Litigation is the last step in debt recovery, not the first. Most debts are resolved before a claim is filed — and the record you build beforehand is what wins the case if it is not.
Step 1 — confirm the debt
Before anything else, establish four things: the contract or invoices the debt arises from, the exact amount owing, whether the contract allows interest and recovery costs, and whether the limitation period has expired. In Queensland the limitation period for a simple contract debt is generally six years from when the cause of action arose. Once it passes, the debt is usually unrecoverable through the courts regardless of merit.
Also check who the debtor legally is. A great many claims are brought against a trading name that is not a legal entity, or against a director personally when the contract was with the company.
Step 2 — the letter of demand
A properly drafted demand sets out the debt, the basis for it, the amount including any interest, a clear deadline, and what happens if payment is not made. Many debts are paid at this stage, simply because the letter shows the creditor is organised and serious.
A demand from a solicitor also creates a document you can put in front of a court later. Threats that cannot lawfully be carried out, on the other hand, create a problem for you rather than the debtor.
Step 3 — negotiate
A payment plan that is actually met is usually worth more than a judgment that cannot be enforced. If you agree to instalments, document it: the amount, the dates, what happens on default, and whether the agreement is in full satisfaction of the debt or only suspends recovery.
Step 4 — choose the right forum
In Queensland the claim goes to a different place depending on its size and nature:
- QCAT — minor civil debt claims up to $25,000, quicker and cheaper, with limited rights to legal representation
- Magistrates Court — claims up to $150,000
- District Court — claims above $150,000 up to $750,000
- Supreme Court — claims above $750,000
Where the debtor is a company and the debt is undisputed, a statutory demand under the Corporations Act is a separate and powerful route: failure to comply within the statutory period creates a presumption of insolvency. It is not appropriate where the debt is genuinely disputed, and misusing it can be costly.
Step 5 — the practical questions
Before filing, answer these honestly:
- Does the debtor have assets or income to pay a judgment?
- Is the company still trading, and is it already subject to other recovery action?
- Will the cost of proceedings and enforcement exceed what you can realistically recover?
- Is there a genuine dispute about the goods or services, which will turn a debt claim into a contested trial?
A judgment is not money. It is a right to pursue money, through enforcement steps — garnishee of wages or bank accounts, seizure and sale of property, or a bankruptcy or winding-up application — each of which costs more.
Preventing the next one
- Written terms of trade, accepted before work starts, with payment terms and an interest clause
- Credit checks and, for significant exposure, a director's guarantee
- Invoices issued promptly, and a reminder process that starts at seven days rather than ninety
- For suppliers of goods on credit: consider registering a security interest on the PPSR before delivery
General information only. This article describes the law in general terms and is not legal advice for your situation. Time limits are strict and the law changes. Call BNE Lawyers on 0423 007 888 to discuss your own circumstances in English or Vietnamese.