The Complete Guide to Debt Recovery pptx

SEVEN Pre-trial and trial 53Introduction 53 A case in the fast track or multi-track 60The time taken for a case to come to court 63 EIGHT Introduction to enforcement 66 Introduction 66Th

T RECOVERY

ROGER MASON

B

How to use the legal system to collect debts

quickly and painlessly

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THE COMPLETE GUIDE TO

DEBT RECOVERY

ROGER MASON

All rights reserved No part of this

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This book relates exclusively to the legal system of England and Wales It should not be relied upon if the legal system of Scotland

or any other territory applies.

The author

Roger Mason is a Chartered Certified Accountant and a Chartered Secretary.

He started his career with the Midland Bank and worked for the Ford MotorCompany before holding a senior position in the film and television business

He was then, for 14 years, Finance Director and Company Secretary of aleading British greetings card company He has a great deal of practicalexperience, particularly in the legal aspects of credit control and in creditcontrol generally

Roger writes for several publications and has twelve books published Theseare on subjects related to credit control, accounting, business, companylaw and the duties of company directors and company secretaries He is

joint editor of the prestigious Financial Factbook which is published by Gee

Publishing Ltd

Roger presents seminars on the subject on which he writes, including the

very successful Legal Aspects of Credit Control Details of this and other

seminars can be obtained from UK Training (Worldwide) Ltd, 4/5 TheMayflower, Liverpool Road, Formby L37 6BU, Tel: 01704 878988

A very important campaign is waged every working day in numerousbusinesses across England and Wales It happens as directors, partners,proprietors, managers, credit controllers and their staff try to collect themoney that is owed to them or their organisations They almost always succeed

in the end, but all too often the end is much too long coming The culture

of slow payment continues to be a problem and for some it can be a life ordeath problem, at least in the business sense

These good people sometimes eventually turn to the courts and it is ally for one of two reasons Usually it is because the customer just will notpay, or at least will not pay within an acceptable period There is no realdispute though there may sometimes be a bogus one Everyone knows thatthe money is owing and it is necessary to threaten legal action Sometimes

gener-it is necessary to carry out the threat and gener-it is the part of the credgener-it controlroutine that comes after the last letter More rarely there is a real dispute.The customer believes that there is a good reason to withhold payment andthe supplier, with greater or lesser confidence, elects to let the courts decide

I have done all this and, to coin a phrase, I have felt their pain They have

my best wishes and this book is written with them very much in mind Ofcourse customers and defendants have a point of view as well and my bookshould be of use to them too It should also help people who want to usethe courts to recover outstanding loans and for other purposes

You will probably notice that I have used the word ‘he’ extensively Thisfollows the time-honoured, but not always followed, understanding that

‘he’ means ‘he or she’, unless the context indicates otherwise In fact, inthis book ‘he’ often means ‘he, she or it’ This would be cumbersome and

I hope that all readers understand No offence is intended

I have tried to provide a very practical guide that will help in many tions I hope that it does and my best wishes to everyone who consults it

situa-Roger Mason

Preface iv

Introduction 1

Will the customer evade his responsibilities? 2

Are you sure what terms govern the contract? 6Arbitration 7Negotiation 8The exercise of retention of title rights 9

Introduction 11The importance of acting decisively 11

What professional help will you employ? 14Your relationship with your solicitor or credit agent 15

The correct identification of the defendant 17

THREE Interest 19

Introduction 19

Introduction 25

Correct designation of the defendant

A detailed study of the claim form 31

FIVE The defendant’s options on receipt of a claim 39

Introduction 39

The permitted time for the defendant’s response 41

Introduction 46Documents received by the claimant 46

An outline explanation of the three tracks 47The importance of the allocation questionnaire 48

A detailed study of the allocation questionnaire 49Notification of allocation to a track 52

SEVEN Pre-trial and trial 53

Introduction 53

A case in the fast track or multi-track 60The time taken for a case to come to court 63

EIGHT Introduction to enforcement 66

Introduction 66The court order, payment by instalments

The Register of County Court Judgments 71Transfer of enforcement to a High Court Sheriff 72

NINE The enforcement measures 75

Introduction 75High Court Sheriff and county court bailiff 75

TEN Bankruptcy, winding up,

Introduction 85

Order of priority in the distribution of funds 90

Administration and its consequences 94

ELEVEN Progress of the civil justice reforms 102

Introduction 102

TWELVE Frequently asked questions 107

Questions about the issue and service of a claim 108

Questions about what happens after

APPENDIX

APPENDIX

is different in that it considers some of the issues involved in the decision

to take legal action or not It is not intended to put you off, but it is onlywise to make a sensible decision and to do so before costs are committed.The chapter starts by posing five important questions and then moves on

to studying four possible alternatives to legal action

Does the customer have the money?

