27 June 2014 #Dispute Resolution
Disputes are an unhelpful distraction to any business. They are costly and divert attention and resources away from the business’s main activities. Unfortunately, we must all accept that there will be situations where parties end up in dispute and may need to consider Court action.
There are a number of dispute resolution mechanisms that can be used to chase debtors, such as issuing statutory demands. However, this article is focused on advising businesses that are considering commencing a claim through the small claims track. It is intended that this will be the first is a series of articles about the small claims track.
The definition of a “small claim” is a claim for money with a value of less than £10,000. If you are asking the Court for anything other than money, such as an Order that the Defendant be prevented from doing something, your claim is not appropriate for the small claims track. The two main advantages of the small claims track are:
We frequently advise clients in relation to these types of disputes and the different options available. However, we rarely run cases allocated to the Small Claims track through to trial because it is simply not economic for us to do so. We set out below some useful considerations that you might consider before taking action.
Who are you claiming against?
Before filing Court papers, you must ensure that you sue the right person. Although this may seem obvious, companies often have trading names and, in such circumstances, you should sue against the company’s official legal name, not the name it trades under. Furthermore, although you may have been dealing with an individual, consider whether that individual is dealing with you in their capacity as a director of a company and therefore whether it is the company that is the proper Defendant as opposed to the individual you have been dealing with.
What are you trying to recover?
You must consider whether the remedy that you seek from the Defendant is capable of being dealt with on the small claims track. As mentioned above, the small claims Track will only deal with claims for money so if you are seeking some other remedy, the small claims track may not be appropriate.
Secondly, you should consider what your actual losses are. For example, where you have provided services to another company and raised an invoice for those services that has not been paid, any VAT that you have included in that invoice should be claimed from the Defendant as well. However, if for example, you had been promised the opportunity to provide services but had not actually done so, your claim would be for the loss of profits alone.
When should you commence Court Proceedings?
Trying to recover debts through the Courts is a drain on your time and resources. Court proceedings should therefore be a last resort. The Court would always encourage parties to set out their claim in writing and allow the proposed Defendant the opportunity to respond before commencing Court action.
Where should you commence your claim?
The Court system offers an online service called Money Claims Online that allows you to issue a claim on the internet. The Court fee for starting claims through the Money Claim Online service is less than the paper based version. However, the paper based version is available through the County Court Business Centre.
How do you commence your claim?
To start a claim, you should obtain a Claim Form from the Ministry of Justice website or from your local County Court. The Claim Form provides you with full details of where to send the claim and where to find details on Court fees that will need to be paid at the same time as the Claim Form is sent to the Court. Guidance can also be found online at the Ministry of Justice website.
Why are you bringing your claim?
The Court also requires you to briefly summarise the basis on which you say that the Defendant should pay you money. This section is known as the Particulars of Claim. When completing this section, bear in mind that the Court has no background information on your business and circumstances and therefore is entirely reliant on the information you provide. Setting out your claim in a logical and coherent manner could improve your chances of being successful in the claim. For example, if you believe that there was a contract for you to provide services to the Defendant, set out the details of how that contract was formed, which terms of the contract you seek to rely on, how you believe you have fulfilled your obligations under the contract and how the Defendant has failed to fulfil its obligations. It is not enough just to say that you have an invoice that is unpaid. You need to say why you believe that the Defendant should pay that invoice.
We will be bringing you a follow-up to this article in the near future to advise on what to expect after a claim has been started and how to enforce a Judgment once you have obtained one.