Good morning Everyone
You must never ignore a Statement of Claim but act promptly.
I wish to address in this topic over the next three newsletters as regretfully I have had to assist several clients who did not act appropriately after receiving a Statement of Claim.
Receiving a Statement of Claim is stressful. Understanding what it means and acting promptly can help protect your legal rights and prevent an avoidable judgment being entered against you. A Statement of Claim (“SoC”) is the formal court document used to commence civil proceedings in the courts of New South Wales. It sets out the allegations made by a person or organisation bringing legal proceedings against another party.
The person commencing the proceedings is called the plaintiff, while the person against whom the claim is brought is called the defendant. A SoC is commonly used in disputes involving:
- Unpaid loans and personal debts.
- Outstanding invoices for goods or services.
- Disputes between businesses.
- Breaches of contracts.
- Claims for damages arising from alleged breaches of legal obligations.
- Disputes involving the recovery of money or property.
The SoC identifies the legal basis of upon which the plaintiff’ alleges that the defendant has breached an agreement and the orders or other relief that is being sought from the court. Civil proceedings may be commenced in either the Local Court of New South Wales, the District Court of New South Wales or the Supreme Court of New South Wales, depending on the nature and amount of the claim, in accordance with the jurisdiction of the relevant court. The choice of court is important as it can affect the applicable procedures, the orders available and the potential costs consequences.
If you receive a SoC, it extremely important that you take urgent action and seek legal advice. A plaintiff has the ability to obtain what is termed a Default Judgment if the defendant has not filed a defence within 28 days of its service. If the SoC is challenged, a defence needs to be prepared or if you have no defence to an application, you have the capacity to admit the claim and make an application to pay by instalments.
Whilst in all matters, negotiation is available, on our experience it is only in the early stages, that a defendant has prospects of success. Every delay by a defendant reduces those prospects.
Upon receipt of a SoC, you need to identify the following:
- The amount of money claimed, if applicable.
- Whether interest and legal costs are also claimed.
- The factual allegations made against you.
- The legal basis upon which the plaintiff relies.
- The date the Statement of Claim was filed.
- The date and circumstances in which you were served.
- The deadline for responding.
If the claim concerns a company, a director or another individual should not assume that the company and its directors are interchangeable. Whether an individual is personally liable depends on the circumstances and the legal basis of the claim. Similarly, if a claim is brought against you as a guarantor, trustee or other representative, the capacity in which you are sued must be examined carefully.
If you dispute the claim, you should obtain legal advice promptly so that an appropriate response can be prepared and filed within the required period. Preparing a defence often requires examination of contracts, invoices, loan agreements, bank statements, correspondence and other documents. It may also require consideration of legal issues that are not apparent from the SoC itself. If you need more time, do not assume that the plaintiff will agree to an extension or that an informal request automatically changes the court deadline. Obtain advice about the appropriate steps to take.
If the defendant fails to respond within the required time, the plaintiff usually will be entitled to seek default judgment. A default judgment is a judgment entered because the defendant has failed to take the required procedural steps, rather than because the court has determined the disputed issues after a defended hearing. Depending on the nature of the claim and the applicable rules, the plaintiff may seek judgment for the amount claimed, together with interest and allowable costs.
Once judgment has been entered, the plaintiff is able to take enforcement action to recover the amount owing. This may take the form of the following:
- A writ for the levy of property;
- A garnishee order affecting money owed by the judgment debtor or held in a relevant bank account;
- Other enforcement procedures available under NSW law; and
- If the defendant is a company, the defendant may issue a statutory demand in accordance with the Corporations Act 2001.
The availability and appropriateness of any particular enforcement method depends on the judgment, the debtor’s circumstances and the relevant legal requirements. Usually, a judgment can have significant financial consequences and may make the dispute more difficult and expensive to resolve.
Although it is possible to have a default judgment set aside it is usually more costly that if the 28-day period has be adhered. In accordance with the Uniform Civil Procedure Rules the court has the discretion to set aside a default judgment based upon:
- a reasonable explanation for the default;
- the reason for the delay in action once becoming aware of the judgment; and
- providing the court with an arguable or valid defence to the SoC.
The essential message is simple: never ignore a SoC, even if you believe the claim is incorrect, unfair or entirely without merit. If you have received a SoC, you will need to gather the relevant documents early to assist your solicitor to assess the claim and prepare an appropriate response.
Depending on the nature of the dispute, you should try to locate:
- The Statement of Claim and all accompanying documents.
- Any contract, loan agreement, guarantee or other relevant agreement.
- Invoices, receipts and payment records.
- Bank statements and transaction records.
- Emails, text messages and letters exchanged with the plaintiff.
- Any earlier demands for payment or notices of dispute.
- Documents supporting your version of events.
- Any documents relating to a proposed settlement.
- Details of when and how you received the court documents.
You should also provide a clear chronology of events, including any relevant conversations or agreements. Most importantly Do not destroy, alter or discard potentially relevant documents. The earlier your solicitor can review the evidence, the easier it may be to identify the issues in dispute and determine the appropriate response.
If you or anyone you know either wants to issue a SoC or has received one, please have them contact me for a confidential conference to discuss their matter.
Wishing you a wonderful day,
Jeffrey Choy
JCL Legal
0419 233 670
[email protected]
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Legal Disclaimer: This guide is for informational purposes only and does not constitute legal advice.