Recovering a commercial debt

4th September 2013

When businesses are struggling to obtain payment from a customer or client, debt recovery specialist Jagdip Bains explains that there are a number of points to consider before deciding on a course of action.

Court proceedings

The court is obliged to deal with matters justly and at proportionate cost, so you should:

  •  conduct a cost/benefit analysis before initiating proceedings – make sure the cost of enforcement is factored into the calculations;
  • check that the other party is good for the money – there is no point in incurring the cost of litigation if the business in unable to enforce the judgment;
  • be cautious about starting proceedings if the business does not intend to see them through. The business will almost certainly be liable for the other party’s costs if it discontinues the claim;
  • be careful about threatening to start formal proceedings if the business does not intend to do so; 

Recovery of any costs will depend on: 

  • who wins or loses;
  • a party’s conduct and compliance with court rules and orders (for example, a failure to comply with a pre-action protocol can have cost consequences even for the party that wins);
  • when the matter is concluded (whether before or after proceedings have been commenced); and
  • the financial value of the claim and consequently the track the claim is allocated. 

Reaching a settlement

It almost always makes sense to consider informal methods of recovering a debt as they can provide the quickest and simplest solutions alternatives include using negotiation or mediation.

The court will expect the parties to have explored ways of settling the claim before they issue proceedings and may penalise a party in costs if they fail to do so.

You should also think about the disadvantages associated with litigation, for example: 

  • litigation can be disproportionately expensive to the sums being argued about;
  • legal costs (other than fixed court fees and fixed costs) are usually irrecoverable if the debt is less than £10,000;
  • the outcome of litigation is uncertain;
  • the court is only able to offer a limited range of remedies;
  • the parties often destroy any prospect of resuming a commercial relationship. 


Negotiation is a dialogue intended to resolve a dispute and produce agreement on a future course of action. One way in which a trade debt might be recovered is by opening a negotiation with the debtor. This can be done verbally or in writing


Mediation is a flexible, voluntary and confidential form of dispute resolution in which a neutral third party assists parties to work towards a negotiated settlement of their dispute. The parties retain control of the decision whether or not to settle and on what terms.

The “without prejudice” rule

Parties usually negotiate on a “without prejudice” basis. This rule generally prevents statements made in a genuine attempt to settle an existing dispute (whether made in writing or orally) from being put before the court as evidence of admissions against the interest of the party which made them.

Doing nothing

The business can always simply write off the sum that it is owed. Before taking this step, you should consider the: 

  • size of the debt;
  • likely cost of recovering the debt;
  • importance of the current relationship between the parties; and
  • likelihood of maintaining an ongoing commercial relationship between the parties. 

The Ansons dispute resolution team are able to offer fixed fees for different stages of the litigation process for debts up to the value of £25,000. We are also able to offer fixed fees for mediation or without prejudice meetings throughout Staffordshire

Please call Jagdip Bains on 01543 267 196 should you require further information about our debt recovery services or an estimate of costs enabling businesses to budget for litigation.

Ansons Solicitors have offices in Cannock and Lichfield.