As a business owner, dealing with unpaid invoices can be both frustrating and financially damaging. Navigating this situation can be challenging, but taking proactive measures can help protect your business and resolve the issue more effectively.
The first step in addressing unpaid invoices is to understand your legal rights and the steps you can take to protect your business. Before jumping into legal action, try reaching out to your client to understand the reason behind the non-payment. There may be a simple explanation, such as an oversight or a temporary cash flow issue, that can be resolved amicably. Always remember to keep a record of all communications, as this can be useful if legal action becomes necessary later.
If reaching out fails and your client continues to refuse to pay, its time to hire an attorney who specializes in debt collection. A specialized attorney can help you navigate the legal process and increase your chances of recovering your money.
The litigation process may become quite complicated when a debtor decides to defend the matter. However, this rarely happens in matters where credit was issued and not repaid.
REGISTERED LETTER OF DEMAND
Your attorney will usually send a letter of demand to the debtor as an indication of the seriousness of the matter. However, this is not a compulsory requirement. If you, however, wish to claim interest on the debt (at 15.5% per annum) as allowed for in the Magistrate’s Act as and legal fees, it is advisable to send a letter of demand. The letter of demand must have a heading stating that it is a letter in terms of the Magistrates’ Court Act and must describe the nature and purpose of the claim.
In other words, there needs to be sufficient information for the debtor to identify what the claim is for and how much is being claimed. The letter should give the debtor a period of ten business days to pay the amount claimed or an opportunity to make a payment arrangement with the creditor. The letter can be sent by registered mail, served by the Sheriff of the court or delivered by hand (make sure to get an acknowledgement of receipt).
SUMMONS
Should the claim not be settled by the debtor after receiving the letter of demand, it will be necessary to file a summons with and have it issued by the clerk of the Magistrates’ Court if the amount being claimed is less than R200 000 or the Registrar of the High Court if your claim is more than R200 000. A summons is usually drafted in a standard format and has a particulars of claim attached to it. The particulars of claim may be included in the summons itself if it contains less than 100 words. Alternatively, it needs to be attached to the summons as an addendum and contains finer details about the claim. The particulars of the claim are a detailed account of how the claim arose and what amount is being claimed. When the summons is drafted, the credit provider is listed as the Plaintiff and the debtor is listed as the Defendant.
The Plaintiff may draft the summons themselves and attach a copy of the initial loan agreement to it. The summons needs to be stamped by the clerk of the court and the Plaintiff may arrange to have it served on the Defendant by the sheriff operating in the jurisdiction of the Defendant. A summons must be served by the sheriff of the court. Once the sheriff has served the summons, he notifies the clerk of the court and the Plaintiff by handing over a return of service stating the time and manner of service.
A summons should contain the following information:
- The name and address of the Plaintiff
- The name and address of the Defendant
- A form of notice of intention to defend
- A notice advising the Defendant that they have ten days to enter a notice to defend.
- A form of consent to judgment
- A notice drawing the Defendant’s attention to the consequences of their failure to obey the order of the court once judgment has been granted against them.
- The particulars of the claim which must contain:
- Citation: details of the Plaintiff and Defendant;
- Jurisdiction: that the court has jurisdiction because either the action arose in its area or that the defendant resides or works in the court’s jurisdiction;
- The cause of action: what is the basis of your case, e.g. loan agreement;
- Statement that damages are being suffered by the Plaintiff and that the damages are caused by the Defendant, and
- Prayer: what relief you are asking for (be sure to include legal fees and interest).
In this financial climate, businesses, small and large alike, cannot afford to let their debtors’ books spiral out of control. Swift handover of outstanding amounts to an Attorney, is the most effective manner in which to ensure that a maximum of overdue accounts are collected.
Contact Nagel Attorney & Notary for expert guidance on how to recover money owed to your company.