The court process in debt recovery proceedings is driven by court rules and regulations. 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.
Giving your legal representatives as much information as possible prior to issuing proceedings and providing prompt assistance throughout the proceedings will help to minimise that delay and the associated costs.
Before deciding to seek recovery, it is essential to consider the benefit of issuing court proceedings.
You should obtain an estimate of legal costs and undertake a careful cost/benefit analysis. Consider the time involved, as well as the debtor's ability to pay.
The nine-step court process
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. Each state and territory has various 'tiers' of courts, which in turn have jurisdictional limits as to the claims they may hear.
2. Ensure that your claim is brought within the statutory time limit, which may vary between jurisdictions.
3. Set out your claim in a 'statement of claim' (or 'complaint' in some jurisdictions). The court registry will then issue the proceeding, returning it to your legal representative.
4. It is then necessary to serve the claim on the debtor. Service rules and regulations differ depending upon whether the debtor is a company or individual.
5. The debtor then has time to file its defence and provide a copy to you. A defence may also be accompanied by a counter-claim.
6. If the proceedings are defended, the court rules provide for the disclosure of relevant information.
This includes 'discovery', where each of the parties is required to disclose all relevant documents and correspondence. Parties may issue subpoenas compelling the production of documents which neither party has but which may be relevant.
In some instances, parties may serve 'interrogatories'. These are a series of questions designed to limit the issues in dispute and which the party served is required to answer on oath through an affidavit.
7. The court will often fix a pre-hearing conference or directions hearing. A pre-hearing conference is an informal conference to clarify the issues in dispute and promote resolution.
Directions hearings determine whether procedural matters are being complied with and fix dates for their completion.
8. 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'. This step is combined with step seven in some jurisdictions.
An independent third-party mediator helps the parties to reach a resolution, but does not adjudicate the claim.
9. 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.
Be patient – it may take time
After the court has heard all evidence, submissions and arguments, it will often reserve its decision to allow it to consider all of these matters before delivering its judgment.
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 complexity and on the time available for the court to deal with it.
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.
If you are successful, an order will normally be made that the debtor pay your legal costs for the proceedings.
However, keep in mind that the court rules in each jurisdiction set fixed amounts claimable for legal costs, which never equate to the actual amounts charged to you.
Louise Thompson is a special counsel in the dispute resolution team at Colin Biggers & Paisley.
For more information on debt recovery techniques, check out these articles on lodging a caveat against someone who owes you money and lodging a caveat against a business.
- The relationship between perception and information
By Sascha Moore
- Does sponsorship provide a good return on investment?
By Steve Scanlan
- Getting workers to win the war against cyber crime
By Sean Duca