1.1 Amicable Phase
It is the policy of Accounts Receivable Australia to maintain a professional demeanor throughout the collection process, working with debtors to solve outstanding debts in a way that satisfies our clients’ needs. We pursue debts via oral and written contact, and we adhere to all state and federal laws as passed in Australia. Accounts Receivable will examine all relevant documents and pursue the best course of action recommended by our legal team. The legal team is charged with conducting any investigations deemed necessary.
1.1.2 Local agent
Field visits are uncommon in Australia, but can be used to encourage debtors to satisfy their obligations. The goal of a field visit is to assess a debtor’s financial situation and business operations. This process may not be economical in the vast “Outback” region of the country, however.
Accounts Receivable Australia cannot collect interest on a debt unless such an interest rate was specifically agreed to at the time the debtor entered into a contract with our client. Furthermore, Australian debtors are not accustomed to paying such interest and it is often used more as a negotiation tool than as a fee levied upon the debtor. If the amicable phase fails and a lawsuit is filed, however, Accounts Receivable Australia does reserve the right to attach interest costs to the claim amount.
1.1.4 Debt collection costs
Unless the creditor’s terms specifically permit for the charging of debt collection costs to the debtor, they will have to be covered by the creditor. As with interest, any debt that proceeds to the legal phase can have these costs attached to the claim amount. The debtor will then be responsible for those costs, as well as any court fees incurred by the creditor.
Simple contract debts in Australia are subject to a statute of limitations lasting six years from the first due date of the debt. This time period starts over if the debtor acknowledges the debt in writing or makes a payment toward the balance. Court judgments have a statute of limitations that lasts 12 years, making collection after that period of time impossible.
1.1.6 Accepted and most common payment methods
Debts are typically satisfied via cheque payment or bank transfer. Direct debit payments are not offered.
1.1.7 Types of companies
The sole trader is also the business’ owner, and they conduct business on their own. Unlimited liability includes personal assets and any assets that the trader shares with another individual.
This association of people or entities operates a business that can be normal, limited, or incorporated. Some partners may enjoy limited liability, while the rest will be fully liable of debts and other obligations. Partners can be held for debts incurred by fellow partners in the organization.
In this business, a trustee maintains property or income that is produced for the benefit of the organization’s trustees. Structures can be complex, as can the legal and financial obligations associated with trusts.
Proprietary Limited Company:
This business exists separately from tis shareholders and is regulated by the Corporations Law. Extensive obligations are outlined for the company’s directors; the company has limited liability, although the directors of the company can be held personally liable of they have engaged in fraudulent, reckless, or negligent conduct.
1.1.8 Sources of information
Accounts Receivable Australia contacts with various experienced reporting agencies that can help us assess the financial situation of personal and corporate debtors. It is possible for us to obtain financial information, information regarding assets, and other information, based on the debtor’s legal form. We are also able to employ investigators when the need arises.
1.2 Retention of Title
The Personal Property Security Act of 2009, suppliers can register their interest on the country’s PPS Register in order to protect their own interests. This same register gives them a right to repossess the goods if their customer refuses to pay or satisfy any debts. Suppliers register only once for each customer they serve.
While the PPS Register is important, failure to register with the service does not necessarily render a Retention of Title agreement invalid. It does mean, though, that any ROT actions will be of a lesser priority than those registered with the government’s own database. Because of this, suppliers should take seriously their obligation to register with the database. Failure to do so can lead to legal headaches and — in some cases — the inability to recover goods already delivered to a customer who cannot, or will not, pay for them. It also means they will bear significant legal expenses in defense of their own goods and agreements.
1.3 Safeguarding measures
If a debtor cannot quickly satisfy an outstanding claim lodged against them by our client, we are able to request securitization of that debt. This is done amicably by our solicitors, who draw up the necessary legal documents and authenticate them with the country’s Justice of the Peace. This process allows for the deed to be used as evidence of the debt if any lawsuit is later filed by the creditor. For corporate debtors, Accounts Receivable Australia can require any directors to sign a personal guarantee that will lead to a structured repayment plan.
1.4 Legal Procedures
If and when the amicable process fails, Accounts Receivable Australia can pursue legal action against a debtor in one of the country’s relevant court systems.
1.4.2 Legal System
The local courts of Australia handle debts not exceeding $40,000 AUD.
The district courts of Australia handle debts between $40,000 and $750,000.
The Supreme Court handles debts in excess of $750,000.
