County Court Debt Recovery should only be considered after every reasonable attempt to recover an outstanding commercial debt has been exhausted. Most businesses have established credit control procedures for dealing with overdue accounts. However, when those procedures have failed, it is often appropriate to consider instructing a professional debt recovery agency before commencing legal action.
The involvement of an independent third party frequently changes the dynamics of the recovery process. Letters, emails and telephone calls from a debt recovery agency often carry significantly more weight than further correspondence from the creditor, particularly where the debtor has become accustomed to ignoring internal collection procedures.
The vast majority of commercial debts are recovered during the debt recovery process without the need for County Court proceedings. It is only where every reasonable avenue has been exhausted that legal action should be considered.
The Civil Procedure Rules Start Long Before Court Proceedings
Many businesses are unaware that there are rules governing the conduct of parties before County Court proceedings are commenced. These are known as the Civil Procedure Rules (CPR), and, in many respects, they act as the legal referee for civil litigation.
Their purpose is to encourage parties to exchange relevant information and documents, respond to correspondence promptly, act reasonably and make genuine attempts to resolve disputes before Court proceedings become necessary.
A party that withholds important evidence before proceedings are commenced, only to disclose it later after legal action has begun, may find that the Court takes an unfavourable view of that conduct. Likewise, a failure to engage with correspondence or comply with the Civil Procedure Rules may have significant consequences.
It is perfectly possible to win a County Court claim but still lose on costs. The Court has wide discretion when making costs orders and may refuse to award some or all of a successful party’s legal costs, or even order them to pay costs unnecessarily incurred by the other party because they failed to comply with the Civil Procedure Rules or acted unreasonably during the pre-action process.
Deciding Whether Legal Action Is Appropriate
Once the pre-legal process has been exhausted, the next question is not simply, “Can we issue a County Court claim?”
The better question is, “Should we?”
Before County Court proceedings are commenced, businesses should understand the likely costs, the commercial implications, the evidence available and the realistic prospects of recovery.
Some form of credit assessment should always be carried out on the debtor before legal proceedings are commenced. Obtaining a County Court Judgment is often the easy part; converting that Judgment into cash can be the difficult part.
If a credit report reveals that the debtor company already has three recently registered County Court Judgments, that should immediately prompt a careful commercial assessment. If the value of the debt is sufficient to make legal action economically viable, proceedings may still be appropriate. However, that decision should be made with a full understanding of the debtor’s apparent financial position and the likelihood of recovering the money once a judgment has been obtained.
Legal action should always be a commercial decision rather than an emotional one.
Over the years, we have secured settlements at every stage of the litigation process, including receiving payment in full by electronic transfer on the steps of the Court just moments before the trial was due to begin.
Issuing County Court Proceedings
Before County Court proceedings are commenced, we always ensure that a 7 Day Letter Before Legal Action has been issued. This provides the debtor with one final opportunity to resolve the matter and demonstrates compliance with the pre-action requirements of the Civil Procedure Rules.
Failing to follow the appropriate pre-action procedures may have consequences later in the proceedings, particularly when the Court considers the conduct of the parties and any order for legal costs.
If legal action is considered appropriate, proceedings can then be issued electronically through the County Court Online system.
The Court fee, together with any statutory interest and recoverable debt recovery charges that are properly claimable, can be added to the value of the claim.
Many debtors decide to pay shortly after receiving the Claim Form. Others make acceptable proposals for payment before the matter progresses further.
Where a Defendant disputes the claim and files a Defence, the matter follows a different procedure. Defended claims involve additional stages, including case management, disclosure of evidence and, where necessary, a final hearing. As this is a substantial subject in its own right, we will examine the defended County Court process in a separate article.
Although some claims are defended, many are subsequently settled as the proceedings progress because the time, cost and uncertainty of litigation often encourage the parties to reach a commercial settlement.
Over the years, we have secured settlements at every stage of the litigation process, including receiving payment in full by electronic transfer on the steps of the Court just moments before the trial was due to begin.
What Happens If the Claim Is Ignored?
If the Defendant fails to respond within the prescribed time, the claimant is normally entitled to request what is known as a Default Judgment.