Legal action is pointless if the customer does not have the means to paythe amount of the judgment awarded In fact it is worse than pointless becauseyou stand to lose the court fees and possibly other costs too There is atime-honoured saying that in matters of the law the only person who candefeat a very rich person is a very poor person If the customer does nothave the money, it is unlikely that a rich philanthropist will be found to provide

it and you had better not start legal proceedings

Despite this you would be wise to be very sceptical when you hear that thecustomer just does not have the money The claim is usually not true andthe means can often be found if the customer’s bluff is called, perhaps withdifficulty, perhaps by favouring one customer over another and perhaps

by paying in instalments If the business is a company and it is continuing

to trade, the directors may well be taking on personal liability if the claim

is true This should be pointed out to the directors, forcibly if necessary.The legal position may be summarised as:

‘Directors may be personally liable for debts if the company carries on trading when they know, or ought to know, that there is no reasonable prospect of avoiding insolvent liquidation.’

It may of course be difficult in practice to establish whether the customerdoes or does not have the means to pay Credit reference agencies may be

a source of good information Another good indicator may be the Register

of County Court Judgments This is covered in Chapter 8

Will the customer evade his responsibilities?

Unfortunately there are a few customers who will do everything possible

to ‘play the system’ They will use technicalities to delay the legal processand, after the defence has failed, to avoid or delay paying up after judgmenthas been obtained This may involve legitimate defensive tactics or it mayentail outright cheating, such as claiming that documents were never servedwhen that was not the case

Reforms made in recent years have made it harder to do this and the claimant

is more likely to be able to defeat these tactics Nevertheless, there is stillsome scope for such behaviour Regrettably it probably will not stop whenjudgment is obtained and it might not be easy to enforce the judgment andobtain actual payment Advice on this is given in Chapters 8 and 9

If you are in the right and if you are both patient and determined, you shouldsucceed in getting judgment in the end, and so long as the customer hasthe means to pay, you should get the money in the end It will just be anexasperating process So long as you correctly claim interest as described

in Chapter 3, you should have the consolation of getting that as well

Of course only a minority of customers would consider using such tactics.Let us hope that your customer list does not include many (or preferablyany) of them

What are the chances of winning?

Statistically you are very likely to win, especially if you define winning asobtaining judgment If, more realistically, you define winning as gettingpaid, your chances are less, but still quite good However, statistics can bevery misleading, as was noted by a man with one foot in a bucket of iceand the other foot in a bucket of boiling water He had just been told that,statistically speaking, he should be comfortable

The great majority of cases are not defended The defendant either pays,admits the debt and asks for time to pay, or does nothing at all All threepossibilities mean that the claimant can get either payment or judgment

by default In most cases there is no real dispute and the only problem isthat the customer will not pay in a reasonable timescale, unless he is forced

to do so In such cases there should be few doubts about issuing a claim.Much more thought is necessary if you face the prospect of a real disputeand a seriously defended claim This is a different matter Both sides willstart to incur costs and it could get expensive There will probably be acommitment of time as well Just possibly, a counterclaim maybe issued.This makes you a defendant too and closes off your option of abandoningthe claim and walking away

None of this is intended to deter you from pursuing your claim and seekingredress If you think that you are in the right, this is usually the best thing

to do Nevertheless, if a seriously defended case is in prospect, such a courseshould not be commenced lightly It would certainly pay to have a cool,dispassionate look at the case and perhaps seek another opinion, possiblyfrom a solicitor

Are you prepared for the costs?

Prospective claimants are often nervous of the costs that they will incurand of their prospects of recovering them from the defendant They areright to consider them, especially if the case is complicated with an uncer-tain outcome or if the defendant is likely to try and evade payment afterjudgment has been awarded Costs can be put into three categories as follows:

The main court fees are listed in Appendix 1 This is correct at the time

of publication but it might be wise to check that changes have not sincebeen made

A court fee is payable when a claim is issued and it will be on a slidingscale according to the size of the claim If a defence is entered and ifthe claim is for an amount greater than £1,000, the claimant must pay

a fee to file the allocation questionnaire There are other court fees, inparticular in the area of enforcement of judgment

Court fees must be paid in advance and the required action will nothappen if this is not done All court fees may be added to the claim andare recoverable from the defendant if the case is won or undefended.All properly claimed court fees for enforcement are recoverable fromthe defendant

Payment of the court fees is enforceable in exactly the same way as theoriginal debt However, you must succeed in obtaining payment fromthe defendant If you cannot do this, the court fees must ultimately bewritten off as irrecoverable

2 Solicitor’s costs

These may be added to the claim if, and only if, it is prepared by asolicitor So long as the claim is undefended or successful, they arerecoverable from the defendant Solicitor’s costs may also be claimed

in respect of certain other forms that may be necessary As with courtfees you must succeed in getting them from the defendant, and if thiscannot be achieved, they are irrecoverable

