Independent schools have to be financially sound like any other business but they face unique issues when it comes to recovering unpaid school fees.
A balanced view needs to be formed on the debt recovery process with the welfare of the child in mind. Although each case should be considered on its merits, it is also important that schools have robust policies in place and act quickly to prevent bad debt.
One of the most increasingly common reasons we are encountering for non-payment involves complications surrounding parents divorcing. Parents often blame each other for allowing the debt to escalate but where both parents have contracted with the school, they remain jointly and severally liable for payment of the fees, regardless of the circumstances of their relationship.
In one case we handled the father had been declared bankrupt, but the contract with the school showed that both parents were liable, and it was identified that the mother had an interest in a property that could be enforced against if necessary.
The mother disputed the case. She said she had separated from the father and he had agreed to pay the fees; that the school should have known about the separation and contacted her at her new address; that she was not aware the debt had built up and if she had known, she would have removed the children from school. She also said the onus was on the school to expel the children rather than let debt accumulate.
At court it was ruled that the school could not have been expected to contact the mother at another address, not known to them; that contractually both parents were liable and it was the responsibility of the parents to repay the debt and prevent it increasing.
The judge found in our favour and our client was awarded the full amount of the debt together with all costs and interest. Eventually the mother settled the debt.
Even where one parent is the school’s primary contact, when it comes to payment of fees and both parents are liable, schools should ensure that both parents are kept informed and all demands are sent to both parents – preferably under separate cover. In doing so you avoid any argument from one parent claiming that a debt has escalated without their knowledge.
Obviously schools want to handle divorce situations sensitively but there is no reason why debts should be written off just because couples have separated or divorced and there are legal routes to follow.
Another reason for non-payment is when parents have simply encountered financial difficulties and can no longer afford payment of the school fees. Sometimes, parents may be asset rich, but cash poor so it’s worth considering that the debt can be secured against an asset, such as a property, protecting the school’s fees and eventually leading to a full recovery.
Financial difficulties can be temporary so instalment plans can be put in place. By undertaking regular reviews of the debtor’s financial circumstances and asset position, we identify when their position has improved and a payment in full or increased instalments can be made.
When payments are not made due to a dispute it is important to follow the complaints policy and tackle them head on and thoroughly. Be commercially minded. If a dispute has some merit, it is sometimes better to consider a reduced settlement or instalments as opposed to pursuing a matter through the court – but be wary of reputational issues, parents talk and you do not want it to be assumed that reductions will be offered as a matter of course.
Phil Roberts is a Senior Associate and Debt Recovery Team Manager at Clarke Willmott LLP