Debt Recovery Case Studies

The Client is a factoring company and we were pursuing recovery of the money due to them under the terms of a written indemnity, which had been provided to them by a Director of the Company, which had gone into liquidation.

The Director refused to pay the money due, claiming that there were invoices he had submitted to his customers, and if the Client collected these invoices, there would be sufficient funds to repay this debt. He further claimed that the client was in breach of the factoring agreement by failing to recover these funds.

We were able to demonstrate that under the terms of the factoring agreement, the client was under no legal obligation to recover these funds. They were obliged only to telephone a certain number of customers to verify they had received the goods for which they had been invoiced, and to send out monthly statements, both of which they had done.

Judgment was successfully obtained against the indemnifier. However, he continued to refuse to pay, he claimed to be unemployed and have no assets, he refused even to submit a realistic payment proposal. In view of this, our client was left with no alternative than to pursue bankruptcy. A Statutory Demand failed to prompt any response, other that another refusal to pay, so a bankruptcy petition was issued.

The bankruptcy hearing was some three months away when the Debtor was served with notice of the Hearing. He waited until 24 hours before the bankruptcy hearing to instruct his solicitor to contact us to make payment. We recovered our client’s total debt, together with all bankruptcy costs, on the afternoon before the bankruptcy hearing was due to take place.

Our client is a firm of accountants. They had provided professional services to a limited Company. They were instructed by a Director of the Company to provide detailed tax advice in relation to a number of companies within the group.

The Client undertook the work, which in fact proved to be a lot more involved than first anticipated, thus costing far more than the original fee estimate. The Client kept the company informed of every increase in fees, notwithstanding which, at the time of invoicing, the Company refused to pay, referring to the original quotation.

We issued legal proceedings for the client, which were Defended, the Defendant maintaining that they were only prepared to pay the original fee estimate, contained in the letter of engagement.

We were able to demonstrate to the Court that our client had in fact kept the Defendant Company fully informed of all changes to the amount originally quoted. As the Defendant had requested further work, our client provided them with regular updates and sought their agreement to further fees being incurred.

We obtained a Judgment against the Company for the total amount of the debt, together with costs and interest.

Our client is major high street bank, and the team of staff with whom Jayne Lees works deal with the factoring and invoice discounting part of the business. It became apparent from taking on the client that their legal knowledge was varied and in some cases very limited, so Jayne offered training, at no charge.

This has developed over the years and we have a training programme in place so from when a new member joins the team they have an introduction to legal process; an overview of the things we can do, and those we can’t. This is continued through their progression and the training includes spending time at our offices so they can see how we work.

Jayne found that sometimes a client’s lack of understanding can make them frustrated; when they are not aware of the court timetables for example. Having spent time with the client developing their understanding, and her understanding of their requirements and processes, this has both cemented the relationship with them and helped us to exceed their expectations of a provider of legal services.

The training programme is still developing and evolving, to encompass the changes in their internal processes, and changes to the CPR, and continue to work with the client as this method assists in developing their staff, and demonstrates our loyalty to them.

Acting for a television advertising company collecting outstanding debts whilst they were winding down the business which resulted in collections of 87% of the ledger passed across.

We were approached by the temporary credit manager of the business who we had previously carried out work for to assist him in pre and post legal collections for them. It was clear from the beginning that the debts were in some instances a couple of years old and had not been chased for a long time if at all. Also in addition to company’s in England & Wales there were debts in Scotland, Northern Ireland and Eire.

The debts ranged from a few hundred pounds to in excess of £35,000. After sending out the initial letters I made telephone calls to all of the debtors who had no intention of paying as they knew that the client was winding down the business and believed they could get away without paying. They made every excuse not to pay including spurious disputes which I was able to counter and continual requests for paperwork which I had in my possession.

Due to my perseverance on the telephone I only had to issue proceedings on 6% of the matters and recovered in each instance.

We had been acting for a nationwide company for a number of years doing ad-hoc training on various credit management and legal topics. Following a change of management we were ask to carry out regular on going training for existing staff and also were incorporated into their induction program for new starters in their collection departments.

I was requested to attend offices all over the country including Belfast to carry out training. For new starters I wrote a particular training program to cover the basic principles of credit management, telephone collection techniques, identifying legal entities and the legal process. This proved to be a very important part of their induction as the vast majority of new recruits had no previous knowledge of collections.

With the existing staff more in-house training programmes were written on topics such as legal entities, erosion of profit margins, legal process and insolvency. These have proved to be very successful and have been expanded to other parts of the business including sales personnel and I have been invited on a number of occasions to speak at national conferences on these subjects.

