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How to collect business debts

by Jim Heath

What happens to the innocent

SEE IF the following story sounds familiar.
At the time, you were really happy to make the sale. He was a new customer, and his order
was worth $6200. A promising new customer. And he was delighted with your product (or
But now thirty days have gone by, and you've had no cheque. So you phone him. No
problem, really. "It's just that two directors need to sign the cheques, and one of them is out
of town. He's expected back in two weeks."
Two weeks later, you phone again. The director got back, they tell you, but he's having a
minor operation on his leg. He went straight to hospital and didn't get a chance to sign any
cheques or go through his in-tray. Terribly sorry, but they swear you'll get a cheque next
Nearly two months have now gone by. The $6200 would be useful in your cash flow. You
have bills to pay, like anyone else. You try phoning again -- but now have trouble keeping the
irritation out of your voice. Has that cheque been signed yet? Yes, they say, but it's with the
book-keeper, who has a whole pile of cheques that need to be "entered into the computer".
"When?" you ask.
"By Friday," they assure you.
Surely, things can't keep going wrong? (Or, more darkly: surely, they must run out of excuses
Not so. The problems can go on for a long time yet. That computer, for example: there could
be a disk crash. Or your cheque could be sent to the wrong person, to someone who's in New
Zealand. But never mind, they'll issue another one... when the computer is fixed. And the
other director gets back from Canada. And the book-keeper recovers from his open-heart
surgery. Provided they can find the chequebook, in the mess that was left after the sales tax
people raided them. Always assuming that the person you want to speak to has returned from
a meeting that seems to last as long as the polar night.
Even if you're pretty innocent, you'll realise you're being strung along. Time to put the
pressure on! But how?

Usually what happens next in a story like this is that you make a few angry phone calls. In
your last call, you threaten legal action. (A message that's carefully taken down by their 16year-old receptionist, because everyone else is still in that polar meeting.)
Then you crack. You've had enough! You storm down to your lawyer (if you have one -otherwise, you grab the yellow pages and pick one). There, in that comfortable chair, with
that attentive face taking it all in, you feel like you're loading shells into a cannon. They did
this, they did that! Great ammunition! Blast them, Mr Lawyer!
This takes an hour. In extreme cases, even two. Your story isn't that coherent. You haven't
brought any papers -- or not enough. Anyway, you now feel better. It's now in the hands of
your lawyer. Now they'll see! Boy, will they! No messing around with you.
Back at your office, you send copies of the papers your lawyer asked for. You get them out of
the office within an hour, and send them to the lawyer by courier. (Why wait for the post? So
slow. That might delay things a day!)
A week passes. Surely by now something dire must have happened to those guys who owe
you the money? Agitated, you phone the lawyer. His tone jars you a little. Yes, he's looked at
the papers. He suggests that he will write the debtor a letter, saying that legal action will be
taken if no cheque is paid within seven days. A little casual and slow, you think -considering those guys deserve, well, death, practically.
It takes another week before he actually sends the letter. How is this possible? Surely, there
can be nothing more urgent than your $6200? A whole week, to get a letter out? But you
don't dare resent your lawyer, your main weapon. But still, you don't feel exactly the way
you did at the beginning. A thought -- hard to repress -- keeps coming up: maybe you didn't
get a tough enough lawyer? But the idea of starting all over...
The letter goes out, and another week creaks by. Nothing. No $6200. No response. Zero.
You can't stand it! You'll hit them with a summons! Mind you, you haven't done this before,
and you picture something like a lightning bolt. It will leave them stunned, and just alive
enough to beg for mercy and write a cheque.
Actually, what you say to your lawyer is milder: "I believe that a summons would be the
logical next step. Let's hope they respond in a more positive way, so the matter will be
speedily concluded." So rational.
Several more weeks pass. Probably a month. Little by little, your lawyer informs you about
the facts of legal life. You don't get out a summons just like that. (At least, he doesn't, not
with his workload.) It's a little mysterious, anyway, this summons. You're not even exactly
sure what it... er, does.
But you're beginning to learn not to press your lawyer too hard for details and petty

information. He seems, well, unforthcoming. Sometimes you get the impression that your
case isn't the supernova at the centre of his universe.
In the end, the summons is 'served'. A clear picture, that: an unpleasant-looking individual
pounds on the door of your enemy (that's what he is now). You can visualise your enemy
opening the door, turning pale, and receiving the summons with shaking hands. The same
effect -- you think -- as a visit from Al Capone. You feel good all day.
After this event, the excitement never stops. Your lawyer lets you know that the debtor has
21 days to "file a defence" (that's what you think he said, worked up as you are). Otherwise,
you'll win the case by default!
Plenty of scope for the imagination there. Many the pleasant hour you pass, downgrading
your debtor's intelligence. His days pass dimly, you imagine, his mind consisting of some
thin, grey, moronic vapour. So stupid! He'll be enraged when you snatch that $6200 away
from him, just because he couldn't remember to file a defence! After all, you know the debtor
spends all his time in meetings, he can never find anything, and his computer is always
broken. How could someone like that ever file a defence?
Unfortunately, he does. Rather, his lawyer does. It's nothing more than a little note on an
official form that says that they intend to defend the action.
Your mood turns grim. The debtor has passed through thunderbolts and a visit from Al
Capone, and still hasn't coughed up the $6200.
Time for a conference with your lawyer. "What do we do now?" you ask. He most likely tells
you the next move is to put the matter down for trial in the Magistrates' Court. (Depending
on the background of the case, there are probably lots of other things he could do. But he is
an old hand, and knows they'd run your bill up so high you'd have a fit.)
So the case goes down for trial, in six or eight months. And you receive a Statement of
Account for Professional Services. $465, including mention of 'two attendances upon you'
and 15 'telephone attendances'. (You begin to wonder if all those phone calls you made,
asking all those questions, were a good idea.) You take comfort in recalling the lawyer said
you'll get some of your legal costs back from the debtor, providing you win the case.
Now it's hard to maintain a heroic posture for six months. Probably you don't manage it. A
week before the trial, your nerves get shaky. After all, you have no idea what you're in for.
(And you don't feel like pounding the lawyer with questions and running up another bill for
telephone attendances.) You can't shake off vivid images of trial scenes from TV dramas.
Terrible cross-examinations, everything checked and scrutinised to the dot. "How do we
know that's really your signature, Mr. Bottomley?"
Probably you cave in. Your lawyer talks to the enemy lawyer, and they suggest a

compromise: the debtor will pay you $4500 straight away, and it will all be over.
You'd be wise to take it. That way you'd end up with $4500, less the $465, less another
smaller bill for the final work by your lawyer ($120). So you'll end up with a figure that
begins with a plus sign. You don't end up owing money (an all-too-possible outcome, if you
carry on, pig-headed for victory).
But say you aren't built like that. With you, it's the principle of the thing. You did excellent
work for the guy, just what he wanted, spot on time. He doesn't deserve to get away with
this! You'll show him what stuff you're made of.
You plunge into the trial. Amazingly, the enemy defends it, with witnesses and everything.
And his lawyer actually makes you sound like you were lying about some things! At least, he
made out that what you did or said could have been interpreted another way. All this takes
two days in court.
Ah, but you win. Judgment and costs are awarded to you. At this point, the word 'costs' has
an intriguing ring. You take it to mean the enemy will have to pay the $6200, plus all the
money you'll now owe your own lawyer. (Two days in court. It doesn't bear thinking about.)
By and by, you get a bill from your lawyer for $4840. And find out you're entitled to recover
$3220 from the loser. It's what the court scale allows. So you are down quite a bit. Your legal
costs are $4840, minus the $3220 owed by the debtor, plus the old legal bill for $465...
whoops, not to forget the smaller one for $120. Altogether, you've had to fork out $2205 to
collect $6200!
Anyway, you've taught the enemy a lesson. No one can mess around with you! You'll even
go into the red, and spend lots of time and worry, to punish anyone who tries to cheat you.
Except there's one problem. When do you get your cheque from the debtor? ($3220 legal
costs, plus the $6200.) He lost, the court ruled in your favour. Surely, he now has to pay at
Your lawyer explains that you have a 'judgment'. This means there's no longer any argument:
the debtor owes the $6200, as well as the legal costs the court has awarded you. But now you
have to enforce the judgment. If the debtor doesn't just hand over the money, you have a
couple of options, explains your calm lawyer. One, you can send in the sheriff and he'll seize
furniture and other assets the debtor owns. Or you can put the company into liquidation -but then any other creditors will join in and you'll have to share the spoils.
The sheriff sounds like the best idea. The debtor's computer, for example. Even if it really
was broken, it still must be worth quite a bit. And there must be lots of other stuff in that
So your lawyer issues a warrant of execution, instructing the sheriff to seize assets to the

value of $9420.
Many weeks pass, then your lawyer phones to say the sheriff has reported there are no goods
to seize.
"What!" (And that's the beginning of wisdom.)
"Unfortunately," your lawyer explains, "Everything was encumbered. The computer and
everything was leased. The company didn't really own anything. There was nothing the
sheriff could seize. The company is just a shell, really. So it wouldn't do any good to put it
into liquidation either."
Result: your $6200 'sale' has cost you $5425 in legal fees.
The following chapters tell you much better ways of coping with all this.

How to avoid problems - cheaply

First, check them out
IT IS ridiculous for anyone smart enough to be in business not to make routine credit checks.
There is no point chasing a debtor with a summons if there's nothing there. You'll get plenty
of 'legal action' -- but you'll pay for it all yourself. The debtor won't be touched.
Look under 'Credit Reporting Services' in the Yellow Pages. Call a couple of these services.
Get their literature. Then join one. You pay an annual subscription (in the very low hundreds)
and a small fee each time you want to find out about someone (whether a person, or a
business). And I do mean a small fee: less than $10, usually.
On an individual, you can get information like this:*

Driving license number and date of birth.

Name of employer, and previous employer.

His address, address before that, and before that.

Companies he is a director of, and former companies.

Credit services, banks etc. that have been enquiring about him, and when.

Any writs and summonses served, and whether he has had any court judgments
against him.

Default information, including written-off accounts and accounts referred to a

collection agency.

Which mercantile agents have made enquiries about the person.

* At least in August, 1990, when I'm writing this. The Privacy Amendment Bill is still smouldering in Federal
Parliament. If it ever passes in the form it's in, this might change the sort of credit information you can lay your
hands on. But I don't believe a strong form of the Bill will last long. Businesses need information on people
who apply for credit. They will get the information somehow. If businesses can't do credit checks through
someone like CRAA, then no doubt they'll find another lawful way. Find out how other businesses do it, then
do it too.

On a company, you can get information like this:

Trading address and registered office.

Incorporation details, issued shares and paid capital.

Details of directors.

Writs and summonses served and outstanding court judgments.

Default information, including written-off accounts and accounts referred to a

collection agency.

Which mercantile agents have made enquiries about the company.

So if someone who asks you for credit is in financial trouble, you'll know it before you start
doing business. You can tell him: sure, send us the $6200 and you can have the (whatever it
is). If he huffs and storms and threatens to take his business elsewhere, let him. Let one of
your competitors have the loss.
Now I realise it's easy to say, "Keep your credit tight". I know the temptations. The sales
staff are selling, selling. Maybe business isn't too good, and you really want this sale. But I
repeat: the easy way to get difficult debtors to pay is never give them credit to start with.
Money up front, or no sale.
But even if your credit checks are squeaky tight, you still won't avoid all problems. A debtor
can 'go bad' for a hundred reasons. He can be a first-rate customer for years, then something
slips. Instead of paying in 30 days, all of a sudden he drifts out to 45 or 60. Or maybe a
cheque will bounce. Or something else that's not just quite normal. This should start to ring
little bells. You should find out what the problem is. Use your credit reference agency. If that
doesn't show any ominous signs, then phone the customer. You're entitled to find out what's
happening -- you're providing the customer with credit.
The customer might say, "Accept things as they are, or we'll go somewhere else." That can
put you in a quandary. Maybe he's spending $10,000 a month and it's an account you don't
want to lose. But really, you might go for three months without getting paid. Maybe $30,000.
And if he doesn't pay in the end, it means you might have to find $300,000 in new sales to
make it up.
I urge you to get this credit checking right before you worry about the rest of the things in
this book. You can stop reading right here, and do very well for yourself if you just do that.

