A customer that cannot pay your invoices might also not pay other suppliers

The importance of acting decisively

A customer that is having problems paying your invoices is probably also having problems paying other suppliers too. Your legal action may well put you into competition with these other suppliers and early decisive action may give you the advantage. This applies to issuing a claim, pursuing a claim through to obtaining judgment and to action to enforce the judgment. It is widely believed that money obtained from a customer as the result of an enforcement measure goes pro rata to all claimants with outstanding judgments. This is not usually the case, and money is normally applied to the judgment creditors (as the successful claimants will usually then be called) in the order in which they applied for the relevant enforcement measures. The following illustrates the principles:

A Ltd issued a claim for British Pounds 10,000 against X Ltd on 10th January and obtained judgment for this amount on 8th September;
B Ltd issued a claim for British Pounds 6,000 against X Ltd on 17th January and obtained judgment for this amount on 26th September;
B Ltd applied for enforcement action by a county court bailiff on 28th September;
A Ltd applied for enforcement action by the same county court bailiff on 29th September;
The county court bailiff seized the assets of X Ltd and these were ultimately sold. After deducting fees and expenses the amount realised was British Pounds 8,000;
B Ltd gets British Pounds 6,000 plus any properly claimed continuing interest and court fees. A Ltd gets whatever is left.

This shows exactly why it may be beneficial to act quickly and decisively, but even if there are no competitors, you will still want your money as soon as possible.

The final warning letter

You should almost always send an explicitly worded final warning letter before commencing legal proceedings and there are two sound reasons for doing so. The first and most important is that it often works and you could well get payment without resorting to the courts. The second reason is that it is expected, and a judge may be displeased and penalise you on costs if one has not been sent.

A good final warning letter should be short, not abusive, should state exactly what is going to happen and should state when it is going to happen. By definition there should only be one final warning letter. If you send two or more, you were not serious the first time and it may adversely affect your reputation.

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