Litigation can be a confusing and tiresome process with the numerous procedures in the ACT Courts and Tribunals. That’s why we at Chamberlains are committed to helping you through the processes should any concerns arise. We have outlined below a rough guide on the ACT Court processes and options available in order to make a claim.
Making a claim
The ACT Civil and Administrative Tribunal (ACAT) has jurisdiction to determine civil claims up to $25,000 in value. The process for recovering a debt above this amount is by commencing proceedings in the ACT Magistrates Court (ACTMC) by way of an Originating Claim & Statement of Claim (collectively, Documents). Unlike ACAT, ACTMC is a costs jurisdiction, which has its pros and cons (particularly when the proceedings are defended).
As stated above, proceedings in the ACTMC will need to be commenced by way of filing the Documents. Filing fees apply, and the Applicant is required to personally serve the Documents (by way of a process server) on the Defendant.
The Applicant is entitled to claim pre-judgment interest on the principal sum and costs, depending on whether the proceedings will be defended or undefended.
If the Defendant does not file a Notice of Intention to Respond or a Defence within 28 days after the Documents are served on them, then the Applicant may apply for Default Judgment.
Once Default Judgment has been obtained, the Applicant will need to serve a Form 2.49 Notice about Court Order and Enforcement Options on the Defendant along with the Judgment. Once seven days have lapsed from this date of service, the Applicant will be able to commence enforcement action in the ACTMC.
Suppose the Defendant does file a Notice of Intention to Respond or a Defence within 28 days (or occasionally even beyond this time period), and the matter does not otherwise settle outside of Court. In that case, the Applicant will be required to progress through the various stages of litigation, including considering the Defendant’s Defence (and potentially Counterclaim), attending directions hearings, preparing the Applicant’s evidence, considering the Defendant’s evidence and preparing the Applicant’s evidence in reply, potentially undertake discovery and issue any subpoenas or notices to produce, attend to any necessary interlocutory applications, potentially attending a mediation, preparing submissions and eventually attending a final hearing.
If the matter is contested on a completely meritless basis, the Applicant may make an Application for Summary Judgment, whereby the Court may strike out a Defence for lack of merit and award Judgment in favour of the Applicant without the need for the parties to take part in the further stages of litigation. However, this is a very high threshold test and is only occasionally successful, for instance, where a Defendant lacks any reasonable defence whatsoever.
If the proceedings are contested, costs in the ACTMC follow the general rule that ‘costs follow the event’, meaning that the unsuccessful party must pay the successful party’s costs. Costs orders, however, are always at the Court’s discretion, so the orders may vary as follows:
Party – party basis: where the successful party may recover between 40% and 60% of its costs from the other party;
Indemnity basis: where the successful party may recover between 60% and 80% of its costs;
Solicitor – client basis: where the Court must also have regard to the allowable costs;
Or on any other basis, the Court considers appropriate.
The Court may also make adverse costs orders in respect of the conduct of the matter. For example, the Court may make costs orders in response to non-compliance with the Court timetable or in respect of the other party’s costs thrown away for subsequent amendments made to the Statement of Claim after the close of pleadings.
Costs orders are commonly ‘as agreed or assessed’, meaning that the parties ought to try to agree on the amount of the costs sought, and if agreement cannot be reached then the legal costs must go through a costs assessment process, which is a separate Court application.
An indemnity costs order is a type of costs order in which a party is ordered to pay a higher percentage of the successful party’s expenses in a scenario where a reasonable offer is made and is not accepted, and the successful party obtains an outcome the same or better than the amount of the offer. Indemnity costs orders are challenging to obtain, and very compelling evidence needs to be relied upon in order to seek such an order successfully.
If the Applicant is successful in obtaining a judgment, and the Defendant fails to make payment of the judgment debt, the following enforcement options are available:
I. Statutory Demand
This is relevant where the Defendant is a corporation.
