Get your money back: How to collect your debts

If you are owed money, and friendly reminders and informal negotiations have not yet worked for you, it may be time to seek legal advice on the legal processes available to you for the recovery of your debts.

How much are you owed?

How you go about getting your money back will depend on the amount owed to you, as different amounts will fall under different Court jurisdictions and accordingly different rules and fees will apply.

$12,000 or less

If the debt is under $12,000 or less, it falls under the jurisdiction of the South Australian Magistrates Court as a Minor Civil Claim. The court fees involved with a Minor Civil Claim are relatively inexpensive and the process is quite user friendly. Parties to a minor civil claim are generally self-represented in Court, however Clelands Lawyers are able to assist you with the process by drafting and filing documents, and providing advice on the court processes.

More than $12,000

If the debt is over $12,000 but $100,000 or less, any Court action must be commenced in the South Australian Magistrates Court.

If the debt is over $100,000, any Court action must be commenced in the South Australian District Court.

For complex actions, and some specific Court actions, any Court action must be commenced in the South Australian Supreme Court.

In these jurisdictions, Clelands Lawyers is able to represent you every step of the way, and can engage Counsel if necessary to appear on your behalf.

Letter of Demand or Pre-Action Notice

The first step in using the court process to recover your debt is to write a letter of demand or pre-action notice to the person owing you monies. The exact form of the letter will depend on the Court in which the Court action must be commenced.

If the Magistrates Court is the correct Court, then Magistrates Court Civil Rules 2013 (SA) Rule 21A (1) applies, and sets out as follows:

“Subject to this Rule and to any order of the Court the plaintiff is not entitled to the costs for filing of a claim other than a counterclaim, a third party claim, a claim for non compliance with an EPA, or a claim under the Worker’s Liens Act 1893, unless notice in writing of the intended claim was given to the intended defendant not less than 21 days before the filing of the claim, or where Sub-rule(2) applies in accordance with that Sub-rule, by any means authorised in these Rules for service of a claim.”

If the District Court is the correct Court, then Rule 33 of the District Court Civil Rules 2006 (SA) provides that written notice must be given to the Defendant, setting out an offer of settlement and details of the intended claim and supporting material.

However, if your debt concerns construction work, then the complex procedures set out in the District Court Civil Supplementary Rules 2014 (SA) must be followed, starting with a letter of claim under Supplementary Rule 17.

In theory, a debt claim may be commenced in the Supreme Court. However this path is rarely ever taken and most debt claims over $100,000 are commenced in the District Court.

A carefully worded letter may be enough in some circumstances to motivate a debtor to make payment, or to commence negotiations for settlement.

However, if the debtor does not make contact and fails to make payment within the prescribed amount of time set out in the letter of demand or pre-action notice, the next step is to file a claim.

From Claim through to Enforcement of Judgment

As a creditor seeking payment of a debt, you will need to file a statement of claim (as the Plaintiff), in the relevant jurisdiction. Once filed, a filed copy of the claim must be served on the person or company owing you money (now, the Defendant).

The Defendant will then be required to file a defence within a prescribed amount of time.

The next step is the exchange of documentary evidence, known as “discovery”.

Once any other required pre-trial steps have been taken, the action is set down for trial.

At trial, the Judge will make a decision as to whether the debt is payable, and if so, in what amount.

The next step is enforcing payment under the judgment. This can be very difficult if the Defendant (now the Judgment Debtor) has no assets. If the debt is not recoverable, bankruptcy or liquidation proceedings may be the next step.

Practical Tips

  • Although the court processes for debt collection can be relatively straightforward, it is important to be prepared and organised, and to adhere to deadlines to increase your chances of successfully pursuing a debt claim.
  • Make sure you keep detailed records of all agreements and correspondence, payments and missed payments. This will allow you to act efficiently on overdue amounts and maximise your chances of recovering the debt.
  • One very effective method of debt recovery is to enter into an “Enforceable Payment Agreement” (‘EPA’) under the Magistrates Court Rules. The benefit of this is that if a Defendant debtor defaults on the EPA, you are able to obtain a summary judgment for the amount of the debt without going through the usual pre-trial process.

Our commercial litigation team at Clelands Lawyers Adelaide Pty Ltd is happy to assist you with your debt collection needs.

 

Tom Walker and Shannon McMenamin

June 2018