Dealing with overdue invoices can be a frustrating experience. However, there are effective steps you can take to tackle this common issue. In this blog post, we’ll explore essential strategies that will help your business collect late payments and maintain a healthy cash flow.

Understanding the Importance of Collecting Overdue Invoices

Late payments can disrupt the financial stability of your business, affecting your ability to pay suppliers and meet expenses on time. Unpaid invoices not only strain cash flow but also consume valuable time and resources that could be better utilised elsewhere. By promptly addressing overdue invoices, you demonstrate the importance of timely payment to clients and maintain a healthy relationship with them. 

Step 1: Communicate Clearly and Early

When it comes to dealing with late payments and overdue invoices, clear communication is key for businesses. The first step in addressing this issue is to communicate openly and early with your clients or customers.

Initiate a friendly reminder about the outstanding payment as soon as it becomes overdue. Be polite but firm in your message, clearly stating the amount owed and the due date.

Utilise various communication channels such as emails, phone calls, or even face-to-face meetings if necessary. By being proactive in your approach, you can show that you are serious about collecting the overdue invoice while maintaining a professional relationship with your client.

Clearly outlining the consequences of non-payment can also serve as a motivator for prompt settlement.

Step 2: Set up a Payment Plan

Setting up a payment plan can be a proactive approach to facilitate the recovery process. By offering flexibility in how the debt can be repaid, businesses demonstrate understanding while also ensuring you receive what is owed to your business.

A well-structured payment plan should outline clear terms and deadlines for repayments. This clarity helps both parties stay on track and avoids any confusion or misunderstandings along the way. It’s essential to communicate openly about expectations and make sure all terms are agreed upon by both parties involved.

Step 3: Consider Legal Action

Sometimes the case may require more serious measures. This is where considering legal action can be a necessary step for UK businesses.

Legal action involves taking formal steps to recover the debt owed to your business through the court system. It sends a clear message to the debtor that you are serious about collecting what is rightfully due.

Before pursuing legal action, it’s important to review all documentation related to the debt and seek advice from debt recovery solicitors. We can provide guidance on the best course of action based on your specific circumstances.

Step 4: Utilise Debt Collection Services

By partnering with reputable debt recovery solicitors, you can increase the chances of recovering the money owed to you while maintaining professional relationships with your clients. As professionals we understand the legal aspects of debt recovery and can navigate complex situations efficiently.

Timely action is crucial when dealing with late payments and overdue invoices. Implementing these essential steps in your collection process will not only help you recover what is rightfully yours but also ensure smoother cash flow management for your business. Stay proactive, communicate clearly, consider payment plans, explore legal options if necessary, and leverage debt collection services to maximise your chances of successful debt recovery in the UK market.

If you’re unsure if your business debt is worth pursuing, check out our recent article here.

Spire Healthcare Limited v  RSA [2022] EWCA Civ 17

Insurance policies commonly contain an aggregation clause, providing that two or more claims are to be treated as a single loss for the purpose of the deductible and policy limit where they are linked by a contractually-defined unifying factor.  Such clauses can have a major impact on the amount recoverable.

The issue in this case was whether losses must be aggregated when they arose from two very different  types of breach of professional duty by a single individual.

The Facts

Mr Paterson was a consultant surgeon at hospitals managed by Spire for some years, until he was suspended from practice by the General Medical Council.

A number of former patients, both private and NHS, who had been medically required to undergo mastectomies, claimed that Mr Paterson failed to remove all breast tissue, thereby exposing them to an unnecessary risk of recurrence and metastasis.  Mr Paterson’s motive for this practice of performing sub-total mastectomies, or “STMs”, was never adequately explained, although he may have regarded it as “cleavage sparing”.  The psychological and sometimes also the physical effects on the claimants were profoundly damaging.

Meanwhile, it was found, in relation to a second group consisting mainly of private patients, that Mr Paterson had falsely reported pathology test results as indicative of the presence of cancer and then carried out unnecessary surgical procedures on the patients concerned.  His motivation here appeared to have been financial gain.  The victims of this practice suffered assault and mental distress as well as economic loss.

In all, some 750 former patients made claims against Mr Paterson, Spire and the Foundation Trust that employed him for NHS work. The claims were managed in the form of group litigation, which was settled when a compensation fund was set up for the victims.  Spire’s outlay by way of defence costs and contribution to the fund was over £37m. 

