As with all legal disputes, prevention is cheaper than the cure. Even with simple debt recovery matters, legal costs can soon escalate to the point where the commercial viability of pursuing the matter is extinguished. There will always be customers who will try to escape paying for the services that you have provided so it is essential that you have measures in place that can minimise the costs and risks of litigation.
Clear terms and conditions setting out the obligations of you and your customers can avoid disputes relating to your services and payment. Requesting money on account or a deposit before work is carried out is an effective way of reducing the risk of cash flow issues that can be caused by chasing debt. Such measures are commonplace and if reasonable should not dissuade potential customers. Before confirming instructions, especially those relating to larger business deals, it is essential that you know who you are contracting with. For example, is it a company or an individual? There can be a tendency to assume the answer without research and this can lead to difficulties when commencing legal proceedings. If you are unsure, asking your customer at the outset is much simpler than doing so after the relationship has broken down. It is also important to establish whether they are solvent or have assets against which you could potentially enforce a judgment debt. This may well dictate the terms of your arrangement or whether you enter into an agreement at all. Remember, a county court judgment ordering A to pay B a sum of money is effectively meaningless if A has no means to pay.
While litigation should only be used as a last resort, it is sometimes unavoidable. The above measures, however, may serve as useful preparation, as you will have hopefully secured a deposit / money on account to cover some of your costs, identified the status of the contracting party and determined whether they can afford to pay judgment. Litigation must be commenced by a formal letter setting out the basis of your claim and the consequences of non-compliance within a reasonable time period. If there is no dispute, this alone can encourage an uncooperative debtor to pay up. If not, then you, as the Claimant, can formally submit a claim to court, setting out the full details of the matter and what you are seeking together with supporting evidence. The Defendant will have an opportunity to submit a defence (if he has one), in which case the Court give further directions for the management of the case leading up to trial, within which time settlement can be explored. If no defence is submitted within the requisite time, you must apply for default judgment, which you will then be able to enforce through a number of methods. In addition to the Defendant not being able to pay, however, another not so uncommon problem is locating the Defendant, especially if an individual. Your initial enquiries into the status of the Defendant before entering into a contract may help minimise the chances of this problem arising. If it does and he does not want to be found, then you will be in the hands of search companies that cannot guarantee success.
Assuming that these problems do not arise, you can enforce judgment in any one or more of the following methods: securing a charge on the Defendant’s property; obtaining an order that the Defendant’s employer pay you out of the Defendant’s salary or that the Defendant’s bank pay you; obtaining a warrant for bailiffs to attend the Defendant’s property. If unsure which method(s) to use, you can force the Defendant to attend court to answer questions on his assets and liabilities, which may enable you to better determine the most appropriate method of enforcement.
If litigation looks to be unavoidable, it is strongly recommended that you seek legal advice to maximise your chances of a successful and swift conclusion. A City Law Firm Limited has a strong Dispute Resolution team who offer affordable and comprehensive legal advice in this area.
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