Debt RecoveryDebt recovery is all about maintaining a constant relationship with the debtor and finding the point where the resistance to paying is removed.

Commencing Legal Proceedings

Despite the best efforts of you or your eCollect account manager, some debtors deliberately choose not to pay or respond to our clients claims. For these debtors, the issue and service of legal proceedings in a court or tribunal may often change their attitude.

Our clients are often concerned about the potential cost of legal proceedings. For legal proceedings where the claim amount is relatively low and no defence is expected from the debtor, E C Legal will provide a fixed price for the initial stages of legal proceedings so that our clients can have some certainty about the important question of how much is it going to cost. See Debt Recovery Litigation costs.

Before starting litigation, here are some observations for your consideration:

Strength of your Case – detailed preparation is required before you start

You need to assess carefully the strength of your case. Most debt claims that come to E C Legal via eCollect are very strong. The more that you are able to rely on documents rather than conversations to prove your claim, the stronger your claim will be.

Before commencing litigation, you must ensure that all relevant documents or notes have been provided to us. This can be a significant exercise and our clients sometimes attempt to provide only the documents that they think are relevant. The effort in providing all the documents before the start of a case is worthwhile. The case is much more likely to move to a satisfactory conclusion with less delay and less cost if this is done.

If you are relying on conversations to assist in showing what the arrangement was between you and the debtor then the details of these conversations should be recorded in writing and sent to us. We have a blank Statement of Events document available which you can use to detail what happened between you and the debtor.

As a part of the initial work, E C Legal will review the evidence in support of the claim and may, if your case does not have sufficient supporting evidence, advise you not to continue.

Your Motivation

You need to understand why you are considering litigation. Is it a purely financial consideration or is it a matter of principle? i.e. you do not want to let the debtor get away with non-payment.

Litigation does not always go the way that you might expect and is therefore inherently risky. Our advice to you will be based on obtaining the best possible financial result in this litigation. In giving you advice about this litigation, we may recommend that you settle for less than the full amount of the claim. In most cases, this type of advice is based on our extensive experience in litigation where even the best prepared cases can sometimes fail for reasons outside of your or our control. If your motivation is purely financial, you should be prepared to factor in an allowance for this risk in any settlement proposal that might come up.

Some of our clients want to have their day in court and are not happy with anything less than 100% of their claim. We love this approach because there is nothing better as lawyers than winning 100% for your client. But we all need to be cautious because, even after winning 100% in court, the overall financial result for our client might be worse than if they had settled for a lesser percentage earlier on.

Capacity of the Defendant to Pay

You cannot get blood from a stone. Even if you have an order from a Court or Tribunal , the debtor still may not pay due to the fact that they have no money to do so. This is one of the inherent risks of litigation.

It is practically impossible to find out whether a debtor / defendant has the capacity to pay the amount of any order made by a court or tribunal. Often, our clients are the ones that are best placed to gauge this capacity. After all, our clients will usually have dealt with the debtor in business and will know more about their circumstances than we do.

We recommend our clients find out as much about the debtors situations possible including:

E C Legal can do a bankruptcy search / credit search / title searches on a person however the cost of this is significant (approx. $100.00 – $500.00) and probably will not give a definite answer about the debtors financial position. Note that the cost of these searches is not recoverable from the debtor in normal circumstances.

Tribunal or Court?

In each state and territory, a potential claimant has a choice of the forum in which to bring the claim.

Tribunals (e.g. Victorian Civil and Administrative Tribunal in Victoria or the Consumer Trader and Tenancy Tribunal in NSW) are established to provide a low cost option for you to make a debt claim. The Tribunals are do-it-yourself organisations and representation by lawyers is not permitted as a general rule. eCollect provides a service in which eCollect will draft the initial claim paperwork on your behalf and file it with the Tribunal as well as providing you with some hints as to how to best present your case. The cost of this is around $200 – $400 plus GST and the filing fee. The eCollect charge is not generally recoverable from the debtor but the filing fee can often be recovered.

For claims under $2,000, our usual recommendation is to bring the claim yourself in a Tribunal without any assistance.

