The following story is a tale of how failing to pay moneys owed can end up not only with costs escalating but can also lead to the risk of a business being closed down as a result of a Winding-Up Petition.
A client was disputing a debt of up to £70,000 in relation to legal costs accrued by their lawyer, because unfortunately the lawyer had not achieved the result the client expected.
After protracted negotiations the lawyers agreed to accept a settlement of £5,000.
However, the client failed to pay because another director of the company refused to pay even this amount.
The lawyer then took the company to court and obtained default judgement for £15,000.
Another 12 months passed, and still the debt was not paid so finally the lawyer issued a Winding-Up Petition in respect of the £15,000 judgement plus interest and costs.
The client had no option but to pay up to avoid their company being closed down. It cost £20,000 excluding our modest fees.
Plainly this whole sorry situation could have been avoided and been considerably less costly had the client paid the £5,000 that had been agreed albeit with only one director. Instead, doing nothing resulted in having to pay more than four times that amount and to face a cliff-hanger situation regarding its future.
This is a perfect example of how doing nothing can so exasperate creditors to the point where they lose patience altogether. Do you have any similar examples or anecdotes to share?
For a collection of free articles on Winding-Up petitions and associated issues why not download the “Turnaround” App from your Appstore or visit the Knowledge Bank at K2 Partners.