Business Guide: Recovering unpaid small debts

Business Guide: Recovering unpaid small debts


If you are a business and are owed money you may be thinking about suing in the County Court to recover your money. This is a guide about some of the things to consider and how to pursue a claim.

This guide applies to debts with a value of less than £10,000; claims at this level will be referred to the “small claims” track which is designed to be easy to operate so that you can pursue the claim yourself without the need to instruct a solicitor. Legal fees are not normally recoverable for small claims which means that if you instruct a solicitor you will not recover their fees if you win; equally, you will not have to pay the other sides legal costs if you do not succeed! If you would rather instruct a solicitor to pursue the debt for you then you can find details of our charging rates are on our debt recovery page here (debt recovery costs)


(a) Are you likely to win your case? Most claims issued in the County Courts by firms or companies are for money owed for work done and/or goods delivered and these types of claims are often not disputed which means it could be straight forward to get a Court Order or Judgment for payment of the debt. If the debtor however indicates an intention to dispute your claim, or you are not sure whether you are likely to win then you may wish to get some legal advice about that.

(b) If you win are you likely to get your money? If the debtor has no money, assets or anything else of value then even if you get a Court judgment you still might not recover any money. If the debtor is a limited company then the action will be against the company and you should bear in mind that if there are no assets in the company’s name then you will not recover any money. You can check the Register of Judgments to see if there are already any unpaid judgments registered against the individual or business debtor.

(c) What fees and expenses will be incurred? You will have to pay a Court fee for issuing the Claim Form and there will be a further fee payable if your claim is disputed and you need to proceed to a final hearing or trial. The up to date list of fees can be found here (fees). The issue fees depend on the value of your claim and currently for small claims (as at the date of this note: June 2020) the fees range between £35 (for a claim valued at under £300) to £455 (for a claim valued at £10,000). If you obtain a Judgment then any court fees you pay will also be added to the amount to be recovered from the debtor.

(d) If the claim is disputed where will the hearing take place? If the debtor (Defendant) is an individual then the claim will be transferred to the debtor’s local court for the hearing. If the debtor is a limited company then you can sue the company at its place of business such as shop or local office (you do not have to sue them at their registered office) and this may keep the claim local to you rather than being transferred to a different Court where the company’s head office is based.

(e) If the claim is not disputed you can obtain Judgment (and take enforcement action if necessary) without the help of a solicitor. You will not usually need to go to Court for a hearing. The debtor may admit the claim but ask for time to pay or to pay by instalments. You can write to the Court and object if you do not agree, but the Court will not make an Order to make the debtor pay more than it considers they can afford.

(f) If the claim is disputed then both you (the Claimant) and the debtor (the Defendant) will be asked to complete a Directions Questionnaire form. The Court uses the answers you provide to the questions in this form to allocate your case to the appropriate track for your claim. In your case, for a debt under £10,000, the claim should be allocated to the small claims track. Your claim will be given a hearing or trial date and you will be told what to do to prepare for that hearing. When Directions Questionnaires are sent out there is a question on the form asking whether you want to consider trying to resolve the dispute by mediation or alternative dispute resolution (ADR). You should carefully consider this. If both parties agree to mediate (or other form of ADR) it will be an opportunity to pause the court proceedings and try and resolve the dispute without the need to proceed to a trial or a final court hearing. We would normally recommend trying to resolve the claim at this stage by mediation or ADR.

(g) If you have a Judgment but the debtor still does not pay then you will need to decide whether you want to take enforcement action. This will incur further fees and if the debtor has no money then taking enforcement action will be a further expense that you will incur, but you still might not recover anything.

(h) Make sure that the debt is not older than 6 years before you commence proceedings. If it is older than 6 years then you will be out of time for issuing a claim.


Before you commence Court proceedings you must make a reasonable attempt to recover the debt. If you do not, the Court may penalise you. Prior to issuing any proceedings the Court will expect you to follow the relevant Pre-Action Protocol.

If your claim is against an individual (including a sole trader) there is a specific Pre-Action Protocol for Debt Claims that will apply. A copy of the Protocol can be found here (Protocol). Follow the steps in the Protocol.

If your claim is against another business then the debt pre-action protocol will not apply, but the Court will still expect you to take reasonable steps to try and settle the claim and avoid the need to issue proceedings, “litigation is a last resort”. The Court will expect you to follow the general Practice Direction for Pre-Action Conduct and Protocols (PD) which sets out general steps that the Court will expect you to follow before issuing proceedings.

