Are You Being Served? Collecting Debt the Fun Way!
In good times or even these harsh economic times, there is no shortage of confidence tricksters, deadbeats, shysters, shills, frauds and the occasional well-intentioned dud businessperson who tries to delay, fob off or totally deny due payment. For that reason, we decided to use our advice and experience from the music industry in collecting debts to help those in the pet industry as they get dudded by their debtors. So here it is--how to collect on their promises and have fun doing it.
Because I personally handle debt recovery for my companies--opting not to use expensive lawyers, collection agencies that often get 50% and seldom collect all the money--I've been asked about how an individual or small company can take on a debtor and get paid. If you haven't been paid up front, gotten a substantial deposit, don't have a contract, or maybe you've been smoothtalked out of your goods or services by a con man, I'm happy to share my secrets which have a 95% success rate. They result not only in payment in full before you have to do a little paperwork for the court, if you do have to take action (cheaply and without a lawyer), you will get paid your filing costs, interest, costs of service and others making your debt collection a profit centre.
I'll give you a few examples below on how I've recovered debt from a variety of companies with the latest only yesterday (November 6, 2008) when I updated this article. We publish the AustralAsian Music Industry Directory and the pet magazine Urban Animal, so our debtors are usually advertisers, but can also be ones that use our services. The latest one was a pet supply company for $2000 and others have ranged from a major music icon for $5500 through to a carpentry firm for $550.
We're very strict with credit so we have few debtors and insist on being paid up front where there is any doubt. In many ways, I'd rather not do business with people who I doubt will have a good ending, but we are very intolerant of the ones that may have managed to slip through the net.
You see, if someone is dodging payment, we not only remind them that we take legal action to recover debts (which we report to the credit reference authorities like Dun & Bradstreet and CRA) but that neither the company nor any operations of their principals shall ever be listed again in our Directory should the matter go to court. And if it's an Urban Animal case, any legitimate supplier would hate to never get editorial space or be banned from advertising.
It's a rather effective threat since no one really wants to be known by their anonymity in the Directory and few would risk their future standing in the industry (or with their current or future credit providers) by crossing legal swords with us. And the beauty of serving up a writ to recover debt is that it is so simple and cheap as well as being very effective in most cases. And fun!
In the recent past, (it is a matter of public record) we have had to resort to the courts to collect money from four entities. So as to save them more embarrassment than what we put them through getting paid, we won't give the names of the Sydney recording studio, Sydney radio station owner, Melbourne graphic artist and Internet entrepreneur. In the end, we got paid by all of them--more than the original amounts owed to us--and also recovered our legal costs--though we only used a lawyer as added muscle for only one half billable hour in one rather high amount case.
We filed all the cases except for one at our local Newtown court--a couple of blocks down the street. It takes about 15 minutes, is easy with the original invoice and copies of letters sent to collect, plus is actually a bit of fun--especially when you serve the summons yourself.
Following a simple letter of demand that gave the debtors their last chance to pay up (it's a standard letter--two of which I've appended at the end of this article; one a nice one, and one the nasty one that we put out), we then 'kick it up a notch' and apply the heat.
In NSW, it costs less than $100 to initiate a collection action and another $50 or so more to have the summons served by the Sheriff or process server if you don't want to make it personal. It can also be served by a courier or other representative and it generally shocks the shit out of the debtor and makes them think seriously about paying up. But most times, they'll pay once the get the faxed and registered mail letter of demand.
You must serve it at their registered office if a company. That's easy to find out--just go to the ASIC database, give their company name and you'll get basic info for which you can get a readout of their company details for $17 from Dun and Bradstreet in a matter of minutes. I'll give you an example.
The most recent pet company (we'll call them GPO P/L) had a 1300 number and a PO Box in one suburb in Victoria. Doing a company search on ASIC before we were getting ready to write the writ info, we discovered their Registered Office was in a nearby suburb. Getting the full printout from D&B, we Googled the address of the Registered office and found an accountancy firm at that address. We called them and asked if they were the registered office for GPO and bingo! We had the right place to serve and name of the principal of the firm, who we told would be receiving the summons for his client. He of course immediately called them.
