The recovery of relatively small debts can be a frustrating process. The cost, both financially and in time spent, can easily become disproportionate to the amount owed, leaving you out of pocket and out of patience.
Where a debtor is refusing to repay the amounts owed, it may become necessary to take legal action to seek recovery of a debt. There are three different procedures within the Isle of Man Civil Courts when it comes to standard debt claims, and the amount owed will dictate which procedure your claim would fall into, and the related rules that apply:
- Small Claims – this is for any claim up to £10,000 (or £5,000 for personal injury claims);
- Summary – this is for any claim over £10,000 up to £100,000; and
- Ordinary – for any claims over £100,000.
When calculating the total amount owed to decide which procedure to issue in, you should not include any amounts not in dispute, any claim for interest or costs.
Small debts will therefore fall into the Small Claims procedure. Small Claims is unique in that it is designed to be more “user friendly” for the lay person, meaning you don’t need an advocate to represent you. Indeed, it is only in exceptional circumstances that legal costs can be recovered in the Small Claims procedure, other than a small amount of costs known as “fixed costs”.
This means that if you have a debt of £9,000, being the upper level of debt addressed under the Small Claims procedure, even if you pay an advocate to represent you, it is very unlikely you would be able to recover their costs as part of your claim. You can claim the Court filing fees you incur from the debtor if you are successful, and they will be added on to the debt amount.
There are however means at your disposal to better protect your interests if you find yourself a creditor. Below are some basic steps you can take to make sure you’re in the best position possible if you do need to seek the Court’s assistance in recovering a debt:
- Make sure your agreements are in writing, up-to-date and you have a complete copy. While often relationships where money changes hands may develop and grow over time, it’s important to make sure any agreements are kept up-to-date and are properly recorded. Then, if a dispute should arise, you have evidence that there is a debt. This is the first hurdle many fall at, as they cannot prove the debt is owed or must rely on old and incomplete documents.
- Keep detailed records, with correspondence preferably in writing. There is of course a benefit in picking up the phone sometimes, but make sure to make a contemporaneous note of what is discussed, and the gold standard would be to follow up in writing with a summary of anything discussed and agreed, so again you have the necessary evidence to support your position should you end up before the Court arguing over a debt. It doesn’t need to take any specific form, just enough to ensure you can prove the terms agreed if it should be disputed later down the line.
- Know the process:
a. Firstly, try and resolve the issue yourself by demanding payment in writing. Set out the terms that were agreed, what’s owed, any interest to be charged, and what the next steps will be if it’s not repaid by the deadline;
b. If that doesn’t resolve matters, you can issue a claim by filing a Claim Form with the Isle of Man Courts. The rules on how to do this (along with the template Claim Form) can be found on the Courts’ website;
c. Gather your evidence and make sure you have everything the Court will need to understand the dispute and be persuaded that you have a right to the money you say is owed to you. Preparation is key; and
d. Lastly, think about enforcement. Even if you obtain a judgment against a debtor, do they have the means to pay you? If not, you could be throwing good money afterbad.
Sometimes matters don’t go to plan, and it may be that you need some legal advice to help you along with the process, or, depending on the amount of the debt, it may be worth it to you to let an advocate deal with the matter for you even if you can’t recover all legal fees incurred.
DQ are happy to assist with claims of any value, and will always be clear as to the likely costs and recoverability of those costs so you can make an informed decision on how to pursue a debt claim. If you have a claim you would like to discuss, please contact our Dispute Resolution team.
Disclaimer
The information and/or opinion contained in this note is necessarily brief and general in nature and does not constitute legal advice. Appropriate legal or other professional advice should be sought for any specific matter. Any reliance on such information and/or opinion is therefore solely at the user’s own risk and DQ Advocates Limited (and its associates and subsidiaries) is not responsible for, and does not accept any responsibility or liability in connection with, any action taken or reliance placed upon such content.