Better than many businesses, I can tell you.

Another suggestion: treat your sales and credit people as equals. Pay them the same, push
them the same. Invite your credit manager to some of your sales meetings. If your credit
manager has guts, he might say something like, "You bastards out there make the sales, but I
can't get the money. Don't you eyeball them? Look, so and so is paying on 90 days now. Is he
earning a quid? Or is he slow as hell out there, with no contracts? Is there lots of stock
around? Let me know. You might try picking up a cheque too, next time you're there."

Then get it in writing

THE MORE you get in writing, the stronger your hand will be if the debtor goes bad. If you
have to go to court, your case will be tight. (But usually, with lots of signed documents in
your hands, you probably won't need to: the debtor will realise his position is too weak.)
I know this isn't a popular topic. All that paperwork hassle -- for what? It feels like driving
with the brake on. But I wouldn't be doing you a favour if I didn't at least mention 'credit
management' (the right term for a system for checking out your customers, and keeping all
the documentation straight).
How much documentation you use -- and what sort -- depends on the size of your business,
how much bad experience you've had with debtors, how much you know about credit
management, how tolerant your customers are about signing papers (including directors
guarantees), and a hundred other things. But whether you know it or not, you already have a
credit management system: it might be good, or less good, or downright lousy -- but it's
You may be relieved to know that I'm not going to mention anything else about this topic.
(As I said, I've found that people really don't like to hear about it.) But that doesn't let you
off. If you get your credit management wrong, it will come back and thump you. If you get it
right, you'll get your money almost every time. But to get it right, you may need help: if you
feel shaky on all this, you can join the Australian Institute of Credit Management and let
them help you.

Simple ways to collect a debt yourself

LET'S SAY you've got a bad one. The money is way overdue, you've called a few times -now you're convinced it isn't going to be easy. What should you do?
I wish I could list nine easy steps. It's not that simple. First, it depends on the size of the debt
-- $31 calls for a different strategy than $1200, or $34,000. It's different chasing an
individual than chasing a company. If it's a company, it depends on the size of the company.

It can also depend on how important you are to them.

Let's look at the main categories, then list things that often work. But caution: don't follow
any of this slavishly. Use common sense and a bit of psychology. We're dealing with quirky,
obstinate, vain and wonderful humanity -- even if they are debtors. You know the history of
the debt, and you know what the debtor is like. Use everything you know. Use it skilfully to
turn up the pressure.

Little debts owed by individuals

1. Write them a letter, saying it's unlike them not to pay promptly, and please could you have
the money. Use a bit of shame on them.
2. Keep phoning them, politely but firmly. (Keep threats out of it, but keep records of the
calls you make -- they may be useful later.) Just wear down their excuses and hope they'll get
tired of it all. By and by, it may seem simpler for them to pay the $31.
3. If a cheque is there (they say) but for some inventive reasons it never gets sent, say you'll
send a courier around at 10.45 to pick it up. That often works wonders.
4. If it seems worth it, send someone from your office around to pick up the cheque. If you
can afford to do this, you'll almost always get a cheque this way. (Professional debt
collectors favour calling around on Saturday afternoon.)
WARNING: You'll probably be all right visiting the debtor personally, if you're just offering
to pick up the cheque and you don't start making big waves. But if you handle things wrong,
there's always some danger of being prosecuted for 'harassment'. A legally minded (or
bloody-minded) debtor might try calling the police. True, the police might have better things
to do than follow up. But don't ask me to guarantee it.

Big debts owed by individuals

1. You can try steps 1 to 3 above. But don't let too much time go by doing that. Instead, go
straight to...
2. Call in to see them. Call in at work, or at home, or wherever you can find them. Not many
people can stand the pressure of a personal call. And remember, this is a big debt -- one that's
important to collect. The best way is to collect it yourself.

Little debts owed by companies

1. Make sure they have at least one letter from you, firmly but pleasantly asking for the
money. This means a letter -- not one of those stickers you put onto copies of your invoice.
('A friendly reminder' and so on.)

2. Try wearing them down with telephone calls. Phone daily, even twice a day. (Not the most
popular job for someone on your staff, but it's the only cheap way to collect small amounts.)
Don't threaten anything: instead, moan about your own cash flow, or say your accountant
wants to square up his books, or whatever sounds OK. They may pay faster than you expect:
some companies keep a log of demand calls, and after you've logged in a certain number,
you get your cheque.
3. 'Offer' to send around a courier. This often breaks through their weaker excuses and
exposes a realm of truth: they might tell you they're having temporary cash-flow problems,
and that the account will be paid within two weeks.

Big debts owed by companies

1. Try steps 1, 2 and 3 above (for small debts owed by companies). But go through the steps
faster. This is a big debt, after all. Don't mess around too long before you...
2. Go and see them. Make an appointment with the credit manager. If you get a lot of
excuses, just go without an appointment, unannounced, and plop down in reception. Be
polite and smile at everyone. Look like you're prepared to spend the day. Take something to
read, or even a laptop computer and do some work. Sooner or later someone will see you.
Then you'll either get a cheque, or you'll find out what you're really up against.
TIP: if a big debtor is in financial trouble, and you push him hard, he might find something
'wrong' with your product and offer part payment. Your product was faulty, or your service
wasn't up to scratch -- or whatever. This is face-saving. But it offers an easy chance to get
most of your money.
Consider his offer very seriously. Believe me, it can be the best thing you can do. You'll
probably still end up with a profit on the deal. (And he'll be happy, because he's got a
reduction.) You'll have saved yourself a lot of time. And you'll probably get more money
from the debtor than you'd get in any other way. Also you'll come away feeling like a good
guy. You're reasonable, you can compromise. Do it! Do it! Don't get involved with law courts
and endless hassles if you can avoid it. Pride can be very expensive.

Psychological section: know thyself

DEBT-COLLECTION professionals estimate that at least 80% of people have terrible
problems asking for money. Even if there's no squabble. They just hate asking. They can't
stand the idea of walking up to someone and saying, "You owe me such and such. May I
have a cheque please?"
Are you like that? Worse yet: is your credit manager like that? (Many are.)
Here's a simple test: you're in a queue and someone pushes in. Do you grumble under your
breath and let him in? Or do you pipe up and say, "Hey! There's a queue here. Go to the

back." Eighty percent or more would let the person push in. The same 80% are the ones who
have trouble asking for money (from anyone -- even their own brother).
If you're honest and think you aren't a natural debt collector, take account of the fact. Hire
someone who finds it easy. This is precisely what many debt-collection agencies try to do
themselves: pick people who are psychologically right for the job. There's no point in them
hiring someone to collect debts if it takes the person half an hour to calm down each time he
phones someone.
And back to you: think of your health. If debt collection rattles you, you won't be able to
sleep at night. Is it worth it? Can you run a business that way?
You have to know how much debt-collection you can stand, then hand over the job when you
reach your threshold. That's what I do. I press debtors to a certain extent -- then just throw up
my hands and let the professionals go after them. The peace is wonderful.

Getting rougher: the counsel of experience

SO MUCH for preaching. You probably didn't buy this book to hear you should tighten up
your credit system, or to find out a few new tricks to collect debts yourself. Let's say you've
done all that and it didn't work. Someone owes you money, and it's turning into a hard case.
What next?
I'll take you through the possibilities. I'd better say that I've used the methods I'll tell you
about. This isn't theory. It's experience.
My business is writing things for people. (Brochures, speeches, articles, reports, ads,
marketing letters, and sometimes books.) Believe me, all kinds of people phone and ask me
to do jobs. My clients range from individuals, to some of the largest international companies.
The big companies aren't always prompt payers. And the individuals -- wayward as they
sometimes appear -- are often OK. Very hard to predict. And I had plenty to learn.
For this book, I also interviewed all sorts of people: debt collection agencies, private
investigators, a magistrate, sheriffs, and lawyers. They were happy to help. They told me it
was about time someone did a realistic book about debt collection! And they gave me an
earful -- valuable information, worth a lot to me in running my own business. I'm now
sharing it all with you.
In the next chapters, I talk about how to collect the difficult debts. Wild waters.

Using a lawyer
As a shock tactic
YOU CAN TRY asking your lawyer to send the debtor a letter. The idea is to startle the
debtor into paying. This sometimes works.
Sometimes a lawyer is willing to write a letter that begins like this: "We act on behalf of
Minimax Circuits Pty Ltd. We are instructed that you are indebted to our client to the amount
of $1200."
And it ends something like this:
"We advise that if the sum of $1200 is not received by our office within fourteen days of the
date hereof, our client will issue proceedings against you for that sum without further notice
to you."
Your lawyer hasn't insisted on knowing what the matter is about. He (or she) just sends out a
letter. Even so, a letter like this isn't free. Make sure you know how much it's going to cost.
And weigh that against the size of the debt. And think about the psychology of the debtor: is
he used to getting letters like this? Will he just shrug?
If you want to use this technique regularly, you may be able to work out a deal with a lawyer.
A bulk rate. But usually you'll get the same kind of reaction you'd get from a doctor if you
phoned up and asked for a prescription for double-strength penicillin, without saying what
your symptoms were. He'd want you to come in and be examined first. Similarly, lawyers
didn't spend all those years in law school to be asked to write letters without getting any
From the evidence I have, the success rate for a straight lawyer's letter isn't too high. (But as
one lawyer told me: "It depends on the nature of the debt and to whom it is owed. Obviously,
if the debtor thinks he has a good defence the letter will draw no instructive response...")
But if you continue to the next step, and get your lawyer to send a summons, that often does
the trick -- especially for a debt that's only a couple of thousand dollars. Your expenses have
gone up, though: there are some court costs, more lawyer's time, and the cost of getting the
summons served. Worse yet, if your lawyer insists on getting stuck into the case and finding
out what it's about, you could be up for hundreds of dollars just to get a summons served.
Remember, we're talking about trying to startle the debtor into paying. You realise it's not
economic to carry the legal process any further: the sum you're chasing is too small, or you
suspect the debtor hasn't got much money anyway. You're hoping to jolt the debtor into
issuing you a cheque (and probably put off paying someone else). Shock tactics.
If the debtor doesn't pay when he gets a summons, then -- if you wish to -- you can normally

just let the matter die. You don't have to list the action for trial.
If the debtor wants to be difficult -- or stand on some high principles -- he can list the matter
for trial himself. (But as you might imagine, this doesn't often happen.) A slight danger is
that the debtor will later apply to the court to have your action formally dismissed (for 'want
of prosecution'). This makes it extremely hard, or expensive, to sue him for the debt later, if
you discover he actually has some money. Also, the court may 'award costs' in the debtor's
favour -- so you'll get a bill for some part of the debtor's costs in getting the action dismissed.
And you have to pay it.
In short, matters are not always 100% under control, even when you only threaten legal
action. But as you'll see in the next section, if you decide to drive the legal process all the
way to the court, your steering wheel can snap off completely.

When you expect to go to court

TWO important points, right away:
1. Ask your lawyer to request a pre-hearing conference at the court. Ask him to do it as soon
as he can. If the pre-hearing conference is granted, it usually speeds things up. And it can
save you a lot of money in legal fees and court costs. More on this later.
2. Check that the debtor will be able to pay you when you win your case. (Don't expect the
lawyer to check on this.) If necessary, hire a private investigator. Find out somehow! There is
no point spending money -- and your time -- to get a court judgment, only to find out the
debtor can't pay you.

