The Directors Friend - Director's Personal Liability for Costs

THE DIRECTORS FRIEND BLOG

‘Directors personal liability for costs’

This is the next in the series of blogs for the Directors Friend blog.

The case

In the recent case of Mullaley and Company Limited and (1) Regent Building Services Limited (2) Christopher White [2017] EWHC 2962 (Ch) heard by David Stone sitting as a Deputy High Court Judge considered (amongst other issues) an application for injunctions to prevent the presentation of a winding up petition.

Summary

The company Mullaley & Co. Limited (the ‘Company’) by way of opposing a Statutory Demand issued by Regent / Mr White brought the proceedings due to the threat to wind it up made by the same.

That was in circumstances where Regent Building Services Limited (‘Regent’) / Mr White chose not to use the option to pursue a contested debt in the usual way under Part 7, rather than using the Statutory Demand procedure for uncontested debts.

Responding to a Statutory Demand by a company

In the Directors Friend earlier blog this area of law was explained briefly. Essentially an application should be made to Court within 18 days of service of the Statutory Demand (if, in the meantime it is not withdrawn). The application should set out the detail of why the debt is disputed or there is a cross claim. This should be put across in good faith and has sufficient substance to justify it being determined in a normal civil action.

The debt in this case was disputed by the Company on the basis that (at paragraph 14) that:

  1. The debt was not assignable without the Company’s consent, which it has never given;
  2. Some of the amounts that made up the debt had been paid, or were not at that stage due; and
  3. The Company contested the ability of Regent / Mr White to claim the debt on behalf of the (alleged) assignor.

Correspondence between the parties had elicited 3 different copies of an Asset Purchase Agreement (‘APA’) all of which were subject to criticism for various reasons.

A winding up petition was presented against the alleged Assignor and any APA post that date would have been void under section 127 of the Insolvency Act 1986 (discussed here). In any event a third party had a fixed and floating charge over the assets of the Assignor (paragraph 16).

The judgment

The judge set out that the:

  1. Courts power to grant an injunction in these circumstances stems from its jurisdiction to prevent an abuse of process (per paragraph 41);
  2. Court does have to go into the argument sufficiently to be able to form a view about whether the dispute to the debt or the cross-claim put forward in good faith and has sufficient substance to justify it being determined in a normal civil action (per paragraph 42);
  3. Threshold for establishing that a debt is disputed on substantial grounds in the context of a winding up petition is not a high one for restraining the presentation of the winding up-petition (per paragraph 43); and
  4. Hurdle is a low one. Winding up procedure should not be pursued on the basis of a debt which is disputed in good faith, and where that dispute is of sufficient substance to warrant determination in the usual way (per paragraph 44).

The judge found at paragraph 51 that:

… any of these three disputes on its own would have been sufficient to grant an injunction to restrain Regent/Mr White from presenting a winding up petition against Mulalley. Together they are compelling.

The injunctions were granted.

Unfortunately for Mr White it was found that his conduct was unreasonable and an order for indemnity costs was made against Regent and him. That is payment of costs in full!

The Directors Friend comments

It is telling that the ‘Agent’ as stated by the judge at paragraph 49(b) in all of the APA’s was Rigil Kent Corporate Rescue Limited now Rigil Kent Corporate Acquisitions and Turnaround Limited. This company was placed into Provisional Liquidation on 19 December 2017 and compulsorily wound up on 28 February 2018. The Insolvency Service press release dated 08 January 2018 is here.

The press release states:

All of the companies were part of a scheme and business model which purported to provide advice and business recovery services to directors of insolvent companies.’

Whilst Regent / Mr White did have the benefit of legal advice at an earlier stage of the case it is notable to see the ‘Rigil’ name here.

It was also unsurprising that in the circumstances that the injunctions were granted where the threshold is not a high one.

Therefore, the lessons for a well-advised director would be:

  1. Obtain the right professional advice at the right time from a regulated firm;
  2. Make sure that in attempting to collect a debt that you / the company use the right process to do so; and
  3. Make sure that your conduct as a director in litigation with driving the actions of the company is not unreasonable or that director may be at risk of personal liability for costs.

