I’ve Invested Money but Not Been Repaid – What Can I Do About It?
Investing in businesses or providing personal loans, you’re taking a financial risk, including the possibility of delayed repayments or a complete default and failure to pay. Navigating these challenges effectively requires a solid understanding of your legal rights and the various recovery strategies available.
We consider both practical and legal approaches to recovering loans, as shown below.
We’re a specialist litigation firm; we only deal with these situations where something has gone wrong. If you’re in a situation where you have loaned monies or have invested sums without being repaid, reach out to Helix Law.
Our specialist commercial litigation team act nationally and will be happy to explore and advise you on your best options.
What Options Do You Have To Recover Debts Owed to You?
Care needs to be taken when dealing with unpaid debts to ensure you aren’t being too reasonable or patient. You might be losing ground without even realising it. For example, whilst you’re patiently trying to agree on a resolution, perhaps the debtor will be taking steps to sell assets.
Although a debtor might say they’re attempting to remortgage to repay you, unless you have certainty their remortgage monies are going to be paid to you, this risks actually worsening your position. Whilst you might be minded to accept delay, there is usually a 6-year limitation period for breach of contract claims, after which pursuing recovery is difficult, if not impossible.
For all these reasons and more, it is incredibly important to be clear on your position’s strengths and weaknesses, and it’s rarely the case that one size will fit all.
Getting your own house in good order
Before taking any steps, it is essential to be clear on where you stand, and a review of your position- the documents you have and evidence in support of what you say, is essential.
For example, do you have a copy of the loan agreement? Are you clear when (date), to whom (borrower and bank account details) and what (the amount) that was lent? When were monies repaid? Has there been any change in the debtor’s circumstances? Are there any risks to your position the debtor has or hasn’t communicated to you directly?
Being clear on where you stand is vital before anything is said or done, not least to ensure you’re clear on the positives and negatives (if any) of your position. For example, if it has been six years since the breach of contract, it might ordinarily be time-barred, but if the debtor agrees to repay notwithstanding this, it might be possible to avoid the worst outcome.
If you’ve lost a copy of the loan agreement or there never was a contract in writing, it might be sensible to clarify and confirm the core terms and what has happened via email or letter before seeking recovery. In that way, any admissions or acknowledgements by the debtor can be relied on by you.
It’s also worth doing some research on the borrower. Loans often last for years; much can change in the intervening period. Are assets still owned? What does the financial position look like? The borrower’s solvency and assets position might significantly impact how you pursue recovery and how patient you are willing/able to be.
In one situation, it might be a race to acquire assets. In another situation, you might be able to accept a short delay.
Speaking to The Debtor Informally
An initial conversation might be sensible to explore whether this is a mere oversight. Caution is needed to ensure there can be no later suggestion of delay or an agreed variation. However, if/when brought to the debtors’ attention, this should trigger engagement—perhaps an apology and repayment. If so, this might be the end of matters. If not, you may need to consider further steps.
Any conversation should be limited to confirming the amount outstanding, repayment methods and calculation. It is also good practice to set out what was discussed in a follow-up email so there can be no later disagreement. It should be made clear that you will have no alternative to escalate matters absent repayment.
To what extent you enter into any sort of negotiation, you should ensure that it takes place on a ‘without prejudice save as to costs’ basis, meaning it is off the record and cannot be referred to by anyone unless an agreement is reached.
This protects negotiations and means that parties can reasonably try to negotiate in good faith without fearing this appearing to be an admission in front of a judge. Negotiations protected by without prejudice privilege cannot be referred to in court unless the parties agree or there’s an agreement.
Sending a Letter of Claim
When informal negotiation hasn’t been successful, and your legal and factual position is clear, it’s then necessary to escalate matters.
Before issuing court proceedings, it is essential to draft and send a detailed letter of claim. This must comply with the practice direction governing pre-action conduct- part of the civil procedure rules that govern litigation in England and Wales.
Where an individual owes the debt, you also usually need to ensure the debt recovery pre-action protocol is complied with.
Taking the above steps protects your position in terms of recovering your legal costs in due course.
Positioning is crucial in any litigation and dispute. It’s a formal letter that clarifies and expressly sets out your position in detail, including what you say you’re entitled to and why. Being seen to be taking matters seriously is fundamentally important so that your opponent understands you’re not to be taken lightly. The letter must technically comply with the Civil Procedure Rules. Ensuring the content is technical
Issuing Court Proceedings
If a formal demand letter does not prompt repayment from your debtor, advancing to a claim will be necessary. This is a critical stage and requires a pleaded Particulars of Claim to be drafted, which fully sets out the dispute’s details.
A claim will lead to a trial unless a settlement can be agreed. If your claim is successful, the court will order a Judgment in your favour, which will usually include the original debt plus any applicable interest and costs.
With Judgment in hand, we can then secure the order against assets—usually property—and force the sale of those assets if necessary to recover the monies owed.
Alternative Dispute Resolution
All parties should consider alternatives to litigation at every stage of a dispute. Importantly, however, disputes don’t just resolve themselves; there is no magic in any other process, including alternative dispute resolution.
It’s only when the parties understand there are going to be serious repercussions for their conduct and behaviour unless they settle that the conditions for settlement have been created.
Mediation is a form of ADR that can be appropriate when direct discussions have failed. We are experienced litigators and regularly attend mediations with and on behalf of our clients.
Our head of commercial litigation and Partner/Co-owner, Alex Cook, is an accredited commercial mediator, having trained in this way to better advise our clients on how to position themselves in advance and how to prepare to succeed in obtaining a positive outcome at mediation.
Considering Insolvency
Threatening insolvency can be effective but is a blunt instrument from an investment recovery perspective. It can be very easy to defend against Statutory Demands. A statutory demand is a formal notice from a creditor to a debtor, indicating that failure to settle the debt could lead to severe legal steps to declare the debtor insolvent.
The warning applies to businesses and individuals, notifying that the creditor will initiate winding-up or bankruptcy proceedings for companies. The difficulty for creditors is that these are usually not appropriate if there is a dispute.
Frequently Asked Questions
Can Investors Ask For Their Money Back?
Yes, investors often have the option to reclaim their funds when investments go wrong and debts have not been paid. However, this is best approached directly, formally, and fairly quickly, relying on the content of formal contracts (ideally) such as loan agreements. Where there is one lender/investor (you) who is unpaid, there are usually others, and it can become a race to assets.
Need Advice? Contact Helix Law.
If you’re an investor or have loaned monies but have not been repaid, or you are concerned you may not be repaid, it’s sensible for you to obtain some advice on your position and best next steps from a specialist commercial litigation solicitor.
Our expert team act for lenders and investors in disputes across the country, often where there has been a degree of miss-selling or misleading advice provided, which downplayed (or completely ignored) risks to you in terms of repayment. We’ve dealt with situations in property investment circles where borrowers have provided private and company lenders with their loan agreements- obviously entirely the wrong way around.
We also act for private bridging lenders in claims. Whatever your situation, we’re ready to offer the best possible advice tailored to help you recover your funds as quickly as possible.
