If you have needed to recover a debt, you may have sent a letter of demand in the past. However, these can sometimes be unsuccessful in recovering debts. Therefore, you should be aware of the other legal options available in Victoria (VIC) to pursue money. In Victoria, creditors can recover debt through two forums, the:

This article will explain these two processes and weigh up the benefits of each.

Using VCAT to Recover a Debt

VCAT has the power to deal with disputes or claims that arise between purchasers and suppliers of goods or services. These claims are known as consumer and trader disputes. In dealing with consumer and trader disputes, VCAT may:

  • refer a dispute to a mediator appointed by VCAT;
  • order the payment of a sum of money that one party owes to another party;
  • vary any term of a contract;
  • declare that a term of a contract is, or is not, void;
  • order the refund of any money paid under a contract;
  • make an order for a party to perform a contract;
  • order rescission of a contract;
  • order rectification of a contract;
  • declare that a debt is, or is not, owing;
  • make an order for the possession of land; or
  • order a party to do or refrain from doing something.

What are the Limits of VCAT?

In regards to disputes between suppliers and purchasers about the supply of services, an additional requirement is needed for the issue to be heard in VCAT. This requirement is that the applicant must establish that the supply was made “in trade or commerce”. This means that it was made in the course of business activities.

For example, you may have provided a service on a one-off basis or as a hobby. If so, you may not be able to commence proceedings in VCAT to recover payment for a debt.

In contrast, a supply of goods does not need to be in trade or commerce to fall under VCAT’s consumer and trader dispute area.

What Are the Pros and Cons of Suing in VCAT?

Unlike the courts, VCAT was designed to be user-friendly if you wish to represent yourself without a lawyer. Additionally, the starting point in a VCAT proceeding is that each party must bear their own costs of the proceedings. Accordingly, while this reduces the risk of an adverse costs order, it also reduces your chance of being awarded costs.

Furthermore, the decisions in VCAT are only legally binding when they have been specifically empowered under a law. This means that VCAT does not have a general power over commercial disputes. As such, it cannot deal with claims about breaches of contracts.

Using the Courts to Recover a Debt

The first matter to be considered in selecting the appropriate court is the value of the debt. You can only bring a claim to the Magistrates Court of Victoria for debt over $100,000. In comparison, you can bring claims for any amount of debt in the County and Supreme courts. When distinguishing between using either County or Supreme courts, the latter is more appropriate for complex debt recovery. Subsequently, it charges higher filing and hearing fees.

What are the Pros and Cons of Suing in a Court?

Unlike under VCAT, each court has power over all commercial disputes and can, therefore, deal with any type of civil debt claim. However, the court process is more complex than VCAT and it will be beneficial for you to have legal representation.

The exception to this rule is for small claims (up to $10,000) which can be tried in the Magistrates Court by way of arbitration. Arbitration is where an independent and neutral arbitrator makes a decision about a dispute between parties.

In general, the courts tend to be slower than VCAT in listing matters for hearing or trial. Furthermore, the level of case management increases as per the court hierarchy.

Unlike in VCAT, in court proceedings, the guiding principle is that ‘costs follow the event’. This means that if you are successful, the court will award costs in your favour as per the court scale. The court scale is often far below what your actual legal fees will cost. Furthermore, the process of fixing an amount of costs may require a separate application to the Costs Court.

Key Takeaways

The choice of the appropriate setting in Victoria to commence debt recovery proceedings can be very complex one. You will need to consider:

  • the amount you are looking to claim;
  • whether you wish to seek legal representation; and
  • whether your issue is empowered under law or if it is a general commercial dispute.

If you have any questions about debt recovery matters in Victoria, contact LegalVision’s debt recovery lawyers on 1300 544 755 or fill out the form on this page.

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