WHAT TO DO NOW

If you are faced with:

  • worrying insolvency issues with your company;
  • a claim against you for misfeasance / breaching your duties as a director to a company or any claim for personal liability; and / or
  • director disqualification

then please talk to me today on +44 (0)1992 558411.  That is in order to protect your position without delay.  The earlier that you speak with me the more that I can likely help.

The Directors Friend is a Hertfordshire / London based solicitor and a full member both the Insolvency Lawyers Association and the Association of Business Recovery Professionals.

Until the next time...

 

THE DIRECTORS FRIEND

 


Debt Recovery service from £10 plus VAT

Debt Recovery service from £10 plus VAT

By Breeze & Wyles Solicitors Ltd

What can we expect?

  • No minimum fee.
  • No % of the value of your debt fee deducted.
  • No minimum debt.
  • Solicitor led.
  • Your letter before action will be sent within 24 hours of your instructions being received
  • The debtor is directed to you, so that you control the cost.

Breeze & Wyles Solicitors Ltd are pleased to offer you their Debt Recovery service. Please see: http://www.breezeandwyles.co.uk/index.php/debt-recovery/.

To give you maximum confidence in our Debt Recovery Service Breeze & Wyles Solicitors Ltd are authorised and regulated by the Solicitors Regulation Authority.

Interested?

  • Why not try the Breeze & Wyles Solicitors Ltd Debt Recovery service today to collect your outstanding debt?
  • What do you have to lose?
  • Don’t let your debtors get away without paying you! Use the Breeze & Wyles Solicitors Ltd Debt Recovery service.
  • The earlier that you instruct us the more likely we can help.

We also have experienced insolvency solicitors available to advise you today.

Our experienced and friendly team are waiting to hear from you today. Please contact us on +(0)1992558411 and ask to speak to Sharon Matchwick:

Sharon.Matchwick@breezeandwyles.co.uk or Rita Wright: Rita.Wright@breezeandwyles.co.uk.

 


Debt Recovery

Changes to Debt Claims

Debt RecoveryThe Civil Procedure Rule Committee has introduced new rules in relation to debt claims which will be governed by Pre-Action Protocol for Debt Claims and will come into force on 1st October 2017.

The new Protocol will apply to any business, sole traders and public bodies who are claiming payment of money (debt or alleged debt) from an individual including sole trader. Therefore, the Protocol will apply to a sole trader making a claim against another sole trader.  However, this will not apply to business to business debts.

The aim is to encourage both parties to enter into early communication and exchange of information / documents regarding the debts. This will in turn enable the parties to resolve the matter without the need to start court proceedings.  The idea is also to be cost beneficial to all parties to engage in early pre-litigation communication.

A creditor is required to send a Letter of Claim detailing the agreement, issues and how the debt can be paid etc. The Creditor cannot issue court proceedings within 30 days of sending the Letter of Claim.  This is to allow the Debtor to review the Letter of Claim and prepare a detailed response setting out their issues etc.

The Court will take into account whether all parties have complied with the Protocol when giving directions for the management of proceedings. Therefore, failure to comply with the Protocol could result in the proceedings being stayed until the Protocol has been complied with, cost sanctions against the non compliant party or even the claim / defence being dismissed.

If you would like to discuss this further, please contact Sharon Matchwick or Rita Wright in our Debt Recovery Department on 01992 558 411

or email debtrecovery@breezeandwyles.co.uk


The Directors' Friend: – Facing Personal Liability for 'Wrongful Trading' - Call for 'Robin Hood'

This is the next in my series of blogs for the Director’s Friend.

SUMMARY

In order to obtain an order from the court that a director is personally liable for wrongful trading under section 214 of the Insolvency Act 1986 (the ‘Act’) the Liquidator or Administrator have to not only prove the elements of wrongful trading, but they must demonstrate how the wrongful trading caused an increase in the company’s net deficiency. That is its losses.

