QCAT

How to Avoid and Manage Building Disputes in Queensland

01/01/2020 By // by Wayne Davis

Building disputes can arise in a number of different ways between a number of different parties.

A building dispute can be between a building owner and a building contractor; between 2 or more building contractors; or homeowner, contractor and a third party.

By using building and construction lawyers, a building dispute can be avoided or effectively managed.

Qld construction law can be complicated. This article provides general information on avoiding disputes, and effectively managing building disputes.

Building disputes can be managed effectively if they are dealt with quickly. Contact our building dispute lawyers in Brisbane and the Sunshine Coast

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OR CALL: 1300 545 133 FOR A FREE PHONE CONSULTATION

What is a Building Dispute?

A building dispute can arise in a number of different circumstances, these can include:

Defective building work;
Delayed building work or abandonment of work;
Breaches of building contracts;
Unclear or confusing ambiguous contractual language;
Variations that have not been agreed, nor put in writing;
Disagreements as to payment claims and schedules;
Debt recovery and non-payment of money;
Significant differences in contract price;
Negligence claims for bad quality of workmanship against a builder; and
Non-completion of building work.

We will briefly discuss these types of building disputes in more detail below

Defective Building Work

Defective building work is usually separated into two (2) groups:

Structural defects; and
Non-structural defects.

A structural defect can be identified to the QBCC within six (6) years and six (6) months from the date of completion of the work.

A non-structural defect can be identified to the QBCC within 12 months from the date of completion of the work.

Typical Types Defective Building Work

A list of typical defective building work in Queensland can include:

Slab and footing failures and category 3 and 4 cracks in concrete;
Incorrect dimensions of bedrooms, dining rooms, lounge and living rooms, family rooms, studies, halls, entries and stairways;
Incorrect dimensions of garages, carports, verandas, decks, patios etc;
Voids, holes, or category 2 level cracks in masonry walls;
Any visible stains, mortar smears and damage caused by cleaning;
Any visible staining, folds, splits, dents, open joints between panels, cracking and other distortions in wall cladding;
Any visible staining, folds, splits, dents, open joints between panels, cracking and other distortions in roof cladding;
Any visible irregularities or undulations in roof tiles;
Cracks in external rendered surfaces;
Visible cracks or open joints in external finishes applied to lightweight substrate or if they allow the ingress of water;
Category 3 and 4 cracks in internal rendered surfaces on masonry substrate;
Visible Cracks in mouldings and/or other architectural features and joints greater than 1mm;
Defects and cracking in plasterboard sheeting, other sheeting and cornices;
Visible gaps between mouldings or between mouldings and other fixtures over 1mm;
Visible cracking, displacement, pitting or similar blemishes in natural stone, marble or similar materials;
Visible blemishes such as paint runs, paint sags, wrinkling, dust, bare or starved painted areas, colour variations, surface cracks, irregular and coarse brush marks, sanding marks, blistering, uniformity of gloss level and other irregularities;
Visible holes and any other unfilled depressions in painted or stained timber;
Visible cracks in shower recess and components and cracks in shower bases, screens and glass;
Splits in timber decking that extend to the end or side edge of the timber;
Departures from the documented set out for concrete pools;
Damages to appliances and fittings supplied as part of the building contract; and/or
Visible scratches, fractures, chips or other blemishes on glazing and mirrors.

The above are only defects in certain circumstances, and small or minor defects may not be defects under contract or the QBCC.

There could be other types of defects in building work. For more defects, view the QCBB Standards and Tolerance Guide

Delayed Building Work

A builder has an obligation to bring the work to practical completion on the date for practical completion.

A building and construction contract will usually include a clause which says something along the lines of “the builder will not unreasonably fail to perform the work diligently, or unreasonably delay or fail to maintain reasonable progress of the Works” – or something like this.

Obviously, this does not include delay because of storms / heavy rains, floods, bush fires, etc. or things outside of the control of the builder.

The non-breaching party must issue a notice to remedy breach for the delay.

But, if the builder does not remedy the breach by bringing the building works to completion on the date of practical completion without a reasonable explanation, then they may be in breach of the building contract and may allow the non-breaching party to terminate and sue for damages.

A party may terminate for delay if the following criteria are met:

The building works are seriously incomplete at the time the notice to remedy breach is served; and
There did not exist any circumstances which would have prevented the builder from having completed the works on time.

Breaches of Building Contracts

A breach of contract occurs when a party to a contract does not perform their obligations under the contract.

Not all breaches of contract give rise to the right to terminate the contract and so care should be taken, and advice should be sought before attempting to terminate a contract.

However, all breaches allow for the innocent party to claim damages (if damages have been incurred).

There will usually be a clause in the building contract which will provide a framework for breaches and substantial breaches of the building contract.

There could be any number of breaches that could occur under a building contract, and it is vital to get qualified legal advice.

Unclear or Confusing Ambiguous Contractual Language

Entering into a building contract which has unclear or confusing ambiguous contractual language could lead to an expensive building dispute.

For example, if a party believes that something is included in the price, or not included in the price, a badly worded clause could lead to a building dispute which could cost both time and money.

If a definition, clause, phrase, specific term, or word is vague, ambiguous, or unclear then this could cause serious problems.

This includes residential or commercial building contracts between homeowners, builders, contractors, subcontractors, or third parties.

We would always recommend getting legal advice before entering into any building contract.

Variations that have not been Agreed, nor put in Writing

It is essential that all variation to building contracts be properly documents in writing.

Section 40 of Schedule 1B of the Queensland Building and Construction Commission Act says:

The building contractor must give the building owner a copy of the variation in writing

Further, Section 41 of Schedule 1B defines what needs to be included in the written variation notice.

The document evidencing the variation complies with the formal requirements if it—
(a) is readily legible; and
(b) describes the variation; and
(c) states the date of the request for the variation; and
(d) if the variation will result in a delay affecting the subject work—states the building contractor’s reasonable estimate for the period of delay; and
(e) states the change to the contract price because of the variation, or the method for calculating the change to the contract price because of the variation; and
(f) if the variation results in an increase in the contract price—states when the increase is to be paid; and
(g) if the variation results in a decrease in the contract price—states when the decrease is to be accounted for.

However, in some cases the Queensland Civil and Administrative Tribunal may allow a variation that was not in writing if

There are exceptional circumstances; or
The building contractor would suffer unreasonable hardship; and
It would not be unfair to the building owner for the building contractor to recover an amount.

The contractor can also vary the contract without getting it in writing if the variation is required to be carried out urgently; and it is not reasonably practicable to produce a copy of the variation in writing.

Variations are a constant source of building disputes and it is vitally important that the variation process be carries out every time.

The above relate to domestic or residential building contracts only. The QBCC does not require commercial building contract variations to be in writing. However, it is just good practice to make sure that all variations to a building contract are documented in writing.

Disagreements as to Payment Claims and Schedules

A payment claim is a claim made under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (“BIFA”).

Very strict time limits apply to the different stages of BIFA. Ensure that you do not miss out on a claim by contacting our building and construction lawyers today.

If the parties disagree about the amount of the payment claim, there is a relatively straightforward and structured process allowing a party to seek / dispute payment for the goods and/or services provided.

This will include issuing a payment claim, a payment schedule, the correct notice, and then proceeding to either Court or a seeking a determination from an adjudicator.

Read more here – Making a Payment Claim – BIFA (QLD)

Debt Recovery and Non-Payment of Money

Debt disputes are very common in the building and construction industry.

They can arise in any number of ways and for any number of reasons. Perhaps there is a dispute as to the quality of the work, or the inclusions / exclusions in the contract. Or, perhaps they arise because of an insolvent party.

Commonly, these debt disputes arise because of a difference in the contract price where the parties did not vary the price correctly (if at all), or the varying party trying to recoup unforeseen expenses.

Whatever the reason, building disputes in relation to debt can be resolved by:

Issuing a BIFA payment claim;
Issuing a BIFA subcontractor’s charge;
Issuing a creditor’s statutory demand; or
Commencing legal action for breach of contract.

As litigators, one of our main jobs is to avoid litigation and going to Court. If possible, we would almost always recommend informal or alternative dispute resolution before going to Court.

Read – Building and Construction Debt Recovery

Negligence Claims for Bad Quality of Workmanship Against a Builder

A builder owes a duty of care to a homeowner / landowner / contractor to construct and/or supervise the building works to the standard of a reasonably competent builder.

A homeowner / landowner / contractor will rely on the skill and expertise of the builder as a licensed builder registered with the Queensland Building and Construction Commission.

A builder will breach their duty of care the homeowner / landowner / contractor if they fail to ensure that the building works at the property were carried out in a proper and workmanlike manner.

The other party can sue in negligence for damages sustained because of the breach.

How to Avoid a Building Dispute in Queensland

Building a house, or any kind of building and development project, is a big commitment and can incur significant costs.

