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Small Claims Debt Recovery
Posted 10 December 2004 - 12:14 PM
Recently I was involved in a trade gone bad, that left me waiting for my money for 6 weeks after the person had the work done. It all came down to debt recovery the proper way. I have a friend who is a lawyer who gave me a lot of info and helped me with a lot of research, I think this is worthwhile sharing.
Firstly do yourself a favour and research your buyer/seller a little, these forums have a wealth of knowledge, check the Purchasing Experience thread pinned in the For sale section, Talk to a few people and keep every record of your dealings (email, msn logs, sms etc) Get as much info on the buyer/seller as possible, address (home/business) phone numbers (land line is a must and make sure it's them), if it's a genuine sale/purchase this info should be free flowing. Best that you do most of your dealings with email to a NON hotmail account, as it is hard to prove who the actual owner is.
Get a Written agreement of sale is a must, in my case I did not have one, but was advised that a verbal agreement was good enough but it would had been easier if I had one. Hanís example is a good one; include everything, dates, and every little detail, including the said condition of the goods.
Now you are covered and know whom you are dealing with. If things now go bad, it is best to keep a cool and calm demeanour, donít threaten and donít get agro. I know itís hard sometimes, but it will help prove that you did everything in your power to resolve the matter in a favourable way.
Initial action should be to send a letter of demand to the other party advising them of the dispute and the money outstanding, giving them a defined period within which to settle the matter or else face legal action. I have attached a sample letter of demand that my Lawyer did for me.
Taking legal action
If the response to your letter of demand is unsatisfactory, you must decide whether to proceed with your threat of legal action or write off the debt.
Many people adopt the latter action if the debt is relatively small - say under $2,000 - because of the perception that it is too difficult and expensive to pursue, especially if lawyers are retained.
However, a "do it yourself" option is available. All State and Territory courts offer a small claims division of their local court or tribunal that provides a simple debt recovery procedure.
What is a small claim?
A small claim is a claim in respect of a sum of money, goods purchased or delivered, labour or a combination of these. It generally applies to a claim up to an amount of $6,000 depending on the State or Territory in which the legal action is conducted.
Who do I sue?
A small claims action can be brought against a person (sole trader), a group of people (partnership) or a corporate entity (company, incorporated association). If the debtor is trading under a business name you need to do a business name search to identify the owner of the business. This can be done by carrying out a search at the Business and Consumer Affairs Office (or its equivalent) in your State or Territory.
The owner of the business will be identified in the Defendant or Respondent details of your claim form (often referred to as Statement of Claim) as follows:
Defendant: Glen and Glenda of 99 Fantasy Crescent, Smithville NSW trading as (or "t/a") Cross Dressers.
If the debtor is a company - for example, Cross Dressers Pty Ltd - any business documents (eg. invoices, business letters, etc.) should have a nine digit Australian Company Number (ACN) after the company name. A company search, using this ACN, should be conducted at the Australian Securities Commission (ASC) to identify the registered office address at which to serve the claim as well as to ensure that the company is not in liquidation.
To sue or not to sue?
Although small claims debt recovery is a relatively simple procedure to follow, certain matters should be given consideration before embarking further.
Debt recovery action involves a two-step procedure. Firstly, a claim is lodged with the court or tribunal which enters judgment in your favour. Secondly, and this is often more difficult, certain actions must be pursued to enforce the judgment and actually recover the money. Briefly, these measures include obtaining a write of execution against the debtor's property, securing a garnishee order against the debtor's wages or bank account, or (but this is uncommon with small claims) forcing the debtor into bankruptcy.
It is important, therefore, to assess whether the debtor will have the ability to pay before commencing legal action. If the debtor has a number of creditors seeking payment of debts and is basically insolvent (ie. unable to pay their debts) it may not be worth pursuing legal action. If, after a company search, you find that the company is in the hands of a receiver or liquidator, contact that person direct. This warning is not made to discourage legal action, as often simply receiving a statement of claim will be sufficient to prompt the debtor into payment, to avoid the extra expense and delay associated with court proceedings.
Where there is a genuine dispute over the facts and the evidence to support your claim is not strong, consider whether to proceed further. If your claim is unsuccessful and the other party retains a solicitor to represent them (although not common in small claims), the party will apply for a legal costs order against you.
Make efforts to settle the matter. Reaching a workable settlement is preferable to spending time and money on court proceedings. Commencing a small claims action does not prevent the parties from settling the dispute between themselves at any time.
Small claims procedure
Small claims can be dealt with by the Small Debts Court ("the Court") or the Small Claims Tribunal ("the Tribunal") depending on the nature of the claim.
When can I use the Court?
The Court is used to take action against someone who owes you a set amount of money (eg. IOU, a dishonoured cheque, wages or an amount agreed upon before the dispute arose) up to $5,000.
