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Legal action may arise for several reasons, including chasing unpaid accounts, breach ofcontract, personal injury, etc. The chasing of debts is a time consuming and often expensiveprocess. However, procedures within the Small Claims Courts have been issued to reduce thetime and expenses of small claims cases. The Small Claims Court in England and Wales isdesigned to resolve disputes where the sum involved is £5,000 or less. The majority of thesecases are handled through a system of arbitration. Arbitration is an information hearing of thecase before a District Judge. It allows small claims to be dealt with quickly, cheaply andinformally by allowing the creditor to present his or her own case without the use of a solicitor.Where larger amounts are involved, most people will prefer to use professional representation inthe courts.

Legal action should be seen as a last resort. Ask yourself three questions about the debt:

Have you tried every available option to resolve the matter amicably? Once the courtproceedings have begun, and a summons issued, any 'customer relationship' is most likelydestroyed.Does the debtor in default have no valid reasons for disputing the claim?Is the person financially able to pay? Pursuing someone who is unemployed or living on amodest fixed income may be pointless.

If you can answer "yes" to all three of the questions you should seriously consider taking courtaction. However, before proceeding you should advise the defaulter of your intended action,stating in writing that you will take court action if payment is not received within the period oftime you specify, generally seven days. This may provoke payment, but if the claim is disputedyou should act upon your statement and take the matter further.

ProceduresIt is a two-stage process to recover money through the county court. You must first obtain a'judgement' for the amount of the debt. A judgement is legal recognition of the existence of thedebt and an order for the debtor to pay. Should the debtor not immediately settle the debt, youmay have to have the judgement 'enforced' via one of the methods available through the court.

Obtaining a judgementA default summons may be used to demand a specified amount of money, usually when you areseeking to recover payments for goods or services, but can also be used when claiming fordamages, such as for injury or breach of contract, when the court will decide upon the value ofthe claim. You can start a claim in any county court, but if it is defended, the case will beautomatically transferred to the defendant's county court.

It is up to you to initiate the claim and identify the defendant in question. Go to the county courtand state that you wish to issue a summons for money owed to you. The court will give you adefault summons form which you must complete. You will need to decide whether you are suinga firm or an individual and if you are making your claim against more than one person, you willneed to complete a form for each one. Forms are available free from the county court, but aprocessing fee will become due when you return the forms to the court. The amount of the fee isdependent upon the amount of the claim and will be added to it, as it is recoverable from thedebtor. If the action succeeds interest may also be claimed on the debt. (Even if no contractualprovision was made for this, you can claim for statutory interest from when the debt became dueto the date of the judgement.)

Small claims procedures are generally used to avoid the use of a solicitor or lawyer. However, ifthe defendant decides to employ a solicitor, then you are advised to do the same, although thiscost cannot be reclaimed from the losing party.

Enforcing a judgementObtaining a judgement does not guarantee that you will get paid, and the court will not enforcethe judgement unless you ask it to do so. Again, a fee is payable for this, which will be added tothe amount to be recovered from the defendant. A choice of methods is available and you willhave to decide which is appropriate, taking into consideration the size of the debt, and yourknowledge of the debtor and his/her assets. Some procedures involve only the completion offorms and paying the appropriate fees, others are more complex. The following options areavailable:

Warrant of execution against goods - This involves authorising a county court bailiff or sheriff

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9/21/2015 Debt Recovery: Legal Action - Shell LiveWIRE | Business Library

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Insolvency and Liquidation

to seize and sell goods belonging to the defendant to settle the debt and associated costs.This is a commonly used method, but is generally ineffective because the resale value of thegoods is often low. In addition, certain goods are exempt from the procedure, including itemsthat are on rental or hire purchase, items needed for the defendant to use personally in histrade and necessary domestic items.Garnishee proceedings - You can request that the court order a third party who owes thedefendant money to pay this directly to the court. Generally this will be a bank where thedefendant holds an account, but it can also be a customer of the debtor. You will need toknow details of the account. Attachment of earnings - if the defendant is in regular employment, this is the best methodavailable to enforce the judgement. The court will order the employer to make deductionsfrom wages to settle the debt. Bankruptcy or liquidation - if the debt is large and the debtor is self-employed, the only way toobtain payment may be through a bankruptcy petition. This procedure is very complex andprobably best left to an insolvency lawyer. 'Winding-up' or liquidation proceedings are theequivalent to bankruptcy where the defendant is a limited company.Oral examination - if you need more information about the defendant's financial situation, youcan apply to have him/her questioned by an officer of the court. This may be useful to assistin the choice of enforcement methods.

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