1.4.3 Required documents
Legal proceedings can only begin when Accounts Receivable Australia has received the following documents:
- Account statements indicating timely or late payments
- Credit notes paid against any invoices still outstanding
- Contractual agreement between the creditor and debtor
- Terms and Conditions agreement between the creditor and debtor
- Order requests, deliveries, and confirmations, if needed
1.4.4 Legal dunning procedure
It is unnecessary to send any notice of demand, a reminder to pay, or other correspondence, before pursuing a lawsuit against the debtor, unless stated otherwise in the original agreement. It is considered good form, however, to send a pre-legal notice to the debtor and give them a final chance to satisfy the debt.
A lawsuit begins when the creditor files a Statement of Claim. This outlines the debt and informs the debtor that, should they not pay immediately, legal action will commence. The debtor has 28 days after receiving the Statement of Claim to defend the issue at hand. If this does not happen, and if the debtor does not satisfy the debt, a judgment will be entered against them by the relevant court.
The creditor can begin the lawsuit in any level of Australia’s court system, but risks commencing the matter in an inappropriate court if they escalate too quickly. In this case, the lawsuit will be sent to a lower court.
If the debtor does not reply to any communication regarding the lawsuit within 28 days of receiving notice, creditors are entitled to a default judgment lodged against the debtor by the court. This is done by requesting and submitting and Application of Default Judgment. This application must include an affidavit in support of the filing by an officer of our client. It must carefully consider the debtor’s entire financial situation before being filed. After it has been submitted and approved, a judgment can be enforced for up to 12 years.
Appeals from the local court system in Australia go directly to the country’s Supreme Court. This adds a significant cost to the proceedings. Even so, if an appeal is necessary, it must be filed within 28 days of the court’s initial decision unless stated otherwise by the judge.
In addition to an appeal, the debtor can also request to overrule a default judgment. This is based on proving two key pieces of information:
- A reasonable explanation of why no response was filed to the original notice
- A valid defense making the original claim invalid
Both of these key things must be proven. Satisfying only one requirement will not be grounds for removing or modifying a default judgment against the debtor.
Legal costs in Australia are based on the cost of each state’s laws and regulations, and they do differ between Australia’s states. These costs, despite their variable nature, are based on the principal of the debt. A summons in Australia typically costs between $200 and 1400 AUD; filing fees range from $300 to $1,000 AUD; and a default judgment application costs between $200 and $600 AUD. After the proceedings, enforcement can cost up to $1,000 AUD. In the event of bankruptcy, legal costs may escalate as high as $5,000 AUD.
1.4.8 Expected timeframe
A standard legal procedure in Australia lasts between 10 and 16 weeks. An appealed or defended court proceeding can take a year or more depending on the nature of the case.
1.4.9 Interests and costs in the legal phase
Interest and debt collection costs can only be charged to the debtor if stipulated in the terms and conditions between the creditor and debtor. Local laws prohibit the automatic charging of interest and collection costs, but a legal proceeding in Australia’s court system does permit for a flat fee to be attached to a debt’s principal amount. That cost is directly tied to the cost of filing fees, drafting costs, solicitor fees, and interest.
1.5.1 Enforcement in debt
Judgments can be enforced as follows:
This order allows the creditor to recover the debt by directly charging the debtor’s bank account. It also allows for the garnishment of wages. Typically, the most common garnishment issued is placed against a debtor’s salary or hourly wages. It remains in place until the debt is fully satisfied.
For creditors who are unsure of the debtor’s financial situation, an Examination Notice can be filed with the judge to allow for an investigation into the debtor’s income and assets. The filing fee ranges from $100 AUD to $150 AUD, and is the first step toward recovery in many cases.
For debts higher than $5,000 AUD, the creditor is permitted to start a bankruptcy proceeding against the debtor. This ensures that many of their assets will come under the control of a trustee who will be charged with liquidating and distributing their value to the creditors with outstanding obligations. This should only be pursued when it has been established that the debtor’s property or other assets hold enough value to cover the outstanding balance as determined by the court; it is typically preceded by an Examination Order. It’s worth noting that bankruptcy proceedings can begin for debts over $5,000 AUD, but the filing fee itself can cost as much as $6,000 AUD.
Winding up is basically bankruptcy for corporate entities. The creditor must prove that a company is insolvent in order to proceed, and issue a statutory demand. The debtor then has 21 days to respond. If they fail to do so, a Winding Up Order can be filed with the court. This should be considered a last resort, however, as it is almost prohibitively expensive.
