Sadly, in the current economic climate, yard owners are increasingly faced with defaulting liveries and in extreme circumstances are left with abandoned horses when their owners disappear, owing significant amounts of money. It is therefore very important to have in place a well drafted livery licence, that fully defines the terms of the agreement between the parties and what happens in the event of a default so that the defaulter is clear of their obligations and the yard owner has good options for enforcement. For a yard owner faced with a non-paying livery there are a myriad of issues. So, if the unthinkable happens, what are the options?
No yard owner wants to act like an interest free overdraft for its liveries. Default should be taken seriously. However, there may be good economic reasons to take a reasonable line with your livery and to negotiate new terms upon which they may pay back the arrears but otherwise continue the arrangement. However, where this is not possible, for example where you believe your livery will never be able to meet their debt, your priority will be to take steps to limit your exposure and to free up the space on the yard for a livery who is willing and able to pay.
If you have a good written agreement, it should provide your debtor with a specified period (notice period) in which to remove their horse/s and any equipment, including tack and feed. We recommend that you should communicate this “notice period” to the livery in writing and ideally, hand it to the debtor personally. If you do not have a written agreement you will need to give “reasonable” notice. What constitutes reasonable notice will depend upon the circumstances. If a debtor has been using the premises for several years then a reasonable period may be longer than for a livery who has only recently joined your yard. Alternatively, the frequency by which their payments are made, i.e. weekly or monthly, may also determine the notice period. Once the notice period has expired and the livery has not left, they will be trespassing on your property, without permission. This entitles you to various legal remedies such as changing locks; seeking a court injunction requiring them to leave and to remove their property from your yard.
Invariably complications arise when a livery abandons, leaving horses for which you will be obliged to care for. If you have served a notice to quit then once the notice period is up, you become what is termed an involuntary bailee of any property that has not been removed. Under s12 of the Torts (Interference with Goods) Act 1977, you can take certain steps to discharge your obligations as bailee, so ultimately you can sell the property. This includes animals. The steps required under the Act must be strictly complied with which may vary depending on the circumstances. We would always recommend you take professional advice in such a situation so as to avoid any exposure to a claim from an owner on the basis that you were not entitled to deal with their property or animals. However, one common trap is that you will need to be sure you are not selling property belonging to a third party, for instance, horses on loan or vehicles licensed to a third party.
You can sue on the debt in the County Court. Alternatively, you might be able to serve a Statutory Demand and invoke the insolvency procedure. However, due consideration should always be given to the likelihood of the debtor disputing the amount being claimed as a debt. Where the debtor could raise a “genuine dispute” as to whether monies were owed a statutory demand is not appropriate. It is important also to consider the debtor’s financial circumstances. Clearly pursuing court action or insolvency will amount to little more than a pyrrhic victory, if the debtor is impecunious and has no means of meeting the sum claimed in any event.
Whilst a well advised yard owner with a good written agreement has useful tools available to enable them to act quickly and recover what it is owed, recourse to court proceedings might be costly, in the event that even if successful the livery cannot meet its debts. So, in order to protect your business, we recommend active management from the start and regularly throughout your relationship with your liveries. Take the opportunity now to health check your licence agreements and credit control procedures. Henmans regularly advises individuals and businesses on debt recovery issues and in particular are well placed to advise rural and equine businesses in relation to the specific issues that arise.
Contact Esther Stirling or Tamsin Hyland, solicitors in the dispute resolution department for further information.
Henmans LLP 5000 Oxford Business Park South Oxford OX4 2BH
Tel: 01865 781000 Fax: 01865 778504 welcome@henmansllp.co.uk