The action must be brought either in the Court located in the district where the dispute arose, or where the other person lives or carries on a business, or where the other person agreed in writing to repay the debt.
When can I use the Tribunal?
The Tribunal can also hear claims up to the value of $5,000.
However, in addition to the usual contractual disputes between consumers and traders the Tribunal can deal with other types of disputes including those relating to residential tenancy bonds, dividing fences and damage caused by a vehicle.
What should I do?
You need to lodge a claim form in either the Tribunal or the Court. The forms are available from Small Claims Tribunal.
If you live in the Brisbane metropolitan area the forms are available from the Small Claims Tribunal or the Small Debts Court, 179 North Quay, Brisbane. If you live in a country centre forms are available and can be lodged at the office of a Clerk of the Magistrates Court (who is also a Registrar of the Tribunal), or any legal aid office.
The claim must be lodged and filed in the registry of the Court or Tribunal in the district in which your claim arose.
You can get help in lodging your claim from the Registrar of the Tribunal or Court.
The claim form must include the full names and addresses of yourself ("the Claimant") and the other party ("the Respondent"). It should also be lodged with a copy of any contract and other documents, such as receipts, which relate to the claim.
The Registrar will then send a copy of your claim to the other party. Shortly thereafter both parties will be notified of the time, date and place for the hearing of the claim.
What does the Respondent do?
The Respondent is required to attend at the hearing (together with their witnesses and evidence) to defend the claim. If the Respondent is unable to attend the hearing they may give their evidence in defence of the claim by filling a statement of oath or, with the consent of the Court or Tribunal, they may appoint an agent to represent them. If the Respondent fails to do any of these things the claim may be heard without them.
How much will it cost?
A small fee is payable when you lodge your claim. The amount of the fee is relative to the amount claimed. This fee is recoverable if you are successful.
Can I settle before the hearing?
Yes. If the matter is settled to your complete satisfaction you should advise the Registrar (or Clerk of the Court in country centres) in writing that you wish to withdraw your claim.
What happens at the Tribunal hearing?
Parties are not allowed to be represented by a lawyer unless both parties and the Referee agree.
Both parties must organise documents required to support their case (eg. bills for work done, sales slip, receipt, photographs, contracts etc.). Parties must also organise for the attendance at the hearing of witnesses who will assist in proving the facts of the case. Expert witnesses are called at a party's own expense. Sworn written evidence can be used but verbal evidence is preferred.
The Referee will usually ask if the parties can agree on a settlement. If an agreement is reached, it will be recorded by the Registrar, otherwise the Registrar will hear the dispute.
It is then up to each party to the dispute to present their case and to call witnesses when necessary. After hearing both parties the Referee will make a binding decision based on what they consider fair and equitable.
What happens at the Court hearing?
A Magistrate presides over the hearing and will attempt to resolve the dispute in a similar fashion to the Referee of the Tribunal.
Orders made by the Referee or Magistrate are final and binding on all the parties. Only in exceptional circumstances would an appeal against the decision be allowed.
When an order for the payment of money is not satisfied the other party may enforce the judgment in the Local Court or by contacting the Civil Registrar at the courthouse who will advise you on how to enforce a claim.
Letter of Demand
A letter of demand is sent to a person or organisation who owes you money (a debtor) following your supply to them of goods or services (eg. sale of artwork, performance fees, etc). The letter advises the debtor of the amount outstanding and threatens court action to recover the debt if it is not paid within a certain time. A sample is overleaf which can be used as a guide for writing your own letter of demand.
Why send a letter of demand?
A letter of demand serves two purposes. Firstly, it is a "get tough" measure to warn the debtor of your intention to commence legal proceedings unless payment is made. Only one such letter should be sent and you should be prepared to act on your threat to initiate legal action otherwise the debtor may simply call your bluff. Secondly, the letter is a document which may be tendered in evidence during court proceedings as written proof of your claim of the debt owed.
Copies of any relevant documents such as contracts, letters of agreement, invoices, etc, should be attached to the letter of demand to assist the debtor to identify the transaction and their liability to pay.
It is advisable to send the letter of demand by registered post or fax to confirm receipt and don't forget to retain a copy for your records.
How to respond to a letter of demand
If you receive a letter of demand from a creditor or debt collection agency for monies owing, do not ignore it. Carefully check the letter and if there are any matters that are unclear or if you require further particulars, write to the creditor (and keep a copy of the letter). If the claim is disputed you should seek legal advice.
If you do not dispute the claim, contact the creditor and attempt to negotiate settlement of the matter on a 'without prejudice' basis. This means that you can try to reach a compromise without putting at risk your legal right to sue for the full amount if a compromise is not made.
Most creditors are willing to accept less than the full amount as it relieves them of the administrative expense and delay in pursuing debt recovery action through the courts.
