06 Aug Debt recovery for businesses: Part 1 which court and when?
Part 1 of Debt Recovery Series by Maria Rigoli and Damian Ballan
THE LETTER OF DEMAND (LOD)
A LOD is sent to a person or organisation who owes you money (the debtor) following your supply to them of goods and services. The LOD advises the debtor of the amount outstanding and threatens court action to recover the debt if it is not paid within a certain time.
The LOD serves 2 purposes:
1.1. It warns the debtor of your intention to start legal proceedings unless payment is made and gives the debtor one more opportunity to pay;
1.2. The LOD can be tendered in evidence during court proceedings as written proof of the claim of the debt owed and your attempt to settle the matter.
The LOD should enclose or attach relevant documents to identify the transaction and the liability of the debtor.
PROS: cheap, time efficient, early intervention may assist avoid litigation, allows a less adversarial and litigious approach to recover debts, may assist in recovery of part of your legal costs if forced to go to court
CONS :Need to follow through with litigation/going to court, experienced debtor’s may ignore LOD’s
LITIGATION, WHICH COURT?
The amount of the debt will determine which Court or Tribunal to issue the legal proceedings:
- The Magistrates’ Court of Victoria can determine most disputes over money or property up to the value of $100,000.
- The County Court of Victoria can determine most monetary claims for recovery of debts but these are generally of less complexity than litigation in the Supreme Court of Victoria.
- The jurisdiction of the Supreme Court of Victoria is unlimited in the amount of money that may be claimed and it is effectively unlimited in the subject matter.
- The Victorian Civil and Administrative Tribunal (VCAT) can hear and determine some debt matters if they relate to:
- consumer matters
- domestic building works
- legal services
- owners corporation matters
- residential and retail tenancies disputes
- sale and ownership of real property, and
- use or flow of water between properties.
WHAT TO DO IF THEY STILL DON’T PAY?
Seek legal advice.
Commence litigation by filing an application for an order / complaint /writ.
Obtain judgment from the court or tribunal (defended matter) or by default judgment if the matter is not defended.
Enforce the judgment.
ENFORCEMENT OF JUDGMENT DEBT- WHICH METHOD FIRST?
Summons for Oral Examination ( SOE)
- The SOE is best utilized if you have no information about the debtor’s financial position.
- The Court’s Registrar (the Registrar)will issue a Summons against the debtor requiring the debtor to appear in Court with all relevant documentation to be examined on oath about their financial position.
- In practice a questionnaire will also be served with the Summons on the debtor to answer and return on the SOE hearing date and is generally conducted by the Registrar or Deputy Registrar of the Court.
- The SOE can be served on an individual and an officer of a company.
- If the debtor fails to appear after being served with an SOE a warrant may be issued for the arrest of the debtor, to compel their attendance at a further hearing.
PROS: Able to gain information about the debtor’s financial position before undertaking further more expensive enforcement options, relatively quick and cheap if you can locate the judgment debtor and serve them with the SOE. CONS: May be a waste of time as the information provided at the SOE andmay not assist with the debt recovery.
Other methods of enforcement including bankruptcy and garnish and will be explained in the next short articles in this series.
MORE LEGAL INFORMATION
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