will be seriously compromised if you are not willing to take things further.

With all of that in mind, Lovetts are always happy to discuss the options available with their clients before they arrive at the claim stage. If a debt can be dealt with in a matter more appropriate to the circumstances at an earlier stage then we are happy to put it forward as a strategy. So what are the areas you should consider prior to claim and what preparation should you make?

1. Do I Have The Evidence?

Always be aware that a case may be defended. If a case is defended you will need the evidence to support it. Do you have the people and the documents to support yourclaim?

2. Do I Need To Take Advice?

Consider getting advice before starting proceedings if there is a serious dispute, or, you have doubts about your case. Remember you may have to pay the other party’s costs if you later want to stop the case.

3. Consider ADR (usually mediation)

If there is a real dispute, the court requires the parties to consider whether the dispute should be settled. If negotiations fail you should consider ADR (Alternative Dispute Resolution) before going to court.

The options here are:

• Mediation (a form of negotiation with the help of an independent person or body);
• Early neutral evaluation (where an independent person or body, for example a lawyer or an expert in the subject, gives an opinion on the merits of a dispute); or
• Arbitration (where an independent person or body makes a binding decision), many types of business are members of arbitration schemes for resolving disputes with consumers.

In many cases, you may not know there is going to be a real dispute until proceedings are issued.

However, generally, if there is a dispute, then unless summary judgment is possible, you should consider suggesting mediation before proceedings are issued.

It’s worth bearing in mind the following observations:

“Megarry J once described the law reports as charts of the wrecks of unsinkable cases. Because of its uncertainty and expense, prudent parties usually try to avoid litigation where possible. It has to be borne in mind that the “settlement value” of a claim is not an objective fact (or something which can be assessed by reference to an available market) but a matter of subjective opinion, taking account of all relevant variables. Often parties may have widely different perceptions of what would be a fair settlement figure without either being unreasonable. The object of mediation or negotiation is then to close the gap to a point which each finds acceptable” (Supershield Ltd v Siemens Building Technologies FE Ltd [2010] EWCA Civ 7 per Toulson LJ at para 28)

Mediation is the normal form of ADR. Mediation is designed to a solution which is mutually commercially acceptable at the time rather than work out the strict legal rights and wrongs of a situation.

“In so many cases? the best time to mediate is before the litigation begins. It is not a sign of weakness to suggest it. It is the hallmark of commonsense. Mediation is a perfectly proper adjunct to litigation. The skills are now well developed. The results are astonishingly good. Try it more often.” (Ward LJ in Egan v Motor Services (Bath) Ltd [2007] EWCA Civ 1002)

4. Consider A “Part 36 Offer”

This also applies where there is known to be a real dispute. If the debt is more that £5000, you should consider making an offer that complies with Part 36 of the Civil Procedure Rules. The offer says how much you will accept, including interest but excluding costs. If the offer is not accepted and:-

• the case goes all the way to trial, and
• you get a judgment which is the same as, or better than your offer,

you would normally recover around 80-90% of your costs from then on. If you don’t make a part 36 offer, the rule of thumb for costs is that you normally do well to recover two thirds of your actual costs.

You could also be awarded interest at up to 10% over base on both the money you recover and your costs.

A well pitched offer can therefore put some pressure on the late paying client to think very carefully before refusing it and forcing you to go to trial.

5. Is All In Order?

• If you are supposed to have a contract signed by the debtor, do you have it? Is it signed by the debtor?
• Have any disputes or queries been resolved or brought to a point where it is clear they can’t be resolved without going to court?
• Have any negotiations been dealt with?
• Has the late paying client promised payment or admitted the debt in anyway? If so, let us have a copy.

6. Terms Of Business

Some people are under the impression that a contract has to be in writing. It doesn’t.

Every order involves the parties making a contract. For example, a contract is created when someone places an order over the telephone. Where your company has printed terms and conditions they don’t just apply automatically to every order. They have to be part of the contract. They will be part of the contract if:

• The debtor has signed a written contract containing your terms (signing a fax sheet referring to terms on the back which aren’t transmitted isn’t enough)
• The late paying client signed up to your terms when completing your account application form either because the terms were on the back or are referred to in the application form. If your terms change after the debtor has signed the application form don’t forget the new terms have become part of the contract with the debtor in one of the other ways mentioned here!
• The terms were sent to the client before the order was placed so the client knows your terms of business – but see “Battle of the forms” below.

It is not enough for the terms to be on the invoice, your debtor has to have been told of them before the order was placed. However, the fact that your terms were on invoices for previous orders may possibly be enough to incorporate them into later orders.

If you are satisfied that you have duly considered all alternatives and have done the necessary preparation, than you can rest assured that you have done your best to ensure any claim issued is a success.

Note

This briefing paper is intended only as an indication of points you could consider and take advice on. You should always take professional advice on any particular situation or the drafting of your terms of business. This note is not legal advice so please don’t treat it as such.

Sending a letter before action (LBA) is only as effective as the creditor’s willingness to enforce it. The risk is that once debtors know you have no intention to carry out your threat of action, your front line weapon rapidly becomes increasingly ineffective.

