The Problem: You’re owed money, but your client or customer isn’t paying despite repeated emails and phone calls. You’re wondering whether to send a formal letter of demand or take them straight to court. Making the wrong choice could cost you thousands in legal fees or delay your payment for months.
When a Queensland business owes you money, you have two main legal pathways: sending a letter of demand or filing court proceedings. The right choice depends on several factors including the amount owed, your relationship with the debtor, and how urgently you need payment.
What is a Letter of Demand?
A letter of demand is a formal legal document that requests payment of a debt within a specified timeframe (usually 7-30 days). It’s your final attempt to recover the debt before court action and serves as evidence that you’ve given the debtor a reasonable opportunity to pay.
Key benefits of letters of demand:
- Cost-effective vs thousands for court action
- Often resolves disputes quickly without destroying business relationships
- Required before most court proceedings in Queensland
- Creates legal evidence of the debt and your attempts to recover it
- Can include interest and costs
When Court Action Makes More Sense
Sometimes going directly to court is the better strategy, particularly when:
- The debtor is insolvent or about to become insolvent – If you suspect the business is failing, speed is critical. Court proceedings can lead to freezing orders or other urgent remedies to protect your interests.
- The debt is disputed – If the debtor genuinely believes they don’t owe the money, a letter of demand rarely resolves the issue. Court proceedings with proper evidence disclosure may be needed.
- The amount is substantial – For debts over $25,000, the cost differential between demand letters and court action becomes less significant relative to the amount at stake.
- You need urgent remedies – If you need to prevent asset disposal or require an injunction, only court proceedings can provide these remedies.
- You’re trying to send a message to other suppliers – Suing is a reputational double-edged sword.
Our litigation team can guide you through the court process efficiently.
The Queensland Court System for Debt Recovery
Understanding which court to use affects both cost and timeframes:
- Queensland Civil and Administrative Tribunal (QCAT) – For debts up to $25,000. Lower costs but limited enforcement powers. Solicitors can’t attend for or with you unless given permission (i.e. “leave”), which is seldom given.
- Magistrates Court – For debts up to $150,000. Good balance of cost and enforcement options.
- District or Supreme Court – For larger debts. More expensive but the process is less flexible and often faster. These courts usually send a file down to the Magistrates Court for enforcement anyway.
Step-by-Step Decision Framework
Step 1: Assess the relationship If you want to maintain a business relationship, start with a letter of demand. If the relationship is already damaged, court action may be appropriate.
Step 2: Evaluate the debtor’s financial position Solvent debtors often respond to demand letters. Struggling businesses may need court pressure to prioritise your debt.
Step 3: Consider the timeline Letters of demand can resolve matters in 7-30 days. Court proceedings typically take 3-12 months but create stronger legal pressure.
Step 4: Calculate the true costs Factor in your time, legal fees, court costs, and the risk of an unsuccessful outcome when comparing options.
What Happens After You Send a Letter of Demand?
Three scenarios typically unfold:
- Full payment – Many debtors pay once they receive a formal demand.
- Partial payment or negotiation – Many debtors will contact you to arrange payment plans or dispute portions of the debt.
- No response – This strengthens your position for court proceedings and may support applications for legal costs.
Common Mistakes That Weaken Your Position
- Sending demands without legal advice – Poorly worded demands can actually harm your case if you later go to court.
- Making unrealistic threats – Don’t threaten court action unless you’re prepared to follow through.
- Accepting partial payments without documentation – This can complicate later court proceedings if full payment isn’t made.
- Waiting too long – Queensland has limitation periods for debt recovery. Most commercial debts must be pursued within six years.
When Professional Legal Help is Essential
Consider engaging a litigation lawyer when:
- The debt exceeds $10,000
- The debtor has disputed the amount or liability
- You’re dealing with a company that may be insolvent
- Previous demand letters have been ignored
- You need urgent court remedies
Our commercial law team works with Queensland businesses to manage and recover debts.
Owed money by a customer or client?
Tell us who owes you, how much, and how long it’s been outstanding. A member of our litigation team will contact you to talk through your options, whether that’s a letter of demand, negotiation or court.
Need to act fast? If you think the debtor may be insolvent or moving assets, call us now on 1300 334 566 (8.30am–5pm, Monday–Friday) or submit an enquiry above.
Bennett Carroll Solicitors has acted for Queensland businesses since 1974.
We help clients right across Queensland by phone, video and online, with offices in Brisbane North, Brisbane South, the Gold Coast and the Sunshine Coast, and Ipswich and Brisbane Central by appointment.
Urgent debt recovery matter? Call now or start a live chat below for advice on your legal options.