How to save some money on lawyers' fees

IF YOU LEARN to behave like a lawyer's ideal client, your bills will be lower.
Don't present your lawyer with a half-crazed story, full of sound and fury but with no legal
value in it. First write out what happened, in full detail. Get it typed. Make sure it's very
When you get to a point in the story that you can substantiate with a document, refer to the
document in the text. ("See the Contract, document A.") Put all these documents in order,
with the story on top, send them to your lawyer and ask him to read them.
After he's done that, then make an appointment to see him. You'll be amazed at the difference
this makes. The meeting will go fast and smoothly. The lawyer will ask you about any points
that aren't quite clear from the papers you gave him.
From then on, keep in mind that your object is to get the debtor to pay you. Don't get so

wrapped up in the proceedings that it becomes a mission to punish the debtor.

Anywhere in the proceedings, the debtor's lawyer may suggest a compromise. Think very
carefully before you turn it down. Your legal costs will never be any less.
The more you can bury your pride and anger, and see the whole business as a procedure, the
more likely you'll come out ahead. It also means less time spent talking to your lawyer about
what amounts to your emotional reactions to the whole business. He'll listen to your
problems, and guide you away from irrational decisions -- but it will cost you.
Keep your cool. Treat it like a game of chess.
The statistics are good: less than 10% of the Magistrates' Court summonses for debts ever go
to trial or to arbitration at the court. The rest are settled before they get that far.

What the lawyer is thinking

YOUR LAWYER doesn't want you to hit the roof when you get his bill. So if you're just
chasing a few thousand dollars, he probably hopes that the debtor will make some
acceptable offer before the trial. He knows this would be to your advantage. Your legal costs
would probably then be reasonable, measured against the amount you'll collect.
The debtor's lawyer is thinking the same thing. Sure, the debtor has some kind of defence,
but his lawyer doesn't know if it will stand up until he looks at all the details. These things
are always more complicated than the client can imagine. In law, practically everything is
arguable. There's no way the debtor's lawyer wants to spend huge amounts of time on this
either, and run up a colossal bill, if there's some hope it won't be needed.
Upshot: the lawyers on both sides tend to do the minimum, just shadow-box for a while. To
both of them, it's a fight about a small sum (a few thousand dollars). They can't afford to sink
a lot of their client's money into the sort of pre-trial preparations you see in Rumpole dramas.
Usually, very little happens until about a week before the trial is due to begin. Even if the
trial looks like going ahead, the lawyers still won't do as much technical preparation as they
could. For a debt of say $6000, their clients just couldn't afford it. So your lawyer isn't going
to look into every possible 'cause of action' and the debtor's lawyer isn't going to spend his
evenings pondering subtle and sophisticated defences.

Getting to the bottom of it: why Magistrates' Court actions need to be 'cheap'
IT ALL goes back to the scale of fees in the Magistrates' Court. The court puts limits on how
much the winning side can stick the losing side for, in legal costs. There are good reasons for
this. There'd be little point in having a hierarchy of courts (Magistrates', County, and
Supreme) if all the courts handled cases of any size, and allowed similar costs.

The Magistrates' Court handles cases less than $25,000 and has a correspondingly modest
scale of allowable fees. This means that if your lawyer's bill runs over the Court scale by say
$250, you can't claim the $250 from the debtor if you win the case. You're $250 out of
pocket, no matter what.
And there's something else: if you're suing for a debt of $500 or less, you aren't allowed to
claim any of your legal fees from the loser. (Except in rare circumstances, not worth hoping
for.) The only good news is that if you lose the case, the debtor can't hit you with a bill for
part of his lawyer's fees.
To repeat: if you sue someone for $500 or less, you pay all your own lawyer's fees.
If you aren't aware of all this, your lawyer certainly is. And this is what curbs him.
Mind you, there are complicated trials in the Magistrates' Court. Sometimes it can't be
helped. There might be 10 witnesses, the trial might go on for a week -- all over a debt of just
$3500. Such a thing might happen, for example, if the debtor was getting legal aid. "Why
worry?" he might think. "My costs are all covered. What can I lose?" (Actually, if he did
lose, he'd have to pay the Court's scale costs to you. Legal aid wouldn't cover that.)
In the higher courts, the costs themselves can become a driving force. For example, a 'small'
dispute for $9000 could eventually get appealed to the Supreme Court, with costs that might
soar to twenty times that on each side. Both sides are now in so deep, it's mostly the legal
costs they're worried about. They want to win and collect the costs back from the loser. Stuff
the $9000! Just save me from my lawyer's bills!

If you win, how much do you pocket?

MOST OF the people who buy this book will be chasing sums that would put their cases in
the Magistrates' Court. County Court cases normally begin at $25,000, and Supreme Court
cases at $100,000. (But complex cases for smaller amounts can sometimes be started in the
higher courts.)
So-o-o, let's say you win your Magistrates' Court case. You know the debtor has the money,
because you checked before you started all this. Say he owes you $6000. And you have a bill
from your lawyer for $3000. Question: how much of your $3000 lawyer's bill can you
recover from the debtor? The hedged answer is: it depends how complex the proceedings
were. If they were a lot more complex than the court scale allows for, then you'll have to pay
a big whack of your lawyer's bill yourself.
Averaging over a lot of cases, the winner will recover about two-thirds of his lawyer's bill.
So if you are facing a lawyer's bill of $3000, the loser will have to pay perhaps $2000 of this.
Result: of the original $6000 owed to you by the debtor, you actually pocket $5000 ( $6000
he pays you because he lost, plus $2000 of your lawyer's costs he pays you, less $3000 you

have to pay your lawyer).

In a more complex case, you might only be able to recover $1500 towards your lawyer's bill
from the debtor, or even only $1000. Down go your final takings.
No matter what, you'll end up a bit out of pocket. (Not to mention the time it's taken you.)
You may win by default, before trial. But even if it doesn't go to trial, you still have to pay
your lawyer. At different stages, the court may award you costs for this or that. But add them
all up, and it won't cover what you owe your lawyer.
With arithmetic like this, you can see why your lawyer always has an eye on costs, and will
usually try to keep them under control.
Notice that the percentage payback gets better the bigger the amount you're chasing. If you'd
been owed $20,000 instead of $6000, the costs could have been the same (if the proceedings
were no more complex). But you would have recovered $19,000 of your $20,000, instead of
$5000 of your $6000.
NOTE: if you're chasing a big debt -- $50,000, for example -- then you're in a different
realm. You'll be running in a higher court, one with a more generous scale of costs. Things
are different there. But these big claims aren't the subject of this book. If you have
proceedings for a large sum under way, then shut this book and pay close attention to what
your lawyer tells you. You're already in good hands.

A few more facts of life

A LOT OF lawyers detest debt-collection cases. Just imagine it from their point of view:
The client chasing the debt is all worked up. Often he hasn't chased a debt in court before, so
he doesn't have a clue about the procedure, the economics of doing it, or anything else. He
expects legal miracles, not realising that the case will be tried by an impartial magistrate who
will listen carefully to both sides. And because the scale of costs is fixed by the rules of the
Magistrates' Court, the lawyer has to go easy on costs and preparation, otherwise the client
might collapse when he sees the bill.
Is it worth it for the busy lawyer? Many say no. A lot of big law firms won't touch
Magistrates' Court Cases. Some of them won't even handle County Court Cases. For them,
it's the Supreme Court or nothing.
Some medium-sized law firms will take Magistrates' Court cases, but the job will probably
be given to an articled clerk or restricted practitioner. For experience. (And, boy, does he
ever get it.) Older lawyers look over his shoulder now and then, to make sure things are
going all right.
Lawyers who are sole practitioners will often accept Magistrates' Court cases. Often they are

like the GPs of Law. They'll help you whether you have a gumboil, flu, snow blindness, a
broken tibia, or something worse. These lawyers are street-smart and have developed ways
of coping with overwrought, debt-chasing clients. But they still don't 'like' these cases. Who
So if you go into their offices with an orderly pile of paper, and a cool head, and a smile, and
a clear understanding of what to expect, they'll put you in a different class. They might not
mind doing it for you. And that's pretty good.
HINT: if you think you'll keep needing legal help in Magistrates' Court, year after year, a
good way to pick a lawyer is to go down to the court and watch. Some lawyers are in
Magistrates' Court every day -- it's their bread and butter. (Unlike the articled clerks, who are
there now and then, for experience.) See which lawyers seem to be winning the cases. Then
pick one who matches your style of doing things.
Another little fact of life is this: if the debtor you're chasing hasn't been to court before, the
closer you get to the trial, the more likely he is to settle. He begins to think about what is
coming. Maybe his lawyer starts to tell him how he'll be cross-examined, how he's going to
be on oath in the witness box, how the other side is going to imply that he's lying, and that
it's going to be tough. And he thinks, ooooh, I didn't realise it was going to be like this. Or
the crunch might not come until he actually appears at the court in the morning. (Many cases
get settled on the morning of the trial.)
This is probably the reason so much stuff gets settled in the pre-hearing conferences in the
County Court. It's the first time the client actually goes down to court. Not a bad system,
really -- considering that the function of the court is to resolve disputes. If the aura of the
court alone will bring people to their senses, well that's one way.
The same thing is now happening in the Magistrates' Court. Pre-hearing conferences were
introduced in 1988 and the score sheet is encouraging. For those who like data, here's what
happened in 1989, the first full year for pre-hearing conferences:*

* From computer data supplied by the Attorney General's Department, Victoria (Information Section, Courts
Management Division).

3780 cases were put down for pre-hearing conferences.

464 of these cases were settled before the pre-hearing conference (a phone call
maybe, "Look, why bother with a hearing? Can we settle this?..").

678 were settled at a pre-hearing conference with the Clerk of the Court.

43 were settled at a pre-hearing conference with a magistrate.

162 were settled after the pre-hearing conference. The two sides thought again,

reached agreement, and asked the court to record it.

1763 were adjourned (which probably means that negotiation was inconclusive, but
we aren't given details, because the pre-hearing conferences are private).

670 later went on to trial or court arbitration.

Moral: if your lawyer suggests a pre-hearing conference, then do it. Or the debtor's
lawyer might suggest it. Yes again! There's better than a 30% chance of getting it
settled, with no further expenses.

DIY law: taking the wolf by the ear

At daybreak I'll be off,

to see the Kaukonians about a debt they owe me,
an old one and no trifle.
-Homer, The Odyssey

IF YOU run a small business, you may be tempted to act like a DIY lawyer. Maybe you've
used a lawyer a couple of times to chase debtors, and the process hasn't really seemed that
hard. (Beware of that feeling -- but more on that later.)
Anyway, you've discovered the following intriguing fact: you can march down to the
Magistrates' Court and fill out a summons yourself. The clerk will help you word it. The
court fee is pretty small (remembering the size of those lawyer's bills you've had). And for
another modest fee, the court will even have the summons served for you. All this has the
same legal force as if the documents had been prepared by a team of QCs.
So far so good. The debtor has 21 days to pay up, or notify the court he intends to defend the
action. If he pays before then, well and good. Case closed. You got your money.
But let's say he doesn't pay. He puts in his notice to defend. (Even worse, his lawyer files the
notice to defend.) Now what? Let me tell you this: the possible moves open to you, and the
countermoves open to the debtor, can create more scenarios than the War Room at the
Pentagon. Anything you do, the other side can probably argue about. And anything you do
might also trip you up later.
In case you don't believe me, consider this: The Magistrates' Court Civil Procedure Rules
1989, sets out what you can do (and can't). There are 74 pages of small print, with hundreds
of topics like "Affidavit by two or more deponents" and "Time for serving interrogatories"
and "Counterclaim on stay, etc., of original proceeding."

