Most businesses will experience the frustration of unpaid debts from customers, clients or others from time to time. Chasing unpaid debts can be embarrassing, time-consuming and damaging to the reputation of a business in addition to the business and personal relationships of business owners. However, failing to collect debts in a timely manner will damage cashflow, may increase the prospects of not getting paid at all and can, in some circumstances, be catastrophic for the business leading to insolvency and closure.
Business owners can reduce the risk of unpaid debts by putting in place proper contracts and procedures and ensuring that those procedures are implemented. This should enable businesses to manage debts efficiently and effectively when they arise.
When debts are not paid, it is usually important to be able to manage and resolve the relevant issues as efficiently and effectively as possible in order to minimise disruption, save time and costs and avoid causing any damage to the reputation of the business. Where circumstances permit, the pro-active management of debts may enable the parties to maintain or even strengthen their business relationship.
Whether you are a claimant or a defendant in relation to a dispute in relation to an unpaid debt, we are able to provide efficient and effective legal advice and support in relation to your dispute using our legal knowledge, experience and commercially focussed approach to resolve the dispute in a way that is right for you and your business.
There are several key stages in assessing and resolving disputes in relation to unpaid debts. These include:
At the outset, it is vital to determine accurately the amount of the debt (together with any interest or other sums which may have become payable), how and when it arose and whether the whole or any part of the debt is disputed.
We can advise on the most appropriate way forward when a debt is undisputed or when the whole or any part of the debt is disputed.
Once the amount of the debt, how and when it arose and whether the whole or any part of the debt is disputed has been established, it is necessary to determine what remedies may be available.
The remedies available are likely to vary depending on the circumstances of the case and whether or not the whole or any part of the debt is disputed. When debts are disputed, this is often on the basis of breach of contract or negligence but there can be other grounds. It may also be that a debtor puts up spurious reasons for failing to pay a debt in order to try to avoid payment, reduce the payment or to obtain more time to make the payment.
We can advise as to whether a debtor has legal grounds to dispute the whole or any part of a debt and what remedies may be available to you (and, in the case of a disputed debt, the debtor) and consequently help determine whether it is likely to be in your interest or the interests of your business to pursue the outstanding debt.
Normally, it is in the interests of the parties to identify and resolve any issues and disputes efficiently and effectively so that they can continue to progress their business arrangements in an acceptable manner.
Where there is a written contract between the parties, the contractual terms may include provisions relating to the rectification of certain contractual issues (including unpaid debts) and the resolution of contractual and other disputes. Where this is not the case, it is often sensible to try to take steps to resolve any contractual or other issues or disputes. By way of example, the parties may agree to try to achieve resolution through direct discussions or some form of alternative dispute resolution.
Where it has not been possible to resolve any issue or dispute in relation to an unpaid debt, it may be that it is necessary to formally notify the other party (or parties) that legal action will be taken unless the relevant unpaid debt is paid. This notification is usually sent in the form of a ‘letter before action’. It will, amongst other matters, set out the complaining party’s legal position, the outcome the complaining party wishes to achieve and the steps it proposes to take if a suitable agreement is not concluded.
We can prepare appropriate and effective letters before action and advise you on subsequent communications with a view to helping resolve disputes in relation to unpaid debts.
It has become more and more common for parties which are in dispute to use alternative methods of resolving disputes prior to issuing legal proceedings or during the litigation process (typically at an early stage). The 4 main alternative methods of resolving disputes (commonly called ‘Alternative Dispute Resolution’ or ‘ADR’) in the UK other than court proceedings are negotiation, mediation, arbitration and conciliation.
Whilst ADR is not suitable for every dispute, courts often expect disputing parties to take steps to resolve disputes prior to commencing legal proceedings or at an early stage of the litigation process. An unreasonable refusal to do so may result in the court imposing sanctions (typically in the form of costs penalties) on the relevant party.
We can advise on the relevant form of ADR and assist you in relation to the ADR process with a view to helping resolve any contractual disputes.
If it has not been possible to resolve a dispute, it may be that the only way forward is to commence formal legal proceedings. Where that is the case, we can help prepare your claim and provide clear advice on legal, procedural and tactical issues in order to assist you through the litigation process efficiently and effectively.
If you would like more information about debt recovery and disputes in relation to unpaid debts or would like to discuss a potential or existing dispute, please email us at firstname.lastname@example.org, complete an Enquiry Form or call us.