If someone owes you money and refuses to pay, there are a number of options available to you.

Firstly, a Letter of Demand should be sent to the debtor. This provides evidence of the debt and can warn the debtor that if they fail to contact you within a specified time (we usually recommend fourteen days) then you will initiate Court proceedings to recover the debt.

If the Letter of Demand is ignored you should consider commencing court proceedings. You should first think about how much the debt is, how much you would accept to settle the debt, whether the debtor has any money (or assets) available to pay the debt and the costs and time required to recover the debt.

A Statement of Claim is the first document you file with the Court outlining details surrounding the debt owed to you.

The defendant debtor may file and serve a defence in response to your statement of claim. If so, the Court will list the matter for a pre-trial review when orders for the service of evidence will be made. Once all evidence is filed and served by each party a date for hearing will be set.

If a Statement of Claim is unanswered by the defendant debtor after 28 days of serving the document then you can apply to the Court for Default Judgement.

Importantly, there are strict rules relating to serving court documents, for example an individual must be “personally served”.  If you fail to effect service, then proceedings will be delayed further.

Default Judgement

Default Judgement is an order made by the Court in favour of the plaintiff (the person making the application) on the basis that the defendant has failed to file a defence within the 28 days allowed. So, by default, the plaintiff “wins” as the defendant has not answered the case against them.

The Court will consider the documents that have been filed and, if the claim is for a specific amount of money, will generally make an order for the defendant to pay the full amount claimed.

This is called Default Judgement and the order is made without the need for you (or your lawyer) to attend Court and argue your case.

Once judgement has been entered in your favour, either as the result of a  hearing, or by default judgement, you must then think about how to enforce the judgement.

Enforcing a Judgement

Often, the defendant debtor will pay the debt without further dispute once an Order is made against them. Sometimes, and despite a Court ordering payment, a defendant will ignore your demand for payment.

There are a number of actions available to secure the judgement debt.

1. Examination Notice

Serving an examination notice on a judgement debtor requires them to answer specific questions and produce documents relating to their financial status. The Notice must be filed with the Court and then served on the judgement debtor.

This is a fairly cost effective way of determining the financial position of the debtor, however, if the debtor has not complied with a Court Order to pay a debt, then they may be un-cooperative when responding to your examination notice.

Non-compliance may result in an examination order being made by the Court. If such an order is made, then an arrest warrant may be issued.

2.     Garnishee Orders

A garnishee order is an order made by the Court directing a third party who holds funds on behalf of the debtor, or who owes the debtor money to pay you instead.

These orders are often directed to employers (for wages) or to banks (who hold funds in savings accounts).

A Garnishee Order is a suitable form of enforcement action when you know the debtor’s bank account number, or other details of how they keep funds or how they are paid by an employer. A third party, especially a bank, is likely to pay the amount owed.

Failure to comply with a garnishee notice may result in the third party having a judgement for the debt entered against them personally.

3.     Writ of Execution

A writ of execution is an order allowing the sheriff to take physical possession of the debtors’ personal property in order to sell it, and pay the debt in full.

This is commonly the simplest form of enforcement. Usually the sheriff will seize household or business goods and/or vehicles and then advertise and auction the goods.

Writs of execution to sell land are very rarely ordered by the Court, unless all other property has been sold and there are no other alternatives available (such as paying the remainder of the debt by instalments).

4.     Payment of debt by instalments

Payment by instalments may be negotiated between the parties, or may be made by an order of the court.

Interest will accrue on the outstanding balance of the debt, however, generally if the debt is paid within 28 days from the date of judgement, no interest should be payable.

5.     Insolvency Actions

An application for the winding up of a corporation may be used when a company owes you money and the amount is at least $2,000.00. For more on winding up applications see our blog.

If someone owes you money, or if court proceedings have been commenced against contact our team on  to find out what your next course of action could be.

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