Chapter 10: Responding to a statement of claim

10.1 Receiving a statement of claim

A creditor has six years, from the date debt was incurred or acknowledged, to start a court action against a debtor. After six years, a creditor’s claim becomes ‘statute-barred’, which means they cannot go to court to recover the debt. If a creditor starts court action for a debt that is more than six years old, you may have a complete defence to the claim.

Where a creditor wants to start court action, the first step will be filing and service of an initiating application called a statement of claim (UCPR Form 3A or 3B). At this point, the creditor becomes known as the ‘plaintiff’, and the debtor becomes the ‘defendant’. A statement of claim is a court form that starts proceedings and notifies the intended defendant(s) of the ‘claim’ that the plaintiff is making. Once served with a statement of claim, you have 28 days to file a defence (UCPR Form 7A or 7B) or take some other steps to try to stop the matter going ahead. If you do not respond within 28 days, the plaintiff can seek a judgment against you, without further notice. In this chapter, we explore your options for responding to a statement of claim.

10.2 What is a statement of claim?

A statement of claim starts court proceedings and sets out what the creditor says you owe them and why. Self-representing creditors will file a Form 3B, and those with lawyers file a Form 3A.

Note: References to ‘forms’ in this and the following chapters are references to standardised forms under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). These forms are available from court registries or the UCPR website. We also include some sample forms in Chapter 18 of this guide. You should always check the UCPR website for the most current version of each form.

Genuine court documents

You should check that the document you have received is a genuine court document. An official statement of claim will always include the following:

name and location of the court where the application was filed
a court stamp
a court number/reference
plaintiff contact details
details of what the plaintiff wants and why
a description of what will happen if you do not respond
options for responding to the statement of claim.

The statement of claim will not list a court hearing date/time. You will only get a listing date if you choose to defend the claim and have the matter decided by the court.

It is an offence to send people documents that look like court documents, to try to obtain money, property or financial advantage falsely. If you have concerns about the document you have received, get legal advice, or talk to court staff.

10.3 Responding to a statement of claim

After being served with a statement of claim, you have 28 days to respond (so it is essential to act quickly). Your options are:

negotiate with the plaintiff
agree to pay the entire debt
agree to pay the debt in instalments
file a defence (asserting that you deny the entire claim or part of the claim)
file a statement of cross-claim (asserting that you have a counter-claim against the plaintiff or a third party
file a notice of motion to have the matter transferred to another court/venue
do nothing (not recommended).

BE CAREFUL! You should seek advice from a lawyer before admitting to the plaintiff that you owe the amount claimed — especially if you have any doubts about the matter.

Consequences of not responding in time

Ignoring a statement of claim will not make it go away. If you do nothing, the plaintiff can get a judgment against you without having to go to court (called a ‘default judgment’). All the plaintiff needs to do is wait 28 days, from the date of service, and complete a form seeking a default judgment. The plaintiff can begin to enforce the debt after obtaining judgment — see Chapter 14, Enforcement.

The plaintiff may not act straight away, so you might still be able to file a defence after 28 days. You must, however, file your defence before judgment. If you are running out of time, and want to defend a claim, it may be helpful to ask the creditor/ plaintiff for more time. If you communicate honestly and openly with the creditor, they may be willing to give you a bit more time to sort things out.

A creditor is only legally obliged to wait 28 days before seeking judgment. After this time, you will have lost your ‘right’ to defend the claim (unless you have good reasons for not filing the defence within the time allowed). If you have a good reason for missing the filing deadline and a good defence to the action, you can apply to have a judgment set aside (see Chapter 15 part 15.2 Setting aside default judgment).

Information gathering

If you’re unsure what the claim is about or how you should respond, you should get more information from the plaintiff.

The first step is to telephone or write to the plaintiff, or their solicitor if legally represented, asking for details about the claim — this is known as asking for ‘further and better particulars’. You should ask for copies of any relevant documents they have and for a detailed breakdown of the amount they say is owed, and how and when it came to be owed (for a sample letter see Chapter 17). You should keep a record of any contact you have with the plaintiff or their solicitor, including the date of your conversation and what you discussed.

