Debt recovery solicitors are legal practitioners, admitted to practise law in their State, Territory, or jurisdiction, who specialise in the recovery of debts and the enforcement of money orders. Stonegate Legal focus on debt recovery and insolvency law.
Debt recovery solicitors are different to debt collectors because they are actually admitted solicitors, who have passed the requirements to practise law in Queensland and understand the commercial debt recovery process.
Debt recovery solicitors offer legal debt recovery solutions, including:
- Debt Recovery Advice to Creditors and Debtors;
- Letter of Demand and Calderbank Letter of Offer;
- Recover Unpaid Accounts for your Business;
- Suing for a Debt in the Courts or Tribunal;
- Debt Dispute – Claim and Statement of Claim;
- Enforcing a Judgment or Money Order;
- Companies Served With a Creditor’s Statutory Demand;
- Statutory Demands and Winding-up Applications;
- Bankruptcy and personal insolvency;
- Credit Agreements, Contract Terms, and Guarantees;
- Caveats, the Enforcement of Mortgages other Security;
- Personal Property Securities Registration; and
- Mareva Injunction / Freezing Order.
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Debt Recovery Advice to Creditors and Debtors
It is not just creditors that debt recovery solicitors act for, but we also act for debtors.
It might not always be the case that a debtor does not want to pay, or does not have the means to pay. In some cases a debt may arise because of:
- An unfair contract term (liquidated damages clause for example); and/or
- Incomplete or unsatisfactory work; and/or
- The goods / services provided were not of sufficient quality; and/or
- Any number of other genuine reasons.
We act for both creditors and debtors, plaintiffs and defendants, in all jurisdictions. Debt recovery matters are not always as black and white as people think.
However, the majority of the work that debt recovery solicitors do is on behalf of creditors, chasing unpaid business debts. We usually commence the legal debt recovery procedure by sending the debtor or debtors a letter of demand.
Letter of Demand and Calderbank Letter of Offer
In most cases a letter of demand identifies the parties, identifies the contract, identifies the breach, and demands payment of consideration.
A letter of demand will also put the debtor on notice that a creditor intends to take a legal step in the proceeding should they not attempt to resolve this debt dispute.
At the very minimum, a letter of demand will include the following:
- Proper identification of the debtor – person or company;
- The amount of the debt outstanding, free from costs or interest (if claimed);
- A description of the debt (why the money is owed);
- The nature of the breach and when the debt was due and payable;
- Include the date of the letter of demand;
- Any relevant evidence such as contracts, invoices, emails agreeing to work or other written agreements that you have with the person/company you are claiming the money from.
- A time and date on which the debtor has to pay the debt, 7 or 14 days for example.
We offer a fixed-fee letter of demand for initiating recovery of your outstanding debts.
Recover Unpaid Accounts for your Business
There are a number of different types of debts that arise in daily life. These include credit card debts, medical or dental debts, personal loan debts, unpaid mobile phone debts, unpaid utility bills (after moving for example), bank overdraft charges, unpaid car finance, unpaid payday loans, and so on.
However, the most common type of debt we encounter is unpaid business debts, such as unpaid invoices from a customer after trade credit. For example:
- Your business provided goods and/or services under a contract;
- Your business issued an invoice for the cost of providing those goods and/or services;
- You gave fourteen (14) or thirty (30) days payment terms; and
- They do not pay the invoice.
Business debt recovery is best taken care of by a specialist debt recovery solicitors to ensure that you get the best possible chance of recovering your money.
We strongly advise attempting to resolve your debt disputes prior to initiating legal action and engaging debt recovery solicitors. Litigation can be costly, and can be a long and drawn-out process. If you can agree to settle this matter without resorting to the expense of a Court action, then we strongly advise you to do so. Skilled debt recovery solicitors can negotiate a settlement with your debtor.
However, this is not always a viable option. Sometimes you will have to commence legal proceedings to recover your debt in a Court or Tribunal, and you have to engage professional debt recovery solicitors.
Suing for a Debt in the Courts or Tribunal
There are two main options in Queensland for recovery of a business debt, and small debt recovery, they are:
- Suing in the Court with jurisdiction; and
- Suing in the Queensland Civil and Administrative Tribunal (“QCAT”).
The jurisdiction of these courts and tribunals are:
- QCAT – small claims of up to $25,000.00
- Magistrates Court – claims up to $150,000.00
- District Court – claims up to $750,000.00
- Supreme Court – claims over $750,000.00
There are pros and cons for commencing proceedings in a Tribunal or commencing proceedings in the Court.