The pre-action protocols are designed to ensure that all the parties have sufficient details about the dispute and have an opportunity to resolve it before any court proceedings are issued. You need to decide which protocol applies to your circumstances and take the steps set out in the Protocol. The Court will look to see that you have made a reasonable attempt to resolve the dispute and comply with any relevant Protocol.

The basic pre-action conduct steps to take will include:

1. Setting out your claim in writing to the debtor

2. Stating the amount owed and what it is for

3. Allowing a reasonable further and final period of time for payment to be made

4. Stating that Court proceedings will be started if payment is not made

5. Attaching relevant documents, like a copy of the original invoice

Keep copies of any letters, emails or texts you send or receive in case you need to show to the court that you have taken appropriate pre-action steps


After the Pre-Action Protocol steps have been taken and if there is no, or an inadequate, response without payment then the next step is to go to Court. To commence Court proceedings you will need to complete a Claim Form and send it to the Court with a cheque for the correct issue fee (if you are unsure of the correct fee you can check it by contacting your local County Court); alternatively you can make your claim online by registering at and filling in the on-line Claim Form. If you want to submit the forms online you will need to register first. You can pay the Court fees on line by credit or debit card and the issue fees are a little cheaper when paid on-line. If you prefer to send the Claim through the post you will need to complete an N1 Claim Form which you can download here (N1).

To complete form N1 you will need the name and address of the debtor. Fill in your details and the debtors details on the Form. You must include a title if the claim involves individuals eg Ms, Mr, Mrs, Miss, etc. If the claim involves companies then state the company’s name in full eg X Company Ltd.

In the top right hand box of the form state the name of the Court where the Claim is going to be issued. You will be issuing in the CCMCC (County Court Money Claims Centre), so in this box write “CCMCC”. Leave the other sections of this top right hand box empty (eg Claim number, issue date etc as these are details that the Court will fill in). Towards the bottom of the form you are asked to specify the County Court hearing centre you prefer to attend if there is a hearing – give the name of the town with the County Court nearest to you. On the front page of the N1 Claim Form you are asked to provide “brief details of the claim”. You only need to provide brief details here and you can write: “This is a claim for an unpaid debt of £[amount] for [state the goods or services you provided] that was payable on [date]”. If you wish to claim interest (see below) then add the words “Plus interest”. You will need to work out the amount of interest being claimed. In the box at the bottom right of the page state the value of your claim plus any interest and in the box below that add the Court fee you are paying. Leave the “legal representatives costs” section blank. Add the total. In the bottom left hand box write the debtor’s name and address again. This is the name and address where the proceedings will be served.

Over the page of the Claim Form you are asked to set out more details of your claim. In the section headed “Particulars of Claim” you will set out the facts in support of your claim. Use the following format, numbering each of your paragraphs:-

Introduce your self – state who you are and your type of business; eg “The Claimant is X Ltd and is a business providing [state details of your business eg a business providing gardening tools and equipment or financial services or whatever].”

State who the Defendant is; eg “The Defendant is …….. (an individual)/or a business [specialising in eg gardening services].

Describe the details of the transaction(s) giving rise to the debt; eg “On [date] the Claimant provided [goods or services – (state which or both)] to the Defendant.

Set out the details of the debt; eg “The total payable by the Defendant to the Claimant for the [goods/services – (state which)] is £[amount] and it remains unpaid. [If part paid, state how much was paid and when and how much remains unpaid].”

Confirm that you have complied with the Pre-Action Protocol. “The Claimant has allowed a reasonable time and given adequate notice to the Defendant in order for payment to be made. The Claimant has complied with the relevant Pre-Action Protocol and the Pre-Action Protocol Practice Direction.

If you wish to claim interest add the relevant interest paragraph (see interest section below).

At the end of the Particulars of Claim sum up by writing:- “AND the Claimant claims:- a) Damages in the sum of £ b) Interest (if you are claiming interest, or otherwise delete) c) Costs

Complete and sign the Statement of Truth at the bottom of the second page. It is important that you understand that by signing the Statement of Truth you are confirming the truth of your Particulars of Claim. If you sign the Claim Form, knowing that some of the facts that you have stated are wrong or untrue then you will be in contempt of Court and can be punished. Write your name and address at the bottom left of the second page. Print and sign a copy.

