Court rules on debt recovery have been tightened up this month. If you haven't got all the defendant's correct details, your claim could be thrown out
Getting paid and getting paid on time is something that all businesses wish for, but unfortunately the construction has one of the worst reputations of any industry for settling outstanding debts.
The experience of the courts, and probably most professionals, is that a written record of the details of the contract is often slapdash and sometimes totally lacking. That in itself often gives rise to disputes between the parties, and it deprives those parties of at least one route to resolving that dispute - adjudication.
Changes to the civil procedure rules, which came into force this month, may also deprive the unpaid party from a further method of recovery - that of last resort: a claim for payment through the courts. The changes in court procedure make it imperative for certain information to be provided to the court if it is to issue proceedings for the recovery of a debt. The new mandatory fields of information required by courts include postcodes of defendants, their full names as well as trading names and whether they trade as a company, partnership, consumer or sole trader.
The title of individual parties is also compulsory and failure to be able to say whether you have traded with a Mr, Mrs, Dr, etc, could result in a court rejecting a claim.
Getting the basic information right could mean the difference between getting paid or not. Make sure you obtain and keep all relevant details when opening accounts and entering into any contractual relations. If you've not done this already and a contract is formed it may be too late to get the correct data.
Without key information, such as the date of birth of an individual, judgments obtained cannot be enforced. But be careful - it is not appropriate to gather excessive or sensitive information, as this could be a breach of the Data Protection Act 1998. It is not, however, a breach of the act to provide data to the court, as a duty of confidentiality is owed to defendants in court proceedings by claims under the act.
The change in procedure is a response to the fact that insufficient information was often provided to courts during debt recovery proceedings. It is not the job of the courts to ensure that the details are correct and they can now preclude a party from claiming against another if it does not provide the required details.
Certain parts of the industry have ignored for too long the need for certainty of basic details when entering into contracts. That is despite the incentives that industry standard contracts and the Construction Act provide to promote written agreements to help it get paid.
Not getting a clear written agreement in these circumstances will lead to long and costly disputes; not getting key information will leave you with nowhere to turn to pursue your claim to payment. Get the relevant details prior to contracting rather than when you are chasing payment as that may be too late. Getting these elements right from the start will help with collection and cash flow.
Having certainty in the contractual relationship and having full information about the contracting parties will enable budgeting and credit checking pre-contract and will enable you to respond effectively to warning signals during the relationship. Traditional warning signs include late payment or non-payment of invoices, part payment of invoices by lump sums, payment by post-dated cheques, invoices cleared upon receipt of new deliveries, exceeding credit limits, change in delivery/ordering patterns and use of multiple suppliers.
Often these signs are ignored. Trade continues until one or other of the businesses fails. That could be your business. Certainty in the contract will provide the parties with clear terms as to payment. In the case of default, it may allow suspension or termination of the contractual obligations and entitlement to interest and perhaps other payments. Having contact information will facilitate early and direct contact with decision-makers at the defaulting payer and will better enable credit controllers to monitor the risk.
Not having full information about those with whom you deal is no longer an option.
Chris is a partner at Ricksons Solicitors. Email: firstname.lastname@example.org