Pros and Cons of Commencing Proceedings in QCAT
The pros of commencing proceedings in QCAT are:
- It is a lot less expensive than commencing in the Court;
- The process can be a lot quicker than the Court;
- QCAT is designed for self-represented people.
The cons 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 debt recovery solicitors to appear at a QCAT hearing, you will need the leave of the tribunal, which is not always given;
- The minor debt jurisdiction is capped at $25,000.00.
Pros and Cons of Commencing Proceedings in the Court
The pros of commencing proceedings in the Court are:
- It is a legal process, with judicial officers who understand the law. It is less likely that you will get a non-typical result (as happens in QCAT);
- You can use debt recovery solicitors and barristers to maximise your chances of successfully obtaining your desired outcome;
- You are able to claim costs, either standard costs or indemnity costs of commencing the proceeding.
The cons of commencing proceedings in the Court are:
- It is more expensive than QCAT;
- It can take longer to reach your desired outcome.
QCAT Minor Debt Dispute or Claim and Statement of Claim
Whatever you choose, either an application for a minor debt dispute in QCAT or commencing proceedings in the Court by claim and statement of claim, the processes are similar.
A QCAT minor debt dispute is commenced by application.
The application is completed, and sealed with the seal of the Tribunal. Once sealed you have to serve the respondent with the application. The respondent then has twenty eight (28) days in which to file and serve a response to the application.
Then, both the applicant and the respondent attend a hearing to get the matter resolved.
Proceedings in the Court are commenced by claim and statement of claim. The claim is then filed in the Court with jurisdiction and sealed with the Court’s stamp.
Once you have a sealed version, you (or your debt recovery solicitors) must personally serve the defendant with your claim and statement of claim. Once served they have twenty eight (28) days in which to file and serve their defence and counterclaim.
In any of these jurisdictions, if the debtor (QCAT respondent or Court defendant) fails to serve a response or a defence within twenty eight (28) days, you can apply for a judgment (QCAT decision), allowing you to start enforcement proceedings.
Enforcing a Judgment or Money Order
A decision in QCAT is not an enforceable money order.
Rule 793 of the Uniform Civil Procedure Rules 1999 (QLD) (“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 Queensland Civil and Administrative Tribunal Act 2009 (Qld) says:
(1) This section applies to a final decision of the tribunal in a proceeding that is a monetary decision, to the extent the decision requires payment of an amount to a person.
(2) A person may enforce the final decision by filing a copy of the decision in the registry of a court of competent jurisdiction.
(3) On filing a copy of the final decision under subsection (2), the decision is taken to be a money order of the court in which it is filed and may be enforced accordingly.
So, if you have an enforceable judgment or money order from the Court, or you have registered your QCAT decision in the Court with jurisdiction, and your debtor still will not pay, then you can commence enforcement proceedings to enforce the money order. Our debt recovery solicitors can do all of this for you.
There are a number of different enforcement options, they are commenced by:
- Enforcement hearings;
- Enforcement warrants;
- Statutory demands; and/or
- Bankruptcy notices.
It is very important that you get suitably qualified debt recovery solicitors to make these applications, as strict compliance is usually required.
Companies Served With a Creditor’s Statutory Demand
Once you have an enforceable money order against a company as respondent / defendant, and the judgment debt is for $2,000.00 or more, then one of the best tools for enforcement is serving the company with a statutory demand.
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If the debtor company fails to pay the judgment debt, or fails to “secure or compound for that amount or total to the creditor’s reasonable satisfaction, within 21 days after the demand is served on the company” as per section 459E(2)(c) of the Corporations Act then they are presumed to be insolvent.
Based upon that presumption of insolvency, the judgment creditor can apply to wind up the judgment debtor.
Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445 said:
To “compound” for a debt is to accept an arrangement for payment of the amount of the debt or of a different amount.
So, if they don’t pay the judgment debt, or enter into a payment arrangement to the creditor’s reasonable satisfaction, then the judgment creditor can apply for a winding up order.
Statutory Demands and Winding-up Applications
Non-compliance with a statutory demand raises the legal presumption that a company is insolvent. With that legal presumption assisting, the judgment creditor can apply to the Federal Court or Supreme Court for an order winding up the judgment debtor company.
Once the winding up order is made, and a liquidator is appointed, then all of the company’s assets can be liquidated to satisfy creditors.