Then, if issuing by post, send three copies of the signed Claim Form to the Court with a cheque payable to HMCTS for the Court issue fee and a covering letter addressed to: The Court Manager CCMCC, Salford Business Centre, PO Box 527, Salford, N5 0BY. In the covering letter you can write: “Dear Sir/Madam I enclose three copies of a new Claim Form for issuing together with a cheque payable to HMCTS for the issue fee in the sum of £ [Court fee]. Please issue and serve a sealed copy of the Claim Form on the Defendant and send me a sealed copy for my records. Yours faithfully.

The Court will acknowledge your claim and send you a Notice of Issue confirming the date on which the Claim Form was issued. At the same time the Court will serve a sealed copy of the Claim Form on the Defendant by sending it in the post. The Claim number for your claim will be stated in the documents you receive back from CCMCC. This is an important reference as it is unique to your claim and you will need to quote it on all future communications and documents you send to the Court


The Defendant has 14 days from the date on which the Claim Form is served in which to respond to the claim. The Court will let you know the date of service. If there is no response after the 14 days is up you can ask the Court for a default Judgment. This is an Order for payment of your claim in full plus Court fees and interest. This means that you win your claim by default. You can request default judgment by filling in Court form N225 here (N225). Send it to CCMCC and the Court will issue a default Judgment.

If the Defendant does respond to the claim then the claim can either be admitted or opposed. If it is admitted, then you can fill in and send the form N225 to the Court which will be a request for Judgment on admission. If the Defendant wants to oppose the Claim then they will complete and file an Acknowledgement of Service indicating the intention to oppose the claim. As long as this Acknowledgement is sent in time (within 14 days), the Defendant then has a further 14 days to prepare and serve a detailed Defence. The Defendant will then serve a Defence. This document responds to your Particulars of Claim in your Claim Form and will set out all the reasons why the Defendant is disputing your claim. It must be sent to both you and the Court. If the Defendant is opposing your claim you will need to consider the reasons for disputing the claim carefully. There may be explanations and information in the Defence that you were not previously aware of. You need to be reasonably confident you can win your claim before proceeding.


If your claim is opposed the Court will ask both you and the Defendant to complete a Directions Questionnaire. The Court will send both parties a proposed Notice of Allocation to the Small Claims Track, which means that the Court recognises your claim is a small claim and the small claims procedure should apply. The Court will also ask both you and the Defendant to complete a Directions Questionnaire. This Questionnaire asks for further information to help the Court manage the case to conclusion. The Court will send you the Directions Questionnaire form. The form is self-explanatory. Complete the answers and sign and send it back to CCMCC in good time before the date on the Notice (if posting – this needs to be two clear days before the due date) and send a copy to the Defendant. Keep a copy for your records.

At this stage you will also need to decide if you wish to attempt to settle the claim by mediation or other form of alternative dispute resolution, rather than go straight to a Court hearing. We would normally recommend this. Mediation is a less formal procedure and the court may offer a free small claims mediation service so there will be no additional expense. A mediation can take place by telephone when a mediator will attempt to resolve the differences between the parties by discussions taking place on a set date. It is worth considering mediation at this stage because the Defendant will know that you are serious about pursuing your claim to Court and it is a good opportunity to pause and see if it is possible to resolve the claim now by negotiation. The Courts and Judges take a dim view of parties who unreasonably refuse to consider mediation as a way of resolving the dispute and a party acting unreasonably could be penalised in costs.


The Court will send you a notice of the date, time and place for hearing of your claim. They may send this at the same time or shortly after they send the Order for Directions which sets out the timetable to comply with. The Directions Order may order you to take certain steps before the dispute comes to trial, such as disclosing relevant documents and any statements you intend to rely on by certain dates. You should make sure you comply with any steps that the Court directs. If you cannot comply then you should seek agreement to extend the deadline dates or make an application to the Court. The hearing Order will also include a date by which the hearing fee is to be paid, if it does not then contact the Court and ask them to confirm the payment date for the hearing fee. If you do not pay the hearing fee in time then you may not be able to proceed to the final hearing.


Prepare for the hearing. Make notes of your key points and rehearse what you intend to say. You need to be able to “tell the story” – to explain (i) the agreement to provide the goods/services; (ii) the agreement to pay; (iii) the request or demand for payment (invoices); (iv) the failure to pay by the due date; (v) your calculation of interest. You may find it helpful to prepare a chronology of key events as an aide memoir to assist you at the hearing.

