By Jodie Rodrigues, solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group
So you’ve found an outstanding invoice. Sure, all invoices are valuable to a business but now you’re considering whether there is any commercial benefit to asking a lawyer to chase the debt. There are real advantages in using a lawyer rather than a debt collector to assist with collection of your debts. There are three main questions you should ask when considering which invoices to chase through legal proceedings:
1. What can be recovered?
The obvious recoverable amount is the value of the invoice.
If proceedings are commenced to recover the invoice, you can claim interest, filing fees, process server fees and some set amounts for your legal costs. These costs are capped at the court’s rate and will depend on the amount of the invoice.
Invoices will normally be charged under an agreement or contract. Depending on the terms, it may be possible to recover interest and costs at the contract rate. Otherwise there is generally a statutory entitlement to interest at rates specified in the court rules.
2. What evidence do you have to support the debt?
This question is particularly relevant if the debtor is denying liability for the invoice or the work performed in the invoice. If an invoice is disputed, the court will need to be satisfied of the evidence supporting the debt, generally in an affidavit or statement.
One question will be whether this evidence is provided to the debtor before commencing proceedings. Generally speaking this can be helpful (but not always) as it may help to identify any real issues, and to show the debtor that you are serious about the recovery process.
3. Should you use a lawyer or a debt collector to assist?
Some businesses will try to chase an invoice on their own or through a debt collection agency. At the end of the day and if the matter cannot be easily resolved, it will need to be sorted out in Court proceedings. There is no doubt that legal proceedings, whether through a lawyer or a debt collection agency, can involve a great deal of time and money if not handled correctly. For that reason, chasing a debt through a court should be the last option for a business and this is one of the reasons why a lawyer can better assist
A solicitor can demand payment of the invoice through a strongly worded letter. In the best case, the debt will be paid in response to the letter as most debtors, receiving a latter on solicitor’s letterhead will immediately know you are serious. As a middle ground, a response can help inform you (and your solicitor) about how best to pursue the debt. If it is just that the debtor can’t make payment of the full amount of the invoice at once, this can allow discussions regarding a payment plan that can be recorded in a deed or court orders. If it is that the debtor is simply refusing to pay, at least you may be able to understand whether there is any legal basis for non-payment and can consider the viability of recovering the invoice amount given the debtor’s position. In the worst case, you can approach the court with the benefit of having made reasonable efforts to resolve the invoice beforehand, which can sometimes assist in arguments over legal costs.
Separately, a negotiated payment agreement may allow the opportunity to obtain security for payment of the debt if not already held. This may enable you to record your interest with the land registry or on the PSPR with the assistance of a lawyer. That registration can give you priority over other creditors and can be a significant advantage.
Matthews Folbigg Lawyers has a specialist team dedicated to Insolvency, Restructuring and Debt Recovery. If you would like more information or advice in relation to Insolvency, Restructuring or Debt Recovery practice and procedure, please contact Stephen Mullette or Jeffrey Brown on (02) 9806 7459 or (02) 9806 7446,or email stephenm@matthewsfolbigg.com.au or jeffreyb@matthewsfolbigg.com.au.
