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Litigation

What You Need to Know About Debt Recovery in New South Wales

By | Business Law, Litigation

There are few more frustrating experiences for a company than chasing debts incurred by clients and customers. That frustration is compounded by how much time and money it can take to recover outstanding amounts owed to the business.

While many creditors are inclined to immediately threaten court action to enforce collection of what is owed, this course can prove costly and time-consuming, and should always be seen as a last resort.

Upfront communication with the debtor, payment plans, alternative dispute resolution and a letter of demand are all steps that could be taken to try and recover the debt before the matter needs to proceed to court. Below is some more detail on methods of debt recovery in NSW.

Preliminary methods of debt recovery

Ideally some honest communication with the debtor via phone, email or other means can resolve the issue. This is a process of investigation as to why the debt has not been paid and what is possible – such as instalments, a downpayment or some other payment plan – in order for the debtor to make headway in resolving the issue.

Should this means be unsuccessful, or the results uncertain, the parties might use alternative dispute resolution (ADR) as a way to reach agreement on debt repayment. So long as both parties are amenable, an independent third party can manage negotiations between them to find a mutual agreement on how to resolve the debt.

If ADR fails to recover the debt, most companies will proceed to a letter of demand. In general, this should be drafted after consulting with a lawyer experienced in debt recovery, and constitutes a formal request for payment which will detail the amount owing; the deadline for payment; and the consequences if payment is not forthcoming, including progressing to legal proceedings to recover the debt.

The court process for debt recovery

If the terms set out in the letter of demand are ignored, legal action can commence. A creditor must file a Statement of Claim with the relevant court in order to begin the legal process of debt recovery.

The size of the debt and its nature (business-related, personal, etc.) will determine which court hears the matter and also what the process will eventually cost.

The path to resolution is also complicated when a debtor raises a defence as to why they haven’t paid the debt. When this happens both parties will be required to submit evidence and attend a hearing in court.

Where a debtor does not file a defence, the creditor can apply for a default judgment where the court can order the debtor to pay back the money – known as a ‘judgment debt’ – without a hearing. Once ordered, a judgment debt can empower a creditor to take further enforcement action.

Creditors can begin enforcement proceedings at any time up to 12 years from the judgment date where debtors ignore orders of the court.

Types of enforcement

A creditor can seek court orders for a number of different ways to enforce debt recovery. These include:

  • Garnishee order: this orders a third party who holds money on behalf of the debtor, such as a bank, or someone who owes money to the debtor, to have money deducted and paid towards the debt amount.
  • Writ of execution: an order by which the sheriff’s office can seize and sell property of the debtor to pay off the creditor.
  • Writ for possession of property: directs the sheriff’s office to seize and sell property of the debtor in order to pay the creditor.

Additionally, when the debt is over $5,000 in NSW , a creditor may ask the court to declare the debtor bankrupt. Doing so may result in the debtor surrendering control of their money and other assets to a trustee. The trustee will then try to resolve the bankrupt’s debts.

Where a debtor is a company and the debt is over $2,000, a creditor may issue a statutory demand under section 459E of the Corporations Act 2001 (Cth) which requires the debtor to pay the debt within 21 days. This demand can be made with or without a judgment debt but it should be noted that to do so without may see the debtor challenge the demand on the basis that the debt is in dispute.

A debtor who fails to comply with a statutory demand leaves itself open to a creditor commencing proceedings to find it insolvent. Conversely, should the debtor have limited or no assets, this process may see the creditor never recovering the debt.

In conclusion

The various steps in trying to recover a debt can be complex and consume a lot of valuable company time. Moreover, different strategies apply depending on the amount and type of debt, and different time limits can also apply.

If you need advice on a debt recovery matter, contact our Central Coast Lawyers today on (02) 4365 4249 for an expert assessment of your situation and how we can achieve your desired outcome in a prompt and cost-efficient fashion.

Litigation Guardians

Litigation Guardians – When Is It Appropriate?

By | Estate Planning, Litigation

One of the most common misconceptions about hiring a lawyer is that he or she will be solely responsible for making all of the decisions about your case both before and during any litigation.

It is true that your lawyer is legally and ethically obligated to provide the best possible legal advice and act in your best interest but provided you are making sound decisions based on the information he or she provides, your lawyer must also follow your instructions.

But what happens if you aren’t capable of telling your lawyer what to do? If you’re incapable of doing so because you’re under 18 years of age or disabled, the court will appoint someone called a litigation guardian to act on your behalf. In other words, this is someone who will effectively ‘step into your shoes’ to assess your best interests and instruct your lawyer accordingly.

To be selected as a litigation guardian, someone must:

  • be an adult;
  • demonstrate that he or she does not have any interest in the case that is opposed or potentially harmful to the interest of the person in need of his or her services;
  • be able to act fairly and competently;
  • consent to being a litigation guardian under applicable laws.

In some cases, relatives or other concerned parties will ask a lawyer to act as a litigation guardian. This is because a knowledgeable, experienced lawyer can act with a certain degree of objectivity and professionalism.

More often than not, the litigation guardian is a relative, friend or caregiver.  Barring that,  the court may select someone who does not personally know the person requiring a litigation guardian. In either case, the person chosen to fill this role must become familiar with the person’s situation and issue instructions that reflect their charge’s best interests.

Litigation guardians are generally appointed in the following types of cases:

  • Personal injury;
  • a criminal compensation application;
  • various matters related to Wills;
  • family provision applications.

A litigation guardian must be selected to represent someone in any Federal Circuit Court matter in which that party is incapable of understanding the proceeding or its potential consequences; or is incapable of fulfilling his or her legal obligations. Applicable court rules dictate that a minor must have a litigation guardian unless the court orders otherwise.

In accordance with Family Law Rules, a litigation guardian in the Family Court is known as a ‘case guardian’. In any Family Court matter a person who is legally classified as a child or is otherwise incapable of instructing his or her attorney, and/or fulfilling his or her legal obligations, must have a case guardian in order to initiate, continue, respond to, or intervene in proceedings. The only exception to this rule is if the court finds that the child not only comprehends the nature and possible consequences of the case, but can also make certain decisions and meet his or her legal obligations.

There are several methods for appointment. Someone can simply apply to be appointed a litigation guardian or case  guardian. In certain circumstances, the court may ask the Attorney-General to nominate a litigation guardian or case guardian. The court may also make its own motion for appointment of a litigation guardian. It may also remove or replace a litigation guardian.

Once the appointment is finalised, the litigation or case guardian must advise all other relevant parties about it in writing.

A newly-selected litigation guardian or case guardian must also abide by applicable court rules. Furthermore, he or she must do everything ordinarily required of a party to the litigation. Finally, he or she may also do anything that the party to the litigation would ordinarily do for his or her own benefit.

As we have already noted, a litigation guardian must obtain proper legal advice. In this context, he or she must duly consider any proposals for resolution of the case, such as participation in alternative dispute resolution.

In accordance with a relevant court order, any costs incurred by the litigation guardian are paid by a party to the litigation or from the income or property of the person that he or she represents.

To learn more about how to be appointed as a litigation guardian or any related issues, contact our Central Coast lawyers today.