If you wish to take action to reclaim a debt there are a number of things to consider before beginning the legal process. The Court will expect you to have made an effort to resolve the dispute with the other side before you take legal action.

Legal action should only be a last resort, so you should explore other options:

• Taking back your goods and services, if that is appropriate (under a retention of title clause)
• Communicating with the customer and seeking to persuade them to pay
• Considering forms of alternative dispute resolution such as mediation. You may have a contract with your customer which already specifies how disputes should be resolved.

You should make sure that you are satisfied that the customer can pay because if they have no assets then you cannot be certain of recovering anything from them. Credit reference agencies should be able to give you a credit rating for the customer and details of any unpaid County Court judgments.

If you do issue proceedings then the amount of money you are claiming will determine whether your case will be handled by the County Court or High Court. The County Court is where most claims will be issued if your claim is worth at least £25,000 and it is a complicated one you may need to consider whether it should be issued in the High Court. If your claim is for a fixed amount and is below £100,000 you may be able to start the claim using HM Court Services Money Claim On-Line website (registration required).

Once the proceedings are issued the Defendant is allowed 14 days from the deemed date of service of the claim in which to reply. However, if the Defendant files an Acknowledgment of Service within that period indicating that they intend to defend the claim then they will have a further 14 days (so a total of 28 days from the deemed date of service) in which to file with the Court their Defence.

A lot of Defendants will either pay the amount claimed when they receive the proceedings or do nothing. If they do nothing then Judgment in Default will be entered against them at the appropriate time. If the claim is defended the parties will be sent Allocation Questionnaires by the Court for completion and this form gives the Court more information about the claim and how the Court decide which case management track to allocate it to. At this stage the parties are also given an opportunity to try mediation to resolve their dispute.

The Court will allocate the claim if defended (and any counter claim filed by the Defendant) to one of three tracks:

• Small Claims Track – generally for claims below £5,000. Evidence in such cases is not normally given under oath and legal costs are not recoverable by the winner against the looser save in exceptional circumstances. Court fees can be recovered and some of the limited expenses including loss of earnings whilst attending Court, travelling and overnight expenses if appropriate. The costs of any expert, such as a Surveyor can be recoverable.
• The Fast Track – normally for claims worth between £5,000 and £15,000.
• The Multi Track – usually for claims over £15,000 and where cases are complex.

On both the fast track and the multi track proceedings are much more formal than the small claims track and costs are usually awarded.

You have the right to claim interest under three circumstances, but only one type of interest can be applied at any one time:

• Interest under a written contract between the parties
• Interest under the County Court Act 1984, which is simple interest only at a flat rate of 8
• Statutory interest on commercial debts. This can be claimed under the Late Payment of Commercial Debts (Interest) Act 1998 and in some circumstances a compensation payment of up to £100 can also be claimed. The rate of interest is 8% over the Bank of England base rate as at either 30th June or 31st December.

For advice on Debt Recovery please contact:

Paul Addison on 01934 637 909 e-mail addison@powellslaw.com, or
Rabina Ahmed on 01934 637 913 e-mail ahmed@powellslaw.com.