When a person or business is owed money, there may be a number of reasons why this hasn’t been paid.
It may be that the debtor simply does not have the money available to pay, or perhaps that they have no intention of paying, irrespective of the debts legality.
Another reason may be that there is a dispute about the debt. This may be about the amount owed, about the products or services delivered, or perhaps about contract terms such as cancellation. The dispute may even relate to a separate supply of products or services between the two parties which has spilled over into this contract.
The “won’t pay” reason is unlikely to benefit from mediation and we would certainly urge anyone in such a situation to look elsewhere for their clients. There isn’t really a dispute at the centre of the matter, and yes, there are whole industries that view this type of practice as legitimate.
Court action might assist but I would always ask business owners to question just how much they are willing to pay, both in costs and time, to confirm that they had made a bad decision. Before proceeding you need a commitment to follow it through to the end, and to understand that the process might take years. Might these resources not be better spent in other areas?
On the face of it, the “can’t pay” the story looks similar, but mediation does at least allow for a discussion on what non-monetary and monetary later options might be available. It is amazing what parties looking to continue a relationship can achieve through mediation.
Where there is a debt and a dispute, mediation can prove very beneficial in reaching a conclusion; where both parties can agree and accept a solution.
It is important that both parties come to the mediation with the mindset that they are there to reach an agreement. That does not mean being ready to roll over and agree to anything to make the problem go away, nor does it mean refusing to concede even the most minor of points.
In a relatively straight-forward commercial dispute, the mediator should be able to help the parties reach an agreement, which will be legally binding – within a day, at most two, so that the agreed settlement can then be promptly enacted. The payment details are likely to be agreed as part of the mediation.
Mediation brings many benefits. It provides:
Court action will take several months to go through the system to reach a decision by the judge. It is also quite likely that the judge will insist that the parties try to reach an agreement through mediation or another form of alternative dispute resolution, before hearing the case. This will further delay the case.
Even if a judgment is awarded, there is still no guarantee that payment will be made, with the need for enforcement action and further delays waiting to recover the debt.
The mediation session will continue until agreement is reached. It may make for a long day, but the idea is to take one day out to reach a settlement, with that mindset there is a good degree of certainty that there will be an agreement.
Even if a compromise is reached which means that the creditor recovers a good percentage of the sum owed rather than 100%, they are likely to still find themselves better off than having gone through the courts, with the accompanying legal costs they would have incurred and speedier access to funds.
It is important to remember that although costs can be awarded in favour of the claimant by the court, it is extremely unlikely that this amount will equal the cost of the invoices presented to you by your solicitors.
Where there is a dispute about a debt, mediation can be a speedier, lower cost and more certain course of action than going through the courts.
At Frost Group, we want to make things as easy as possible for you. That is why, if you can’t come to us, we’ll come to you. We operate face to face, nationwide meetings, wherever is most convenient for you.