Solicitor’s costs are added to the claim according to a scale The amountadded to the claim may well not be the same as the amount actuallycharged by the solicitor

3 Legal and other costs

If the case is not defended, you will be responsible for your own legaland other costs These may be small or, if you have not employed asolicitor or other specialist, they may be non-existent

The starting presumption in a defended case is that the loser will paythe winner’s costs However, the judge has discretion and may take intoaccount the behaviour of the parties He may not award costs or onlyaward a reduced amount If the claim is for less than £5,000 and is decided

in the small claims track, legal costs will not be awarded but able out of pocket expenses may be awarded

reason-A further factor is that costs awarded will be according to an approvedscale, and may well be less than what has actually been paid It is anextremely rough guide but you may perhaps get two thirds of the amountactually spent Wide variations will be encountered and if you employvery expensive legal practitioners, the amount recovered will probably

be less than two thirds of the sum spent A final point is that you mustsucceed in getting the defendant to pay the amount awarded, and theusual enforcement remedies are available to you for this purpose Ifyou do not succeed, the costs awarded will be irrecoverable

All this is best illustrated with an example Let us suppose that both youand the defendant spend £3,000, and let us further suppose that full costs

are awarded and that the two thirds rule of thumb is a good guide for bothparties If you win you will recover £2,000 of the £3,000 spent and will be

£1,000 out of pocket If you lose, you must pay £2,000 to the defendant andpay all your own £3,000 costs, so you will be £5,000 out of pocket.Before leaving the subject you may be relieved to know that many solici-tors are willing to provide their services on a ‘no win, no fee’ basis This isexplained further in Chapter 2

Are you sure what terms govern the contract?

Sellers (and buyers too) often get it wrong and misunderstand the legalposition This does matter Sellers frequently think that because they haveprinted their conditions of sale on invoices and statements their terms willgovern the contract It is certainly a good idea to print seller’s terms oninvoices and statements, but by itself this is not enough What matters iswhat is agreed at the time that the contract is made Invoices and state-ments are issued after this has happened

A contract is made when an offer is unconditionally accepted This doesnot have to be in writing, though it makes it clear for all concerned if it is

To be absolutely sure the buyer should have signed to accept your tions of sale, either for just one order or in a general document coveringall future business It is not uncommon to be presented with ‘buyer’s termsand conditions’ and if you sign them you will be bound by the buyer’s terms

condi-If neither side signs or agrees the other side’s terms, it is probably the casethat the last assertion of terms will prevail It can all get very childish but

it is the law

There is no law that gives an automatic period of credit of 30 days or anyother such period The period of credit will be what is stipulated by thecontract or agreement It frequently happens that there are no terms becauseneither side has produced them If this is the case, there probably is noperiod of credit and the invoice will be due for payment immediately after

it has been issued, though (as with other points) custom and practice may

be a factor

If everything goes well, your terms and conditions may not matter much,but if things go wrong, it may be crucial that they have been accepted andgovern the contract For example, if you want to charge interest permitted

by the terms or if you want to rely on a retention of title clause, you willprobably have to show that the terms have been accepted You will certainlyhave to do so if you are dealing with a liquidator or receiver

a case Apart from anything else legal action usually ends a relationshipwith a customer, regardless of who wins Arbitration may cause less ill feelingand allow scope for future trading

Arbitration may be particularly suitable when a dispute is very technical

or specialised In these circumstances both sides may prefer to trust thejudgment of an appropriate arbitrator Some contracts contain clauses whichspecify that disputes will be settled by arbitration, and the law allows partieswho are not bound by such clauses to choose to resolve a dispute by arbitra-tion One of the organisations offering non-court based arbitration is:The Chartered Institute of Arbitrators

12 Bloomsbury Square

London WC1A 2LP

Tel: 020 7421 7444

The parties may at any time try to negotiate a settlement and they may dothis in any manner that they choose Negotiations can take place after aclaim has been issued as well as before, and they can even take place whilst

a trial is in progress Alternatively there is a formal system for making offers

to settle, and this must be employed using strict rules The system is known

as Part 36 Offers and Part 36 Payments and it is covered in Chapter 7 Thissystem can only be used after a claim has been issued

Negotiation does not have to be conducted on a without prejudice basis,but there are obvious advantages in doing so You should make it clear thatyou are negotiating in this way, and the words ‘without prejudice’ should

be prominently marked on any letters and perhaps on other documentstoo This means that if the negotiations fail, you will be free to present yourstrongest case in court and to press the full amount of your claim.Documents marked in this way may not normally be used without yourpermission, but they may be taken into account when costs are awarded.The law about acceptance of without prejudice offers may be summarised

as follows:

• a without prejudice offer may be withdrawn at any time before it

is accepted;

• if a without prejudice offer is accepted, it becomes a contract and

is binding on both sides;

