Australia: Debt recovery proceedings: what are the basic Court procedures?

In brief - Analyse benefit of seeking recovery before commencing proceedings

The Court process in debt recovery proceedings is driven by Court rules and regulations that are specific to each Court and state. That process can be frustrating, especially when you are confident that the debt is owed and the debtor is using the Court procedures to delay payment even further. By giving your legal representatives as much information as possible prior to issuing proceedings and providing prompt assistance during the course of the proceedings, you can help minimise that delay and costs.

Consider cost/benefit, time and chances of recovery before issuing court proceedings

So your claim has been quantified and your demand for payment has been sent and been met with either silence or a refusal to pay. Your next step is to issue court proceedings seeking recovery.

Before incurring the costs of doing so, it is essential to step back and ask the question "What is the benefit of doing so?".

You should :

  • obtain an estimate of legal costs from your legal representatives
  • undertake a careful costs/benefit analysis as issuing proceedings can be costly
  • note that legal proceedings will take time to be resolved. If proceedings are defended it may take up to 12 months (or even longer) to have a final order made. Conversely, if undefended, judgment may be awarded in a matter of months
  • understand that you and your staff will need to commit time to assist your lawyers in making the claim
  • consider whether the debtor will be "good for the money" if you are successful

You may decide to write the debt off on the basis of the cost/benefit analysis and you may be able to claim an income tax deduction or a goods and services tax (GST) adjustment so that you do not pay income tax or GST on amounts you have been unable to recover from the debtor.

Commercial debt recovery is generally through the Courts rather than Tribunals

So having undertaken that analysis, you have decided to pursue recovery through proceedings.

All the state and territory jurisdictions offer a simple debt recovery procedure for small claims by either Tribunals or divisions within the Courts.

The advantage of using Tribunals is that the process is informal, legal representation is not required, it is less costly and the matter can be dealt with quickly.

However, the jurisdictions of many of these Tribunals is limited to consumer debts rather than commercial debts. Generally, recovery of commercial debt is through the Courts.

Court rules and procedures for debt recovery claims

Unlike many legal TV dramas, the process of obtaining a judgment on a debt recovery claim is seldom glamorous or dramatic! It involves methodically going through a number of steps to ensure that the Court has all the information it requires to make a decision on the case. While each Court and state has its own specific Court rules and procedures, the following nine general steps apply:

  1. Determine which Court has jurisdiction to hear your action

Each state and territory has various "tiers" of Courts which in turn have jurisdictional limits as to the claims they may hear. For instance, the Magistrates' Court in Victoria can only hear claims up to $100,000.

  1. Ensure that your claim is brought within the statutory time limit

There are time periods restricting when claims can be brought. Again these may vary between jurisdictions. For example, contractual claims in Victoria generally need to be made within six years of the date the contract was breached (although that time may be extended in certain cases, such as fraud).

  1. Articulate your claim

It is necessary to set out your claim in a "statement of claim" (or "complaint" as called in some jurisdictions). That will include information as to the circumstances in which the debt was incurred - how much, when, where, why.

The claim will also include reference to the documents which prove the debt (e.g. proof of delivery, invoices).
Your claim is provided to the Court Registry which will then "issue" the proceeding returning it to your legal representative.

  1. Serve the claim

It is then necessary to "serve" the claim issued by the Court on the debtor, i.e. giving it a copy. There are rules and regulations which set out the particular requirements for service. These will differ depending upon the nature of the debtor. For example, service on a company by posting to its registered office is adequate, however, personal service on individuals is normally required.

  1. Wait for a defence

Following service, the debtor then has time to file its defence to the claim and provide a copy to you. A defence may also be accompanied by a "counter-claim" which is essentially a claim made by the debtor against you which, if proved, can be set off against the claim you have against it.

  1. Discovery, subpoenas and interrogatories

If the proceedings are defended, the Court rules provide for the disclosure of relevant information regarding the claim. This includes "discovery" - a process where each of the parties is required to disclose all documents and correspondence relevant to the proceedings and upon which they intend to rely or other parties may rely. While these documents may not necessarily always be favourable to your claim, the Court rules and the obligations imposed on parties who choose to litigate their claims require all relevant documents to be disclosed. You are required to list those documents, usually in an affidavit which also requires you to positively state that they are the only documents in your possession or control which are relevant to the proceeding. Each party is then entitled to look at those documents and obtain copies of them.

There may also be other documents which neither party has but which may be relevant to the proceedings. Parties may issue "subpoenas" compelling production of those documents. For example, bank records may be relevant and a subpoena issued to the bank compels it to produce the documents listed in the subpoena to the Court by a certain time. Once produced to the Court, the parties are then able to inspect and copy those documents.

In some instances parties may serve "interrogatories" on another party. These are a series of questions designed to limit the issues in dispute between the parties and which the party served is required to answer on oath through an affidavit.

In a simple debt recovery action, the process of discovery is likely to be relatively simple and interrogatories will not be required. However, the discovery process can be arduous in more complex actions.

  1. Preliminary hearings

The Court will often fix a pre-hearing conference or directions hearing. A pre-hearing conference is an informal conference between the parties and the Court Registrar to clarify the issues in dispute and promote resolution.
Directions hearings will determine whether procedural matters are being complied with and fix dates for their completion. For instance, it may be necessary to apply for further discovery from the debtor if you believe it has documents which have not been disclosed that are relevant to the proceeding.

  1. Mediation

This step is combined with step seven in some jurisdictions.

All Courts encourage the parties to seek resolution of disputes prior to the final hearing and will normally require the parties to attend a "mediation". An independent third-party mediator (either chosen by agreement of the parties or Court appointment) will meet with the parties and their representatives and assist them to try and reach resolution. The mediator does not adjudicate the claim but acts as a facilitator. A mediation is always conducted "without prejudice" to the rights of the parties to pursue their claims should the mediation fail.

  1. Trial

If the mediation fails, the matter will go to a final hearing or trial.

At the trial you will be required to prove your claim. This may involve you giving oral evidence in the witness box about the circumstances of the debt. You may be cross-examined on your evidence by the debtor's legal representative. The judge or magistrate may also ask you questions to clarify matters.

After the Court has heard all evidence, submissions and arguments made by the legal representatives of the parties, it will often "reserve" its decision to allow it to consider all of these matters before delivering its judgment.

Your legal representatives will be notified once the judgment is delivered.

The Court process can be lengthy and if the matter goes to trial, your case may not be dealt with for over 12 months after it has been issued, depending on the complexity of the claim and defences and on the time available for the Court to deal with it.

What if the proceeding is undefended or if there is no legitimate defence?

If undefended or if the debtor admits your claim, judgment for the amount claimed together with an allowance for legal costs and interest can be entered.

Legal costs are claimable but are fixed amounts

If you are successful on your claim, an order will normally be made that the debtor pay your legal costs of the proceedings. The Court rules in each jurisdiction set fixed amounts claimable for legal costs. Those rates never equate to the actual amounts charged to you. So even if you are successful in obtaining judgment, you will not be entitled to recover from the debtor all of the legal costs incurred by you.

So you have obtained judgment - what next?

The next article in this series will deal with measures to enforce your judgment.

Read our first article in this series: Effective debt recovery starts with identifying your debtor
Read our second article in this series: Quantifying your claim when recovering debt

Louise Thompson
Restructuring and insolvency
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions