Chasing debts and harassment claims

The good news is that the UK is officially out of recession. Whether businesses agree, traders & directors will still be doing everything in their power to ensure that their businesses do not get affected by economic uncertainties. This will include chasing debts swiftly for fear that slow payment will impact cash flow against a background of the banks being more careful with credit including overdrafts.

But there is a thin line between good business acumen and harassment. Case law has demonstrated that the courts are prepared to award damages if they feel that a debtor has been harassed in the race to secure debts. Undoubtedly, economic uncertainties will test tempers but if this leads to individuals in a business behaving inappropriately, a harassment claim is a real possibility. Whether it is a customer claiming damages for harassment against a big corporation or one businessman suing another for causing anxiety and distress, The Protection from Harassment Act 1997 is increasingly being used as a tool in a variety of situations from bullying claims to debt recovery claims.

A business may take the view that it does its work well and thus it should be paid on time; if this payment is slow in coming then the business is well within its rights to chase its client for the money — hardly an unusual situation these days, unfortunately. But if businesses fail to consider the harassment legislation in all of this they may end out paying money not getting it in.

The Protection from Harassment Act 1997 was a piece of legislation brought in to deal with stalkers but is now being used in a variety of other situations, including the employer/employee relationship in bullying cases and in debt recovery matters.

The Court of Appeal considered this issue in the well-documented case of Lisa Ferguson v British Gas Trading (10 February 2009). In a badly handled debt recovery action, British Gas sent Mrs Ferguson threatening bills and letters. Such threats included legal proceedings and more importantly for her as a businesswoman, threats to report her to credit rating agencies.

Mrs Ferguson decided to take a stand and sued British Gas saying that their behaviour amounted to unlawful harassment contrary to The Protection from Harassment Act. She claimed £5,000 for distress and anxiety and £5,000 for financial loss due to the time that she had lost and expenses that she had incurred in dealing with British Gas.

British Gas tried to strike out her claim saying that it was perfectly correct for them to treat customers in this way, not least because the letters were generated by computer. The Court of Appeal, however, agreed with Mrs Ferguson that the behaviour could amount to harassment and that it was strongly arguable that it did. The Court of Appeal also rejected the argument from British Gas that as a large corporation, it could not be legally liable for mistakes made by either their computerised debt recovery system or those programming it.

The issue of harassment came under scrutiny again in S&D Property Investments Ltd v Nisbet (13 July 2009). The case started off as a straightforward debt recovery action in the sum of £111,579, said to be due from Mr Nisbet relating to monies loaned pursuant to a property development opportunity. Mr Nisbet admitted the debt but sought to counterclaim damages for harassment by Mr French, a director and shareholder in S&D. He maintained that S&D was vicariously liable for Mr French’s behaviour and that his counterclaim should be set off in extinction or reduction of S&D’s claim.

An unusual and striking feature of the claim was that Mr French acknowledged that previously he had a reputation for extreme violence, having been involved in gang crime in Liverpool. However, he maintained that he had put that behind him and now campaigned against violence and criminality.

The judge accepted that Mr French’s initial frequent and insistent chasing of the debt was not harassment but when he made reference to being tempted to beat Mr Nisbet, this was oppressive and unacceptable and amounted to harassment. The court also had little trouble accepting that Mr French calling at Mr Nisbet’s house on two occasions and shouting abuse amounted to harassment, which is hardly surprising since Mr French had previously been convicted of using threatening, abusive and insulting words on those occasions (an offence under the Public Order Act 1986).

This case is an extreme example but it does show that oppressive and unacceptable behaviour in seeking to recover a debt can backfire and result in the payment of compensation for distress, anxiety and financial loss as the award of £7,000 damages to Mr Nisbet demonstrates.

Whilst one might feel that the behaviours exhibited by Mr French were exceptional, those displayed by British Gas might well be thought less so. Both these cases should act as a cautionary reminder for businesses that when seeking to make a recovery of a debt, a business should not end up actually paying out compensation under the Protection from Harassment Act or indeed, as is possible, being subjected to a fine and/or a prison sentence of up to six months.

Roddy MacLeod is a partner at law firm Weightmans LLP.

roddy.macleod@weightmans.com