The Complete Guide to Debt Recovery pptx

T RECOVERY ROGER MASON B DEB THE COMPLETE GUIDE TO How to use the legal system to collect debts quickly and painlessly Blank page THE COMPLETE GUIDE TO DEBT RECOVERY ROGER MASON Published by Thorogood 10-12 Rivington Street London EC2A 3DU Telephone: 020 7749 4748 Fax: 020 7729 6110 Email: info@thorogood.ws Web: www.thorogood.ws © Roger Mason 2003 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying, recording or otherwise, without the prior permission of the publisher. This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than in which it is published and without a similar condition including this condition being imposed upon the subsequent purchaser. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher. A CIP catalogue record for this book is available from the British Library. PB: ISBN 1 85418 227 7 Cover and book designed by Driftdesign. Printed in India by Replika Press. Special discounts for bulk quantities of Thorogood books are available to corporations, institutions, associations and other organisations. For more information contact Thorogood by telephone on 020 7749 4748, by fax on 020 7729 6110, or e-mail us: info@thorogood.ws 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 Motor Company before holding a senior position in the film and television business. He was then, for 14 years, Finance Director and Company Secretary of a leading British greetings card company. He has a great deal of practical experience, particularly in the legal aspects of credit control and in credit control generally. Roger writes for several publications and has twelve books published. These are on subjects related to credit control, accounting, business, company law 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 The Mayflower, Liverpool Road, Formby L37 6BU, Tel: 01704 878988. Preface A very important campaign is waged every working day in numerous businesses across England and Wales. It happens as directors, partners, proprietors, managers, credit controllers and their staff try to collect the money 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 or death problem, at least in the business sense. These good people sometimes eventually turn to the courts and it is gener- ally for one of two reasons. Usually it is because the customer just will not pay, or at least will not pay within an acceptable period. There is no real dispute though there may sometimes be a bogus one. Everyone knows that the money is owing and it is necessary to threaten legal action. Sometimes it is necessary to carry out the threat and it is the part of the credit control routine 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 and the 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. Of course customers and defendants have a point of view as well and my book should be of use to them too. It should also help people who want to use the courts to recover outstanding loans and for other purposes. You will probably notice that I have used the word ‘he’ extensively. This follows the time-honoured, but not always followed, understanding that ‘he’ means ‘he or she’, unless the context indicates otherwise. In fact, in this 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 situa- tions. I hope that it does and my best wishes to everyone who consults it. Roger Mason Contents Preface iv ONE The decision to take legal action 1 Introduction 1 Does the customer have the money? 1 Will the customer evade his responsibilities? 2 What are the chances of winning? 3 Are you prepared for the costs? 4 Are you sure what terms govern the contract? 6 Arbitration 7 Negotiation 8 The exercise of retention of title rights 9 Bad debt write off 10 TWO Preliminary planning 11 Introduction 11 The importance of acting decisively 11 The final warning letter 12 What professional help will you employ? 14 Your relationship with your solicitor or credit agent 15 Choice of legal route 16 Claim the maximum possible amount 17 The correct identification of the defendant 17 THREE Interest 19 Introduction 19 Interest permitted by a contract 19 Statutory interest 20 Interest at the statutory rate 23 Interest after judgment 24 FOUR The issue and service of a claim 25 Introduction 25 The issue of a claim 25 Bulk issue of claims 27 Correct designation of the defendant and also of the claimant 27 A detailed study of the claim form 31 A claim for a dishonoured cheque 35 A specimen claim form 36 Service of the claim 36 FIVE The defendant’s options on receipt of a claim 39 Introduction 39 The documents explained 40 The permitted time for the defendant’s response 41 The defendant’s options 41 SIX After a defence has been entered 46 Introduction 46 Documents received by the claimant 46 An outline explanation of the three tracks 47 The importance of the allocation questionnaire 48 A detailed study of the allocation questionnaire 49 Notification of allocation to a track 52 SEVEN Pre-trial and trial 53 Introduction 53 Summary judgment 54 Part 36 Offers and Payments 55 A case in the small claims track 57 A case in the fast track or multi-track 60 The time taken for a case to come to court 63 An appeal 64 EIGHT Introduction to enforcement 66 Introduction 66 The court order, payment by instalments and continuing interest 67 An order to obtain information 68 The Register of County Court Judgments 