Handling debts and disputes in a time of crisis

In the latest Mersey Maritime Face-2-Face webinar, a trio of legal experts from Liverpool law firm Hill Dickinson offer invaluable advice on settling business debts and disputes. Tony McDonough reports

Hill Dickinson
Law firm Hill Dickinson at St Paul’s Square, Liverpool

 

Cashflow problems and business disputes are part of the everyday world of commerce in the best of times. In the current COVID crisis such issues are manifold.

A trio of legal experts from Liverpool law firm Hill Dickinson offered an invaluable insight into navigating your way through these uncertain times during a Mersey Maritime Face-2-Face webinar.

Legal directors, Colin Lavelle and Julie Agnew, were joined by colleague Michael French, an associate at the firm, each offering a clear and concise presentation with both a general and specific maritime focus.

Terms and conditions

Michael French opened with a presentation on minimising the risk of business disputes by ensuring clear terms and conditions formed part of any contractual agreement between a business and a customer.

“In these uncertain times business continuity can be difficult,” he said. “This is why terms and conditions are important in legal contracts between businesses and their customers… and it is important to keep them under regular review.

“They can be particularly important in the maritime sector as businesses are often dealing with customers in other parts of the world and in different legal jurisdictions. Deals are frequently done via phone calls and email.”

He added that a common problem was when terms and conditions are introduced later and not part of the initial contact…”They need to be agreed at the point the contract is formed,” said Michael.

Terms and conditions, he concluded, must be “clear and robust” and there was a responsibility to highlight any potential “onerous”, whilst excluding  or any “unfair” terms if dealing with consumers. He said: “Ensure your business uses a consistent process to incorporate terms.”

Insolvency

The global pandemic has placed many businesses in a precarious position and this can be an issue both for your own business and for those who owe you money.

According to Julie Agnew, insolvency is defined in two ways – balance sheet and cashflow. The first concerns the balance between assets and liabilities but said the second, cashflow, was the more commonly used.

She explained: “The question is are bills being paid when they are due? Is your customer paying you late and is this a usual thing? If they often pay late then that may be just the way they are.”

What to look out for, added Julie, was customers who may usually pay on time are suddenly late with their payments. If the debt is large, they may approach you to ask to stretch the terms of payment over a longer period.

Key advice here from Julie is to stay on top of credit control. As soon as potential problems with customers arise, get on top of them quickly and find out what the situation is before it becomes more difficult to resolve. The aim being to minimise any impact your customers financial difficulties may have on your business.

She also talked about cashflow problems you may be having with your own business.

Once insolvency becomes an issue for your business, Julie explained, then your legal responsibilities as a director switch from growing your company to ensuring to look after the interests of your individual creditors.

“Can your company avoid insolvent liquidation – looking at this reasonably and objectively it is about not worsening the position of your creditors,” she said.

maritime, ship, vessel, port, cargo, export, import
Maritime firms often operate across multiple jurisdictions

 

Protective measures

Taking more of a specific maritime focus, Colin Lavelle talked about how you can best protect your business interests in the event of disputes. In particular, he looked at the use of ‘liens’ and ‘ship arrest’ as means of taking security.

A lien is the right to retain an item of property belonging to someone else in order to secure the payment of a debt. Colin said: “For the lien to be effective you must take possession of a property lawfully and that possession must continue to be lawful.”

Failure to ensure the possession is legal, he added, may expose you to the risk of a claim in conversion, essentially a civil action for theft of that item. A common law lien can be used to detain specific goods arising from a particular transaction; whilst a contractual lien can be used more broadly depending on the terms of the contract. For example, the item may be sold to pay the debt if this is agreed in the contract.

Pitfalls to bear in mind, said Colin include possible third-party ownership of the goods or the depreciation of the goods.

Ship arrest is where you may take control of a vessel in order to secure a payment of a debt by its owner. Colin advises to explore commercial options to maximise the chances of recovery and be aware of possible expenses that may arise such as maintenance of the vessel or ensuring the welfare of the crew.

An important overall message of the webinar was that it was important to act quickly in cases of disputes or unpaid debts and that it was often better to seek consensus and agreement rather than confrontation.

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