• an oral agreement is usually binding on both sides, but it is soundpractice to confirm it in writing This avoids arguments about exactlywhat was agreed

The exercise of retention of title rights

There may be a clause in your conditions of sale that states that you retainownership of goods after delivery until payment has been made, and thatyou may repossess the goods if you have not been paid Such a clause willonly be of use if your conditions govern the contract and the pitfalls in thisarea were explained earlier in this chapter Of course such a clause is only

of use if you supply physical goods, as it is not possible to repossess a servicethat has been performed

Recovery of goods is almost always less attractive than payment but it maywell be worth considering, especially if you fear a possible bad debt Retention

of title clauses are usually very technical Yours may be an ‘all moneys’ clausewhich gives you the right to recover all goods if any payment is overdue,

or it may only allow you to recover goods that have not been paid for.Obviously, ‘all moneys’ clauses give better protection In exercising reten-tion of title rights you are likely to face the following limitations:

• Rights are only against the customer They cannot normally beextended to a third party who has brought goods in good faith

• Goods cannot be repossessed that have been materially altered Forexample, cloth that has been used to make clothes cannot be taken

• The seller is responsible for the transport costs

• Full credit must be given, even if the goods are old, soiled or out

of fashion

• Repossession may only be accomplished with a court order or withthe agreement of the customer You do not have the right of forcibleentry

Bad debt write off

At first sight this may seem a very poor alternative to legal action and itwill probably look that way on second sight as well, but there are two alter-natives that are even worse than writing off the debt One is to bring a caseand lose The other is to bring a case and win, but fail to enforce the judgmentand get actual payment In both instances court fees and perhaps othercosts must ultimately be written off, as well as the original debt

If VAT is included in the amount written off, it should be recoverable fromCustoms and Excise If the debt was incurred as a result of a transactionfor profit, then tax relief (income tax or corporation tax) may be claimed

at the top marginal rate This can be illustrated with an example of a baddebt of £11,750 (including £1,750 VAT) written off by a company that payscorporation tax at a marginal rate of 30% The after-tax cost of the write-off would be £7,000

It is a sound military axiom, reputedly first enunciated by the Duke ofWellington, that time spent on reconnaissance is seldom wasted It makessense for legal actions too A few minutes thought may increase the chances

of success It is worth considering the issues raised in this chapter

The importance of acting decisively

A customer that is having problems paying your invoices is probably alsohaving problems paying other suppliers too Your legal action may wellput you into competition with these other suppliers and early decisive actionmay give you the advantage This applies to issuing a claim, pursuing aclaim through to obtaining judgment and to action to enforce the judgment

It is widely believed that money obtained from a customer as the result of

an enforcement measure goes pro rata to all claimants with outstandingjudgments This is not usually the case, and money is normally applied tothe judgment creditors (as the successful claimants will usually then be called)

in the order in which they applied for the relevant enforcement measures.The following illustrates the principles:

• A Ltd issued a claim for £10,000 against X Ltd on 10th January andobtained judgment for this amount on 8th September;

• B Ltd issued a claim for £6,000 against X Ltd on 17th January andobtained judgment for this amount on 26th September;

• B Ltd applied for enforcement action by a county court bailiff on28th September;

• A Ltd applied for enforcement action by the same county court bailiff

on 29th September;

• The county court bailiff seized the assets of X Ltd and these wereultimately sold After deducting fees and expenses the amountrealised was £8,000;

• B Ltd gets £6,000 plus any properly claimed continuing interest andcourt fees A Ltd gets whatever is left

This shows exactly why it may be beneficial to act quickly and decisively,but even if there are no competitors, you will still want your money as soon

as possible

The final warning letter

You should almost always send an explicitly worded final warning letterbefore commencing legal proceedings and there are two sound reasonsfor doing so The first and most important is that it often works and youcould well get payment without resorting to the courts The second reason

is that it is expected, and a judge may be displeased and penalise you oncosts if one has not been sent

A good final warning letter should be short, not abusive, should state exactlywhat is going to happen and should state when it is going to happen Bydefinition there should only be one final warning letter If you send two or

more, you were not serious the first time and it may adversely affect yourreputation The following is indicative of what might be sent:

We notice with regret that the above balance is still

outstanding Although we wrote on 23rd April and 2nd May

we have received neither payment nor a reason why payment

should not be made

We must now tell you that we expect payment to be made by

18th May If payment has not been received by that date, we

will pass the matter to our solicitors with instructions to

commence proceedings This will be done without further

warning to you

Yours sincerely,

P Jones

Credit Manager

What professional help will you employ?

