If you run a business, as a self-employed person, as a partnership or as a limited company, you are always at risk of being sued – by a customer, an employee or a member of the public. Someone could be injured, someone might feel aggrieved about their treatment whilst in your employ, and someone could demand payment or services under a contract that you dispute.
Whatever the circumstances, if you are sued you will need to consult with your own solicitors about the strength of your case and your options for resolving the matter. Even if you are not at fault in any way, you’ll need to pay for your legal advice and representation – and cases can run on for months or even years. When those cases are paid at an hourly rate of £150+ the costs can really add up.
Ultimately, if you are successful, then the court can order that your opponent is to pay your legal costs as well as their own. On the other hand, if you lose you can be ordered to pay your own costs and those of your opponent.
This is where Professional Indemnity Insurance, Employers’ Liability Insurance and Public Liability Insurance can be very important and no doubt sorting out these policies will have been one of your first acts when setting up your business. It will pay not only the legal costs (for your solicitors and those of your opponents if necessary) but any compensation ordered or agreed.
If you don’t have this insurance in place then as well as the legal costs you will have to pay the compensation ordered or agreed from your business’s assets. If your business is a limited company then only the business assets will be used to pay the debt. Unfortunately, if the debt exceeds the value of the company’s liquid assets then the other assets will have to be sold to repay the debt. If the debt exceeds the company’s total assets the company might have to go into compulsory liquidation.
If your business is not a limited company then your personal assets can be used to repay the debt – that can mean that your home has to be sold. Sometimes it can be agreed that the person who has sued you can have a charge over your home rather than force you to sell it (e.g. if it is used as a family home for young children) – that would act like a mortgage and would be called in in certain circumstances (e.g. after a set period or on the sale of the house).
If you don’t pay the amount ordered and don’t have capital assets that can be seized or sold, your income can be garnisheed by having an attachment order made (a set amount is taken from your wage each month).
If you don’t pay the amount ordered, you can be imprisoned for breach of the order – which is contempt of court.
If you later acquire assets then these can be used to pay off the debt.
It is obviously important to seek legal advice at the earliest opportunity should you be contacted by someone saying that they intend to sue you. If you have insurance you must also report the matter to them promptly and do not respond to any correspondence from the person seeking to sue you until you have spoken to your insurers (who can advise you on the issue of admitting liability).
DBS Law cover a broad range of law from, property law, through to personal injury, immigration law, divorce lawyers, commercial litigation and employment law such as professional negligence and unfair dismissal. DBS Law are able to offer you up-to-the-minute legal advice, looking after your needs and being there to support you when you require advice, representation or resolution.