If you cannot afford to pay back the amount in full, offer to pay by monthly instalments that are reasonable in the circumstances (this option is usually available if the matter is taken through the courts). If you are unable to pay at all then write a letter to the creditor pointing this out.
SAMPLE LETTER OF DEMAND
[debtor's name & address]
Dear Sir/Madam [or name of the person if known],
I am writing concerning the amount of $[amount] which was due to be paid on [date] and remains outstanding despite my requests for payment. This amount relates to:
[include whatever is appropriate, eg
* goods supplied to you by me at your request, and being [insert a brief description of the goods and any relevant dates]
* services provided to you by me at your request, and being [insert a brief description of the type of service and any relevant details]
* monies due to me pursuant to the terms of our contract dated [date] and being for [insert a brief description]]
For your reference I enclose a copy of:
[include whatever is appropriate, eg
* my original invoice dated [date]
* our contract]]
I demand that payment of the full amount be paid to me at the above address within [no. days usually 7 or 14 days] days from the date of this letter.
Please note that if recourse is had to legal proceedings this letter will be tendered in court as evidence of your failure to attempt settlement.
However, without prejudice to my rights for full recovery of the debt, I am prepared to:
[include whatever is appropriate, eg
* accept the amount of $[a lesser sum] as full and final settlement of the debt if paid within 7 days [or other appropriate period] from the date of this letter.
* accept instalments of $[amount] per week/month until the debt is fully paid, the first instalment to be paid on [date] into [specify address/bank account details] and thereafter on the first working day of every week/month until the debt is fully paid.]]
[your name and contact details]
I am not a lawyer or by any way related to the legal profession, but feel free to ask me anything, I will help you out best I can (having been through this).
i. Downing Centre, Local Court, Civil Claim Enquiries, Sydney, telephone (02) 9287 7923
ii. Your nearest Local Court - see the White Pages.
iii. Your local community legal centre (eg. Inner City Legal Centre in Sydney) can also provide advice and assistance on how to file a defence and other enquiries regarding the procedures of the Small Claims Division of the Local Court.
i. The Registrar of the VCAT Civil Claims List telephone (03) 9628 9830 or 1800 133 055 and the website at www.vcat.vic.gov.au
ii. Melbourne Magistratesí Court - Civil Division telephone: (03) 9628 7777 and the website www.magistratescourt.vic.gov.au
iii. The Federation of Community Legal Centres (Victoria) Secretariat can refer you, where appropriate, to your nearest community legal centre. Telephone (03) 9602 4949. You can also visit the website www.austlii.edu.au/au/other/clc/clc_tocs.html#VIC
i. The Registrar of the Small Claims Tribunal 179 North Quay Brisbane QLD 4000. Tel: (07) 3227 4578
ii. The Registrar of the Small Debts Court 179 North Quay Brisbane QLD 4000 Tel: (07) 3227 5778
iii. If you live outside Brisbane contact the nearest Magistrates Courts Office, or community legal centre.
Ring the Court of Requests in Hobart for a small claims information brochure. Court staff can assist you regarding a claim, but are not permitted to give legal advice - you should contact the Community Legal Service on (03) 6234 5032 for such advice. The Legal Aid Service can be contacted on 1300 366 611. Information on how to make a claim is available at www.courts.tas.gov.au/small claims and www.courts.tas.gov.au/magistrates.
Contact your nearest Local Court Office. General information may be obtained from the Office of Consumer Affairs; tel: (08) 8999 5184, the Northern Territory Local Court tel; (08) 8999 6298 or the Department of Health and Community Services in the Northern Territory.
i. The Courts Service of the Local Court offers general information about procedures, forms and costs and can be contacted on (08) 9264 1538. Information is available on the internet at www.justice.wa.gov.au.
ii. Contact the Ministry of Fair Trading telephone on (08) 9222 0777
iii. Contact the Federation of Community Legal Centres (WA) telephone (08) 9221 9322 for referral to the appropriate community legal centre.
i. Adelaide Magistrates Court - Civil Registry
31 Flinders Street
Tel: (08) 8204 2444
ii. The Legal Services Commission of South Australia
Tel: (08) 8205 0155 or 1800 188 126
i. Magistrates Court
Knowles Place off London Circuit
GPO Box 370
Canberra ACT 2601
Tel: (02) 6217 4272 or (02) 6217 4273
ii. Canberra Welfare Rights and Legal Centre
Tel: (02) 6247 2177
iii. Small Claims Court
Tel: (02) 6267 2787
All the information here I have found from my own research, this is not to be relied on as a substitute for legal advice. I accept no liability for losses caused by reliance on any of the materials here. Before acting on any matter, take advice from a qualified legal practitioner or your local legal aid office.
Posted 28 June 2011 - 06:21 PM
I'd say just a letter of demand and the possibility of legal action (i.e. actually showing them you are serious about the claim) would be enough to scare a lot of people into paying
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