Failing payment, litigation options are available whether they be via Local, District or Supreme Courts or pursuant to the Corporations Act by way of the Winding Up/Liquidation process. Options and costs will be discussed before the necessary action is commenced.
The small claims action is where a business or sole trader or an individual can recoup money owed through a legally enforceable transaction of goods or services.
Small claims action is effective for cases where the:
- Claim is for less than $20,000
- Entitlement being claimed is covered under Australian workplace laws, and the
- Statutory time limit has not expired.
So, what steps should I take to recover unpaid debts?
Step One: Issue a Letter of Demand
If you are chasing outstanding debts, the first step is to issue a Letter of Demand to the other party.
The letter should:
- State the debt outstanding.
- Provide a defined period of time for the payment of the debt.
- Inform the other party that further legal action will be taken if the letter is ignored
The letter should not:
- Harass the debtor or Impersonate a court document. A formal straight forward letter with attached invoices should be sufficient.
Step Two: Receive a response
A debtor can respond in a number of ways, they may:
- Pay the full debt
- Show that no money is owed (e.g. transactional documentation)
- Negotiate payment arrangements or a compromise or ask for payment by instalment.
- Ignore the letter, or Respond in an unsatisfactory way where the debt will likely be unpaid.
You may consider writing the debt off. In some situations, there are tax benefits that can help lessen the loss of this outcome, but you should seek further advice from your tax accountant.
Step Three: Approach the Local Court Small Claims Division (the litigation process)
The Small Claims Division is geared toward reaching an outcome in one of two ways:
Through a pre-trial review that enables both parties to discuss and reach a satisfactory outcome, before escalating to
A hearing where a judgement will be made. Once a Judgement is obtained, various recovery avenues are available, including:
The enforcement processes available by the Courts. These include a Writ of Execution of Chattels or Land, Garnishee Orders over Bank Accounts, Wages or others, or Examination Summons.
Company Winding Up
Sometimes, the litigation process can involve either a straightforward default Judgement (which occurs when the debt is not disputed) or a range of procedural aspects involved with the defended litigation.
We can appear on your behalf in any of the Courts is Sydney and state wide.
Speak to one of our lawyers for more information on the best course of action for you, and the costs involved.