It is vitally important that you spend some time and money at the beginning, to avoid any stressful building disputes along the way.

There a number of things that a party to a building contract can do to attempt to avoid a building dispute. These include things like:

Seek legal advice before entering into the contract;
Do some due diligence on the builder / other party;
Keeping good lines of communication open;
Ensure that the contracts (and all variations) are in writing;
Take notes and photographs & keep a diary;
Ensure the parties have realistic expectations;
Seek help from a professional early before the disagreement escalates; and
Properly review all of the facts of the disagreement.

We will explain these in more detail below.

Seek Legal Advice before Entering into the Building Contract

We would always advise that you seek written advice from a qualified lawyer before entering into a building contract.

The lawyer will ensure that the building contract is compliant and will identify any risks and liabilities.

If you know about the risks and liabilities beforehand, then you can choose to either not enter into the contract, or it will not be a surprise if the event happens.

The building and construction lawyer will also do some due diligence on the builder / other party.

Do some Due Diligence on the Builder / Other Party

It is very important that you do some due diligence on your builder / contractor. Don’t rely on what a bloke down the pubs says.

Do a QBCC license search for the builder and the building company.

Obtain an ASIC current extract to see all of the company information and who the directors are.

Do an ASIC directors search to see if the director has been a director of now insolvent companies or has been disqualified.

Check the ASIC Insolvency Notices website to see if there have been any insolvency forms filed on the company.

Conduct a search of the State Court records or Federal Court records to see if the company and/or builder / director has been involved in any litigation.

Read reviews online, do some serious searches online to find any relevant information.

Ask for references and actually take the time to follow up with those references.

It is not enough to simply do the above, you must be able to correctly interpret what the information gathered. It might not be relevant that the company has had 10 Court proceedings, for example. They could have been dismissed. It may not be relevant that a winding up application was once filed, it may have simply been a missed statutory demand, for example.

It is important that you get advice from a building disputes lawyer before engaging with a builder / contractor. A little due diligence at the beginning may stop a lot of problems down the line.

Keeping Good Lines of Communication Open

One of the key elements to avoiding building disputes is to have clear communication between the contracting parties.

Make sure that you have regular site meetings so that the parties are always on the same page.

Have a good relationship with the other party so that you can talk through any issues that may arise. This will help you work through most of the disagreements.

Also, be prepared to compromise. Things happen, nothing is ever 100% perfect. Be prepared for a little give and take between the parties.

Ensure that the Building Contracts (and all Variations) are in Writing

As above, the parties to a building contract or subcontract must ensure that firstly, the contract itself is in writing, and secondly, that any and all variations to the building contract are in writing.

It is common for parties to a building contract to informally agree to a variation on site. A conversation can occur on site about something that needs to be changed or varied.

This conversation must be followed up in writing and have all of the elements required for an enforceable variation.

Also, you should get legal advice from a building disputes lawyer for advice on:

Any and all plans and drawings contained in the contract;
Details of all payment claims and schedules, are whether they are compliant;
The review process, any milestones, and the signing off process;
The sum payable under the contract, the progress payments dates, times etc; and
Any mechanism for dispute resolution prior to going to Court.

Take Notes and Photographs & Keep a Diary

Keep a diary and take detailed notes and photographs in relation to the progress, who was on site and for how long, and all conversation you have with the other party.

Follow everything that was discussed up by email to ensure that you have a paper trail.

Keeping proper records can help avoid costly building disputes.

If there is a potential dispute in the future about something that was or was not done or said, then the extrinsic documents that you can provide can help avoid a building dispute.

Ensure the Parties have Realistic Expectations

It is important that parties to the building contract do not have unrealistic expectations.

Builders, homeowners, contractors, and subcontractors should ensure that they understand about the building process, timeframes, and potential risks and liabilities, so that the expectations are managed.

Managing expectations will assist in avoiding building disputes.

Get a Building Disputes Lawyer Involved Early

It is important to seek help from a building disputes lawyer early before the disagreement escalates and becomes something that needs to be litigated.

It is important that the parties (but preferably their lawyers) properly review all of the facts of the disagreement to know exactly what the disagreement is.

As mentioned above, a litigation lawyer should attempt to advise their clients to avoid litigation where possible, and the costs and time involved with litigation.

A building disputes lawyer should attempt to get the parties to resolve this dispute informally where possible, rather than commencing legal action in the Courts.

But what is informal building dispute resolution?

Resolving Building Disputes Informally

Trying to resolve a dispute informally by negotiation, by informal agreement, by expert determination, or mediation is a good way to resolve building disputes.

Resolving building disputes informally takes the least amount of time and costs the least. It is usually in everyone’s best interest to attempt to informally resolve these building disputes.

Also, it is a good idea to try to resolve commercial disputes commercially, with the parties maintaining a commercial relationship.

Resolving Building Disputes by Negotiation

Lawyers will usually try to negotiate with the other party to seek a resolution to the building dispute.

This may involve several letters to the other party or the other party’s lawyers, seeking clarification to disputed facts, or seeking evidence to support the claims made.

A lawyer will then advise on the client’s prospects in litigation and advise on a reasonable compromise to resolve the dispute.

A lawyer will then send Calderbank letters of offer to get a without prejudice settlement negotiations started.

If the matter can not me resolved by negotiation, then the parties may want to consider settling the dispute by mediation.

Resolving Building Disputes by Mediation

A mediator is a third-party, usually a barrister, who will guide the parties to the building dispute through a structured process in an attempt to reach a resolution.

The end result of a mediation is for the parties to sign a legally enforceable contract or deed of settlement, which will outline the steps required by each party to finalise the building dispute.

Attending a mediation can save considerable time, legal fees and court costs.

If an agreement can be reached by negotiation or mediation, then this agreement should be documented in a deed or contract.

Seek an Expert Determination of the Dispute

Expert determination is a process in which the parties in dispute agree to have their dispute determined by an independent third-party, or expert.

In most cases the expert is a person with technical experience, such as an engineer, or a construction expert

Parties to disputed building contracts will sometimes include a clause requiring the parties in dispute to refer dispute to an expert for determination rather than going to Court.

Alternatively, the parties in dispute may agree to enter into a stand-alone expert determination agreement to save the expense and time of going to Court.

The determination is binding on the parties.

Making a Contract or Deed of Settlement

If the negotiated agreement includes consideration, then the agreement can be documented in a formal contract.

If there is no consideration, then the agreement must be documented in a formal deed of settlement.

If the building dispute cannot be resolved informally then the parties may need to resort to formal resolution of the building dispute.

Resolving Building Disputes Formally

If the parties need to formally resolve the building dispute, they can do a number of things, namely:

Make a complaint to the QBCC;
Seek an adjudication of the dispute;
File proceedings in Court or QCAT.

We will explain these in more detail below.

Make a Complaint to the QBCC

The Queensland Building and Construction Commission (“the QBCC”) is the first place that a party to a building dispute should go.

The QBCC can resolve the following disputes:

Complaints relating to building design;
Complaints relating to pre-purchase and termite inspections;
Complaints in relation to building certifiers;
Complaints in relation to defective work;
Complaints in relation to non-completed work; and
Complaints in relation to unlicensed contractors.

If your building dispute relates to the above, then the QBCC can assist with the dispute.

Seek an Adjudication of Building Disputes

If the dispute relates to an unpaid progress payment, then the parties may opt to have the debt dispute adjudicated.

A BIFA adjudication is a fast and cost-effective way of resolving building and building disputes without resorting to the Court or QCAT.

Once a decision has been made, the adjudicator will issue an adjudication certificate which can be registered in the Court and enforced as if it were a decision of that Court.

Very strict time limits apply to BIFA claims, so it is vital that you act now to protect your rights.

Read more about making payment claims – How to Make a BIFA Payment Claim

Read more about making adjudication applications – How to Make an Adjudication Application

Commencing Proceedings in QCAT

The QCAT Building Disputes department has jurisdiction to hear building disputes.

The jurisdiction is conferred by section 77 of the QBCC Act says:

(1) A person involved in a building dispute may apply, as provided under the QCAT Act, to the tribunal to have the tribunal decide the dispute.
(2) However, the person may not apply to the tribunal unless the person has complied with a process established by the commission to attempt to resolve the dispute.

So, to enable QCAT to hear the dispute, the Applicant must have been referred by the QBCC after applying for their dispute resolution process.

Domestic Building Dispute is defined as a dispute arising:

1. Between a building owner and a building contractor;
2. Between 2 or more building contractors;
3. In negligence, nuisance or trespass; or
4. Between a building owner or a building contractor and any 1 or more of the following:
a. an architect;
b. an engineer;
c. a surveyor;
d. a quantity surveyor;
e. an electrician or an electrical contractor;
f. a supplier or manufacturer of materials used in the tribunal work.

