Unpaid Invoice - England and Wales - Debt Recovery

What to do?

 

You have a UK based client who is not paying your invoice. You have sent the invoice, sent a reminder, emailed the client several times and made phone calls as well, but the invoice is still not paid. You realise that your time is precious and chasing payment is getting expensive. The experience is stressful and a waste of valuable resources. What are your options?

You have a number of options available to you such as filing on disputesregister.org, mediation, going to court, serving a statutory demand, applying to make them banrupt etc. Each has its own advantages and disadvantages.  Here is a summary:

 

Options
	File on the Business Disputes Register	Mediation	Small claims court	Serve a statutory demand
Cost	£26	£50-£300 +VAT depending on claim size	£60 to 5% of claim	Free, or £100 for a "process server"
What you must do	Fill in a simple form about the dispute File Dispute Now	Agree on a mediator with other party	Fill in a form online. You might have to attend a court hearing	Fill in a form and serve it personally
Pros	Quick and economical Reputational damage to other party Warn off other companies Works for non-UK companies as well	Conciliatory gesture to other party	The gravitas of court may compel the other party to settle Affects credit rating of other party	Free to begin with
Cons	May sour client relationship	Requires other party cooperation Signals readiness to meet half way	The court might rule against you Costs can escalate, plus court attendance and travel is time consuming Terminal for client relationship	Fairly complicated Costs can escalate Unlikely to work with non-UK companies
Follow up steps	Remove the dispute from the register if resolution achieved		Send Bailiffs to collect payment Freeze assets or money in an account Charge the debtor's land or property	Apply to make them bankrupt

 

 

Send a reminder

This is stating the obvious, but if you haven’t already sent your client a reminder then this is your first step. You should also try to talk to your client to discover what the problem is before taking any of the other steps suggested in this article. There are a number of options available, some must be tried before others.

 

File your dispute on the Business Disputes Register

The simplest and most straightfoward of all the options listed here. If you believe you are in the right and willing to make details of your dispute public then this is probably the best solution with a success rate of over 50% for solvent companies. This very cost-effective given the low fee of £26.

Simply fill in the form giving details of your dispute with the other party. Your dispute is then automatically published on the internet for the general public to discover as a matter of public record. The other party receives an email notification about the dispute being filed on the Business Disputes Register and is urged to contact you to negotiate its removal. If the dispute subsequently reaches a satisfactory resolution then you have the option to remove it from the register - this is very important because it is what compels the other party to resolve your dispute. Not removing the dispute from the register could be very costly to the other party in lost business. 

The dispute will appear on google searches of the accused's company name, often on the first page. This is very likely to have a detrimental impact on the other party's business reputation and credit rating which is why they will be inventivised to respond and resolve the dispute promptly.

File on the Business Disputes Register

Mediation

You may consider involving an impartial person to mediate between you and the other party. Ideally, this person is trained to whose profession is deal with difficult discussions and negotiations. There will be a fee but it should be cheaper than hiring a solicitor and taking the other party to court. The fee usually depends on how much is owed and the amount of time required of the mediator. Click this link to find a mediator http://civilmediation.justice.gov.uk/ who is registered by the Civil (Mediation Council. For Scotland, use the Scottish Mediation Network.) This a low-cost solution to resolving your dispute out of court. The costs for this service are as follows:
 

Claim amount	Fees per party	Session duration
< £5000	£50 + VAT £100 + VAT	1 hour 2 hours
£5,000 to £15,000	£300 + VAT	3 hours
£15,000 to £50,000	£425 + VAT	4 hours

 

 

Serve a Statutory Demand

You have the option to serve a statutory demand demanding payment of a debt from an individual or company. If you are owed money, ie a “creditor” then you can serve a statutory demand on the debtor provided the debt is less than 6 years old (get legal advice if it is). A lawyer is not required to serve the demand, but you are likely to need one if it escalates to the courtroom.

Once the other party (the ‘debtor’) receives your statutory demand, they have 21 days to:
•    pay the debt; or
•    reach an agreement to pay

 

If the other party ignores your statutory demand or can’t repay the money or fails to respond within 21 days, then you can apply to a court to:
•    make them bankrupt - if they are an individual , a sole trader or member of a partnership and the claim is form £5000 or more
•    get a company wound up i.e. “liquidated” - if you owed over £750 together with other creditors

Be warned that this is a costly solution and there is a good chance you will not recover the entirety of the debt. It is advisable to get legal advice first. Also, you have 4 months to apply to bankrupt or wind up your debtor. 

