Late payment of commercial debts and the increase in court fees

From 09 March 2015, court fees for claims over £10,000 have gone up again. Such claims now require a court fee equivalent to 5% of the value of the claim (or 4.5% for online claims) to be paid on issuing proceedings. By way of illustration the court fee on a claim for £20,000 has increased by 64% from £610 to £1,000. The court fee on a claim for £40,000 has increased by 228% from £610 to £2,000.

Critics point out that the courts are there to provide a vital social function and should not be a cash cow for Government. They wonder - akin to university fees and speed cameras - where does the extra money go and is it used to make direct service improvements?

For SMEs (small and medium sized enterprises) there is a real issue over access to justice. We have always said “Cashflow is King”. Late payers and non-payers continue to be a real problem for SMEs in Yorkshire and across the country. Does increasing the court fee help? It may well do if the prospect of the increased fee, which can be added to the value of the claim and recovered, helps to encourage a debtor to pay early. It will now cost them more money to go to court and lose. However it will not help if the SME creditor is cash-strapped and they simply cannot afford the initial payment or the risk of paying out more money if there is no guarantee they will get it back.

The Government started the year with a push on encouraging the timely payment of debts. Leading by example, there was a commitment to paying 80% of undisputed invoices within 5 working days. There is also talk of legislation to ensure prompt payment within 30 days all the way down the public sector supply chain. This sends a “pay your bills on time like us” message to the private sector but it is not clear how well this fits with such a potentially prohibitive increase in court fees.

One thing remains as clear as before, the importance of good credit control and a solicitor you know who can offer expert debt recovery advice.

For details of our SME debt recovery service please contact Robert Bates on 0113 201 4900.

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