Once QCAT makes a decision, and it is not appealed, then the QCAT decision can be registered in the Court and enforced as if it were a judgment of that Court.

Alternatively, the parties might just file proceedings in the Court.

Commencing Proceedings in Court

Alternatively, the parties can commence legal action in the Court with jurisdiction.

A proceeding is usually commenced by claim and statement of claim.

The objective of the Court process is to have the Court decide the building dispute and give a judgment.

Avoid and Manage Building Disputes in Queensland

This article provides information in relation to avoiding and managing building disputes in Queensland.

If you follow this information (if it related to your building dispute) then you would have done everything you can to avoid or manage the dispute.

However, some people are just unreasonable and will not act reasonably however reasonably you act.

However, there are a few tips and warning signs that you should be aware of.

Tips to Avoid Building Disputes

Below are a number of tips that any party to a building dispute can follow, to decrease the risk of a dispute arising. They are:

Do not send angry or nasty emails and do not be angry or aggressive in person or on the telephone;
Document all variations in writing;
Ensure that builders reach their milestones when they are supposed to;
Ensure that the building is completed at the practical completion stage;
Ensure that you know all of the facts – do the math again, review the contract again;
Ensure that you make prompt payments in accordance with the schedule;
Get legal advice as soon as possible;
Give serious consideration to compromise, it will likely cost less in the long run;
Record everything – keep detailed notes of everything that happens on site;
Review all of the work and only provide sign-off if you are 100% sure of the phase completion; and
Stay focussed, calm, and remember that this is a commercial agreement, it’s not personal.

There are also a number of warning signs to look out for too.

Warning Signs of Potential Building Disputes

If you have doubts about the other party to a building dispute, then there are a few warning signs to consider. The warning signs include:

A number of changes to major subcontractors;
An excessive amount of quality issues;
Badly worded scope of work / inclusions / exclusions;
Constant key milestone dates are being missed;
Constant requests to change the sequence of work;
Disputes resolution clauses that do not read well and are badly thought out;
Late delivery of building materials & building equipment;
Payment claims not in accordance with progress;
Subcontractors contacting the homeowner requesting payment not been paid;
The builder or contractor going slow on site, or not attending the site;
The builder requesting payment in advance before doing the work;
The contract being substantially followed;
The contract not being administered correctly;
The contractor or homeowner constantly missing payment dates; and
Unrealistic and undeliverable schedule of work.

Building disputes can be managed effectively if they are dealt with quickly. Contact our building dispute lawyers in Brisbane and the Sunshine Coast

REQUEST A FREE CASE EVALUATION

OR CALL: 1300 545 133 FOR A FREE PHONE CONSULTATION

Wayne Davis

Wayne Davis, LLB, GDLP – Commercial litigation solicitor and legal practice director at Stonegate Legal Pty Ltd. Stonegate Legal focus on commercial litigation, debt disputes, the enforcement of money orders, and insolvency. Committee member of the Sunshine Coast Law Association. Committee member and volunteer lawyer with the Sunshine Coast Community Legal Service.

stonegatelegal.com.au/

Enforcement Warrant for Redirection of Debts

29/01/2019 By // by Wayne Davis

An enforcement warrant for redirection of debts is an enforcement option pursuant to the Uniform Civil Procedure Rules 1999 (QLD) (“UCPR”).

An enforcement warrant for redirection of debts is a way of enforcing a judgment, enforcing a registered QCAT decision or enforcing a registered adjudication decision.

A warrant for redirection of debts allows the creditor to enforce an enforceable money order over any debts owed to the judgment debtor by a third person.

The redirection warrant confers the obligation on the third person to pay the debt to the creditor rather than the debtor.

Just like other enforcement warrants, a warrant for redirection of debts is obtained by making an application to the Court. The application consists of:

The application;
A statement in support of the application; and
A draft enforcement warrant.

When the Court issues the UCPR enforcement warrant for redirection of debts, it then needs to be served on the third person who owes the debt to the judgment debtor.

This article will give you all the information needed to apply for an enforcement warrant for redirection of debts, and give you hints and tips to avoid pitfalls.

There are a number of difficult steps that need to happen before the third person must comply with an enforcement warrant for redirection of debts. We strongly recommend engaging a qualified legal professional

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Enforcement Warrant for Redirection of Debts

Rule 840(1) of the UCPR says:

A court may issue an enforcement warrant authorising redirection to an enforcement creditor of specified debts certainly payable, belonging to an enforcement debtor, from a third person.

For the Court to issue an enforcement warrant for redirection of debts the creditor will need:

An enforceable money order;
An application – Form 9;
A draft warrant – Form 76;
A statement in support of the application – Form 74; and
To serve the debtor and the third person.

We will give you more information on each of these steps below.

What is an Enforceable Money Order?

Rule 793 of the UCPR says:

“enforceable money order” of a court, means – a money order of the court; or a money order of another court or tribunal filed or registered under an Act in the court for enforcement.

Schedule 3 of the UCPR defines an order to mean:

“order” … includes a judgment, direction, decision or determination of a court whether final or otherwise.

An enforceable money order is a money judgment from the Court, or a decision in QCAT or an adjudication decision registered in the Magistrates Court.

A QCAT decision or an adjudication decision that has not been registered in the Court is not an enforceable money order.

Rule 793 of the UCPR says:

“enforcement creditor” means – a person entitled to enforce an order for the payment of money; or a person to whom the benefit of part of the order has passed by way of assignment or in another way.

If an enforcement creditor has an enforceable money order, then to issue the warrant the enforcement creditor will need to ensure that they are eligible.

Eligibility Requirements

The eligibility requirements to be granted an enforcement warrant for redirection of debts include:

There must be a debt owed;
The debt must be an actual debt presently due; and
The debt must be owed by a third person.

We will discuss these eligibility requirements in more detail below.

There must be a Debt Owed

Rule 839 says that the payment of earnings or payment into Court are not debts which can be directed under this warrant. These debts are dealt with in their own enforcement warrants.

As stated above, rule 840(1) of the UCPR says “specified debts certainly payable”. The UCPR is silent on what constitutes a “specified debt”.

The debt must be owed to the judgment debtor in his/her/its own right. The debt cannot be owed in its capacity as trustee for example.

The debt also cannot be an unliquidated debt but must be a liquidated amount.

The most common scenario is instalment payments or debts owed under credit agreements for example.

The Debt must be Presently Due

The debt must be presently due and cannot be the mere possibility or probability of a future debt.

Rule 840(3) of the UCPR says:

A debt may be redirected only if the debt, or the part of the debt belonging to the enforcement debtor, is payable to the enforcement debtor from the third person on the date the enforcement warrant is served on the third person.

In Jackson & Chenoweth v Marsh & Webster Ltd [1924] QWN 51 McCawley CJ, Lukin J, Macnaughton J said:

[The] rule … should be read as restricted to debts existing, whether payable in present or in future, and did not include the money which C., on the transactions with B., might ultimately become possessed of on behalf of B. That there was no debt “owing or accruing” by B. to C. at the time the Magistrate made the garnishee order that could be attached.

A conditional debt payable upon a certain event occurring cannot be redirected until the condition has been satisfied.

In Queensland Carriage Waggon and Tramcar Co Ltd v Somerville (1890) 4 QLJ 10 following a long line of precedents Lilley CJ said:

This was not a perfected, absolute debt; it was not due or accruing due, because defendant had not done work, and might never finish it. It depended on a condition—that was, the architect’s certificate … I cannot deal with the money until Campbell has got what is owing him; and, at present, there is no debt, legal or equitable, nor is there a prospect of any. The rule nisi must be dismissed, with costs of all parties, to be paid by the judgment creditors.

So, the debt must be a present debt and not a debt future or contingent debt.

The Debt must be Owed by a Third Person

The debt must be owed by a third person, which means any person and includes the State.

Rule 793 of the UCPR says:

“third person” means – a person (including the State) from whom a debt is payable to the enforcement debtor; or is likely to become payable to the enforcement debtor

The State Can owe Debts

Section 95 of the Civil Proceedings Act 2011 (QLD) deals with debts owed by the State.

The third person must be within Australia.

The third person must be within Australia. In Suzlon Energy Ltd v Bangad [2011] FCA 1152 applying obiter dicta from Société Eram Shipping Co Ltd v Cie Internationale de Navigation [ 2004] 1 AC 260 Rares J said:

In principle and on authority it seems to me that the court should not, save in exceptional circumstances, impose such a requirement upon a foreigner …

The debt can be from a Bank

The debt can be from a financial institution to the credit of an enforcement debtor.

Section 97 of the Civil Proceedings Act 2011 (QLD) says:

An amount standing to the credit of an enforcement debtor in an account in a financial institution is, for enforcing a money order, a debt payable to the enforcement debtor

This means that any money held in a bank account can be used to enforce the judgment debt, even if the conditions under 97(1)(a) to (d) have not been met.

