Right at the beginning you must choose between issuing a claim in the High Court or a county court, or presenting a winding up or bankruptcy petition. The issue of a claim is the route normally taken and most of this article is devoted to it.
Winding up applies to a company and bankruptcy applies to an individual or general partnership. In each case the amount owing must be at least British Pounds 750 and you must be in a position to establish the case very clearly. Winding up and bankruptcy are available as a means of enforcement of judgment, but it is also possible to go straight for winding up or bankruptcy without issuing a claim and obtaining judgment first. The threat of a winding up or bankruptcy action can be extremely effective. It is virtually guaranteed to seriously annoy the customer and will probably end any chance of further business, but it is unlikely that you will want such business anyway. The prospect of the threat succeeding is the main attraction and actually doing it has disadvantages. Apart from anything else the person who does it does not get any priority when the assets are distributed, which may well take a long time.
If you issue a claim, which is by far the most common option taken, you must decide whether to do so in the High Court or in a county court. The limits on the choice are:
Sometimes the amount that can be claimed is clear and obvious, being the sum total of all the outstanding invoices, though interest should be claimed as well. Sometimes, though, it may be possible to raise further invoices ahead of the issue of a claim. Perhaps some things have been overlooked. Perhaps a few ancillary items have not been invoiced for reasons of goodwill, but at this stage goodwill should not be a factor. Have a close look and bill everything that can be billed.
It may even be possible to raise invoices in respect of matters not covered by the contracts against which the claim is being made. The Statute of Limitations specifies a limit of six years for England and Wales (five years for Scotland). Perhaps further charges can be made in respect of business done over this six year period. It may well not be possible and you may have effectively taken payments in full and final settlement. Legal advice on the point may be necessary.
The above suggestion might be considered unethical, though there is nothing ethical about a customer not paying money that is owing. Needless to say only amounts that may legally and legitimately be claimed should be considered.
This sounds obvious and easy but a lot of mistakes are made. It is important and you should get it exactly right. Getting it nearly right may well not do.
A common fault is failing to recognise that the customer is a company, rather than a sole trader or a partnership. You may know the customer as Smith and Jones but if it is really Smith and Jones Ltd, this is what must be stated on the claim form. An interesting possibility arises if the reason that you do not know that the customer is a company is because this fact was not disclosed to you, and in particular if it was not disclosed on your customer's company notepaper. In these circumstances one or more people may have taken on personal liability for the debt.
Another common mistake is confusing two companies in a group, perhaps with similar names. Each company is a separate legal entity and you must name the right one. Black and White (Midlands) Ltd is not the same as Black and White (North) Ltd, even if they are both owned by Mr Black and Mr White.
It is a legal requirement that a company must disclose on its notepaper its exact registered name, its registered number and place of registration, and the address of its registered office. Certain other types of organisation are also required to disclose specified information on their notepaper. It is an excellent idea to check a recent piece of notepaper or some other document issued by the customer. You may use the information yourself or you may send the document to your solicitor or credit agent. Be prepared for a call from them thanking you because they do not often get this level of help from their clients.
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