Aged Debt

[GLA2019]

Good afternoon all,
New here and from what I have see already I may be here a lot!!

We are a small community organisation that works with local schools, the local authority, local and national charities to provide education and mental health services across the whole of our community.

A while ago we worked with a school and they didn't pay one of their invoices. The school transitioned from Local Authority run to being a trust. on this transition the school's business manager contacted me and asked me to credit the invoice and reissue in the name of the new organisation. This I did and awaited payment. Payment did not arrive and I am now in discussions with the "New" business manager who is now telling me that as the original contract was delivered under the proviosus ownership that I will have to chase them for payment.

I wish to resolve thisASAP and am of the feeling that as the then business manager instructed me to credit and reissue in the new organisations name and the business manager being an officer of that organisation then the "New" iteration of the school has assumed responsibility for payment of the invoice. Am I correct in this assumption? I would like to know how far I can push them in an email before threatening them with legal proceedings as a negative response from this next communication will result in a letter before action and then proceedings. I would like to avoid this, however I will take it to court if needed. we may be small but will not be bullied.

Thanks in advance for any help.

 

[Mark T Jones]

What was the legal entity on the contract?

 

[GLA2019]

What was the legal entity on the contract?

the instruction to provide services came from the school in it's original name and we were running on a term by term basis. the invoice that is outstanding is the second invoice of six total invoices and the only one not paid. so when asked to credit and reissue in the new name of the school I had no concern and indeed all subsequent invoices have been paid, late admittedly but paid none the less.

 

[Lisa Thomas]

Sounds like one for the legal bods. Happy to recommend a solicitor if you don't find one on here - feel free to dm me.

 

[jack52]

I would like to avoid this, however I will take it to court if needed. we may be small but will not be bullied.

and turn a small loss into a large one...

what does the local authority say in response to your payment demand?

 

[Michael Loveridge]

How much is the debt?

 

[eteb3]

am of the feeling that as the then business manager instructed me to credit and reissue in the new organisations name and the business manager being an officer of that organisation then the "New" iteration of the school has assumed responsibility for payment of the invoice.

Do you mean the business manager of the old school is now an officer of the new school? You’re dealing with the same person?

The new school is presumably an academy trust, registered at Companies House as a CLG. If so, did the CLG exist, and was the business manager an officer of the CLG, on the day s/he told you to readdress the invoice?

Probably the business manager thought the invoice could be transferred and has now been told by their lawyers that it can’t be, so is trying to revert to the earlier position. Could invoice the LA and see what happens?

 

[SkyBlue33]

Auditor here of Academy Trusts... usually when a LA school moves to an academy trust all liabilities transfer with them unless the LA agreed in the transfer to pay but I've seen that only rarely. My expectation is that the Academy Trust is responsible for payment.

 

[eteb3]

when a LA school moves to an academy trust all liabilities transfer with them unless the LA agreed in the transfer to pay

Teacher here. That does sound about right. With a legal hat on, though, how does it work? It's not normally possible to transfer liabilities: contracts would have to be novated, and where the work has already been performed, that's not a simple thing to do (notwithstanding the rest of this post).

I will take it to court if needed.

Having thought about it longer, I think your claim is against the Academy Trust - provided the biz mgr you dealt with was its officer, or relevant employee, at the relevant time.

Academy proposed that you forgive the debt owed to the LA, and agreed to pay you the value of the invoice if you did so. Seems to me that you crediting the LA provides consideration to support a completely ordinary contract, which holds good with no reference to the transfer of the school. And you have six years from the date of the credit note to collect on it.

Guess you're also aware of the late payment regulations, and that public authorities have 30 days to pay, and are not allowed to contract out of penalty interest?

 

[SkyBlue33]

Teacher here. That does sound about right. With a legal hat on, though, how does that work? It's not normally possible to transfer liabilities: contracts would have to be novated, and where the work has already been performed, that's not a simple thing to do (notwithstanding the rest of this post).

I am not a lawyer so can't speak on the legal side, but generally contracts appear to be in the names of the schools themselves (at least what I have seen from my experience), until they start renewing them when they show in the name of the Trust.

Usually there are contracts which are dealt with by the LA completely outside the control of the school. Those that transfer are those that the school is responsible for, including any work they are have engaged for.

 

[eteb3]

generally contracts appear to be in the names of the schools themselves until they start renewing them when they show in the name of the Trust.

Interesting: as far as I know a maintained school is not a legal person, so in theory not the proper addressee of an invoice.

