Letter of demand in QLD and what to do if it's ignored

When someone owes you money and isn't paying, a letter of demand in QLD is usually the right first move, and it's the cheapest one you'll make. Some debts get paid soon after a formal letter arrives, because it's the first moment the other side realises you're not going to let it go.

But only send a letter of demand if you're prepared to follow it through into civil litigation if it's ignored. An empty threat teaches the other side they can ignore you, and it makes everything after it harder, so before you send one, work out what you would do next.

Deciding whether the debt is worth pursuing

Before you think about the letter itself, consider whether to pursue this debt at all. That comes down to three things.

The first is whether the debt is provable. An invoice, a signed quote, a contract or an email where they agreed to the price all help, while a handshake and a good memory is a much weaker position.

The second is whether they can pay. A judgment against someone with no money and no assets is an expensive piece of paper, and this is the question people skip and regret.

The third is whether the amount justifies the effort. Below a certain figure, the time you'll spend is worth more than the debt. If all three stack up, go ahead.

What to put in a letter of demand

The letter needs to be specific rather than dramatic. Set out who you are and who owes the money, and exactly what the debt is for, with dates, invoice numbers and amounts. Say what's already been paid and what's outstanding, and state clearly what you want and by when, using a real date rather than "immediately". Then explain how to pay and what you'll do if they don't.

Keep it civil and factual. A letter that reads like a threat is less effective than one that reads like a person who has their paperwork in order and has decided to use it. If it ends up in front of a tribunal or a court, you want it to make you look reasonable.

Give a sensible period to respond, and something in the range of a week or two is common.

Check the time limit before you send one

Missing the time limit is the mistake that costs people the whole debt. There is a time limit on suing for a debt in Queensland. For a debt under an ordinary contract, the Limitation of Actions Act 1974 (Qld) generally allows 6 years from the date the right to sue arose. Once that time has passed, the claim can be defeated regardless of how clearly the money is owed.

The clock can also restart. If the person who owes the money makes a payment towards it, or acknowledges the debt, the 6 years can run again from the date of that acknowledgment or the last payment. An acknowledgment only counts for this purpose if it is in writing and signed by the person making it.

If the invoice is old, find out exactly where you stand on timing before you do anything else. A phone call to a lawyer about this makes sense even if you plan to handle the rest yourself, and it's a short conversation.

Where the claim goes if the letter is ignored

Many people don't know how this part works, and it changes the strategy. For debts of $25,000 or less, excluding interest, you can apply to the Queensland Civil and Administrative Tribunal, QCAT, as a minor debt dispute. It's designed to be used without a lawyer, which keeps the cost down. Parties generally represent themselves, and you usually need QCAT's permission to have a lawyer represent you.

The process depends on the size of the claim. Claims under $1,500 are listed straight for a hearing, without mediation. Larger claims are listed for mediation first, and then go to a hearing on a different day if mediation doesn't resolve it.

Above $25,000, you're in the court system rather than QCAT, and which court depends on how much is at stake. The Magistrates Court deals with claims up to $150,000, the District Court with claims between $150,001 and $750,000, and the Supreme Court with claims over $750,000. The cost profile changes sharply at that point, and so does the case for getting a lawyer involved early rather than late.

QCAT application fees depend on the amount claimed and change each year, so check the current ones on the QCAT website rather than relying on a figure you read somewhere.

Enforcing a judgment

Understand this before you start, because it's where the disappointment usually happens. Winning gets you an order that says the money is owed. It does not transfer any money into your account. If the other side still doesn't pay, you then have to enforce it, and enforcement is a separate process with its own steps and its own costs.

That brings you back to the earlier question of whether they can pay. A well documented claim against a business with money makes sense to pursue. The same claim against a company that is about to fold is throwing good money after bad, and no letter of demand changes that.

If the debtor is a company, there is another route

Where the money is owed by a company rather than a person, a creditor can serve a statutory demand under section 459E of the Corporations Act 2001 (Cth). It puts real pressure on, because if the company doesn't pay or otherwise deal with the demand within 21 days of it being served, the creditor can apply to the court to have the company wound up.

It has a minimum debt amount, strict form requirements and short timeframes, and it is very unforgiving of mistakes. It's also the wrong tool where there is a genuine dispute about the debt, because the company can apply to the court to have the demand set aside. If your debtor is a company, ask about it specifically rather than assuming it applies.

What not to do

Avoid anything that could look like harassment, because there are rules about how debts can be pursued. The ACCC and ASIC publish a joint Debt collection guideline for collectors and creditors, which applies to businesses collecting their own debts as well as to collection agencies. It warns against unduly frequent contact, treats visiting someone's workplace as a last resort, and says you must not mislead someone about the debt or the consequences of not paying. Repeated calls, contacting someone at work, or anything that could be seen as threatening will hurt you far more than the delay costs you.

Be careful not to overstate the debt. Adding costs you haven't incurred, or interest you're not entitled to, undermines everything else in the letter.

Only threaten what you can follow through on. Saying you'll have them declared bankrupt over a $4,000 invoice is not something you could follow through on, and the other side's lawyer will spot it immediately.

Act promptly as well. The longer a debt sits, the harder it is to recover and the closer you get to the time limit.

If you're on the receiving end of one

Plenty of people find this article because they have received a letter of demand rather than sent one. If that is you, don't ignore it. A letter of demand that gets no response often turns into a claim, and a claim you didn't respond to can result in a decision being made without you.

If you dispute the debt, say so in writing, and say why, specifically. If you owe part of it, say which part. If you can't pay it all now, propose something realistic. Many creditors will consider a payment arrangement, because getting paid slowly is better than not getting paid.

What good record keeping does for you

The businesses that recover debts most easily are usually the ones with the cleanest paperwork. That means written terms the customer agreed to, invoices that went out on time with clear due dates, a note of every conversation about payment, and an email confirming what was agreed on the phone.

None of that is glamorous, but it can turn a difficult debt into a straightforward one.

If you're chasing money in Cairns and it's stopped being worth your time

The decision is usually a commercial one rather than a legal one. It comes down to whether this debt justifies the effort and what the realistic path to being paid looks like.

We act in debt recovery and commercial disputes in Cairns as part of our civil litigation work, including where a letter of demand hasn't worked. If you want a straight answer on whether to chase a debt, get in touch.