At the same time, we discovered the debtor's place of business and directors and company secretary which happened to be the principal's wife. Obtaining her name, we addressed the letter of demand to her at their home--which we had found out from Google maps was on a residential dead-end street. We made the letter Registered Mail, Return Receipt Requested so that we could see that they got it. It tends to scare the debtor to see you've tracked them down at their home, even though you are serving a summons on the Registered Office.
We then faxed a letter with the ASIC documents and a timetable for payment, 48 hours, and we sent reminders right on up to the morning we were going to take out the summons. I think it was also the fact that we checked with other media like ours where he had advertised to see if he had paid (he hadn't) and the fact that we were going to be first in line and nasty that made him pay. He did it in full, ten minutes before we would have had a latte waiting for the court to open. Case closed.
The Letter of Demand is what makes 80% of them pay up, but as you'll see by the harsh language below, they'll probably never do business with you again. Then again, who'd want them to? What you have to make clear is that you will be firm with all your deadlines and not hesitate in filing your claim. Past this point, their credit record is in danger.
But if they don't pay from the demand letter, they have 30 days to answer the summons and provide a written answer to the court before being assigned a court date. I've got to tell you that they usually don't, about 90%--either forgetting about the date and not answering or putting it off and hoping it will go away. And if they don't file a response within that first 30 days, you will get an automatic judgment against them for the full amount and all costs (including your filing fees and interest).
In the five cases I'm pointing out now, four of them never responded and one offered to settle for the full amount ($5000 plus court costs and interest) before the 30 days was up. It was so easy as to be amazing and provided some humour to the staff.
In the case of the Sydney studio, I served the writ on the principal in his office hallway as he was carrying his lunch to the door and he was enraged, not believing I would actually file a writ and then have the chutzpah to serve it personally. It was funny, he even tried to avoid touching the paper, not realising that it was useless and he was sprung. But then he made his payment through the court once the judgment was made against him. And he got a black mark on his credit record. We got the money and more.
In the case of the Internet entrepreneur, he had booked an ad on behalf of a venue he had an interest in and then refused to pay it. So we hit him personally with a writ and paid the little extra to have the Sheriff serve it to him at his new place of employment which caused maximum embarrassment. He threatened to cross sue (ridiculous) and blamed his now former partners. But he didn't answer the summons and had the judgment automatically awarded to us. He then refused to pay and we got the court to issue an order to garnishee his wages from his new employer, adding additional salt to the wound. When the employer tried to refuse to do this, we reminded him that they would be in contempt of court and they ponied up the dough in three payday payouts.
The graphic artist from Melbourne was an even greater example of what the power of a writ can do. After being given time to pay and nothing but excuses and lies came back to us, we finally hit him with a writ. He failed to answer it and was hit with a judgment. He then didn't pay and he found himself back in court having to detail his assets and business. Again saying he'd pay, he didn't and moved business and residence. It took about five minutes to find him and direct the Sheriff to seize property to be auctioned to satisfy the debt.
The Sheriff showed up, took his computer, printer, scanner and other business equipment, leaving him with a phone and an empty desk. In that case, he paid the Sheriff the amount he owed us (now double the original debt) but when it was found out that he had previous judgments, that money went to satisfy them. No problem though. When he realised his error, he paid us directly so that we would have the Sheriff release his equipment. We got the money and then he found to his dismay that his equipment would be auctioned for pennies on the dollar to satisfy his other debts.
In another case, a dance promoter dudded a friend's company in Melbourne so he turned the debt over to us to file a writ and serve. The cagy promoter was called by my assistant to posed as a US promoter looking to invest in Australian events. He set a meeting in a Northside cafe but the local debtor suggested his office last minute. Perfect! We went there and just after my assistant walked in the door and was shown into the office, he pressed call on his mobile and I listened on mine until he coughed and then extended his hand to shake. I stepped in focused to the two on my camera as he heard the words, "You've Been Served!", FLASH! He was stunned so I took a couple of more. He didn't want them published in the music media so he paid within hours.
