Helping Clients Recover Debts Community Legal Queensland Meredith Bennett Partner – Disputes 5 October 2016

What we will cover? What to consider before you start a debt collection process Letters of Demand Commencing Proceedings – Magistrates Court Commencing Proceedings – QCAT Statutory demands Bankruptcy notices ADR and debt collection agencies Settlement and deeds of release Questions

What to consider To whom the debt is owed? company or individual? How much is the debt? important for determining the method of recovery How did the debt arise? agreement between two individuals (money lent) consumer / service provider relationship What documentation do you have in support of the debt? agreement – what are the terms? If verbal, scrutinise earlier rather than later email / correspondence / text messages Could there be any counterclaim or set-off raised? Be realistic about recovery sooner rather than later Useful searches to conduct Is the debtor represented

Letter of Demand Should follow attempts to contact the debtor by way of reminder. If possible, letter of demand should state clearly: Refer to previous correspondence Set out precisely but in a summary way the debt is owed How much the debt is Why the debt is due and outstanding A period of time for the debt to repaid (unless there are clear terms providing otherwise) Consequences of not paying within the time frame and/or reservation of rights (this may vary depending on circumstances) Remember, this document will end up before the Court and be evidence Resist over-reaching in order to strengthen your case for summary judgment should proceedings be commenced Consider enclosing relevant supporting documentation Keep a copy of the original documents and the signed letter of demand Do you have up to date address details for the debtor, consider several methods of service

Commencing Proceedings - QCAT Minor debt dispute process Individuals, businesses and traders Debt must be no more than $25,000 Cause of action arose in Queensland Liquidated debt or clear terms of an agreement for money to be paid Cannot use QCAT if: no previous agreement for the money to be paid – eg. claims in equity the debt is for the repair of a defect on a motor vehicle the debt is for damage to property caused by a motor vehicle or from the use of a motor vehicle unpaid wages covered under the Fair Work Act. QCAT can be unpredictable – better for straight forward disputes

QCAT - continued Application Response within 28 days Notice to attend mediation Hearing Appeal

Commencing Proceedings – Magistrates Court Magistrates Court can issue a claim to recover a debt up to $150,000 Can address claims where the amount of money is unknown eg. damages for breach of contract Proceeding commenced by way of claim and statement of claim Be aware of sliding court fees scale For more complex declaratory relief, consider District or Supreme Court

How will the debtor respond? Defence filed? Default Judgment Summary judgment Strike out Reply Directions Hearing Mediation

Enforcing a judgment Re-do searches Enforcement hearings Enforcement warrants Sale and seizure of property / garnishee of wages Bankruptcy notices and statutory demands – more about those later

Statutory Demands Use Purpose and use of Statutory Demands Form How to complete Statutory Demand and supporting Affidavit Service How to effect proper service Setting Aside Challenging as Statutory Demand Defending Acting for creditor in an application to set aside a Statutory Demand 10

Key Points Prescribed form Particulars of Debt Supporting affidavit Form 509H (Schedule 2 Corporations Regulations) Particulars of Debt Sufficient details so debtor company can’t be confused Foreign currency debts permitted Supporting affidavit Required unless judgment debt Must match description of debt in statutory demand By person with knowledge of debt Timing Statutory demand must be dated same date as supporting affidavit

Tips for completing statutory demand Affidavit Sworn same date as statutory demand Personal knowledge of debt or access to books and records Must say debt is due and payable and no genuine dispute Company search to confirm address and ACN Sufficient particulars of debt Signed by solicitor (no issue with capacity)

Service Perform company search at date of service Confirms address at date service Serve in accordance with s109X Corporations Act and s29 Acts Interpretation Act Leaving or posting to registered office Must place documents in envelope and place in post box with a stamp - express post or process server is best Leaving in out tray not service – s29 Acts Interpretation Act Registered post is not service Must be able to swear affidavit of personal knowledge of postage

How will the debtor respond? 21 Days to Act Genuine Dispute Offsetting Claim Other Grounds Demand withdrawn or application to set aside made within 21 days of service - must file and serve Note concept of ordinary course of post Akin to interlocutory injunction or summary judgment Low threshold Indemnity costs if record of dispute Set off or cross demand equal to amount of debt Doesn’t have to arise from the Debt Can be sounding only in damages Some defect that causes substantial injustice or other reason

Effective means of creating statutory presumption of insolvency and getting paid Not a debt collection tool Must only be issued where creditor has intention of winding up if payment not received Payments received likely to be deemed preferences

Outline – Bankruptcy Notices Use Purpose and use of Bankruptcy Notices Jurisdiction Federal Court and Federal Magistrates Court only Form How to complete a Bankruptcy Notice Service How to effect proper service Setting Aside Challenging a Bankruptcy Notice Defending Acting for creditor in an application to set aside a Bankruptcy Notice 16

Key Points Prescribed form Final Judgment ITSA No supporting Affidavit Form 4 (s41(2) and Rule 8 Bankruptcy Rules). Strict compliance necessary – Rule 7 Bankruptcy Rules Final Judgment Attaches sealed copy of judgment (bearing original stamp of court). Judgment must not be stayed Joint judgment creditors all named Foreign currency permitted ITSA Once prepared must be filed at ITSA Once issued by ITSA bearing ITSA’s seal becomes a Bankruptcy Notice No supporting Affidavit Unless cant produce sealed judgment as per Rule 7(2)(a)

Service Personal Service not required but recommended – see Bankruptcy Rule 15 Affidavit of Service confirms service effected – must be able to establish Bankruptcy Notice brought to the attention of the debtor Instruct Process Server Identify debtor, explain document and leave document in their presence and unimpeded access Must be able to swear affidavit of personal knowledge of service - cant leave in out tray Must serve within 6 months of issue – see Bankruptcy Rule 9

How will the debtor respond? 21 Days to Act Default Judgment Offsetting Claim – s41(7) Rule 10 Other Grounds Application to set aside made within 21 days of service - must file application to extend time of compliance Must file application to set aside judgment Must establish that judgment should be set aside Counter-claim, set-off or cross demand that could not be raised in the judgment proceedings Some defect in Bankruptcy Notice – minor errors do not invalidate, but substantive errors that lead to injustice

Requires judgment debt Effective means of getting paid Not a debt collection tool Payments received likely to be deemed preferences

Alternatives ADR Third party debt collection agencies – consider costs, control over the correspondence, reputation. Laws regulating agencies with respect to privacy, contact hours and frequency of contact and style of communication Assigning / selling the debt

Australian Consumer Law and Debt Collection Prohibition of the use of physical force, undue harassment and coercion Prohibition of misleading & deceptive conduct Prohibition of unconscionable conduct

Agreement to settle When dispute resolves, reduce the terms to writing If dispute is subject of legal proceedings, need to prepare terms of settlement Different considerations apply depending on whether you are acting for plaintiff or defendant. eg often, there are some subtle differences scope/width of release mutual or unilateral releases defendant may wish to avoid being subjected to a "judgment" if they default under the deed plaintiff may wish to "discontinue" proceedings, rather than having them "dismissed"

Questions ? This presentation material is intended to provide a summary of the subject matter covered for training purposes only. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this presentation without first obtaining specific professional advice. 220572756