This bank account can include a joint bank account.

Joint Fund

The debt can be owed from a joint fund, a joint bank account in the name of husband and wife for example, where only one is the enforcement debtor.

Section 94 of the Civil Proceedings Act 2011 (QLD) says:

(1) This section applies if the debt belonging to the enforcement debtor is a fund of money owned by the enforcement debtor and others (a “joint fund”).
(2) An enforcement warrant may authorise redirection to an enforcement creditor of a joint fund to the extent of the enforcement debtor’s entitlement.
(3) It is presumed a joint fund is owned by the fund owners in equal shares unless, on application of a fund owner or enforcement creditor, the court decides the actual beneficial entitlement of each fund owner.

Partnership Debts

The debts owing to the enforcement debtor can also be partnership debts.

Section 96 of the Civil Proceedings Act 2011 (QLD) says:

A court may issue an enforcement warrant authorising redirection to an enforcement creditor of particular debts, belonging to an enforcement debtor, from a partnership carrying on business in Queensland even if a partner resides outside Queensland.

If the Third Person is a Company

If the third person is a company then the company is subject to section 440D and 471B of the Corporations Act 2001 (CTH).

Section 440D of the Corporations Act 2001 (CTH) says:

During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except with the administrator’s written consent; or with the leave of the Court …

Section 471B of the Corporations Act 2001 (CTH) says:

While a company is being wound up in insolvency … a person cannot begin or proceed with … enforcement process in relation to such property

So, unless leave is granted by the Court, a warrant directed at a corporate third person under administration or in liquidation cannot be made. Best to check on the ASIC website beforehand.

So, if a judgment creditor is eligible and it can provide an eligible third person, then the judgment creditor can make the application for a warrant for redirection of debts.

Application for a Warrant for Redirection of Debts

The application for an enforcement warrant for redirection of debts – Form 9 – outlines the order (or orders) that the plaintiff is asking the Court to make.

The costs of the warrant are fixed at Schedule 2 of the UCPR depending on the amount of the claim – see item 15.

The application for an enforcement warrant for redirection of debts also needs to state who the third person is namely who the warrant needs to be served on.

The Draft Warrant

The form of the draft enforcement warrant for redirection of debts is Form 76.

The draft enforcement warrant needs to include:

Enforcement Creditor name and address
Enforcement Debtor name and address
Third Person name and address

It also needs to include:

Judgment amount;
Less payments;
Plus interest;
Plus costs; and
Total owing.

The application for an enforcement warrant for redirection of debts and the draft warrant need to be accompanied by a statement in support of the application.

Statement in Support of the Application

The statement in support of the application must be in the approved form – Form 74.

The statement in support of the application should be sworn not earlier than two business days before the date of the application.

Rule 817(1)(b) of the UCPR says:

A person applying for an enforcement warrant must file … a statement in the approved form sworn by the enforcement creditor, or the enforcement creditor’s agent or solicitor, not earlier than 2 business days before the date of the application.

The statement in support of the application for an enforcement warrant for redirection of debts must include the following:

The date the money order was made;
The amount for which the order was made;
The date and amount of any payment made under the order;
The costs incurred in previous enforcement proceedings in relation to the order debt;
Any interest due at the date the statement is sworn;
Any other details necessary to calculate the amount payable under the order at the date the statement is sworn and how the amount is calculated;
Any daily amount of any interest that, subject to any future payment under the order, will accrue after the date the statement is sworn;
Any other information necessary for the warrant being sought.

It is likely that the registrar will require an amended form to specifically identify the debt sought to be redirected by the third person.

The Court will consider a number of factors identified in rule 840(2) of the UCPR .

Factors the Court will Consider

Rule 840(2) of the UCPR says:

In deciding whether to issue an enforcement warrant authorising redirection, including regular redirection under division 2, the court must have regard to the following—
(a) whether the enforcement debtor has adequate means of satisfying the order after deducting—
(i) the necessary living expenses of the enforcement debtor and the enforcement debtor’s dependants; and
(ii) any other known liabilities of the enforcement debtor;
(b) whether the amount of regular debt to be redirected would impose unreasonable hardship on the enforcement debtor;
(c) if the applicant is the enforcement debtor—whether, having regard to the availability of other enforcement means, the issue of the warrant would be consistent with the public interest in enforcing orders efficiently and expeditiously;
(d) whether, having regard to the nature of the debt (belonging to the enforcement debtor from the financial institution) and the type of redirection, a regular redirection or otherwise, is appropriate.

If the Court and/or the Registrar is satisfied of the above, then it will issue the enforcement warrant.

The next step in the process is to serve the enforcement warrant for redirection of debts on the third person.

Service of Enforcement Warrant for Redirection of Debts

Once the Court has granted the warrant and provided the judgment creditor with a sealed copy, the judgment creditor must serve the warrant on the third person.

Rule 842(1) of the UCPR says:

An enforcement warrant authorising redirection of a debt belonging to an enforcement debtor from a third person must be served on the third person to have effect.

There is no mention in the UCPR that a judgment creditor must serve the warrant on the judgment debtor. However, there is a notice to the enforcement debtor on the draft warrant which says:

You may apply to the court to set this warrant aside or to stay its enforcement at any time.

It seems that it is implied in the Form 76 that the enforcement debtor be served a copy of the warrant.

Best practice – serve a copy on the enforcement debtor as soon as practicable after serving the third person.

Ordinary Service of Enforcement Warrant for Redirection of Debts

An enforcement warrant is not an originating application and so ordinary service is the mode of service.

Ordinary service is prescribed at rule 112 of the UCPR and can be performed by:

Posting the warrant to the address of the third person;
Leaving it with a person who looks over sixteen (16) years old;
Leaving it at the address in a position where it is reasonably likely to come to the third person’s attention;
Facsimile of email if permissible.

Best case, unless you can deliver it to the third person personally, express post to the address contained in the enforcement warrant.

Once served the third person has to comply with the warrant using reasonable diligence to give effect to the redirection.

If complied with, the warrant is valid for one (1) year after it was issued.

Section 91 of the Civil Proceedings Act 2011 (QLD) says:

An enforcement warrant ends 1 year after it issues unless the warrant states that it ends at an earlier time.

Failure to Comply with the Warrant

If the third person fails to act using reasonable diligence to comply with the enforcement warrant for redirection of debts, then there are a number of serious consequences.

Section 98 of the Civil Proceedings Act 2011 (QLD) says:

If a third person – does not comply with an enforcement warrant authorising redirection of a debt from the third person; and does not file a notice of objection; and fails to dispute the third person’s liability to pay the debt; the enforcement creditor has the same entitlement to enforce the debt as the enforcement debtor had.

There is also a notice to the third person on the Form 76 which says:

Failure to comply with this warrant may be contempt of court and may entitle the enforcement creditor to obtain an order against you.

So, it is very important that the third party comply with the enforcement warrant.

If the third person objects to the warrant, then it can make an application to set it aside.

Set Aside Enforcement Warrant for redirection of debts

Rule 819(1) of the UCPR says:

An enforcement debtor or another person affected by an enforcement warrant may apply to the court to set it aside or to stay enforcement at any time.

The application should be made by adapting the Form 9 application and providing supporting evidence by way of affidavit Form 46.

Once sealed, a copy of the documents will need to be served on the enforcement creditor and the enforcement debtor.

Rule 31(5) of the UCPR says:

An application must be filed and then served on each respondent at least 2 business days before the day set for hearing the application.

Claim by Other Person

The court may consider that another person claiming the benefit of the debt should be given the opportunity to be heard.

Rule 845 of the UCPR says:

This rule applies if a court considers that another interested person, including, for example, a person other than an enforcement debtor who may be entitled to all or a part of a redirected debt or to a charge or lien on it, should be given the opportunity to be heard.
The court may – order that notice of the hearing of the notice of objection be given to the other person; and at the hearing, decide the other person’s entitlement or give directions as to how the entitlement is to be decided.

Discharge of the Third Person

A payment to an enforcement creditor made by a third person in compliance with an enforcement warrant is a valid discharge of the third person’s liability to the enforcement debtor to the extent of the amount paid.

There is another similar warrant available under this Part, being a warrant for regular redirection from financial institutions, being Division 2 of Part 5.

Regular Redirection from Financial Institutions

A warrant for regular redirection from financial institutions is a warrant directed toward a third person (the financial institution) for a redirection of a regular deposit paid by a fourth person.

The Form for this warrant is Form 77.

Rule 847 of the UCPR says:

This division applies if – an enforcement debtor has an account with a financial institution (the “third person“); and a fourth person (the “fourth person“) regularly deposits earnings into the account (a “regular deposit“).

Rule 848 of the UCPR says:

“regular debt” means a debt, belonging to the enforcement debtor, from the third person because of a regular deposit by the fourth person.

The application is made in the same way as an application for a warrant for redirection of debts, except for the amendments required to ensure that it is an application made under this division.

