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Business debts: “To Sue Or Not To Sue – That Is The Question”

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Paul Trincas, a litigation specialist at law firm, Charles Lucas & Marshall weighs up how far a business should go to recover money it is owed.

Paul Trincas

Paul Trincas

Very often, the first, and perhaps most natural reaction for a business owner faced with a customer or client who has failed to pay without good reason, is to sue for the monies owed.

However, to implement that initial reaction is not as easy or straightforward as you think it might be. Several business and economic factors need to be weighed in the balance before making the decision to sue.

Is there an on-going commercial relationship to maintain ?

It may well be that the monies owed are small compared to the overall gain to be

achieved by not pursuing it through the courts and securing future business worth significantly more, in financial terms, than the current sum owed.

Is the amount worth suing for ?

If the amount is of any significance, and all other measures to secure payment have failed, then it may well be worth suing through the courts. If you succeed in your claim, you would also be entitled to seek payment of your legal costs.

However, where the sum involved is £5,000 or less, then this will constitute a ‘small claim’, where normal costs rules do not apply. Instead, in such cases, the costs rule, subject to very limited exceptions, is that each party, win or lose, will have to pay its own costs. All the successful creditor will be able to recover are the court fee and limited fixed costs. This means that for lesser value claims, the whole exercise is not economically viable.

Will you actually get paid ?

Having succeeded in the action, you will get a Judgment, effectively ordering the customer or client to pay the money. But what if the client or customer does not pay? In this scenario, there is no magical formula for securing payment of your money. The client or customer will not go to prison for defaulting on payment on the Judgment as this is a civil debt and not a criminal matter.

You as the business owner, will then have to go back to court in order to enforce the Judgment debt in the most appropriate method, given the financial circumstances of your customer or client. However, further costs will be incurred in the enforcement process, and, you will only be able to recover limited fixed costs – normally a fraction of the total costs incurred in the enforcement process.

You can contact Paul Trincas on 01635 521212 or

Written by Paul Trincas

August 16th, 2013 at 4:09 pm