Arts Law Information Sheet

Debt recovery – small claims procedure (NT)

An introduction into how one can go about chasing payment that is owning to them in the Northern Territory. It provides clarification on the small claims procedure in the Northern Territory.

In this information sheet:

  1. Please note Arts Law can give legal advice to artists or arts organisations only.
  2. Introduction – letter of demand
  3. Response to letter of demand
  4. Small Claims debt recovery action
  5. To sue or not to sue…
  6. Small claims procedure
  7. Enforcement
  8. More information

Please note Arts Law can give legal advice to artists or arts organisations only. 

Introduction – letter of demand 

This Information Sheet assumes that the contracts under which money is owed are legally enforceable, and that the debts are not subject to the Consumer Credit Code and equivalents. If you are unsure, please contact Arts Law.

When chasing payment for goods or services, the first step is generally to send a letter of demand to the other party telling them of the dispute and the money outstanding, and giving them a defined period within which to settle the matter or else face legal action.

When sending a letter of demand, you should be careful not to:

  • harass the debtor – they have the right to complain about this behaviour to particular government agencies and the police; or
  • send a letter which is designed to look like a court document because this is illegal.

For assistance with drafting a letter of demand see Arts Law's Information Sheet Debt Recovery Letter of Demand.

Response to letter of demand 

In response to a letter of demand, a debtor may:

  • pay the full amount owing;
  • show that no money is owed;
  • negotiate a compromise, for example, payment by instalments or part payment. If a compromise is agreed to, make sure that it is, or is confirmed, in writing to avoid later disputes; or
  • ignore the letter or respond to it in a way that is unsatisfactory to the creditor.

You may consider writing off the debt – either because the debtor's response to your letter of demand is unsatisfactory, or because the debtor has asked you to do this and you have agreed.

If you decide to write the debt off, you may be able to claim a tax benefit to lessen the loss. If the debt is relatively small – say under $2,000 – many people decide to write off the debt because of the perception that it is too difficult and expensive to pursue, especially if lawyers are retained.

Small Claims debt recovery action 

A "do it yourself" legal action is, however, available. All State and Territory courts in Australia offer a small claims division of their local court or tribunal that provides a simple debt recovery procedure. Advantages are that the process is relatively informal, and that costs awarded against an unsuccessful party are limited.

So, what is a "small claim"? A small claim is a claim:

  • in respect of money, goods purchased or delivered, labour or a combination of these; and
  • up to an amount of between $2,000 and $10,000 depending on the State or Territory in which the legal action is conducted.

If the debt is over the limit provided for in the relevant small claims division, you can still bring an action against the debtor, but you will probably need legal representation or at least legal advice. For example, in the Northern Territory, the Local Court can deal with debt recovery claims up to the value of $100,000. If the money that is owed exceeds $100,000 you must commence action in the Supreme Court of the Northern Territory.

Debt recovery court action is actually a two-step process:

  • you must either negotiate a settlement after having commenced proceedings (which you can do at any time up to the hearing) or obtain a judgment in your favour from the local court; and
  • you must actually recover the money owed to you, which may involve taking enforcement action against the debtor. Briefly, these measures include obtaining a writ of execution against the debtor's property, securing a garnishee order against the debtor's wages or bank account, or (but this is uncommon with small claims) forcing the debtor into bankruptcy.

To sue or not to sue… 

Things to think about when deciding whether or not to commence a debt recovery action and when you should do this, include:

  • whether the debtor can pay. If the debtor has a number of creditors seeking payment of debts and is basically insolvent (i.e. unable to pay their debts as they fall due) it may not be worth pursuing legal action. If, after a company search, you find that the company is in the hands of a receiver or liquidator, contact that person directly;
  • whether there is a genuine dispute over the facts, and whether the evidence to support your claim is strong. If your claim is unsuccessful and the other party retains a solicitor to represent them (this is not common in small claims), the party will apply for a legal costs order against you;
  • that it is generally worth the effort to settle a matter out of court as this is unquestionably preferable to spending time and money on court proceedings. Again, if you do reach agreement with a debtor, make sure that the agreement is in (or is at least confirmed in) writing, to avoid later disputes;
  • wherever you start debt recovery court action, there is a time limit on bringing it, which is generally 6 years from the date the debt first arose. Limitation periods can start again, though, in certain circumstances, such as when a debt is confirmed by a debtor signing a contract that states the money owed to the creditor. You may need help from a lawyer to work out the relevant time limits, if they are an issue.

