Slater Byrne Recoveries collected the full amount of debt, plus interest, from a hospitality company managing restaurants and events venues that were affected by the lockdowns imposed due to COVID-19.
A security services company contacted the Slater Byrne Recoveries team in Sydney in September last year to collect a $19,000 debt. The Debtor was a company in the hospitality industry, managing several restaurants and venues. Before engaging us, the Client was trying to collect the debt on its own. The Debtor, however, was on minimal staff operations due to COVID-19. No one was in their office manning the business email for accounts.
Moreover, the Debtor was only willing to pay 50 cents on the dollar because they were claiming financial hardship. The Client made it clear that it was not in the position to accept the 50% proposal. They provided labour and have already paid the wages and other associated on-costs.
The Client though was willing to accept a payment arrangement over time, even if the period runs for three to six months. The Client’s only request was that the Debtor opens its lines of communication and commit to making a down payment. The Client also acknowledged that COVID-19 was affecting everyone, including the Debtor. Therefore, the Client was willing to give some added time to the Debtor to pay.
Initially, Sandra Chary, the SBR account manager assigned to the case, sent a letter of demand to inform the Debtor that it has outstanding payable against the Client. That demand letter also notified the Debtor that we have been appointed as the debt collection agency.
|16 September||Opening of Debt; Letter of Demand Sent to Debtor|
|23 September||Notice of Impending Legal Action Filed|
|20 October||Draft Statement of Claim Sent to Client for Review|
|29 October||SBR Receives 50% Payment Offer from Debtor|
|30 October||Debtor Paid in Full|
The debt collection process in this case was fairly straight forward. The letter indicated that the Debtor had within 7 days from the date SBR issued the demand letter. The Debtor was adamant again that they could only pay 50% of the outstanding debt. The Client reiterated, they would be flexible, but the debt needed to be paid in full.
Before the expiration of the demand letter, SBR, after discussions with the Client, sent the Debtor a notice of impending legal action. That notice includes a fixed date for filing a Statement of Claim (“SOC”) against the Debtor in the appropriate court.
After a SOC is issued, should the Debtor not file a defense within the time frame required, the Client’s solicitors intend to proceed with Default Judgment. Following this, the Client can then enforce the Judgment. The Client may also add associated costs to the debt.
The Debtor can choose to engage a solicitor to represent them and lodge a defense within 28 days after being served with the SOC.
Is it possible to lodge default notices against the directors as well as the company?
The Client raised this question during the debt collection process. Unfortunately, Slater Byrne cannot lodge default notices against the directors of the Debtor because the unpaid debt is not a personal debt. If the directors owe the debt in their personal capacity, the Client will need to take legal action to be able to affect the credit rating of the directors.
Notice of intention to sue expired without further response
Because it was not appropriate to lodge default notices against the directors, SBR’s option was to wait for the Debtor’s response on the notice of intention to sue. SBR made several phone calls to follow up on the Debtor. The Debtor insisted that it was having difficulty addressing the outstanding debt.
Because the Client is not happy to accept a reduced payment, the Client decided to proceed with a SOC. Once the Client serves the SOC, the Debtor will have 28 days to respond by either paying the debt in full + costs, entering a suitable arrangement, or filing a defense.
If the Debtor files a defense, the Client may need to pay further hearing and solicitor fees. The solicitors though were not envisioning a defense as the Debtor did not dispute the debt. The Debtor was simply trying to get a discount on the total amount payable.
Things to consider before serving a SOC:
- Obtaining the correct ACN for the client,
- Ensuring a Contract is in place, and
- The various costs that may be payable during the proceeding, including a hearing allocation fee.
As we were unable to issue a Statutory Demand here due to Covid-19 restrictions with legislation, we advised our client to commence with legal proceedings instead through a Statement of Claim.
Once The claim was issued, we received a formal offer from the debtor to settle. This was rejected and they ended up providing another offer to pay the debt in full.
Debtor was attempting to get a reduction of up to 50% of the debt hereby claiming financial hardship due to the Covid-19 pandemic. They failed to substantiate any evidence of this prior to our client commencing legal action.Sandra Chary, Slater Byrne Recoveries accounts manager
|Original Debt||Interest||Paid Amount|
The SBR team was anticipating taking the legal route to recoup the full amount of the debt. However, we were surprised to receive a letter from the Debtor saying it has conferred with its executives and has decided to pay the outstanding amount in full, including any interest and legal fees.
This debt collection case was straightforward but was compounded with the hardship companies experienced because of the COVID-19 pandemic. Ultimately, the Client collected the full amount of debt that it was owed, and the Debtor was spared the costly litigation expenses.
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently working in a Marketing/Head of Sales capacity at Slater Byrne Recoveries.