A Company Owes You Money and Won’t Pay? Process Our Senior Lawyer Qian Long Uses

First, the groundwork: a letter of demand

The recovery process almost always begins the same way; with a formal letter of demand that sets out the exact amount, when it was due and a deadline in which to pay it, which is usually somewhere between seven and fourteen days. 

Before the letter of demand is sent, Long asks clients to gather their proof, such as the agreement or the terms you both agreed to, evidence the money is owed, bank statements and the trail of emails and messages covering the amount, any interest and what the money was for. 

If some of it isn’t in writing, bank statements and a clear account of what was actually agreed to can still support the demand.

A letter alone can often be enough, and sometimes the company may want to settle for a lower figure. If that suits you, the matter can end right there with no further action needed.

You can see more about that opening step in detail in this article: how a Gold Coast tradie chased $40,000 in unpaid invoices. 

In this article, we’ll take a closer look at when a letter of demand doesn’t work because the deadline has passed and the company is still ignoring you. 

What Long does next depends entirely on the answer to one simple question.

The fork our lawyers reach for next

That question is: is the debt genuinely disputed? The answer will decide everything that follows.

• If it isn’t in genuine dispute because the money is clearly owed and there’s evidence the company accepted this, a statutory demand is usually the fastest, cheapest way to force the issue.
• If it is genuinely disputed, and the company really is contesting whether the money is owed, a statutory demand isn’t the right approach. You’re looking at a court claim instead.

We are blunt about why this decision matters: if you use the wrong tool for the wrong debt, it can end up costing you more than doing nothing at all. 

Here’s how each side of it works.

What a statutory demand is, and why our lawyers say it works

A statutory demand is a formal demand made under the Corporations Act 2001 (Cth). They are used when a company owes you a debt at or above the statutory minimum amount, which is currently $4,000.

Once served, the company has 21 days to either pay up or apply to the court to set the demand aside. If it fails to do either of these things, the law presumes the company is insolvent, which opens the door to applying to wind the company up.

“A lot of debtors pay very quickly once a statutory demand lands because it’s going to cost them too much money to engage a lawyer to deal with it, so they just pay.”

 – Qian Long, Senior Lawyers at Kingsford Lawyers. 

The way Long describes it, that last point is the reason statutory demands work. Our team turned a nagging invoice into a hard deadline with real consequences. 

In Long’s experience, many debts are paid well within the 21 days, not because the debtor has a change of heart, but because fighting a statutory demand is likely to end up costing them far more than simply paying what they owe. 

If the company still doesn’t pay or move to set the demand aside, the matter can end up back in court and they’ll have to explain to a judge why they haven’t paid, all with the threat of insolvency hanging over them.

When a statutory demand backfires: the mistake our lawyers watch for

Statutory demands are a powerful tool, which is exactly why using one for the wrong debt can end up backfiring, sometimes with a costs order made against you. 

Long treats it as the wrong approach when:

• The debt is genuinely disputed. If the company has a genuine dispute about whether the money is owed, or is able to make a genuine offsetting claim of its own, it can request to have the demand set aside, backed by affidavit evidence, and you may be ordered to pay its costs. Statutory demands are for debts that are clear and not in serious dispute, not for arguing about whether a job was done to the required standard.
• The amount is below the threshold. If what’s owed is under the statutory minimum of $4,000, you can’t make a statutory demand.
• You’ve got the wrong entity. A statutory demand only works against a company. If your debtor is a sole trader or an individual, this process doesn’t apply, and serving it on the wrong company (easy to do when a business trades under several names) can sink the whole thing.
  

This is the misjudgement Long most often sees catch people out. On a clean, undisputed debt, a statutory demand is fast and cheap. On a disputed one, it’s the wrong instrument, and it can cost you.

If the debt is genuinely disputed: the court path

When a debt is truly contested, the pressure-lever approach won’t work, so Long will usually move on to a claim. In broad terms, this means preparing and filing a claim and a statement of claim. The company will then either file a defence (and you file a reply) or choose to ignore it.

If a company chooses to ignore a properly served claim, you can apply for default judgment against the debtor. A default judgement is more involved and more expensive than a statutory demand, and which court you’re in depends on how much you’re owed. 

There’s more information on this in the Gold Coast tradie article we mentioned earlier.

Our team won’t hand you one big total up front and hope for the best, they price everything out stage by stage so you only ever have to decide on the next step. As a rule, claims are charged by the lawyer’s hourly rate, depending on how complex the matter is.

“I won’t promise too much. I just take it step by step, the claim, then the statement of claim, so the client is only ever deciding on the next piece of work.”

– Qian Long, Senior Lawyer at Kingsford Lawyers 

When Qian Long say it’s worth getting help

You can send a letter of demand yourself, but we will ensure you pick the right path the first time, which is invaluable because a statutory demand aimed at a disputed debt, or the wrong entity, can end up costing you more than doing nothing. 

In Long’s experience, it’s always worth seeking legal advice, especially when:

• The company has gone silent and the informal route has clearly run its course.
• The debt is a significant sum you can’t afford to write off.
• They’re disputing it: once it’s a contest of evidence, it‘s no longer a simple debt.
• The business looks shaky: if there are signs the company is heading towards insolvency, timing matters for whether and how you’ll be paid.

The money’s still owed: the only question is which lever

If a company goes quiet about a debt they owe, it doesn’t make your invoice disappear. It just means you need to make the right move. 

For a clean debt above the minimum threshold, Long will often recommend a statutory demand long before anything as slow or costly as a court case. If you get the decision right, you can be paid within 21 days.

If you’re chasing a company that’s stopped answering, our commercial lawyers can usually tell you which path fits your debt quickly. Kingsford Lawyers acts for businesses Australia-wide, with offices in Melbourne and on the Gold Coast, and we’re available 7 days a week. 

Book a free chat with one of our professional and courteous lawyers, with no obligation and no pressure.