How to collect debt from a company in administration

A debt owed from a hotel

An entertainment agent contacted us in March 2017. They were owed money from a hotel venue that they had provided entertainment to over Christmas 2016 and had not been paid.

The amount was over £2000! To make matters worse the agent had to pay the acts for their performances.

A cheque for the full amount had been sent by the hotel, which was made of rubber and was imprinted with “refer to drawer.” Not good!!

The hotel was clearly having cash flow issues. Our client was promised and promised the payment by the father of the hotel owner. The father  was happy to be the communique between our client and the son, hotel owner.

Getting Proof of the Debt Owed

Our client visited the hotel on numerous occasions from January to March to collect payment. There were also many texts between our client and the debtors father. In some of the texts the father had agreed to pay the debt. He was embarrassed by his son’s mis-management of the hotel and how he had dealt with running the business.

The father did at one point pay our client from personnel money £320.00 to cover some of the debt and re-enforcing the agreement that he would take it on.

The plot thickens

Time passed during March and no further money was paid to our client who then instructed us to help collect the debt.

We were sent a copy of the invoice and the contract, both of which had the hotel name, but there was no mention of the hotel being limited.

We sent a Notice Before Action letter to the owner of the hotel and asked him nicely to pay the invoice.


The father was the only person to respond saying the hotel was now in administration. He provided us with the contact details of the administrator. He also said that the hotel was a limited company and our letter should have been sent to it and not to his son care of the hotel.

Our client was never told it was a limited company and the contract sent to the defendant clearly did not say the name of the hotel followed by it’s limited name.

We spoke to the administrators and found out that our client was not included on the creditors list. This we felt was further proof that the father had agreed to take the debt on personally.

We went ahead with court action against the father, it was a risk but one worth taking. This is because we truly believed he had made a new contract with our client by accepting responsibility for the debt.

The defendant (father) filed a defence saying the debt was owed by the limited company. He said that he had only agreed to pay the debt because he was embarrassed by his son’s Mis-Management of the hotel. We waited for case management directions from the judge. Once we had the directions in our possession, we proceeded to get our bundle of paperwork together.

  • witness statement.
  • invoice, contract and refer to drawer cheque.
  • all relevant text messages highlighting sentences which showed the defendant agreeing to pay the debt.
  • email from administrator confirming our client was not included on the creditors list.

Attending Court

Paula attended court to support and reassure our client and to advise him on the do’s and dont’s. We are not solicitors, so Paula couldn’t enter chambers to listen to the hearing. Some judges will allow a McKenzie friend to enter but to date no one from Franklin James has been allowed in unless attending solely on behalf of a limited company.

It is nerve racking waiting for your client to come out of chambers. You really want them to win and truly believe they deserve to. You wonder if you have addressed all the points of law that you could rely on to enable the judge find in your client’s favour.

After a while our client returned to say the judge had been very stern with both the defendant and himself. He did not allow them to refer to the bundle of filed papers, saying he had read the file and understood the case.

He asked them to leave chambers whilst he addressed a point of law, another wait until they were called back in.

The Outcome

Eventually our client returned to the waiting area, jubilant. He had won!

The point the judge needed to check was to see if it was a new contract being made between our client and himself, or in fact he had gifted the money.

The Judges Decision

The judge decided that there WAS a new contract. He also said that none of the paperwork had included the word “limited”. We are not sure why this mattered given that there was a new contract. Neither did it matter the company was in administration, because the contract was with the father.

This case was won on such a fine line. In fact one wrong word could have lost us the case “gift.” But it didn’t and that is because we could prove that a new contract had been agreed with the evidence of the text messages.

The Payment Deadline

The deadline given for the payment to be made to our client is today the 28th November 2017. We have also been assured that the total payment will be paid today.

An update will of course be posted!

If the payment does not arrive today we will be transferring the claim to the High Court Bailiffs. The High Court Bailiffs will obtain a Writ of Control from the High Court.

If he can’t pay, they will take it away!!!