A common question of clients when they first contact us is “why not just go straight to court in Ontario to sue over my unpaid invoice?  Why bother with the lawyer?”  Our answer is as follows:

Strong Chance of Collecting on Your Unpaid Invoices

By sending a legal letter of demand on your behalf, you are increasing the likelihood of collecting on your unpaid invoice.  This is because many debtors do not take their creditors seriously until they see that the creditor actually intends on taking them to court. 

Attempt At Avoiding Time and Expense Of Going To Court

Courts in Ontario can be quite bureaucratic, and collecting a debt in court by a lawsuit is never easy.  There are all sorts of legal procedures, such as exchanging Statement of Claim and Defence, there’s the disclosure obligations of an Affidavit of Documents, the mandatory mediation, the examination for discovery (for debt collection files of over $50,0000), there’s the pre-trial, and then the trial.  And this does not even consider the possible interlocutory steps such as motions!  Therefore, for a fixed rate, why not attempt to avoid the hassle of going to court to collect on the unpaid invoice.

Shows The Judge That You Tried Avoiding Court

Generally, courts encourage parties to explore all avenues of settlement before resorting to a court action to collect on an unpaid invoice.  In fact, there is a rule in the Rules of Civil Procedure that encourages offers to settle made in the course of litigation prior to trial.  In the small claims court, as well, offers to settle are encouraged and rewarded by doubling the trial victor’s costs in the event she beats her offer to settle.  Therefore, one can only increase their ability to maximize reimbursement of costs after trial by showing that he tried to avoid court with a letter before litigation even began!

The Cost of the Demand Letter Can be Claimed In Court

Not only will a judge be sympathetic when one tries to settle before commencing a lawsuit for an unpaid invoice, but a reasonable judge should reimburse one who has paid a lawyer for a letter of demand.  

In sum, when doing a cost benefit analysis, one has really much more to gain from a demand letter than lose.  One can avoid going to court and collect on an unpaid invoice by sending a lawyer letter, and even if the matter does not settle, one can appear sympathetic before a judge and claim back the cost of the demand letter.  Thus, in reality there is no cost to the demand letter at all.

* The above article is for general information purposes only. In some instances a letter may not be warranted. For instance, if you believe it may tip off a potential debtor to flee the country. A lawyer should be consulted on a case-by-case basis.

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