Simple steps to effective school fees recovery

The obligation to pay school fees is a contractual obligation: parents enter into a contract with a school to provide their child with an education service in return for fees.

The terms of the arrangement are set out in the Parent/School Contract, which must comply with consumer protection legislation in relation to the terms and the enforcement of them.  Terms which are unfair, or might be considered unfair or onerous (for example, a clause containing an obligation to pay a large financial penalty for late payment of fees) are unlikely to be enforceable.

As with any business, there will be a proportion of parents who do not adhere to their contractual obligations; specifically who do not pay the fees and charges that they have contracted to pay.

The causes of non-payment are complex and many, and not only beyond the scope of this article but - in many cases – outside of the school's control.

What is in the school's control is:

• the ability to minimise the occurrence of non-payment of fees by having clear terms in its contract as to what is payable and when (in particular when fees will be payable in lieu of notice); and
• a rigorous enforcement policy once initial requests for payment fail.

What do we mean by a rigorous enforcement policy? 

In essence this means being prepared to recover debts through the courts, if necessary. While no one wants to go to court, it is important to recognise that as a last resort the court system is there to determine that a debt is owed and to order a debtor to pay that debt.

We work with our schools clients to make best use of the pre-action stages of litigation before resorting to a formal claim. The rest of this article gives you an overview of the debt recovery process.

The first stage is to write a letter before action to the debtor(s)

The content of that letter is governed by the "Pre-Action Protocol for Debt Claims" and should set out the sum that must be paid (i.e. fees, charges and interest) and the clauses under which the relevant sums are due (e.g. the notice clause). The letter should also include copies of the relevant documents (e.g. the relevant contract and Acceptance Forms). It should then give the debtor a reasonable period of time to respond, to set out reasons why they disagree that the debt is payable and/or make proposals for settlement.

Adherence to the protocol is particularly important in the case of debts of over £10,000.  These claims are subject to the court's costs regime whereby the general rule is that the losing party is usually ordered to pay a contribution to the successful party's costs. Non-compliance with the protocol can lead to an adverse costs order, even if the party who has failed to comply has won the case.

However, given that the objective is to recover the debt rather than to incur the costs of court action, an initial protocol-compliant letter can be instrumental in recovering monies and keeping overall costs to a minimum. The letter will give all the information to the debtor and enable the parent(s) to take independent legal advice. This can lead to the debtor addressing the debt and providing payment or proposals for payment thereby leading to settlement before matters go further. Or it can flush out a debtor's arguments as to why the debt is – according to them – not owed.

Then, issue a claim through the courts

On the rare occasion that the letter before action does not produce recovery of fees, the next step is usually to issue a money claim through the courts.  The debtor will be given a further opportunity to pay. If the debtor does not defend the claim, a request for a default judgment may be made. This will lead, if not settled, to what is known as a CCJ (county court judgment), paving the way for further enforcement.

Clearly if a debtor is willing to pay but has no money to pay all of the debt in one go, it might be sensible to come to a manageable instalment plan for repayment.

There will always be a minority of debtors who will not pay a debt or CCJ voluntarily.  At this stage the school will need to consider whether to enforce payment of the CCJ (again through the courts).  The school will probably need to investigate the debtor's means to pay in order to ascertain whether and when to enforce.  If a debtor has equity in a house or other assets, an application for a charging order could be made. This will secure the debt which will be paid out from the proceeds of a sale of the asset.  Alternatively an employed debtor could be made subject to an attachment of earnings order whereby the employer is ordered to withhold a sum from the debtor's salary and pay it towards the judgment debt.  Other methods of enforcement are available too. 

What's the risk?

As always, there are a number of risks to consider with any litigation. Schools that have experience in pursuing debts through the courts will know that proceedings can be expensive. Schools will always need to carry out a cost versus benefit analysis in relation to the steps it takes to recover unpaid fees.

There also needs to be a balance struck between implementing your rigorous enforcement policy and maintaining a good relationship with your parent body. Clarity and consistency generally assists in this regard.

Also be aware of the precedent decisions that you set. The summer Term is usually the point at which schools reflect on any overdue accounts. Now, more than ever, you will need to consider the various duties that you are obliged to comply with as a school, including company and charity law. Acting in the best interests of the school at this time will require a simple and effective approach to debt recovery.

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At Wilsons, we a have an experienced debt recovery team specialising in the recovery of unpaid school fees. Our team can assist with the preparation of letters before action and/or court proceedings in accordance with your debt recovery strategy.

For further information and advice, please contact Vicky Wilson, Alexandra Sollohub or your usual Wilsons contact.