Chapter 13: Judgment
13.1 What is judgment?
The court will make a final decision, after considering all the evidence and hearing both party’s cases — this is called ‘judgment’. If the court thinks you are right, and decides in your favour, you will not have to pay the debt. If the court decides for the creditor/plaintiff, judgment will be entered against you for the amount decided by the court — the ‘judgment debt’. Once a judgment is entered, the proceedings enter a new phase; the creditor/plaintiff is now called the ‘judgment creditor’, and you (the defendant) are called the ‘judgment debtor’. The judgment creditor can now start to enforce the debt against you. See Chapter 14 Enforcement.
A creditor can request default judgment in cases where the defendant files no defence within 28 days of being served with a statement of claim. If you have a good reason why you haven’t filed a defence, and you have an actual defence against the action, you may be able to get the judgment set aside. See Chapter 15 Stopping enforcement.
When a plaintiff or cross-claimant issues a statement of claim, and they are successful, they are entitled to claim interest on the debt to the date of judgment.
Judgment is the final, binding decision of the court. You cannot appeal against a decision of the Local Court just because you dislike it. You can, however, appeal some decisions in limited circumstances:
- Small Claims Division — appeal to the NSW District Court, based on ‘denial of procedural fairness’ or ‘lack of jurisdiction’.
- General Division (magistrate or assessor decisions) — appeal to the NSW Supreme Court, based on an ‘error of law’.
- General Division (arbitrator decisions) — application for rehearing before a magistrate.
Tip: If a magistrate has heard the matter, and a judgment made against you, you can make an oral application to the court to pay the debt by instalments. You should provide evidence of financial hardship and of your inability to pay the debt in full to assist in your application — for example, evidence of income, expenses, other debts and so on.
See 13.9 below for further information about appeals and rehearings.
13.2 How is the judgment debt calculated?
The judgment will set out how much the winning party is entitled to receive, including:
- the amount of compensation or damages
- professional costs
- disbursements and witness expenses
- pre-judgment interest — this is a standard interest rate applied to debts substantiated by the court (at the time of writing, the judgment creditor can claim interest of 4.25% from the date of the cause of action until the date of judgment). See 13.7 Pre-judgment interest below.
Note: Pre- and post-judgment interest rates change regularly. Up-to-date interest rates are available on the NSW Local Court website.
An amount for compensation or damages
The main component of the judgment is usually an amount for compensation or damages. This component may be the amount claimed in the statement of claim, or it may be a lesser amount if the defendant successfully shows that the amount claimed was unreasonable.
Case study - Yusuf v Rachael (Part A)
Yusuf’s solicitor issued a statement of claim (UCPR Form 3A) against Rachael for $12,500 in damages (Small Claims Division of the Local Court). Yusuf claimed that Rachael was responsible for causing damage to his vehicle when she drove through a red light and hit his turning vehicle. Rachael, acting for herself, filed a defence (UCPR Form 7B) and statement of cross-claim (UCPR Form 9) stating that the traffic light was amber when she went through it, and that Yusuf turned across her lane in front of her. She also filed two alternative quotes, to repair Yusuf’s car, and argued that the quote Yusuf had provided was too high.
Both parties filed personal statements, plus Yusuf had a witness statement from an independent witness stating that Rachael had run the red light. The case went to hearing, as the parties would not agree to settle. The magistrate found that Rachael had run a red light and was responsible for the damage to Yusuf’s vehicle. The magistrate did, however, accept Rachael’s argument that the quote provided was excessive in the circumstances. The magistrate ordered Rachael pay Yusuf $7000, for damage to his vehicle.
13.3 Costs
Small Claims Division
There is no general power for the court to order costs in the Small Claims Division (section 37 of the Local Court Act 2007 (NSW)). However, the court may make orders for the payment of costs in the following limited circumstances (Rule 2.9, Local Court Rules 2009 (NSW)):
- if proceedings are discontinued or dismissed, or the defence is struck out at a pre-trial review or a hearing
- if proceedings are adjourned because of a party’s default or neglect, including a party’s failure to comply with a direction of the court
- if the court hears proceedings on a motion
- if the court makes a judgment after a full hearing.
