Introduction
Many times, I have been approached by clients who will be aggrieved that their debtors are defaulting in payments. They would therefore want legal assistance in recovering the amounts owed. Some debts are from business transactions while others are from personal transactions with colleagues. At times the frustration is that the creditor has inadequate or no documentation to prove the amount he or she will be claiming. What may be available are testimonies by other people who may claim to have knowledge of the debt. Due to technology some of the available “evidence” may be “WhatsApp” messages which are not readily admissible in court, if at all. In this article I give some advice on how to handle debt recovery where there is insufficient or no documentation or evidence.
Collect evidence or documentation
Try as much as possible to build a file of evidence to sustain a creditor’s claim of the amount being claimed. For example, go back to whatever documentation might have been there prior to or at the time of transaction giving rise to the debt.
Meetings with debtor
Despite your grievance or disappointment, it may be advisable and beneficial to hold meetings with the debtor to discuss the outstanding amount. Ahead of the meeting a creditor can send an email or letter to confirm the meeting and, in the email, can mention the outstanding amount. The creditor can ask the debtor to confirm venue, date, time and agenda. If the debtor replies that email or letter that will contribute to evidence that there was indeed discussion or engagement over the outstanding amount or even that the debtor confirmed the outstanding amount.
During the meeting with the debtor the creditor can ask the debtor to propose a payment plan. The creditor can even ask the debtor to send an email or letter to confirm the proposed payment plan. Such documentation has the effect of confirming the outstanding amount and can be admitted as evidence in court in the event of litigation.
It is advisable to have a creditor’s witnesses in the meeting who may later testify in favour of the creditor. It is recommended that the meetings be recorded by way of minutes. The creditor may even volunteer to take the minutes and record the salient deliberations or resolutions of the meeting such as the outstanding amount and the proposed payment plan. This will prove that at the time of the meeting a certain amount was owed by the debtor and that the debtor offered to pay certain amounts by agreed dates. The creditor is urged to accept any reasonable payment plan for purposes of having the debt confirmed by the debtor. The creditor can then send minutes of the meeting to the debtor and ask him or her to confirm, especially in writing or by signing the minutes. Signed minutes have high probative value.
Payment plans
After the meeting the creditor is advised to push for the signing of the payment plan by the debtor, confirming the debt and the proposed payment plan. The payment plan should be witnessed. Default in payment will give foundation to the cause of action in litigation.
Where the debtor continues to default against a signed payment plan the creditor may push for a revised payment plan to be signed by the parties with the assistance of the creditor’s legal practitioners. Lawyers know how to word a payment plan in a manner that makes it admitted as evidence with high probative value in court. The creditor has to be tactful as some debtors who are in the habit of defaulting may resisting paperwork involving lawyers.
Part payments
A reasonable creditor should accept part payments. It is better to fight for the recovery of reduced debtors. The creditor may encourage the debtor to make part payments from the debtor’s bank account to that of the creditor to create an audit trail.
Receipts, statements and reconciliations
Where payments are made through cash or even transfers there is merit in sending statements or reconciliations to the debtor showing the opening balance, payment and closing balance and ask the debtor to confirm. At times on a receipt or acknowledgement of receipt it may be prudent to show both the amount paid the balance after the payment. It may difficult for the debtor to rebut such evidence during litigation.
Litigation
If or when litigation is eventually instituted there will be some documentation to prove the debt. That will make the work of the commercial lawyer easier.
Conclusion
In debt recovery proceedings it is important to have adequate documentation to prove the debt. Words or emotions do not necessarily amount to evidence.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Profile
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deal and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He writes in his personal capacity. He can be contacted on +263 772 246 900 or gohofisi@gmail.com