The issue of a claim and perhaps fighting a case is well within the ities of most readers of this book, and so is enforcement action after judgmenthas been obtained You should seriously consider the do it yourself route.This is encouraged, though not required, for claims up to £5,000 handled

capabil-in the small claims track Legal costs will not be awarded capabil-in the small claimstrack

The second option is to employ a solicitor and this is a requirement for acompany issuing a claim in the High Court Solicitors are specialists likely

to give good service and there are advantages in using specialists, even indoing things that we are able to do ourselves The use of a solicitor is probablywise if the claim is large or not straightforward, and it may make sense if

it is likely to be defended

Thirdly, you could use one of the many credit agencies that offer services

in this field These will employ solicitors or use the services of solicitors asnecessary Credit agencies range from large organisations operatingnationally or internationally, through to small businesses specialising inparticular sectors of the market or areas Experience and personal recom-mendation may well be factors in the choice of solicitor or credit agency,

if one is used Small firms of solicitors are likely to collect debts alongsidemany other sorts of work Larger firms are likely to have specialist depart-ments to handle debt collection These specialist departments do have certainadvantages

The traditional way for a solicitor to charge for his services is on the basis

of time expended plus reimbursement for expenses incurred However, manysolicitors and virtually all credit agencies offer some variation of ‘NO WIN,

NO FEE’ This sounds too good to be true, and of course it is because theyare remunerated by a percentage of the money eventually recovered Theprecise details are negotiated and the percentages are usually on a slidingscale The solicitor or credit agency is banking on a spread of cases withthe successful ones paying for the failures It is a matter for negotiationbut court fees and perhaps some other costs will probably be payable bythe client regardless of the outcome ‘NO WIN, NO FEE’ has obvious attrac-

tions, but of course solicitors and credit agencies normally make tory annual profits and do not suffer Do think carefully before handingover a straightforward claim for a large amount and with a good chance

satisfac-of success This could be expensive

Your relationship with your

solicitor or credit agent

You may well have heard the advice that having appointed your credit agent

or especially having appointed your solicitor, you should step back and lethim get on with it, just speaking when spoken to and answering any questionsthat he may ask They are after all, the experts There may be some sense

in this and in legal matters you should rarely challenge a solicitor’s advice,but in some respects it does not have to be this way

Most solicitors and credit agents press on remorselessly according to a set pattern This is a cost-effective approach and is most likely to achievethe maximum payment in the minimum time It is exactly what is wanted

pre-by most clients The client hands over the case, hopefully banks a cheque

at the end and does not think much about it in between This is probablyright for you, but you can change your mind and you can ask questions.You can decide to accept a customer’s proposal, and you can come to feelsorry for the customer and call the whole thing off This does happen andnot all slow payers are rogues Some may be facing real personal tragedies

It is of course the solicitor’s privilege to give you frank advice, perhapsincluding the advice that you are being silly It is probably also the solic-itor’s privilege to charge for abortive work undertaken

There may be a little scope for cutting back on your time commitment Clientsroutinely photocopy all outstanding invoices for their solicitors and thiscan be a big job It may be worth asking if it is really required in all cases

An acceptable substitute may be a list of the outstanding invoices showingthe invoice numbers, amounts and invoice dates

Choice of legal route

Right at the beginning you must choose between issuing a claim in the HighCourt or a county court, or presenting a winding up or bankruptcy petition.The issue of a claim is the route normally taken and most of this book isdevoted to it However, it is worth giving some thought to the other option,which is explained in more detail in Chapter 10

Winding up applies to a company and bankruptcy applies to an individual

or general partnership In each case the amount owing must be at least

£750 and you must be in a position to establish the case very clearly Winding

up and bankruptcy are available as a means of enforcement of judgmentand this is explained in Chapter 9, but it is also possible to go straight forwinding up or bankruptcy without issuing a claim and obtaining judgmentfirst The threat of a winding up or bankruptcy action can be extremelyeffective It is virtually guaranteed to seriously annoy the customer and willprobably end any chance of further business, but it is unlikely that you willwant such business anyway The prospect of the threat succeeding is themain attraction and actually doing it has disadvantages Apart from anythingelse the person who does it does not get any priority when the assets aredistributed, which may well take a long time

If you issue a claim, which is by far the most common option taken, youmust decide whether to do so in the High Court or in a county court Thelimits on the choice are:

• A claim regulated by the Consumer Credit Act must be issued in

a county court You cannot choose the High Court

• All claims may be issued in a county court There are no minimum

or maximum amounts

• Only clams in excess of £15,000 may be issued in the High Court.Since 1999 many of the differences between the High Court and the countycourts have no longer applied, and the great majority of claims are issued

in a county court The High Court is more suited to really big cases involvingdifficult or involved points of law or fact and perhaps with large amounts

at stake Cases destined for the so-called ‘small claims court’ are issued in

a county court in the same way as other claims

Claim the maximum possible amount

Sometimes the amount that can be claimed is clear and obvious, being thesum total of all the outstanding invoices, though interest should be claimed

as well and this is explained in the next chapter Sometimes, though, it may

be possible to raise further invoices ahead of the issue of a claim Perhapssome things have been overlooked Perhaps a few ancillary items have notbeen invoiced for reasons of goodwill, but at this stage goodwill shouldnot be a factor Have a close look and bill everything that can be billed