Courts usually make costs orders against defendants which means money paid to lawyers to bring the claim on your behalf can be recovered from the debtor – at least in part. Our experience is that claims brought in the Courts usually receive a higher level of attention from debtors than claims brought in Tribunals.

E C Legal will consider and advise on the appropriate jurisdiction if you wish to proceed with the fixed price engagement to commence proceedings.

Alternative Jurisdiction

If the parties are in the same state or territory, that state or territory will be the appropriate jurisdiction for the claim and you do not need to consider this section.

However, if the parties are in different states or territories, a careful choice will be need to be made about which state or territory is the most appropriate.

Considerations as to where the agreement is made and the most convenient place for all the parties need to be made.

E C Legal lawyers will cover these considerations as they draft the claim for issuing by the court.

Your Time and Effort

Debt claims are usually relatively straightforward but, even so, you need to be prepared to give the necessary time and effort towards obtaining a successful result. This means not glossing over any part of the case and providing all the available documents before any further action is taken. Where conversations are going to be used to support the claim the most detailed account of the conversation possible should be written and sent to us. The more time and effort you commit, the better will be the chances of a successful case.

The most effective and successful legal cases are those where our clients have prepared their entire case completely before we start. This includes written statements about what has happened and PDF copies of all relevant documentation. E C Legal staff members can assist in the preparation of your case.

Having the cases fully prepared before we start means that we can see the strengths and weaknesses in our client’s case and may be able to take steps to improve our client’s position. Once the case is started, the debtor/defendant is automatically on the back foot because they have to respond to our client’s claim. The court process is very generous in allowing time to do this (often unnecessarily so in our view) but with our client’s case fully prepared, we will be able to apply pressure to the defendant to come up with a suitable settlement proposal.

Roles – Lawyers and Recovery Agents

Where eCollect is engaged as the debt recovery agent, eCollect’s role is to handle as much as possible of the prelitigation work or time that is not recoverable from the debtor e.g. collating the evidence in support of your case, instructing and liaising with the lawyers, handling any settlement negotiations and reporting back to you etc. This work would otherwise be chargeable by E C Legal and so there is a potential saving in legal costs by engaging eCollect to handle the debt recovery and prelitigation part of the claim.

E C Legal lawyers will consider the evidence in support of your case and will draft, file and serve all the necessary court documents on your behalf provided that the evidence you provide reveals reasonable prospects of success.

When litigation commences and eCollect is engaged as a debt recovery agent, the eCollect account manager will be the principal point of contact for both clients and defendants until a defence is lodged. The E C Legal lawyers will look after the legal proceedings only and won’t be involved in any settlement negotiations. This keeps the legal costs to a minimum.

However, once a matter is defendant, the E C Legal lawyer must take over the principal conduct of the file.

Two Pieces of Practical Advice

  1. Make a decision about starting litigation or not without delay. Debts rarely get easier to collect.

  2. Take the litigation one step at time. The path that litigation can take is highly variable despite the best efforts of your lawyers and recovery agents to direct it to the outcome we seek. Discussions about possible outcomes can waste a large amount of time especially the further away the outcome is from the current position. The option is available for you to have detailed discussions with the lawyers about all possible options however the cost of those discussions will not usually be recoverable from the debtor. Our experience with small claim litigation is that you should authorise litigation at one step at a time with a firm estimate as to the price of that step.

Starting the Litigation

Small claims litigation for debt recovery matters is often effective as some people think you will not do anything about the debt and consequently get a big shock when they are served with the legal process. Those people often pay or start a serious discussion about payment plans.

The others, the ones who have ignored every letter and every phone call may require more than just an order from the Court. Just because you have an order from a court or tribunal does not necessarily mean payment! Lawyers are lawyers – not magicians.

If having read this, you are in agreement that litigation against the debtor is necessary, then eCollect or E C Legal will provide further advice setting out the costs, timeframe etc.

Lawyers from E C Legal are available to discuss your case with you personally. To obtain full and proper legal advice, you should consult a lawyer in person. However, you need to be aware that E C Legal will charge you for the time spent in such a consultation – which for the initial assessment and review will be approximately $150.00.

If you wish to consult an E C Legal lawyer in person, please contact us directly or your eCollect Account Manager can arrange for this to occur.