It is essential to protect yourself by asking for notice before they try to get a judgment against you. If you need extra time to file your defence, the last paragraph of your letter should say something like:

… As I am considering defending this matter, I ask you not to enter judgment until I have had the chance to look at the information requested. In any event, please give me at least 14 days’ notice of your intention to enter judgment.

The information provided by the plaintiff should give you a better idea of whether you should defend the claim. If the plaintiff has made a noticeable error, contact them or their solicitor and point out the mistake. If they agree to drop the application, it is best to protect yourself by completing a deed of settlement, confirming that the claim was decided in your favour (see Chapter 17 for a sample deed of settlement). The plaintiff should also discontinue proceedings by filing a notice of discontinuance (UCPR Form 33).

10.4 Negotiating with the creditor

It may be worthwhile attempting to negotiate an outcome with the plaintiff creditor to avoid a judgment against you (which is recorded on your credit history and will adversely affect your credit rating). Settlement discussions with the plaintiff may include making an offer to repay part of the debt in full settlement of the matter or offering to pay the debt by instalments. Negotiation with the creditor can start immediately or may take place at any point up until the final hearing of the matter (in cases where you have filed a defence).

If you are writing letters to the plaintiff to try to settle the matter, you should include the words ‘without prejudice’, which means that your offer can’t be used against you later in court. See sample offer of settlement, Chapter 17.

Where parties resolve the matter by agreement, you can:

Request a consent judgment — either by handing your written/signed agreement to the judicial officer dealing with your matter or by submitting a consent judgment form (UCPR Form 44) to the court registry. See sample terms of settlement, Chapter 17.
File a notice of discontinuance — if the plaintiff decides to withdraw their claim they can file a notice of discontinuance (UCPR Form 33) which must be signed by both parties. Once lodged, current proceedings will end, but if you renege on your agreement, the plaintiff can start a new application.

10.5 Agreeing that you owe the debt

If you agree that you owe the money claimed by the plaintiff, you will save money by agreeing to pay the debt. There are two court forms which deal with this situation:

Notice of payment (UCPR Form 34) — where you agree to the debt and can pay immediately.
Acknowledgement of liquidated claim (UCPR Form 35) — where you agree to the debt but cannot pay immediately.

Notice of payment

If you want to pay the full amount owed, including interest and costs claimed, you can do this and then file a notice of payment (UCPR Form 34). This form tells the creditor and the court that the debt is paid. The court then stops the action, no judgment is made, and the matter is finalised.

Acknowledgement of liquidated claim

If you agree that you owe the amount claimed, but you cannot pay the full amount, you can file an acknowledgement of liquidated claim (UCPR Form 35). At the same time, you should also file a notice of motion to pay by instalments (UCPR Form 46). This form includes an affidavit and a statement of financial position, giving evidence of why you cannot pay right away. This application may or may not be accepted by the court. See the sample notice of motion to pay by instalments, Chapter 18.

If you agree that you owe the debt, it will be hard to get out of paying the interest, fees and costs unless the plaintiff is willing to negotiate.

After you have filed the acknowledgement of liquidated claim form, a judgment is entered against you for the whole of the amount claimed by the plaintiff. Once there is a judgment against you, the plaintiff can act to enforce the debt. For more information about enforcement, see Chapter 14, Enforcement.

Note: If you file the acknowledgement of liquidated claim form with the court within 28 days of being served with the statement of claim, you are likely to pay less in legal fees.

10.6 Defending the claim

You can defend a statement of claim if you believe you don’t owe all or part of the money claimed. To defend the claim, you must file a document called a ‘defence’ (Form 7B — if self-representing). You should do this within 28 days of being served with the claim, or the plaintiff has the right to seek a default judgment against you. Your defence must be filed at the registry where the creditor filed the statement of claim.