Content of Enforcement Warrant for Regular Redirection

As well as the provisions outlined above the enforcement warrant for regular redirection must also include:

The name of the financial institution;
Details of the enforcement debtor’s account;
The amount of the deduction to be made; and
The name and address of the enforcement creditor.

See Rule 849 of the UCPR for more.

Once drafted correctly, filed and sealed with the Court’s seal, the enforcement creditor must serve the enforcement debtor and the financial institution.

Service of the Warrant for Regular Redirection

For the warrant to take effect, the enforcement creditor must serve the enforcement debtor and the financial institution.

Rule 850 of the UCPR says:

An enforcement warrant for regular redirection must be served personally or by post on the enforcement debtor and the financial institution.

Sending the warrant by express post with a delivery receipt should suffice, but to be 100% sure, then an enforcement creditor can engage a process server to personally serve the warrant.

Once served, the warrant comes into force after the seventh (7th) day after service is effected.

Complying with the Warrant for Regular Redirection

After that date, the financial institution must deduct from the account the amount specified in the warrant and pay it to the enforcement creditor within two (2) business days.

The enforcement debtor must keep enough funds in its account to pay the amount specified in the warrant.

The obligation under the warrant is discharged upon the total amount specified in the warrant being paid or the enforcement warrant is set aside, varied or expires.

Enforcement Warrant for Redirection of Debts

We strongly suggest that you engage a suitable qualified legal practitioner who specialises in the enforcement of money orders.

If you have a QCAT decision or adjudication decision which need to be registered in the Magistrates Court and enforced, or a judgment, direction, decision or determination of the Court to be enforced then contact our dedicated enforcement lawyers today.

There are a number of complicated steps that need to happen before a Court will issue an enforcement warrant for redirection of debts or an enforcement warrant for regular redirection from financial institutions. We strongly recommend engaging a legal professional.

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Unpaid Rent Arrears in Queensland

03/01/2019 By // by Wayne Davis

Unpaid rent arrears in residential property can have a serious impact on landlords’ cash flow.

The popular misconception is that landlords are all wealthy property tycoons – but this is simply not true.

A vast majority of investors are small investors who own only one (1) investment property.

Landlords and owners have bills to pay, a mortgage to pay, perhaps property manager or property agent commissions to pay.

Unpaid rental arrears and other residential tenancy problems in Queensland is governed by:

Residential Tenancies and Rooming Accommodation Act 2008 (QLD) (“Act”); and
Residential Tenancies and Rooming Accommodation Regulation 2009 (QLD) (“Regs”).

This article will explain the process of debt recovery for unpaid rent arrears and the eviction of a bad tenant for unpaid rent.

Rent arrears can have a huge impact on cash flow. If you have tenants who owe unpaid rent then contact us immediately. Our lawyers provide expert help with rent arrears and eviction of tenants

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Unpaid Rent Arrears – Residential Tenancy

Section 10 of the Act says:

“Residential premises” are premises used, or intended to be used, as a place of residence or mainly as a place of residence.

Section 11 of the Act says:

“Residential tenancy” is the right to occupy residential premises under a residential tenancy agreement.

Section 12 of the Act says:

A “Residential tenancy agreement” is an agreement under which a person gives to someone else a right to occupy residential premises as a residence.

A residential tenancy agreement can be wholly or partly in writing, wholly or partly oral, and wholly or partly implied – or any combination of these.

So, best case scenario is that you have an RTA Tenancy Agreement, but any document which says “Residential Tenancy Agreement” will usually suffice.

However, in our experience we see all kinds of informal agreements. If you are a landlord who has an informal agreement and you are unsure if it is a residential tenancy agreement, then you should contact us to see if it is an agreement to which the Act applies.

Breach for Non-Payment of Rent

If the tenant has not paid rent for seven (7) days, then the landlord must give the tenant a notice to remedy the tenants breach.

The prescribed form for a notice to remedy the tenants breach is a Form 11.

Section 325 of the Act prescribes the requirements of the notice to remedy the tenants breach:

The approved form must provide for the notice (a) to be signed by or for the party giving the notice; and (b) to include particulars of the breach; and (c) to state the day by which the party to whom the notice is directed is required to remedy the breach.

The tenant will then have a minimum of seven (7) days to remedy the breach. Section 328(1) of the Act says:

The allowed remedy period for a notice to remedy breach must not end earlier than 7 days after the notice is given.

If the tenant fails to pay the rent in this time, then the landlord can give the tenant a notice to leave for unremedied breach.

Notice to Leave for Unremedied Breach

If the tenant does not pay the rent by the time stipulated in the notice to remedy breach, then the next step is to issue a notice to leave for unremedied breach.

The prescribed form for a notice to leave for unremedied breach is a Form 12.

The Form 12 must be issued after the date the tenant had to remedy the breach (pay the rent arrears).

Section 326 of the Act prescribes the requirements of the notice to leave for unremedied breach, and includes that the notice must:

Be in the approved form; and be signed by or for the lessor; and identify the premises; and require the tenant to hand over vacant possession of the premises to the lessor on the day stated in the notice; and state the ground on which the notice is given; and give particulars of the ground on which the notice is given.

The notice to leave for unremedied breach must also state that information about the tenant’s rights and obligations is contained in the agreement; and that the landlord may apply to QCAT for a termination order without giving the tenant any further notice.

The notice to leave for unremedied breach must give the tenant a prescribed time to leave – for rent arrears the amount of notice is seven (7) days.

Section 329(2)(a) of the Act says:

The handover day for a notice to leave given by the lessor must not be earlier than – if the notice is given because of an unremedied breach and the breach is a failure to pay rent – 7 days after the notice is given.

If the tenant fails to leave then the landlord must make an urgent application to the Queensland Civil and Administrative Tribunal (“QCAT”) for an order terminating the tenancy and issue a warrant of possession.

The date on which the tenant must leave is called the “handover day”.

Schedule 2 of the Act says:

“Handover day” for premises, means the day stated in a notice to leave … as the day vacant possession of the premises is required to be … handed over to the lessor.

Serving the Notices by Post

Clause 44(3) of the RTA General Tenancy Agreement says that:

A notice may be given to a party to this agreement or the … by giving it to the party or agent personally; or if an address for service for the party or agent is stated in this agreement, then by leaving it at the address, or sending it by prepaid post as a letter to the address.

Notices may also be given by facsimile or by email depending on the individual tenancy agreement.

If there is no stipulated address for service for the debtor tenant, the tenant’s address for service is taken to be the address of the rental property.

TIP – We suggest sending the notice by express post. This will provide the landlord with a time and date that the notice was delivered (and therefore given) to the debtor tenant.

Time for Compliance with Notice

The time that a debtor tenant has to comply with notices given pursuant to the Act, including the notice to remedy breach and the notice to leave, must be from the date that the notice is given.

The date that the notice is given is different from the date that the notice is issued!

Time for delivery by Australia Post must be accounted-for in the time for compliance.

In Marsellos Pike Real Estate v Bate [2014] QCATA 316 Senior Member Stilgoe OAM was required to decide on appeal if the correct time had been given in a notice to remedy breach, and if the tribunal had the power to waive compliance with the provisions of the Act.

The appeal jurisdiction of QCAT decided:

Section 328 of the [Act] states that the period for remedying a breach of tenancy must not end earlier than seven days after it is given … ‘issued’ is not the same as ‘given’.

This means that the time starts from the date of delivery, and not the date of issuance.

This is important because the notice to remedy breach requires a date for the tenant to remedy the breach to be included in the form.

TIP – As well as sending by express post, we suggest giving the tenant a few days extra for compliance with the notice.

For example, if you post the notice by express post on 1st of the month – the notice will likely be delivered on 2nd of the month – the date for compliance is therefore by 9th of the month.

We suggest giving them until 11th or 12th of the month – just in case.

Or, if the tenancy agreement allows for it, facsimile or email on the same day. If you do email, then request a delivery receipt and a read receipt.

The appeal jurisdiction of QCAT also decided:

QCAT has no discretion to waive the requirement of seven days’ notice. The learned Adjudicator pointed out that notice period in s 328(1) of the Act is mandatory. Section 349 does not allow the tribunal to cure defects in a notice to remedy breach, only a notice to leave.

It is very important that the notices are completed and served correctly, or it could cause fatal problems down-the-line.

Urgent Application to QCAT

If you have ticked all of the boxes above, and the debtor tenants do not leave the property, then you are able to make an urgent application to QCAT.

The Act defines an application as an urgent application if the application is because of a failure to leave the property.

Section 415(1)(a) of the Act says:

An application to a tribunal is an “urgent application” if it is an application for a termination order made because of – a failure to leave.

The prescribed form for an urgent application is a QCAT Form 2 – Application for minor civil dispute – residential tenancy dispute.

You will need to file and serve the application on the debtor tenant.