Right behind all these rules, are 40 pages of forms. These show the correct way to set out
official documents. For example, form 4A gives all the right words and layout for a
summons. There are forms for "Witness summons for production" and "Warrant to seize
property" and "Order that person indebted or employer of judgment debtor give statement"
and every other form used in Magistrates' Court proceedings.
If that's not enough detail for you, you can pop down to the Law Book Company and buy a
copy of "Australian Civil Procedure," by Bernard C. Cairns. Five hundred and seventy-six
pages, to tie it all together for you.
I confess that I've actually read all this stuff. But I also confess that I find it hard to
remember. But perhaps I'm not the only one: in Magistrates' Court trials, the lawyers are
often the ones carrying a copy of the Rules (the cover smudged from use and no longer its
original brilliant white). The rules are complicated. That's the bad news. The rules have to be,
to make sure justice is as balanced and fair as possible in all kinds of tangled circumstances.
The good news is that the magistrates will usually be understanding if you don't have a
lawyer. If you slip up on a rule -- say you forget to file some affidavit -- the magistrate may
stop the proceedings so you can correct your mistake.
So it's possible to go right through a trial without hiring a lawyer. If you sit in at the Court
sometime, you'll see that it does happen and that someone acting for himself can win his
Should you try? I'd say you probably shouldn't act without a lawyer if it comes to a trial. If
you are game to try it yourself up to that point, you may be OK. For example, you can send
the summons, wait for the debtor to announce his intention to defend, and then you can list
the action for trial. If that's all that happens, you should be OK. As the trial date approaches,
the other side may decide to settle. You'll have won, cheaply.
But as soon as anything gets at all tricky, I'd run for a lawyer. Or I'd get a lawyer the instant
you find out the debtor has one. And I'd certainly get a lawyer if the trial looks like going
ahead. If you've made any small mistakes in the statement of claim in your summons, your
lawyer can probably get them corrected -- without delaying the trial.
Why not go to trial yourself? First there are all the procedures you have to get right. You
can't just turn up on the day with 10 witnesses and a cardboard box full of papers and go in
full hog. Before that stage, the debtor may want 'discovery' (he wants to see some of your
papers), and maybe he has 'interrogatories' (he has a few questions for you). If you don't
respond, you'll be summonsed and your ignorance will cost you money.
But there's something even more crucial: you probably won't present your case to the best
advantage. And you won't find important weaknesses in the debtor's case. Remember: the
case wouldn't get to trial unless the debtor was defending himself. He might say you haven't
kept your agreement, or you never had a contract at all. Possibly he might be right. Certainly

the magistrate is going to give him the same rights to be heard that he'll give you.
But the magistrate can't help you with cross-examination. And if you cross-examine someone
yourself, it's like hunting bears by blowing pepper at them. Maybe you know that story? It
goes like this:
There was a hunter who was sure that he'd come up with a foolproof way to hunt bears: "It's
simple!" he told his friend. "You just fold a piece of paper in half, then pour some pepper in
the crease. When you see a bear, you go up to him and blow the pepper in his face. It can't
The hunter set out to prove it. A few hours later he was back. His clothes were torn, and he
was covered with scratches and cuts.
"Hell!" said his friend, "What happened?"
There was a moan. "It was working fine... But then the bear blew first."
In a trial, questioning the debtor's witnesses is a bit like hunting bears. And if the witness
happens to be an expert at something, then you're up against a smart bear -- the sort that
might blow first. Even barristers can come unstuck when they cross-examine an expert
witness (that is, attack the testimony the expert witness has given).
If you ever feel confident about cross-examining an expert witness, then read the following
transcript -- then lie down until your feeling of confidence goes away.
The transcript is from a trial that took place in the United States. A doctor has just given
evidence saying he thinks that a cancer cure didn't work, because the patient probably didn't
have cancer in the first place. The lawyer on the opposite side now stands up to crossexamine the doctor. The lawyer needs to show that the doctor might be wrong -- that the
patient might really have had cancer. But the doctor is stubborn. Very.

Q. Doctor, before you took the stand, did you see this record, Exhibit 40, the hospital record
in this case?
A. I glanced at it for two or three minutes before I came into the courtroom but didn't have a
chance at all to look at it properly.
Q. You didn't read the entire record while upon the stand, did you?
A. No.

Q. You don't know now, then, the full contents of this hospital record?
A. I believe I have got the essential parts of it.
Q. But you don't know the full contents?
A. No.
Q. And without knowing what the full contents are, you don't know whether you have the
essential parts or not?
A. I think I know the essential facts in this story and I am prepared to answer questions on it.
Q. Now, what are the essential facts, as you conceive them, in this story?
A. (Describes certain facts.) Then a biopsy operation was performed and some tissue was
removed from this area, and I think I saw two pathological reports. In the first report the
pathologist was in doubt. He made several suggestions, and in his second report the
pathologist stated that he thought it was hemangioendothelioma.
Q. From the facts that you have given us, you have sufficient facts to make your own
diagnosis in this case?
A. No, I can't make my own diagnosis without examining the patient and examining the
slides, certainly not.
Q. Then you are not able to diagnose this case as not a case of cancer?
A. I never make a diagnosis without examining the patient.
Q. Then, Doctor, as you are here upon the stand now, you do not say that this was not a
cancer case?
A. No; I will neither say that it is not nor that it is.
Q. Then, if you don't know whether it was a cancer case or not, you don't know whether in
this case a cancer case was cured or not?
A. Not knowing whether it was a cancer or not, the cure is of no importance.
Defendant's lawyer: I will ask to have it stricken out as not responsive.
The judge: answer the question.

A. The answer is no.

Q. Doctor, would the physicians who were in attendance -- that is, those who saw the patient,
made the biopsy, saw the X-rays -- be in any better position to pass upon the diagnosis than
you would be?
A. Provided they were competent, they would be.
Q. If we assume they are men of ordinary capacity and intelligence, qualified to act in the
capacity in which they were acting, they would be in a better position?
A. No, not adequate. They would have to be experts. The answer is no.
Q. Then a man of ordinary capacity, seeing the patient, seeing the X-rays and studying the
biopsy, would not be as well qualified as you, sitting here with your greater general
knowledge but with your incomplete knowledge of the actual facts?
A. The answer is yes. I believe that I can, with my experience of cancer, review a record and
the doctors' reports and make an interpretation of a case which might possibly be more
competent than the interpretation of some physicians who have not had a great experience in
very difficult and unusual cases.
Q. The question is this: in this case you think that the physicians who examined him at the
University of Michigan Hospital, if they were men of ordinary capacity, qualified to practice
their respective professions, who had the advantage of studying the X-ray pictures of him,
who had had the advantage of seeing him, would not be as well qualified to diagnose this
case as you are?
A. No. I have great confidence in the men of the University of Michigan and I would take
their interpretations very seriously.
Q. Now, Doctor, do you know how many sections of different parts of the body were taken?
A. I believe, if I interpret that record correctly, that there was one operation and that a
specimen was taken from the lesions through the incision. Now, whether the surgeon cut one
little specimen or two or three, I don't know.
Q. And did you observe whether or not the bone itself was analysed?
A. Yes.
Q. By the pathologist?
A. Yes, it was.

Q. And did you observe the pathologist's finding upon that?

A. Yes.
Q. And what was that as you observed it?
A. I indicated to you there were two reports. I think I saw two pathologists' reports.
Q. But did you observe what the diagnosis was as stated in the report?
A. Yes. There were two diagnoses. There were two reports. In the first report, the pathologist
said he was in doubt as to the nature of the tumour, and he mentioned several possibilities. In
the second report he seemed to be a little more certain, however, that it was
Q. Doctor, will you show me in the hospital record where the two reports are to which you
A. Here they are.
Q. You are indicating here two sheets, Exhibits 40-e and 40-f, that are immediately adjoining
in this record?
A. That is right.
Q. Exhibit 40-e is dated September 1, 1934?
A. Yes.
Q. And Exhibit 40-f bears the same date?
A. Yes. So I think it would be the different parts.
Q. Those are the two that you referred to?
A. Yes.
Q. Now, Doctor, which one was the first diagnosis he made, that he wasn't satisfied with, that
he wanted to make a further report on?
A. I assume this [40-e] was the first one, and this [40-f] was the second; particularly because
this shows that there was decalcification. This must have been taken a little later.
Q. Can you tell us which is the first one, Doctor?

A. I just answered the question the best I can.

Q. You say you are assuming; then you can't tell us?
A. No.
Q. So you can't tell if one or the other of these two reports was the first report?
A. They are dated on the same date.
Q. The question is, you can't tell us whether one or the other is the first report?
A. Yes. I am trying to tell you if you permit me.
Q. Well, I am merely asking you, can you tell us?
A. I can't answer that question with yes or no.
Q. All right. Then you can't say yes or no to that question?
A. No, sir.
Q. Then you don't know which of these two was the first report?
A. Yes, I think I do know.
Q. But you don't know.
A. I think I do.
Q. You think you do, but you really don't know, do you?
A. I think I do.
Q. Well, Doctor, are you willing to say you do know which was the first report?
A. I said I think I know.
Q. Therefore, you are willing to say that you do know which is the first report?
A. I am not absolutely certain of anything.
Q. Now, Doctor, you said in your testimony that you would assume that the report, Exhibit
40-e, first appearing in order in these sheets was the first report. Is that correct?

A. There is no significance to that.

Q. Did you say you would assume it?
A. I think I did say it.
Q. Do you want to withdraw that now?
A. It doesn't make any difference.
Q. Then you don't want to assume that now?
A. It is of no importance in this case whether it is first or second, not in the slightest.
Q. It makes no difference whether the first report in order, or the second report, was first or
second in fact?
A. Not the slightest.
Q. They may be concurrent reports then?
A. Still it wouldn't make any difference medically.
Q. So that, for all we know, they were concurrent reports?
A. Maybe they were. I don't know.
Q. Why did you refer to them as the first report and the second report?
A. I looked at the one sheet first and the following sheet second.
Q. Without observing whether one was first or one was second?
A. It makes not the slightest difference medically.
Q. Didn't you want to convey the impression that the pathologist made one report and then
felt uncertain in his mind and asked leave to make a second report?
A. I intended no such inference.
Q. You intended no such inference?
A. I don't think so.

Q. Don't you know whether you intended the inference or not?

A. I know I didn't.
Q. Then it isn't true, so far as you know, that the pathologist was in doubt and wanted to have
a second biopsy and the second report was filed?
A. The pathologist was in doubt and told us so in his report.
Q. Then it isn't true that the pathologist desired to have a second report, so far as you know?
A. I don't know anything about that here.
Q. Now, you say the pathologist was in doubt as to whether or not this was a cancer?
A. I didn't say that. I said he was in doubt as to the diagnosis.
Q. Was he in doubt as to the diagnosis of cancer?
A. I am not certain about that. I think he was in doubt as to the nature of the lesion, and I ask
to see that sentence again.
Q. Well, Doctor, then as you recall the matter, you don't recall that this pathologist had any
doubt at all about this being a cancer?
A. Yes. He had doubt of the diagnosis.
Q. He had no doubt about it being cancer, as far as you know?
A. He had doubt of the diagnosis.
Defendant's lawyer: I ask to have that stricken as not responsive.
Judge: it may be.
Defendant's lawyer: Now will you read the question? [Which was done.]
A. I am unwilling to answer the question. I would want to look at the report again. I think
there is a little unfairness to ask me any such questions when I tried not to take too much
time and read the record.
Q. Now, Doctor, let me ask you this. Didn't you testify that the pathologist was in doubt
about it being cancer?

A. If I did say that, I would like to have it read to me.

Q. Didn't you say that?
A. I don't remember.
Q. Did you intend to say that?
There are pages and pages more of this. Anyway, here is the (happy?) ending:
A. I will not answer yes or no. It is not a fair question.
Q. You won't tell us, then, whether or not you were trying to convey the idea that you did not
agree with that report?
A. Your Honour, I am trying to say that I am not certain about the diagnosis.
Q. You do not disagree with it?
A. Not being certain, I neither agree nor disagree.
Q. Yes. So all that you do say is that, for all you know, they may be right?
A. They may be right.
Q. And if they are right, the man had cancer?
A. Definitely. Yes.