In some circumstances, the liquidator is able to claw back assets which were made prior to the winding up process, adding to the asset pool. These voidable transactions include:
- Unfair preferences payments and uncommercial transactions;
- Unfair Loans; and
- Unreasonable Director-Related Transactions.
It is vital that you seek suitably qualified legal advice and assistance from debt recovery solicitors before attempting to wind up a judgment debtor company.
Bankruptcy and Personal Insolvency
If the judgment debtor is a person (and not a company), and the judgment debt is $5,000.00 or more, then you can commence bankruptcy proceedings.
Bankruptcy proceedings are commenced by serving the judgment debtor with a bankruptcy notice.
Failure to comply with the bankruptcy notice entitles the judgment creditor to present a creditor’s petition to the Federal Circuit Court.
If a sequestration order is made, forcing the judgment debtor into bankruptcy, then most of their assets can be realised to satisfy the creditors.
The trustee in bankruptcy also has claw back powers under the Bankruptcy Act 1966 (Cth), and can attempt to void any transfer of property that are voidable transactions in bankruptcy. Section 121 of the Bankruptcy Act says:
A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if the property would probably have become part of the transferor’s estate
Before thinking about making a judgment debtor bankrupt to satisfy your debts it is vital that you get legal advice from suitably qualified insolvency, bankruptcy and debt recovery solicitors.
Credit Agreements, Contract Terms, and Guarantees
To improve your chances of satisfying your judgment debt by the methods above, debt recovery solicitors can also review your existing, or create new, credit agreements, contract terms, and guarantees.
Having the correct credit agreements, contract terms, and guarantees can drastically improve your chances of securing the total amount claimed, plus costs.
If you are a business that gives credit to your customers, or if you offer trade credit, it is vital that you have legal instruments which you can rely on when you need to.
Some of the options to include in credit agreements, contract terms, and guarantees, are favourable terms in the event of a default, and security for the credit, such as caveats and registrable mortgages over real property, or a registered interest on the Personal Property Securities Register, pursuant to the Personal Property Securities Act 2009 (Cth).
Caveats, the Enforcement of Mortgages other Security
Caveats – A charging clause in a contract may allow you to lodge a caveat over the real property of the debtor as security for the debt.
A caveat is a great tool to protect your interests in a debt recovery matter as it prevents any dealing with the real property until the caveat is removed.
However, care should be taken with caveats! If you do not have a charging clause in your contract, credit agreements, and guarantees, then you will need a “caveatable interest”. Lodging a caveat without a caveatable interest can have serious consequences for you.
Mortgages – A registered mortgage over the debtors’ real property is the one of the best securities that you can have. Unlike the equitable mortgages created by charge (as above) a registered mortgage is a secured interest making you a secured creditor rather than an unsecured creditor.
However, it is highly unlikely that a trade debtor will agree to a registered mortgage on the title to his/her land.
Director’s Guarantees – If you have traded with a debtor company, it is essential that you get a directors guarantee. A personal guarantee guarantees the obligations of the company, so if they default, then you can commence proceedings against the guarantor.
Personal Property Securities Registration
If you are selling goods on trade credit, or finance, then it is essential that you secure your interest in those goods by registering your interest on the Personal Property Securities Register, pursuant to the Personal Property Securities Act 2009 (Cth).
Once again, it is vital that you get this procedure correct. Debt recovery solicitors can take care of your security interests for you.
Mareva Injunction / Freezing Order
Freezing orders, also known as a Mareva order is based upon the English case of Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd’s Rep 509, and extended to Queensland by Bank of New Zealand v Jones [1982] 2 Qd R 466.
These legal principles were then added to the UCPR by Uniform Civil Procedure Amendment Rule (No 1) 2007, commencing on 1 June 2007.
Rule 260A of the UCPR says:
(1) The court may make an order (a “freezing order”) for the purpose of preventing the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.
(2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.
The requirements of a Mareva order or freezing order are numerous and complicated. A debt recovery solicitor can help you to freeze a debtor’s property to help secure your chances of getting payment.
Debt Recovery Solicitors
As you can see, there is a lot more to what debt recovery solicitors do than just collecting debts. Debt recovery solicitors can manage your entire debt recovery matter from start to finish.
DEDICATED FOCUS – COMMERCIALLY MINDED – PROVEN RESULTS
OR CALL: 1300 545 133 FOR A PHONE CONSULTATION
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.
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