Over the years when I have been carrying out this training the staff who have left and gone to other business have then requested I carry out similar training programs for the staff at their new employers.

A client who we had been acting for had recently acquired a company who did substantial work abroad and approached us to assist them in recovering foreign debts

The client’s credit control operation had no previous experience in collecting from foreign companies and their initial thoughts were to write debts off rather than incur costs in pursuing the debts.

We were able to assist them in training of their own staff in what to look for when dealing with foreign companies. Additionally we were able to collect substantial sums of monies for them through our foreign section and then by our extensive portfolio of agents throughout the world.

Whilst acting for a client (a national manufacturer of boilers for the domestic market) we noticed that many of the debts being sent to us were either very easy for us to collect, or had simple disputes which really should have been resolved prior to passing them to us.

Martin Hughes discussed the situation with the Credit manager, and we agreed that he would visit his company and carry out an audit of their internal credit control procedures.

It was soon obvious what the problems were.

·          There was no query resolution system in place allowing problems to be identified and followed up in a timely and effective manner

·          Dunning letters, rather surprisingly, were not despatched to an agreed credit cycle and were to say the least ineffectual in their content

·          There did not appear to be an agreed Credit Policy in place regarding returns and in many cases debit notes which had been initiated by their customers

Martin devised a manual system for him regarding query resolution, as he did not have a software application which would deal with this.

Dunning letters were rewritten with an agreed credit control cycle to escalate the debts.

A procedure was written to identify and deal with the returns and debit notes.  This part filtered into the query resolution system.

Not surprisingly, the volume of work received from the client reduced to a trickle.  We did, however, retain a loyal client who continued to pass work of a more tricky nature to us.

Martin Hughes received a telephone call from the Credit Manager of an international branded clothes business.

They had a debt of £120k with a major retailer in Mexico City.  Despite their best efforts, they had been unable to obtain settlement.

In Mexico the legal process can be long winded and expensive.  It is generally accepted that most proceedings for the recovery of debt will take approximately one year, without adding any appeal processes.

The matter was urgent as investigations revealed that the Mexican Government had also issued proceedings in the courts for unpaid taxes.  A different strategy was required.

Martin contacted local agents, previously used by us, and within three hours we had their representatives at the retailer walking round and to all intents and purposes doing a stock take.

The retailer was a sole distributor of our client’s products in Mexico, and as such had large signs both inside and outside the premises with our client’s logos and brand names.  Martin ensured the retailer was aware that they were now in breach of contract and not only would we remove all of our goods but we would also insist on the removal of all signage.

There followed a long procession of calls and emails between Martin, our agents and the retailer.  Within three weeks of instruction to us, our client had received payment in full.  This demonstrates how a pure legal process in a foreign country may not be the best option, and very often may be the lazy option.

Martin is unaware how long it took for the Mexican Government to get paid for their claims.

At the request of a bank Martin Hughes went to see a client of theirs who was giving them concern regarding their cash flow.

Martin went to clients and checked:

·                      The Sales ledger

·                      Age of debt and values

·                      Margins

·                      Stock control

·                      The Purchase ledger

Martin found that the client had become over reliant on one customer.

Unfortunately, this customer was a very large national who dictated their payment terms (and then exceeded the agreed extended terms) and to whom the goods were sold at very small margins.  Due to the size of the customer, the client felt unable to take action against them.

As a result the client was unable to obtain goods, as they were on stop with their suppliers, which meant that they were not able to fulfil orders from their other customers who provided far greater margins.

It was absolutely clear to Martin that the business would fold within three months unless they took immediate steps to rectify the situation.

The one action needed was to stop supplying the offending large customer and to obtain settlement of their outstanding invoices.  The client decided to follow Martin’s advice.

Martin was advised by the bank some three-to-four months later that there had been a dramatic turnaround in the fitness of the company.  They were now concentrating on supplying the smaller companies on higher profit margins and as a result did not have the same cash flow worries and the profitability of the company had increased.

Acting for a globally known and respected company, John Spratt received urgent instructions to advise on the possibility of their being able to recover a bad debt from a well-known retailer in administration.  The problem was that John’s advice to the client had to be that the Administrator was not in a position to pay the debt of any creditor from the company’s assets except (a) pro-rata with all other unsecured creditors at the end of the debtor company’s insolvency process or (b) if the payment was necessary in all the circumstances in order to maintain the business of the company in administration under his management pending a possible sale.

