Unsupported browser

For a better experience please update your browser to its latest version.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

Chasing payment through the courts, or send the boys round

  • Comment

'My clients are owed money and the rotters won't pay. What can I do?', an enthusiastic new pupil once asked.

'Well, you can issue a claim form for the debt and apply to the court for summary judgment.

Of course, if the debt is disputed and 'the rotters' can show that they have real prospects of successfully defending the claim then you won't get judgment and you will have to prepare for trial.'

'Can I do anything else?'asked the pupil.

'Well, if 'the rotters' are a company, you can issue a statutory demand and apply to the court to wind them up. The Insolvency Rules allow you to do something similar to partnerships. It usually works. Most companies would rather pay up than be wound up. Of course, if 'the rotters' dispute the debt - if, for example, they have a counterclaim or 'cross demand' as the Chancery practitioners call it - you won't succeed and will have to go to trial.'

The new pupil was unimpressed. 'Anything else?' she asked.

'Well, if the contract is a construction contract, you can start an adjudication under the Housing Grants Act and the Scheme for Construction Contracts.

With any luck you will get a decision in your favour within 28 days. Of course, 'the rotters' may raise any number of arguments about the adjudicator's jurisdiction, the validity of the claim and their reasons for not paying and there is no saying how they will be dealt with. And remember, it's not cheap. But most people think that it is worth a go.'

'So apart from a claim form, a statutory demand and a notice of adjudication, what can I do?' persisted the pupil, much in the vein of John Cleese and 'what have the Romans done for us?'

'Well you can do a bit of heavy chasing, ' I offered, to which the pupil replied: 'What's that?'

'You know, rather than write a letter to 'the rotters' saying 'your account is overdue', produce a document with the words, 'YOU OWE US MONEY' in bold red type and follow it up with, 'unless you discharge this debt forthwith appropriate action will be taken' and put some fancy formal signature at the bottom making it look like a legal document. It is supposed to put the frighteners on 'the rotters' but most are immune to it. In fact, I was once asked to confirm that a document my clients had received was not 'in legal format' but was just 'a bit of heavy chasing' . When I looked at it, I saw that it was a Statutory Demand, foreshadowing an application to wind the company up. That got a laugh at Chambers tea, I can tell you.'

The pupil was not amused: 'Is that it? A few legal procedures and a piece of desktop publishing?'

In despair I concluded: 'Well you could always send the boys round.'

I was reminded of this conversation when reading about the case of George Parke v The Fenton Gretton Partnership (2000) . You may remember that before adjudication got going, the big debate was how an adjudicator's decision was to be enforced in the event that 'the rotters' did not pay up. The Act offered no help and the scheme provided for some convoluted procedure based on the wrong bits of the Arbitration Act.

The decision of Macob v Morrison cleared the way and allowed adjudicators' decisions to be enforced by summary judgment.

Some wondered whether you could not achieve the same end by issuing a statutory demand. The Fenton Gretton Partnership went down this route and when Parke would not pay the £l69,000 the adjudicator decided was due to it, it issued a statutory demand. Parke applied to set aside the demand on the grounds that he had a cross demand for more.

The Chancery Division judge said that a valid cross claim is sufficient to defeat a winding up application, even if it would not have been grounds for resisting an application for summary judgment. The judge set aside the statutory demand.

The moral here: if the rotters won't pay up on an adjudicator's decision don't issue a statutory demand, apply for summary judgment. Either that, or send the boys round.

  • Comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions.

Links may be included in your comments but HTML is not permitted.