Recovering Outstanding Debts

The Process of Debt Recovery

Recovering outstanding debt involves several procedural stages. If a obligor fails to make payment or makes only partial payments over a certain period, in New South Wales you may initiate legal proceedings in the Local Court or District Court, depending on the amount of the claim, by filing a Statement of Claim.

Service of a Statement of Claim

A Statement of Claim must be personally served on the defendant. Different rules apply depending on the type of debtor.

Service on Individual Defendant

In circumstances where the defendant is an individual, it must be physically delivered to the debtor. If the debtor refuses to accept the document or is not present, the server can:

leave it in the presence of the defendant and explain that it is a Statement of Claim issued by the Court;
leave it with a person at the debtor’s home address who appears to be over the age of 16 years and living at that address;
leave it at the debtor’s work address, with a person who appears to be over the age of 16 years, if the defendant is a sole trader; or
ask the Court to post it to the defendant either at the debtor’s work address if they are a sole trader, or the debtor’s residential address.

Service on Company Defendants

If the defendant is a company, the server can:

personally hand it to a director of the company; or
post it to the registered office of the company.

The Defendant’s Options After Being Served

Once served with the Claim, the defendant (whether an individual or a company) has four options:

Take no action: If the defendant does not respond within 28 days, you may apply for a default judgment.
Contact the plaintiff to negotiate: The defendant may contact the plaintiff to negotiate a repayment plan or settle the amount owed.
File an admission: The defendant admits to owing the amount. They may also apply to pay by instalments.
File a defence and/or a cross-claim: The defendant may dispute the claim or make a counterclaim.

The Courts Jurisdictional Limits

In New South Wales:

In the Local Court’s Small Claims Division you can make claims up to $20,000. In the General Division claims are generally between $20,001 and $100,000. It is a more formal process in the general division and you should seek legal advice.
In the District Court you can make claims from $100,001 to $1,250,000 (from December 2022). The District Court handles more complex cases with stricter evidence rules. The court may hear equitable claims such as property disputes up to $100,000).

For debts above $1,250,000, matters typically proceed in the Supreme Court. The Court has an unlimited jurisdiction for high-value claims and has highly formal procedures and legal representation is essential.

Court Procedures

Pre-Trial Review (Local Court Small Claims Division)

In the Local Court’s Small Claims Division, the debtor will receive a notice from the Court scheduling a Pre-Trial Review. An accompanying information sheet explains the process. If the debtor fails to attend, the Court may enter judgment against them.

At the Pre-Trial Review, the Court aims to:

Identify any preliminary issues or orders needed before a hearing.
Determine whether the matter can be settled.
Decide how the case will proceed if it goes to hearing.

Call-Overs

If the debtor files a defence, in either the Local Court’s General Division or District Court, the matter will be listed for a Call-Over. This is a procedural hearing before a Registrar where the Court checks the readiness of the matter to proceed. If either party has failed to comply with Court directions, the Court can issue further procedural orders.

Application for Procedural Orders

At any stage, either party may apply for procedural directions or other orders by filing a Notice of Motion supported by an affidavit. This may include requests for documents, compliance with previous directions, or other relevant issues. Multiple call-overs may occur before a matter is ready for hearing.

Contact Us for Debt Recovery Assistance

At Citilawyers, we provide legal advice and representation for individuals and businesses dealing with debt recovery, insolvency, or bankruptcy matters. Whether you’re pursuing an unpaid debt or defending a claim, our tailored, professional support will help you navigate the legal process effectively.