There are several options available to businesses that have debtors that will not pay. At the outset, it is necessary to examine the reasons why your debtor will not pay. If your debtor has a genuine complaint, then there is a dispute and a keen litigator can help you try to resolve this quickly and cost-effectively through a number of processes.
Firstly, it is always advised to have a solicitor send a letter demanding immediate payment to your debtor. This will usually result in either payment of the debt, or in your debtor putting forward their complaint. Lawyers will then negotiate on your behalf. If negotiation does not produce an acceptable settlement for you, court proceedings can be considered alongside other alternative methods of dispute resolution.
The most appropriate method of resolution will depend on the circumstances of your particular case. Generally, when you wish to preserve a commercial relationship with your debtor, the most user-friendly and non-adversarial method of resolution is often mediation.
If the debt that you are owed is less than £5,000, you may also wish to consider making a claim in the small claims court. The small claims court was set up to provide individuals and businesses with a forum to resolve legal disputes without the need for legal representation. The process is a less formal and more simplified version of the full-blown court claim system. Whether you win or lose, there are usually no legal costs ordered to be paid by either side, so the parties usually bear their own legal costs. At the end of the process, if you are successful, you will obtain a judgment order which is enforceable through the courts. Please see the enforcement section below.
If your debt is between £5,000 and £15,000, any claim made in the County Court would be allocated to what is known as the “fast-track”. This means that the court will aim to list your claim for trial within 30 weeks from its commencement. Unlike the small claims court, a successful party will usually be entitled to repayment of most of their legal fees from their opponent. Parties to a dispute in the fast-track will usually have legal representation.
Disputes over sums between £15,000 and £50,000 are most often allocated to what is known as the “multi-track” of the County Court, which is a more flexible resolution procedure, and the time it takes for your matter to reach trial will depend on its complexity. Disputes involving sums over £50,000 will normally be dealt with by the High Court.
In cases where there is no apparent complaint or dispute from your debtor, there is a further alternative. Consideration will be given to the commencement of insolvency proceedings against your debtor, initially by service of what is known as a “statutory demand”.