If more than 28 days have passed since being served with the statement of claim, you should contact the registry to see if default judgment has been entered. If not, you are still able to file a defence. If a default judgment has been entered, go to Chapter 15 for guidance on stopping enforcement.

You should also check the date on which the statement of claim was filed. A plaintiff must serve a statement of claim within six months of filing.

There is no filing fee to lodge a defence. You can file the defence in person at the court registry, by sending it to the court’s address or by using the NSW Online Registry. The court will send a copy to the plaintiff and return a sealed copy to you. After your defence is filed, the court will send you a notice of listing for your first hearing date, called a pre-trial review (Small Claims Division) or a call-over (General Division).

Note: Record your allocated court date in your calendar/diary immediately, so you don’t forget — if you fail to turn up to the hearing, the court will dismiss your defence, and judgment will be entered against you (regardless of whether you owe the debt or not).

Defending the whole claim

Your defence form essentially asserts that you deny some or all of the plaintiff’s claim. You must explain in your defence why you disagree with the statement of claim. Some common grounds of defence include:

you have already paid the money
the debt is statute-barred (more than six years old)
the accident was not your fault (in motor vehicle matters)
the goods or services you agreed to pay for were not provided or were sub-standard
you did not enter the contract as the plaintiff alleges
you disagree that specific terms or conditions were a part of the agreement
the alleged debt was a gift rather than a loan (for example, your friend gave you some money, but said you didn’t have to repay them)
the plaintiff misled you about a product or service
you were unfairly pressured into the contract.

If your matter goes to a hearing, you can only raise arguments that you have listed in your defence, so you must include all possible grounds for your defence. You should get free legal advice, or see the chamber service, for assistance in drafting your defence.

Case study - defending the entire claim

John and Samira are involved in a car accident, and neither party is insured. Samira stopped her vehicle at traffic lights, and John hit her from behind. John’s car was badly damaged, and he issues a statement of claim against Samira, claiming that she was at fault because she stopped too quickly. John claims $4000 for repairs to his vehicle, $90 for interest, $105 for filing and $49 for service fees.

John makes the following claims in the ‘pleadings and particulars’ section of his statement of claim:

On 10 March 2020, the plaintiff was driving behind the defendant, along Stacey Street in Bankstown.
The defendant was speeding and stopped her car abruptly at the traffic lights, in front of the plaintiff.
Due to the defendant’s negligent driving, the plaintiff could not stop his car in time to avoid a collision and hit the back of the defendant’s car.
The plaintiff incurred $4000 worth of damages to his car as a result of the defendant’s negligent driving.
The plaintiff claims:
1. $4000 in damages, and
2. interest according to section 100 of the Civil Procedure Act 2005 from 10 March 2020 to 10 September 2020.

Samira is shocked to receive the claim because John had admitted fault at the scene. She also has the name of a witness who saw that John was driving too fast when he hit her car. Samira gets legal advice and decides to defend the whole claim. She files a defence (UCPR Form 7B) (see sample defence, Chapter 18).

Note: Samira could also issue a cross-claim for damages against John (see 10.7 below and the sample statement of cross-claim in Chapter 18).

Defending part of the claim

You may want to defend part of the plaintiff’s claim if you agree that you owe some money but disagree about the amount claimed, or that you are wholly responsible.

If you believe you owe only part of the amount, you can do one of two things:

Contact the plaintiff directly, to explain what you’re willing to pay and why. If the plaintiff agrees, you can file a consent judgment (UCPR Form 44) for the amount agreed; or
If it is impractical to contact the plaintiff, or it is too late, or the plaintiff will not agree, you can file a defence (as outlined above) explaining why you should not pay the whole amount.

