Legal action is pointless if the customer does not have the means to pay the amount of the judgment awarded. In fact it is worse than pointless because you stand to lose the court fees and possibly other costs too. There is a time-honoured saying that in matters of the law the only person who can defeat a very rich person is a very poor person. If the customer does not have the money, it is unlikely that a rich philanthropist will be found to provide it and you had better not start legal proceedings.
Despite this you would be wise to be very sceptical when you hear that the customer just does not have the money. The claim is usually not true and the means can often be found if the customer's bluff is called, perhaps with difficulty, perhaps by favouring one customer over another and perhaps by paying in instalments. If the business is a company and it is continuing to trade, the directors may well be taking on personal liability if the claim is true. This should be pointed out to the directors, forcibly if necessary. The legal position may be summarised as:
'Directors may be personally liable for debts if the company carries on trading when they know, or ought to know, that there is no reasonable prospect of avoiding insolvent liquidation.'
It may of course be difficult in practice to establish whether the customer does or does not have the means to pay. Credit reference agencies may be a source of good information. Another good indicator may be the Register of County Court Judgments.
Unfortunately there are a few customers who will do everything possible to 'play the system'. They will use technicalities to delay the legal process and, after the defence has failed, to avoid or delay paying up after judgment has been obtained. This may involve legitimate defensive tactics or it may entail outright cheating, such as claiming that documents were never served when that was not the case. Reforms made in recent years have made it harder to do this and the claimant is more likely to be able to defeat these tactics. Nevertheless, there is still some scope for such behaviour. Regrettably it probably will not stop when judgment is obtained and it might not be easy to enforce the judgment and obtain actual payment.
If you are in the right and if you are both patient and determined, you should succeed in getting judgment in the end, and so long as the customer has the means to pay, you should get the money in the end. It will just be an exasperating process. So long as you correctly claim interest, you should have the consolation of getting that as well. Of course only a minority of customers would consider using such tactics. Let us hope that your customer list does not include many (or preferably any) of them.
Statistically you are very likely to win, especially if you define winning as obtaining judgment. If, more realistically, you define winning as getting paid, your chances are less, but still quite good. However, statistics can be very misleading, as was noted by a man with one foot in a bucket of ice and the other foot in a bucket of boiling water. He had just been told that, statistically speaking, he should be comfortable.
The great majority of cases are not defended. The defendant either pays, admits the debt and asks for time to pay, or does nothing at all. All three possibilities mean that the claimant can get either payment or judgment by default. In most cases there is no real dispute and the only problem is that the customer will not pay in a reasonable timescale, unless he is forced to do so. In such cases there should be few doubts about issuing a claim. Much more thought is necessary if you face the prospect of a real dispute and a seriously defended claim. This is a different matter. Both sides will start to incur costs and it could get expensive. There will probably be a commitment of time as well. Just possibly, a counterclaim maybe issued. This makes you a defendant too and closes off your option of abandoning the claim and walking away.
None of this is intended to deter you from pursuing your claim and seeking redress. If you think that you are in the right, this is usually the best thing to do. Nevertheless, if a seriously defended case is in prospect, such a course should not be commenced lightly. It would certainly pay to have a cool, dispassionate look at the case and perhaps seek another opinion, possibly from a solicitor.
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Note: This article was sent to us by: Andie Howell at 05082010
1. A customer that cannot pay your invoices might also not pay other suppliers
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