New Zealand Law
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You are out of the Disputes Tribunal as you realise due to the limited jurisdiction. I suggest that you continue to repond to the debt collector as i suggested, but tell the supplier and the debt collector that sending to a debt collector is inappropriate since you have offered to place the money with a stakeholder to await the outcome of negotiation. They will need to file a claim in the District Court and for this you will need to brief a lawyer and argue the work was not adequate
Some contracts do have mediation and arbitration clauses so you should check what your contract says. You cannot force mediation or arbitration however without such a clause.
In my experience cases like this are won on expert evidence. i recommend you get an engineering expert to look at this machine and provide an opinion. This may well persuade the manufacturer/supplier that they have a real risk if this goes to court.