It may even be possible to raise invoices in respect of matters not covered

by the contracts against which the claim is being made The Statute ofLimitations specifies a limit of six years for England and Wales (five yearsfor Scotland) Perhaps further charges can be made in respect of businessdone over this six year period It may well not be possible and you mayhave effectively taken payments in full and final settlement Legal advice

on the point may be necessary

The above suggestion might be considered unethical, though there isnothing ethical about a customer not paying money that is owing Needless

to say only amounts that may legally and legitimately be claimed should

be considered

The correct identification of the defendant

This sounds obvious and easy but a lot of mistakes are made It is tant and you should get it exactly right Getting it nearly right may wellnot do

impor-A common fault is failing to recognise that the customer is a company, ratherthan a sole trader or a partnership You may know the customer as Smithand Jones but if it is really Smith and Jones Ltd, this is what must be stated

on the claim form An interesting possibility arises if the reason that you

do not know that the customer is a company is because this fact was notdisclosed to you, and in particular if it was not disclosed on your customer’s

company notepaper In these circumstances one or more people may havetaken on personal liability for the debt.

Another common mistake is confusing two companies in a group, perhapswith similar names Each company is a separate legal entity and you mustname the right one Black and White (Midlands) Ltd is not the same as Blackand White (North) Ltd, even if they are both owned by Mr Black and MrWhite

It is a legal requirement that a company must disclose on its notepaper itsexact registered name, its registered number and place of registration, andthe address of its registered office Certain other types of organisation arealso required to disclose specified information on their notepaper It is anexcellent idea to check a recent piece of notepaper or some other documentissued by the customer You may use the information yourself or you maysend the document to your solicitor or credit agent Be prepared for a callfrom them thanking you because they do not often get this level of helpfrom their clients An alternative source of information is Companies Housewhose main address in England and Wales is:

an incentive to pay without the commencement of legal proceedings.Unfortunately, statutory interest sounds very similar to interest at the statu-tory rate, but they are not the same and the terms are explained in this chapter.Provided that both buyer and seller are acting in a business capacity, youshould be able to claim statutory interest up to the issue of the claim, andthis is to be preferred because the rate of interest is higher From the issue

of the claim interest at the statutory rate (currently 8%) takes over Thiscan and should be claimed

Interest permitted by a contract

This is not all that common in Britain and such interest is often not enforced,even when the seller has a contractual right to do so Nevertheless, it issometimes included in contracts and in conditions of sale, and it can beextremely important Advice was given in Chapter 2 about the possibilitiesfor maximising the amount of the claim and interest can be a significantway of doing that It might even be possible to charge interest on late paymentsmade in the past

To be effective the conditions of sale must govern the contract and not merely

be printed on the invoice Advice on this point was given in Chapter 1 Subject

to this, interest permitted by a contract may be charged on unpaid debtsincluded in a claim A contract takes precedence over statutory interest solong as it provides a ‘substantial remedy’ It also takes precedence overinterest at the statutory rate (currently 8%) Interest permitted by acontract is likely to be at a higher rate than this, although it may be lower.You may have seen examples such as ‘two per cent per month’ or ‘6% overthe base rate of Barclays Bank PLC applying from time to time’ The courtswill not enforce usurious rates of interest but they will enforce commer-cial rates, even high commercial rates

Statutory interest

A long-running campaign for a general statutory right to interest if debtswere paid late was finally rewarded by the Late Payment of CommercialDebts (Interest) Act 1998 This does provide for substantial interest penal-ties and should in theory have led to a marked improvement in the late paymentculture that is so prevalent in Britain Unfortunately the results of the Actare generally regarded to have been very disappointing, although as largebusinesses have only been able to claim this interest since August 2002 it ispossible that this judgment will eventually have to be reassessed

The key points of the Late Payment of Commercial Debts (Interest) Act 1998may be summarised as follows:

Implementation in stages

This has been in three stages:

1 contracts made from 1st November 1998: small businesses againstlarge businesses and the public sector;

2 contracts made from 1st November 2000: small businesses againstall businesses and the public sector;

3 contracts made from 7th August 2002: all businesses and the publicsector against all businesses and the public sector.

