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Not paid? Your next step

Nothing is more frustrating than completing work, supplying a service or providing goods, and then not being paid. So what are your options?

You will be in a stronger position if you have terms and conditions or a detailed contract that applied to the situation. If you do then your first step should be to read what those documents actually say. When should you have been paid by? What was actually agreed? It is extremely important to be clear on the contractual documents especially before commencing litigation or taking any steps that might impact commercial relationships.

Assuming you are properly entitled to be paid, that you have raised a proper invoice payable by the proper legal person (an individual, company, partnership or LLP) then you have two principle options to force the position and to recover monies owed to you. This blog assumes that the debt does not relate to a construction site or project. If it does then your options may differ slightly. We would therefore suggest you search ‘adjudication’ above, or simply call or email us and we will be happy to help you.

First, where there no is genuine triable issue (i.e. where the debt is not disputed) you might consider insolvency- bankruptcy in the case of an individual, winding up in the case of a company. The first step is serving a statutory demand or a statutory notice. Care needs to be taken when drafting and serving these types of notices because where there is any genuine triable issue or dispute, or even an arguable triable issue or dispute that you do not agree is valid, it is possible for the debtor to apply to set aside the demand. If an application is made to set aside a statutory demand that might result in a costs order against you even though ultimately you are owed money. Taking the right step at the right time is therefore extremely important.

Second, you can start taking steps to prepare for issuing a claim in court. The first step is to prepare a detailed letter of claim setting out what you say you are entitled to and why. The letter should set out what will happen after a certain period of time if you have still not been paid and why you say you are entitled to receive a sum of money. There are various additional items that you may not have considered- for example as a result of the late payment of commercial debts (interest) act 1998 many claims for commercial debts can include interest at 8.5% and statutory compensation can also be added- £40 for every invoice less than £1,000, £70 per invoice worth more than £1,000. Statutory compensation and interest can be useful ways to maximise and increase the value of your claim particularly if you are being forced to consider court proceedings just to recover monies you are owed. Does your contract include the right to recover legal costs in addition? Now is the time to review and to check this. If not, why not?

Specialist litigation solicitors should be instructed to review whether you are ready to send a detailed Letter of Claim or even issue court proceedings. We would always suggest you find solicitors who are prepared to back their own advice by offering to work on a no win, no fee basis, or with their fee being an agreed percentage of the amount they recover.

If there is no resolution following a detailed letter of claim then ultimately your next step may well be to issue a claim in either the county court or the High Court. If the value of the claim is more than £10,000 then usually the losing party will be ordered to pay the winner’s legal costs as well as their own, in addition to the debt. That makes it important to ensure you take the appropriate steps at the right time or there is a risk that you might lose on a technical point which might result in you being ordered to pay some or all of your opponent’s legal costs, even where the court agrees that you are ultimately owed money.

Recommendation

  1. Ensure you have a written contract or at least Terms and Conditions;
  2. Make sure you send your invoice to the correct person or entity;
  3. Make sure you have done everything you said you would do or that you were required to do;
    If your invoice has gone unpaid then review the position and consider drafting a detailed Letter of Claim. Ensure such a letter is compliant with the Pre action Protocol for Pre action Conduct (http://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct);
  4. Consider instructing specialist litigation solicitors to review your best approach.

8 April 2016

 Jonathan Waters is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.

Helix work with our clients to understand their business and the challenges faced. From partnership disputes to unpaid invoices to problem employees we have it covered. We work to help reduce the risk to your business when challenges inevitably arise. It’s why at Helix you’ll hear us say that we enjoy working together, with you. It’s what we’re all about.

Contact Helix Law on 01273 761 990 or email [email protected]