That is the company should objectively have been placed into Liquidation at X date. It was not. The net deficiency has increased as a consequence – by how much? No evidence = no personal liability.

SECTION 214

In summary, this is claim for personal liability against a director of a company. The claim is made up of the following:

  • The company is insolvent and is in Liquidation or Administration;
  • A person has been a director of that company at any time; and
  • At some time before the commencement of the winding up of the company, that person knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation or entering insolvent administration.

The court, on the application of the Liquidator, may declare that that person is to be liable to make such contribution (if any) to the company’s assets as the court thinks proper.

The court shall not make a declaration if that person took every step with a view to minimising the potential loss to the company’s creditors as they ought to have taken.

That takes into account:

  1. the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company, and
  2. the general knowledge, skill and experience that that director has.

BACKGROUND

A recent appeal case heard by David Foxton QC on appeal from Registrar Jones (Brooks and another (Joint Liquidators of Robin Hood Centre plc (In Liquidation) v Armstrong and another [2016] EWHC 2893 (Ch)) the directors successfully appealed the amount of compensation payable by them.

The Registrar in the earlier decision had held that the directors had been guilty of wrongful trading; that the net deficiency of the company had on the evidence increased and that as a consequence the directors had to contribute £35,000.00 to the company’s assets.

That was in circumstances where the directors were facing a claim in a sum in excess of £700,000.00.

The directors were faced with a number of dates on which it was claimed that they knew or ought to have known that the company was facing insolvent liquidation. The Registrar found that the directors had that knowledge on one date, but were not wrong to continue to trade until a later date. That was because up to that later date the directors were taking steps to minimise further losses to creditors.

FINDINGS

Essentially, the Liquidators were found on the facts to have failed to make out their case that there had been an increase in the net deficiency (losses) of the company during the period of wrongful trading. This is fundamental irrespective of losses caused to individual creditors.

No increase in the net deficiency = no case.

COMMENT

Following this decision, it shows that a Liquidator or Administrator must show that the wrongful trading alleged actually caused losses to creditors of the company.

From a director’s perspective, it shows that there are risks when you are a director of a company that is or maybe trading insolvently to you personally. However, with the early and right advice this can be mitigated or even perhaps with the assistance of Robin Hood defeated…

I understand, however, that the Liquidators have applied for permission to appeal this decision – watch this space.

WRONGFUL TRADING AND DIRECTOR DISQUALIFICATION

The well-advised director will also be mindful of the risk in section 10 of the Company Directors Disqualification Act 1986 that states:

‘(1)       Where the court makes a declaration under section 213 or 214 of the Insolvency Act 1986 that a person is liable to make a contribution to a company’s assets, then, whether or not an application for such an order is made by any person (emphasis added), the court may, if it thinks fit, also make a disqualification order against the person to whom the declaration relates.

(2)        The maximum period of disqualification under this section is 15 years.’

The directors of the company were perhaps fortunate that the Registrar chose not to also exercise the jurisdiction to disqualify the directors from acting for a period of time.

WHAT TO DO NOW

If you are faced with insolvency issues with your company, a wrongful trading claim for personal liability or director disqualification proceedings please talk to me today. That is in order to protect your position without delay. The earlier that you speak with me the more that I can help. Why not call me today on 01992 558 411 and speak to me without obligation, pressure or cost.

If you are happy to instruct me my firm and I are happy to talk to you about fixed fees or staged fees that are agreed with you in advance of any work being carried out or we can liaise with your insurers. Your work will be carried out by me or others under my close supervision. I am happy to come to you to take instructions. My firm is based in London and Hertfordshire, here in the UK.

YOUR ADVISER

Finally, is you advisor a practising solicitor (and thus insured to advise you – check with the SRA) and if so is your solicitor a full member of the Insolvency Lawyers Association (‘ILA’) (ask them). Membership of the ILA is a public mark from insolvency peers that your representative has the requisite knowledge, skill and experience to advise you. I am both. Accept no substitutes.

Until the next time...

THE DIRECTORS FRIEND


Government Consultation suggests that you should review your Debt Procedures!!

