By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group
Obtaining a judgment is a goal in the debt recovery process. Debt collection is not easy and the Court Rules make provision for collecting money but it’s not a one way street.
Judgments in New South Wales can generally be entered by a Court in three ways:
– by default;
– by consent; or
– by Order.
A default judgment is entered following the service of a Statement of Claim and non-compliance by the defendant. If after 28 days elapses and no payment is received and no Defence is filed, the creditor can then file at the Court an affidavit confirming the Claim was served and an application for judgment. Upon processing the application, if the Court accepts the Claim was served and that the debt remains unpaid, it will then enter judgment for the creditor as at a nominated date and amount.
A judgment by consent is entered by agreement between the parties and is usually accompanied by a plan for repayment. The Court will usually enter the judgment in the terms agreed upon by the parties.
Judgment entered by Order is generally made following a contested hearing of the claim and the defence pleaded by the debtor. If the creditor is successful, the Court enters judgment for the creditor for the amount awarded by the Judge (or Magistrate).
However, on application, the Court may set aside a judgment if sufficient cause to do so can be shown by judgment debtor. The most common judgment set aside is a default judgment. To be successful, the defendant has to show cause as to why the Claim was not attended to prior to the entry of judgment and that there is a defence at least “on the merits” to the Claim.
In our experience, the bar is set fairly low by the Courts in determining the application as ordinarily the court will look to allow defendants to be given a reasonable opportunity to appear and present their case to the Court for final determination. Should the judgment be set aside, we generally advise the creditor to seek an order for its costs which include the judgment application itself and any enforcement costs thrown away. Costs as always are at the discretion of the Court but if the creditor has followed the Court Rules in the proceedings to date, the Court will generally make an award for its costs.
Further, if the application is granted, the creditor should seek an order that the judgment be set aside conditionally upon the costs being paid and a Defence being filed within say 14 days. Again this order would be at the discretion of the Court but if made, may save time and costs for the re-entry of judgment should the debtor not comply with the conditions set.
Setting aside a judgment that has been entered by consent is more difficult as the party seeking the order will need to show some form of injustice has taken place that led to the consent being given in the first place. Having the judgment set aside would again be at the discretion of the Court.
Any order for judgment by a Judge following a hearing will generally require an appeal to a higher jurisdiction and then only on a question of law as compared to a question of fact. It may be argued, for example, that the presiding Judge applied the law incorrectly on admission of some evidence. Each case is different and will require careful consideration both at law and on a commercial basis in deciding whether to file the appeal.
The ability to set aside a judgment is installed into the Court Rules for good reason but can have severe costs ramifications for those who abuse the opportunity.
For any guidance on the setting aside of a judgment either as a creditor or as a debtor, or any step in the debt recovery process, contact the professional team at Matthews Folbigg Lawyers for competent and practical advice.
The Court Rules for setting aside a judgment can be found at
http://www.austlii.edu.au/au/legis/nsw/consol_reg/ucpr2005305/s36.16.html
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact Darrin Mitchell on 02 9806 7428 or darrinm@matthewsfolbigg.com.au or a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au
Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au