A Default Judgment is entered because the Defendant has failed to respond to the proceedings, rather than because the Court has heard evidence from both parties.
Once Judgment has been entered, the claimant is entitled to consider enforcement immediately. In practice, however, many creditors choose to give the debtor one final opportunity to settle the Judgment before commencing enforcement action. Where appropriate, enforcement action, including transfer to the High Court for enforcement, can be initiated without unnecessary delay.
A County Court Judgment Has Commercial Consequences
Once a County Court Judgment has been entered, it is likely to become a matter of public record approximately 10 days later.
For many businesses, the consequences of a registered County Court Judgment extend far beyond the amount of the debt itself. Banks, finance companies and invoice finance providers routinely monitor public records. Where lending or finance facilities are in place, notification of a newly registered Judgment may trigger a review of the Debtor company’s financial position and the facilities being provided.
Many suppliers also protect themselves through trade credit insurance. A registered County Court Judgment may result in a reduction or withdrawal of credit limit by the insurance company, requiring future purchases to be made on a pro-forma or cash basis.
A registered County Court Judgment may also affect future applications for finance, banking facilities and commercial credit. For many businesses, protecting their commercial reputation and credit profile becomes a compelling reason to settle the Judgment promptly.
Paying a County Court Judgment
If the debtor pays immediately after being notified that a judgment has been entered, the claimant can notify the Court online that the Judgment has been satisfied. Debtors should always request confirmation that this will be done before making payment.
In most cases, where payment is made promptly, and the Court is notified before the Judgment is registered, it will never become a matter of public record and will not appear on the debtor’s credit file.
If the Judgment has already been registered, payment within 30 days of the date the Judgment was entered allows the claimant to notify the Court. The Judgment will be removed from the Register and, as a result, will be removed from the debtor’s credit file.
Where payment is made more than 30 days after the judgment was entered, the Court can still be notified. The Judgment will remain on the Register and continue to appear on the debtor’s credit file for six years from the date the Judgment was entered, but it will be marked as Satisfied, confirming that the debt has been paid.
County Court Proceedings Should Never Be Feared
Many business owners hesitate before taking legal action because they believe Court proceedings are inevitably expensive, complicated or confrontational.
The reality is that the vast majority of commercial debt claims never reach a final hearing. Many are resolved shortly after proceedings are issued, whilst others settle as the litigation progresses.
The County Court exists to provide businesses with a structured and independent method of resolving disputes when every other reasonable avenue has failed.
Like every other stage of commercial debt recovery, legal action should be approached commercially, proportionately and only when it represents the most appropriate course of action.
Need Advice About an Unpaid Commercial Debt?
If your business has an outstanding commercial debt, regardless of the amount involved, contact NPD & Company for a free, confidential discussion. We will explain the recovery options available and recommend the most appropriate course of action based upon the circumstances of your case.
Telephone: 020 8665 6666
Email: info@npdandco.com
Alternatively, if you prefer to manage the recovery process yourself, our Credit Control Room portal provides a range of low-cost, pay-as-you-go services, including professional debt recovery with live online case updates, legal letters, the ability to create Late Payment Invoices under the Late Payment of Commercial Debts legislation, and instant company credit reports.
How long does a County Court Judgment remain on my credit file?
If a County Court Judgment is paid before it is registered, it will normally never appear on the debtor’s credit file. If it is registered but paid within 30 days, it can be removed from the Register and the credit file. If it is paid after 30 days, it will remain on the credit file for six years but will be marked as Satisfied.
When should I issue a County Court claim?
A County Court claim should only be considered after every reasonable attempt to recover the debt has been exhausted. Before commencing proceedings, you should ensure that the debtor has been given a final opportunity to pay, the Civil Procedure Rules have been complied with, and the likely prospects of recovery have been assessed.
Should I carry out a credit check before issuing a County Court claim?
Yes. Before issuing proceedings, it is sensible to assess the debtor’s financial position. Obtaining a County Court Judgment is often the easy part; converting that Judgment into cash can be far more difficult. If the debtor already has several recent County Court Judgments, you should carefully consider whether legal action is commercially worthwhile.