On 23rd December last year, the government announced that they will discuss new measures to protect consumers from unknown debt claims. The upcoming consultation will consider how to  protect consumers against unsuspected debts or unknown claims, but also allowing appropriate redress for companies that are owed money. The government has highlighted that both consumers and companies should take steps to ensure that the information they have is up to date to help circumvent this issue. The government has also advised that a public advice campaign will be launched sometime this year to provide straightforward guidance to consumers on ‘how to communicate accurate address information, find out about outstanding claims and how to challenge erroneous claims.’

The government website states that the consultation will look at ways to:

  • better protect consumers who are sent mail to inaccurate addresses
  • verify addresses again before a claim is sent
  • protect people’s credit scores from being damaged if they resolve outstanding debts quickly
  • consider how modern communication could notify people of outstanding debts
  • assess the role of parking companies and examine how drivers are informed of fines

Although this is a positive step by the government, as it aims to improve the current system and ensure consumers are more knowledgeable surrounding their debts, it can mean more responsibility on our commercial clients when chasing after bad debts. Sharon Matchwick, from our business services team, comments that:

‘more diligence is required on the part of commercial companies to ensure that they are sure they are sending their Letters before Action (LBA) and issuing claims against the right people’.

In the first instance, this can mean more chance of your debts being repaid and more quickly by LBA, claims being issued correctly first time round and less chance of them being challenged for being erroneously brought. However, this also effectively means companies having to set aside more time to satisfy themselves of who their debtor is in the first place. Breeze and Wyles has the expertise to advise you and the systems in place to carry out initial checks against debtors which can save you valuable time and money in the long run.


Reuse of a Prohibited Company Name by a Director leaves the Director caught in an expensive web!!

This is the next in my series of blogs for the Director’s Friend.

SUMMARY

Following a prosecution for breach of section 216 of the Insolvency Act 1986 (the ‘Act’) (re-use of a prohibited company name by a director) with confiscation proceedings following the Court of Appeal recently concluded that:

  • a confiscation order can be made against an individual who is convicted for trading under a prohibited name / style; and
  • the court is entitled to hold that the total turnover (not just the net profit) for the entire period of trading under that name is recoverable.

SECTION 216

In summary, this is where a director of a company reuses the same or a similar name to a company that has entered into insolvent liquidation, so as to suggest an association.  This name is known as a “prohibited name”. This can include any name registered at Companies House, a trading or other name.

BACKGROUND

A recent Court of Appeal decision R v Neuberg [2016] EWCA Crim 1927 handed down by Lord Thomas of Cwmgiedd, CJ considered the law of confiscation following a successful prosecution against an individual for breach of section 216.

The appeal was as a result of a reference by the Criminal Cases Review Commission (‘CCRC’).

The Appellant was a director of company Watergate Services Limited trading as ‘Neuberg Metal Spinners’ (the ‘Company’) which went into liquidation on 19 November 2001.

By the time that the Company was placed into liquidation the Appellant was trading in her own name as ‘Neuberg Metal Spinners’.

After 19 November 2001, it was not lawful for the Appellant to use the name of "Neuberg Metal Spinners" but she continued to use that style until 14 June 2002.

The Appellant was charged with trading under a prohibited style, namely "Neuberg Metal Spinners", without the leave of the court, between 19 November 2001 and 14 June 2002 contrary to section 216 of the Act.  She pleaded guilty to that offence on 12 November 2004.

She was given a community sentence and disqualified from being a company director for five years.

Further, a formal Order for confiscation was made on 12 April 2006. The benefit was the turnover of the Appellants trading in the sum of £288,948. The realisable assets were £100,000.  The Order was made in the amount of £100,000.  The judge fixed the term of imprisonment in default at two years and ordered the appellant to pay £7,500 towards the cost of the prosecution.

The Appellant paid £100,000 as ordered.