The maximum amount of costs allowable is equivalent to the costs that would be allowed if the creditor obtained a default judgment. The winning party may also claim some limited disbursements, such as court and service fees and fees for expert opinion reports (limited to a maximum of $350 for each report).
Schedule 1 of the Legal Profession Uniform Law Application Regulation 2015 (NSW) sets out the costs that can be awarded for the recovery of certain debts and the enforcement of certain judgments in the Local Court.
General Division
In the General Division of the Local Court, the court has discretion as to whether it will award costs. The court can decide who is liable for costs and how much is to be paid.
The court may fix the amount of costs, or make an order that the costs be as agreed or assessed. The court will consider if the time spent on the case is reasonable in the circumstances.
The general rule is that the ‘costs follow the event’ — that is, the losing party will be ordered to pay the costs of the winning party. These orders are not designed to punish the unsuccessful party, but to compensate the winning party for the cost of running the case. Costs are typically awarded even where the unsuccessful party has nearly succeeded or has acted reasonably in commencing or defending the proceedings. The court does not, however, have to assign costs to the successful party if that party has misbehaved or wasted the other party’s time in some way. Of course, the court can only award costs if a solicitor has acted for the successful party — a party cannot claim professional costs if they ran the case themselves.
In the General Division, the court will usually order either ‘party/party’ costs (or costs awarded on an ordinary basis) or ‘indemnity’ costs.
See also Part F of Local Court Practice Note Civ 1 for relevant information about costs.
13.4 Party/party costs
The court will usually order the losing party to pay the winning party’s legal costs on a ‘party/party’ basis. Rather than deciding an exact amount on the day of the hearing, the court may order that the parties reach an agreement between themselves (later) about what the fair and reasonable ‘party/ party’ costs should be.
Party/party costs are not the total legal bill of the other side but are usually about 60–70% (or two-thirds of the actual legal expenses of the winning party). It isn’t easy to estimate how much party/party costs might be in a matter. The full amount of the other side’s legal bill will vary, depending on the hourly rate of the solicitor, the length and complexity of the case, and the amount of work and time a solicitor has spent preparing a matter.
As an example, a solicitor representing a party in a General Division claim worth $28,000, might charge their client $6000. The party/party costs that the losing party would then have to pay might amount to about $4000. Which means the winning party will need to pay their solicitor the balance ($2000).
If parties can’t agree, they can make an application to a costs assessor in the NSW Supreme Court to determine what ‘reasonable costs’ should be. Costs assessment will incur an additional application fee, and the person who loses in this regard will have to pay the application fee and related costs.
13.5 Indemnity costs
If the losing party has misbehaved and wasted the court’s time, the court can order the unsuccessful party pay the winner’s costs on an ‘indemnity’ basis, being the entire legal bill of the other side. Misbehaviour may include pleading a false case, refusing to accept a reasonable offer of compromise, or deliberately and unnecessarily dragging out the proceedings.
13.6 Disbursements and witness expenses
Disbursements
As well as professional costs, the court will usually order the losing party to pay the winning party’s ‘disbursements’. These are the expenses incurred in running the case and may include the following:
- court filing fees — the fee for filing a statement of claim or cross-claim
- service fees — the costs of paying the Sheriff’s Office or a process server to serve documents up to a maximum amount of $69.00 (at the time of writing)
- company searches — where a company search is needed to find the proper address for service
- written quotations — if the party paid to get a quote to repair damaged property.
Witness expenses
In both the General and the Small Claims Divisions of the Local Court, the successful party can be awarded a reasonable amount to reimburse the costs of witnesses who were required to attend the court for a hearing. Reasonable witness expenses would cover lost (net) wages, travel expenses and meals for the day.
