Commencement of Proceedings
The goods have been sold and the services rendered. The invoice has been 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 protect your rights in relation to the debt, and/or proceed to recover the debt.
Non-litigious options may include recording a default listing with a credit agency, registering a caveat on real property of the debtor or any guarantor (if a caveatable interest exists), or repossessing goods. Some of these steps may end up involving litigation as well. Please speak with our specialist team to discuss these options and more further.
If you seek to start 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 filing of a Statement of Claim in the Local Court if the debt is less than $100,000; or in the District Court for debts up to $750,000. Debts greater than $750,000 are litigated in the Supreme Court, although in certain cases smaller amounts may be argued about in the Supreme Court where some special orders or issues are involved .
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 any Credit Application and Terms of Trade are essential. Copies of invoices issued are also critical, especially if you they include Terms of Trade. Any correspondence sent or received from the debtor will 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.
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. The Court Rules allow for you to include a claim for a set fee for the preparation and filing of the Statement of Claim by your lawyer.
Once the Statement of Claim has been issued it will need 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 the debtor finally accepts that attempts to delay payment have come to an end.
If your debtor is a company, an alternative way to proceed without litigation (at least initially) is to issue a Creditor’s Statutory Demand. This is a formal demand issued to the debtor pursuant to section 459E of the Corporations Act 2001 (Cth). No legal proceedings are required to issue this demand, which can be prepared by your lawyer, although 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. If the debtor fails to respond to the demand within 21 days after service, the debtor is presumed to be insolvent. 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 separately here.
Matthews Folbigg Lawyers can advise you on the best path to take after reviewing your documents and discussing with you the responses that can be anticipated to service of a demand or Statement of Claim.