How would you feel about handling a witness like that? Could you have ever made him
admit, "Definitely. Yes."
OK, this is an extreme example. (And a long transcript to have in a book about debt
collection.) But the point is the debtor's witnesses may well determine who wins your case. If
you don't have the skill to bring out inconsistencies, to show how a witness is colouring the
evidence, and isn't remembering something correctly, you are handicapped.
If the debtor has a lawyer, you are really handicapped. His lawyer will go at your witnesses
hammer and tongs. (And at you too, if you give evidence.)
It seems to me that if a case is worth fighting in court, it's worth getting a lawyer.
All this complexity may seem 'unfair'. You know: "I know he owes me the money! Why all

this?" But maybe the debtor knows he doesn't owe you a penny. What then?
To keep you from killing each other, a court process has evolved that's as fair as anyone can
make it. Down the centuries, a subtle collection of rules have been built up that govern what
is allowed as evidence in court. The point of it all is to try to make sure that both parties get a
fair trial.
Some of the rules of evidence seem arbitrary -- if not strange -- unless you know the reasons
for them. It's a handicap not to know them. Why handicap yourself? Pay a lawyer to look
after you.
It's true that the magistrate will filter out 'evidence' that isn't solid. But why make things
harder? Much better to present a clean case.
NOTE: most cases for less than $5000 go to arbitration, and this is a less formal process
than a full trial. (I talk about the details shortly.) In an arbitration, it is sometimes OK to
handle things yourself -- but only if the debtor has no lawyer, and his case seems very weak.

Don't sue George when Harry owes you the money

IN FARAWAY Debtland, there is a place where you'll find the bones of people who have
chased the wrong debtor. It is impressive to look at the bones. There is a mountain of them.
Unless you're careful, your bones will make the mountain a little higher.
Why? What's the problem?
Thousands of people sue someone -- or some legal structure -- that's simply not involved! It
may take a long time to find that out. It may cost them thousands to find out. And it's all
money lost. They can't get back a penny.
If you're handling the legal action yourself -- and that's what we're talking about in this
chapter -- then make sure you go after the right debtor. If you start on the wrong foot, even if
you bring in a lawyer later, he probably can't fix things. You'll have to start over.
Here are some of the 'people' you can sue:
An individual. Mary-Sue Goodheart. Or Doctor Xavier McPherson. You sold the person
something, or did the person some service, for an agreed amount of money. And the
scoundrel didn't pay. Right. Go for it! Put that person's name on the summons.
A sole trader. A sole trader may have a trading name: Black Hole Earthmoving. Forget it.
Just go after the person behind it -- the individual. Put his name on the summons.
A partnership. Dangerous waters. There can be two partners, or twenty -- or sometimes
thousands (as in the big accounting firms). You probably only dealt with one of the partners.

Or even just someone who works for the partnership. But someone there owes you money.
The safe thing to do is sue everyone in sight: all the partners as a group, and each of them
individually, and also the guy you actually dealt with (if he isn't a partner and already on the
list anyway). That way you're covered. No one who might be responsible (or own something
you can seize later) can wriggle out of it. You can do it all on one summons. Later I'll give
you some examples of what can go wrong if you don't do things this way.
A company. If you are sure that you have really been dealing with a company as such, then
sue that. A company has a life of its own, legally. It's like a person who can't die, even if the
directors die (they are just replaced by other dispensable mortals). It's true that you can kill
(liquidate) a company, but you don't do it by killing the people who run it. Legally, a
company is very real. It can sue. You can sue it. The company itself can owe you money, no
matter how the people who work for it may come and go.
A trust. There are a lot of these around. For example, mine: "Viacorp Pty Ltd as trustee for
the James Heath Family Trust". Trusts usually have a trading name tacked on. In my trust, its
trading name is "J&E Copywriting." If you sold something to J&E Copywriting, and you got
no cheque, who should you sue? The answer is: that whole long name. You can tack on the
trading name too, but it doesn't matter. On the summons you might also use a few
abbreviations: "Viacorp Pty Ltd ATF James Heath Family Trust TA J&E Copywriting".
Technically, you could just sue Viacorp Pty Ltd, but that gets messy because Viacorp Pty Ltd
might be doing something in addition to acting as a trustee. It could be acting as a trustee for
several different trusts, or it could be trading in its own name -- selling used 747s, for
example. It might take a lot of sorting out in court to determine which of these trading
entities actually owed you the money. Better to be clear, if you can. It will be cheaper.
There are other wrinkles to this as well. The trustee of a trust doesn't have to be a company. It
might be two or more people, acting as trustees. For example, if my Family Trust got fed up
with Viacorp Pty Ltd as a trustee, the Family Trust could chuck out Viacorp and appoint new
trustees: my wife and her brother, say.
If all this doesn't get you worried, it should. It explains why lawyers are so careful -- right at
the beginning -- to try to pin down exactly who owes you the money. If a company is
involved, or seems to be, the lawyer will do a search at the Corporate Affairs Office to see
what the company structure is. He will also trace through and see who is behind a business
Even so, it may not be clear who the debtor really is. Is it cunning Mr. Bloomhardy himself,
who bought those 500 bags of cement from you? Or was it really his company, Bloomhardy
& Foolhardy Pty Ltd? Nothing was put on paper. And your recollection of what Mr.
Bloomhardy told you, and what you told him, is getting hazy. A lawyer would probably sue
Mr Bloomhardy himself, and also sue his company. Both on the same summons. Then sort
out later which is the actual debtor -- or leave it to the magistrate, based on sworn evidence

in court.
This uncertainty can seem amusing when it happens to someone else. (Go down to court
sometime and watch the proceedings.) But beware: it's no fun at all when it's your money
and you chase the wrong debtor. Be careful.

If it goes to arbitration, you're lucky

IN 1988, the Magistrates' Court set up a new system to speed things up and cut expenses. It's
an arbitration system, a kind of mini-trial. It's much less formal than a trial but just as
effective in getting your money. I'll talk about the advantages in a minute. First, here's how
the court decides which cases go to arbitration:
1. Your claim has to be for $5000 or less.
2. The case can't be too complicated. Magistrates can usually detect the signs of a complex
case by glancing through your claim and the reply the debtor made.
3. The case shouldn't involve a question of fraud. For example: the debtor says he never
heard of you, and claims your invoice is an attempt to get money by deception.
4. It would violate common sense to refer the case to arbitration. In the words of the
Magistrates' Court Act 1989: "[if] it would be unreasonable for the complaint to be referred
to arbitration having regard to its subject-matter, the circumstances of the parties or the
interests of any other person likely to be affected by an award under this Division."
In short, if you are claiming less than $5000, your case will probably go to arbitration. This
is good news. Arbitration cases move through the system pretty fast. (You should have a
decision in about three months from the time you apply for a hearing.*) So you don't have to
live to be 107 to get your money.
Even if you don't win the case, the arbitration hearing is your friend. The simplified
arbitration procedures save the debtor money in presenting his case, so that if the court
decides you have to pick up some of his costs, the bill shouldn't flatten you.
* According to information from the Office of the Chief Magistrate Victoria, for the financial year ended 30
June, 1989. About half the civil cases in the court went to arbitration that year, and half to trial.

REMINDER: in this Chapter, I'm assuming that you're handling things yourself (DIY law).
If the debtor goes into arbitration with a lawyer helping him, then I don't recommend you try
any heroics. Get your own lawyer in there. Even with a lawyer, it won't be too expensive.**
Arbitration procedures are fairly simple (which cuts legal expenses), and your case itself
must be fairly simple (otherwise the court wouldn't have allowed it into their arbitration
system in the first place). If you have a lawyer, then he'll handle the technicalities and you
won't have to worry what to do. But if it's just you against the debtor, with no lawyers, then

read the rest of this section.

** With some luck. When this was being written (August, 1990), the Court had plans to put a cap on the costs
in arbitrations: $500 for claims up to $3000, and $600 for claims up to $5000. So if you won a case for $2500,
for example, the most you could claim for your costs and lawyers fees from the loser would be $500 -- not
nearly enough in many cases. So find out how much the cap is, and try to get your lawyer to estimate his costs.
Then weigh things up.

How arbitration works

THE Magistrate first tries to sort the thing out informally. Common sense, Dutch Uncle, let's
be reasonable. If that doesn't work, he'll then hear both sides, as in a trial. But the hearing
isn't crushingly formal: "...the Court is not bound by rules of evidence but may inform itself
on any matter in such manner as it thinks fit."
You can present evidence orally or in writing. You can bring in witnesses. You can bring in
statements signed by people involved in the case (preferably witnessed by a Justice of the
Peace, or someone else entitled to witness oaths).
Sometimes the Magistrate will insist that the oral evidence you present be given on oath. He
might also insist that any signed statements you bring in be properly witnessed ('affidavits').
It's up to him. It he isn't satisfied with your evidence -- or the debtor's -- or wants some point
cleared up, he can stop the proceedings and ask you to come back on a certain date.
When the hearing is finished, the Magistrate makes an 'award' in writing. He may or may not
include the reasons for the award. (If you wish, you can ask for the reasons, and you will get
them. But you must make the request in writing.) But this is the important point: the award
has all the legal weight of a court order that follows a normal trial. You won, and you have
the weight of law behind you in collecting your money.
The Magistrate may also 'award costs'. This means the court says you can collect $X from
the debtor, to help cover the money it cost you in pursuing him. (Possibly things like
photocopying, secretarial costs... whatever the court thinks is reasonable.) But you can't
depend on this -- it's entirely up to the discretion of the court.
NOTE: if the debt is for less than $500, then the court will rarely award any costs.
TIP: if you're completely new to all this, it could be worth asking a lawyer to help you
organise your presentation. Ask him what is important legally, and how to establish the
points you need to make. But then present the case yourself at the hearing. This is a middle
way between doing it all yourself, and letting the lawyer do it all. This gives you a lot of
help, but a middle-range lawyer's fee.
And if you win? You get a court order in your favour. This means the argument is over. There
is no question that the debtor owes you the money, and he owes it NOW. But to enforce this
and collect your money, you may need more help from the court or the sheriff. (See Chapter


But if you can, get a pre-hearing conference

THE advantages are:
It very often works! It's an informal and private session, but tends to bring the debtor
to his senses. He realises what he is up against, all the legal trouble and hassles he is
facing, and the common sense of settling the thing right then.
If the court grants a pre-hearing conference, it will probably take place long before
you could get a formal hearing (that is, a trial or arbitration). So if things are settled at
the pre-hearing conference, you've gained a lot of time.

If you reach a settlement at the pre-hearing conference, then it becomes binding: the
Magistrate (or registrar) refers it back to the court to make a formal order.

If the debtor doesn't show up, the court will probably make a formal order that lets
you proceed as if the debtor had filed no notice of defence. You win by default.

The proceedings are entirely off the record. Even if you mess things up, and admit
something you possibly shouldn't have, it won't go against you at a later hearing. So
you can safely stand against both the debtor and his lawyer.

How to do it
THERE aren't any court rules on requesting a pre-conference hearing, and no form to fill out.
You can ask the Clerk of the Court in any way you wish, even by telephone. But I
recommend writing a simple, but tidy, letter.
First look up the number on the summons form you filled out. Then send a letter, saying
something like this:
The Clerk of the Court
Magistrates' Court
Dear Sir
RE: No. [summons number] 199_ [fill in year]
I request a pre-hearing conference on this action, because I believe it is a matter that could
readily be resolved that way. [Or, if the case is complicated because the debtor is raising all
kinds of legal arguments, you might say this instead: "I request a pre-hearing conference on
this action, because I believe the complexity of the issues would make it desirable."]
Yours faithfully

Ned Kelly

Stage two
IF THE pre-hearing conference is granted, then prepare for it. Look up all the facts you may
want to remember, and organise your papers so you can find things if you need to. Review
everything in your mind, so you know what happened when.
Finally, before the conference, try to go in with an open mind. Be ready to negotiate, to give
away a little if you need to in order to settle the thing. Control your temper (if you're angry
about the debtor). Don't start a World War . Remember, this conference can be your cheapest,
fastest, and easiest way to get your money.
Possibly the court will beat you to it and summons you to a pre-hearing conference anyway,
before you ask them. They can do it, and sometimes they will do it. Problem solved!
Organise yourself, and go in with a flexible attitude.