Case study — defending part of a claim

Jane and Khalil booked their wedding reception with Wedding Co. Unfortunately, Jane’s mother was diagnosed with terminal cancer eight months before the planned wedding, and they decided to have a smaller wedding, sooner, so her mother could be involved. Wedding Co did not have any availability, so they cancelled their booking and went with another provider. A year later, they received a statement of claim from the Local Court, claiming they owed Wedding Co a $5000 cancellation fee. Jane and Khalil agreed that they owed a cancellation fee (which they had forgotten to pay at the time), however, on their reading of the contract they only owed $1500 (because of the length of notice given). Jane and Khalil filed a defence with the court, outlining their case. Wedding Co contacted them before the hearing date and made an offer to settle for the reduced amount of $1750 (inclusive of the cancellation debt and related court costs). The parties signed a deed of settlement, and Jane and Khalil paid the agreed amount immediately. Following the agreement, a notice of discontinuance was then filed with the court, which meant that no judgment was entered against Jane and Khalil.

Changing your defence

Sometimes, you may need to make changes to your defence after filing — this is called ‘amending’ your defence. You need to ask the court for 'leave' (permission), to file an amended defence. Common reasons to amend your defence may include to:

correct an error
clarify, add or remove grounds for the defence
add or remove parties.

If the court grants you leave to amend your defence, your updated version should be titled ‘amended defence — amended [date]’. You should strike-through the incorrect information and enter the new information as underlined or bold text. As with the original defence, the amended defence needs to be filed with the court, and a stamped copy served on the other party/parties (you will need to do this).

You should seek further legal advice if you think you need to amend your defence.

10.7 Other responses to a statement of claim

Other responses to a statement of claim may include:

cross-claims, and
applying to have the case transferred to a different venue.

Cross-claims and third-party notices

At the time that you file a defence, or even if you don’t file a defence, you might decide to file a statement of cross-claim (UCPR Form 9), against:

The plaintiff — this may be appropriate if you believe that the plaintiff owes you money, goods, or compensation. For example, in the case study above, Samira could file a defence to John’s claim and a cross-claim for damage to her car.
A third party — this may be appropriate if you believe a third party is liable for all or part of the damages.

If you only file a cross-claim, without a defence, the plaintiff can still get a default judgment against you, and the court will deal with your cross-claim separately. If you want to defend the plaintiff’s claim, it is essential that you also file a defence (UCPR Form 7B, if self-representing). In both situations:

You must file your application within 28 days of receiving the statement of claim, and usually at the same time as you file a defence. If you don’t lodge the cross-claim in time, you will need leave or permission from the court to file the cross-claim.
The court will charge a filing fee for each application. If you are making a cross-claim as an individual, the filing fee is currently $105.
You need to detail your claim and substantiate your application in the same detail as though you were initiating the proceedings.
The registrar will arrange to serve a copy of your cross-claim(s) on the plaintiff, but you will be responsible for personally serving the third party with the cross-claim, defence and original statement of claim (see What is proper service? in Chapter 9).
Once you file a statement of cross-claim, you will become the ‘cross-claimant’, and the other party/parties become the ‘cross-defendant(s)’.

You should get legal advice before deciding to bring a third party into the proceedings because it will complicate matters and take longer to resolve. You also risk having to pay the third party’s costs if your claim against them fails. Sometimes, it might be more sensible (and cost-effective) to cut your losses and settle (regardless of fault).

Applying to have the matter transferred to a closer venue

Usually, proceedings will run in the court where the plaintiff files their initiating application, but if the courthouse is too far away, you may be able to get the venue changed. You cannot, however, have a hearing moved to a different court that is less than 100 km away from the originating venue. Part 8 of the Uniform Civil Procedure Rules 2005 (NSW) deals with change of venue applications. You can also find relevant information in section 10 of Practice Note Civ 1 (Case Management of Civil Proceedings in the Local Court).

As the defendant, you have a right to have the matter heard in an ‘appropriate’ court. To be appropriate, the court must be:

in a region where you (the defendant) live or work
in a region where you (the defendant) lived or worked when the cause of action arose, or
in a region where the cause of action happened.

If the court dealing with the matter does not satisfy one of these criteria, you may have a good case to change the venue.

