Many businesses struggle with managing cash flow and, in
difficult economic times, it is not uncommon for things to reach
the point where a customer just won't pay.
What are the legal options to recover payment?
In very general terms, legal options to seek to compel payment
making a formal demand for payment through a lawyer;
serving (in relation to a company debtor) a statutory demand
under the Corporations Act 2001 (Cth) for payment of debt,
as a precursor to liquidation proceedings; and
In some industries – for example, the building and
construction industry – there may be other options available
to recover payments, such as, for example, action under the
Building and Construction Industry Payments Act 2004
The right option will depend on the circumstances – and
some options may not be appropriate. It is important to get good
advice to make the right judgment call on the best approach to
Sometimes debt collection can also be about improving your
position through commercial negotiation. If a customer won't
pay, in real terms, you have nothing. And formal legal processes
are no guarantee of payment – particularly where the customer
doesn't have capacity to pay. So negotiating terms to get your
business into a better position can be worthwhile.
The sort of negotiation options that may be appropriate
putting a formal repayment agreement in place that acknowledges
taking security in exchange for time to pay; and
agreeing to a discount on the basis of immediate payment.
Care needs to be taken with each of these options as, for
example, accepting payment where there are issues of insolvency or
bankruptcy in play can leave your business exposed if the customer
Another option sometimes considered by businesses is engaging a
debt collection agent to represent the business to try to recover
the debt on a speculative basis – i.e. on the basis that the
agent gets a commission from any amount collected.
In weighing up whether to engage a law firm or a debt collection
agent asking the following questions might be useful (as well as,
of course, considering cost):
Which organisation is best placed to represent my business?
Will the organisation and its approach be consistent with my
Do I know enough about the organisation – is it reputable
and well established?
What level of information do I want about the process? Do I
want regular updates of the interactions with the customer or am I
happy to leave things in the hands of someone else?
What is my exposure to cost or claims from the customer?
Cooper Grace Ward is a leading Australian law firm with
extensive experience in debt recovery and commercial dispute
negotiation. We have acted for businesses of all sizes in these
types of matters and have a solid track record of strongly
representing our clients' interests in a way that suits their
requirements and brand.
Winner – EOWA Employer of Choice for Women Citation 2009,
2010, 2011 and 2012
Winner – ALB Gold Employer of Choice 2011 and 2012
Finalist – ALB Australasian Law Awards 2008, 2010, 2011 and
2012 (Best Brisbane Firm)
Winner – BRW Client Choice Awards 2009 and 2010 - Best
Australian Law Firm (revenue less than $50m)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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