Debt
Recovery
 NB:
These notes were correct as at March, 2001. The Civil
Claims procedures are constantly changing and a range
of fees apply in respect to proceedings. These notes are
quite general and cover only common procedures.
For
detailed information about the following article please
contact your professional accountant at Perry Ure on 02
4926 4522 or email mail@perryure.com.au
Statement
of Claim
To
begin an action, a Statement of Claim must be issued in
a Local Court. The person who issues it is the "plaintiff"
and it is taken out against the "defendant".
The plaintiff must have the defendant's name and address
and details of the debt (amount, date incurred, invoice
number, what it is for).
The
Statement of Claim must also indicate if the matter is
General Division or Small Claims Division - Small Claims
Division is responsible for claims of up to $10,000. Claims
over $10,000 but less than $40,000 are handled by the
General Division.
If
the defendant is a business, a search must be made to
find out its details before the Statement of Claim can
be issued:
-
where
the defendant is a company - go to the Australian Securities
and Investments Commission to check the company name,
obtain an ACN number and registered office address (web
address on the Perry Ure "Links" page);
-
where
the defendant is a business name - go to the Department
of Fair Trading to check the name of the proprietor
of the business name and find out the address of the
principal place of business (web address on the Perry
Ure "Links" page).
For
simple claims, the counter staff at a Local Court will
usually prepare the Statement of Claim. More difficult
claims are usually referred to the Chamber Magistrate
at the Court.
There are two types of Statements of Claim:
-
Statement
of Liquidated Claim
For work done and materials provided, goods sold and
delivered, professional services rendered, etc. (Can
also be used for motor vehicle damage claims.)
-
Ordinary
Statement of Claim
For claims for damages due to negligence, breach of
contract, etc. This is rarely used by small business
people and should be drafted by a solicitor.
Once
a Statement of Claim has been issued it must be "Served".
Service on the Defendant
Anyone
at least 16 years old can serve a Statement of Claim.
A plaintiff can pay for a sheriff's officer to serve it.
The
court can arrange for service of the summons by pre-paid
post where the defendant is an individual. This fee is
currently $26. This option is only available to the courts.
Alternatively, if the plaintiff so desires, the Sheriff
is able to serve the Statement of Claim. These costs are
added to the outstanding debt. The service fee pays for
delivery to the defendant and preparation of an affidavit
of service.
It
must be served:
-
on
an individual: by handing it to the defendant personally,
or to someone who appears to be at least 16 years old
and a resident at the defendant's place of abode;
-
on
a company: posted or handed to someone who appears to
be at least 16 years old and an employee at the REGISTERED
OFFICE ADDRESS of the company;
-
on
a business name: posted by certified or registered mail
to the principal place of business, or served on the
proprietor(s) personally.
There
are two divisions in the Local Court: Small Claims Division
and General Division.
Debts
of up to $10,000 are handled by the Small Claims Division
and those over $10,000 but not more than $40,000 are handled
by the General Division. The issue fee depends on that
amount actually claimed. Currently fees are: $56 for claims
of $3,000 or less; $74 for claims of more than $3,000
and up to $10,000; and $140 for those matters exceeding
$10,000 but not more than $40,000. $40,000 is the limit
of the Local Courts jurisdiction.
Defended Actions
A
defendant wishing to dispute the debt must file a defence.
If there is a cross-claim, it should be filed at the same
time.
If
a claim in the General Division is defended, see a solicitor
as the hearing is formal and certain procedures need to
be adhered to.
If
a claim in the Small Claims Division is defended, the
procedure has been simplified so that people without any
legal training should be able to conduct their own hearing.
The action is first listed for "pre-trial review"
to try to bring the parties to a settlement through mediation.
If this fails, the matters in dispute are defined and
directions given by the Court as to when and how the hearing
will be conducted. The hearing usually does not involve
parties giving oral evidence. The Court usually directs
parties and their witnesses to provide written statements
and a decision is made on the evidence in the statements.
An Assessor may determine a small claims matter.
Undefended Actions
-
Confessions
and applications to pay by instalments: A defendant
might file a "confession" to all or part of
the debt. If a part-confession is filed, the plaintiff
can accept or reject it. An application to pay the amount
confessed to by instalments might be filed. If the Registrar
of the Court makes an instalment order, again the plaintiff
is given the opportunity to accept or reject it. If
the Registrar refuses to make an order or the plaintiff
objects to an order, there is a hearing as to payment.
-
If
28 days have expired after service and the defendant
has ignored (not fully paid, confessed or defended)
the Statement of Liquidated Claim, the plaintiff can
apply for "default judgement". The procedure
is the same in both divisions of the Court to obtain
default judgement and a plaintiff should not need a
solicitor. It is simply a matter of going to the Court
counter and filing an:
affidavit
of service (stating how the service was carried out);
and
affidavit of debt (stating how much is owing).
Judgement
is then automatically entered by the Registrar. The plaintiff
becomes the "judgement creditor" (or just "creditor")
and the defendant becomes the "judgement debtor"
("debtor").
In
the case of an Ordinary Statement of Claim, the plaintiff
must apply for an Order for Judgement and will require affidavits
supporting his/her claim as to quantum (amount claimed).
To Enforce the Judgement
This
is also usually done at the counter. The usual ways are
to:
- issue
a writ of execution - the fee is currently
$49. A sheriff's officer will go to the debtor's address
and try to collect the money. If the sheriff's officer
is not given full payment, he or she will then list "chattels"
owned by the debtor (property, excluding land) then ask
the creditor for advertising fees for a sale by auction.
At
this point, the judgement debtor will often file an application
to pay the debt by instalments, which then goes through
the channels described above.
If payment is then not made or an application to pay by
instalments lodged at the Court, the chattels can be sold
at auction and the money sent to the creditor.
- issue
a garnishee order - to anyone that owes the
debtor money. This will usually be either the debtor's
bank account manager or employer (known as the "garnishee").
The order directs the garnishee to send the money to the
creditor. If the garnishee order is directed to the debtor's
employer, only a set amount can be deducted from the debtor's
wages or salary.
Once again, an application to pay by instalments may be
lodged by the debtor after a garnishee order is issued.
-
issue an examination summons
- if little is known about the debtor's financial position
(property or source of income). This summons the debtor
to go to a nearby court to be examined about his/her financial
position.
The plaintiff must conduct the examination if the plaintiff
lives within 30 kilometres of the court at which the debtor
is to appear, otherwise the plaintiff may file a request
for the Registrar to conduct the examination.
Failure to attend can result in a warrant for the debtor's
arrest being issued.
- issue
a writ against land
- for debts of $3,000 or more. You should see a solicitor
to do this if a writ of execution is unable to be satisfied.
- bankruptcy
in the case of an individual for debt must be at least
$1,500 or $2,000 for liquidation of a company. Bankruptcy
information is provided by Insolvency and Trustee Service
Australia, which is an Executive Agency of the Commonwealth
Attorney General's portfolio.
For further information refer to their website at : http://law.gov.au/aghome/commaff/itsa
- winding
up proceedings in the case of a company. In this case,
see a solicitor.
Bad Debts and the GST
If
GST is accounted for on an accrual
basis, GST may have been paid before all or part
of a debt is recovered. Any bad debts written off will need
to be accounted for by reducing the amount of GST paid on
the bad debt. Later, if some or all of that debt is recovered,
GST will need to be paid on the amount recovered.
This information brought to Perry Ure clients by the
NSW Department of State & Regional Development.
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