If you are owed a debt under $100,000.00 and the debtor has defaulted in their obligations to make repayment, it is possible to initiate proceedings in the Magistrates’ Court. Under the Limitations of Actions Act 1958 (Vic), a creditor must commence debt recovery matters within six years of the date of the debt.
Below is an outline of the processes involved in initiating debt recovery proceedings in the Magistrates’ Court.
Step 1 – Issuing a Letter of Demand
Prior to commencing formal court proceedings, it is prudent to first issue a Letter of Demand to the debtor. This Letter of Demand informs the debtor of the outstanding amount and provides a deadline for payment. If the debtor fails to settle the debt within the specified timeframe, you can proceed with legal action.
Step 2 – Filing a Complaint
Should the debtor fail to respond to the Letter of Demand, you are then in a position to commence proceedings by filing a Complaint with the Magistrates’ Court. The Complaint must be in the relevant Form 5A (accessible via the Magistrates’ Court website) and clearly articulate the details of the debt owed (including any evidence such as invoices or contracts). Importantly, both an Overarching Obligations Certification and Proper Basis Certification must also be filed with the Magistrates’ Court.
Once the Complaint has been prepared and filed with the Magistrates’ Court, it must then be served on the debtor. Typically, this involves personally serving the debtor with the Complaint at their residential address. However, there are also alternative means for service available such as by registered post. The Magistrates Court General Civil Procedure Rules 2020 (Vic) stipulate the relevant rules pertaining to service of court documents. In addition to the Complaint itself, two blank copies of Form 8A (Notice of Defence) must also be served on the debtor.
Step 3 – Debtor’s Response
Once the Complaint is served, the debtor has 21 days to file a Notice of Defence. The debtor must serve a copy of the Notice of Defence on you or your legal representative.
If the debtor files a Notice of Defence, the matter will likely proceed to a hearing in the Magistrates' Court.
If the debtor does not file a Notice of Defence within 21 days, you can instead apply for default judgment.
Step 4 – Default Judgment
Due to the debtor’s lack of defence, an avenue exists to apply to the Magistrates’ Court for an order of default judgment. This process does not typically require a court appearance and can expedite the recovery of the debt owed.
Nonetheless, it should be noted that the Magistrates’ Court can dismiss a complaint if a defence or default judgment isn’t filed within 12 months of the initial complaint being made.
Step 5 – Enforcement
In the event that a Magistrates’ Court order is made in your favour, you may need to subsequently apply for enforcement of that order, depending on the cooperation of the debtor.
You can apply to the Magistrates’ Court for one of the following enforcement options:
· Summons for oral examination
· Warrant to seize property
· Attachment of debt (i.e., garnishee order)
· Attachment of earnings order
· Instalment order
How we can help
Debt recovering proceedings at the Magistrates' Court involve several procedural steps, starting with a Letter of Demand and potentially leading to enforcement actions post-judgment. Each step requires careful preparation and adherence to legal rules.
If you wish to further discuss your options or require assistance with the debt recovery process, please contact one of our lawyers on 03 9450 9400.
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