Someone Who is Overseas Owes Me Money. What Should I Do?

If someone owes you money, there are a number of ways that you can seek to recover a debt. Recovering a debt from an individual or company that is overseas, however, adds another dimension to the process of debt recovery. There are many issues to take into account in assessing your options for enforcing the payment of that debt. This article will go through those issues and highlight the best way for you to recover your debt from someone who is overseas. 

Do You Have an Enforceable Agreement?

As a preliminary consideration, it is important to assess whether the person who owes you money (debtor) made a legally binding promise to pay you. Ideally, both parties should have some form of a written contract. One of the issues that a court will determine is which place has the closest and most real connection with the debt and the dispute. The question here is whether a court within Australia can hear the matter. The answer is easy to determine where a written contract contains an express term about the governing law and a forum to resolve disputes.

Where Was the Contract Formed?

For an agreement to be binding, it requires both an ‘offer’ and an ‘acceptance’ of that offer. As a general rule, the formation of a contract occurs at the location of acceptance. Usually, courts require not only acceptance but also the communication of that acceptance. Communication of acceptance ensures that both sides are aware that the agreement has started.

The exception to the general rule of the formation of the contract is the ‘postal acceptance rule’. This means that as soon as a party “posts” their acceptance, the contract begins.

Therefore, the methods you are using to create your contract with someone who is overseas (whether it is fax, post or email) can have a bearing upon what law governs your agreement. However, whether the postal acceptance rule applies to email correspondence is an uncertain area of the law. If you are negotiating and forming your contract by email, there is significant uncertainty as to whether acceptance takes place at the time a party sends their acceptance, or when the other side receives it.

How Can You Recover the Debt?

Letter of Demand

You can issue a formal letter of demand for the money owed to you. Even if you have already been chasing the debtor for the outstanding amount, a formal letter can sometimes compel the debtor to act. This is particularly so if you clearly state your intention to commence legal proceedings if the debt is not paid. However, there is some risk that the debtor may ignore the letter if there:

• are issues around the enforceability of the agreement that led to the debt; or
• is uncertainty as to which law governs the agreement between you and the debtor.

Statutory Demand

A statutory demand is a formal demand to collect a debt under rules within the Corporations Act 2001 (Cth). You can issue statutory demands against foreign companies that carry on business in Australia. Issuing a statutory demand is useful when the foreign debtor doesn’t dispute the money they owe you.

Going to Court

If you wish to start court proceedings, you can only do in your state or territory. To start proceedings, you must be able to show that there is a connecting factor between Australia and the debtor. In NSW, these “connecting factors” include that the contract:

• was made in Australia;
• was to be performed (either in whole or in part) in Australia; or
• is governed by Australian law.

There are also certain grounds upon which a foreign debtor could challenge your proceedings, including:

• ‘forum non-conveniens’: An argument that the Australian court is an inappropriate forum to hear a dispute with the foreign debtor; or
• that the dispute is beyond the court’s power.

A foreign debtor could also commence proceedings against you to seek an anti-suit injunction. An anti-suit injunction is an application seeking an order from a local court to prevent you from continuing the proceedings in Australia.

If you are successful in obtaining a judgment against the foreign debtor, enforcing this judgment in the debtor’s country is mostly a matter of foreign law. You can obtain certain certificates from the Australian court to assist you in this process. 

Key Takeaways

It is important to be aware of the number of issues that are at play in recovering money from a foreign debtor. These issues surround all aspects of the contract, including its:

• formation;
• acceptance; and
• enforceability.

If you have any questions or need assistance in recovering money owed to you, contact LegalVision’s litigation lawyers on 1300 544 755 or fill out the form on this page.