Both parties are required to attend at the hearing of the application and a decision will be made by a member of the tribunal.

The decisions that can be made for rent arrears include:

Termination Order;
Money Order for the Unpaid Rent;
Warrant of Possession; and
Compensation for Failure to Leave.

For more information of QCAT applications, see QCAT Applications.

Termination Order

A termination order is an order terminating the residential tenancy.

Section 293(1) of the Act says:

The lessor may apply to a tribunal for a termination order because – (a) the lessor gave a notice to leave the premises to the tenant; and (b) the tenant failed to hand over vacant possession of the premises to the lessor on the handover day.

Section 293(2) of the Act says:

An application under this section must be made within 2 weeks after the handover day.

The application for a termination order must be made within two (2) weeks of the handover day.

If the tribunal makes an order terminating the tenancy, then the tenancy is over.

Money Order for the Unpaid Rent

As well as a termination order, the tribunal can make an order that the tenant pays to the landlord the amount of the unpaid rent arrears.

By that time, then rent arrears might be around two (2) or three (3) months’ rent.

If the tenant still refuses to pay the amount of the QCAT decision, then the landlord may attempt to enforce the monetary amount in the Magistrates Court (more below).

If the tribunal makes a termination order, then it also must issue a warrant of possession.

Warrant of Possession

Section 351 of the Act says:

A warrant of possession must (a) authorise a police officer, or a stated authorised person, to enter the premises and give possession of the premises to the person in whose favour the termination order was made

A warrant of possession allows the landlord or the landlords agent to attend at the property and forcibly evict the tenant with the police if required.

The landlord or the landlords agent can then change the locks and look for new tenants.

Compensation for Failure to Leave

If the tenant remains in possession after the handover day and forces a landlord to execute the warrant for possession, then the landlord is entitled to claim compensation for any loss or expense and an occupation fee equal to the amount of rent that would have been payable.

Section 358 of the Act says:

If a tenant fails to hand over vacant possession of premises after a termination order is made by a tribunal, the lessor is entitled to receive from the tenant (a) compensation for any loss or expense incurred by the lessor by the failure; and (b) an occupation fee equal to the amount of rent that would have been payable by the tenant for the premises for the period the tenant remains in possession after termination of the agreement.

The landlord might be able to claim reasonable losses and expenses including:

Rent arrears;
Interest on the outstanding rent arrears;
Cleaning costs;
Repair costs;
Pest control fees; and
Filing fee for the application.

This section is to be read with the landlord’s duty to mitigate their losses pursuant to section 362 of the Act which says:

The lessor … must take all reasonable steps to mitigate the loss or expense; and is not entitled to receive compensation for any loss or expense that could have been avoided by taking the steps.

So, if a landlord has managed to get the tenant out of the property and has mitigated their reasonable losses & expenses (by getting new and better tenants for example), then all that might be left to do is to enforce the money decision of the tribunal.

Enforcement of a Money Decision

A decision in QCAT is enforced in the Court by registering a copy of the decision in the Magistrates Court, making it an enforceable money order.

Rule 793 of the Uniform Civil Procedure Rules 1999 (QLD) (“the UCPR”) says:

“enforceable money order” of a court, means (a) a money order of the court; or (b) a money order of another court or tribunal filed or registered under an Act in the court for enforcement.

Section 131 of the QCAT Act says:

A person may enforce the final decision by filing in the registry of a court of competent jurisdiction (a) a copy of the decision that the principal registrar has certified to be a true copy; and (b) the person’s affidavit about the amount not paid under the decision.

Once registered you have the choice of a number of different enforcement options.

Please read our content on enforcement of a registered QCAT decision here.

Rent arrears can have a huge impact on cash flow. If you have tenants who owe unpaid rent then contact us immediately. Our lawyers provide expert help with rent arrears and eviction of tenants

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Problems with the Recovery of Rent Arrears

There are a number of different unique problems which occur when attempting to recover debts relating to unpaid rent or rent arrears.

Where is the Debtor Tenant?

One of the main problems encountered by landlords and/or their agents is that the debtors will often move and not provide a forwarding address.

Any of the available enforcement options will at some point need a process or a document to be personally served or served by pre-paid post.

If the debtor has left no forwarding address, then it may be difficult and/or expensive to try to find them.

Does the Debtor Tenant own any Property?

The fact that the debtor is renting probably means that they do not own any real property.

This is not always the case, the debtor tenant might have a rental investment property, but it is more likely than not that they do not own any real property.

Seizure and sale of property is a great way to enforce a debt for rent arrears against a debtor tenant.

Does the Debtor Tenant have a Job?

In some cases, the debtor tenant might not have a job and may have been getting rental assistance from the Government.

If the debtor tenant is not working, then it will be even harder to enforce a judgment against the debtor because a warrant for redirection of earnings will not be available.

The Debtor Tenant is a Person

Because the debtor tenant is a natural person then the statutory demand process and winding-up / liquidation options are unavailable in the recovery of rent arrears.

Rent Arrears FAQ

This section attempts to answer the most commonly asked questions regarding the termination of a residential tenancy and the recovery of unpaid rent arrears.

Can I withdraw the notice if the tenant pays the rent arrears?

Yes.

Section 333(1) of the Act says:

The lessor may withdraw a notice to leave for an unremedied breach given by the lessor if the tenant remedies the breach.

If you have had a reasonable relationship with the tenant until the breach, and the tenant remedies the breach before the expiration of the notice to leave, then the landlord can withdraw the notice and the tenancy continues as if the notice to leave had not been given.

The Tenant is claiming that the house was not fit to live in

It is common for a debtor tenant with rent arrears to make counterclaims against a landlord. The test of whether a house is fit for the tenant to live in is determined by a reasonableness standard test.

In Fine v Geier [2003] QSC 73, Wilson J said:

Questions of fitness for habitation and repair are to be judged against a standard of reasonableness having regard to the age, character and locality of the residential premises and to the effect of a default on the state or condition of the premises as a whole

In Gray v Queensland Housing Commission [2004] QSC 276, Chesterman J said:

“…[N]ot every defect… will condemn a house as unfit. It is to be deemed to be unfit for human habitation if and only if it is so far defective…that it is not reasonably suitable for occupation in that condition…”.

So, unless the property is not reasonably suitable for occupation, or a landlord has failed to do what was required of them under the Act, then the landlord should be able to still claim for unpaid rent arrears.

What to do if tenant stops paying rent?

If the tenant stops paying rent, then the landlord needs to take the following steps:

Issue a notice to remedy breach;
Issue a notice to leave;
Application to QCAT for termination order;
If they do not leave, execute the warrant of possession;
Enforce the monetary decision in the Magistrates Court.

How long can a tenant not pay rent before eviction?

An estimate of minimum time frames are:

Seven (7) days unpaid rent allows for a notice to remedy breach;
One (1) day to serve the notice to remedy breach by express post;
Seven (7) days after giving notice for the tenant to remedy breach by paying rent arrears;
One (1) day to send notice to leave for unremedied breach by express post;
Seven (7) days for the tenant to leave;
If they do not leave, then approximately twenty-eight (28) days to get an urgent application in QCAT;
A further twenty-eight (28) days for the execution of a warrant of possession.

So best-case scenario, the tenants can be out in up to twenty-three (23) days.

The worst-case scenario, the tenant will be out in around seventy-nine (79) days or 11 weeks.

Does landlord have to accept late rent?

If the tenant pays the rent arrears within the time in the notice to remedy breach, then the landlord has to accept the rent.

If the tenant pays the rent after the notice to leave, the landlord does not have to withdraw the notice. However, if the tenant disputes the notice then it will have to be shown that the issuance of the notice is reasonable in the circumstances.

Can a landlord sue for unpaid rent?

A landlord can sue for unpaid rent.

If the tenant remains in possession after the handover day and forces a landlord to execute the warrant for possession, then Section 358 of the Act says that the landlord is entitled to claim an “occupation fee” being equal to the amount of rent that would have been payable.

Can a landlord garnish wages for unpaid rent?

A landlord can only apply for an enforcement warrant for redirection of earnings after QCAT has made a money order, and that money order is registered in the Magistrates Court.

See our article about applying for an enforcement warrant for redirection of earnings.

How long does a landlord have to claim damages?

Section 293(2) of the Act says that an application under this section must be made within 2 weeks after the handover day.

If an application is made outside of this time then QCAT does not have jurisdiction to hear the application.

In Bergin v Department of Housing and Public Works [2013] QCATA 190 the QCAT appeal jurisdiction discussed whether QCAT had jurisdiction to (a) provide relief from the procedural requirements of section 293(2), and (b) if QCAT has jurisdiction after the two (2) week period.

