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If you wish to recover your debt through legal proceedings be aware that, in some cases, the process may become complicated and you may need to seek legal assistance.

The type of legal proceeding will depend on the amount of the debt owed by the person.  There are four main courts you may go to depending on the amount of the debt:

• Debts of up to $10,000 are dealt with in the Small Claims Division of the Local Court.
• Debts between $10,000 and $60,000 are dealt with in the General Division of the Local Court.
• Debts between $60,000 and $750,000 are dealt with in the District Court.
• Debts over $750,000 are dealt with in the Supreme Court.

Legal proceedings go through a number of steps:

Step One - Statement of Claim

To start a legal proceeding you must lodge a Statement of Claim at the relevant Court.  As a plaintiff you will lodge a Statement of Claim against the person who owes you the money (known as the defendant).

A Statement of Claim is a document that sets out:

• who owes you the money;
• how much you are owed;
• when and how the debt arose;  and
• how long they have to pay you back.

In the case where a business owes you money it is required that you conduct a search to identify the business name, address, place of business and ABN (for companies).  You may obtain this information from the Australian Securities and Investments Commission (ASIC) for companies or the Office of Fair Trading for other businesses.

You may complete a Statement of Claim at any Court or ask your lawyer to prepare a Statement of Claim for you.  If you are lodging your Statement of Claim at the Local Court you may access Statement of Claim forms from the NSW Local Court website at www.lawlink.nsw.gov.au/lc.nsf.

Step Two - Serving the Summons

Upon lodging your Statement of Claim you will be issued a Summons that must be served to the defendant.  A Summons is a Court document which informs to defendant that a legal claim has been sought by the plaintiff for a certain amount of money.  The Summons also demands that the debt be paid by a certain date.

A Summons may be served by either the Sheriff's Office or yourself.  If you serve the Summons yourself you should ensure that you serve the Summons correctly.  Because each Court may have different rules on serving a Summons it is best to check on the correct procedure beforehand.  A Summons should be handed to the person who is named in the document who owes you the money or, in the case of a company, to the registered office.  You may either post the Summons to the registered office of the business or hand the Summons to an employee of the business.  Note that you can only serve the Summons to a person who is over the age of 16 years.

After you have served the Summons you may be required to provide the Court information on how and when the document was given.  This is usually done through an Affidavit of Service.  Make sure you have proof that the Summons was actually served.

Step Three - Legal Proceedings

Upon receiving the Summons the defendant may:

• ignore the Statement of Claim;
• file a confession to the debt;  or
• file a defence to the debt.

No Action
After 28 days, if the defendant has not responded to the Summons with a confession/defence or has not made any payment thereby ignoring the Statement of Claim, the plaintiff may ask the Court to make a "default judgement".  Applying for a default judgement is simple and does not require a solicitor.  The plaintiff will be required to file an Affidavit of Service (stating how the service was carried out) and an Affidavit of Debt (stating the amount owed).  In this case the Court will normally decide in your favour without you having to go to Court at all.

Undefended Action
The defendant may file a confession to the debt and request to pay the amount by instalments.  If the Registrar of the Court makes an instalment order the plaintiff is given the opportunity to accept or reject it.  If the plaintiff rejects an instalment order or the Registrar refuses to make an instalment order there is a hearing as to what the payment should be.

Defended Action
If the defendant believes that they do not owe the money or does not agree with the amount of the debt a defence may be filed with the Court.  As well as filing for a defence the defendant may file for a cross claim at the same time, if they wish to raise a claim against the plaintiff or any other person.

Upon filing for a defence/cross claim, the Statement of Claim, defences and cross claims are filed together and referred to as "pleadings".

Claims of less than $10,000 that are dealt with in the Small Claims Division of the Local Court have been simplified.  A solicitor is not necessary for the hearing.  A "pre-trial review" is first conducted to try to negotiate a settlement between the two parties.  If there is no agreement a hearing is scheduled to decide the matter.  Generally the hearing does not involve parties giving oral evidence.  Rather the Court directs parties and their witnesses to provide written statements and a decision is made based on the evidence in the statements.

Claims larger than $10,000 require a more formal procedure to be undertaken.  There are several procedures before a hearing.  Each party may need to list and make available to the Court all documents in their possession or control and/or issue Court orders (subpoenas) requiring third parties to produce specific documents to the Court.  Further, the Court may order each party to file statements, or Affidavits in some cases.

Due to the complex nature of formal Court proceedings, it is advisable that you seek the assistance of your solicitor if your debt recovery goes that far.

Step Four - Enforcing the Judgement

If you are successful in your legal proceedings, the next step is to enforce the judgement.  This means taking action to recover the debt from the debtor.

To recover your debt you may:

• issue a writ of execution, whereby the Sheriff's Office goes to the debtor's address to try to collect the money;
• issue a writ against land, in the case where a writ of execution was unsuccessful;
• issue a garnishee order to anyone that owes the debtor money.  The order directs the garnishee to direct the money to the creditor;
• issue an examination summons if little is known about the debtor's financial position.  This summons the debtor to go to a nearby Court to be examined about their financial position;
• seek the debtor's bankruptcy in the case of individuals or liquidation/winding up in the case of a company.

Prescribed forms are required for enforcing the judgement.  These are available from the Court or, in the case of the Local Court, from their website at www.lawlink.nsw.gov.au/lc.nsf.

It is important to note that the debtor may at this point apply to the Court to pay by instalments.  If an application is made and rejected another hearing relating to the payment may arise.

Costs

Legal proceedings may be complicated and expensive.  You are likely to incur costs at every stage of the legal process, including costs relating to your solicitor and to the services of the Sheriff's Office.  Consult your Local Court for information on costs that may be incurred.