Small Claims Division
In the Small Claims Division, witnesses are not required to attend the hearing. Any third parties who filed statements in support of either the plaintiff’s or defendant’s claim are not required to be present at the hearing for cross-examination. So, parties cannot claim witness expenses for third parties.
If you self-represent, the court will typically order the loser to pay your witness expenses comprising lost (net) wages, travel expenses and meals. If a solicitor has attended court on your behalf, witness expenses may not be awarded to you (as your attendance as a witness is not required).
Case study — Yusuf v Rachael (Part B)
The magistrate also ordered that Rachael pay Yusuf’s disbursements and legal fees which included the following:
- fee for filing the statement of claim $105
- fee for service of the statement of claim $45
- legal fees $1259.20
General Division
In the General Division witness expenses can be claimed for all the witnesses who attended the hearing — this would include the party whose claim it was, and any witnesses who filed affidavits and appeared at the hearing to be available for cross-examination.
13.7 Pre-judgment interest
If the amount of the claim is more than $1000, the plaintiff can claim pre-judgment interest from the time the debt became due until the date of judgment. Pre-judgment interest rates are set by the Local Court Rules 2009 (NSW). If the creditor claims pre-judgment interest, and the claim is accepted, the amount of interest becomes part of the judgment debt.
The magistrate can decide the rate of pre-judgment interest, governed by the following principles:
- contractual interest — if there was a contractually binding agreement between the debtor and creditor about the payment of interest (for example, a personal loan or credit card at, say, 15%), interest can be claimed at the rate agreed; or
- statutory rate — if there was no agreement about interest, and the creditor has not claimed a specific rate, interest is calculated at the statutory rate determined by the Local Court Rules 2009 (NSW) (currently 4.25% p.a.); or
- specific claim — if the creditor has made a specific claim for interest (which was not based on a contractual agreement between the parties) the magistrate should allow the lesser of the statutory rate determined by the Local Court Rules 2009 (NSW) (currently 4.25%) or the amount claimed.
Note: the court will only add pre-judgment interest if the creditor claims it.
Creditors can make mistakes when working out pre-judgment interest, so check the calculation and the interest rate are correct. The date from which interest is charged is critical. Interest can only be charged from the date the debt becomes due. So, in a motor vehicle property claim, it can be claimed from the date of the accident. When the debt relates to goods and services, interest can only be claimed from the date payment was due (which is not always the date when goods or services were received). It is worth checking this.
Case study — Yusuf v Rachael (Part C)
Yusuf and Rachael had no contractual agreement about pre-judgment interest. In his statement of claim, Yusuf’s solicitor claimed pre-judgment interest from the date of the accident until the date of judgment at a rate of 9%. Rachael argued that the rate should be the statutory rate of 4.25%. The magistrate agreed and included a figure for pre-judgment interest in the judgment of 4.25% x $7000 for six months (from the date of accident 14/6/20 until the date of judgment 14/12/20) being 0.0425 x 7000 x 0.5 = $148.75.
Therefore, the total judgment debt will be calculated as follows:
- principal debt (for damages) $7000.00
- disbursements $150.00
- legal fees $1259.20
- pre-judgment interest $148.75
- Total judgment debt $8557.95
13.8 Interest on the judgment debt
The total of the amounts in the previous section forms the ‘judgment debt’. The judgment debtor has 28 days to pay the debt in full. If it is not paid in time, interest will automatically accrue on the unpaid balance of the judgment debt.
The (post-judgment) interest payable on the judgment debt is determined by Rule 36.7 of the Uniform Civil Procedure Rules 2005 (NSW) and is currently a rate of 6.25%. This rate is updated from time to time. Court staff, or the Local Court website, will have a table of the different interest rates and the periods for which they apply.
There are two primary methods of calculating the interest:
- Usual commercial practice — judgment creditors may calculate the interest in the usual commercial way of adding interest to the debt in an ongoing way. Any repayments are deducted from the interest first and then deducted from the principal.
