Pre-enforcement and debt collection

Our thanks to Maria Koureas-Jones from Woodfines Solicitors for co-presenting our recent webinar on High Court enforcement for businesses, and also for answering the pre-enforcement questions raised during the webinar.

debt collection call

Where we have made a duplicate payment of an invoice and the supplier is slow to return the payment, could we threaten to apply interest in such circumstances?

A claim for recovery of a duplicate payment of an invoice, would be a restitutionary claim rather than a contractual one. A claim for interest would not therefore, be made under the contract between the customer and supplier or under the Late Payment provisions.

However, where a duplicate payment has been made, you may be able to claim compound interest under the House of Lords' ruling in Sempra Metals Ltd v HM Commissioners of Inland Revenue and another [2007] UKHL 34.

Could it be considered harassment to demand payment over the phone?

Harassment is a course of conduct which amounts to harassment of another and which the defendant knows or ought to know amounts to harassment.

What constitutes harassment depends on the facts; where a creditor is professional in his approach to credit control (i.e. by calling a debtor in a professional and non-threatening manner at reasonable intervals after an invoice becomes due), this is unlikely to amount to harassment.

Needless to say, if a creditor were to call a debtor regularly in an aggressive and threatening fashion or where, for example, a creditor called the debtor at unreasonable times of the day, requesting payment over the phone could indeed amount to harassment.

Calling a debtor is an important part of any credit control process. The key is to approach these calls in a professional fashion.

If a company has ceased trading, can we chase debt against the director’s other businesses?

A limited company has its own legal personality independent from its directors. If Company A is liquidated and Company B starts trading, Company A and Company B still have separate legal personalities, even where the directors of both are the same people.

Therefore, a creditor of Company A cannot pursue Company B for Company A’s debts, simply because the directors of Company A and B are the same.

Where a director of Company A has given a personal guarantee to the creditor, or in extremely limited other circumstances, a creditor may be able pursue the directors of Company A personally. However, in the absence of a personal guarantee, this will be an exceptional remedy rather than the norm.

This scenario, which is not uncommon in practice, highlights the need for a creditor to closely monitor the credit being afforded to limited companies and the benefits of obtaining a personal guarantee from a customer’s director, where the customer is a limited company.

How do you credit check a sole trader or director? Does it require their consent or can it be done without their consent?

Some businesses may be able to undertake credit checks on a sole trader or director using a credit reference agency. If a business does not have access to such a facility, a business can check whether a sole trader or director is a home owner via a Land Registry search.

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