If you decide to settle your case, it means that you are ending the dispute by agreement rather than a Court making your decision. In most instances, resolving your dispute with the other party before a hearing is a best case scenario. For one thing, you remain in control. Once the matter goes to court, the power to decide who wins and loses moves to the Magistrate or a Judge. In this article, we set out key considerations when you are a defendant in proceedings.
Debt Collection Matter
You have an unpaid loan for which your creditors (the plaintiffs) have initiated legal proceedings against you with a Statement of Claim to recover the money you owe them. You do not wish to dispute the claim as you agree that you are liable to repay the debt but have financial difficulties preventing you from repaying your creditors in full. To avoid the costly and lengthy court process, you wish to resolve the matter informally and reach an agreeable out-of-court settlement with the plaintiff. So what should you consider?
1. What Amount Can You Reasonably Offer?
There is little to no point in reaching an agreement to settle the matter with the plaintiff if there is no feasible way you can repay the amount agreed. Your lawyer or financial planner can offer advice as to what offer you can realistically bring to the negotiations table.
2. Can You Pay the Debt by Installments?
Most Courts allow a Defendant to file a Court document requesting they pay by installments. For example in NSW, you can file a Notice of Motion to pay by instalments. You will need to set out information about your income, assets, debts and repayments and what installment plan you are willing to offer. The Registrar will then look closely at the information you have provided and make a decision as to whether your proposal is reasonable.
3. How Will You Repay the Debt?
The most common way is by electronic funds transfer but payment can be made via bank cheque, or in some instances, cash.
4. Will You Pay the Plaintiff’s Legal Costs or Interest?
You have two options if the plaintiff claims costs against you.
1. Some parties reach an ‘inclusive settlement’. That is, a sum of money is offered and accepted which includes all claims for interest and costs. Offers of compromise must state whether the settlement amount offered is inclusive or exclusive of legal costs. For example, party B can offer party A $50,000 in full and final settlement of their claim; or
2. Pay an amount to settle the dispute and state an additional amount for the plaintiff’s legal costs.
It’s also useful to remember that if a creditor refuses a defendant’s reasonable offer to settle out of court, they are subject to cost penalties. Similarly, if you reject an offer, or decide not to proceed with settlement, and end up in court and lose, you can be liable to pay more than your original debt plus the plaintiffs costs.
5. Will You Have a Separate Agreement Recording the Settlement?
In many instances, it is a prudent step to record the settlement in a Deed of Settlement as well as with the Court. You can read more about what a Deed of Settlement includes in our article.
6. What Happens if You Fail to Pay Any Amount When It Falls Due?
This information is usually set out in a Deed of Settlement.
7. What Court Document Will You Use to ‘End’ the Proceedings?
Once you have reached a settlement with the plaintiff, you may wish to have the agreement approved by the Court. Applying for a Consent Judgment can be a way of doing this. Once you have filled out and signed the form at Court, it will become enforceable and can be used by the plaintiff to prompt recovery of the debt. A Consent Judgement is still considered a court judgment even though you never appeared before the Court, and it will, therefore, appear on your credit record. Alternatively, depending on the stage of the proceedings the plaintiff may agree to discontinue its proceedings against you if a favourable agreement is reached between the parties.
There are many factors to consider when you are attempting to settle a dispute. Seeking legal advice from an experienced litigation lawyer as soon as you are served with a Statement of Claim is advisable as they will be able to set out your available options, explain Alternative Dispute Resolution processes to you, and assist with negotiations if you wish to resolve your matter before you reach Court. If you have any questions, get in touch with our Disputes team on 1300 544 755.