Debt recovery in the ACT

Contributed by Elizabeth Samra and Andrew Tan (Consumer Law Centre of the ACT) and AGS secondee Subeta Vimalarajah, and current to March 2022

If demands for payment do not succeed, court or tribunal action may be the only other option available to the creditor seeking to recover the debt. However, a creditor considering legal action should be mindful that a debtor who has no income or assets may not be vulnerable to recovery action.

Following is a brief outline of how the court process operates. Whether an action for recovery of debt is heard in the Supreme Court, Magistrates Court or the ACT Civil and Administrative Tribunal (“ACAT”) depends typically on the size of the debt involved. This chapter describes proceedings brought in the ACAT and the Magistrates Court. Where the sum sought is over $250,000, the matter must be dealt with in the Supreme Court. The Supreme Court also has the power to make orders in relation to land. A debtor will probably need legal representation if dealing with a matter in the Supreme Court. Initiating or defending matters in the Supreme Court can be very expensive.

ACT Civil and Administrative Tribunal

The ACT Civil and Administrative Tribunal Act 2008 (ACT) (“ACAT Act”) gives power to the ACAT to hear and determine civil disputes.

The ACAT deals with claims up to $25,000. The ACAT is less formal than other ACT courts. Apart from fees and out of pocket expenses, legal costs generally cannot be recovered from the unsuccessful party. People can be represented by lawyers in the ACAT, however the ACAT has been designed specifically to cater for unrepresented people. If a debtor receives a claim from a creditor through the ACAT then legal advice or financial counselling assistance is recommended.

Procedure in the ACAT

In this section the creditor is taken to be the applicant and the debtor the respondent.

The application

As noted above, an application by a creditor for the recovery of debt cannot be made to ACAT for amounts greater than $25,000, unless the creditor abandons the excess (see s 21 ACAT Act) or the parties agree that the excess is not being abandoned (see s 21 ACAT Act).

Proceedings in the ACAT for debts owing are commenced by completing and filing a Civil Dispute Application. ACAT has only one application form for civil disputes. The person filing the claim is the applicant and the respondent is the party that the proceedings are against. The fees for filing an application are outlined on the ACAT website. Certain persons are exempt from paying ACAT fees.

All civil dispute applications at ACAT must include:

• Applicant’s details, representative details of the applicant (if any) and respondent’s details;
• Previous attempts to resolve the dispute (if any);
• Type of application made – typically will be a debt or contract application (see below for debt declaration applications);
• The date the dispute arose, a brief description of the dispute;
• Details of the amount claimed;
• The fee for commencing proceedings;
• The amount of any search or hearing fees;
• Details of interest claimed;
• A statement outlining how interest is claimed.

The application should be lodged with one original set of documents for ACAT and copies for each party to the application plus an additional copy for the applicant. If a civil dispute application is filed in ACAT, it is served either by ACAT by prepaid post or by the applicant personally on the respondent. ACAT will send the application to the respondent by prepaid post by default, unless the applicant indicates otherwise. If the applicant seeks to have the application personally served on the respondent, the person who served the documents must complete an Affidavit of Service.

Response

A respondent who receives a civil dispute application will also be sent a response form (Response – Civil Dispute). The response is to be completed by the respondent, and may indicate one of the following:

• Admission of liability in whole and a payment proposal;
• Admission of liability in part and a proposal as to how the amount admitted is to be repaid;
• Application disputed in full and a detail of the dispute provided. The respondent may also lodge a counter claim and include details of the respondent’s claim against the applicant.

A respondent must file a response with the ACAT within 21 days (if personally served) or 25 days (if ACAT served an application by post). The ACAT will accept a response after this time if the applicant has not filed an Application for Default Judgment. If the respondent does not file a response in time, the applicant may apply for default judgment by filing an Application for Default Judgment and if the application is complete, the ACAT will enter a judgment for the applicant against the respondent.

A copy of the judgment will be forwarded to the applicant. A money order made by ACAT is taken to have been filed in the Magistrates Court for enforcement on the day the order is made (see s 71 ACAT Act). Any enforcement action must be taken in the ACT Magistrates Court not ACAT (see Making a Debtor Pay).

Agreement before judgment

The parties may reach an agreement while the dispute is on foot in ACAT. If so, ACAT must be notified in writing of the terms of that agreement. This may be done in two ways:

• The applicant may file a notice of discontinuance; or
• Seeking consent orders for ACAT.

Preliminary conference

If the respondent files a response, the ACAT will send the applicant a copy of the Response Civil Dispute Form and Admission of Acceptance of Liability form (if applicable).

If the applicant does not accept the response, the Registrar or a Member of ACAT will hold a preliminary conference with both parties to consider the dispute. The preliminary conference is designed to facilitate a resolution of the matter between the parties without it proceeding to hearing. If the parties cannot come to an agreement, the parties will be given directions for hearings and the matter will be listed for hearing.

Hearing

At the hearing, the applicant and the respondent present their cases to the ACAT. Each party has the opportunity to call witnesses, to tender evidence and make submissions on the facts or the law. Either party may wish to be represented by a lawyer at the hearing. After hearing both sides, the ACAT makes a decision and records a judgment.

Judgment/order made in the absence of a party to proceedings

If a party does not attend a proceeding in ACAT, an order may be made in their absence. To have the proceedings restored the applicant must file an 'Application for Interim or Other Orders' form asking for their application to be restored. If default judgment has been entered, there is no guarantee that it will be set aside. It is ultimately a matter for the ACAT and may be based on a number of factors, including the reason why the judgment was entered in the first place and reason for non-attendance.

