Debt recovery during COVID-19

In addition to its overall negative impact on the Australian economy, the COVID-19 crisis has also seen opportunistic individuals disingenuously attempting to rely on the current environment to avoid their legal obligations in circumstances which do not genuinely warrant them doing so.  

This type of conduct has in part been facilitated by the unprecedented nature of many of the temporary relief measures recommended by government or mandated by State and Federal Parliaments, together with the urgency with which they were announced or introduced.  People have sought to take advantage of the confusion surrounding entitlements to relief measures, the processes associated with implementing them, and the many untested loopholes. 

The most notable example of this has been seen in the commercial leasing sector, where the news has been dominated by commercial tenants arbitrarily refusing or failing to pay rent, seeking rental extensions, or demanding rent relief without making adequate disclosure of their financial records.

The significant insolvency protection measures afforded to companies and individuals during COVID-19 may also have exacerbated this type of behaviour. 

It seems that numerous entities which are yet to see their cash flow or profitability significantly impacted are taking advantage of the significantly increased thresholds for serving statutory demands, and the extended timeframes in which to satisfy them, in order to shift bargaining power in negotiations or to avoid payment of their debts entirely.

If you are owed money by a debtor who is unreasonably taking advantage of the COVID-19 crisis, and there is no substantial factual dispute, there are other debt recovery methods that can assist – e.g. an originating application in the Queensland Courts[1] to obtain a simple judgment for that debt.  This can often be a much quicker and less expensive process than filing a claim, which is only filed in circumstances where there is a factual dispute and the debt is likely to be disputed.

If the debtor still refuses to satisfy a judgment, there are a number of enforcement measures available, including:

• requiring the debtor to provide a statement of the debtor’s financial position;
• a warrant for the redirection of the debtor’s earnings (from an employer, or another third party) to you;
• a warrant for the seizure and sale of real or personal property owned by the debtor;
• a garnishee order, which directs a third party who owes money to the debtor to instead pay you;
• a warrant requiring a financial institution to redirect the debtor’s regular payments (such as annuities or commissions) to you;
• and a Mareva order, which freezes the debtor’s assets to prevent them from dealing with them.

The Queensland Courts are still open for business as usual and they have implemented an array of new technological measures to progress both new and existing matters.

If you have a debt owing to you that you would like to recover, please contact one of our Litigation and Dispute Resolution team members.

[1] Similar procedures are available in each of the other States and Territories within Australia

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.