Dr J R Forbes, Member held that QCAT could not extend the time and so QCAT does not have jurisdiction to hear an application if filed outside of the two (2) week time frame. Dr J R Forbes said:

[T]he Adjudicator … inadvertently fell into legal error by purporting to exercise jurisdiction he did not possess. Consequently, leave to appeal … must be granted, the appeal allowed, and the order terminating the tenancy set aside.

Can a landlord charge a tenant for damages?

Yes. If the tenant has caused damage to the property other than fair and reasonable wear-and-tear, then the landlord is entitled to recover the cost of repair or replacement from the tenant.

Does a landlord have to prove damages?

Yes. Although the tribunal is not bound by the same rules of evidence as the Courts, it is good to rule-of-thumb to provide the tribunal with independent evidence to prove your claim.

If you are claiming that something needs to be replaced rather than repaired, provide an independent report from an expert (or someone who knows about that thing).

If you are claiming some monetary amount for damages, then provide the tribunal with a couple of different quotes from independent sources.

This way the tribunal has something more to formulate their monetary decision on than just the word of the landlord.

Rent arrears can have a huge impact on cash flow. If you have tenants who owe unpaid rent then contact us immediately. Our lawyers provide expert help with rent arrears and eviction of tenants

FOCUSED – DEDICATED TEAM – PROVEN RESULTS

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Wayne Davis

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Recovering Debts or Money Owed

10/11/2018 By // by Wayne Davis

Do you need to collect debts or money owed to you?

You can recover debts or money owed in the following ways:

Negotiating with the debtor;
Mediation or alternative dispute resolution;
Filing a claim in the Court with jurisdiction;
Filing a claim in QCAT or another tribunal;
Issuing a statutory demand on an insolvent company;
Enforcing the judgment with an enforcement warrant;
Enforcing the judgment with bankruptcy or liquidation.

This article will explain each of the above and give you information on the best way to recover debts or money owed by a person or debts or money owed by a company.

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Negotiating with the Debtor

In the first instance, when trying to recover debts or money owed, we recommend trying to resolve the debt matter by negotiating with the debtor.

Non-payment of debts or money owed to you is very likely a breach of contract, and as such you will be entitled to legal (or equitable) remedies. You can certainly highlight those remedies and foreshadow any relief that you will be entitled to as leverage on your side of the negotiation process.

Be mindful not to foreshadow relief that you are not entitled to!

You can’t tell the debtor that you will issue a statutory demand if the amount of the debt is below the statutory minimum.

Likewise, you cannot foreshadow bankruptcy if any future judgment would be less than the statutory minimum for a bankruptcy notice … and so on.

This is essentially what we do in a letter of demand.

Compromise or Settlement

As in any negotiation, there is an element of compromise. To reach a resolution, you may be prepared to compromise for the debt and accept a lesser amount.

The rationale for this is because if you are forced to go to Court or engage a solicitor, then an award of costs (if any) will likely not cover the actual costs that you have spent, leaving a gap which you will be out-of-pocket.

If this gap is $2,000.00 for example, then you may be prepared to accept something up to $2,000.00 less than the debts or money owed in an attempt to resolve the matter early.

If the debtor accepts a $1,000.00 reduction in the debts or money owed, then this should not be seen as a $1,000.00 loss, but a $1,000.00 win because you are not put to the cost, stress, and time of commencing legal proceedings.

Part of the job of a debt recovery lawyer is to advise our clients on the commercial realities of their debt recovery matter.

These compromise negotiations are conducted on a without prejudice basis. See our article here on settling matters early.

Mediation or Alternative Dispute Resolution

If negotiations fail, or do not yield a satisfactory result, then you can attempt to mediate or attempt another form of alternative dispute resolution.

Mediation is a good way of attempting to resolve disputes without resorting to litigation through the Court system and incurring those costs.

A mediation is a structured process where an objective third-party mediator assists to resolve the disputes over debts or money owed.

The objective of the mediation is to reach an agreement and get the parties to sign a legally binding mediated agreement.

Of course, the debtor still needs to pay the debts or money owed after the mediated agreement is made. If the debtor has breached one agreement by not paying the debts or money owed, then you should be mindful that the debtor could quite easily breach the mediated agreement too.

Filing a Claim in the Court with Jurisdiction

If all else fails, then you are able to commence legal action in the Court with jurisdiction.

The Courts have a monetary jurisdiction for debts or money owed:

Magistrates Court – up to $150,000.00
District Court – from $150,000.00 to $750,000.00
Supreme Court – over $750,000.00

Proceedings to recover debts or money owed are commenced by filing and serving a claim and statement of claim.

If the debtor does not respond to your claim by filing and serving a defence within 28 days, then you can get judgment in default and commence enforcement proceedings.

If the debtor attempts to defend your claim or counterclaim, then you will likely be involved in protracted litigation unless you can obtain a summary judgment, or the parties agree to settle the matter and discontinue the proceedings.

The objective is to get a judgment or enforceable money order which you can enforce on the judgment debtor to force the debtor to pay their debts or money owed to you.

Another way to get an enforceable money order is to register a QCAT decision in the Magistrates Court.

Filing a Claim in QCAT or Another Tribunal

If you have a minor debt of under $25,000.00 then you can file a proceeding in the Queensland Civil and Administrative Tribunal (“QCAT”).

Similar to proceeding in the Courts, you must file and serve an application on the debtor. If they respond, then it goes to a mediation and/or a hearing and the QCAT Member will decide on the amount of debts or money owed to you.

If the debtor does not respond, then you are able to obtain a decision in default.

The main advantages of commencing proceedings in QCAT are:

It is a lot less expensive than commencing in the Court;
The process can be a lot faster than the Court; and
QCAT is designed for self-represented people.

The main disadvantages of commencing proceedings in QCAT are:

The minor debt jurisdiction is mostly a no costs jurisdiction. This means that you will not be able to recover your costs save for a few designated items;
Legal representatives do not have an automatic right of appearance. This means that if you want us to appear at a QCAT hearing, you will need the leave of the tribunal, which is not always given.

Once you obtain a decision in QCAT, you can register that decision in the Magistrates Court and it becomes an enforceable money order which can be enforced on the judgment debtor.

Enforcing the Judgment with an Enforcement Warrant

If you get an enforceable money order, then you can attempt to enforce that order with one of a number of different enforcement warrants. The most common types of enforcement warrants are:

Enforcement Warrants for Seizure and Sale of Property;
Enforcement Warrants for Redirection of Debts; and
Enforcement Warrants for Redirection of Earnings.

I will explain these in a little more detail below

Enforcement Warrants for Seizure and Sale of Property

A warrant for seizure and sale of property allows the Court bailiff to seize and sell personal and real property of the enforcement debtor.

The warrant relates to vehicles and real property predominately. There are some strict requirements when applying for this type of enforcement warrant, and the bailiff is unable to seize exempt property.

Enforcement Warrants for Redirection of Debts

A warrant for redirection of debts directs a third party to make payment that are due to be paid to the enforcement debtor to the enforcement creditor.

Again, there are strict requirements for this type of warrant and it is best to obtain legal advice.

Enforcement Warrants for Redirection of Earnings

A warrant for redirection of earnings is a warrant directed at the enforcement debtor’s employer. It orders that the employer direct the ordered amount of the enforcement debtor’s salary to be paid to the enforcement creditor as payment of the debts or money owed under the judgment or money order.

Again, there are strict requirements for this type of warrant and it is best to obtain legal advice from a suitably qualified debt recovery lawyer.

Enforcing the Judgment with Bankruptcy

If your debtor is a person (not a company) and you have a judgment of over $5,000.00 which is less than six (6) years old, then you can apply to the Official Receiver – the Australian Financial Security Authority (“AFSA”) for a bankruptcy notice.

The debtor has 21 days to comply with the bankruptcy notice or he/she would have committed an “Act of Bankruptcy”.

It is this act of bankruptcy which allows you to present a creditor’s petition to the Federal Circuit Court for a sequestration order making the debtor bankrupt.

The bankruptcy process involves the appointment of a bankruptcy trustee to administer the bankrupt estate of the debtor in an attempt to recover the debts or money owed to creditors.

The bankruptcy usually lasts for three (3) years. In this time the bankruptcy trustee can void transactions and attempt to realise assets to pay a divided to creditors.

Issuing a Statutory Demand on an Insolvent Company

The it is a company that has the obligation to pay the debts or money owed, and the debts or money owed is over $2,000.00 then you can issue a creditor’s statutory demand on the debtor company.

A creditor’s statutory demand is a demand for payment pursuant to section 459E of the Corporations Act 2001 (CTH).

You do not need a judgment to be able to issue a statutory demand, however if there is a genuine dispute about the debt, or the debtor company has an offsetting claim, then a statutory demand without a judgment could be set aside.

The debtor company has 21 days after being served with the statutory demand to do any of the following:

Pay the debt or debts in the statutory demand; or
Secure or compound for the debt in the statutory demand; or
Request that the demand is withdrawn; and/or
Apply to set the demand aside.