1.5.2 Enforcement in movable goods
There are several ways to enforce a debt involving movable goods.
Writ for the Levy of Property:
This option allows for the sheriff local to the debtor to seize and sell the personal property of the debtor in order to satisfy their obligation. This is often considered a strong negotiating tool, as the mere presence of the sheriff can encourage debtors to satisfy their obligations. Costs start at $50 AUD to file the Writ, and sheriffs typically charge a 3 percent levy on the outstanding principal that they’re charged with recovering. Occasionally, a deposit of several hundred dollars by the creditor will be necessary.
1.5.3 Enforcement in immovable goods
Debtors who own property can be pursued via bankruptcy proceedings or the liquidation of a corporate entity.
1.5.4 Expected timeframe
Enforcement can take between six weeks and nine months, depending on which method is chosen.
1.6 Insolvency Proceedings
In Australia, insolvency is determined by the debtor’s current cash flow and their ability to use that cash flow to satisfy all outstanding debts. This is regulated by the country’s Corporations Act. That act states a company is insolvent if it cannot pay its debts by their due dates.
Insolvency’s main goal is to pay creditors an equal proportion of funds derived from the company’s assets. For individuals, its goal is to enforce the payment of a balance to the creditor demanding payment.
After a creditor has filed an application to wind up a company, a Notice of Winding Up Application is issued to a company’s headquarters. The company is given 21 days to comply with the statutory demands set forth in the notice. If they do not, proceedings may be issued by the creditor in Australia’s Federal Court or Supreme Court.
A winding up proceeding occurs at the court, and a judge determines whether or not a company should be wound up. If the company is to be wound up, the court will appoint a liquidator. Normally, this liquidator has been chosen by the creditor in advance, and has made the proper arrangements with the court to be assigned to the case.
Winding up is essentially another way of declaring a company insolvent and, if the application is granted, insolvency may be considered in tandem. During this consideration, additional creditors can lodge a claim against the company in pursuit of a satisfaction of their own debts. The liquidator assigned to the case has the power to accept or reject such claims made by creditors. Additional documentation can also be requested.
It should be noted that the costs associated with the original creditor’s filing of the Winding Up Application will receive priority when the debtor’s assets are liquidated and distributed to those who have an accepted application for disbursement of funds.
1.6.3 Required documents
A claim can be filed against the debtor when the following information is provided to us:
- Copies of orders, delivery notes, and order confirmations
- Copies of conditions of sales
- Copies of correspondence with the debtor to prove the claim
- Copies of invoices
- Copies of contracts
1.6.4 Expected timeframe and outcome
Insolvency proceedings in Australia can take several days or several years, depending on the complexity of the case.
1.6.5 Limited companies
Propriety Limited companies can be liquidated or enter into administration during a proceeding. Company directors are often able to put a stop to liquidation by appointing an Administrator to help relieve the financial stress they’re experiencing. This process does not apply, however, to companies that do not respond to the statutory notice within the 21-day period.
1.6.6 Unlimited companies/individuals
Unlimited companies, while not common in Australia, are sometimes pursued in insolvency proceedings. They can be liquidated, and their members can be bankrupted, while pursuing the recovery of an outstanding balance. Bankruptcy can take up to three years for the individuals involved, though this can be extended in rare situations. As a result of these proceedings, a permanent record is entered into the country’s National Personal Insolvency Index, accessible by the public.
Creditors are notified of the bankruptcy’s outcome and must stop pursuing payment of their balances with the debtor. A trustee is appointed to help these creditors get paid, and can do the following:
- Sell any personal or business assets, except those excluded by law
- Garnish wages toward the payment of debts if income levels are over $48,000 AUD annually
- Investigate the debtor’s finances and recover money transferred to someone else to avoid payment
1.6.7 Pool of creditors
This does not apply in Australia.
Unfair payment priority generally applies to those transactions that skew in favor of just one creditor at the expense of others who have lodged a claim. The aim of the rescission law is to prevent this from happening. These payments fall into a time frame that extends to six months prior to the date of bankruptcy or liquidation.
Disputed payments may have to be refunded by the creditor if their preference can be proven as preferential and invalid.
1.7 Arbitration and Mediation
Creditors and debtors who want to avoid a lawsuit or judgment can agree to meet with a mediator or arbitrator to resolve the matter more amicably. Private tribunals that look to serve the interests of industry, community, and commerce conduct these two processes. While widely available, however, these methods are rarely used.To get started today, call us at321-710-3530 to speak with an associate