What can I do when a Client or Customer won’t Pay an Invoice?

When one party provides goods or services, the other is expected to honour the bargain by paying the agreed price. Yet it is all too common for that payment to be withheld. This article explains the practical steps an aggrieved party can take, under English law, to secure redress when the counter-party defaults on its payment obligations.

A. Seek an Early Resolution

A creditor is initially expected to take reasonable steps to resolve a matter without involving the court. This will include (i) contacting the debtor to demand payment and (ii) serving a Letter Before Action on the debtor, setting out the debt, the legal basis of the claim, and provide a short deadline for the debtor to make payment.

B. Issue a Claim

If a debt is not satisfied, the next step is to issue court proceedings. The quantum of the debt will determine which court the claim should be issued in and the sum of the initial court fee payable by the creditor to commence the claim.

C. Obtain a Judgment

If the debtor fails to respond to the claim, the creditor can request a Default Judgment. If the debtor responds to the claim by filing a defence, the claim may proceed to trial unless an earlier settlement is reached between the parties. If the claim is ultimately successful, the court will issue a Judgment, confirming its decision.

D. Enforcement

If the debtor still fails to pay following the Judgment being issued, the creditor is able to consider several enforcement options:

1. Writ of Control – by obtaining a writ, High Court Enforcement Officers will attempt to seize and sell debtor assets to recover the outstanding debt and seek to satisfy the Judgment.
2. Charging Order – this is a mechanism through which the debt is secured against real property owned by the debtor. Whilst it does not immediately force the sale of the property, the creditor may be able to apply for an order for sale in due course, which forces the debtor to sell the respective property to enable the creditor to recover the debt.
3. Third Party Debt Order – if the creditor has information concerning the debtor’s finances, the purpose of such order is to freeze and redirect money owed to the debtor by a third party (often a bank account).
4. Attachment of Earnings Order – only applicable when enforcing against individuals.
5. Insolvency Proceedings – if the debt is undisputed or if the creditor has a Judgment in its favour, the creditor can seek to wind up a company creditor if the debt is at least £750, or can seek to bankrupt an individual debtor if the debt is at least £5,000.
6. Order to Obtain Information – where a creditor lacks knowledge of the debtor’s assets to enable it to consider its enforcement options, a creditor can apply for an order compelling a debtor’s company officer to attend court and disclose information about the debtor’s company assets and finances.

E. Consider your Options

The most effective enforcement method relies upon the debtor’s known assets and the sums involved. One key factor to consider prior to commencing proceedings is to conduct an exercise of due diligence, to ensure that the debtor does in fact have the ability to settle the outstanding debt (either financially or by way of realising assets).

How to Get in Contact‍

iLaw’s Dispute Resolution team often works with clients who have not been paid and are seeking to enforce an existing contract.

If you have any questions concerning an ongoing dispute, or if you are concerned that an ongoing issue is close to being escalated and you would like to discuss your options, please do get in contact with Jamie Short at jamie.short@ilaw.co.uk or call +44 (0)203 987 0222.

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