Working closely with his client’s management team, and having enlisted the help of a colleague in the insolvency profession, and also with the help of John’s Partner Hitendra Patel, John was able to negotiate and draft an agreement with the Administrator that he would pay the whole of his client’s substantial debt rather than face the consequence of their withdrawing their services from the company in administration. This work was done largely over one weekend, with frequent written communications and many telephone calls.

John’s clients were delighted with a wholly successful outcome, which seemed at the beginning to have been against the odds.

Jean Dunson acts for a client who is involved in temporary and permanent professional services recruitment.

Our client was in dispute with a solicitor’s practice (the Defendant), having introduced its Candidate, Mr. G (a solicitor) to the Defendant for temporary employment. The Defendant employed Mr. G on a temporary basis for just under a year, subject to our client’s Terms of Business. We issued proceedings on behalf of our client for recovery of fees for the temporary period of employment which the Defendant defended alleging that Mr. G was negligent in the performance of his duties and our client was responsible for the resultant loss and damage caused to the Defendant for failing to ensure that “the services of its worker would be performed to a reasonable standard of care, competence and diligence to be expected of any agency specialising in the provision of professionally qualified solicitors”.  The Defendant was also claiming damages in excess of £5,000 plus interest by way of counterclaim. 

The matter was passed to Jean to deal with in the Defended Commercial Recoveries Department. At trial, we argued on our client’s behalf that our client had complied with its obligations under the Terms of Business, by using “reasonable endeavours” to ensure that Mr. G was “efficient, honest and reliable”. As Mr. G was under the sole direction, supervision and control of the Defendant during the period of engagement pursuant to the relevant clause in the Terms of Business, our client was not responsible for the acts or omissions of Mr. G during this time.

The Court agreed and our client was awarded judgment against the Defendant.

Jean Dunson’s client (the Claimant) supplied packaging machinery and materials to food producers in the UK. The Defendant was a supplier of packaging equipment to the food processing industry.

Our client was seeking recovery of sums due in respect of goods and services supplied and invoiced to the Defendant between February and May 2004, which included the supply of replacement and spare parts and transportation costs. Our client contended that the replacement and spare parts ordered by the Defendant were either collected by the Defendant or delivered to the Defendant’s customers direct and that payment of its invoices was due in full.

The Defendant denied that it was liable and counterclaimed for the cost of the replacement parts, arguing that they should have been supplied under warranty.  We argued on our client’s behalf that as they were electrical items, they were expressly excluded from warranty under our client’s terms and conditions.

At trial, the District Judge found that the Defendant had returned four out of six defective parts and that the returned parts were covered by warranty. He did not agree that the returned parts were subject to the warranty exemption of electrical components and found against our client on this point, partly due to the lack of any reference in our client’s correspondence to suggest that such an exemption applied.

Our client nevertheless succeeded on its Claim and was awarded Judgment accordingly, whilst the Defendant partially succeeded on its Counterclaim. 

Jean acts for a client who is involved in the provision of unsecured personal loans and who had made a loan advance to the Debtor in May 2006. The Debtor signed a Loan Agreement which was governed by the Consumer Credit Act 1974 (“CCA”), agreeing to repay the advance plus interest in 60 instalments. The Debtor defaulted in payments, a default notice was issued and the account was terminated in February 2008.

We were instructed to recover the balance outstanding under the Agreement and issued a claim on our client’s behalf in the County Court. The Debtor defended the claim, alleging that the Agreement was “fundamentally flawed” and unenforceable, citing a number of breaches of the CCA, including an allegation that the wrong form of warning had been used in the Agreement. This turned out to be true, as the warning used in the Agreement actually applied to a different type of credit agreement. Therefore technically, the Agreement was unenforceable and our client was not entitled to proceed with its claim.

Despite the defective Agreement, Jean was able to progress the claim to trial on behalf of our client by successfully applying for an enforcement order. The court has power to make an enforcement order where there have been certain technical breaches of the rules governing the formalities of credit agreements which would otherwise render the agreement unenforceable.  

At trial, judgment was awarded to our client in the full amount claimed.

Pete’s Client was a sole trader taking on haulage contracts.  Pete’s Client had been sub-contracted by a company (“the Defendant”) who specialised in the delivery of ‘portacabins’.  Pete’s Client had quite a few problems obtaining payment from the Defendant despite working for them for some time.  Eventually, over £20,000 was outstanding to Pete’s Client.  The only explanation that the Defendant would offer regarding the non-payment was that credits were due from Pete’s Client but there was no detail as to what these credits may relate to.

