Our client, of all sizes, have at some point experienced a debtor who is not willing to pay their outstanding invoice for work which was undertaken for them or goods supplied to them. Often debt recovery takes away key personnel’s focus from the business as the debtor is often resolute in refusing to pay their invoice. We attempt to take away the distraction from key personnel and provide our clients with a cost effective solution in resolving the matter.
We are experienced in providing:
- Letters before action;
- Issuing claims for outstanding debts;
- Enforcing judgement;
- Instructing bailiffs;
- Attachment of earnings;
- Freezing assets of the debtor; and
- Charging the debtor’s land or property.
There are a number of options to consider when attempting to recover a debt, including:
- Writing off the debt;
- A negotiated settlement or mediation;
- Insolvency proceedings; or
- Court proceedings.
Our clients have the benefit of knowing that they will receive a personal and proactive service in often complex and challenging debt recoveries.
Should you need any debt recover legal advice then please contact us on 01274 924200 or email us at debtrecovery@bakerreign.co.uk and a member of our debt recovery team will contact you.
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It is always open to a business to write off the debt. Often this is considered when the cost of pursuing the debt outweighs the amount involved. Alternatively, it may be the case that the business wishes to preserve the commercial relationship between itself and its debtor. This is sometimes the case because the commercial relationship between the parties is worth considerably more than the debt itself. Alternatively the business may undertake a credit check of the debtor and learn that the debtor is simply unable to pay its debts and therefore pursuing the debt may be a futile exercise.
A negotiated settlement can be undertaken by either an informal dialogue or by a formal mediation.
Informal dialogue
A business should consider whether a debt should be pursued through a negotiated settlement with its debtor before embarking upon a more formal and litigious recovery route. Often this can be a more cost and time efficient manner of pursuing the debt and can often result in good returns for the business. The negotiations are usually conducted through representatives of the respective parties and can be conducted flexibly. The negotiations can be conducted either in person, verbally, on the telephone or via email. By pursuing a less confrontational method of debt recovery it is often the case that the commercial relationship between the parties can be preserved.
Mediation
Mediation is a more formal step than engaging in informal dialogue. However, it is the step before pursuing formal litigation. Mediation requires a third party, the mediator, to help both parties work towards a negotiated settlement. The mediation would be conducted within a formal and confidential forum. As the mediator is trying to bring both parties to a negotiated settlement the forum of mediation is quite flexible.
Without prejudice and full and final settlement
When attempting to bring the matter to a negotiated settlement it is important to ensure that the correspondence relating to the recovery of the debt is both “without prejudice” and in “full and final settlement” of the debt.
The reason why it is important to mark the correspondence without prejudice is to ensure that any genuine attempt to settle the matter before it is put before a Court is then not used in evidence in Court should the matter become litigious. This also applies to matters discussed verbally. It should be made clear before any verbal discussions that such matters are without prejudice.
The debtor will want to ensure that the negotiated settlement is in full and final settlement of its obligations in relation to the specific debt which the business was seeking to recover.
Statutory demand
This is a written notice which must be in the prescribed form which demands payment of the debt owed by the debtor company. The statutory demand includes the following details:
- The amount owed;
- The date by which payment must be made;
- The consequences of ignoring the statutory demand;
- Details of whom the debtor can contact regarding the statutory demand; and
- The right of the debtor company to dispute the statutory demand.
The debtor then has 21 days to satisfy the demand. Alternatively, the debtor has 18 days to have the statutory demand set aside or cancelled.
If the statutory demand is ignored then the pursuing business may issue a winding up petition against the debtor company.
Winding up petition
This should be considered as a last resort when other attempts at recovery of the debt have been unsuccessful and the commercial relationship between the parties has broken down beyond repair. The company seeking the winding up of the debtor company would file the petition at Court. The Court would then make an order than an administrator be appointed to conclude the affairs of the debtor company. If the debtor company is insolvent then not all of the creditors will be paid and it must be noted that this includes the petitioning company. Once the administration has concluded the debtor company will be dissolved and therefore will no longer be in existence.
Pre-action
Prior to the issuing of Court proceedings the parties are required to have complied with the pre-action protocols or the practice direction – pre-action conduct. If this is not followed the Court may impose cost sanctions for failure to comply and therefore it is essential that this is complied with. However, it must be noted that the Court will not be overly concerned with minor transgressions. However the Court will consider the proportionality of the steps taken by the parties and the urgency of the matter. It is also worth noting that should a party refuse to engage in a form of alternative dispute resolution before an action is started then the Court can issue sanctions against that party.
Issuing proceedings
Prior to issuing proceedings it is expected that the pursuing company has attempted other means of settling the dispute. It is also important that prior to issuing a claim that an analysis of the financial position of the debtor company is undertaken. Therefore, at the outset this will allow the issuing party to ascertain whether the debtor company would be able to satisfy the judgement, should one be ordered. The contract, should one be in existence, between the parties should also be reviewed to ensure that there are no contractual terms which dictate how the dispute should be resolved.
Although the Court procedure is relatively simple for unpaid and undisputed invoices, the circumstances surrounding the case can make the process both costly and timely.
There are Court fees payable upon the issue of a claim and the amount of the Court fees varies depending upon the amount being claimed. There are also Court fees payable at different stages of the claim and should the claim be successful there will be costs to be paid at enforcement.