Debt Recovery Services
Debt Recovery Services
01 June, 2015
Debt Recovery Services
Why use us?
As a law firm we understand very well the need to manage cash flow and mitigate the strain on a client’s business caused by bad debtors. We also understand that debt recovery can be a time consuming and distracting process which, if not pursued using effective strategies, can cause further loss to a client’s business in the form of time and effort that could be better spent productively focusing on core business.
We have therefore developed a multi-tiered tailored debt recovery strategy focused on maximising efficiency as far as resources, time and money spent are concerned. We are conscious of the need to have a process in place which is not only primarily aimed at optimum recovery of outstanding debts, but also allows ongoing evaluation of the likelihood of success, and the ability to make a decision at any time to stop further costs being incurred by the client if recoverability of the debt turns out to be highly doubtful.
Debt Recovery Strategy
Our debt recovery strategy is divided into two stages as follows:
Stage 1: Pre-litigation
We pursue debts for clients on the basis of a reasonable up front fixed fee (to cover a reasonable portion of our base costs), plus a success fee calculated in accordance with the age of the debt. Accordingly, we bear the majority of the risk of recovery for the client, so that the client does not incur further significant costs by throwing ‘good money after bad’ in trying to obtain payment of a debt that may ultimately be unrecoverable.
Whilst our focus is primarily on debt recovery in the United Arab Emirates we can and do pursue debts throughout the Middle East region through engaging the services of local correspondents we work with.
Upon instruction, and depending upon the specific circumstances of a debt, we will generally pursue the following course of action:
Step 1 – Information
Obtain from the client all relevant information relating to the debt, including copies of any agreements, orders, invoices, bills of lading/air way bills, delivery notes, copies of correspondence and the full contact details of the debtor. We note that you must provide all relevant and material information regarding the history of the debt to us and the debt must be undisputed and not previously challenged by the debtor or we reserve the right to charge additional fees for our time spent on attendances and/or may need to consider proposing an alternative fee structure.
Step 2 – Preliminary Assessment
Based on the information provided, we will make enquiries, where possible, to assess the status of the debtor and whether there are likely to be assets in the applicable jurisdiction from which recovery may be possible. We often find debtors have ceased trading and/or left the jurisdiction in which they were trading, and/or are already the subject of claims, which can impact the commercial viability of pursuing the debt, depending upon the amount in question.
Step 3 – Contact the Debtor
Contact is then made with the debtor. Depending upon the circumstances around the unpaid debt, this may involve correspondence via email or telephone, and meetings. Usually at this stage some response is received leading to a further assessment of the best course of action to take. In some cases, this may involve agreeing a payment plan with the debtor. In the event of a successful recovery, we normally seek payment by way of bankers order, electronic transfer or other payment via our firm’s trust account1 in order that we can monitor and chase payments. Recoveries are then remitted to the client, net of fees and disbursements.
Step 4 – Letter before Action/Proceedings
If no response is received, or if it is considered pointless to pursue further communication with the debtor, we will send a letter before action to the debtor requesting settlement of the debt and reserving the client’s right to take further action, including issuing proceedings against the debtor for the recovery of the debt. Where the debtor has bounced cheques, we will also reserve our client’s right to take action in relation to the bounced cheques (this can be persuasive in jurisdictions such as the United Arab Emirates where dishonouring cheques is a criminal offence punishable by imprisonment).
It is also an option at this stage to serve a notarised letter of demand which carries with it the weight of being an official court document serviced by a court official on the debtor. A notarised letter of demand needs to be signed by the client or an authorised signatory before the notary public in the United Arab Emirates. The notary fee for the notarisation and delivery of the letter of demand is in the region of AED 250. If the letter of demand is to be signed by an authorised signatory, this must be by way of power of attorney. If the power of attorney is to be put in place by us, this will attract additional drafting and execution costs.
In the event that proceedings are required to be initiated as per Stage 2 below, we will engage one of our local advocates to file proceedings in the relevant jurisdiction.
Stage 2: Litigation
In the event that Stage 1 above does not result in payment by the debtor and you decide to proceed with taking court action for recovery of moneys from the debtor, our local UAE advocate will need to be engaged (given that only local advocates may appear as counsel before a UAE court).
Our scope of work under Stage 2 will consist of:
● instructing our local advocate;
● preparing the necessary power of attorney from the client to the advocate as required to be submitted to the court;
● preparing statements of claim and related case fling documentation;
● replying to the debtor memorandums which will be submitted to the court;
● and attending court hearings along with the local advocate; and
● providing you with updates regarding the progress of the case, as required.
We note that our scope of work does not include attendances on matters outside those set out above, which may include such items as:
● providing comprehensive legal advice on ongoing court matters or cases;
● assisting with any settlement negotiations with debtors;
● drafting settlement agreements;
● opening execution files with the court and obtaining attachments orders over the debtor assets, if required; or
● attending appointed expert meetings and making of any necessary submissions to an appointed expert.
If you would like to discuss how we can help you, please contact Nathan Banks or Andrew Morris.