FINDINGS

It was found by the Court of Appeal that:

  • the criminal activity was carrying on the business in the prohibited name;
  • it was clear that the Appellant carried on the business under a prohibited name;
  • it was the carrying on of that business under that name that gave her a significant benefit;
  • For present purposes, it was sufficient to say that, as the court held in 2007, the judge was unquestionably correct in calculating the benefit by reference to the turnover; and
  • On the basis of the information (a lack of financial analysis of the accounts) put before the Court, that there was nothing from which the Court could infer that the amount of the confiscation order in the sum of £100,000 was in any way disproportionate.

The Court observed that attempting to conduct an exercise in ascertaining the financial position of this business more than 14 years previously was one that would have been fraught with difficulty.

The Court therefore rejected the appeal and stated that it was a matter of some regret that the reference was made to the Court (by the CCRC) without a more careful analysis of the basis on which the reference was to proceed.

COMMENT

Following this decision, any director or other convicted of this offence could be ordered to pay a sum equal to the total turnover for the entire period of illegal trading. This would be in addition to any fine or prison sentence handed down as a punitive element.

The director could also be disqualified from acting as a company for a period of time.

In addition, again that director / individual could also find themselves personally liable to repay the creditors of the business under section 217 of the Act, although possibly not in the case under discussion. So, heavy sanctions!

WHAT TO DO NOW

If you are faced with a claim for personal liability or a prosecution under these sections please talk to me today. That is in order to protect your position without delay. The earlier that you speak with me the more that I can help. Why not call me today on 01992 558 411 and speak to me without obligation, pressure or cost.

There are options that are outside the scope of this article to avoid the draconian consequences under this law, but the well-advised director must move swiftly to protect their position.

If you are happy to instruct me my firm and I are happy to talk to you about fixed fees or staged fees that are agreed with you in advance of any work being carried out or we can liaise with your insurers. Your work will be carried out by me or others under my close supervision. I am happy to come to you to take instructions. My firm is based in London and Hertfordshire, here in the UK.

YOUR ADVISER

Finally, is you advisor a practising solicitor (and thus insured to advise you – check with the SRA) and if so is your solicitor a full member of the Insolvency Lawyers Association (‘ILA’) (ask them). Membership of the ILA is a public mark from insolvency peers that your representative has the requisite knowledge, skill and experience to advise you. I am both. Accept no substitutes.

Until the next time...

THE DIRECTORS FRIEND


The Latest Insolvency Service Enforcement Statistics are out!

This is the latest in the series for my blog ‘The Director’s Friend’.

In a press release dated yesterday (13 December 2016) the Insolvency Service (the ‘IS’) set out their latest enforcement outcome statistics.

These show that for the year 2015 / 2016 that 1,210 director disqualification orders and undertakings were obtained with a running total of 807 for the year to date. The clear majority of the disqualifications were pursuant to section 6 of the Company Directors Disqualification Act 1986 (‘CDDA’).

The average length of a disqualification is on the up to 5.9 years.

In passing the number of Bankruptcy and Debt Relief Restriction Orders and Undertakings is down sharply from the period 2009 / 2010, but is still in excess of 300 a year.

The average length of a Restriction, however, is at an all time high at 5.3 years.

COMMENT:-

The director disqualification statistics show that directors of companies that have been placed into liquidation and administration are at risk of being investigated and disqualified with the period of time that the director is disqualified for on the increase.

WHAT TO DO NOW?

If you are faced with a claim for director disqualification by the IS please talk to me today. That is in order to protect your position without delay. The earlier that you speak with me the more that I can help. Why not call me today on 01992 558 411 and speak to me without obligation, pressure or cost.

If you are happy to instruct me my firm and I are happy to talk to you about fixed fees or staged fees that are agreed with you in advance of any work being carried out. Your work will be carried out by me or others under my close supervision. Finally, I am happy to come to you to take instructions.

Until the next time...

THE DIRECTORS FRIEND


More Bad News for Directors and their Personal Liability

This is the next in the series of blogs for the Directors’ Friend.

