Debt Recovery Litigation and Notice in Australia

If you are struggling to recover debts from clients or for other Debt Recovery Litigation related matters, the first step is a well-worded letter of demand which puts the debtor on notice that they are seriously overdue.

In many cases, a polite letter of Debt Recovery Notice from a solicitor’s office is enough to induce a client to pay, but some cases may need more direct letters. If these fail, the next step is to apply for judgment via the court process and enforcement.

Court

Most debt recovery litigation action occurs in the Local Court (as opposed to the District or Supreme Court). Smaller claims, of less than $10,000, are started in the Small Claims Division of the Local Court, which limits the costs involved. In the Small Claims Division, you bear your own legal costs regardless of the outcome. In the General Division the jurisdictional limit (maximum claim) is $60,000, excluding any court ordered interest. Any claim in excess of $60,000 and up to $750,000 must be brought in the District Court, while Supreme Court litigation is recommended only on the advice of your solicitor.

Interest

As the plaintiff, you may claim interest under Uniform Civil Procedure Rule 36.7 and s101 Civil Procedure Act 2005. Interest is calculated as 6% above the cash rate last published by the Reserve Bank of Australia in the 6 month period immediately before the period claimed. In a liquidated claim, the interest figure is usually calculated and specified in the claim. No calculation of interest has to be made when filing an unliquidated claim for damages.

Costs

If you are successful in a litigation proceeding, it is at the discretion of the court to reimburse your costs. Unless the court otherwise orders, costs are awarded as assessed, on a party/party basis excluding solicitor costs such as advising the client. As a rule of thumb, the recovered amount is usually about two thirds to three-quarters of actual costs. Costs are not recoverable from any other party without an order of the Court.

Service of Documents

A Statement of Claim is valid for service for 6 months from the date of filing: UCPR r 6.2(4). Part 10 UCPR sets out the requirements for service of documents under the Rules – Debt Recovery.

The originating process may be served anywhere in Australia. However, where it is to be served outside New South Wales it must be served with a Form 1, a special debt recovery notice explaining how the matter may be defended. Failure to serve a Form 1 with the Statement of Claim results in the process being improperly served.

  1. Individuals must be served personally.
  2. Companies may be served by post on the registered office.

The Defendant has 28 days within which to lodge a Defence: UCPR r 14.3(1). If a Corporation is in liquidation it is not possible to sue without the leave of the court. Where a person is represented by solicitors, documents may be served by sending to the solicitors. However, confirm before doing so that the solicitors have agreed to accept service.

Default Judgment

In both liquidated and unliquidated claims a Plaintiff can apply for default judgments if no defence has been filed: UCPR r 16.3(1) after 28 days of service, judgment will be entered for the amount of the claim plus interest plus costs.

Settlement

If a settlement is agreed, terms of the settlement should be filed in court. The court’s form is very simple and little more is needed if payment is to be made in a lump sum. A detailed deed is recommended if the settlement includes payment by instalments.

Enforcement

If you have obtained a judgement and the debtor has still not paid you need to enforce the debt. The choices are listed below. Each may be useful depending on the particular circumstances. After obtaining a judgment, the situation can be reassessed.

  1. Seizure and sale of assets.
  2. Garnishee of wages or salary.
  3. Examination Summons.
  4. Bankruptcy.

After obtaining a judgment, it is a good idea to send a copy to the debtor and invite them to pay the debt. The letter should make it easy for the debtor to pay, i.e. include how much to pay, where to send a cheque or EFT payment.

If you are concerned about debt recovery litigation, debt recovery notice or civil litigation, call CMA on (02) 9906 8188 for practical advice and peace of mind.

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