You may be reluctant to make a claim due to worries about offending your larger clients because you are fearful of not getting further orders.  You shouldn’t be.

If you have tried every other avenue of approach with no success, it is worth remembering that a customer who is no longer paying your invoices is no longer a customer? They are a debtor.

So, What Are The Secrets To Cost Effective Claims?

• Know your client base! You should know your clients better than anyone; after all, you gave them the “loan” when you extended credit.  Keep your records up to date on a regular basis. Always keep in mind that situations change quickly and a company which was previously doing well can easily have cash flow problems if a large creditor gets into difficulties.  
• Know who the debtor actually is! This may sound a little odd but it’s not unusual for the actual debtor identity to be less than clear. Have you got the right name? Does the documentation support your assumption of who you are dealing with? Check who the debtor is very carefully, as getting it wrong can cause problems further down the line. 
• Ensure you have included all the names associated with the business. This is not an issue with a limited company but it can cause problems with a non-incorporated business. If you are issuing a claim against a non-incorporated business ensure you add the names of the owners. This ensures the business itself goes out of business you can pursue the owners themselves. 
• Make sure the debtor is still trading. Carry out a credit search – if the company already has unsatisfied county court judgments, there is a strong possibility it will not be unduly bothered by another.  If so, it may be worth considering insolvency proceedings as an alternative to the county court route, as long as the debt is not going to be defended. 
• Check that you have addressed all known queries or disputes before issuing a claim. The debtor may have spoken to a member of staff in another department or at a regional office about an issue with the service/product. Have you checked with the debtors usual contacts at your business? Sometimes, the customer goes back to the individual who sold them the product if they are unhappy, Check with the sales force in case they have had any feedback. 
• Stay rational and detached. It can be tempting to ‘punish’ a client, or act on a personal grievance. Avoid doing this. Irrational thoughts do not usually end in a happy result! 
• Get on with it! The old adage “speed is of the essence” is particularly true when recovering money.  The longer you leave it, the lesser the chances of a good recovery, hence debt recovery company’s that charge on a “no win – no fee basis” will charge commission based on the age of the debt.  The older the debt, the higher the commission. 
• Review your terms and conditions and make sure you include a term allowing you to recover your costs if you are forced to take action to recover what you are owed. You can also minimise your exposure to costs by instructing solicitors that operate on a fixed price basis.

None of this advice is rocket science but it is the difference between using the legal system cost effectively and finding yourself out of pocket.

Note

This briefing paper is intended only as an indication of points you could consider and take advice on. You should always take professional advice on any particular situation or the drafting of your terms of business. This note is not legal advice so please don’t treat it as such.

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

Things can only get better… 2013 Court Services Satisfaction Survey paints grim picture ahead of 25th CCUA Annual Conference, 15th October 2013
www.lovetts.co.uk

One year after a damning report on the state of the court service in the UK, a new satisfaction survey conducted by the CCUA (Civil Court Users Association) with the support of Lovetts Plc, the debt recovery law firm, has painted a similarly grim picture with either no improvement or a further deterioration in service levels. An overview of the findings has been released ahead of the CCUA’s 25th Annual Conference taking place at the Leicester Marriott Hotel on 15th and 16th October 2013.

The survey was completed by 49 major corporate and legal firms representing the UK’s largest users of the court service – the majority of whom use the court services on a daily basis. Their participation in itself demonstrates the depth of feeling about the service levels being experienced.

Respondents were asked to rate the quality of service provided by the CCBC (County Court Bulk Centre), local county courts and the CCMCC (County Court Money Claims Centre) over the 6 months from January to June 2013 and whether they had improved, stayed the same or deteriorated.

Brian Havercroft, Chairman of the CCUA said: “Last year we conducted the first ever satisfaction survey amongst court users. The findings were so shocking we wanted to repeat the exercise this year to establish whether any improvements had been made. To say this year’s survey responses are disappointing is an understatement. Feedback suggests there has been very little improvement and in some areas service levels have actually declined further. Staff knowledge at the CCBC is identified as a particular area of weakness with a marked deterioration in service levels compared to other aspects of the service. Just as an example, 2-5 minutes is the typical waiting time for phone calls to be answered by 24 of the firms and 12 of the firms who answered the survey typically wait over 5 minutes.”

The picture isn’t any better from the feedback on the local county courts. Just over 60% felt the speed and efficiency of services had worsened. Furthermore, 71% had experienced lack of response to correspondence and emails and over 60% had been inconvenienced by lost documentation.

Users of the CCMCC faced similar issues with problems experienced across all areas, however most worryingly the biggest concerns surrounded Claims and Judgments – the core purpose of their service.

Charles Wilson, Chairman of Lovetts adds: “Last year in a speech at the CCUA Conference, I reported on the dismal findings of the first survey – it was a very clear call for action and prompted a great deal of debate. It seems abundantly clear that the court service has failed to grasp the nettle and the reputation of many UK businesses continues to be unfairly damaged because of the failings of the system. It’s about time the court service got to grips with the management challenges it faces and acted on this damning feedback.”