Defending Business Debt Recovery Claims

Recovering a Business Debt

Most, if not all, businesses, regardless of the sector in which they operate, are likely to have to deal with a debt recovery claim at some point. We recognise that debt recovery disputes can arise in various circumstances, and we tailor our approach to ensure that our clients achieve the best possible outcome at the most appropriate cost. We are experts in acting for both creditors and debtors in relation to business debt recovery claims. 

Disputed or defended business debt claims usually arise when the creditor and the debtor disagree on factual issues, often around the supply of goods or services.

Top tips on defending a business debt recovery claim

1. Do not ignore correspondence you receive from the creditor regarding the unpaid debt. If you do, the creditor will likely commence Court proceedings or insolvency proceedings to recover the unpaid debt. Our experience is that if you engage with the creditor regarding the debt claim, it may be possible to resolve the dispute without time-consuming and costly Court proceedings or insolvency proceedings having to be issued. 

2. If Court proceedings or insolvency proceedings are commenced against you, again, do not ignore these! The issuing of Court proceedings triggers certain steps that the debtor must carry out to avoid the creditor obtaining judgment in default and then taking steps to enforce that judgment, such as instructing bailiffs or commencing winding-up proceedings. The same also applies to insolvency proceedings such as the service of a statutory demand or winding-up petition. Debtors should take immediate legal advice if served with a statutory demand or a winding-up petition, especially when the debt is disputed. This is so that the appropriate steps can be taken to deal with the statutory demand or the winding-up petition within the relevant Court timescales.

3. If the claim is substantial and complicated, consider instructing a solicitor to represent you. A specialist business debt recovery solicitor can advise on matters such as:

• Whether there are any technical deficiencies in regards to how the debt recovery claim has been brought or any procedural errors made in respect of the service of Court or insolvency proceedings.
• Whether the creditor has complied with certain pre-action protocols before issuing Court proceedings. If the creditor has not, the debtor can bring this to the Court’s attention, and sanctions may follow. 
• What the relevant deadlines are to respond to the Court or insolvency proceedings.
• Whether the Court’s jurisdiction should be challenged. Where debt claims have an international element, jurisdictional issues can arise. There are rules that govern whether the English courts have jurisdiction to deal with business debt recovery claims with a foreign element to the claim. 
• If the English courts should deal with the debt recovery claim, what Court should deal with the claim. There are a variety of different Courts in England and Wales. The County Court deals with most debt recovery claims unless they are particularly complicated or of a high value, in which case the High Court may deal with the claim. 
• Should the creditor be asked to provide copies of documents that it relies on in support of its claim.
• What documents you should provide to support your defence of the claim.
• On what legal basis the debt recovery claim can be defended, and whether you have good prospects of defending the claim.
• What the appropriate steps will be in dealing with the debt recovery claim. For example, if the creditor’s particulars of claim (one of the first documents the creditor has to produce when issuing Court proceedings) disclose no reasonable grounds to bring a claim, it may be appropriate to make an application to the Court to strike out parts of or the whole of the creditor’s claim. 
• Whether independent expert evidence may be helpful in resolving the dispute.
• What settlement tactics may be appropriate in resolving the claim, and when such tactics should be deployed.
• Whether an admission should be filed with the Court and served on the creditor either in respect of the whole of the claim or part of it.
• Whether you should be obtaining security for your costs in defending the claim. Debtors can apply to the Court for an order requiring the creditor to pay money into the Court or provide a bond or guarantee as security for the debtor’s litigation costs. This protects the debtor against the risk that they will win at trial and be awarded their costs, but then not be able to enforce the costs order against the creditor. The claim can be stayed (i.e. not continue) until the security is provided. 
• Whether the creditor should be asked to provide further information so that its claim can be better understood.

 4. When defending a business debt recovery claim, it can be helpful to:

• Prepare a chronology of events.
• Prepare a list of the key people involved.
• Identify sources of evidence, both in terms of documents that can be disclosed and witnesses who could give evidence at any trial.

5. It is important to understand who the claimant is when responding to any debt recovery claim. The following points should be considered:

• Do the creditor and debtor have an ongoing commercial relationship they wish to preserve?
• Carry out company and financial searches on the creditor. These can help identify a creditor that is in financial difficulty. 
• What are the creditor’s sensitivities? Might they be concerned about adverse publicity? Would an ongoing claim prevent any sale, merger or flotation of the business? 

Here to help

If you would like further information about how we can help your business recover its business debts or defend a debt recovery claim, please do not hesitate to contact a member of our Business Debt Recovery Team using the contact details below.