Turning the screw: how to enforce a court order

In judgment be ye not too confident,
Even as a man who will appraise his corn
When standing in a field, ere it is ripe.
-Dante, The Divine Comedy

TOO RIGHT. You've won your case, and got a court judgment. But you haven't got any
money yet. As I've repeatedly warned, unless you've done some checking first, you may
never get any.
By some miracle, the debtor may now pay you without any fuss. If so, that's the end of the
Usually it ain't that simple. Most people don't put off paying a debt, drag their heels right
through a court case, unless they're short of money in the first place. They dispute the bill
because they haven't got enough money to pay everyone they owe.
Even when you hold a court judgment, a debtor can be alarmingly reluctant to pay you
anything. For example, maybe you've been chasing Harry Slime and you're pretty sure he
hasn't got any cash. But you know he does have a car. Now he isn't going to sell that car to

pay you. You have to force him.

If you've been chasing a company, you can run into other problems. Lots of them.
First, here's a little summary of the things you can do, now that you hold a judgment:
1. You can drag the debtor into court and question him about what he owns, what his salary
is, who owes him money -- and anything else about his financial position. If the debtor is a
company, you can make the directors bring in the books, tax records, the whole works. (You
suddenly have the interrogation powers you usually associate with tax officers.)*
It's a good idea to use these powers. You'll find out where the assets are ( if there are any),
and can work out what to do next.
2. You can get the sheriff to seize property owned by the debtor. (This sounds great, but there
are snags.)
3. If the debtor is an individual, and he has an employer, you can get the court to order the
employer to pay you part of the debtor's wages.
4. If anyone owes the debtor money, you can get the court to order that they pay you instead.
(You can see how useful it is to question the debtor in court, to find out all these things.)
5. If the debtor is a company, you can apply to put it in liquidation. Usually this isn't a
wonderful idea, because you don't get first grabs this way. (All other creditors can jump in
and share whatever shrivelled slice of pie might be left.) But the threat of liquidation can
sometimes be useful: the directors may be worried that their personal assets could be
grabbed, if the liquidator later shows that the company kept merrily trading even when it was
clear it wouldn't be able to pay all its bills.
* You used to be able to do this using what was called a 'summons for oral examination'. It's missing in the new
court rules, but I'm told this was an oversight and it's going to be put back in. By the time you read this, the old
oral examination summons will probably be up and running again. But if not, you can do the same thing in a
roundabout way by using the Attachment of Debt Proceedings (Rule 27.27). But you need help from a lawyer.

If you're thinking, "Ah, ha! Let's do that: wind up the company, and go after the directors'
money. They have heaps." Well, it might be worth doing after you've tried other things. But
only if the company owes you a lot, and the directors are rich. There are risks: it will cost
you $2000 or more to put the company into liquidation, other creditors will share in the
plunder -- and the directors may successfully defend themselves... "Who, us? Trade when we
shouldn't have! Ridiculous. " If they have money themselves, you can bet they won't just
hand it over. They'll get some expensive legal talent on their side. Who knows, they may
even be innocent...
REMINDER: one way or another, you now have a judgment against the debtor. It doesn't
matter what process you used. You may have used a lawyer, and gone through a whole trial.

You may have got it by default, after you issued a summons yourself and the debtor didn't
defend it. You may have got it after an arbitration, where you handled everything yourself.
You may have got it when the debtor failed to show up at a pre-conference hearing.
Even if you didn't use a lawyer before, you'd better get one now. It's still all right for you to
decide the grand strategy: "I want to examine the Directors in court, about the company's
assets" or "I want to attach Harry Slime's wages" or "I want to send in the sheriff to seize
assets." But if you try to handle the paperwork and formalities yourself, you might botch it -and cost yourself time. At this stage, you aren't asking your lawyer to do anything very
complex: he's only helping you through routine forms, and giving some simple tips. Use his
experience for these things. It shouldn't cost a lot.

Unleashing the sheriff

I'VE GOT news for you. The sheriff isn't a ferocious creature who'll immediately burst into
the debtor's building and start ripping stuff out. The sheriff may remove goods at some stage,
but it doesn't happen instantly.
What actually happens?
First, you've got to apply to the court to send in the sheriff. The sheriff only obeys
instructions from the court -- not direct orders from you. To get the sheriff to move, you need
to get what's called a 'warrant of execution.' I've mentioned this many times already. This is
certainly a scary-sounding document ('execution'-- boy!). But it's actually a routine order to
the sheriff to try to collect the money the debtor owes you. You can get a warrant of
execution automatically after you have a court judgment, just by filling out a form and
applying for it. (Assuming the debtor hasn't already caved in and paid you.)
The court checks the details, then issues the warrant of execution -- usually pretty quickly.
It's then up to you to send it to the sheriff with the required fee ($86 at the moment).
But this doesn't mean the sheriff instantly hops into his (or her) car and proceeds, foot to the
floor, to the address on the warrant. The sheriff may have a backlog. (Dear friend, you aren't
the only one chasing a debt.) It might take him a few weeks to act on your warrant. Even if
he hasn't got a backlog, it may take him a day or two to organise a visit to your debtor.
Let's consider what happens if everything goes well.
The sheriff shows up at the door and the debtor is there. The sheriff explains his
humanitarian mission: he is seizing goods to cover a debt owed to so and so (to you, which is
why it's humanitarian).
"Oh dear, oh dear," says the gentle and amazed debtor. "How did such a thing ever happen?
Here let me pay you right away." He peels off a few hundred-dollar notes, the sheriff gives
him a receipt, and that's the end of it. A couple of weeks later, you get the money from the

Usually, it ain't so easy. Many things interrupt this smooth flow between warrant of
execution and money in your pocket:
1. You sent the sheriff to the wrong address.
Happens all the time. For example, if you're chasing a debt owed by a company, the Law
required you to send the original summons to the registered office of the company. This
might be a firm of accountants.
The sheriff arrives at the same address, and before he's half way through his introductory
speech, he gets told that the company he's after doesn't really work there. There's nothing to
seize. The sheriff of course can't grab just anyone's gear to pay your debt, so he goes away
and returns the warrant of execution, with an explanation about why he couldn't execute it.
It's not the sheriff's job to find the correct address of the company (or person) he's chasing.
The sheriff isn't a debt-collector. He simply obeys plain orders from the court. Go to this
address, seize goods from this person, or that company. If there's anything incorrect about the
order, then the sheriff is stymied.
This wrong-address problem happens a great deal. Remember, probably a year has gone by
since you filed the original summons. Lots of companies move in a year. (Even more
individuals move: about one million a year, in Australia.) So unless you correct the address
that appeared on the summons, it's likely to get passed through to the warrant of execution.
Lawyers offices are by no means immune from mistakes of this sort (and worse, as we'll see
in a minute).
If the sheriff is sent to the wrong address, it isn't tragic. But it costs you a bit of time, while
the warrant of execution gets corrected.
2. There's nothing to seize (or nothing WORTH seizing)
Remember that advice, way back? That there's no point going through a whole legal process,
to find the debtor has no assets or way of paying you.
A lot of the time, that's exactly what the sheriff finds. He goes to a company address and
formally seizes everything. ('Formally,' because the sheriff first seizes things 'on paper'. He
usually gives the debtor a few days to pay, and if he doesn't pay, then the goods can be taken.
Meanwhile, the debtor isn't allowed to remove the goods or sell them, without the sheriff's
permission.) But the debtor often pipes up and announces that everything is leased. And the
only valuable things are owned by the debtor personally, in his own name. The sheriff goes
ahead with the paperwork, but he knows he won't be able to get any money out of the
company. He won't be able to sell the stuff owned by the leasing company for enough to pay
the balance owing, cover the costs of the sale, and have anything left over. (Assuming the

leasing company even let the sheriff do it.) And anything that's owned by someone
personally can't be seized to cover a company debt (though the person who claims to own it
can be required to prove it.)
On the other hand, if the sheriff is chasing a debt owed by a person, then what does he find?
Not much, usually. Unless the lounge suite is new or leather, it will cost more to take it away
than it will get at auction. The sheriff won't take things that aren't worth taking. (You
wouldn't thank him, would you, for an invoice instead of a payment?) Similarly, that old
Morris 1100 will be left at the debtor's house, even if it's fully paid. (Cars have to be towed
away, and advertised, and that costs.)
If the car is worth something, but it's on hire purchase, it can't be seized. So we're down to
the TV and the video recorder. Everyone has those. Sometimes they've even been paid for.
But there's a snag: Victorian State law says that one TV and video recorder are 'necessary
household property'. The sheriff can't take them. He can take any extra TVs or video
recorders -- but he has to leave the basic survival kit of one each. Anyway, even if he gets a
TV, it isn't worth that much. You should see the rows and rows of TVs at the auctions -- put
there by sheriffs, and from repossession by cash-converters and money-lending people.
Oodles of TVs, which means they go cheaply.
In this lamentable category of 'nothing to seize' comes the all-too-common case of a husband
who runs up debts, and the wife who owns all the goods. There's nothing the sheriff can seize
from the husband, though the house may be full of Picassos and antique furniture and gold
bars. It all belongs to her -- see, here are the papers to prove she bought all this treasure.
Even if the stuff is jointly owned, the sheriff can't seize it.
3. You've been chasing the wrong person.
This happens so much it would make you weep. And it will if it happens to you.
For example, some people sue one of the partners in a partnership. Finally, a year down the
track -- after summons, judgment, warrant of execution -- the sheriff stands at the door of the
partner you sued. "I only own half of the stuff," he tells the sheriff.
You might think, "Fine. He can take half then. That should be plenty." But hold on: he means
half of everything. The sheriff can't seize (and sell), half a table, half a computer, half a filing
cabinet. So you're stuffed.
This goes back to what I was saying about making sure you're suing the right person. Make
sure you know whether the money is owed by a person, or several people (yes, you can sue
in bunches) or a company, or a trust.
4. The company has gone into liquidation

But that's incredible! How could anyone even think of suing a company after it's gone broke?
Um. Lawyers do it from time to time. You know, the process starts when the company is still
alive, and momentum carries the legal action forward, right to the end. When no one from
the debtor company shows up at court, your lawyer thinks -- "How wonderful, we win by
The sheriff, in close touch with reality, eventually comes back with the awful news: the
company went into liquidation six months ago. It takes a certain skill for the lawyer to
explain this gracefully to his client. His client has 'won' but will probably get nothing. Zero.
And he's still up for his lawyer's bill.
5. The person you're chasing goes bankrupt
You can be very close to success, and have this pulled on you. The sheriff can have
everything out of the house and on the morning of the auction, he gets handed a bankruptcy
notice. This means you still have to pay the costs for removing all the goods from the house
-- and if you get anything at all, it won't be much.

Q: What can I do to help the sheriff in his quest for my money?

ONE THING you can do is find out what the person or company owns. As I said earlier,
once you get a judgment, you're entitled to summons the debtor to court and question him
(under oath) about his assets. (It's called a 'Summons for Oral Examination.') You can make a
debtor bring his tax returns, bank statements, account books, everything you might want to
see. Very useful information: you can discover that boat at the holiday house, or the 60
tonnes of xerox paper the company has stored in a sheep shed. Then you tell the sheriff (in
Another thing you can do is understand the sheriff's position. He is not allowed to break into
a place to remove goods, even if the people are never there. He can not act instantly just to
satisfy your thirst for vengeance (or money). He will not be impressed if you shout, "I don't
care what's there! Just take it!" The sheriff is an extension of the court's authority, and also an
extension of the court's insistence on fairness. Someone may owe you money, but the debtor
still has rights. The sheriff won't seize stuff until he's sure the debtor owns it (to mention one
Calm down. The sheriff will get your money if it's possible to get it.

