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, you will need to commence legal action and gain the assistance of the Court in the collection of your money.
Firstly, it is important to note that proceedings may only be commenced for a debt that is due and payable from 6 years of the date of filing proceedings. Therefore, should the debt exceed 6 years, the debt has exceeded the limitation period for recovery action to occur.
Each State in Australia has slightly different steps or terminology for 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 helpful, but not essential if you don’t have them. Copies of invoices issued are again helpful, 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 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 varies for the amount claimed and the technicality of the debt owed. 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). Such demand must be supported by an affidavit sworn or attested to on your behalf that confirms the debt due and that it is not disputed. The section provides for a presumption of insolvency to be created if the debtor fails to respond to the demand within 21 days after service of the demand. If the presumption of insolvency arises, you may file an Application in the Supreme Court or Federal Court seeking an order that the company be wound up and a liquidator appointed.
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 received to service of the demand or Statement of Claim.
Who should you get in your corner as your lawyer – the team at Matthews Folbigg!
We would be delighted to have the opportunity to present our debt recovery credentials to you.