In some financial dispute cases in Australia, situations like these often arise: someone suddenly discovers a sum has been deducted from their bank account, or someone suddenly receives a Bankruptcy Notice. The first reaction in such a situation is bound to be bewilderment — it’s only a minor dispute, I haven’t even been to court yet, so on what basis can my property be forcibly seized?
In this situation, we must discuss a common procedure in Australian law — default judgement. To explain it in plain terms, let’s first look at a few classic cases:
Case Analysis
Case 1
In 2016 there was a news story in Australia:
A Melbourne couple were forcibly evicted from their own home over a $20,000 credit card debt, and their property was to be auctioned. The cause was that in 2008 the couple had spent $20,000 on a credit card and stopped making the minimum repayments, and after receiving many letters demanding repayment of the debt they ignored them. In April 2013, a debt company purchased their credit card debt and commenced legal proceedings, demanding repayment, failing which bankruptcy proceedings would be initiated. When the case was heard, the couple did not appear in court, and the court entered a default judgement of bankruptcy against them. They later appealed but their request was dismissed. In the end, the couple were forcibly evicted from their home.
Case 2
Mr Zhang purchased a restaurant, but things did not go smoothly in actual operation and the business ran at a loss. After a long period of poor performance, Mr Zhang shut up shop in frustration and ignored the bills for utilities and rent. The landlord engaged a solicitor, who drafted a statement of claim and handed it to Mr Zhang in person, but Mr Zhang assumed it was just another rent demand and, feeling no urgency, ignored it. Several months later, bailiffs suddenly knocked on his door and told Mr Zhang that the court had issued an enforcement order and his house was about to be auctioned, because under the court’s default judgement, even though the house was Mr Zhang’s personal property, the plaintiff had the right to apply to have it sold. Under Australian law, once Mr Zhang received a statement of claim bearing the court’s seal, he was required to respond within 28 days — either to file a defence or to appear in court. However, Mr Zhang neither filed a defence nor appeared, but chose to ignore it, which gave the plaintiff the opportunity to obtain a default judgement from the court.
Case 3
In 2016 there was a court-ordered auction in Adelaide, of a house worth $1.4 million, arising because the home’s owner — a female doctor — refused to pay $2,084 in compensation for a car accident, because she denied having any involvement in the incident. The claim then dragged on for two years, and the associated legal costs accumulated to $3,552. Ultimately the court issued a writ of seizure, seizing the doctor’s $1.4 million property for auction — a claim over a few thousand dollars ended up turning into the auction of personal real estate.
What is a Default Judgement? What preconditions must be met for a court to enter a default judgement?
A default judgement is a disposition by which the court enters judgement without a hearing. Ordinarily, after the plaintiff serves a statement of claim or court summons on the defendant, if the defendant fails to respond within 28 days, the plaintiff may apply to the court for a default judgement. When applying for a default judgement, the plaintiff must prove to the court by affidavit that the defendant did in fact receive the statement of claim but chose to do nothing. The Local Court, District Court and Supreme Court may all enter default judgements within their respective civil jurisdictions.
So how is it confirmed that the defendant received the documents?
Generally, the statement of claim is delivered directly to the defendant by a process server after confirming the defendant’s identity in person. If the defendant is a company, the documents are sent to the company’s registered address; if it is an individual, the documents are handed over personally after identity is confirmed, which proves that the defendant has received the documents.
In debt recovery cases, if the plaintiff obtains a default judgement, the judgement will order the defendant to pay money to the plaintiff or return goods. It should be noted that
a default judgement is not the final outcome of the case; it is merely a precondition for seeking a range of remedies from the court, and indeed it can be said that a default judgement is only the beginning of a series of subsequent judgements.
In Australia, pursuing outstanding payments through legal means often involves suing the debtor and obtaining a default judgement, and then enforcing the judgement to recover the debt. Taking NSW law as an example, the three most commonly used financial measures are:
– Bankruptcy
The purpose of bankruptcy is to liquidate most of the defendant’s assets and to capture a portion of the defendant’s income for the three years from the date of bankruptcy, to be applied towards repayment of the debt. Once the court enters a default judgement, the plaintiff may shortly thereafter commence bankruptcy proceedings in the Federal Court, provided that the total debt determined by the court is at least $10,000.00.
– Garnishee Order
If the defendant is in turn owed money by a third party, a garnishee order will direct that third party to pay the sum owed to the plaintiff instead. Examples of third-party garnishees include banks, employers, real estate agents, debtors and other financial institutions. The relevant debt must be an existing debt, due and payable at the time the garnishee order is served. The debtor’s cheque accounts, bank term deposits, bank savings accounts, funds held in fixed deposits and the like are all subject to the garnishee order.
– Writ for the Levy of Property
To successfully enforce a writ for the levy of property, the plaintiff must know that the defendant owns the relevant property, and that the property can be seized by court enforcement officers and used to repay the debt. Relevant property includes any goods in which the judgement debtor has a beneficial interest, as well as money, cheques, bills of exchange, promissory notes, bonds or other securities belonging to the judgement debtor.
Final Thoughts
Because Australian courts relatively often resort to default judgements, some people do not take court summonses seriously when they receive them before judgement, and some new migrants, unable to understand the contents of the letters, choose to ignore them, resulting in default — and ultimately, quite helplessly, have their personal property, and even their homes, compulsorily seized by the court and auctioned. So in Australia, if you receive any letter from a court or other public authority, be sure to read it carefully and on no account ignore it.
