As a small business, cash-flow is extremely important to the daily functioning and long-term health of the business. We have all seen the consequences of late payment on our businesses.
Unfortunately, the Government has introduced a new Pre-Action Protocol for Debt Claims. A Pre-Action Protocol is a set of guidelines which you are required to do before you take a matter to Court. If you do not carry out these steps, the Judge may order you to pay the Debtors costs or put the case on hold until you comply with the Protocol. This can have a damaging effect as it further delays the payment you are waiting for and increases the costs.
Before the Pre-Action Protocol for Debt Claims
Prior to the Protocol, if you had not been paid by the Debtor, all you had to do was follow the contractual agreement i.e. if the contract said you would be paid in 60 days or the matter would be referred to an Arbitrator etc. If payment was still not made you could issue a formal letter before claim requiring payment within 21 days. If this letter before claim was unsuccessful you could then issue Court proceedings for an order for payment. Simple enough!
After the Pre-Action Protocol for Debt Claims
The Protocol came into force on the 1st October 2017. The Protocol applies to Business Creditors who are seeking payment from sole traders or individuals.
Under the new Protocol a letter before claim must still be issued, although this must now be more detailed. The Debtor then has 30 days to reply. The Debtor can now also ask for additional time to respond if they are seeking legal advice. There is a set form within the Protocol which the Debtor must complete and return. Once you have this form from the Debtor, you will have to wait a further 30 days before you can enter Court Proceedings.
You are now also under a positive obligation to take steps to settle the matter without Court Proceedings, by using methods such as mediation. If an agreement cannot be reached then you must give the Debtor 14 days notice that you are issuing Court Proceedings against them. Taking the total up to at least 64 days before you can take any action.
The downside of the new Protocol on Small Businesses
The effect of the new Protocol is that small businesses now have to wait at least 11 weeks more before they can take matters to Court. Due to the additional work involved i.e. mediation and the expertise required to draft the letter before claim, the costs have now also increased. The Protocol also seems to favour the Debtor. A well-informed Debtor can now continue to delay matters more than ever before.
How to minimise the damage?
The best way of dealing with these changes is to ensure you have an effective system in place for monitoring late payments. The sooner these are addressed, the sooner legal action can be taken if necessary.
It is also wise to ensure you speak to a Solicitor who can draft a set template letter before claim for you. This will ensure that you are able to take the initial steps yourself fairly quickly. It also means that when you refer the matter back to your Solicitor, they simply have to issue the 14 day notice to the Debtor and then start Court Proceedings. As always, staying one step ahead of the Debtor is key!
For further information or assistance please do not hesitate to contact Ms Annam Nasir, Head of Civil Litigation at Baches Solicitors on 0121 553 3286 or firstname.lastname@example.org.
Many of us have heard of the distressing case of Brenda Grant. Despite Brenda making a Living Will confirming she did not want life sustaining treatment her life was prolonged for 2 years before her wishes were respected. This was all because the existence of her Living Will was not known for some time. Whilst the family have been awarded a £45,000 settlement this does not compensate for the upset and distress they faced.
What is most concerning is that a legal document was made by Mrs Grant which was ignored.
How can you avoid this happening to you?
Baches prefer clients to make a Lasting Power of Attorney for Health and Welfare instead of a Living Will.
What’s the difference?
A Living Will is a document you set up with your GP and your Solicitor, it can be time consuming to arrange and is seen as an outdated document by many which is why it is often ignored.
The Lasting Power of Attorney however allows you to record your wishes in a formal document, you then appoint Attorneys to carry out those wishes. They can decided whether you receive life sustaining treatment and other matters concerning your health.
The reason Baches prefer the Health and Welfare Power of Attorney is because when you make the document it has to be signed by the Donor (person making the document/patient), Certificate Provider (who confirms the Donor is able to understand and make decisions) and also the Attorneys. It also has to be registered with the Courts to be effective. As the document involves more parties and has to be registered for use, should the Donor end up in a situation such as Mrs Grants plenty of people will know about the Lasting Power of Attorney and therefore the Donors wishes are acted upon straight away.
If you have a Living Will and wish to change this to a Lasting Power of Attorney for Health and Welfare or wish to protect yourself by making a Lasting Power of Attorney please contact our experienced Private Client team on 0121-553-3286.
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