Who can I sue? 

A small claims action can be brought against a person (sole trader), a group of people (partnership) or a corporate entity (company, incorporated association). If the debtor is trading under a business name you need to do a business name search to identify the owner of the business. This can be done by carrying out a search at the Business and Consumer Affairs Office (or its equivalent) in your State or Territory or using the Australian Securities and Investments Commission (ASIC) National Names Index which can be accessed free via their website.

The owner of the business has to be identified in the Defendant or Respondent details of your claim form (often referred to as the Statement of Claim) as follows: Defendant – Glen X of 99 Surreal Crescent, O'Connor, NT trading as (or "t/a") Fantasy Dressers.

If the debtor is a company - for example, Fantasy Dressers Pty Ltd - any business documents (such as invoices and business letters) should have its nine digit Australian Company Number (ACN) after the company name. A company search, using this ACN, should be conducted through ASIC to identify the address of the registered office at which to serve the Statement of Claim and to ensure that the company is not in liquidation (you will have to pay a fee to ASIC to complete a registered office address search. See the ASIC website for more information).

Small claims procedure 

In the Northern Territory, a small claim may be made in the Small Claims Division of the Local Court ('Small Claims Court').

When can I use the Court? 

If you are a person who is capable of managing your own affairs (including a company, an association, or a person over 18) you may make a small claim in the Small Claims Court under the Small Claims Act where the value of your claim does not exceed $10,000.

In the Northern Territory an action for debt (which is founded on the basis of a contractual breach) must be brought within 3 years from the date that the debt first arose.

What should I do? 

To start a claim you must fill in a Statement of Claim form, which you may obtain from any NT Local Court office or the Court's website. Make sure you include accurate addresses both for yourself ('Plaintiff'), and the other party ('Defendant'). Then hand in (file) the completed form to the Local Court nearest to you. If, however, that venue doesn't have a particular relationship to the Defendant or the claim, the Defendant can apply to have the matter transferred to another more appropriate venue of the Court.

The Statement of Claim and a Notice for the Defendant to defend, admit or counter claim the action (which is included on the Statement of Claim form) must be delivered (served) to the Defendant personally. This means that the documents must be delivered to the Defendant in person, and that mailing them is not sufficient. You can serve the Statement of Claim up to 12 months after the date it was filed, after which you need to ask the Court for an extension of time.

The Court can arrange service of the Statement of Claim and Notice to the Defendant. If you serve the Statement of Claim and Notice on the Defendant yourself, you must file a Declaration of Service (a sample is provided on the Statement of Claim form) in the office of the Court where the claim was filed, within 28 days of service. The Declaration is proof that the Defendant has been served with the Statement of Claim. Depending on who the Defendant is, you may need to follow rules set out in other legislation like the Business Names Act or Corporations Act. If you are unable to personally serve the Defendant with the Statement of Claim and Notice, you may pay for a licensed process server or private bailiff to do this.

If you are claiming a sum of money, you may include a claim for interest on that amount. The Court may have discretion to award whatever rate of interest it chooses.

What does the Defendant do? 

The Defendant has 28 days from the date on which the Statement of Claim is served to settle the claim, or pay the claim, or file in court a Notice of Defence or a Notice of Admission (admitting all or part of the claim) or an offer to pay (eg. by instalments). A copy of any document filed by the Defendant will be sent to the Plaintiff.

If the Defendant fails to do any of these things within that time, the Plaintiff can apply for judgment without a court hearing by filing an Application for Default Judgment form, which may be obtained from the court office. Even after this has happened, though, the defendant may apply to have the judgement set aside and the matter re-heard.

How much will it cost? 

A small fee is payable for filing the Statement of Claim with the court. The fees are available at the NT Courts website.