If the Defendant is served with a Statutory Demand and it fails to comply with it within six months of service (as per the current insolvency laws in light of COVID-19, otherwise it is 21 days), the Defendant will be presumed to be insolvent for a period of 3 months in accordance with section 495F of the Corporations Act 2001 (Cth) (Act).
Upon service of the Statutory Demand, the Defendant will be able to apply (within six months of service as of now) for the Statutory Demand to be set aside or varied on one or more of the following grounds:
a. There is a genuine dispute about the existence or amount of the debt.
b. The Defendant has an offsetting claim, being a ‘genuine claim’ that it has against the Applicant by way of a counterclaim, set-off or a cross-demand.
c. There is a defect in the Statutory Demand issued by the Applicant, whereby substantial injustice will be caused unless the demand is set-aside (see section 459J(1)(a) of the Act).
d. There is some other reason why the demand should be set aside (see section 459J(1)(b) of the Act).
If the Defendant fails to have the Statutory Demand set aside or varied, the Applicant will be able to seek that the Defendant be wound up, and a liquidator be appointed to manage its affairs. In such a scenario, whether the Applicant will be able to recover any amount owing under the judgment will depend on the financial affairs of the Defendant, as determined by a liquidator.
II. Bankruptcy Notice
This is relevant where the Defendant is a natural person.
If the Defendant is served with a Bankruptcy Notice and it fails to comply with it within six months of service (as per the current insolvency laws in light of COVID-19, otherwise it is 21 days), the Defendant will have committed an act of bankruptcy, which can be used to commence any sequestration proceedings to bankrupt the Defendant and have a trustee appointed over his/her affairs. In such a scenario, whether the Applicant will be able to recover any amount owing under the judgment will depend on the financial affairs of the Defendant, as determined by the trustee in bankruptcy.
In the meantime, the Defendant will have the opportunity to contest the Bankruptcy Notice if it wishes to do so as well as any sequestration proceedings to show that he/she is not insolvent.
III. Enforcement Hearing
This is an enforcement mechanism in the ACTMC and is a means to obtain information about the financial affairs of the Defendant, including the Defendant’s income, assets, liabilities, investments and other factors relevant to its financial position. Any information obtained here can be used to assist with one of the below enforcement orders.
Once the Enforcement Hearing subpoena is filed and served, the Court will allocate a date for the enforcement hearing to occur, which the Defendant (or in the case of a corporation, the Defendant’s director) will be required to attend.
At this Enforcement Hearing, the Registrar will preside over the matter and orally examine the Defendant or its director to ascertain the Defendant’s financial position. After this, the Court may order the judgment debt to be paid by instalments or issue one of the below enforcement orders. The Court can also award costs incurred by the Applicant.
If, however, the Defendant fails to appear at the Enforcement Hearing, the Court can issue a warrant for their arrest.
A filing fee is also payable on application for an Enforcement Hearing, and the Applicant will be required to pay the process server’s costs associated with personally serving the Enforcement Hearing Subpoena. The Defendant will also need to be supplied with conduct money to meet their reasonable expenses in appearing at the Enforcement Hearing in order to deem service effective.
IV. Seizure and Sale Order
This is an enforcement mechanism in the ACTMC which authorises a Sheriff’s Officer to attend the property of the Defendant (as nominated by the Applicant) and seize goods belonging to the Defendant for the purpose of auctioning them to recover money owed to the Applicant. These goods must be fully owned by the Defendant.
Here, the Defendant may then apply to the Court to have the judgment debt paid by instalments. Based on the evidence presented before the Court concerning the financial affairs of the Defendant, the Court will either accept or reject this application.
V. Redirection Order
This is an enforcement mechanism in the ACTMC which allows the Court, upon application by the Applicant, to make an order to redirect funds out of the Defendant’s nominated bank account in order to pay the Applicant. The Court is also able to redirect monies owed by a third party to the Defendant.
VI. Earnings Redirection Order
This is an enforcement mechanism in the ACTMC for a Defendant that is a natural person, as it allows the Court, upon application by the Applicant, to make an order to redirect wages from a nominated employer of the Defendant in order to pay your client.
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