 

Get the demand letter here: 

• For a limited company: www.gov.uk/government/.../sd1-eng.doc

  

• For a partnership: assets.publishing.service.gov.uk/.../sd2-eng.doc

• If you are in Scotland see here: www.aib.gov.uk/form-1-statutory-demand

 

You must serve the statutory demand form to the party that owes you money in one of the following ways:
•    hand it personally to the individual 
•    leave it at the registered office of the company (or partnership). If there is no registered office then at the main place of business 
•    hand it personally to a company director, company secretary, manager or principal officer
•    use a ‘process server’ to serve it
•    Send it by registered post or put it through a letterbox only if it cannot be delivered in person.

 

You must keep the following records in case your demand is ignored:
•    A copy of the statutory demand
•    Proof of the time and date statutory demand was served
•    Evidence that the debtor has received the statutory demand

 

Small claims court

Another option is to make an application to a county court to claim money owed by a business or individual person. This is sometimes known as taking someone to a ‘small claims court’. If you claim is for a specific amount, you can apply online at https://www.gov.uk/make-money-claim. Otherwise you will need to download and complete a paper claim form N1 https://www.gov.uk/government/publications/form-n1-claim-form-cpr-part-7

If you win, the court will order the person or business who owes you money (the ‘debtor’) to pay you. There are ways the court can collect your payment if they ignore the court order.  However, if the other party doesn't have the funds, going to court will be of no use; make sure you check that they have money. Even if the judgement is in your favour, this not guarantee you will get paid: the amount awarded by judge might not be the amount you claimed for, and the other party might not be able to pay and may even avoid paying. There will be a number of dishonest firms who will avoid paying out no matter what, even if visited by bailiffs. It is worth checking (for a small fee) a company for any court history with the Registry Trust. 

It is possible that the judge will deem your case too complex and reject it as a small claim. There is no automatic qualification.
If after 14 days, the individual or business you are claiming against fails to respond to, you can apply for a 'judgment by default ', in which case you will probably win the case by default.
 

 

Court fees:

To make a claim, you must pay a court fee. The fee for making a money claim online is cheaper than the fee for sending a paper claim form. The fee is based on the amount you’re claiming, plus interest.
 

Claim amount	Fee (paper application)	Fee (online)
Up to £300	£35	£25
£300.01 to £500	£50	£35
£500.01 to £1,000	£70	£60
£1000.01 to £1,500	£80	£70
£1,500.01 to £3,000	£115	£105
£3,000.01 to £5,000	£205	£185
£5000.01 to £10,000	£455	£410
£10,000.01 to £100,000	5% of the claim	4.5% of the claim
£100,000.01 to £200,000	5% of the claim	cannot claim online
over £200,000	£10,000	cannot claim online

 

You may have to pay more fees later on - for example, if there’s a court hearing or you need to get a judgment enforced. You may be able to claim the fees back if you win the case.

You might have to go to a court hearing if:

• the defendant disagrees about owing you any money
• disagrees with the amount you are claiming for
• you disagree with their offer to repay you
   

The court may send you a questionnaire asking for more information on the case. If your claim is under £10,000, you’ll be asked if you’d like to use the court’s small claims mediation service to reach an agreement with the defendant.

 

If there is a hearing, you can:

• represent yourself
• have a barrister or solicitor represent you (expensive)
• ask someone to advise you in court or speak on your behalf - they do not have to be a lawyer

 

After the Hearing

You should get a decision on the day of the hearing which will also be sent you by post. If you win, You can ask the court to collect payment from the person or business who owes you money (the ‘debtor’) if they do not pay you after receiving the court order. You must pay a court fee when you ask the court to collect the payment.

 

Find out what the debtor can afford to pay

Ask the court to order the debtor to attend court to provide evidence of their income or spending, for example bills and statements. If the money is owed by a business, you can ask for an officer from the company to attend court and give details of its accounts. You can then decide if you want the court to take further action to collect your payment. These are some options available to you

 

Send bailiffs to collect payment (debt recovery)

You can ask the court to send bailiffs to collect the money.  The bailiff will ask for payment within 7 days. If the debt is not paid, the bailiff will visit the debtor’s home or business to see if anything can be sold to pay the debt.

 

Freeze assets or money in an account

The court can freeze money in the debtor’s bank, building society or business account. The court will decide if money from the account can be used to pay the debt.

 

Charge the debtor’s land or property

You can ask the court to charge the debtor’s land or property. If the land or property is sold, the debtor must pay this charge before they get their money.