Before you sue

Most people in business will encounter the frustrating experience of not being paid for a service rendered or goods supplied. It is almost inevitable it will happen one day, planning ahead can minimise your risk.

Here are some steps you can take before seeing a lawyer:

  1. Make sure you are clear with whom you are contracting. If there is any doubt, ask for ID or carry out searches before you do the work or deliver goods.
  2. If you have a contract that you work with make sure that it is clear, concise and properly vetted by someone with legal knowledge.
  3. Follow up early and consistently about your unpaid accounts. The longer you leave it the harder it will be to get paid.  Don’t be afraid to telephone and email the debtor to find out what the problem may be.
  4. Keep records of all follow up. This can be useful because if the debtor initially admits the claim or promises payment, those admissions can be used if the debt later becomes disputed. It is a particularly good idea to ask for a quick email stating that the debtor will pay within a set period or on certain terms. This makes it more difficult for the debtor to later complain about the product or service.

Whoever does follow up on debts needs to be emotionally intelligent and possess an ability to deal with potentially difficult individuals. Going down the legal pathway can be vexing, potentially lengthy, and at times expensive. Any step that you can take to avoid legal proceedings is worth considering.

The demand

If those strategies are not successful the next step is a letter of demand, usually from a lawyer, but you can do this yourself.

A letter of demand is sent to the person who owes the debt. The letter must outline the money outstanding and give them a specified period of time to pay the money before legal proceedings are commenced. The letter should give sufficient information and supporting documentation to enable the debtor to readily identify the debt.

It is important to send a letter of demand before launching into legal proceedings as it may resolve the matter promptly.  There can be adverse consequences in terms of costs if you commence legal action prematurely. There are certain rules regarding letters of demand outlined in the ACCC Debt Collection Guidelines, such as you are not allowed to harass the debtor.


If the matter is not resolved after sending a letter of demand and waiting the period of time specified, then the next step is to commence proceedings in the relevant court.

The court that you go to will depend on how much the debt is:

  1. The Magistrates Court deals with claims for debt up to $75,000;
  2. The District Court deals with claims for debt over $75,000 and up to $750,000; and
  3. The Supreme Court deals with claims for debt above $750,000.

Most legal actions which are truly “debt collections” are dealt with in the Magistrates Court.

When a claim is $10,000 or less you can choose to either make a minor case claim or a general procedure claim in the Magistrates Court. A minor case claim is a claim for less than $10,000.

If you elect to make a minor case claim you are not allowed legal representation except in limited circumstances and you cannot claim legal costs, except allowable costs such as court filing or process server fees. The upside is that there are no legal costs!

The process for a general procedure claim is as follows:

  1. Complete the application form called a general procedure claim, lodge the completed form and pay the fee.
  2. Serve a copy of the claim on the defendant. Service can be arranged through the court.
  3. The defendant then has 14 days to lodge a notice of intention to defend.
  4. The defendant can decide to admit the claim, ignore the claim or defend the claim.
  5. If the claim is ignored and the time expires you can make an application for the court to enter judgment against the defendant.
  6. If the claim is defended, you have 14 days to lodge a statement of claim. A statement of claim is a document setting out the factual and legal basis for your claim.
  7. The defendant then has 14 days to lodge a statement of defence setting out the factual and legal basis for the defending them claim.
  8. The claimant can then request a pre-trial conference. A pre-trial conference is a mediation style meeting aimed at settling the matter or narrowing the issues in dispute.
  9. If the matter is not resolved at the pre-trial conference, then the court makes further orders to progress the case to trial which is a full hearing of the case.

It may be necessary to seek legal advice in relation to a claim for debt. Please contact us here if you would like to discuss these processes further or have any questions.

Please note that any information included in this article is general information only and does not constitute legal advice. Please contact us to discuss your particular circumstances and the best process to recover your debt.