By Michael Cope, Cornwalls Special Counsel, Brisbane

As a member of your industry association, you are entitled to have a free letter of demand sent by Cornwalls for any debts that you may be owed over $550 (ex GST). You can have the free letter of demand sent by visiting the member portal on your website and following the link. masterelectricians.com.au/legal-advice

But what happens if the letter of demand does not work? What are your options?

Cornwalls offers members up to 20 minutes of free advice when your debt is not paid or prior to sending the letter of demand.

This article sets out some of the options that are available to you when the letter of demand does not work.

Minor Debt Recovery

In our view, where the amount of your debt is less than about $15,000 it would usually be uneconomical for you to engage a solicitor to pursue the debt any further. In those cases, we recommend that you bring a proceeding on your own behalf in the Queensland Civil and Administrative Tribunal¹. We recommend that you commence your claim in the minor civil dispute jurisdiction rather than the building list. A claim for unpaid labour and materials clearly falls within the definition of minor civil dispute/debt. The advantage of commencing the claim in that part of the tribunal is that no legal representation is permitted there. Whereas, in the Building List legal representation can be and is often permitted.

Statutory Demand

In a case where the debt is:
1. owed by a company,
2. above approximately $10,000, and
3. there is no dispute about the debt or claim the work is defective,

one option available to you is to issue a Statutory Demand pursuant to the Corporations Act. This is a formal document requiring the company to pay the money or apply to the court to set the demand aside within 21 days of the demand being received.
If the demand is not complied with then the next step would be to apply to wind the company up.

It is relatively easy to set the demand aside, so it is important to be certain that there is no ground for disputing the debt. The issuing of the demand is relatively cheap and simple. It is also a powerful tool, as most people do not want their company wound up, particularly in Queensland where it could result in the directors being prohibited from running a company that has a building licence.

Security of payment

Where a debt is disputed for some reason, particularly where it is asserted that the work is defective, then the cheapest and fastest way to recover your money is under the security of payment system. Your unpaid invoice can be issued as a payment claim under the Act and if a payment schedule is received disputing the claim, then you can proceed to an adjudication application under the legislation. If you are successful, then the adjudicator’s decision can be enforced as a judgement of a court.

Court or other proceedings

Obviously, in any case where someone owes you money you can take proceedings in a Court or in the QCAT. These are of course time-consuming and far more expensive than the other options discussed.

Subcontractors’ Charge

Finally, we should mention this option. Obviously, as the name suggests, this only applies where you are a subcontractor. It is a claim for a charge over monies owed by the principal to the head contractor/builder. These days, this is only used as an option where the head contractor/builder has gone into liquidation or administration, or you think it is about to. Strict time limits apply. For these reasons, this is an option you should seek advice on prior to issuing a letter of demand not afterwards.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.

1. In Victoria, such claims are brought in the VCAT. In Western Australia minor debts of less than $10,000 can be claimed as a Minor Case Claim in the Magistrates Court. In Tasmania, claims of less than $5000 can be brought in the Magistrates Court. In South Australia such claims for less than $12,000 can be brought in the Magistrates Court. Finally in New South Wales such claims for less than $20,000 can be brought in the Local Court.