Debt Recovery

 

TAKE CONTROL

As business owners, we all sometimes put off the tough decisions. High on that list is debt recovery. It’s uncomfortable, time-consuming and if not dealt with, can be financially crippling.  Our recommendation? Take a step, any step towards dealing with the issue. By this, we don’t just mean continuing to send out statements of account, but actually addressing the elephant in the room.

Before you see a lawyer, try these self-help steps:

  1. make sure you and the debtor are on the same page – make sure that the debtor knows how much they owe you, what it is for, and when you expect to be paid. Click here for a free sample letter or email that might help you get going.
  2. Pick up the phone – if you are clear on number one, call the debtor. Although it can be uncomfortable, it can also result in a speedy resolution. Diarise the date and time of call, and what you discussed.
  3. Call in to see them – where practical, a direct and frank discussion can be very beneficial and even healthy for the continued working relationship between you and the person owing you money. Of course, we would not recommend this if the relationship has broken down irretrievably, but give some thought to whether this might yield a speedy resolution. Again, keep a diary note.
  4. Get formal – if your approaches to date have come up short, give them a final letter of demand. We can provide you with a free sample to give you a starting point.

WHEN TO STRIKE

Almost without fail, the primary reason why litigants want to go to court is based on principle. At some point, we all feel like we’ve been treated badly, and the person treating us this way shouldn’t be allowed to just get away with it. Although this is probably factually accurate, it’s never wise to issue proceedings purely on principle.

Instead, taking the step of issuing proceedings requires a clinical, pragmatic approach, free of emotion. Court action not only result in further legal fees, but it also gets a little harder (and potentially more expensive) to try to pull out. You need to establish whether the other side has any reasonable chance of defending their position, or even whether they have the money to pay even if you are successful in court.

The flipside is that there are always those debtors that will push you and push you until you have to take this step, ignoring all but court proceedings.

WHEN IT’S WORTH THE CHASE

Regrettably, some debtors will just ignore you, and if that’s the case, you should give us a call. We’ll give you

  • a comprehensive summary of the debt recovery process
  • what each step costs
  • how long each step takes

Once you’ve spoken with us you’ll be equipped to make an informed decision.

Legal Fees and Cost Orders

A relatively common misconception among litigants is that a victory in court will also enable the recovery of all their legal fees and expenses. Although in certain circumstances this can be true, the reality can be different.

Court rules surrounding costs are very complex, but the following summary should give you an understanding of how costs are awarded, and how adverse costs orders can be used for and against you in litigation.

Court Costs

The ordinary rule is that costs follow the event, but this is subject to the discretion of the court. Further, the definition of costs is broken up into a couple of different parts which can also have a bearing on your net position at the end of any proceedings.

This ordinary rule applies to particular costs called Standard Costs. Standard Costs are calculated under a set table court rules and generally represent about 60% – 70% of the total legal fees a litigant might incur when going to court. The balance 30% to 40% may never be recoverable from the unsuccessful party.

The second definition of costs is called Indemnity Costs. These are basically your total legal fees being the Standard Costs plus the balance 30% to 40% mentioned above.

The 30% to 40% gap between Standard Costs and Indemnity Costs is a little bit like the Medicare gap when seeing a health professional. That is, the court costs Scale (Standard Costs) will only cover you for certain expenses, but not all of the expenses you incur when engaging a lawyer.

It’s Not Just Money. It’s Also Time.

Thanks to Netflix, all litigants think that progression to court is relatively speedy. The opposite is, in fact, the case, and a seasoned litigation lawyer can often delay, frustrate and increase the cost of proceedings for months (even years) with a multitude amendments, applications, requests and other steps, seemingly for little gain.

The reality is that what should be an open and shut case can quickly descend into a costly dispute over a variety of issues that you never may have wanted to deal with but, because the court rules allow it, the other side can introduce them to their advantage.

In our experience, court action needs to be considered in terms of months to years, not weeks to months

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