To object to the venue, you must fill out a notice of motion (UCPR Form 20) and an affidavit (UCPR Form 40). Your affidavit should include information about:

the venue you want
why you want the venue changed
why the venue you nominated is appropriate
any additional information that supports your application.

You should file these forms with your defence (Form 7B) and within 28 days of service of the statement of claim. Once submitted, the registry will serve a copy on the plaintiff, and the plaintiff then has 14 days to file an affidavit (if they disagree with relocation). After this, the court will decide whether to allow the relocation of proceedings. Where the court decides to change the venue, the court will transfer your file to the new venue, and you will receive updated listing details.

See sample change of venue application in Chapter 18.

Consumer credit matters

If a credit provider commences an action against you in court, and you dispute the matter, you could complain to the Australian Financial Complaints Authority (AFCA). If you apply to AFCA before judgment, the court matter will be stayed (put on hold) pending AFCA’s determination.

See Chapter 6 for further information about consumer credit matters.

Default judgment

Failure to file a defence within 28 days of being served with a statement of claim entitles a creditor to apply for default judgment. All they need to do is file Form 38 (notice of motion — default judgment for liquidated claim) and Form 41 (affidavit of service). There will be no hearing, and the judgment debt will become legally enforceable against you. The plaintiff (now the judgment creditor) has a further 12 years to chase you for the amount owed, and the judgment debt will be recorded in your credit history.

10.8 Interstate claims

If you’re served with a claim from another state, you can make an application under section 20 of the Service and Execution of Process Act 1992 (Cth) to have the proceedings stayed (on the basis that a NSW court is more appropriate to determine the matters in dispute). When deciding the most appropriate venue, the court will consider the following factors:

Where do the parties and witnesses live?
Where did the cause of action arise?
What are the relative financial circumstances of the parties?
Was there any agreement between the parties about the court or place where the proceedings would occur?
Which state’s law is most relevant to the proceedings?
Has a related or similar proceeding been commenced against the defendant?

In deciding your application, the issuing court may ask for a response from the plaintiff and may hold a telephone or video hearing to help decide the matter.

It can be difficult, time-consuming and expensive to defend an interstate matter. Often it is unclear where the cause of action arose — for example, if you live in Sydney, buy a fridge via email from Melbourne and then fail to make repayments. You may argue the cause of action arose in the place where you agreed (Sydney), but this can get complicated, and you should get legal advice.

See a community legal centre or Legal Aid for assistance in applying to stay interstate proceedings. You can also talk to the originating court itself for help with the correct forms and procedures.

10.9 Enforcement action without a statement of claim

Sometimes, you won’t know about court action until a sheriff’s officer is knocking at your door, threatening to take your property to enforce a debt. This may happen where:

the court permitted substituted service, for example by sending it to your mother to give to you (but she forgot)
a person at your home was given the statement of claim and didn’t give it to you
the statement of claim was sent to your address by the court registry but was not forwarded on to you or returned unopened to the registry of the court (Uniform Civil Procedure Rules 2005 (NSW), Regulation 10.20)
you have unpaid fines, and Revenue NSW has issued a property seizure order (if this is the case, see Chapter 4, Fines).

If this happens, it usually means that ‘default judgment’ has already been entered against you, and the plaintiff has a right to enforce the debt. To stop enforcement proceedings, you can:

Ask to see the sheriff’s copy of the document he or she has in their possession. If you have a defence against the claim, explain to the sheriff that you never received a statement of claim, and you want to defend yourself against it. You can then apply to the court to have the judgment set aside (see Setting aside a default judgment, Chapter 15). If you agree that you owe a debt, and don’t want to lose your property, tell the sheriff you want to fill out a notice of motion to pay by instalments (UCPR Form 46). Filling out this application should stop current enforcement action, pending determination of your instalment request.
Get legal advice as soon as possible.
See Chapter 15, Stopping enforcement.

Legislation and Practice Note

Ninth Chapter

The Local Court of NSW

Eleventh Chapter

Small Claims Division