In years past, I've had one debtor's Jaguar towed away and also gotten a lien against another debtor's house which kept him from selling it until I got paid. It may sound like nasty business but believe me, these people aren't honest little businessmen whose BAS kept them from opening their mail or GST payments kept them from paying their bills--these were professional deadbeats who figure that if they don't pay their bills, their creditors will in most cases give up and go away while they continue to operate in the music business without a problem. Or in the case of the pet industry mini-mogul, he lost what little credibility he had and, having put off the other media, now has them on his case when they found out how quickly I got paid while he avoided their debt.
The only other debtor we had to file a writ against was in Wagga and she was smart enough to refuse to sign for a registered letter, and had moved from her original place of business and registered office. So we were sneaky, Lisa actually, and figured that she couldn't pass up a present. We made a call to her that one of her clients was sending her a bottle of wine from Cellarbrations-R-Us and we would send it to her from Melbourne, all she had to decide was did she want a red, white or champagne. She chose the latter. We said it would be there in a day or so.
Lisa then got a bottle of Passio Pop, about $2.99, placed it in a Styrofoam wine box for shipping with the writ wrapped around the bottle and a Post-It note on top saying "You've Been Served", sending it Express Post from one of our anonymous mailboxes. She got it in Wagga, having to sign for the box and opening it in front of the postal counter worker, realised her mistake and tried to give it back. Too late.
She never filed an answer so 31 days later, the $550 debt had added a couple hundred to it. She still refused to pay, so we sent the Sherriff to her business and he decided on a piece of equipment to seize of a suitable value for auction. It was a $8000 high tech saw that could be easily carted away. Needless to say it was vital for her business so she paid up which was then $880 for all costs and interest.
We have a joke that we have turned litigation into a profit centre. I am of the opinion that if someone wants to rip me off, they can try but I'm enough of a bastard to pursue them for two reasons. One, it is the right thing to do and also gives some satisfaction. And second, it does punish the bill evaders at the same time it reinforces a knowledge in those thinking of ripping our company off that we do take debt collection seriously. So maybe we get a bit of a reputation as getting heavy with deadbeats but I'd rather have that one instead of being deemed a chump and easy mark.
And also, the more often those cheats or thieves succeed, the more likely they are to try it on others. The more they get their justice, the happier the debtors. This article in various updated incarnations over the years and been used by hundreds of people to map out their strategies for recovering debt. All we ever ask for if they are successful is that they choose a nice bottle of pinot noir and surprise us with it.
We actually pride ourselves on paying our bills quickly and almost instantly to small creditors since we believe that cashflow makes the world go around. We'd never try to stiff someone just because they are small enough to dick around. If anything, I encourage anyone who has been fobbed off to try our method of collection and see how it works. The more people who refuse to accept being ripped off and also refusing credit to people with proven no pay record, the better our industry will be for it. Feel free to pass this article around to anyone who you feel may need it.
So that's why today I am sharing some of this information with readers. The Arts Law Centre of Australia has some excellent information on using Letters of Demand and Debt Recovery at their site http://www.artslaw.com.au/LegalInformation/DebtRecovery/DebtRecoveryNSW.asp
And another on the NSW Small Claims process at http://www.lawlink.nsw.gov.au/lawlink/local_courts/ll_localcourts.nsf/vwFiles/Does_someone_owe_you_money.pdf/$file/Does_someone_owe_you_money.pdf
TAS is http://www.artslaw.com.au/LegalInformation/DebtRecovery/DebtRecoveryTAS.asp
As for the future, I wish that we didn't have to spend time chasing deadbeats but there is some sport in it. You see, we're a full service company, so serving the occasional writ can be fun. Like at the press conference of a major promoter with his act in front of media. Or walking up to the podium as another mogul was about to speak. To an audience of his peers. Or getting the Today Tonight crew to interview someone about their brilliant new scheme and then stepping in front of the camera at the right moment and saying "You've Been Served!" See, you can be creative!
