Australian Drilling Industry Association
Introduction
It is very rare for parties to breach agreements nowadays, NOT! The prevalence of contracting disputes is almost as common as the iPhone. Unfortunately, it is part of ‘business’ and often, businesses or contracting parties will fail to pay as required by the relevant agreement. Following the breach, the amount owed is rendered as a debt to the debtor. Debt, generally being non-payment of some sort could be due to a number of reasons such as unsatisfactory quality of the work or disagreements about the quality of the work, delay or a refusal to pay the invoice without any fault on the part of the drilling business involved.
Process to have in place
Organisations now have implemented formal processes that accommodate for the non-payment of their services or sale of their products. Therefore, before even entering into a business transaction it is prudent to do credit checks and due diligence research to understand or be aware of whom your business is entering into a financial dealing with. As such, proper and timely invoicing procedures also need to be utilised to ensure prompt attention is given by those engaging your services so that attention is given to those payable amounts as soon as the invoice becomes payable.
Putting your Concerns in writing by sending a late payment reminder letter
If a debt arises, the initial method of recovering the outstanding amount is to engage in open and direct communication with the debtor.
Issuing a Letter of Demand
If the contact and a friendly reminder to pay the money owed did not work, a letter of demand to the debtor is required. The letter will demand the amount to be paid. It is ideally the same as the initial contact, however, with a more formal edge to it, and maybe a little grunt. You must ensure you are conforming to Letter of Demand guidelines of the relevant authority. A key strategy is to immediately instruct your lawyers to commence recovery proceedings if the debt amount remains payable after the debt is not paid within the period specified by the legal letter of demand.
Legal Proceedings
Litigation itself should be seen as a final resort, to be commenced only after other mechanisms have been exhausted. The appropriate court of jurisdiction generally depends on the amount of the debt and the jurisdiction in which the debt arises. In most occasions legal proceedings will be commenced in a court by lawyers preparing the court documents inclusive of the statement of claim.
What are my options after the Court makes a decision in my favour?
If a Court makes Orders for the debt to be paid to your business, those Court Orders can be forcefully pursued through legal enforcement mechanisms. Each state has Civil Procedure legislation in place which sets out the mechanisms for Court processes and the enforcement mechanisms. These procedures are quite similar between each State.
Creditors Statutory Demand (Only if Debtor is a Company/ Corporate Trustee)
Another very common mechanism is a creditor statutory demand, which can be pursued pursuant to the Corporations Act 2001 (Cth). A creditors statutory demand has the effect of asserting significant pressure and serving a statutory demand can result in almost immediate and often full payment of the outstanding amount as soon as that legislative demand has been served. In summary, the most effective debt collection strategy is to have proper payment mechanisms and internal processes in place. Strategies you can take include direct communication with the debtor, engagement of lawyers to help you resolve the dispute or quite possibly legal action in the Court. Securing outstanding payment from a debtor is often about creating the right amount of pressure and offering the debtor a practical option to repay the debt. AMK Law aim to resolve your situation including the payment of amounts which have been outstanding for periods of time. This is achieved in ways that preserve your business relationship and when necessary through the Court and other mechanisms available. Our Principal Solicitor has presented conferences to Australian Drilling Industry Association. AMK Law can advise on all matters of commercial and property laws. If you have any queries, you can go ahead now and contact AMK Law directly by telephone on (03) 8564 8474 or by email [email protected]. Important disclaimer: This information is of a general nature only and it is not, nor is intended to be, legal advice. If you wish to take any action based on the content of this publication, we recommend that you seek professional legal advice.