A small business is one that has 50 or fewer employees on average in thegroup in the year prior to the contract being made Part-timers are countedpro rata

The compulsory basis of the Act

It is not possible to contract out of the Act, even if both parties wish to do

so However, a contract that provides a ‘substantial remedy’ for late paymentwill take precedence

Contracts that are covered by the Act

The Act only applies to contracts where both buyer and seller are acting

in a business capacity Certain categories of debt, such as mortgages, areexcluded There are no minimum or maximum amounts to the debts onwhich interest may be charged

Definition of ‘late payment’

Payment dates in a contract will fix the due payment dates, so long as thecontract is commercially realistic and provides a substantial remedy forlate payment In the absence of contractual terms it is possible that estab-lished custom and practice will fix the payment period, so long as a substantialremedy is provided, but this is not easy to establish In the absence of both

a contractual term and custom and practice, the allowed payment period

is 30 days This is not a right to 30 days credit and a legal case to recoverthe principal sum may be commenced within this period

The rate of interest

This may be fixed by a contract or by established custom and practice, solong as a substantial remedy is provided In the absence of either of these

it will be 8% over the base rate The base rates at 31st December and 30th

June apply throughout the succeeding six month periods So, for example,

if the base rate at 31st December is 5%, the rate of interest that may becharged until 30th June is 13% It is simple interest only, not compoundinterest

Debt recovery costs

Debt recovery costs may be claimed as well as interest The amount variesaccording to the size of the debt as follows:

The time limit for making a claim

A claim may be made at any time until the matter becomes statute-barred.This is six years in England, Wales and Northern Ireland and five years inScotland It is possible to make a claim after the debt has been paid as well

as when it is still outstanding This is potentially a very powerful weaponindeed A supplier can go back several years and demand statutory interest.This might, for example, be done when an account has been closed andthere is no prospect of further business Such a claim may be made against

a liquidator when a company is insolvent

Interest at the statutory rate

This may be added to all claims The statutory rate may be changed fromtime to time but it has been 8% per year since 1993 Only simple interestmay be charged, not compound interest You might like to note that 8% isequivalent to 22 pence per thousand pounds per day

Interest at the statutory rate may be charged from the date that paymentwas contractually due up to the date of the issue of the claim This is a precisesum that is incorporated into the particulars of a claim There is no statu-tory period of credit and, in the absence of an agreement to the contrary,interest may normally be claimed from the date of delivery or perform-ance of the service, provided that payment of the main amount has beenrequested at the same time, usually by means of an invoice The calcula-tions may be very complicated If there are many invoices, many separateinterest calculations may be necessary It is not necessary to show theindividual calculations and only the total claimed need be shown Of coursethis must be correct or it may later be challenged by the defendant

It is also possible, and of course desirable, to claim continuing interest up

to the date of judgment or earlier payment The following is an example ofthe correct wording for a county court claim It relates to a debt of £10,000due for settlement on 4th July and the subject of a claim issued on 25th July

‘Interest under Section 69 of the County Courts Act 1984 amounting to

£46.03 from 4th July 2003 to 25th July 2003 The total now due is £10,046.03 (ie £10,000 plus £46.03 interest).

Interest as above is also claimed from 25th July 2003 at the rate of £2.20 daily until judgment or earlier payment.’

If the claim is issued in the High Court, reference should be to Section 35A

of the Supreme Court Act 1981

Interest after judgment

Interest at the statutory rate runs after all High Court judgments It is charged

on the remaining unpaid balance on a day-to-day basis and it does not stopwhilst enforcement measures are being taken

Interest does not run after judgment on county court judgments up to £5,000.Interest at the statutory rate does run after judgment on county courtjudgments over £5,000 However, it stops running whilst most enforcementmeasures are being taken, and also when an application is made for anorder to obtain information from a judgment debtor

You might think that the distinctions are not entirely logical, but that is thelaw

a claim form which must be served on the defendant This chapter explains

it step-by-step The following documents are reproduced at the end of thebook and are relevant to this chapter:

• Claim form completed with sample details (2 pages)

• Notes for claimant on completing a claim form (2 pages)

The issue of a claim

Until April 1999 a case started with the issue of a summons or a writ Thesehave now been replaced by a claim form and the same form is used whetherthe action is to be in a county court or in the High Court Claim forms may

be obtained from any county court or downloaded from the court service

website: www.courtservice.gov.uk Various other forms that you may need

later may also be obtained from this website

You must decide whether to issue your claim in the High Court or a countycourt and advice on this was given in Chapter 2 There are approximately

200 county courts in England and Wales and you can choose any one forany reason A full list with contact details can be obtained from the website

www.courtservice.gov.uk They are also listed in the telephone directory

under ‘COURTS’ If you are using a county court, it would be normal touse the one closest to you but this is not a requirement Some courts have

a better reputation for efficiency than others and this could be a factor inyour choice If the case is defended and if the defendant is an individualnot in business, the case will later be transferred to the defendant’s localcourt This takes a little time and could be a reason to issue the claim in thecourt that is local to the defendant’s address