So with this bit of advice--and study the rules as there are a few technicalities to obey simply, it's your turn.
Sample Letter of Demand (Simple, polite and direct)
[Name & Address]
Dear Sir/Madam [or name of the person if personally known],
I am writing concerning the amount of $............... which was due to be paid on ............... and remains outstanding despite my requests for payment. This amount relates to: [include whichever is appropriate goods supplied to you by me at your request, and being ....................................[insert a brief description of the goods and any relevant dates] services provided to you by me at your request, and being . . . . . [insert a brief description of the type of service and any relevant details] monies due to me pursuant to the terms of our contract dated . . . . . . .and being for [insert a brief description of what payment is for].
I enclose a copy of: [include whatever is appropriate]
my original invoice dated. . . . . . . . . . for your reference our contract for your reference.
I demand that payment of the full amount be paid to me at the above address within .... days [usually 7 - 14 days] from the date of this letter, otherwise I will commence legal proceedings against you without further notice. In such an event I would also seek court orders against you for payment of interest on the debt due and for payment of my legal costs.
However, without prejudice to my rights for full recovery of the debt, I am prepared to [include whichever is appropriate] accept the amount of $........... [a lesser sum] as full and final settlement of the debt if paid within 7 days [or other appropriate period] from the date of this letter. accept instalments of $........... per week/month until the debt is fully paid, the first instalment to be paid on ............... 200... to [specify address/bank account details] and thereafter on the first working day of every week/month until the debt is fully paid.
Please note that if recourse is had to legal proceedings this letter will be tendered in court as evidence of your failure to attempt settlement.
And here's the more... nasty one.
A letter of Demand from the Files of IMMEDIA!
(Name of Deadbeat)
(Address of Deadbeat and Fax of Deadbeat ) send by fax and Registered Mail
LETTER OF DEMAND
RE: Music Directory Advertising Debt of $1500--July 20, 20008
To the Attention of: (Name of Head Deadbeat),
We have been instructed by your accounts person, Squirmy-who did not want to give us his last name and hung up on us-to serve you with this formal letter of demand which we are obligated to do prior to initiating legal proceedings for debt collection.
Despite promises of payment, the latest being last week in which he committed to paying the advertising debt of____ of $1500, none was made and he informed us today that you do not have the money to pay them. I find this tactic of delaying payment by ignoring requests, putting off writing cheques when promised and then claiming no funds are available would indicate that your company may be trading while insolvent. We must now have full payment immediately.
In any case, Squirmy, by his actions and rudeness on the phone has eliminated any credit facilities that you have with us and forces us to demand payment from you within 48 hours or we shall initiate legal proceedings without further notice.
Once a legal action is lodged, we will be asking for costs and once action is lodged with court, we will not simply accept payment without you also paying the fees for collection, court costs and any interest the court awards. We have effectively used the legal process to collect from similar debt evaders and you are welcome to discover the process and ask them what the end result is. Your continued inability to make good on your promises has destroyed any credibility you've had with us and any possibility of future credit.
Further, once the court makes the judgment, we routinely notify the appropriate credit reporting agencies such as the Credit Reference Authority and Dun & Bradstreet whose reports may result in your being denied future credit or in your current credit providers restricting existing credit facilities. In other words, we don't cut corners.
As well, we will release the suit's details to the appropriate music media upon initiation of litigation as well as upon judgement. But what this also means is that you will fall under our policy for uncollected debts that we set for the directory from the beginning. If the matter is not cleared up by (we normally give two days), we will also remove your company's listings from any future edition of the directory. And further, we will not list your company nor accept any other listing from any companies controlled or managed by you or any of your directors in any future editions of the directory.
Feel free to call me with your payment details. But don't take any longer than (the date above repeated) to have it in our hands or the next communication you will have will be a summons which will incur hefty additional costs to the amount you already owe.
Phil Tripp-Managing Partner
Hope you've enjoyed this and let me know if you need my address for that bottle of pinot when you are successful. Feel free to email me directly with any comments at firstname.lastname@example.org