Commencement of Proceedings
The goods have been sold and the services rendered. The invoice issued but…no payment. Your unpaid invoice is now starting to hurt you and despite issuing a letter of demand, the monies due have not materialised. What’s next?
Unless you want to forego the debt, steps will need to be taken to either protect your rights in relation to the debt, and/or proceed to recover the debt.
(Normally) non-litigious options such as recording a default listing with a credit agency, registering a caveat on property of the debtor, repossessing goods, etc. Please speak with our specialist team to discuss these options and more further.
If you seek to continue down the path of litigation, it is important firstly to note that proceedings may only be commenced to recover a debt that is less than 6 years of old subject to certain limited exceptions.
Each State in Australia has slightly different steps and terminology for litigious debt collection but essentially the process is the same. In New South Wales, the debt recovery process starts with the issue of a Statement of Claim at the Local Court if the debt is less than $100,000 or at the District Court for debts up to $750,000. Debts greater than $750,000 are filed in the Supreme Court, or if there is some special order required to assist you in the debt collection process.
You should provide your lawyer with some basic details so that you can be properly advised as to the correct path to follow. Documents such as a Credit Application and Terms of Trade are essential – if used. Copies of invoices issued are important, especially if you have Terms of Trade printed on the invoice or its reverse. Any correspondence sent or received can also be of assistance, so that any alleged defences can be considered, and your lawyer can advise you of what can be expected in the debt recovery process you are about to embark upon.
There is a filing fee payable to the Court for the issue of the Statement of Claim. This fee varies from Court to Court and generally is increased annually. Your lawyer will also charge you a fee for the preparation of the Statement of Claim and again this generally varies for the amount claimed and the complexity involved. However, the Court Rules allow for your lawyer to claim a set fee for the preparation and filing of the Statement of Claim from the debtor. Once the Statement of Claim has been issued it has to be served upon the debtor/defendant so that they are aware of the claim being made.
In our experience, a high percentage of Statement of Claims that are issued are paid by the debtor to avoid further action, as they were holding out on payment until they absolutely had to oil that squeaky hinge.
If your debtor is a company, an alternate way to commence proceedings is to issue a formal demand, Creditor’s Statutory Demand, to the debtor pursuant to section 459E of the Corporations Act 2001 (Cth). Unless there is a judgment for the debt, the demand must be supported by an affidavit that confirms the debt is due and not disputed. A presumption of the debtor’s insolvency arises if the debtor fails to respond to the demand within 21 days after service of the demand. This will allow an application to be filed in the Supreme Court or Federal Court seeking an order that the company be wound up and a liquidator appointed. We have discussed further details regarding Creditor’s Statutory Demands in a separate article which can be found here.
In this series of articles we will also explore what can happen if the debt does not get paid, including if the demand or Statement of Claim is defended or if no response is received from the debtor/defendant and you seek a default judgment.
Your lawyer can best advise you on the better path to take after reviewing your documents and discussing with you the responses that can be anticipated to service of the demand or Statement of Claim.