Can I settle before the hearing? 

You may settle at any stage before or during the proceedings but before judgment, but you must let the court know of the settlement. Again, ideally, you will have a written and signed settlement agreement which you can file in court to prove the terms of the settlement.

What happens at the hearing? 

If you wish, you may have another person (eg. a lawyer, friend) represent you. If a lawyer represents you, it is up to you to pay their fees. If you are representing yourself be ready to prove your case. This means having all relevant papers with you (including any contracts, invoices, receipts, and diary notes) and arranging for any witnesses to attend the hearing.

The Court listens first to the Plaintiff's case and then to the Defendant's case. Note that the Court is not bound by the rules of evidence. When the Court has heard the case in full it will give a judgment and make orders which must be obeyed by the party against whom the orders are made.

Costs 

Costs may be awarded if the claim is for more than $5000, and if the court thinks it is reasonable to do so. All costs of the proceedings are awarded entirely at the discretion of the court.

Enforcement 

If the order is not obeyed you can enforce the order. You may seek advice from the Court if you are in this position.

More information 

Arts Law cannot represent you at these proceedings and cannot draft your Statement of Claim, but we can advise you about your rights in an arts related matter both before and during any legal action you pursue. If the debt is over the limit provided for in the small claims division and you need legal representation, Arts Law can assist with referrals to an appropriate solicitor.

You can contact the nearest Local Court Registry Office for more information. Court staff can assist you with information about making a claim.

Darwin Local Court                    
Magistrate Courts                    
Nichols Place                        
Cnr Cavenagh St & Harry Chan Ave            
Darwin NT 0800                                        
Tel: (08) 8999 6225

Alice Springs Local Court
Law Courts Building
Cnr Hartley & Parsons St
Alice Springs NT 0870
Tel: (08) 8951 5716

Katherine Local Court                
Court House                        
First Street                        
Katherine NT 0850                    
Tel: (08) 8973 8956                   

Nhulunbuy Local Court
Court House
Endeavour Square
Nhulunbuy NT 0880
Tel: (08) 8987 1378

Tennant Creek Local Court
Court House
Paterson Street
Tennant Creek NT 0861
Tel: (08) 8962 4377

You can also obtain advice on making a claim from a Community Legal Centre, the Office of Consumer Affairs and the Legal Aid Commission.

Darwin Community Legal Service            
8 Manton Street                    
Darwin NT 0801                    
Tel: (08) 8982 1111                   

NT Legal Aid Commission (Darwin)
6th Floor, 9-11 Cavenagh St
Darwin NT 0801
Tel: (08) 8999 3000

NT Legal Aid Commission (Katherine)        
Government Centre, First St                
Katherine NT 0850                    
Tel: (08) 8973 8704                   

NT Legal Aid Commission (Alice Springs)
77 Hartley St
Alice Springs NT 0870
Tel: (08) 8951 5377

NT Office of Consumer & Business Affairs (Darwin)                         
Ground Floor, Minerals House            
66 The Esplanade                     
Darwin NT 0801                    
Tel: (08) 8999 5184 or 1800 019 319            

NT Office of Consumer & Business Affairs (Alice Springs)
67 North Stuart Highway
PO Box 3796 Alice Springs NT 0871
Alice Springs NT 0871
Tel: (08) 8951 8606

Need more help?

If you have questions about any of the topics discussed above please contact Arts Law.

Disclaimer

The information in this information sheet is general. It does not constitute, and should be not relied on as, legal advice. The Arts Law Centre of Australia (Arts Law) recommends seeking advice from a qualified lawyer on the legal issues affecting you before acting on any legal matter.

While Arts Law tries to ensure that the content of this information sheet is accurate, adequate or complete, it does not represent or warrant its accuracy, adequacy or completeness. Arts Law is not responsible for any loss suffered as a result of or in relation to the use of this information sheet. To the extent permitted by law, Arts Law excludes any liability, including any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this information sheet.

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The Arts Law Centre of Australia has been assisted by the Commonwealth Government through the Australia Council, its arts funding and advisory body.

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