- Reducing the principal first — a preferable method of calculation for judgment debtors is to have any repayments deducted from the principal owing and interest calculated in a separate ledger. This way, you end up paying less interest, because the smaller the outstanding judgment debt, the lower the interest charged.
It is unclear which method is the correct method of calculation. It appears that many creditors, grateful to receive any money at all, will be willing to reduce the principal before adding interest payments, to assist the debtor in repaying the debt more quickly. However, other creditors may insist on following usual commercial practice in their calculation of the repayments and interest accrued.
As it is up to the creditor to calculate the interest payable on the judgment debt, the court will not interfere in the creditor’s calculation unless it appears to be manifestly unreasonable or incorrect.
If you are going to repay your debt over time, you could write a letter to the judgment creditor with your first repayment, saying:
Dear Sir/Madam,
Please accept my initial payment of $…. I would appreciate it if you would put each of my payments towards paying off the judgment debt first and then the judgment interest.
This arrangement will assist me in paying my debt, in full, as soon as possible.
Yours sincerely
A Smith
Also see sample request for postponement of enforcement in 17.12, Chapter 17.
13.9 Appeals and rehearing
A judgment given by a magistrate or assessor in either the Small Claims or General Division of the Local Court is final and binding on the parties. However, if either party disagrees with the decision of the magistrate or assessor they have limited rights to appeal against the decision to the District Court or Supreme Court (see sections 39(1) and 39(2) of the Local Court Act 2007 (NSW)).
We strongly advise you to get legal advice if you are thinking of appealing a Local Court decision. If you lose your appeal, you will have to pay the other party’s costs, in addition to your legal costs and disbursements etc.
Small Claims Division
There are limited grounds to appeal a decision of the Small Claims Division of the Local Court to the NSW District Court. The only grounds of appeal are:
- lack of jurisdiction — the court did not have the power to make the order/judgment made
- denial of procedural fairness — you weren’t given a fair opportunity to present your case.
Upon appeal, the District Court has the power to:
- vary the judgment or order
- set aside the judgment or order
- set aside the judgment and remit the matter back to the Local Court
- dismiss the appeal.
General Division
General Division decisions can only be appealed to the NSW Supreme Court on a question of law — that is, where you believe the law has been misapplied or incorrectly used.
The NSW Supreme Court must give leave (or permission) for any appeals against judgments which involve:
- questions of law and fact (where there are alleged mistakes of law and facts)
- interlocutory decisions (interim decisions, other than final judgments)
- consent judgment
- cost orders.
When determining an appeal, the Supreme Court can:
- vary the terms of the judgment
- set aside the judgment or order
- set aside the judgment or order and remit the matter to the Local Court
- dismiss the appeal.
An appeal is commenced by filing a summons with the appeal court (UCPR Form 84).
You have 28 days to appeal to the appropriate appellate court.
The filing of an appeal does not operate to stay (stop) the orders or judgment of the Local Court. Accordingly, a separate application to stay the orders of the Local Court may be needed, pending the determination of the appeal.
Appellants can lodge a stay application with either the appeal court or the Local Court.
You should think very carefully and get legal advice before commencing an appeal. If you are unsuccessful, you will almost certainly incur more expensive legal costs and fees.
Rehearing arbitrator’s decisions
Where your matter is determined by an arbitrator in the General Division of the Local Court, you have a right to seek a rehearing if you are unhappy with the decision. In these cases, the matter will be reheard by a magistrate of the Local Court and a new judgment entered. The party wanting the rehearing must file a notice of motion – rehearing after arbitration (UCPR Form 32), within 28 days of the judgment and pay the relevant filing fee.
13.10 Other options after judgment
If you lose your case and don’t choose to appeal, you have 28 days to pay the judgment debt. If you can’t pay, the judgment creditor will likely commence enforcement action against you (to try to force payment). Even if this happens, there may still be options available to you — for example, asking for more time to pay, paying by instalments, or offering to pay a smaller lump sum.
Chapters 14 and 15 of this guide deal with enforcement and how to stop it.