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

2. 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

3. 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
/ 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

4. 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

5. 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

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

7. 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

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

9. 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

10. 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

11. 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

12. 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)

13. 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

14. 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

15. 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

16. 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

17. 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)

18. 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

19. 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

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

21. 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

22. 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

23. 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"

24. 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.