Suppliers get tough with late-paying clients

The most traditional route to redress for unpaid commercial suppliers appears to be making a comeback, just as questions about an incoming one continue to be asked.

Updated in 2013, the 17-year-old late payment legislation that levies interest at 8% over the base rate on unpaid commercial debts has long been regarded with trepidation by the unpaid.

They fear that while they could use it to recover their fee plus the interest (with recovery costs since March 2013), the debtor – the client – will never use them as a supplier again.

A law firm has even told Moore News that suppliers should not charge interest under the Late Payment of Commercial Debts Act, until first they consider their relationship with the customer.

But now, that same firm is reporting a “gradual but encouraging rise” in the number of unpaid suppliers using the law to claim what they’re owed, plus interest.

In fact, the proportion of its clients lodging claims under the 1998 late payment legislation has risen from just 1% in 2005 to 24% this year, said Lovetts.

Taking a stand: the confidence of one-man bands to take legal action against large traders who pay late seems to be growing.

This means that about a quarter of the small firms used the law against clients in the year to April 2015.

Perhaps unexpectedly though, the volume of ‘payment demand’ letters sent on the firms’ behalf remains small, and is even smaller than in the previous two years.

“Confidence to take a stand against poor paying customers seems to be growing,” said Lovetts. “The need for payment appears to be overcoming the fear of damaging client relationships.”

The law firm’s boss Charles Wilson put the growing use of the act down to the addition of “reasonable recovery costs” - applicable to commercial debts incurred after March 16th 2003.

“This has made the act significantly more appealing”, said Mr Wilson. “[And] the entitlement to claim interest and compensation remains for six years on each and every invoice paid late.”

He was less positive about the government’s plan to introduce a small business conciliation service, on the basis that only 1% of the debts that his firm acts against are “disputed”.

“While this measure is a step in the right direction, it is not really addressing the problem,” Wilson said, in line with comments on the service by debt recovery specialist Safe Collections.

The lawyer added: “More realistic recoverable legal costs would further discourage late payers from risking court claims, and encourage the new culture that business so badly needs.”

Another debt collection company, Cashflow Rescue, has also expressed doubts about the conciliation service, partly because the firm says it won’t help SMEs left out-of-pocket by other SMEs.

Agents at the company also said: “We have no idea whether this service will have any ‘teeth’. We all know what a county court judgment is and the consequences of not abiding by it.

“But what about a ruling from the Small Business Conciliation Service? Will we be able to enforce it if a company still doesn’t pay up? If you have to go to court to obtain an enforceable decision what’s the point of using the Small Business Conciliation Service in the first place?”

An accountancy firm, Brookson, sounded more supportive of the service, but suggests that the concerns which suppliers traditionally have when pursuing clients over outstanding invoices will remain.  

“Debt recovery processes are seen as a last resort due to the irreparable damage it causes to the party’s relationship and the cost,” said Carl Henning, the firm’s senior solicitor.

“The success of the conciliation service will be measured in terms of preserving relationship as well as securing payments. The question still remains as to who will pay for it.”

Upton's 14-year ban too lenient, say accountants

A 14-year ban for a jailed tax adviser who ripped off hundreds of small firms is “pointless” because he could still get someone to ‘front’ a company while he pulls its strings from the shadows, accountants warn.

In the dock: On top of a jail sentence, ex-accountant Darren Upton received a ban and a disqualification, but many believe he got off lightly.

Darren Upton, jailed last February for six years, was this month disqualified from being a limited company director until 2027, following a lengthy investigation by The Insolvency Service.

But in cases like Mr Upton’s, preventing the offender from being a company director is “pointless and ineffective as a punishment - regardless of the length of the ban," believes Derek Kelly, managing director of ClearSky Accounting.

He told Moore News: “It’s far too easy for such individuals to arrange for others to be named as directors in the eyes of the law, while maintaining a significant influence over a company from the shadows.”

Despite the disqualification order preventing Upton from acting as a company director, or taking part (directly or indirectly) in promoting, forming or managing a company (or a LLP), another accountancy firm told Moore News that it shares Mr Kelly’s concerns.

“Both HM Revenue & Customs and the FSA have acted to prevent him [Upton] having the ability to operate as a director in the future, but there is a risk he could have someone ‘front’ a company for him,” warned The Low Tax Group.

Accountants at DNS Associates agreed. They told Moore News: “Upton cannot be a limited company director [for 14 years], but he might find accomplices, such as a friend or even his wife, to help him run a business not registered in his name.”

DNS's managing director, Sumit Agarwal, pointed out that there was a way to stiffen what he called “too lenient” a punishment for Upton’s “astonishing level of dishonesty”, but an industry body ducked it.

“The Association of Certified Chartered Accountants found Upton guilty of misconduct on three counts but quite frankly, his ban from ACCA membership should have been for his lifetime, not just five years," said Mr Agarwal.

“On no account should this practitioner ever again hold practice membership, so on this basis I believe that the ACCA is failing both its members and the general public.”

Upton’s defenders would likely counter that the Yorkshire-based accountant is already being punished for his fraud and deception (between January 2010 and June 2011) with a hefty jail sentence.

