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New Limits for Court Actions
On 14th January 2008 important changes come into effect in relation to court actions for payment of money. At present in the Sheriff Court there are three levels of actions – Small Claims – for sums due up to £750; Summary Causes up to £1,500 and Ordinary actions for sums above £1,500. From 14th January the limits are being increased to £3,000 and £5,000.
This will have a number of effects on our clients bringing actions to recover modest sums and, unfortunately, few, if any, of these effects are desirable.
In Small Claims cases the Court can only award very limited expenses to the successful party in the action if it is defended. The present limit is £75 although this is being increased to some degree with the maximum being £250. Small Claims are designed to be run without the intervention of a solicitor but companies and partnerships have no option but to instruct solicitors or sheriff officers for at least some parts of the action. The problem with Small Claims is that the limited risk of an award of expenses can tempt people to defend actions to which there is really no defence or to push on with a weak defence rather than seek to settle a case. Where the debt due was only a few hundred pounds there has always been a good argument for just settling such cases on the best terms possible, even just walking from it, rather than incur the cost, both in management time and legal fees, of pursuing the debtor. Where the amount claimed is, say, £2,800, however, that argument is not very attractive but the resultant cost of pursuing the case, especially with a ‘difficult’ defender who fails to turn up for court callings or comply with even the very minimal rules of procedure, could easily wipe out any benefit at all, even if the claim is successful and the money can actually be recovered.
The situation with Summary Causes, while similar, is not quite as serious as the court can award more substantial expenses albeit that these will never cover the actual cost in legal fees.
The best way to protect yourself from these changes is to take the following simple steps;
- If possible get paid as much as possible in advance of supplying goods or services or at the latest at the point of delivery – Tesco won’t let you walk out without paying for a pint of milk, so why should your customers expect to get credit.
- Get a set of terms of business prepared and make sure you use them properly. We are happy to advise you on appropriate terms and how to make sure they work.
- Get as much information about a customer as possible. Make sure you know whether you are dealing with a company or a partnership or an individual and above all make sure you get the name and address correct and in full. Bank details can help, although the opportunity to arrest bank accounts will soon be much less readily available. Find out how long they’ve been in business and try to assess how serious a risk they are.
- Don’t keep doing work for people who don’t pay – all you’re doing is sending out the message that we can be strung along for ages running up a bigger and bigger debt. And don’t ever do more work on the promise that ‘the cheque’s in the post’- only do it when the money’s in the bank – and cleared! There’s no need for cheques in this day and age – banks can transfer funds electronically.
- If someone doesn’t pay on time don’t spend weeks and weeks calling and sending letters. The sooner we get involved, the more likely it is that you’ll get paid.
Of course there are some cases where there is a genuine dispute and in these cases going to court is time consuming and expensive and the outcome is never certain. In recent years we have been involved in developing different approaches to resolving disputes and one of these, mediation, is described in a companion article to this piece.
If we are involved early enough in a dispute we can often find a solution much sooner and at much less cost than the two years a court action can take.
If you want any further information about our dispute resolution, debt recovery or litigation services please contact Robin Millar, Ruth Waters or Janette Wiseman on 01383 721621. Alternatively you can email
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