Find out how to enforce a payment in New South Wales. For an overview on enforcing payments in each Australian state and territory, check out our previous guide.

Step 1: Pick up the phone

In the example above, the business owner attempted to contact the client about the unpaid invoice. Although the business owner’s attempt to contact the client and ask for the payment was unsuccessful, it’s an important first step. In the best case
scenario, the outstanding invoice may have been a result of an oversight and could be resolved by a simple conversation. However, if this step is unsuccessful, you can try Step 2.

Step 2: Send a letter of demand

Put simply, a Letter of Demand is a letter that you can send to the other party (i.e. the client) in attempt to force them to pay an outstanding amount of money. It is something you can create on your own, or you can seek the assistance of a legal professional.

A letter of demand should:

  • Explain to the other party (i.e the client) the dispute;
  • specify the money owing; and
  • set out a defined period of time in which they must resolve the dispute, or     face legal action.

Several outcomes may arise once the other party has received the letter. Ideally they pay the full amount owing and you can move on with business as usual. However the other party may;  try to negotiate a compromise (i.e. ask to pay in instalments); contest that they owe the money; or simply ignore the letter.

Despite your best letter writing skills, a Letter of Demand may not result in your desired outcome, and you might need to proceed to Step 3.

Step 3: Seek debt recovery in the NSW small claims division of the Local Court

If you’ve exhausted the first and second steps without any success, it might be time to commence legal action in the Local Court. Don’t be put off by the thought of expensive and lengthy court proceedings. Recovery of a debt in the small claims division of a Local Court is a ‘do-it-yourself’ course of legal action. It’s relatively informal and the amount of costs payable to the court if you’re unsuccessful is limited.

What is a small claim?

A small claim is a claim if it relates to money, goods purchased or delivered, labour, or a combination of these. The amount of the claim must be less than $10,000.

How does it work?

There are two-steps in the debt recovery process:

  1. Once you have taken the matter to the Local Court, you and the other the party must attend a ‘pre-trial review’ with the aim of settling the matter without the need of setting a hearing date. If an agreement cannot be reached, the court will then hear your case and if you’re successful, the court will award a judgement in your favour.

2.The money must then be recovered from the other party. This will often involve taking enforcement action such as obtaining a writ of execution against the other party’s property or securing a garnishee order against the other party’s wages or bank account – essentially a certain amount of money taken out of the other party’s wage or bank account on a weekly basis.

It’s important to note that the case study above was specific to New South Wales, but the good news is that the process is fairly similar across Australia. For more information visit your specific state or territory local court website.

Still unsure of how to recover your money in NSW or need a lawyer to sign off on the Letter of Demand? Contact a LawPath consultant on 1800 529 728 to learn more.

Anthony Fong

Anthony Fong

Anthony is a Paralegal at Lawpath. Pursuing his interest for Insolvency and Commercial Law, he is currently completing his third year of a combined degree in a Bachelor of Laws/Bachelor of Commerce at University of New South Wales.