The Insurance Cover

Spire had a combined liability insurance policy with Royal & Sun Alliance, covering its legal liability for accidental injuries arising out of medical negligence at its hospitals.  The policy provided that,

“The total amount payable by [the Insurer] in respect of all damages costs and expenses, arising out of all claims during any Period of Insurance consequent on or attributable to one source or original cause irrespective of the number of Persons Entitled to Indemnity having a claim under the Policy consequent on or attributable to that one source or original cause shall not exceed the Limit of Indemnity stated in the Schedule.” (Our underlining)

The limit of indemnity stated in the policy schedule was £10m and the policy was subject to an overall limit of £20m.

Whatever Mr Paterson’s motives may have been in carrying out the procedures, it was common ground that the injuries to patients were accidental from the perspective of Spire.   The sole issue before the Court of Appeal was whether the insurer could aggregate all the underlying claims together and rely on the limit of indemnity per loss of £10m, or whether there had been two originating causes of the losses and Spire could recover up to the overall policy limit of £20m.

The Decision

It is well established that clauses specifying that losses are to be aggregated where they are attributable to one original cause require the widest possible search to be made for a unifying factor in the history of the claims in question.  The original cause does not itself have to be an insured risk under the policy and it need not be the sole cause, but there must be a causative link between the original cause and the loss.  Moreover, the “original cause” as identified must not be expressed in such general terms that it fails to make clear the causal link between the original cause and the claim.

In Cultural Foundation v Beazley (2018) the Commercial Court had held that a claim against an architect for negligently designing defective structural engineering did not arise from the same original cause as a claim for failing to include in its designs detail and provision for the efficient execution of the project, which impacted only on cost. The two claims could not both be characterised in general terms along the lines of “poor initial design” since this was not useful in the context of searching for an effective original cause.

In the present case, the Commercial Court adopted the same approach, by focusing on Mr Paterson’s differing motivation: for Group 1, the original cause of the claims was Mr Paterson’s wrongful adoption of the practice of carrying out STMs; for Group 2, the original cause of the claims was Mr Paterson’s dishonest practice of  misrepresenting the need for  surgery.  Therefore, Spire was entitled to claim for two full losses, i.e. for £20m.

Decision of the Court of Appeal (CA)

However, the Court of Appeal analysed the matter from the perspective of how the claim was covered under Spire’s insurance.  The insurance did not cover any responsibility Spire might have for the negligence of surgeons or consultants.  Therefore, Spire’s ability to claim under the insurance depended on establishing its own negligence or the negligence of employed persons other than Mr Paterson.  This it did by persuading the insurers that (a) it was liable for the acts and omissions of one of its employees who facilitated and failed to report Mr Paterson’s conduct, (b) it had failed to investigate Mr Paterson’s conduct and take action and (c) it had breached an implied term to provide services to patients with reasonable skill and care. 

Based on this analysis and the caselaw requiring the widest possible search to be made for a unifying factor, the CA held that the Commercial Court’s decision had been wrong because the fact that Mr Paterson may have had differing motives in carrying out the injurious acts, and the fact that the claimants were in groups, had no bearing on Spire’s liability for the injuries sustained in consequence of the surgery that was carried out.  The CA held that the claims against Spire were all attributable to one original cause, namely Mr Paterson’s conduct in disregarding the welfare of his patients and performing operations on them without their informed consent. Therefore, Spire was only entitled to recover for one loss, up to the per loss limit of £10m.

For further information, please contact Wendy Miles, Chris Earl or William Sturge at Lovetts.

Lovetts online client portal, CaseManager is a unique case management portal which allows a client to have complete control over the debt recovery process. CaseManager allows clients to instruct Lovetts Solicitors and view their cases 24/7. To ensure CaseManager remains a market leading client portal for debt recovery, Lovetts is continually looking to enhance and develop it. Accordingly, Lovetts recently sent out a client satisfaction survey in order to gather our clients valuable feedback.

The results of the survey are detailed below and the feedback will enable Lovetts to provide our clients with the features and updates that they want to see. At Lovetts we want to make the debt recovery process as simple and stress free as possible. Accordingly 60% of clients that took part in the survey rated CaseManager’s ease of use either 4 or 5 stars out of 5.

66% of clients said they check case information either every time or most times that they login to CaseManager. With the remaining 33% saying they sometimes check case information. For us, this shows that this functionality is really useful and is time effective for both the client and for Lovetts as clients can simply login to their account and have their case information within seconds.

On the flip side we can see that 79% of clients that took part in the survey said that they never view auditing information or search for legal resources. Therefore this is something that we may look to remove.