A director of a company that has been placed in to formal insolvency may receive an enquiry letter perhaps enclosing a Directors Questionnaire from the Insolvency Service.  They may also receive a letter being a notice under Section 16 of The Company Directors Disqualification Act 1986 (“CDDA”) notifying of the intention of the Secretary for State for Business, Energy & Industrial Strategy (that is the Insolvency Service) (“SOS”) to commence director disqualification proceedings against you.

WHAT SHOULD YOU DO?

Do not ignore the letter.  As the consequences for you could be limiting and expensive!

You could consider offering a disqualification Undertaking to be disqualified in order to avoid going to Court or possibly fight the case in Court.  It is inadvisable to do anything without the benefit of specialist legal advice in any event.

Now that is even more the case – Why?

DIRECTOR DISQUALIFICATION AND DISQUALIFICATION ORDERS AND UNDERTAKINGS

In brief, there has been a recent change in the law that is completely new by way of Section 110 of the Small Business, Enterprise and Employment Act 2015 (“SBEEA”) which now allows the Court to make a compensation order against a disqualified director where it appears to the SOS that certain conditions in new Section 15(A)(3) of the CDDA are met in that:

“(a)      the person is subject to a disqualification order or disqualification undertaking under [the SBEEA] and

 (b)        conduct for which the person is subject to the order or undertaking has caused loss to one or more creditors of an insolvent company of which the person has at any time been a director.”

FOR THE BENEFIT OF:

Under new Section 15(B) the amounts payable under compensation orders and undertakings are to be for an amount specified (in the order) to be paid to the SOS for the benefit of:

  1. A creditor or creditors specified in the order;
  2. A class or classes of creditors so specified.

This is as a contribution to the assets of the company:

A compensation undertaking (pursuant to Section 15(b)(2)) is for the same but with an out of court settlement with the SOS.

COMMENTS:

  • This is a new law and an entirely new area of law whereby the SOS in the context of director disqualification is seeking to claim compensation for the benefit of creditors or classes of creditors from the disqualified director.
  • This is an additional statutory power in addition to the powers available to liquidators of companies in liquidation, for example under the Insolvency Act 1986 to include for:
  1. Misfeasance (Section 212);
  2. Transactions at an Undervalue (Section 238);
  3. Preferences (Section 239);
  4. Wrongful trading (Section 214);
  5. Fraudulent trading (Section 213); and
  6. Transactions defrauding creditors (Section 423)

which are other statutory claims by which the liquidator as office holder can seek to recover assets for the benefit of the insolvent estate.

  • It strikes me that there are all sorts of issues to be raised in terms of disputing the conduct and/or resisting the application on the basis of, for example, remoteness of loss and causation of loss. These are applicable in, for example, Misfeasance proceedings.  It would appear to me that they would surely have equal relevance in these compensation proceedings.
  • It is likely in my view that the driving force is to make recoveries for the Exchequer in circumstances where a large number, if not the majority of the director disqualification proceedings brought are, in my experience, for trading to the detriment of the Crown and/or a failure to pay the Crown debt.  The compensation regime would appear to be a vehicle to primarily compensate HM Revenue and Customs, but the SOS’s approach remains to be seen. For example, how far is the SOS likely to interrogate a proof of debt lodged?

OTHER CLAIMS AND EXPOSURE BY THE DIRECTORS:

It would be of concern to the well advised director that any successful recovery by the SOS in compensation proceedings may lead to other claims (as above) being brought by the liquidator of the company.

The office holder is obliged to seek and retain any recoveries on behalf of all of the creditors of the insolvent estate of the company (subject to costs) and it would appear at present that the SOS is only obliged to make recoveries for specific identified creditors who have suffered losses.  It would therefore appear to be a tension between the office holder and the SOS bringing these financial recovery proceedings.

PARALLEL CLAIMS BEING FACED BY THE DIRECTOR:

It would seem very unfair and unlikely that any court would allow both the SOS and an office holder such as a liquidator to bring proceedings against a director based upon the same facts and circumstances.  In other words at risk of having to pay twice for the same offending (mis)conduct.

SUMMARY:

It is therefore the case that the well advised director seeks and obtains advice at an early a stage as possible when the SOS first make enquiries.