Upon issuing proceedings, the Defendant immediately made a payment of £13,000.00 but still refused to provide details as to why credits were due for the remaining balance.  The balance was allocated by the Court to the Fast Track and standard directions were issued.  The case proceeded along these directions and the Defendant did the bare minimum to comply with these.  This meant that they offered up no further details as to why they were disputing the balance. 

Eventually, the day before the hearing, the Defendant tried to get the matter adjourned due to ill health.  Pete’s Client stood firm and asked the Court not to adjourn the hearing.  The Court could see that the Defendant had no real argument in this case and refused the adjournment.  Pete’s Client then presented their case and, due to the clear nature of the documents Pete had prepared with them, Judgment was awarded for the full debt plus ALL costs which had been incurred.

Pete’s Client was a large national limited (formerly PLC) company involved in the delivery of items on a door-to-door basis.  Pete’s Client had delivered hundreds of catalogues on behalf of a ‘fashion’ business based in London (“the Defendant”).  The Defendant was refusing to pay on the basis that none of the catalogues had been delivered; they claimed that all catalogues had been dumped.

From the very beginning of this case, the Defendant proved to be very adept at time-wasting and putting up smokescreens without any real evidence to back up the majority of their defence.  This matter was allocated to the Small Claims Track which generally means that no costs (other than very limited fixed costs) can be recovered which made it difficult for Pete’s Client to make the decision to proceed with this case because, due to the Defendant’s behaviour, costs were racking up.  However, on several occasions, Pete was able to make successful Applications for costs against the Defendant due to the Defendant not complying with Court Orders and wasting time.

This case eventually went to five hearings and, due to Pete’s Client’s perseverance and belief in their case, they were awarded Judgment for almost all of the monies they were claiming as well as the several costs awards.  This case shows that, even when a Defendant is doing their best to make you drop a Small Claims case by using delaying tactics and racking up costs, the right, profitable result can still be obtained.

Pete Gardner’s Client was an industrial engineering company operating from three sites in Cambridgeshire.  They had supplied approximately £5,000 of aluminium honeycomb core to a company (“the Defendant”) who were refusing to pay but providing no specific details as to why this was. 

An initial letter was sent to the Defendant by a colleague in our Commercial Recoveries Department but the Defendant failed to respond resulting in legal proceedings being issued on behalf of Pete’s Client.  The Defendant filed a very short Defence simply stating that the goods Pete’s Client had supplied were ‘faulty and unfit for purpose’.  Court rules state that any Defence filed cannot simply be a bare denial and must contain a coherent statement of facts. 

This Defence clearly did not do that so it became obvious to Pete that a Summary Judgment Application should be made to the Court.  Summary Judgment Applications should be made when the Defendant has no real prospect of defending the Claim.  It also represented a quick way of getting judgment for Pete’s Client and, if successful, would be likely to result in Pete’s Client being awarded their legal costs of chasing the Defendant.

Pete made the Application to the Court and served a copy on the Defendant.  Upon receipt, the Defendant called Pete as, due to the detailed nature of the Application and supporting documents, they became acutely aware that they had no case and did not want their liability to Pete’s Client, in terms of costs and interest, to increase any further.  Therefore, they immediately paid the debt in full together with all costs which had been incurred on Pete’s Client’s behalf.  Pete’s Client had finally recovered all monies owed to them and it had not cost them anything as the Defendant had paid all legal costs.

Working in the Debt Recovery Department, it is the usual course of business to act on behalf of large companies which have many customers that have fallen behind on their payments. 

In order for these clients to clearly see collection statistics in a quick and efficient manner, Chris Annetts created regular monthly financial reports displaying figures such as recovery rates, court fees and solicitors’ costs.  This made comparing the department’s monthly performances easier for them.

The reports were also made in preparation for client meetings.  They showed statistics for individual accounts with an overall figure at the bottom so that our clients can monitor the success rates on a monthly basis.  Depending on his client’s requirements Chris also created reports showing figures of all debt matters we have been instructed on including those that had been closed, giving them a very general yet useful overall figure.

Other reports that Chris provided are ‘one liner’ reports, displaying a short one line description of the next step in the debt recovery process together with the relevant date.  This helps to keep the clients fully aware of the current progress of each file.

This activity is an insight into the administrative side of Chris’ work as, although the Commercial Recoveries Department is primarily instructed to carry out legal services to recover debt, financial reports provide the client with an additional tool to help them to monitor the progress that has been made.  Chris also assisted training colleagues to carry out his role.