Commencing Legal Proceedings
Business Debt Recovery Article #2
This is the second of a four part series of articles containing general information regarding external debt recovery processes and procedures for claims within the jurisdiction of the Magistrates Court of Victoria. In this article, we focus on the commencement of legal proceedings.
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In an article relating to the initial demand for payment we noted that it is often not necessary for clients to provide too much detail to their lawyers in order for a letter of demand to be drafted. However, if the debtor does not pay following the a demand for payment all relevant documents and details are needed to properly draft the documentation necessary to commence legal proceedings in the Magistrates Court.
The extent to which it is necessary to enter into detail in the Court documentation can vary depending upon the nature and subject matter of the claim that is being made and also depending upon the reasons for which the debtor has not made payment. For example, it may be that the debtor has not made payment because the claim is disputed, or it may be that they admit the debt but have not paid for some other reason. If the debt is disputed or if the debtor raises a counterclaim or set-off against the debt, this may lead to commercial litigation and you should visit the business litigation & disputes page of this website.
If a creditor is as certain as they can be that the legal proceedings will not be defended then it is sometimes possible to include less detail in the Court documentation than that which would be required if it is likely that the claim will be defended. This can reduce the legal costs associated with preparing the Court documentation for matters that are unlikely to be defended.
Once all of the required documentation and details have been provided the business debt recovery Court documentation can then be drafted. In the Magistrates Court, legal proceedings are commenced by filing with the Court a document called a “Complaint”. Included within the Complaint is a section for the “Statement of Claim” which is the section in which the details setting out the basis of the claim are included along with details of the quantum of the claim. The Complaint will usually include a claim to the outstanding debt and also a claim to what are known as “scale legal costs” related to the commencement of the proceeding.
The Complaint will in most cases require the debtor to make payment of not only the claim itself but also the scale legal costs in order to avoid further legal action being taken. The scale legal costs are the costs that the creditor is able to claim from the debtor up to the stage of the debt recovery process of issuing the legal proceedings and will not always cover all of the costs that may need to be paid by the client to their lawyer.
After the Complaint has been filed with the Court it (along with two blank Notices of Defence) need to be served upon the debtor. The manner in which the debtor needs to be served depends upon whether the debtor is an individual or a company. In most circumstances, an individual must be served personally by a process server whereas it will usually suffice for a company to be served by posting the Complaint to the registered office of the company. There is also a requirement to serve with the Complaint a particular notice under a piece of legislation called the Service and Execution of Process Act if the debtor is to be served at an address outside of Victoria.
Once the debtor (or defendant) has been served with the Complaint then it is most often the case that they will need to make payment of the debt, including the scale legal costs, or make satisfactory arrangements for payment within 21 days of the date of service. If they fail to do so within this timeframe then, unless they file a Notice of Defence, the creditor (or plaintiff) would be able to proceed to obtain a Court Order for the applicable amount. The next article in this series relates to entering a default judgment or order in default of defence.
The pages of this site relevant to this article can be found here:
The other articles now published in this series are:
- The Letter of Demand - CBL Business Debt Recovery Article # 1
- Entering Default Judgments - CBL Business Debt Recovery Article #3
- Recovering Judgment Debts and Enforcing Monetary Court Orders - CBL Business Debt Recovery Article #4
Please note that the facts and circumstances relevant to every client are different. The above article should not be relied upon as legal advice. Article by Nicholas Corr published 27.5.13. To be notified of new articles:
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