With the new compensation orders regime running in parallel with director disqualification proceedings the financial risk and exposure of the directors has now increased.

It remains to be seen how the tension between compensation claims brought by the SOS and the office holder will be resolved with the director in the middle.

WHAT TO DO NOW?

If you are faced with a claim for director disqualification or a liquidator has sent you a letter before claim please talk to me today.  That is in order to protect your position without delay.  The earlier that you speak with me the more that I can help.  Why not call me today on 01992 558411 and speak to me without obligation, pressure or cost.

If you are happy to instruct me my firm and I are happy to talk to you about fixed fees or staged fees that are agreed with you in advance of any work being carried out.  Your work will be carried out by me or others under my close supervision.  Finally, I am happy to come to you to take instructions.

In February / March 2017 I am intending to give a seminar on this topic. Details to follow.

Until the next time...

THE DIRECTORS FRIEND


Big Business: Pay your debts or risk damage to your reputation

On the 4th of May the Enterprise Act 2016 received Royal Asset. The Act established the role of the Small Business Commissioner to support small businesses, in particular, in relation to disputes with larger businesses. As part of this role, the Commissioner is to provide an in-house complaints handling function allowing small business suppliers to seek a decision from the Commissioner about a payment issue with a larger business with which the small business has a previous, current or potential supply relationship.

The consultation sets out BEIS's proposals on how the Commissioner should operate the complaints scheme, and seeks views on certain aspects of the scheme. For instance, how a small business's headcount should be calculated for the purposes of determining its eligibility to use the scheme. BEIS also asks what factors the Commissioner should take into account when considering whether to identify the larger business, if publishing a report on the dispute. The consultation closes on 7 December 2016.

While there is no date set for implementation of the regulations larger businesses need to be aware that the government proposes to give smaller business suppliers additional means of holding them to account over payment issues. They also need to be aware of the potential reputational impact, should the Commissioner publish a report about a complaint involving them. Larger businesses should familiarise themselves with BEIS's complaints scheme proposals, so that they are prepared to respond to complaints submitted by such business suppliers.

Managing Director of Breeze & Wyles Solicitors Limited Brendan O’Brien said: “The Government has made itself clear about the need to give more forms of redress to small business to ensure that it gets paid on time by larger business. It has become common practice for Large Business to use smaller businesses as a form of free banking. Given the benefit to the economy of healthy small businesses it is essential that this process creates a fair balance between the parties. Everyone must have their say in this process if it is to be effective.”

Web site content note: 

This is not legal advice; it is intended to provide information of general interest about current legal issues.


Have You Chequed How Your Debtors Are Making Payments To You?

Creditors are able to issue proceedings for a “bounced cheque” under the Bills of Exchange Act 1882 (“the Act”). This Act treats payment by cheque as if it were cash and it is considered that the goods or services delivered are undisputed / accepted by the debtor.

This leaves the debtor with limited scope on which to base a defence to the claim, or counterclaim. Suing on a “bounced check” therefore, results in a quicker, more straightforward and less costly recovery process.

If you do receive a cheque which later bounces, it is important to:

1. Keep a copy of the cheque:
2. Write to the debtor asap informing them of the missing payment and asking for a cheque to be re-issued.

If payment is not received, you can then issue through the county court proceedings. Breeze and Wyles specialise in recovery on bounced cheques.

Why is this Act relevant today in an era when the use of cheques is diminishing and electronic payments increasing?

In the 1997 case of Esso Petroleum Company Limited –v- Milton (1997) the Court  Of Appeal held that the Bills of Exchange Act 1882 also applies to payment by Direct Debit. This applies where you have an ongoing relationship with a debtor and payments are made by a Direct Debit which is later cancelled and results in a breach of contact.

If you find you are subject to a bounced cheque or direct debit, or simply have a debtor who will not pay our invoice please contact our specialist Debt Recovery Team at Breeze and Wyles Solicitors Limited on 01992 558411 or email us at debtrecovery@breezeandwyles.co.uk.