Any reputable solicitor will always encourage his or her clients to use the full range of available legal recovery options in securing an overdue payment. The effectiveness of any letter before action (LBA), or the repayment deadlines you have stipulated, will be seriously compromised if you are not willing to take things further and follow up your demands.
With that in mind, solicitors are happy to discuss with clients every avenue that is open to them in recovering debt. Legal claims are not always the most effective and efficient way to deal with a debt, therefore the circumstances of each case must be considered independently so that a prudent strategy can be devised.
However, if a case does get to the claim stage, it is important to understand the process you are entering into. So, what should you consider before taking those first steps down the legal claim route and what preparations should you make?
Questions to Ask Before Pursuing a Claim
Do I have the evidence?
Always be aware that a case may be defended. If it is you will need evidence, so do you have the people and documentation to effectively support your claim?
Do I need to take advice?
Consider getting advice before starting proceedings if there is a serious dispute, or you have doubts about your case. Remember you may have to pay the other party’s costs if you later want to stop the case, so be sure it is worth proceeding with the claim.
Should I consider alternative avenues?
If there is a real dispute, the court requires the parties to consider whether this should be settled before the claim progresses further. If negotiations fail, you should consider using alternative dispute resolution (ADR) before going to court.
The ADR options are as follows:
- Mediation: a form of negotiation with the help of an independent person or body.
- Early neutral evaluation (ENE) aka early neutral assessment (ENA): where an independent person or body, for example a lawyer or an expert in the subject, gives an opinion on the merits of a dispute.
- Arbitration: where an independent person or body makes a binding decision. Many types of business are members of arbitration schemes for resolving disputes.
In many cases, you may not know there is going to be a real dispute until proceedings are issued. However, generally if there is a dispute, unless summary judgment is possible you should consider suggesting mediation before proceedings are issued.
It is worth bearing in mind the following observations:
- “Megarry J once described the law reports as charts of the wrecks of unsinkable cases. Because of its uncertainty and expense, prudent parties usually try to avoid litigation where possible. It has to be borne in mind that the ‘settlement value’ of a claim is not an objective fact (or something which can be assessed by reference to an available market) but a matter of subjective opinion, taking account of all relevant variables. Often parties may have widely different perceptions of what would be a fair settlement figure without either being unreasonable. The object of mediation or negotiation is then to close the gap to a point which each finds acceptable”
Supershield Ltd v Siemens Building Technologies FE Ltd 
Mediation is the normal form of ADR, and is designed to find a solution which is mutually commercially acceptable at the time, rather than work out the strict legal rights and wrongs of a situation.
- “In so many cases… the best time to mediate is before the litigation begins. It is not a sign of weakness to suggest it. It is the hallmark of common sense. Mediation is a perfectly proper adjunct to litigation. The skills are now well developed. The results are astonishingly good. Try it more often.”
Ward LJ in Egan v Motor Services (Bath) Ltd 
Would a ‘Part 36′-compliant offer be relevant?
This also applies where there is known to be a real dispute. If the debt is more than £5,000, you should consider making an offer that complies with Part 36 of the civil procedure rules (CPR). The offer states how much you will accept, including interest but excluding costs. If the offer is not accepted, the case goes all the way to trial and, in addition, you get a judgment which is the same as, or better than your offer and you would normally recover around 100% of your costs from then on. If you don’t make a Part 36 offer, as a general rule of thumb you would normally do well to recover two thirds of your actual costs.
You would also be awarded interest at up to 10% over base, on both the money you recover and your costs. A well-pitched offer can therefore put some pressure on the debtor to think very carefully before refusing it and forcing you to go to trial.
Is all in order?
Before proceeding, ask yourself a few simple questions to ensure you have everything necessary to make your case a solid as possible. These may seem obvious, but these points can be all too easily forgotten, especially when a case is on-going for some time or is particularly challenging:
- If you are supposed to have a contract signed by the debtor, do you actually have it and is it definitely the debtor’s signature?
- Have any disputes or queries been resolved or brought to a point where it is clear they can’t be resolved without going to court?
- Have any prior negotiations been dealt with?
- Has the debtor promised payment or admitted the debt in any way? If so, supply details or a copy if this was done in writing.
Terms of Business
Many people are under the impression that a contract is not a contract unless it is in writing. That is not necessarily the case. Every order or instruction involves the parties making a contract. For example, a contract is created when someone places an order over the telephone.
Where your company has printed terms and conditions they don’t just apply automatically to every order. They have to be expressly part of the contract, a point that cannot be emphasised strongly enough. They will be part of the contract if:
- The debtor has signed a written contract containing your terms. Signing a fax sheet referring to terms on the back which aren’t transmitted will not suffice.
- The terms were sent to the debtor before the order was placed, so the debtor knows your terms of business.
- The debtor signed up to your terms when completing your account application form, either because the terms were on the back or because they are referred to in the application form.
If your terms change after the debtor has signed the application form, don’t forget that the new terms have to become part of the contract with the debtor in one of the other ways mentioned here.
It is not enough for the terms to be on the invoice; your debtor has to have been told of them before the order was placed for them to apply. However, the fact that your terms were on invoices for previous orders may possibly be enough to incorporate them into later orders, depending on the case.
If you are satisfied that you have duly considered all alternatives and completed the necessary preparation, than you can rest assured that you have done your best to ensure any claim issued is successful. Follow these basic rules and you stand a much better chance of recovering any outstanding debt.
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