 

[eteb3]

as far as I know a maintained school is not a legal person

Ah, I was right that the school isn't a legal person, but wrong that the LA is the legal person to sue. It's the governing body of a maintained school that you would sue, and the governors are a body corporate:

Potential liabilities of trustees, members & governors

Trustees, members, and governors of academies and maintained schools can face personal liability for their actions. This is why it is important to understand the potential liabilities and take steps to mitigate them.

www.wrigleys.co.uk

 

[GLA2019]

Do you mean the business manager of the old school is now an officer of the new school? You’re dealing with the same person?

The new school is presumably an academy trust, registered at Companies House as a CLG. If so, did the CLG exist, and was the business manager an officer of the CLG, on the day s/he told you to readdress the invoice?

Probably the business manager thought the invoice could be transferred and has now been told by their lawyers that it can’t be, so is trying to revert to the earlier position. Could invoice the LA and see what happens?

To point one, yes the business manager transferred from the old school to the new trust on transfer day, BM then instructed me to Credit and re-invoice some 22 days later with the instruction coming from their new trust email address not their old school one.

As mentioned in another comment, the contract was with the school directly as names with no mention of or reference to the LA.

Following a telephone conversation with the Chief Finance Officer for the trust and his complete reluctance to accept responsibility for the debt and indeed him blaming me for not chasing it, I pointed out that it was not really my responsibility to chase but their responsibility to pay on receipt of the invoice. I gave a further 14 days to pay, they completely disengaged so court proceedings have now been issued.

 

[GLA2019]

and turn a small loss into a large one...

what does the local authority say in response to your payment demand?

How is it a small loss into a large one? with £115 filing fee and if requires a £230 appearance fee in court the debt including interest is a shade under £2k I stand to recover the entirety of the debt with the interest covering the court fees and then some.

 

[Newchodge]

How is it a small loss into a large one? with £115 filing fee and if requires a £230 appearance fee in court the debt including interest is a shade under £2k I stand to recover the entirety of the debt with the interest covering the court fees and then some.

If you win, the court fees are included in your claim, so 2K+ interest + 115 +230. You start to lose if you instruct a lawyer.

 

[Michael Loveridge]

I gave a further 14 days to pay, they completely disengaged so court proceedings have now been issued.

Who, exactly, did you sue? If you haven't identified the correct legal entity (an extremely common mistake by litigants in person) your claim can be struck out.

 

[GLA2019]

Who, exactly, did you sue? If you haven't identified the correct legal entity (an extremely common mistake by litigants in person) your claim can be struck out.

The school with it's new Academy iteration as per the invoice. The school is responsible for it's own budget so I have issued proceedings against the entity that provided the instruction. One thing I was able to clarify from the finance lead at the trust was that the trust issued budgets for the schools/academies to run independantly allowing local arrangements with local suppliers. plus the fact I have other invoices also issued to the academy after this one so they have already accepted the format of our business relationship.

I think it all comes down to someone dropping the ball and they want to wriggle out of it by trying to use some form of percieved technicality and as we are a small organisation with a sub £100k turnover and they are part of a very large multi million pound trust they seem to want to bully their way out of it.

I suspect they may fail to respond allowing us to seek a judgement, however, we are also prepared for mediation and to appear in court if necessary. We have our time line and our evidence already prepared for any eventuality.

 

[Newchodge]

Would it be worth joining the original purchaser as well?

 

[GLA2019]

Would it be worth joining the original purchaser as well?

That is a good question. The original purchaser was the school before name change and adoption into the trust and receiving academy status. The LA would probably be ultimately responsible but I believe with the personnel involved the debt would have been discussed as part of the transfer and the LA rejected ultimate responsibility in favour of the school being responsible and that debt transferring to the new academy, which is supported by the instruction issued to me by their then Business Manager and subsequent invoices being settled, I think this has just slipped through the net. I don’t think initially this was a malicious action to not pay but now they are upset due to the cost of their mistake.

 

[Michael Loveridge]

I’m not sure that this is as straightforward as you seem to think. I’ve re-read your original message, and it seems that the contract was originally with the local authority. This means that your claim is against the local authority as a starting point.

It's possible for the parties to a contract to agree to `novate' the contract – transfer the obligation for performing it (in this case paying the invoice) to someone else. However, there needs to be a written novation agreement to that effect and, importantly, the new party that is having the contract novated to them (and thereby taking on the obligation) needs to be a party to the novation agreement.