71 Transfer of enforcement to a High Court Sheriff 72 NINE The enforcement measures 75 Introduction 75 High Court Sheriff and county court bailiff 75 Attachment of earnings order 78 Third party debt order 80 Appointment of a receiver 82 Charging order 82 Bankruptcy or winding up 84 TEN Bankruptcy, winding up, receivership and administration 85 Introduction 85 The Enterprise Bill 86 Bankruptcy and winding up 87 Order of priority in the distribution of funds 90 Receivership and its consequences 91 Administration and its consequences 94 Wrongful trading 96 ELEVEN Progress of the civil justice reforms 102 Introduction 102 The main civil justice reforms 102 TWELVE Frequently asked questions 107 Questions about the claim form 107 Questions about the issue and service of a claim 108 Questions about interest 110 Questions about what happens after the service of a claim 111 Questions about enforcement 114 Miscellaneous questions 118 APPENDIX ONE Court fees 120 The County Court 120 The High Court 123 APPENDIX TWO Important court forms 125 [...]... businesses and the public sector; 20 THE COMPLETE GUIDE TO DEBT RECOVERY 3 contracts made from 7th August 2002: all businesses and the public sector against all businesses and the public sector A small business is one that has 50 or fewer employees on average in the group in the year prior to the contract being made Part-timers are counted pro rata The compulsory basis of the Act It is not possible to contract... defendant Payment of the court fees is enforceable in exactly the same way as the original debt However, you must succeed in obtaining payment from the defendant If you cannot do this, the court fees must ultimately be written off as irrecoverable 4 THE COMPLETE GUIDE TO DEBT RECOVERY 2 Solicitor’s costs These may be added to the claim if, and only if, it is prepared by a solicitor So long as the claim is... 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 pay the amount of the judgment awarded In fact it is worse than pointless because you stand to lose the court fees and possibly other costs too There is a time-honoured... are being taken, and also when an application is made for an order to obtain information from a judgment debtor You might think that the distinctions are not entirely logical, but that is the law 24 THE COMPLETE GUIDE TO DEBT RECOVERY FOUR The issue and service of a claim Introduction According to the defendant’s response to the claim, the later chapters in this book may or may not be needed, but this... The after-tax cost of the writeoff would be £7,000 10 THE COMPLETE GUIDE TO DEBT RECOVERY TWO Preliminary planning Introduction Chapter 1 posed the question whether or not legal action should be taken and it explained some of the factors that should be considered in reaching the decision It also explained some of the alternatives to legal action This chapter moves on to some of the points that should... successful, they are recoverable from the defendant Solicitor’s costs may also be claimed in respect of certain other forms that may be necessary As with court fees you must succeed in getting them from the defendant, and if this cannot be achieved, they are irrecoverable Solicitor’s costs are added to the claim according to a scale The amount added to the claim may well not be the same as the amount... closed and there is no prospect of further business Such a claim may be made against a liquidator when a company is insolvent 22 THE COMPLETE GUIDE TO DEBT RECOVERY Interest at the statutory rate This may be added to all claims The statutory rate may be changed from time to time but it has been 8% per year since 1993 Only simple interest may be charged, not compound interest You might like to note that... equivalent to 22 pence per thousand pounds per day Interest at the statutory rate may be charged from the date that payment was contractually due up to the date of the issue of the claim This is a precise sum that is incorporated into the particulars of a claim There is no statutory period of credit and, in the absence of an agreement to the contrary, interest may normally be claimed from the date of... by the solicitor 3 Legal and other costs If the case is not defended, you will be responsible for your own legal and other costs These may be small or, if you have not employed a solicitor or other specialist, they may be non-existent The starting presumption in a defended case is that the loser will pay the winner’s costs However, the judge has discretion and may take into account the behaviour of the. .. the same way as other claims 16 THE COMPLETE GUIDE TO DEBT RECOVERY Claim the maximum possible amount Sometimes the amount that can be claimed is clear and obvious, being the sum 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 Perhaps . T RECOVERY ROGER MASON B DEB THE COMPLETE GUIDE TO How to use the legal system to collect debts quickly and painlessly Blank page THE COMPLETE GUIDE TO DEBT RECOVERY ROGER MASON Published. favouring one customer over another and perhaps by paying in instalments. If the business is a company and it is continuing THE COMPLETE GUIDE TO DEBT RECOVERY 2 to trade, the directors may well. costs are added to the claim according to a scale. The amount added to the claim may well not be the same as the amount actually charged by the solicitor. 3 Legal and other costs If the case is not