Claim forms are provided with a leaflet entitled ‘Notes for claimant oncompleting a claim form’ This is reproduced in Appendix 2 It is well writtenand gives helpful advice There are also various other leaflets available Courtstaff are normally very helpful when asked for advice about procedures orfilling in the form However, they will not give legal advice and are not allowed

to give an opinion about a claim’s chances of success

The form should be carefully completed and detailed advice on this is givenlater in the chapter It should then be signed in ink and photocopied Youwill need one copy for the court and one for each defendant Assumingthat there is only one defendant, you will need the original signed formplus two photocopies The form should be typed or printed in ink All theforms should be taken or sent to the court that you have chosen It is essen-tial that the court fee is paid and these are listed in Appendix 1 The courtfee is on a sliding scale based on the amount of the claim Cheques should

be payable to ‘Paymaster General’ or ‘HMPG’

Court staff will check the form This is not a detailed examination but theywill check that all essential boxes contain an entry, that the correct courtfee has been paid and that everything appears to be in order They will thenallocate a claim number and issue the claim The claim number will be usedthroughout the life of the claim and throughout the life of any enforcementmeasures that may be taken later It must be quoted on all forms and willnot be changed if the claim is later transferred to another court When theclaim is issued one of the claim forms will be retained by the court, onewill be returned to the claimant and a form must be served on each defen-dant Service is essential and is covered later in this chapter

Bulk issue of claims

There is a special facility for claimants who need to issue a large number

of claims through the county court This is for users such as local ities that issue claims for unpaid council tax, and for utility companies Suchusers may, unfortunately, need to issue thousands of claims The ProductionCentre is located at Northampton and its use is restricted to approved users.Communication with the centre is by means of electronic data and is regulatedunder a code of practice There are advantages for bulk users and a reducedscale of fees is applicable

author-Correct designation of the defendant

and also of the claimant

It is very important that the defendant is correctly identified and designated,and that the correct address is given A hypothetical example will illustratethe importance of this Suppose that your customer is John Peter Kendalland that he lives with his sister Judith Pauline Kendall You will be askingfor trouble if you just put J P Kendall followed by the common address So

it is worth taking some care to get it absolutely right You might get awaywith a small mistake, especially if it is not challenged by the defendant, but

on the other hand you might not

It is better to put too much detail rather than too little, so long as you areconfident that the detail is right of course So you are advised to be carefuland to be pedantic It will not do any harm and it might do some good

The correct wording for most of the various categories of defendant is asfollows:

An individual

You should put the surname and if possible all forenames, but failing this

as many forenames as you can You should also put the style by which theperson is known (Mr, Mrs, Miss, Dr, Rev, etc) Examples are:

• Wing Commander Peter Cecil Harrison

• Ms Tracey Karen Farraday

The address to put is normally the home residential address

A sole trader

The full name and style should be given, as for an individual If there is atrading name, this should be given following the words ‘trading as’ Anexample is:

• Miss Wendy O’Reilly trading as Wigan Quality Sandwiches

It is normal to specify a business address if there is one, but a residentialaddress may be used

• Jenkins and Johnson (a firm)

• Wessex Holiday Services (a firm)

It is normal to specify a major place of business if there is one, but the tial address of any partner may be used

residen-A company registered in England and Wales

The exact registered name of the company should be entered There aremore than 1,500,000 such companies, which shows the importance of getting

it exactly right A private limited company’s name ends with the word

‘Limited’ or the abbreviation ‘Ltd’ A public company’s name ends with

‘Public Limited Company; or the abbreviation ‘PLC’ There are just a fewunlimited private companies and their names include neither the word northe abbreviation It is not essential or even very common, but to be absolutelysure you can add the company’s unique registered number which must

by law be shown on its notepaper The example at the end of the bookshows this

The address can either be the company’s registered office or an office thathas a connection with the claim There are often advantages in picking thecompany’s registered office because a company cannot ‘go away’ from itsregistered office, even if in practice that is what it does do All companieshave a registered office

A company registered overseas

The exact registered name of the company should be entered If the company

is registered at Companies House as an ‘oversea company’, it will have aregistered address in Britain and this address should be used Probablysurprisingly, ‘oversea company’ is the correct legal term and there has notbeen a spelling mistake Norway, for example, is only over one sea

If the oversea company is not registered at Companies House, a place ofbusiness having a significant connection with the claim should be used

A club or other unincorporated body

You should put ‘sued on behalf of’ following the name of the personconcerned The following hypothetical example may exercise the imagi-nation of people who enjoy the poems of John Betjeman:

• Miss Joan Hunter-Dunne sued on behalf of Aldershot Lawn TennisClub

A corporation (other than a company)

The full exact name should be stated For example:

• The British Broadcasting Corporation

The address should be either the principal office or an office having a icant connection with the claim

signif-A person acting in a representative capacity

The full name should be given and the phrase ‘as the representative of’ should

be added An example is:

• Mrs Hilda Gregory as the representative of Mr Frederick AlbertGregory (deceased)

The above details relate to the correct identification of the defendant Exactlythe same principles are used to correctly identify the claimant