The most popular way to get money from individuals

THE COURT can order the debtor's employer to deduct a certain amount from the debtor's
pay, and pay it to you instead. (An 'attachment-of-earnings order'.) This is popular with
people chasing debts. It's even popular with the debtors, because it fixes the amount they pay
to a small weekly installment. (And hardened debtors know it's illegal for an employer to

sack them or 'alter' their position because of the order.)

Of course you can't 'attach' the debtor's earnings if you don't know who he (or she) works for.
So Step One is (as usual) to find out. To do it, your lawyer sends the debtor a summons to an
examination at court, and also a very long financial form to fill out -- with questions about
everything from his average bank interest, to his water and sewerage rates. The debtor is
supposed to send the form back to you before the hearing date, so you have time to brood
over it. (If he doesn't, or he botches the job, you can drag the same information out of him at
the hearing.)
At the hearing, the idea is to get enough information for the court to confidently issue that
attachment-of-earnings order. But the magistrate will be balanced about it: he knows you
want your money (maybe even need it badly), but he also has no intention of turning the
debtor into a pauper who walks around counting his ribs.
Even if the debtor doesn't appear at the examination, you can probably still get an
attachment-of-earnings order if you know who the debtor works for. The court can then find
out from the employer how much the debtor gets paid. On that information, the court can
order that up to 20% of the net earnings be deducted for you. (That's the most you can get,
unless the court has full details about the debtor's financial position.)
That's the gist of it. It can get more complicated, but you should be doing this through your
lawyer, and he'll look after you. You usually will get the attachment-of-earnings order. Even
if there are already other attachment orders in force, yours gets in the queue. Money will start
pumping to you when the earlier creditors have got what's due to them.

Other things you can do

WE'RE beginning to scrape hard now. If you've found that the debtor has no employer, and
has no household gear that's worth seizing, what's left?
Well, there's a chance that someone, somewhere, owes the debtor money. When you
examined the debtor in court, pressed him hard, you should have found out all those things.
If you know that he's done contract work for his Uncle Hermann and hasn't been paid, or
sold some things to the Wormhole Antique Shop and they haven't paid him yet, or even that a
bank or building society 'owes' the debtor money because it's deposited there in his name,
you can get the money. The court will order Uncle Hermann or the Wormhole Antique Shop,
or the bank to pay you, instead of the debtor.
If you get this far, your lawyer will be using the word 'garnishee': it's the person (or bank, or
whatever) that you claim owes the debtor money. I say 'claim' because the garnishee might
deny it. But you can dispute that, with more proceedings, and the legal road will fork again.
(To pursue a legal claim, right to the end, can take a lot of stamina.)
If you can't even find a garnishee, you still don't have to give up. The debtor is obviously

living somehow. Maybe he's got a pension, or annuity, or does odd jobs for cash. You can
insist on finding out all that at a court examination. Then the court can order the debtor to
pay you a fixed amount each week. (Let's hope it isn't $3 a week, on a debt of $5000.) If he
disobeys this order -- phut! The court can put him in prison. And he still owes you the money
when he gets out.
As you see, this is all pretty grotty, end-of-the-line stuff. It takes time. It's not uplifting or
fun. The returns are often meagre. But it's where you end up, if you have to pursue a debtor
through the courts, right to the end.
By now you shouldn't need a cost-justification study to realise that it's better business to
make those boring credit checks right at the beginning. Or even get your money -- or part of
it -- in advance if you can.

Using a private investigator

NOT MANY people think of hiring a private investigator to help collect a debt. But it's one
of my favourites! If you hire one who works freelance, it's not ferociously expensive. These
guys can find out anything -- or find anyone (if that's the problem).
"Mr. Rich, I'm a private investigator. I'm here to confirm that you are living at this address,
so that a summons can be issued against you for the $3412.37 you owe to High Rollers
Motor Repairs."
"I'm not here to collect the debt. Like I said, I'm just looking into the background a bit, to
help my client."
"My background!" thinks the debtor.
The private investigator -- probably an ex-policeman -- fills the doorway. He has a certain...
presence. He quietly takes notes.
"Uh, actually, I was just about to pay that. Mrs Rich dropped our chequebook in a bucket of
water when she was hosing down the Rolls. But the bank sent us a new chequebook this
morning. Could I give you a cheque now?"
"No problem."
The private investigator takes the cheque. An hour later he gives it to his client.
No summons, no legal fees. Just $50 to the private investigator for 'checking the debtor's

Unless a private investigator holds a Mercantile Agents' Licence, he can't charge you to
collect a cheque. But he can pick up a cheque for you if the debtor offers it. It's surprising
how often this can happen.
And even the hardest 'professional debtors' -- real scumbags who keep changing their
address -- will pay promptly when one of these ex-policemen advises them that it's either
that, or the CIB. (Extreme debt cases often lapse into fraud.) No harassment, mind you, just
kindly advice.
So it's worth having the phone number for a couple of private investigators. So easy to reach,
so pleasant to use.
The other thing is they can find out if it's worth chasing a debtor. For say $50 you can find
out quite a lot. For $150 you can get a top-line report. You might discover the debtor has a
beach cottage no one knew he had. Or a boat. Or some assets in a false name.
Whatever happens, you'll get back a straight story. You'll find out what the debtor is worth,
or you'll find out he's bad news, and not worth chasing further. Very useful information,
either way. You can make a sensible decision -- a practical, unemotional, business decision.
Go for it, grab the boat. Or forget it, cut your losses.
Compare this precision -- and economy -- with the costs of blindly 'reaching for a lawyer'.
Even ordinary lawyers cost $150 an hour or more. And they can't tell you whether it's worth
chasing someone in the courts.
Common sense will tell you when you should use a private investigator. If you're chasing an
individual or small company, and you aren't sure there's any money there, then a private
investigator can be just right. But if a big company is stalling about a bill -- or maybe
genuinely disputing it -- then you need a lawyer.

Using a debt collection agency

I USE a debt-collection agency. But I don't use them for everything. The further you go in
this matter of collecting debts, the more unemotional and selective you get. You pick your
tactics. You pick your allies. You pick your time.
To help you get a handle on how debt-collectors work, here are some of the differences
between debt-collectors and lawyers:
Debt collectors: Get paid when they collect money for you. And only if they collect.

Lawyers: Get paid as they go (and sometimes in advance). You pay them, no matter what
the results.

Debt collectors: Will usually negotiate hard with the debtor to try to get a settlement before
they start legal action.
Lawyers: Get stuck right into the legal process. Little negotiation, if any.

Debt collectors: Work fast.

Lawyers: May work fast, but for some reason rarely give that impression.

Debt collectors: Will knock on doors, phone at odd hours, and try anything legal to collect
your money.
Lawyers: The only pressure they can use is to pursue the matter through the courts.

Debt collectors: Keep pushing their lawyer hard, if it comes to legal action.
Lawyers: May seem sluggish.

Debt collectors: Pay a lot of attention to whether it's possible to collect the debt. Will
usually check to see if the debtor has assets.
Lawyers: May go ahead without worrying about such things. At best, will raise the point and
leave it to you to decide.

Debt collectors: Can explain to you what's happening, in plain language.

Lawyers: Some will explain clearly. Others may not.

Debt collectors: If they need to use a lawyer, you have to pay for the lawyer, as well as pay
a commission to the debt-collection agency.
Lawyers: Lawyers fees only.

Debt collectors: Can be extremely effective against 'professional debtors'.

Lawyers: Usually no worry to 'professional debtors'.

Debt collectors: Can find missing debtors.

Lawyers: Locating debtors isn't their business.

Debt collectors: Keenly interested in collecting debts, and in all aspects of it.
Lawyers: Rarely very interested.

All that may seem like a recommendation never to use a lawyer. That would be the wrong
conclusion. There are times when you should go straight to a lawyer and let him do
everything. And there are times when you should use neither a lawyer nor a debt collector.
By the time you finish this book, all these choices should be fairly clear.
For now, let's take a closer look at how debt collectors work.
Point one: there are all sorts of debt collectors.
Some are large organisations that operate at a genteel level, sending out increasingly
demanding letters, then starting legal proceedings at a certain pre-determined point. They
don't get out into the field and bang on doors.
Some middle-sized debt collectors specialise in negotiation. They adjust their approach to
the type of debtor. They do go out and see the debtor, but mainly with negotiation in mind.
Maybe the debtor can pay so much a week? Or he could make an offer that might be OK?
Anyway, what's the real reason this person hasn't paid? The debt collector wants information,
he picks up vibes, he uses his common sense and experience to find some way to make

progress. Only as a last resort does he use legal action -- and then only if he's sure there's
really money at the end of it.
Finally, there may be debt collectors who simply want to shake up the debtor, frighten or
embarrass him into paying. I honestly haven't met one like this. If a debt collector is
harassing debtors, he shouldn't be. It's illegal and the debt collector will lose his licence if
he's found out. Yet this is the image people often have of debt collectors -- thugs or demons,
like some of the creatures on the cover of this book. There are newspaper stories about
people being beaten with baseball bats because they didn't pay a debt. But if you look
closely, they owed money to criminals. And criminals have their own ways to collect. Hardly
ever by using licensed debt collectors.
Which kind of collection agency should you use?
Big collection agencies
If you run a big company, but most of your debtors are small, then a big debt-collection
agency could be right. They're simply taking over the routine work of collecting lots of little
ones. A few letters, maybe a phone call, then the threat of a summons -- to see if the debtor
scares into paying. They probably have a cheap, assembly-line method of sending out
summonses. (A lot of small debtors will pay on a summons.) What they do about the rest,
depends on how much they know about the debtors. They might just write off any that don't
pay on the summons.
Scare-tactics agency
Never use a collection agency that tries to scare people. Apart from anything else, it's not
efficient. So many people will pay -- would like to pay -- if they could figure out a way to do
it. Probably they didn't realise that they could work out a repayment scheme. Even humour
can collect a lot of debts. You really don't want a grim agency, with no flexibility,
communication skills, or diplomacy. So forget that one.
Flexible, negotiating agency
That leaves a middle-sized agency, with a lot of negotiating skill. This is a good answer if
you keep getting debts of all sizes that are hard to collect. The agency will chase the small
ones and the large ones, the easy ones and the hard ones. For them, it will all balance out.
You'll get a flexible service, and a lot of good advice. These people are easy to talk to and
really know the score. The best way to understand how they do things is to read some quotes
from the head of one of these agencies (from a tape recording I made with his permission,
over lunch one day):
"I tell our new people, you wear three hats. First, there's social welfare officer -- there's no
point taking legal action with some of these people. They've got nothing. And it won't do our
client any good. The second hat, the main one, is a negotiator. Sometimes our client has done

