Debt Recovery – When Someone Owes You Money

Letter of demand

When someone owes you money for goods or services, the first step is generally for a letter of demand to be sent to the other party telling 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.

Response to a letter of demand

In response to a letter of demand, a debtor may pay the full amount owing or ignore the letter or respond to it in a way that is unsatisfactory to you. If the debtor does not pay you, you may have no alternative, but to commence legal proceedings.

Debt recovery action in Court

Courts in New South Wales offer a debt recovery procedure.

Monetary jurisdiction of the Courts in New South Wales

If the debt is over the limit of $10,000, the action will be commenced in the general division of the Local Court. The general division of the Local Court deals with debt recovery claims up to the value of $100,000. If the amount of money that is owed exceeds $100,000, the proceedings would be commenced in the District Court of NSW. If the amount of money that is owed exceeds $750,000, the proceedings would be commenced in the Supreme Court of NSW.

Who can you sue?

An action can be brought against a person (sole trader), a group of people (partnership) or a corporate entity (company or incorporated association).

What is the first step in Court?

To commence a Court action for the recovery of debt, a Statement of Claim must be prepared and lodged to the Court and the debtor (“the Defendant”).

What can the Defendant do?

Once the Defendant has been served with a Statement of Claim the Defendant must either lodge a Defence within 28 days or pay the amount owed to you.

If the Defendant fails to do any of the above, a default judgment may be entered against the Defendant.

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

What happens at the hearing?

If there is no settlement at or before the pre-trial review, a timetable for evidence is ordered by the Court then a hearing date is set.

Enforcement of the judgment

The order of the judge made at the hearing 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 Court.