They may also stress that rather than trying to evade justice, Upton promptly admitted to multiple counts of fraud which his defence team said he only committed because he was in financial difficulty. 

In particular, regulatory action against his accountancy practice was said to have hit the father-of-one's finances, compelling him to pocket £250,000 that his small business clients had set aside to pay their tax. 

But The Low Tax Group’s managing director Richard Bayliss believes Upton's six-year term is “unlikely to be much comfort to those [former clients of Upton & Co] who have suffered financially.”  

Similarly, rather than just imprisonment, ClearSky's Mr Kelly preferred: “If the authorities want to create a genuine deterrent, they should aim to seize an individual’s personal assets and wealth.

"This would be adequate punishment for someone who has betrayed his or her clients’ trust.”

Meanwhile, an appeal to officialdom was sounded by Mr Agarwal: "The justice system needs to get tougher with this sort of individual who, in this case, clearly has a problem with recognising the boundaries that separate right from wrong."

He added: "On his release from prison, therefore, should Upton attempt to become a director of a company or try to register for professional accreditation, the door should be firmly shut in his face."

Journalists win new freedom under libel law

Journalists have won the freedom to publish news articles that contain allegations about public figures without the threat from libel.

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Vindication: The House of Lords came down on the side of the WSJ, in a ruling that journalists welcomed.

As long as a journalist's reporting is in the public interest, and has been undertaken in a seriously responsible manner, then it can be published without repercussions under English law.

Such is the verdict of The House of Lords, which has found that even if newsworthy allegations later emerge as defamatory and false, journalists can still publish without fear of reprisals.

Handed down yesterday, the ruling is a green light to journalists, editors and their publications to more rigorously pursue newsworthy persons, free from what the judgement describes as the “chilling” effect of lawsuits.

For journalists, the move also strengthens the so-called ‘Reynolds privilege’ established in 2001, which implies a defence against libel on the grounds the public interest was being served.

The Lords were concerned with an article published in 2002 by the Wall Street Journal, “an unsensational newspaper,” they said, which stated that Saudi officials were cooperating with the US government in monitoring bank accounts.

The February 2nd article, entitled, "Saudi Officials Monitor Certain Bank Accounts," was found to have defamed a Saudi businessman and a company belonging to his business group, of which he is president, two courts found.

But the Lords dismissed these verdicts, disagreeing with both the High Court and the Appeal Court, which stated the WSJ should pay £40,000 to the defamed businessman, Mohammed Jameel.

They said the “thrust” of the WSJ’s article was to inform the public that the two nations were in contact, as the US Treasury had demanded that the Kingdom’s central bank reveal if the accounts of prominent Saudis were siphoning money to terrorists. This was “succinctly stated in the first paragraph,” the Lords said.

“This [story] was, without doubt, a matter of high international importance, a very appropriate matter for report by a serious newspaper,” they added, pointing out that although an ally to the US, Saudi Arabia’s status was then precarious, compounded by the 9/11 hijackers being of Saudi origin.

They added: “But it was a difficult matter to investigate and report since information was not freely available in the Kingdom and the Saudi authorities.”

It was also difficult to verify the allegations, which journalists are bound to do under libel law, because the existence of covert surveillance by the highly secretive Saudi authorities would be impossible to prove by evidence in open court.

Delivering his ruling, Lord Hoffman hinted that it was practically impossible for the journalist and second journalist of the WSJ article to meet their commitments of verification as media professionals, even though attempts were made.

Lord Hoffman’s report to the House of Lords, England’s highest court, says a "more detailed consideration" should have been given to the Reynolds privilege by both the High Court and Appeal Court judges.

It’s a view shared by Alistair Brett, legal manager of Times Newspapers.

“Most media lawyers would agree and point the finger at the two judges in charge of libel actions, Mr Justice Eady and Mr Justice Gray.

"Both came in for criticism...on how they have applied the old law in what should be a new context and effectively denied the press the benefit of the 'Reynolds public interest' defence over the past six years,” he wrote on Times Online, the paper’s website.

“From now on, the House of Lords will have breathed new life into responsible investigative journalism. The judgment is as refreshing as it is overdue.”

Journalists should note that in legal scrutiny of editorial decisions, “weight should ordinarily be given to the professional judgment of an editor or journalist in the absence of some indication that it was made in a casual, cavalier, slipshod or careless manner,” the judgement states.

And despite the all-clear for journalists to enjoy greater freedom (on the grounds they report responsibly and in the public interest), they should consider that there remains no protection for so-called ‘kiss-and-tell’ stories.

“The ‘public interest’ comes out on top. But that expression has its own particular meaning – just because something may ‘engage the interest of the public’ does not necessarily make it in the ‘public interest’ - so this judgement will not be carte blanche for the gossip press,” said Roger Sinclair, a media lawyer at Egos Ltd.

Having read the judgement, he also told Moore News: “Secondly, there is a clear duty on the journalist and publisher to take reasonable steps to be sure that what is published is accurate and fit for publication - it has been said that ‘no public interest is served by publishing or communicating misinformation'."