debt recovery

Small Claims Debt Recovery - NSW

when chasing payment for goods or services provided the first step is generally to send a letter of demand to the other party advising them of the dispute and the money outstanding and giving them a defined period within which to settle the matter or else face legal action. For assistance with drafting a letter of demand see Arts Law's Information Sheet "Letter of Demand". Start debt recovery with debt management credit counseling today!

If the response to your letter of demand is unsatisfactory, you must decide whether to proceed with your threat of legal action or write off the debt. If the debt is relatively small - say under $2,000 - many people decide to write off the debt because of the perception that it is too difficult and expensive to pursue, especially if lawyers are retained.

However, a "do it yourself" option is available. All State and Territory courts in Australia offer a small claims division of their local court or tribunal that provides a simple debt recovery procedure. Note that there is a time limit on bringing an action for debt recovery, which is generally 6 years from the date the debt first accrued.

A small claim is a claim in respect of a sum of money, goods purchased or delivered, labour or a combination of these. It generally applies to a claim up to an amount of between $2,000 and $6,000 depending on the State or Territory in which the legal action is conducted.

Although small claims debt recovery is a relatively simple procedure to follow, certain matters should be given consideration before proceeding. Debt recovery action involves a two-step procedure. Firstly, you must negotiate a settlement or obtain a judgment in your favour from a court or tribunal. Secondly, you must actually recover the money owed to you, which may involve taking enforcement action against the debtor. Briefly, these measures include obtaining a writ of execution against the debtor's property, securing a garnishee order against the debtor's wages or bank account, or (but this is uncommon with small claims) forcing the debtor into bankruptcy.

It is important, therefore, to first assess whether the debtor will have the ability to pay before commencing legal action. If the debtor has a number of creditors seeking payment of debts and is basically insolvent (ie. unable to pay their debts) it may not be worth pursuing legal action. If, after a company search, you find that the company is in the hands of a receiver or liquidator, contact that person direct. Where there is a genuine dispute over the facts and the evidence to support your claim is not strong, consider whether to proceed further. If your claim is unsuccessful and the other party retains a solicitor to represent them (although this is not common in small claims), the party will apply for a legal costs order against you.

Please note that the Arts Law Centre cannot represent you at these proceedings nor draft your statement of claim, but we can advise you as to your rights in an arts related matter both before and during any legal action you pursue. If the debt is over the limit allowed provided for the small claims division you will probably require legal representation. Arts Law can assist with referrals to an appropriate solicitor.

It is generally worth the effort to settle the matter out of court as this is unquestionably preferable to spending time and money on court proceedings. Commencing a small claims action does not prevent the parties from settling the dispute between themselves at any time.

A small claims action can be brought against a person (sole trader), a group of people (partnership) or a corporate entity (company, incorporated association). If the debtor is trading under a business name you need to do a business name search to identify the owner of the business. This can be done by carrying out a search at the Business and Consumer Affairs Office (or its equivalent) in your State or Territory or using the Australian Securities and Investments Commission's National Names Index which can be accessed via their website at http://asic.gov.au.

The owner of the business has to be identified in the Defendant or Respondent details of your claim form (often referred to as the Statement of Claim) as follows:

Defendant: Glen and Glenda of 99 Surreal Crescent, Smithville NSW trading as (or "t/a") Fantasy Dressers.

If the debtor is a company - for example, Fantasy Dressers Pty Ltd - any business documents (eg. invoices, business letters, etc.) should have its nine digit Australian Company Number (ACN) after the company name. A company search, using this ACN, should be conducted through ASIC to identify the registered office address at which to serve the claim as well as to ensure that the company is not in liquidation.

In NSW, small claims may be made in the Civil Claims Division of the Local Court ("the Court").

You may use the Court for claims of up to $3,000. However, the Local Court in its General Division can hear claims between $3,000 and $40,000.

To lodge a small claim, you need to file a Statement of Liquidated Claim with the Court. This form is available from the Court and should include the accurate name and address for you ("the Plaintiff") and the other party ("the Defendant"). If the Defendant is a registered company, you should ensure that the name and address on the Statement of Liquidated Claim are the same as those on the company's register. You should include details of any invoice number and when the debt became due. An appointment may be made to see the chamber magistrate at the Local Court who will assist you to fill out the Statement of Liquidated Claim form.

Once the Defendant has been served with a Statement of Liquidated Claim, they have 28 days from the date of service to pay the Plaintiff or defend the claim by lodging a completed Notice of Defence form with the Court, or confess and apply to repay by instalments. The Notice of Defence form is available from any Local Court. If there is no response from the Defendant, the Plaintiff applies for judgment by lodging an Affidavit of Debt form which is available from the Court.

If the Defendant defends the claim the matter will automatically be set down for a pre-trial review.

There is a small filing fee for the Statement of Claim. In addition, you must either pay a fee for the sheriff to serve it, or you can pay a smaller fee to the Court to serve the Statement of Claim by post.

Although each party can engage a solicitor to represent them, for many proceedings before the Small Claims Division there is no need for a solicitor. Legal representation will add to the cost of the claim. Generally, the successful party is not entitled to claim their legal costs from the other party, although they may be able to claim their administrative costs and expenses, such as service fees and witness expenses, for bringing or defending the claim.

Yes, the parties may settle the matter between themselves at any time before the hearing. They are encouraged to do so at the pre-trial review. This is an informal review of the facts surrounding the dispute, and statistics show that an amicable settlement will often be reached at this stage. The review is conducted by an officer of the Court. The failure by either party to attend the pre-trial conference without good cause can result in an order being made against them.

If there is no agreement at the pre-trial review a hearing date is set. The person conducting the pre-trial review will advise all parties as to the evidence they will have to present to ensure that a quick and fair trial will take place.

The order of the magistrate is legally binding on the parties. If either party fails to comply with the order, it may be enforced against the defaulting party in the Local Court.

i. Downing Centre, Local Court, Civil Claim Enquiries, Sydney, telephone (02) 9287 7923

ii. Your nearest Local Court - see the White Pages.

iii. Your local community legal centre (eg. Inner City Legal Centre in Sydney) can also provide advice and assistance on how to file a defense and other enquiries regarding the procedures of the Small Claims Division of the Local Court.

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