Reproduced with the permission of the author:
CHAPTER 18
WHEN ACTING FOR A DEFENDANT
There are no specific rules as to how to advise a defendant in debt collection litigation because the circumstances will vary in each case. There are some general issues which should be checked out prior to responding to the plaintiffs claim and some of these are set out below. A defendant will often be trying to settle at a discount and the skill involved in advising him is to find the best point at which to settle and at the lowest cost. Defending a case can also involve some experience and intuition too. For example if a company without tangible assets owes a debt in the region of €12,000.00 and the plaintiff threatens to wind it up, it will be apparent to an experienced practitioner that there is little reality in the threat given the cost of bringing a petition relative to the size of the debt.
Does the Plaintiff Exist?
16–01 If the plaintiff is a company, the debtor should conduct a companies office search against it initially to establish that it is properly registered at the time of the proceedings and also at the time of the contract and delivery of the goods or services which are the subject matter of the contract. If the plaintiff is not properly constituted, the defendant may be able to stop the proceedings on procedural grounds.
Has the Correct Defendant been identified?
The Plaintiff may believe that he has been dealing with a sole trader whereas the contract may legally be with a company. Sometimes Plaintiffs mistakenly sue the wrong legal person or legal entity and this matter should be clarified at the outset when advising a defendant. If the wrong legal entity has been sued, the wronged party can apply to have the proceedings struck out with costs against the plaintiff.
Is Service Good?
16–02 If the defendant is a company, it should satisfy itself that the proceedings have been served at its registered office. Proceedings served at a trading address which is not the registered office are not properly served unless an appearance is entered by the defendant that rectifies this defect. As always, if there is a doubt as to the validity of service of the proceedings, practitioners should be careful about entering an appearance.
Jurisdiction
16–03 The endorsement of claim should also specify why it is that the plaintiff is suing in the particular jurisdiction, e.g. defendant resides/operates a place of business there. Practitioners should check with clients that this is, in fact, true. Also, if there is a formal contract, it may have a choice of law or a jurisdiction clause and this should be investigated to make sure that the proceedings have been brought in the correct jurisdiction. Again, practitioners should exercise care before entering an appearance which acknowledges the jurisdiction of the court.
Relevant Legislation
Practitioners should advise defendants if their statutory rights have been infringed during the pre-legal or legal debt collection process. Relevant legislation would include The Statute of Limitations Act – is the debt more than six years old? (the estate of a deceased debtor can only be sued within two years of the date of death); the Data Protection Act – has the creditor obtained information about the debtor improperly?; unfair terms in contracts legislation – is the contract legal?; consumer legislation – have the terms of the Consumer Credit Act been complied with by a bank?; have the banking small business and mortgage codes issued by the Financial Regulator been complied with?, etc.
Notice for Particulars
16–04 A defendant should seek particulars of the debt claimed to include a breakdown of how the total is made up, how interest has been calculated and whether proper credits have been allowed if appropriate. It may be that a defendant has a right of set off regarding all or part of the debt. A defendant should satisfy himself that he understands fully the extent of the claim and all of its elements and that the factual matters pleaded in the claim are correct. A plaintiff should answer the defendant’s reasonable questions about the claim and should not apply for judgment without having done so. A defendant should warn a plaintiff that if he does so apply for judgment, without providing such reasonable answers, then the defendant will seek to set aside that judgment and will rely on the letter he is sending to ground an application for the costs of having to so set it aside.
Part-Payment/Settlement
16–05 If part of the debt is admitted by a defendant, that amount should be paid if possible so that the court case will be about the disputed amount only.
This may have the effect of making it necessary to transfer proceedings to a lower court, depending on the remaining value of the plaintiff's claim. This can have important costs consequences for a client. At this point, it may be appropriate to make without prejudice settlement offer of the admitted part of the debt together with part of the sum in dispute to buy off the risk and cost of court proceedings.
If the full amount tendered cannot be paid all at once, a phased payment arrangement over a number of months could be offered. This may be attractive to a plaintiff who is not sure of how strong his case is. If the plaintiff refuses the phased payment proposal, a defendant can attend court and ask the court to make an instalment judgment and vouch his circumstances in writing in support of such an application. Alternatively, if judgment is being given against him in court, he can request a stay on execution to enable him to assemble enough money to pay the debt.
Defending a Case
16–06 If the entire debt is disputed, the defendant should inform the plaintiff in writing and say that a default judgment application should not be made.
On receipt of clear instructions to act on behalf of a properly served defendant, a practitioner should enter an appearance as soon as possible to prevent the plaintiff obtaining judgment in default. If the debt falls within the High Court jurisdiction, this will mean the plaintiff has to set his case down for hearing before the Master. In these circumstances, a plaintiff may be more amenable to settlement. Plaintiffs will wish to avoid the costs and the time it will take to get the case listed for hearing coupled with the costs of the inevitable adjournments.
16–07 Any case where a defendant is incorrectly sued or does not owe the debt should be defended vigorously. Often however, there are borderline cases where there is a dispute between the parties, perhaps in respect of the goods or services provided. In such cases it is necessary to strike a balance between the defendant’s entitlement to refuse to pay the sum demanded arising out of the alleged negligence/breach of contract of the plaintiff, and the costs he will incur in defending the action, which will be compounded if he loses following a full trial of the matter. The eventual outcome of such litigation is never certain.
Counterclaims
A defendant may feel that there is some or no merit in a plaintiff’s claim and a practitioner will have to prepare a defence based on those instructions. Sometimes a defendant may say that whilst there is some merit in the plaintiffs claim, he has a counterclaim against the plaintiff which would have the effect of either abating the amount of the plaintiffs claim or eliminating it altogether. Such a counterclaim is included in a defendant’s written defence. The counterclaim should clearly articulate why the defendant says that the plaintiff owes him money in the same way that the plaintiffs indorsement of claim articulates the principal cause of action. For example a defendant may assert that a certain element of product supplied by a plaintiff was supplied on a sale or return basis and that he is due credits arising from the return of products which have not been allowed by the plaintiff. Another example might be where a plaintiff provided a service such as the installation of software and because one of the software modules would not operate, the defendant may be due an appropriate credit.
If a defendant raises a counterclaim in a defence or by way of replying affidavit, it is open to a plaintiff to seek further particulars of the nature of the counterclaim and subsequently file a formal defence to the counterclaim.
Practitioners should note
16–08 Practitioners acting for defendants should be especially careful to keep in touch with the plaintiff or plaintiff’s solicitor and make sure that a default judgment application is not made because a time limit has expired. They should also advise their defendant clients of the consequences of judgment to include the extra interest & costs and the types of enforcement activity which can be expected if the judgment debt is not paid.
Application to Set a Default Judgment Aside
If a default judgment is obtained against a defendant an application can be brought to set it aside in order to file a defence. The court will assess any such application on its merits taking factors such as bad service of the summons, delay on the part of the defendant, evidence of intention to defend, etc. into account. If the court accedes to the set aside application, it will normally impose conditions such as lodgement of part or all of the judgment amount, and costs of the application to set aside may be awarded against the applicant/defendant. Generally the longer it takes the defendant to apply to set aside, the more onerous the conditions imposed by the court will be.
Appeals
If a defendant is unhappy with a judgment given against him he can appeal within the specified timeframe and have another day in a higher court on the merits of the case. Practitioners should note that an appeal is no bar to enforcement of the original judgment unless a stay has been placed on that judgment.