In this case it seems that the local authority simply instructed you to collect it from the new trust, but that the trust did not agree to take on that obligation, so that there was no legal novation at all.

If I’m correct in my assessment of the situation then you don’t have a valid claim against the new trust, and, as I said in my last post, you run the risk of them applying to have the claim struck out and possibly applying for their costs. Although the sum involved would bring it within the small claims jurisdiction it hasn’t yet been allocated to the small claims track, and unless and until it is legal costs are therefore in play.

 

[GLA2019]

I’m not sure that this is as straightforward as you seem to think. I’ve re-read your original message, and it seems that the contract was originally with the local authority. This means that your claim is against the local authority as a starting point.

It's possible for the parties to a contract to agree to `novate' the contract – transfer the obligation for performing it (in this case paying the invoice) to someone else. However, there needs to be a written novation agreement to that effect and, importantly, the new party that is having the contract novated to them (and thereby taking on the obligation) needs to be a party to the novation agreement.

In this case it seems that the local authority simply instructed you to collect it from the new trust, but that the trust did not agree to take on that obligation, so that there was no legal novation at all.

If I’m correct in my assessment of the situation then you don’t have a valid claim against the new trust, and, as I said in my last post, you run the risk of them applying to have the claim struck out and possibly applying for their costs. Although the sum involved would bring it within the small claims jurisdiction it hasn’t yet been allocated to the small claims track, and unless and until it is legal costs are therefore in play.

I see what you are saying but surely my contract would be clearly with the LA not the school. If what you are saying is the case here then I would be party to any novation as I would need to be invoicing the correct body initially?

I was instructed by the business manager of xxxxx school to provide a service.

We invoiced Business manager at xxxxx school for agreed service

Xxxxx school didn’t pay and invoice was overdue

Xxxxx school was then academised and became part of a trust. Now known as yyyyy academy.

When chased for payment against this invoice the business manager for yyyyy academy (who was the same person as xxxxx school) asked me to credit the invoice and reissue in the new name yyyyy academy. This instruction coming some 22 days after the change and sent from her new email address for the academy detailing her new role as business manager of yyyyy academy.

Credit note issued and invoice raised in the name of yyyyy academy.

The business manager of yyyyy academy in her role as an agent of yyyyy academy has not only accepted the debt but initiated its transference from xxxxx school. Whether she should have done this or not is an internal issue for the academy and the trust. They are not denying that the service was delivered, to my mind they are penalising my organisation for their own internal incompetencies.

I do stand by my court submission in that I have issued against the correct business because as far as we are concerned we have rightly issued an invoice to an organisation, under their direct instruction so the debt sits with them.

I will happily stand up in court and push this narrative.

 

[eteb3]

@Michael Loveridge on my read the new academy is liable because the agreement to pay the new invoice was given in consideration for the release of the LA from the debt.

Failing that the academy is estopped from denying they are liable as claimant has relied on their statement to his detriment.

I agree it’s far from straightforward and think the litigant in person had better be very clear about this in the statement of claim.

@GLA2019 after the switch the delivery of service or not is irrelevant: there is a new contract that makes no reference to it

 

[eteb3]

The school with it's new Academy iteration as per the invoice. The school is responsible for it's own budget so I have issued proceedings against the entity that provided the instruction.

Sorry I missed this late last night. I doubt that is the person to sue.

If you have a footer on the invoice with a company number, and if you sued that company by its registered name, then fair enough. (If the invoice doesn't have this, you may have a different ground to sue someone!)

But generally the legal person is the academy chain, not the school: its internal devolved budgets are irrelevant. (Fwiw, this is one of the reasons academy chains were resisted: every school's assets are liable to be sucked into every other school - by a decision of the trust, not of the school.) Check the footer on the Oasis Academy (Arena) website here, for example: the school is in fact the legal person Oasis Community Learning, which appears on Companies House here, whereas the academy itself does not exist.

 

[eteb3]

f you have a footer on the invoice with a company number, and if you sued that company by its registered name, then fair enough.

Sorry, by "invoice" here ofc I meant "email": the legal person (whatever entity that may be) has a legal obligation to disclose its legal name on all business correspondence - which would include the email from the "new" business mgr.

 

[Lisa Thomas]

I know a debt collection solicitor whose rates are extremely competitive. I would highly recommend you speak to them, if you don't find someone o here who can help. Feel free to dm me for more details.