A common problem that tradespersons encounter with home owners and builders is non-payment for completed work. The collection process always begins before the work commences by completing contracts and confirming in writing any variations. It is equally important to document or record attempts to recover payment after the work is done and follow up promptly. However, what are the options if the client just won’t pay?
The fact is that in every industry there will be a small percentage of clients who, for whatever reason, will dispute the bill or find fault with the work done. When this happens a tradesperson may consider using any dispute resolution service offered by various industry bodies for its members and clients with a view to resolving the dispute. It is always wise to keep lines of communication open with the other party because even if you feel strongly in the right, disputes cost time and money. In the legal industry staff record time spent on matters. Our finding is that the value of the time taking someone to court can sometimes be more than the amount recovered.
Building Commission WA (Commission)
The Commission is a specialist tribunal which has jurisdiction over certain types of home building disputes. The Commission acts quickly and no lawyers are allowed to appear for the parties. The Commission has jurisdiction to deal with:
- contractual disputes, including payment disputes, where –
- is directly between home owners and tradesperson; AND
- work is for amounts from $7,500 to $500,000; OR
- disputes regarding structural / workmanship issues independent of the value of the contract.
The Commission does not have the jurisdiction to deal with payment disputes between builders and tradespersons where tradespersons are sub-contractors.
A tradesperson may file a claim with the Commission against a customer for recovering monies within six (6) years after completion of the work.
At least 14 days before filing the claim the tradesperson must give a notice to the customer specifying the remedy he is seeking and evidence he relies upon. If the tradesperson does not receive any response or does not agree with the customer’s response he may proceed to make a claim with the Commission.
The Commission takes the following steps:
- makes a preliminary decision to accept or refuse to accept the claim;
- may require the tradesperson to provide further information or evidence about the claim;
- notify both parties about the complaint being filed and seek their responses;
- may initiate an investigation into the evidence provided by both parties; and
- may dismiss the complaint OR may make an order for payment if it satisfied that the customer has not paid the outstanding amount.
The Courts have the jurisdiction to deal with payment disputes where the contract is between:
- builders and tradesperson where the tradesperson are sub-contractors; OR
- tradesperson and home owners where the value of work exceeds $500,000; OR
- the value of work is below $7,500.
Before initiating any claim in the courts, the tradesperson should:
- request payment of monies in accordance with the contractual terms between the parties by way of emails, letters, fax etc.; and
- maintain records of communications as evidence of attempts to recover monies.
If the tradesperson does not receive any response or does not agree with the response he receives, he may initiate legal proceedings. As stated earlier, disputes cost time and money so if there is any way of mediating or settling a dispute this should be explored.
The Magistrates Court also has a minor case division which deals with claims under $10,000. Lawyers cannot appear in these matters. Claimants cannot generally claim legal costs for claims which are less than $10,000, excepting court filing fees.
A claim for a debt up to $75,000 is filed in the Magistrates Court. If a debt is over $75,000, the tradesperson may initiate proceedings with higher Courts including District Court which can deal with claims up to $750,000 and Supreme Court for claims over $750,000.
The time limit for starting debt recovery court action is generally 6 years from the date the debt first arose.
Procedures vary from court to court but usually a copy of the claim is served on the opponent. The opponent may admit the claim in part or in full or dispute the claim. If the claim is disputed, the following steps take place:
- list the matter for a pre-trial conference or mediation;
- list the matter for trial; and
- give a judgment on the claim after a hearing.
A lot more can be said about the procedure in courts and whether or not a person should seek to recover his or her own debts. By and large proceeding in the court system is slow and costly so it should always be the option of last resort.
Handy tips to be successful in claiming your monies:
- Ensure that a signed contract with the customer is in place before commencing the work;
- A detailed scope of work is included in the contract;
- Ensure that variations to the contract are documented;
- If a written contract is not in place, maintain copies of records like emails, letters, fax etc. of your interaction as evidence to support your claim;
- Maintain records of any attempts to recover monies; and
- Make the claim reasonably promptly.