Why Sue?
If you are a business that is owed money and have exhausted all other avenues of debt recovery suing comes as a last resort. This indicates that you must consider thoroughly if the situation is right for you.
The Court Procedure:
Taking someone to court can be an effective method of debt recovery, as the procedures are designed to be quick and easy to operate.
Before you go to court, remember to:
- Find out about court procedures and your responsibilities to ensure that you are prepared.
- Seek legal advice, where appropriate to maximise your chance of success.
- Consider carefully whether you can afford the time and expense that court proceedings will take.
- Act quickly to ensure the best results for your claim.
Disputed and Undisputed Claims:
Before going to court, you must consider whether you are likely to win your claim.
Claims made to the County Court by businesses concerning money owed are rarely disputed, indicating that the court will usually grant a ‘Judgement’ as an order of payment.
Although this is the common outcome, if you think your customer may dispute your claim or if you are unsure of the claim’s success, it is best to consult a solicitor.
Alternative Dispute Resolution:
Alternative Dispute Resolution (ADR) schemes are not meant to replace the courts but should be considered before you take legal action.
Their benefits include:
- Being more flexible than court proceedings.
- Solving your problem faster.
- Being less stressful.
- Costing you less money.
- Mediation is often faster and cheaper than taking the matter to court. You can find out more about mediation at civilmediation.justice.gov.uk
How Likely is Compensation?
Before taking your claim to court, you must assess how likely it is for you to receive your money.
- Remember that the Court will not help if your customer has no money, assets or anything else of value.
- Also consider that if your customer is a limited company, the assets under the company’s own name may be limited.
- Although this won’t stop you obtaining judgment, it may make it difficult if you need to take further action to make your customer pay.
- If your customer is a limited company and you think that your customer may dispute your claim, remember that you do not have to sue the company at its registered office.
Other judgements against your customer:
If there are already court judgements against your customer, it may be less likely that your debt will be paid.
To clarify that the customer you wish to make a claim against has no other Unsatisfied (unpaid) Court Judgements you should:
- Search the Register of Judgements and Orders and Fines to establish if an individual or company has any other judgements against them.
- This can be conducted by the address of the company and the information can be obtained for a small fee.
The Time:
Before taking anything to court, you must consider how much time you can afford to spend pursuing the debt.
If a claim is not disputed:
- The process will be quick and straightforward, from issuing a claim form to receiving a judgement.
- The claim itself can be applied for by a form in the post or can be issued online at https://www.moneyclaim.gov.uk/web/mcol/welcome
- Although online submissions can be corresponded with through email, you are still required to dedicate time to moving your case forward as it is your responsibility to tell the court how you wish to proceed with your claim.
- It can be more costly and time-consuming if your claim is disputed and you may need to go to a court hearing.
The Cost:
One of the most sensitive areas of debt recovery is determining if the money that you will spend to instigate a claim is going to be rewarded with financial success.
If you make a claim, you must consider that:
- Even if you do not use a legal representative, you will have to pay the court for issuing the claim form.
- Further fees will also be payable if your claim is disputed.
- You will also have to pay fees if you need to enforce the judgement, if you are successful, this cost will usually be added to the debt owed.
- There is no guarantee that you will receive court fees.
If a claim is disputed:
A claim dispute occurs when your customer resides or conducts business in another court’s area. The claim will be transferred to your customer’s local County Court hearing centre for the hearing.
At this point, you and the defendant will fill out a directions questionnaire and if:
- Both the defendant and you indicate willing to attempt mediation.
- And you claim is for less than £10,000.
The Small Claims Mediation Service will then attempt to arrange a mediation before the claim is transferred to your customer’s local hearing centre. If your claim is transferred, it is still possible that a Judge may refer your case to the Small Claims Mediation Service in which case you will be contacted by HM Courts & Tribunals Service to explain the next steps.
Even if your claim is transferred, you can apply for it to be transferred to another County Court hearing centre if you have good reasons. You may have to pay a fee for this, but you should not have to attend court for your request to be dealt with.
Claiming Interest on Debt:
Under the Late Payment of Commercial Debt (Interest) Act 1998, you may be able to claim interest from when the date payment was due to the date of judgement. ‘Statutory Interest’ means that this can be attained even if your contract with your customer does not include interest. If you obtain judgement for £5,000 or more you may be entitled to interest on the judgement.
How can the Late Payment Act help businesses?
The Late Payment Act gives all businesses, irrespective of size, and public sector bodies, a statutory right to claim interest on late payment of commercial debts.
This means it can help businesses where:
- No right to contractual interest exists. The Late Payment Act provides businesses with the legal right to claim interest on commercial debts that are paid late.
- It can allow suppliers to claim an amount of compensation for reasonable debt costs unless the supplier is at fault.
- It can allow suppliers to challenge contracts that are imposed upon them which do not provide a substantial remedy for late payment. If you are a small or medium-sized business, appropriate representatives can be assigned to do this.
All businesses and public sector bodies can use and amend the act for their specific claims for late payments.
Commercial Debt:
This is a debt that results from a contract made between all businesses and public sector bodies, for a supply of goods or services. Businesses, irrespective of size, can claim late payment interests.
- In the contract, either company can be registered so long as both are engaged in business activity; contracts with consumers are not covered by the Late Payment Act.
- The Late Payment Act applies to any size of debt; compensation and interest for late payment accrue on unpaid commercial debts of any value unless contractual interest has been agreed.
- If you are a small or medium business, a representative body may go to court on your behalf to challenge a contract that doesn’t provide substantial compensation. In this case, it is important to seek legal advice.
If you are a business seeking court proceedings on issues surrounding debt recovery, it is crucial that you obtain legal advice. The process can reap rewards if a judgement is granted but can prove costly if your claim is not successful. However, if alternative methods prove fruitless, Ackroyd Legal can provide you with expert guidance on matters of debt recovery.
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