Most of our clients (75%) told us that they use CaseManager either daily, weekly or monthly with the remaining 25% using CaseManager yearly. CaseManager is so useful for many different reasons, not just instructing us on a case. Clients are able to check the status of cases, run reports, make changes/updates to their account and much more on CaseManager at any point in the day. Therefore, this result is assuring to see as we can imply that the information provided on their is useful for clients.

We would like to say a huge thank you to all of the clients that took part in our survey and allowed us to gather some valuable information which can be used to improve your CaseManager experience.

For every survey completed, Lovetts donated £2 to Oakleaf, which is a mental health charity Lovetts supports. They carry out fantastic work and Lovetts would like to thank all the clients that participated in the survey.

If you have any questions above the above please do not hesitate to contact us at [email protected]

ABN Amro Bank v RSA and Others (Court of Appeal, 2021)

One of the less attractive features of insurance from the policyholder’s point of view is that, when it comes to making a claim, insurers can raise the defence of misrepresentation of the risk or breach of a ‘warranty’.

However, it is possible, when buying insurance, to gain greater protection against claims being declined, by inserting a so-called non-avoidance clause (‘NAC’) into the terms and conditions of cover.  When the insurance market is soft (i.e. hungry for business), this may not be expensive to obtain.

Duties on the purchaser of insurance –  To explain, the law used to be that an insurance was a contract of utmost good faith, which insurers could avoid (i.e. rescind the contract) on the grounds of non-disclosure or misrepresentation of any matter material to the underwriter’s evaluation of the risk.  Meanwhile, a breach of a warranty either suspended or actually terminated cover.

Consumer insurance – In recent years, certain protections have been introduced by statute.  Thus, individuals who buy insurance for purposes mainly unrelated to their business now have the benefit of the Consumer Insurance (Disclosure and Representations) Act 2012.  Put very broadly, in the area of providing information to the insurer this Act modifies the law such that the consumer’s duty is to take reasonable care not to make a misrepresentation (for example, when completing a proposal form) before the contract is entered into or varied.

Non-consumer insurance – Other types of insured, i.e. those taking out commercial non-consumer policies, have the benefit of the Insurance Act 2015 (which covers consumer insurance as well).  For both types of insureds, the  characterisation of utmost good faith has been removed.  However, and again put very broadly, here the pre-contractual duty to provide information is re-cast as a duty of fair presentation, requiring the insured to disclose every material circumstance which the insured knows or ought to know; failing that, the insurer must be provided with sufficient information to put a prudent insurer on notice that it needs to make further enquiry for the purpose of revealing those material circumstances. 

Although the legislation is intended to ensure a better balance of interests between policyholders and insurers, the provisions in the 2015 Act specifying what an insured is taken to know, or ought to know in the sense of what should have been revealed by a reasonable search of information available to the insured, could provide insurers with a basis for declining a claim.  It may not be easy for an insured to be confident that a reasonable search of available information has been made, as such a search could involve having to seek information from employees or third parties and an evaluation of what circumstances are material in the context of the proposed insurance.

Under both statutory regimes, new remedies are available to the insurer in the event of the insured’s breach of duty, such as a lower level of indemnity or amended terms of cover.

Non-avoidance clauses (‘NAC’s) – Given these potential difficulties, various forms of clause have been developed for policyholders to insert into the insurance, to the effect that insurers will not seek to avoid, or seek damages, for non-disclosure or misrepresentation or to rely on breach of warranty, this being subject to a proviso permitting insurers to use their remedies in the case of deliberate or fraudulent misrepresentation or non-disclosure. 

Such clauses are effective in accordance with their terms.  However, they are in the nature of exclusion clauses.  Accordingly they will be construed strictly against those they protect. 

In particular, in order to be effective under judicial scrutiny, the drafting of such clauses needs to match the statutory regime now operating. For example, it may be prudent to provide specifically in a NAC that insurers will not decline cover on the grounds of (a non-fraudulent) failure to undertake a reasonable search of available information.  Also, to provide that insurers’ waiver includes all of the various alternative remedies now available to them and not just avoidance.

Cases on non-avoidance clauses

The caselaw is building up to clarify the meaning and effect of NACs.  For example,

Lovetts’ comment

This note is intended to provide guidance of a practical nature but should not be taken as containing legal advice or any recommendation as to any course of action. 

However, Wendy Miles, Chris Earl and William Sturge will be pleased to provide such advice should you require assistance in drafting any specific policy wording.

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:

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.

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:

* Source: 

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With new, annual contract arrangement

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.”