CPA Bulletin

www.cpa.uk.net CPA Bulletin > November 2023 39 Q&As: 2 As your customer’s ‘hired-in plant’ insurance policy is invalid, then the customer will have to settle the claim themselves for the stolen roller. You could remind them of their liability under the Model Conditions, referencing clause 13(b), and that you will be sending an invoice in due course. If they do not pay the invoice when it falls due, then like any other outstanding debt, you can either pass the matter over to a debt recovery company or take them to court. Subject to any response you receive from the customer, or if payment is not received on the due date, then we can discuss ‘next steps’ at a mutually convenient time. We are having difficulty in obtaining payment from a customer who had hired a roller from us using the Model Conditions, which was then stolen during the hire period. We have continued to charge the customer the two-thirds idle-time rate as per clause 13(b) of the Model Conditions; but the customer’s insurance provider is unwilling to settle the claim on the basis that the insurance application was incorrectly completed. This nowmeans we will also have to raise an invoice directly to the client for the cost of a replacement. Can you please give us some advice on this matter. The first thing to clarify is whether there is actual damage to the plant/equipment, or if this was ‘fair, wear and tear’. The customer is liable if it is the former, but not if it is the latter. Should there be any claim for damage (long) after the hire had ended, it may be challenged by the customer. The Model Conditions does not specify how soon the owner must inform the customer of the damage, but any delay in informing the customer should be explained. Once this damage can be attributed to a particular hire, then that customer is liable under clause 13(b) of the Model Conditions. As the conditions falls under contract law - each contract has effectively a ‘shelf life’ of 6 years - so even if the hire ended a few weeks earlier, they would still apply. I am happy to discuss this further if you wish. After having a look through the Model Conditions, I cannot see anywhere if the customer is responsible for any repairs to the plant after the hire had ended, so has to return the plant back into the condition it was in before the hire began. Can you confirmwhat the position is? Although you have been supplying this customer since COVID - but have not obtained a signature on the Hire Contract Forms (HCFs) for the reasons of COVID - your customer has still paid the invoices on the due date for the machinery which had been supplied. That relationship has continued ever since without issue until - it would appear - your customer is incurring a cashflow problem. For me, the lack of a signature is not an issue due to the customer ordering machinery, and it being delivered, and paid for, so to me, you have an ‘established course of trading’ - both parties have, even without a signature in place, a custom and practice peculiar to you both. Have you sent over the Model Conditions to the customer? Even if you have not, the Late Payments (Commercial Debts) Regulations 2002 allows you to charge 8% above Bank base rates, as well as a ‘one-off’ administration charge. This would be outlined in clause 37 of the CPA Model Conditions 2021 (or clause 36 of the CPA Model Conditions 2011). With regards a disputed debt, as an example, would be whether the machinery supplied was not fit for purpose, which resulted in problems for the customer. This does not seem to be the case, and instead, the customer is trying to use the excuse that ‘no signature equates to no contract’ - despite having the machinery - which in his eyes, means no debt. This is incorrect. If the customer is continuing to hire machinery whilst technically insolvent, i.e., not being able to pay the sums owed on the due date, then it may be better to pass this customer’s details onto The Insolvency Service - www.gov.uk/government/ organisation/insolvency-service There may be also an inference that if the customer is continuing to hire plant with no (or very little) intention of payment, then it may be argued that he is attempting to perpetrate a fraud - which if proven, would constitute a criminal offence. Those are my initial thoughts. If you would like to discuss this in more detail, then please get in touch. We have a customer who we have been dealing with since 2021. Over that time, he had regularly hired equipment from us and paid the invoices when they fell due, until recently. He now refuses to pay any invoices on the basis that the hire agreements were not signed, despite previous contracts having no signature in place but invoices were paid. The reason we did not previously obtain signatures was due to COVID. However, we have started obtaining signatures since April this year and have a sign at our Hire Desk stating so. We have offered him various payment options which we both agreed to, but no payments were forthcoming. We are commencing legal action, but our debt recovery company are reluctant to proceed based on ‘lack of signatures’. Could you please provide some guidance on a bad debt I have.