Avid readers of this column (I live in hope) will be familiar with my pieces on competent retainer management.[i]
In the last year, I’ve encountered an increase in small practitioners who take their eyes off their aged debtors lists to suddenly discover that they have a serious cash flow problem. Now, the best way to deal with this problem is to avoid it in the first place – so read the articles mentioned in the footnote.
But if it’s too late and you’re already there, you need to avoid making the situation even worse through knee-jerk formal recovery actions. So I tell my clients that unless you can answer yes to the vast majority of the following questions, you may well end up with a counterclaim, or in the Legal Services Commission, or have your claim thrown out for lack of evidence or process.
- Is there is a valid client agreement in place?
- Was the work done as per the scope in the client agreement?
- Where the actual work done was greater than the anticipated original scope, is there clear evidence of client’s authority to increase the scope and the related price?
- Is the person/entity you are proposing to sue the same entity on the client agreement?
- Was the matter free from elements of arguable misconduct in its handling – that is, something that the client can potentially turn against you (so the bigger problem is not them owing you money, but you being pursued by the LSC)? (think intemperate language, serious delay, persistently broken promises, conflict, breach of confidentiality ) and following this…
- Are you confident that the client won’t be looking for retribution or an escape from payment because the matter and/or your relationship didn’t finish as they would have liked?
- Have you given the client proper notices that the debts are due and have:
- provided copies of all relevant invoices
- provided appropriate written reminder/follow-up letters
- been clear about due dates/time being of the essence and the potential consequences of non-payment (that is, action without further notice)
- made reasonable attempts to speak with the client about payment?
(Unless you do all of No.7, you will find that your claim may be lost/held up through lack of proper process. If the debt is quite old, it isn’t realistic to just rely on notices given six months ago before commencing proceedings now – the question will always be asked, has your process been reasonable?)
- Are you satisfied that the client has the capacity to pay anyway? (that is, are you just spending $$ chasing a judgment debt that won’t be paid)?
- Is the sum owing worth the effort and the angst? And finally,
- Before taking action, have you reviewed the file history to ensure that none of the complications/problems listed above are seriously in play?
Thinking of your own collection and recovery processes, how did you go in your yes answers?
There will always be special cases where one or two of the above problems may be in play but you still have good recovery prospects – but overall, a yes to all the questions will keep you out of a lot of trouble and stop you burning a lot of unproductive time and effort.
[i] See, for example, dcilyncon.com.au/the-matter-and-the-money, and the ‘Getting paid’ practice management article at qls.com.au > For the profession > Practice support Resources > Practice management resource bank > Practice management articles (member login required).
Published: Queensland Law Society – Proctor – October, 2017