How to start a court claim
Broken promises
Let’s suppose that despite various chasing letters and broken promises of payment, an invoice of £4,500 remains unpaid. A final warning letter threatening court action was sent to the debtor a week ago, but there’s been no response. The situation can’t continue and the directors all agree that this is now the only way forward. However, it will be the first time the company has gone down this route. So where do you start?
Issuing the claim
The first step is to issue the claim. In this case, the amount owed places the matter within the jurisdiction of the Small Claims Court, i.e. it’s under £5,000. In a way, that’s good news as a director can represent the company throughout. To kick the process off, you’ll need to get the right court form - in most cases, including the recovery of unpaid commercial debts, this will be an N1.
Tip 1. A copy can be obtained from your nearest county court or from the Ministry of Justice website (see The next step).
Tip 2. The accompanying guidance notes will tell you what information to provide to the court when you submit the N1 and the fee. At this stage, however, you don’t need to provide any supporting documentation, i.e. a copy of the invoice and all correspondence. That comes later.
Tip 3. Alternatively, a claim can be started electronically using Money Claim Online (MCOL) (see The next step). This is probably your easiest (and cheapest) option. Either way, the correct debtors must be named and the paperwork served in the proper way.
Check all the details
If you get one, or both bits, wrong - which is easy to do - it could allow the debtor to wriggle out of the claim. So check the paperwork. If they are:
- an individual, address the claim to them personally and include where they currently reside or their last known address
- a limited company, use its full name and registered office address; or
- a partnership, use its trading name and state its registered office or any place of business that has a real connection with your claim.
Proper service
Once issued by the court, the claim form must be “properly served”. This is done by sending the N1 to the debtor’s correct address or handing it to them personally (or a director where a company is involved). You can undertake this yourself, but it’s much more sensible to get the court to serve the claim on the company’s behalf.
Tip 1. Do be awarethat it won’t do this automatically unless you’ve used MCOL or have ticked the box on the N1 asking it to do so.
Tip 2. Once the N1 has been served, the defendant, i.e. the debtor, has 14 days to file a defence with the court (unless an extension is agreed). If they fail to do so, you can apply for “default judgment” immediately. Should that happen, information will be sent to the parties about the next stage.
To download a Form N1 (CD 13.16.06A) and for further information on Money Claim Online (CD 13.16.06B), visit http://companydirector.indicator.co.uk.
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