Successful Debt Recovery When Chasing Debtors

Date: Mar 07, 2009
Document Type: Article
Debt recovery encompasses a wide range of matters, from something as commonplace as an overdue account for goods and/or services that remains unpaid outside of the usual terms of trade, an agreed amount due under a contract, an amount due under a guarantee, the cost of repairs, losses arising from a motor vehicle accident,  and so on.
The common feature of all these claims is that a debt is due and the time has come to take firm action to recover it as quickly and efficiently as possible.
It may sound obvious but the place to start with any debt recovery is to find the debtor and bring the debt to their attention.
Who owes the money? Who will legal action be taken against if the debt is not recovered beforehand?
The debtor may be:
(a)     An individual, possibly operating a business
a)      either alone, under their own name, e.g. John Smith; or
b)      within an unincorporated partnership, e.g. John & Mary Smith;
(b)   A company, e.g. J & M Smith Pty Ltd, in which case the debtor should also display its Australian Company Number (ACN), a unique nine digit identifier issued by the Australian Securities and Insurance Commission (ASIC), e.g. J & M Smith Pty Ltd  ACN 123 456 789;
(c)    Whether an individual or a company, the debtor may also be trading under a registered business name, e.g. Widget’s Refrigeration Services. A common mistake is to identify and refer to the debtor according to the business name, which is in fact not a legal entity and therefore legal action should be commenced against the people (or company) using the trading name . If the business name is registered a search will reveal details of who the debtor actually is and how to contact them.
(a)    For individuals and partnerships trading under a business name:
(i)      Search under the business name through the NSW Department of Fair Trading for historical details of:
-           registration of the business name and its currency;
-          the owner of the business name;
-          the trading address of the business and the residential address of anyone on the registration
(ii)    It is common for the debtor operating a business to have an Australian Business Number (ABN) e.g. ABN 12 345 678 901. Having an ABN is essential to anyone issuing tax invoices. Again, searches can be conducted regarding the ABN, such as the debtor’s name, the type of legal entity (e.g. individual, partnership, company), the trading name applicable and further historical details.
(b)   For companies:
Conduct an company (ASIC) search – start with the ACN, or if this is not available, the organisation’s name.  for historical details relating to the company, including:
-          the address of its registered office , which may be the office of its accountant (for service of legal documents);
-           its business address;
-          the address of each of its directors and company secretary, if applicable.
(c)    In both cases:
(i)   look carefully at all correspondence and notes of your dealings with the debtor and cross-check this with the information obtained through your searches;
(ii) this includes telephone numbers supplied by the debtor and any further searches of the White Pages.
A careful scrutiny of all the clues will assist in establishing a profile of the debtor’s identity and whereabouts.
(d)     For difficult to locate debtors:
(i)      Further searches may be undertaken through various centralised data bases, including:
-          Electoral rolls –Electoral Commission;
-          a land title search;
-          phone book
-          site visits
-          applications for building permits – Local Government
-          FCS Online searches
-          sometimes trade organisations can be of use
(ii)    selective use may be made of private investigators where large sums are involved as the cost is otherwise prohibitive.
Assuming all efforts have been exhausted to collect the debt, the next step is to send the debtor a strongly worded letter of demand, making it clear exactly what the debt is, with an absolute deadline for payment to avoid the commencement of legal action.
Keep in mind that the point of this exercise is to get the debtor’s attention.
(a)For individuals and (unincorporated) partnerships, the letter should be sent to each of the addresses obtained in the searches, as well as any other address disclosed in correspondence from the debtor
(b)For companies, the letter should be sent to every relevant address on the ASIC search, namely the registered office, business address as well as to each of the directors – where it is a reasonably large company, the directors will be concerned to receive such correspondence and should be keen to ensure that the company is paying its debts as and when they fall due.
The above list is not exhaustive and it helps to be creative – the debt is important to you – after all, it will only cost you the price of a stamp or a phone call.
Be careful about contacting third parties. The last thing you want to do is put out information suggesting someone has not paid a debt, only to find that you end up on the wrong end of a defamation or libel claim.
If all else fails, start legal action. This is where we can help. At Craddock Murray Neumann we have handled thousands of debt recovery claims. We offer you the services of solicitors who know just how hard you should go to recover a debt – without spending more than the debt is worth.
Contact Dominic Wilson or Julian van Leer ( for advice and assistance. We will put you in touch with an experienced lawyer to guide you through the debt recovery process.
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