For example, a claim with a value of more than £10,000 now attracts a court issue fee of 5% of the claim value. So if you want to recover a £100,000 debt, the issue fee in the County Court is now £5,000. The fee to issue a claim worth £200,000 or more is now £10,000. Five years ago, it was £1,275!
The Courts of England and Wales are self-funding and, in his infinite wisdom, former Justice Secretary Chris Grayling took it upon himself to impose exponential increases in court fees to fund the system, rather than take a good, hard look at the disproportionate and frankly unnecessary number of small, regional County Courts and hearing centres up and down the country and to cut out general inefficiency in the system. The cynical view is that, by hiking up court fees, this will sort the men from the boys and stop litigants swamping the already overstretched court system. In other words, if you’re going to sue somebody, you have to put your money where you mouth is.
The issue of court fees is constantly in the legal press. The principal complaint is that they prevent access to justice for an impecunious claimant. Or, even if you have money, that you won’t want to spend the money. However, in our experience, it is not just about whether a business – already out of pocket – can afford to throw more money at the court process; it is whether, by doing so, they are throwing good money after bad. As lawyers, this work is our bread and butter. But, at the same time, we understand the commercial imperative: if, as a business, you’ve already lost £100K, which you might never recover, do you really want to spend thousands, or even tens of thousands, trying to recover that debt?
What is important to consider whether or not the debtor has money or not. Perhaps they don’t. In that case, it might be pointless in suing them because all you will end up with at trial is a judgment and nothing to enforce it against. A pyhrric victory. You may end up being able to bankrupt or wind up the debtor, but that is not a guarantee of extracting payment.
Apart from a detailed analysis of the merits of your claim (or defence), the answer to whether or not to sue primarily lies in doing some proper due diligence about your target beforehand. Does it have assets? Are those assets in England and Wales? If they are abroad, what is the procedure for enforcing an English court judgment in that overseas country and how onerous / expensive is it going to be? Have a debtor’s assets been moved around recently to try to put them beyond the reach of the creditors (this can be unlawful and reversible if a debtor has moved assets or funds with the object of putting them beyond a creditor’s reach).
Another consideration is your own financial position. Not only have you got to potentially fund your case, but you also need to think about what would happen if, despite all the advice you’ve had from your lawyer, the judge finds against you and orders you to pay (at least some of) your opponent’s costs? Can you afford to pay?
Almost all lawyers will tell you that, before you “press the button” on litigation, a demand letter (commonly known as a letter of claim) will be sent. Some clients think that the letter of claim alone will do the trick. More often than not, it doesn’t. Either the debtor responds with some half baked excuse as to why the debt isn’t payable, or doesn’t respond at all. You are then left in the unenviable position of having to decide whether to sue or not. Making that decision is all about risk. Sometimes, simply serving a court claim form is enough to force payment, or at least bring the other party to the table to do a quick, “dirty” deal. Other times, the claim will be hotly contested.
Ultimately, it is all about an analysis of risk, and your personal approach to risk. Courts and judges routinely extol the virtues of Alternative Dispute Resolution, or “ADR”. ADR can take many forms, but usually involves some sort of early round the table meeting, or appointing a neutral third party as mediator. ADR can be a powerful tool, and can save costs. Statistically, it has a good success rate. But you are much more likely to get the sort of result you can live with at an “ADR” meeting if you’ve at least issued the claim in court first.
When representing clients who are potentially the paying party – and who, in my assessment, have little or no prospect of successfully defending a claim – I quite often advise them not to negotiate or settle at all unless or until the other side sues. Without court proceedings, there is little or no leverage to compel payment or a negotiation.
But every case is different. You shouldn’t just always sue. You need to properly analyse the merits of your claim (or defence) and then think about the liquidity of your target and whether they (or their directors) are shrinking violets or bulldogs. This is where every client’s insight into the nature and character of their opponent is invaluable. As lawyers, more often than not we know very little about your opponent. You, however, may have worked with (or for) them for many years and know how they think and what makes them tick. But the point is that, if you’re game, then suing is more likely to get your opponent to take you seriously and willing to talk. Despite the fact that litigation can be time consuming and expensive, many more cases settle at an early stage in the court process and relatively few get all the way to trial.
At Lupton Fawcett, we have a package of different pricing structures which we can offer to clients to try to lessen the blow of lawyers’ fees. It’s never going to be cheap, but it needn’t cost you the earth.
For further information, please contact Claire Barbesol.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.