The hearing will be before a District Judge, often in Chambers, which is a less formal type of setting than the type of Courtroom seen on television. Arrive at the Court 30 minutes before your hearing starts and check in with the Usher. The Defendant will also attend Court or send a lawyer to represent them. The Usher will tell you when to go into the Court room. Hearings often run late so be prepared for this. Ensure that you have turned off any mobile phone or other device before entering the Court room.

The District Judge will lead the hearing. The Judge will know that you are representing yourself. Present your case when asked to do so by the Judge. Go through your Particulars of Claim as set out on your claim form, elaborating on the details. The Judge may ask you some questions about your case. The Defendant then gets a chance to present the defence. Do not interrupt. Make notes on any points you disagree with. Once the Defendant has spoken you will have a chance to make any further points in response. Once you have done that, the Judge will decide the case, explain the reason for the decision and tell you what order is going to be made. The order will be typed up by the Court and posted to you in due course. If you win, the Judge will make an Order for the debt to be paid, you can also ask for your expenses (these are called disbursements). The main ones will be the Court fees that you have paid. You can claim for:-

Court fees;

Travelling expenses to attend Court

Loss of earnings for the Court date up to £90.00

Prepare a list of your expenses in advance to show to the Judge and Defendant at this stage of the hearing. If you lose, it is unlikely you will have to pay costs to the Defendant but you may have to pay their travelling expenses and loss of earnings up to £90.00. You will have at least 14 days to pay.


Obtaining an Order or Judgment from the Court that the Defendant must pay you may not be the end of the matter. The Defendant could remain as unwilling as before to pay you. A judgment will have consequences for the Defendant, as it will be registered in the Register of Judgments if it is not paid and credit reference agencies will note the default, which will adversely affect the Defendant’s credit record. If you have a judgment you may need to consider taking further steps to enforce payment of the debt.


If your claim is for a commercial debt you may be able to claim interest under the Late Payment of Commercial Debt (Interest) Act 1988. This gives all businesses a statutory right to claim interest on the late payment of commercial debts (even if your contract with the debtor does not include interest). It also allows you to claim an amount of compensation for reasonable debt costs. A commercial debt is a debt from a contract made between businesses or public sector bodies for the supply of goods or services. The businesses can be a registered company, sole trader, public organisation, partnership, trust, body corporate or other legal entity so long as both are engaged in business activity via a contract. The Late Payment Act applies to commercial debts of any size unless you have previously agreed a specific late interest payment as part of the contract.

Contracts with consumers are not covered by the Late Payment of Commercial Debts (Interest) Act, but if the debt arises from a consumer contract then you may be able to claim interest from the date payment was due to the date of Judgment (even if your contract with your customer does not include interest). This is allowed by the rules of the Court and is called statutory interest.

You can only claim for one type of interest.

For commercial debts the wording for your Claim Form to claim interest is:- “The Claimant claims interest under The Late Payment of Commercial Debts (Interest) Act 1988 at the rate of ……. [state the interest rate here – it is the official dealing rate of the Bank of England during the six month period in which your debt became late (either 30 June or 31 December) plus 8%] from …………[the date when interest started to run] to……… [the date you are issuing the claim] in the sum of £ and continuing at the same rate up until the date of Judgment or earlier payment at the daily rate of ………….[enter the daily rate of interest]”.

Compensation can also be claimed under the Late Payment of Commercial Debts (Interest) Act. Demand for compensation arising from late payment must be included in the Particulars of Claim as well and this can be worded as follows:- “The Claimant claims compensation arising from late payment under Section 5A of The Late Payment of Commercial Debts (Interest) Act 1998. Under the table of compensation set out in this provision £ ……….[enter the amount of compensation] is owed”. (The amount of compensation depends upon the size of the unpaid principal debt. For debts less than £1,000.00 the compensation is £40.00; for debts in the bracket £1,000.00 to less than £10,000.00 the compensation is £70.00; for claims of £10,000.00 or more the amount of compensation is £100.00).

For consumer debts the wording for the claim for interest is:-“The Claimant claims interest pursuant to S.69 of the County Courts Act 1984 at the rate of 8% from [the date when interest starts running (ie the date the debt became overdue) to [the date you are issuing the claim] in the sum of £ and continuing at the same rate until the date of judgment or earlier payment at the daily rate of [enter daily rate]“.


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