Debt declaration

In some circumstances, it may be prudent for a debtor to seek a declaration that the debtor does not owe the debt. A ‘debt declaration’ is an order of the ACAT declaring the amount, or a maximum amount, owed to someone else. A debt declaration application cannot be lodged without the debtor having first received a letter of demand. A copy of the letter of demand must be attached to the debt declaration application.

ACT Magistrates Court

The Magistrates Court Act 1930 (ACT) provides the Magistrates Court with jurisdiction to hear civil matters relating to debt and to assist its operations. The rules governing its practice and procedure are contained in the Court Procedures Rules 2006 (ACT) (“CPR”).

The Magistrates Court deals with claims of over $25,000 but less than $250,000. People appearing in the Magistrates Court are often represented by lawyers. If a party is unsuccessful they can be ordered to pay the legal costs of the other party in taking the matter to court. Section 266A of the Magistrates Court Act 1930 (ACT) prevents the Magistrates Court from dealing with civil disputes involving less than $25,000.

In this section the creditor is referred to as the plaintiff and the debtor as defendant.

Procedure in the Magistrates Court

Commencing action

The following steps can be taken by a creditor:

• Completion of an Originating Claim ( Form 2.1), setting out the parties, the nature of the claim, relief being sought, plaintiff’s details, address for service, defendant’s details (as known) and a notice to the defendant;
• Completion of a Statement of Claim ( Form 2.2), setting out the basis of the claim, including the amount claimed, the interest and the amount being claimed for costs and disbursements and advising the debtor about the steps they need to take after receiving the Statement of Claim (this tells the defendant how much they have to pay to bring the matter to an end);
• Arrange for a copy of the Originating Claim and Statement of Claim to be filed, sealed and served. A filing fee is payable to the Court upon issuing the claim. ACT Magistrates Court Fees set out the filing fees as well as other Magistrates Court fees;
• The methods by which a Statement of Claim filed in the Magistrates Court can be served are set out in detail in Part 2.2 and rule 6405 of the CPR.

The proceeding on this claim will be stayed if the defendant pays:

• the amount claimed;
• any amount claimed for interest; and
• the prescribed costs plus any filing and service fees paid.

Defending a claim

A defendant who has been served with a claim can accept or dispute it. If the defendant decides to dispute the claim then he or she must complete a Notice of Intention to Respond Form or a Defence and Counterclaim Form. The defendant must file within 28 days after the day the claim is served.

If the defendant does not file a defence, or a notice of intention to respond and a defence, within this time then proceedings may be heard in the absence of the defendant or default judgment may be entered, or an order made against the defendant.

Pre-Hearing Conference

A pre-hearing conference (attendance is compulsory) is usually arranged once the parties are ready for trial. The pre-hearing conference is a confidential and informal way of the Court seeking to resolve the dispute and to give the parties an opportunity to narrow and clarify the issues in dispute. A claim can be dismissed or a defence struck out for non-appearance.

If the parties are unable to reach agreement concerning their conflict then the matter will go to hearing for resolution.

Hearing

When matter will proceed to hearing if it cannot be resolved between the parties. At the hearing the parties can present evidence supporting their position and the Court will decide the matter based on the "balance of probabilities".

Interest

Interest is payable on any unpaid amount of a judgment.

Other considerations

Admitting a claim

A debtor has little to gain and much to lose by defending a claim when they have no realistic defence or counterclaim. It is always cheaper to settle a claim than to fight it and lose in court.

Rather than pursue a case that they can't win and then lose, a debtor may be wise to admit the claim and come to an agreement with the creditor, settling the matter on the best possible terms for both parties or accepting the court's order as to how the debt should be paid. Debtor's should also consider the risk of a costs order if they lose.

Action should be taken as soon as a Statement of Claim is received. If the amount claimed is correct and no defence is to be made against the claim, the debtor should make an offer to the creditor and, if possible, reach an agreement before an application for a default judgment is filed. Any agreement should be put into writing and signed by both parties.

Defending a claim

There are a number of defences available to a person being sued for a debt. It is best the debtor speaks to a lawyer or financial counsellor about any defences available. If there has been a breach in the procedural requirements around enforcing the debt (see s 88 NCC for example), the debtor has a claim against the creditor or has paid the debt or dispute the amounts claimed, a defence would be available to the debtor. See also grounds for disputing liability (above) for possible defences.

Counterclaim

A counterclaim can be made where the debtor claims the creditor owes them money, where the goods bought from the creditor were defective or where the debtor is making a claim for damages from the creditor. A debtor can make a payment into court which takes into account any counterclaim against the creditor. A counterclaim must be included in the defence and counterclaim and should contain a statement of the nature of the claim, details of the facts and the amount of money claimed. If the creditor accepts the money, both their claim and the debtor's counterclaim are generally seen to be settled.

Setting the judgment aside

A default judgment is not necessarily final because the court has the power to set it aside.

If a court has made an order to pay a debt against a person, that person may apply to have the order set aside if, without any fault on their part, did not know about the initiating process in sufficient time to file a notice of intention to respond or defence and has a good defence on the merits (see Rule 6561 of the CPR).

Rule 6561 of the CPR provides that the application may only be made within 1 year after the day of the default judgment or, if the 1-year period has expired, within the period from the day the defendant learns of the default judgment that the court considers reasonable in the circumstances.