On debt recovery, defamation, and damages: part 4.¹

To recap:
(a) at Mr Chan's request, Ms Tang loaned $120,000;
(b) the loans were not repaid. Ms Tang engaged a debt collection company, which paid visits to and left letters at various locations;
(c) Mr Chan successfully sued Ms Tang and the debt collection company for defamation - but was only awarded $1 in damages; and
(d) Mr Chan, Ms Tang, and the debt collection company are all likely to be out of pocket. And Mr Chan has been made bankrupt (via separate proceedings).

So what are some learning points for commercially-minded businesses and businesspeople?

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1️⃣ Choose your debt recovery methods carefully.

It is a annoying to be owed money.

It is even more annoying when the borrower refuses to repay.

It is therefore tempting to engage a service provider who will make life as annoying as possible for the recalcitrant borrower. After all, borrowers should expect to experience, at the very least, annoyances and inconveniences for not repaying a legitimate debt.

But if you end up choosing a debt recovery method or representative which crosses the line...

...well, let's just say that your annoyances will be multiplied.

And as this case illustrates, if you engage a representative to try and recover the debt for you, you may end up being liable for their actions.

In this case, I cannot imagine that when Ms Tang chose to engage the debt collection company, she was prepared (a) for Mr Chan to sue her for defamation; and (b) to incur costs defending herself.²

Now, at this point, some of you might be thinking:

"Come on, this is just a cheap shot against debt collection companies. What do you have against them? They're just trying to make a honest living. You're just trying to stifle the competition, you hack!"

I have no personal axe to grind against debt collection companies.³ I suggest, however, that lawyers and debt collection companies play different roles.

Sure, a debt collection company can annoy or embarrass a debtor into paying.

But if the debtor is shameless or otherwise immune to such tactics, you'll probably need a lawyer to...

(a) freeze and deduct funds from a debtor's bank account;⁴
(b) have the debtor's property or items seized and sold;⁵ or
(c) wind up or bankrupt the debtor.⁶

A debt collection company can't do this.

Now, I am not suggesting that all creditors should invariably engage a lawyer to take out such enforcement actions. These actions may not bear fruit, and creditors should always do a cost-benefit analysis before taking action.⁷

But I am suggesting that debt collection companies and lawyers play different roles and provide different options.

And I do suggest that debt recovery methods should be chosen in a considered and deliberate manner.

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In part 5, I'll share more learning points for commercially-minded businesses and businesspeople.