The non-payment of a debt is a matter which often causes the party owed money (“the creditor”) to consider legal proceedings against the party who has failed to make payment (“the debtor”). If you are considering whether or not to commence legal proceedings, it may be useful to first consider the following questions.
- How much am I owed?
- What are my legal costs likely to be?
- Is the debtor likely to dispute the debt?
- If I am successful in court, will the debtor be able to pay the debt?
Below is information which may assist you in your consideration of the above questions.
How much am I owed?
It is of course vital to know, and be able to substantiate, the amount you will be seeking to recover from the debtor. Not only must you be able to prove the amount of debt owed, but the amount of debt owed will also determine the court in which you will be required to commence legal proceedings.
The Magistrates Court of Western Australia deals with matters where up to $75,000.00 is being claimed.
The District Court of Western Australia deal with matters where more than $75,000.00 and up to $750,000.00 is being claimed.
The Supreme Court of Western Australia deal with matters where over $750,000.00 is being claimed.
What are my legal costs likely to be?
If you are considering commencing legal proceedings, you should first discuss with your lawyer the legal costs you are likely to incur. If the debt you are seeking to recover is relatively modest, the cost and risk of commencing legal proceedings may persuade you to pursue alternatives for seeking to recover the debt. If you are successful in a trial, you will likely recover some of your legal fees. However, if you are unsuccessful in a trial, you will likely be required to pay some of the other party’s legal fees.
Is the debtor likely to dispute the debt?
You should be open with your lawyer about any reasons the debtor may have to dispute the debt. For example, is it possible the debtor will allege that you did not perform work for them that you were obligated to do? Is it possible the debtor will allege that you did not provide them with goods that you were obligated to provide? The nature and strength of any defence a debtor may have will likely have a direct impact on your legal costs. As such, it is important that you are mindful of this.
If I am successful in court, will the debtor be able to pay the debt?
Even if you succeed in legal proceedings, you must always be mindful of the debtor’s capacity to pay the debt. There is no point wining a case against a debtor who has no assets or cash to use to pay you. This does not necessarily mean that you should not commence proceedings, but you should discuss with your lawyer the options for enforcing payment against the debtor should you be successful.
Always remain mindful of the fact that most debt recovery matters are resolved by private settlements. Most matters never require the commencement of legal proceedings.
If you require advice in respect of a debt recovery matter, please do not hesitate to contact Lynn and Brown Lawyers on 9375 3411 or https://www.lynnandbrown.com.au/contact/