a bung job, so let's settle this thing. The third hat is the hard-nose collection officer. We've
got professional debtors out there. I know people around town who have furnished $400,000
houses, they've owned them, sold businesses and so on, drive around in a Mercedes, and they
don't pay people. Whoever gives them credit, is a sucker. With these types, you've got to get
down on their level and fight. You manoeuvre so they know they're up against a pretty heavy
fighter. They think, I'd better pay this one. But all the other weaker ones, I won't."
"But our policy, if we can't get any part of the money in ten days, we look into them, eyeball
their background a little bit, in order to summons them. If they've got a string of summonses
against them, totalling ten, twenty, thirty, forty grand, and our debt is $500, we're a bit
hesitant throwing our client in there, spending money, because they might waste it. The
debtor is going down fast, so what's the point? We don't want to go for legal action because
we know the ramifications.
"If it comes to a legal fight, we use a hands-on approach with our solicitor. First we get our
own bloke out to serve the summons. We'll ring up the debtor and ask him: OK, you've got
the summons. Are you going to negotiate? What's going on? If that's no good, we maybe get
a default judgment and issue a warrant of execution against goods. But we still contact the
debtor and get him involved. A lot of solicitors don't have a call-back system. They'll just
wait three months, and if the sheriff hasn't contacted them, then they might do something
about it.
"In debt collection, a lot of the time there's a defended action. We call for a summary
judgment right away. Get affidavits from our client, get a court hearing date. Knock out the
defence, because a lot of the time they don't turn up. And we get judgment, and go ahead
with a warrant of execution. Alternatively, if they come up with a defence, our solicitor gives
it to us, we read it, then we fax it to our client and discuss the matter. At that point if the
client will give a little, we may pick up the phone and say, can we settle? What about giving
a discount? And everybody pays their own costs.
"If the client says no, those bastards are so bloody wrong, we get the particulars of claim, all
that's happened. It goes to our solicitor, who draws up an affidavit and it goes off to the
defendant. And we say, there's our particulars of claim. If they aren't prepared to settle then,
we list it for trial.
"Finally the trial gets close. Our solicitor might get an offer. He'll fax it through to us. Court
hearing is Friday. He's prepared to offer such and such. Will your client accept? We talk to
the client. If so, boom. Done. As long as we have the cheque tomorrow. We cancel the court
hearing. We've done that many times.
"We keep pushing. When the sheriff serves the warrant of execution, he gives them another
five days. What often happens is he comes back and gets a big sob story. 'Give us another
couple of weeks', they say. Debtors have been able to delay the sheriff for a month or two by
promising payment. We'll ring the sheriff and ask if he's got it yet. Two weeks later, have you
got it? Give him another week. How's it going? You get much success? He might say, look

there are goods here worth about $300 and the lady said she was going down to get a loan,
and I was going to give them a bit of time. Other times, he'll say, yes, I've got the goods -- or
I've got the cheque. They've paid.*
* [ For balance, I should tell you that a sheriff who read this said he "didn't listen to debt collectors, only to
their lawyers." I found many other examples of this kind... Lawyers and court officials who weren't sure how
debt collectors work. Sheriffs who complained about the ignorance of some lawyers. Lawyers who moaned
about how long it takes the sheriff to act. Debt collectors who lashed out at lawyers... No serious contradictions,
but enough conflicts of viewpoint to add a colourful human slant on the world of debt collection. ]

"A lawyer wouldn't do that. (Some would, to a point.) We follow it up. Because we aren't
getting paid until the debt's collected. And that's the key difference. We're eager to go after
the debtor, because we want a result. Because we want to get a commission. Because we
want to show our clients we do a good job. We want them to give us more debts to collect.
"What you need with a solicitor, is someone to crack the whip. Someone who knows what
they're doing. In debt recovery, you might be up against a lawyer who's being slow -- we've
had this -- because their client told them, I want to drag this one out. Lawyers are very
reluctant to slam another lawyer straight into court for not responding. Because they're
scared of the judge turning around and saying, haven't you given this guy enough time? Say
you want to push for discovery. Your lawyer shakes in his boots. I've been told, 'No, no, I
can't do that.' I have to push him.
"I settle a lot of accounts for our clients purely on economic grounds. One just the other day:
I spoke to the guy, the client wanted three grand. There was a little bit of funny business
going on. They wanted $3000 from this debtor -- the client told us the debt was $3000, but
we'll credit them $500 because there was a bit of a dispute on the job. They acknowledged
that this guy would have a bit of a claim. So we'll accept $2500. So I went to the debtor and
he said, no way, mate. The shoddy job, they did this and this. I talked to him a bit, joked with
him -- as I said, it depends how the debtor responds, what we do. He could see the funny
side, and also the business side. He was a bit stubborn. So he said, I'll give you $1500 and
that's it. I said, you've got to be joking, mate. They've already dropped $500.
"So I came back to the client and spoke to him. He said, no, no, no, I want the $2500, but
look, if you really have to take $1500 I'll take it. But get more if you can. I went back to the
debtor, and said, look the time you're going to take off work, any sort of legal action, there's
no winners. The time and money you're going to spend on this, even though you think you're
right is going to be horrific, you're going to employ a solicitor -- you won't get all your costs
back, because the court doesn't work that way. You might get 50% of your costs back,
awarded, if you win.
"So I said, meet him halfway. $2000. And he thought about it and said, look, yeah, I can't
afford the time off work --self-employed business man. OK, I'll settle. The client was happy.
All done."
And my conversations with debt collectors were so interesting, here are some quotes

from another one:

"The lawyers are very highly paid people. To my knowledge, there aren't many who
specialise in small debts. And as they get busy, they tend to gravitate to more lucrative work.
"Where litigation is used, you should research it pretty thoroughly before you start. Lawyers
tend to look at themselves basically to do litigation. And negotiations by a lawyer are pretty
expensive, because of the time. They consider they aren't serving their client properly unless
they issue proceedings, because none of the costs are recoverable until they're on summons
or whatever. So there's a problem about doing anything but minimum negotiation.
"It's the opposite for a debt collector. I know very few debt collectors who encourage
litigation. The lawyers really aren't encouraging it -- it's just they can't really do anything
else. Lawyers don't have people on the road, they can't knock on doors, they don't have those
telephone skills and things. Their telephone skill is avoiding wasting time on the telephone.
It's bringing the thing to a head, defining the issues, and settling them.
"If other lawyers are involved, you need a lawyer. If we get a matter defended, we don't try
to argue with a lawyer. We brief our lawyer, who takes over. So perhaps where litigation is
certain, you need a lawyer. Where another lawyer is involved on the other side, you need a
"Where you don't need a lawyer is where you don't really know what you want. Where the
debtor is missing, or it's not clear if he has the assets. Or whether there are important nonlegal aspects to be considered, like negotiating with the guy. I'm not talking about reaching a
settlement with him. For example, where the guy is worried about what's going to happen to
him in procedural things. Where a lawyer might not want to talk to him. The lawyer might
just say, if you don't pay, we'll serve.
"One of the biggest problems we have with our clients is when they start to realise it's their
own fault they've got this problem. And they're desperate to find someone else to blame. You
know, the debtor is the worst bloke in the world -- often he is. But frequently he never should
have been given credit.
"Before you engage someone to give advice, you have to take a hard look at yourself. You
have to be ready to write debts off if you can't collect them. If you get burned, be careful
about criticising the people who advise you. Very often people fly into lawyers offices
wanting to issue summonses. The lawyer might say, 'It's 50-50, it's your decision.' He really
means that. You might lose. You are really asking for it if you don't listen to him."
Some of this sounds critical of lawyers. It isn't really -- any more than criticising Mercedes
because they make high-quality, expensive cars. That's what they do. My aim is to describe
things as they are, as I found them. Once you know how things work, how different worlds
interact and what matters to different players, you can make effective decisions. And we are

getting there...

The dreaded section 364

ONE WAY to get immediate attention from a company that owes you money is to threaten to
wind it up (liquidate it). If a company owes you more than $1000, you can do this. It doesn't
matter how big the company is. It's easy -- and cheap -- using section 364 of the Companies
If you know how to word it, there's nothing to stop you from doing it yourself. You simply
write out the message, march up to the company's office, and stick it to their door with
BluTack or four drawing pins. If they don't pay up in 21 days, you'll wind up the company.
No matter if they own half the State, and they only owe you $1000.21.
In practice, because the wording needs to be right, you need a lawyer to do it for you. But it's
simple enough, so it doesn't cost much.
Debt collectors use this tactic sometimes. But they always send an ordinary summons too.
Boom, boom, two barrels: a summons, and a section 364. Because the debtor might defend
the 364 and it could collapse unless you already have a judgment. So to speed things up, you
move toward judgment at the same time you issue the 364.
Another problem: it's expensive to use the 364 (rather than just issue it). It might cost $2000
or more to get to the point of appointing a liquidator. And then the liquidator will put out his
hand and want a few thousand up front before he'll do anything. (Who could blame him?)
But the point is, you can just let the 364 hang there. The company doesn't know if you mean
it or not. Believe me, there are lots of angry creditors out there who do uneconomic things
just for vengeance. The company you're after can't be completely sure you aren't a lunatic.
You might actually wind them up! Uneasy lies the head that wears a corporate crown -- if
there's a 364 in the in-tray.

What next?
WIDEN your attack. Become more flexible, and also much more precise. Use 'smart'
weapons. Don't send in a division of tanks, when you can get on the hot-line and talk the
debtor into surrendering.
There's a lot of detail in this little book. So a summary might be in order:
1. Tighten up your credit policy. Check on people and companies before you give them
credit. Also, get as much as you can in writing about your agreements, delivery terms, etc.
2. Before you start chasing a debtor using legal proceedings, find out if he's worth chasing.

That is, find out if you'll you get something at the end of it all.
3. Be ready to compromise and negotiate, at any stage.
4. Collect large debts by sending someone around personally. Do it yourself, if you have the
5. If you still get a stream of hard-to-collect debts, then find a good debt-collection agency
and sign up with them.
6. Keep in mind what a private investigator can do for you. Sometimes the easiest way to get
a cheque is to have one of these gentlemen help you.
7. If the debtor is using a lawyer, then use a lawyer too.
8. Organise your background papers well before you see a lawyer.
9. Before your case gets to trial, get a lawyer -- whether the debtor has a lawyer or not. (In an
arbitration, it may be OK to handle things yourself, if you care to, provided the debtor
doesn't bring in a lawyer.)
10. Once your case is listed for trial or arbitration, try to get a pre-hearing conference.

Thanks to...
SOME OF the most valuable parts of this book are there because many professional people
gave me their time. Lawyers, debt collectors, a magistrate, private investigators, a creditreference association, and sheriffs. Many of them gave me long interviews, and they all read
the manuscript. (In one case, twice!) Thanks to you all, whether I'm allowed to name you or
My visible thanks to:
Mr Kevin Allen, Members Services Executive, Credit Reference Association of Australia
(CRAA) Ltd
Mr Paul Cooney, W. J. Lawrence & Co. Pty. Ltd.
Mr Maurice Kerrigan, Licensed Private Detective
Of course these people aren't responsible for what I have said. Many of the opinions and
suggestions are my own. Errors are also mine, if there are any (but note my disclaimer in the


Some legal terms that come up a lot

Attachment of earnings order: A court order instructing the debtor's employer to pay part of
the debtor's wages to you.
Garnishee: A person (or company etc.) that you claim owes the debtor money. You can often
get the court to order the garnishee to pay you instead of the debtor.
Judgment: The official decision of the court in a trial. It says who won and how much the
loser owes. You need to get a judgment in your favour before you can send in the sheriff, for
Nulla bona: No goods to seize. An all-too-common report by the sheriff.
Order: An order made by the court to pay money (or do something).
Summons: A document issued by the court, usually requiring the person summoned to appear
at the court. There are many different kinds of summons. The one people usually refer to as a
'summons' ("If you don't pay, I'll send you a summons") is technically an 'originating
Summons for oral examination*: A document issued by the court requiring a debtor to appear
so that he can be questioned about his ability to pay a debt he owes, and (usually) a court
order made to require him to pay in instalments. You have to have a judgment -- to have won
the case -- before you can request that the court issue a summons for oral examination.
Warrant of apprehension: A court order instructing the sheriff to arrest a debtor and bring
him into court. Issued if a debtor fails to appear when required by a Summons to Witness.
Warrant of execution: A document issued by the court, instructing the sheriff to seize goods
from a debtor.
* As I mentioned earlier, this isn't yet in the new rules for the court, but I have been told it was an oversight and
will be put back in. By the time you read this, it may exist again and you can use it.

After all that, here's a quote from the year 1759... it may raise a faint smile:
"Small debts are like small shot; they are rattling on every side, and can scarcely be escaped

without a wound: great debts are like cannon; of loud noise, but little danger."
-- Dr Johnson, from "The Life of Johnson" by Boswell.

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