When is litigation necessary?
Debt recovery litigation becomes necessary when a debtor refuses to pay despite a letter of demand or when the debt is genuinely disputed and needs a court determination. It's also the appropriate path when the debtor is an individual (rather than a company) and a statutory demand isn't available.
We don't litigate for the sake of it. Court proceedings are a means to resolution — and in many debt recovery matters, the act of filing proceedings prompts the debtor to settle before a hearing is required.
Australian court hierarchy for debt recovery
The court your matter is heard in depends on the amount you're claiming:
Local Court / Magistrates Court — debts under $100,000
Most debt recovery matters fall into this category. The Local Court (NSW), Magistrates Court (QLD and VIC), and equivalent courts in other states handle claims up to $100,000. These courts are designed for faster, less formal proceedings. Typical timeframe: 2-4 months from filing to resolution.
District Court / County Court — debts $100,000 to $750,000
For larger debts, the District Court (NSW and QLD) or County Court (VIC) has jurisdiction. These proceedings are more formal and involve additional steps including discovery and potentially expert evidence. Typical timeframe: 6-12 months.
Supreme Court — debts over $750,000
The Supreme Court in each state handles the largest claims. Supreme Court proceedings involve full procedural requirements and are suitable for complex or high-value disputes. Typical timeframe: 12-18 months.
The litigation process
While every matter is different, the typical debt recovery litigation process follows these steps:
- Pre-action correspondence — a formal letter of demand satisfying the court's pre-action requirements
- Filing a Statement of Claim — we prepare and file the initiating court document setting out your claim
- Service on the debtor — the debtor is formally served with the proceedings
- Defence period — the debtor has 28 days (typically) to file a defence. Many matters settle at this stage
- Default judgment — if the debtor doesn't file a defence, we apply for judgment in your favour without a hearing
- Hearing or settlement — if the matter is defended, it proceeds to mediation or hearing
- Judgment and enforcement — once you have a court judgment, we use enforcement tools to collect the debt
Costs and our no-win-no-fee approach
For eligible debt recovery matters, we act on a no-win-no-fee basis. You don't pay our legal fees unless we successfully recover your debt. Court filing fees and disbursements are also recoverable from the debtor in most cases.
Before commencing any proceedings, we'll give you a clear assessment of:
- The strength of your claim
- The likely timeframe to resolution
- The costs involved and what's recoverable
- The debtor's capacity to pay (because a judgment is only valuable if it's enforceable)
Pre-action requirements
Australian courts require creditors to take reasonable steps to resolve a debt before filing proceedings. This usually means sending a letter of demand and allowing the debtor a reasonable time to respond. We ensure all pre-action requirements are met so your claim isn't delayed or dismissed on procedural grounds.
After judgment
Obtaining a court judgment is only half the battle — you also need to enforce it. If the debtor doesn't voluntarily pay the judgment amount, we have a full range of enforcement tools available, including garnishee orders, writs of execution, and examination summons.
The information on this page is general in nature and should not be relied upon as legal advice. Please contact us for advice specific to your situation.