If the debtor company does not do any of these things, then they are presumed to be insolvent and you can apply to wind the debtor company up in insolvency to recover the debts or money owed to you.

We offer professional advice and assistance in all things related to statutory demands


Issuing Statutory Demands	Setting Aside Statutory Demands

Enforcing the Judgment with Winding Up & Liquidation

As mentioned above, non-compliance with a statutory demand raises the legal presumption of insolvency. This presumption assists a creditor with an application to wind up the company in insolvency.

The winding up application process is very complicated with strict timelines and needs to be provided by a debt recovery and insolvency lawyer.

The process includes making the application with a supporting affidavit, other affidavits, notices to ASIC, and a consent of the liquidator.

If the application goes unopposed then it is likely that you will get the order winding up the debtor company in liquidation.

The liquidator will bring the company to an end and attempt to realise an many of the assets as possible, including voiding any voidable transactions, to make a payment of the debts or money owed to company creditors.

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Wayne Davis

stonegatelegal.com.au/

Commercial Debt Recovery

10/03/2018 By // by Wayne Davis

Commercial debt recovery is the recovery of debt between businesses, usually performed by commercial debt recovery solicitors.

If you have ever run a business or company, you will understand the impact that non-paying clients have on your cash flow.

Have you provided your client / customer with goods or services and they are refusing to pay their invoice? If so then you may need to commence with the process of debt recovery.

The usual commercial debt recovery process will look something like:

Overdue payment reminder letters (up to 3);
Letters of demand for payment;
Demands over the telephone;
Attempt mediation with an objective third-party;
Legal action by commencing court proceedings; and
Payment or enforcement action.

This article will explain the commercial debt recovery process, give you tips and links to helpful debt recovery resources, compare traditional debt recovery methods, and outline our commercial debt recovery services.

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Commercial Debt Recovery

A typical scenario in relation to a business debt will be something like this:

You are a small to medium size business offering credit terms to your clients;
You provide goods and/or services to a client, on credit terms for 7, 14 or 30 days typically;
The time for payment of the invoice has passed, and the client has not paid.

Anyone who has had this happen can understand how unfair this is, and how much time you may need to invest to get this debtor to pay.

The first step is to send the debtor reminder letters.

Commercial Overdue Payment Reminder Letters

Overdue payment reminder letters (as I am sure you already know) are letters sent by the creditor business reminding the debtor business that they are behind on their payments.

We typically recommend sending up to three (3) overdue payment reminder letters.

The first overdue payment reminder letter should be a reasonable friendly letter. The debtor could have genuinely forgotten to pay, missed the invoice, been sick, etc.

There is no value in coming straight out of the gate with all guns firing. We recommend giving them one (1) week to pay, then at the end of that first week, if they have not paid then you can send the second and third letters. The second and third overdue payment reminder letters can be a little more urgent.

Commercial Overdue Payment Reminder Letters

Be mindful that any communication with a business debtor must be for a reasonable purpose, and should be for the following reasons:

To explain what you will do if they do not pay, including commencing legal proceedings;
To ask why the debts have not been paid, or to ask why any repayments have stopped (if you have agreed to a repayment plan);
To understand why the debtor has not been able to be contacted, and why the business debtor has not responded to your calls or emails;
Make a demand, or demands for payment of the commercial debt;
To provide the business debtor with information in relation to his/her/its business account with you;
To attempt to get updated contact details if the business debtor has moved, or phone numbers have stopped working;
To make arrangements for the payment of the business debt or to enter into a payment plan;
To attempt to settle this matter, or arrange a mediation with the debtor; and
To sight, or seize a security interest, for example collateral under the Personal Properties Securities Act 2009 (CTH) (“PPSA”).

You will only exacerbate matters, potentially prolong any recovery efforts, and even land yourself in trouble with the police if you attempt to do any of the following:

Unreasonably harass or hassle the business debtor;
Attempt to mislead or deceive the business debtor, telling them things that are not true in an attempt to coerce payment from the debtor;
Breach the trust of, or take unfair advantage of, the disability or disabling circumstances of your business debtor, or act in any way unconscionably;
Us any physical force against the debtor, or in any way coerce a business debtor, or a third-party to do anything; and
Take anything belonging to the debtor that you do not have a right to take (secured property under the PPSA for example.

After you have given them some further time to pay the invoice(s) and if they do not, then you will need to engage a solicitor to send a letter of demand.

Letter of Demand for Outstanding Payment

We have written extensively about letters of demand for outstanding payment on this site.

Search our site for letter of demand content

We offer a FREE Letter of demand template below and FREE comprehensive letter of demand checklist written by lawyers.

Click for FREE Letter of Demand Template
Click for FREE Letter of Demand Checklist

If you get no luck, or your solicitors get no luck, from the letter of demand, then you may have to commence legal proceedings to recover this commercial debt.

Commence Legal Action for Commercial Debt Recovery

The recovery of business debts is usually commenced by claim and statement of claim.

You can commence action in the Courts or in the Queensland Civil and Administrative Tribunal (“QCAT”).

Jurisdiction of the Courts and QCAT

The monetary jurisdiction of the Queensland Courts are:

Magistrates Court – claims up to $150,000.00
District Court – claims up to $750,000.00
Supreme Court – claims over $750,000.00

The monetary jurisdiction of the QCAT is:

QCAT – small claims of up to $25,000.00

Advantages and Disadvantages of QCAT in Small Claim for Minor Debt

The advantages of commencing proceedings in QCAT are:

It is a lot less expensive than commencing in the Queensland Courts;
The process can be a lot quicker than the Queensland Courts;
QCAT is designed for self-represented people, and lawyers need leave to appear.

The disadvantages of commencing proceedings in QCAT are:

The minor debt jurisdiction is mostly a no costs jurisdiction. This means that you will not be able to recover your costs save for a few designated items as mentioned above;
Legal representatives do not have an automatic right of appearance. This means that if you want us to appear at a QCAT hearing, you will need the leave of the tribunal, which is not always given.

Enforcement of Money Orders

The purpose of commencing legal proceedings is (amongst other possible reasons) to secure a judgment.

Once you have a judgment from the Courts, or a decision from QCAT registered in the Court, then if the debtor continues to not pay the judgment debt, then you will have to commence enforcement proceedings to enforce the judgment debt against the debtor.

You can enforce the judgment debt by one of the following enforcement warrants (if applicable):

Enforcement Warrants for Seizure and Sale of Property;
Enforcement Warrants for Redirection of Debts;
Enforcement Warrants for Redirection of Earnings;
Order for Payment of Order Debt By Instalments;
Enforcement Warrants for Charging Orders;
Money In Court and Stop Orders; and/or
Enforcement Warrants for Appointment of a Receiver.

If you are unable to enforce the judgment debt through the Queensland Courts then you may want to consider insolvency as an enforcement option. We can assist you with issuing:

A statutory demand for payment; or
A bankruptcy notice.

Non-compliance with a statutory demand raises the legal presumption of insolvency, and based on that legal presumption, a creditor can apply to wind up the debtor company.

Non-compliance with a bankruptcy notice allows a judgment creditor to present a creditor’s petition in the Federal Circuit Court of Australia.

To ensure that you do everything correctly, you are advised of the risks, and that your interests are properly protected, it is advisable to engage a suitably qualified commercial debt recovery solicitor.

Why use a Commercial Debt Recovery Lawyer

The law around debt recovery, securities, enforcement and insolvency is very complicated, and if you are not careful, you could have a costs order made against you. Commercial debt recovery lawyers are fit and proper people, lawyers have to comply with strict rules and legislation. A good debt recovery lawyer can help you with all of that and the following:

Create and enforce due diligence procedures in relation to whether a new customer is eligible for a credit account;
Obtain the correct security or charge which secures the debt in case of a default;
Issue letters of demand outlining the rights of the creditor and foreshadowing what may happen if the debtor does not pay;
Issue a debtor company with a statutory demand for payment, advise on the strict time requirements, and then the winding up procedure;
Enforce any or all security or charge, by enforcement in the Court with jurisdiction, or the seizure and sale of the collateral under the PPSA.
Commence legal proceedings in the Court with jurisdiction, or in the tribunal for the recovery of commercial debts;
Commence enforcement proceedings to enforce a money order, enforcement warrants, enforcement hearings, issuing statutory demands, issuing bankruptcy notices;
Make applications such as a Mareva injunctions or freezing orders to secure the assets of the judgment debtor; and
Draft or update credit contracts to ensure that you are able to recover your debts effectively, you are able to recover as much of your costs as possible, and the debt is secured.
DEDICATED FOCUS – COMMERCIALLY MINDED – PROVEN RESULTS
GET A FREE FEE ESTIMATE TODAY
OR CALL: 1300 545 133 FOR A PHONE CONSULTATION

Wayne Davis

stonegatelegal.com.au/