We all know how frustrating it is when a debtor is either unable or unwilling to pay you money that is due and owing. When the amount of that debt is significant, it is inevitable that you will have to expend time and further money on legal fees trying to recover that debt. In most circumstances, at least a portion of those legal costs can also be recovered from your debtor. There are, however, a couple of things that you can do to assist with recovery of your legal fees.

Be Proactive With Your Contract Drafting

Ensure that a lawyer has adequately drafted your contract if you require a party to pay you for either goods or services. Your contract should include a clause (or clauses) setting out your rights and entitlements in circumstances where that party defaults on payment. A well-drafted contract will state that you are entitled to claim ALL of your costs of recovery, including legal fees, from your debtor once they have defaulted on payment. You can rely on this clause during negotiations with your debtor, as well as later if you are required to commence formal court proceedings.  

Letter of Demand

Before you can begin formal court proceedings, you must send your debtor a letter of demand. As the name suggests, the purpose of a letter of demand is to demand payment of the outstanding debt from the debtor. It provides the debtor with a final opportunity to pay the debt before you commence court proceedings. 

It is also important that your letter of demand not only set out the amount of the principal debt which is owing but that if you choose to commence court proceedings, the debtor will be liable to pay your additional legal costs. Sometimes, this alone is sufficient motivation for your debtor to pay any outstanding amount.  

What Else do I Need to Know?

There are some other important factors you should know once you have initiated court proceedings: 

  1. If you commence proceedings in the Small Claims Division of the NSW Local Court, your legal costs are capped. For example, if your claim is worth between $5,000 and $10,000, you can only claim a maximum of $802.56 in legal costs (current as at 23 June 2016).
  2. A party that is self-represented is not usually entitled to recover professional legal costs.
  3. If you are unsuccessful in your proceedings, the court can make an order requiring you to pay the defendant’s legal costs. The court can order costs on either an ordinary basis or an indemnity basis. For more information on the types of costs and orders that a court can make, you can read our article, ‘But I won!  Why can’t I recover all of my out of pocket expenses and legal costs?.
  4. Costs can be awarded against any party who causes an unnecessary delay during proceedings.  

***

If you require your contracts reviewed or need to start debt recovery proceedings, or if you have any questions about the Small Claims Court, get in touch with LegalVision’s disputes resolutions lawyers on 1300 544 755 or fill out the form on this page. 

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy