MAGISTRATE COURT JUDGEMENTS
If you owe a debt to a creditor and you fail to pay them within their specified trading terms the creditors may instruct their solicitors to issue proceedings against your company or any directors who have personally guaranteed the performance of the company to the creditor. These proceedings are formally called the issuing of a Complaint.
If you are a company the creditor will be required to serve the proceedings on your registered office as it is recorded at the time of issuing the Complaint with the Australian Securities & Investment Commission (ASIC).
Once prepared and lodged with the appropriate court, the Complaint is served on the company by posting the Complaint by ordinary mail. This is distinctly different from individuals such as guarantors who are required by law to receive service personally byway of a process server. Unlike individuals, there are no requirements for a Complaint to be physically served on a company or be sent by registered mail.
This creates an all too often problem, as for most companies their registered office is located at their accountants and in a busy accounting practice the Complaint has a tendency to go unnoticed, unattended or just plain lost.
If a defence is not entered within 21 days from the date of service (which for companies is deemed to have occurred two business days after posting the Complaint) the creditor will be allowed on the 22nd day to apply for default judgement. This means that an Order is made by the Magistrate awarding the amount being claimed in the Complaint plus costs plus interests.
Once the Order has been made, the creditor then has to decide what action to take next. In this case they will normally be guided by their legal representatives who may suggest that it is appropriate for an application to be made to have the Sheriff attend the companies premises in order to seize property to the value of the judgement Order. This is known as a Warrant to seize goods.
The Sheriff is an officer of the court and as such has a wide range of powers bestowed upon them in order to carry out their business and execute the Warrant. This includes inter alias ordering the locks to be changed on a building where there is just reason to believe the debtor may abscond or taking away unencumbered vehicles, machinery, tools etc that belong to the company.
In this respect, the onus for proof of ownership of the goods seized vests with the debtor who must provide proof of ownership if they are alleged not to belong to the debtor company. Failure will result in the goods being taken away for sale at public auction.
For the hundreds of companies being sued each week this means that the first time they hear about the judgement is when they receive a visit from the Sheriffs office to execute the Warrant.
If you can’t pay the judgement debt you face losing your companies property. In some cases the Sheriff has had no option other than to take equipment which turns out to be vital for the day-to-day operating of the company.
Unfortunately, for the Sheriff’s office they have a job to do however disheartening that may be.
Even if you pay the Judgement debt, and irrespective of whether the amount owed is $400 or $40,000 the judgement will appear on your companies credit report for 5 years. This may cause extreme difficulties for the debtor company when applying for, or obtaining trade credit and finance.
In addition, if you have a fuel card or a certain type of credit card, the credit card companies may be on a watch list which means they will be notified by the credit bureaux shortly after the default or judgement is entered against you. This may result in the card being suspended or canceled.
A Judgement is recorded on a companies credit file like this example below:
_______________________________________________________________
Court Judgements
Date: 07/03/2005 Amount: $2,458
Creditor: MAXIMUM PRODUCTS PTY LTD
Plaintiff Number: T030045668 Court Code: Magistrates court
Judgement
Association Code: Principle Acc Co Borrow:
Status: Status Date:
_______________________________________________________________
Every business and individual requires a healthy credit rating to conduct its day-to-day business and participate in a society that relies on credit. Bad credit may result in higher mortgage interest rates or out right rejection.
If you or your company has received a judgement which is now recorded with Baycorp or Dun & Bradstreet, it is important not to pay the debt without seeking professional advice first.
A judgement will remain on a credit rating for 5 years even when paid.
Speak to Latham Moore & Associates today before its to late!