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Simplified debt recovery
The government is considering proposals for simplified court procedures for debt recovery. At present there are three separate sets of court rules, principally relating to the size of debt being sued for. The Law society of Scotland has proposed that this be reduced to two and that all actions for less than £1500 be treated as 'small claims'.
The legal expenses recoverable from an unsuccessful party in a small claim are currently limited to £75. Some businesses have been content to deal with small claims themselves. Others have been forced either to meet legal costs that are inevitably out of proportion to the debt due to them or take a 'commercial view' and accept less to avoid the cost of going to court or not seek to recover anything below the small claims limit (currently £750).
The Government has not yet accepted the proposals, but it seems likely that there will be a change. Businesses will have to consider their internal credit control procedures and learn how to use the new procedures to their best advantage. We will be reporting on the changes as soon as they are announced
.Financing Litigation
No business is exempt from litigation. Some are better able to avoid it; some are just unlucky. Whatever the background, the cost of even a 'relatively' simple court action is likely to be thousands of pounds, with the risk of having to meet at least a large proportion of the other sides bill if you are unsuccessful.
Legal expenses Insurance has been available for many years, but many have been shy of taking it on as an additional and apparently unnecessary cost. It normally only covers matters that were not known about or even that do not relate to facts or circumstances that existed at the time the policy is taken out. By the time the need arises it's too late to get cover. In many cases, it is also essential that advice is sought from the insurers as you progress. In employment matters, for example, you must take the action they advise in progressing through disciplinary action or dealing with a dismissal, or the policy will not cover you.
A new type of policy is now available. 'After the event' cover can insure against the risk of losing and avoiding having to pay both sides expenses. A claim is only possible if you are completely unsuccessful. The cover is naturally more expensive than traditional cover, but normally a lot cheaper than meeting even the other sides expenses. The cost of cover depends on the type of cover. For commercial actions it may be about 15% of the amount of cover asked for. There is no payout if you win, but you do have the comfort of a safety net if you lose completely.
Robin Millar, November 2000
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