What is a Statement of Claim and What Action Should You Take?

If your business has received a statement of claim, you are probably aware it’s an urgent and serious matter. But what exactly is a statement of claim, and what should you do if you’ve been served with one?

What is a statement of claim?

At a general level, a statement of claim is filed when there’s a dispute between parties and it has been escalated to the court. The statement of claim is a summary of the facts supporting the plaintiff’s or applicant’s case. The plaintiff or applicant is the person or organisation that’s applying to the court to start legal proceedings.

In the case of a financially struggling company with trouble paying its bills, a statement of claim could be a notice from a court to the directors of a company to pay a debt verified to be due. It means the courts have become involved in the debt recovery process, and the plaintiff is asking you to pay up or go to court.

It’s the first step in a court process that could lead to significant problems if you ignore the statement of claim.

The key thing to understand about a statement of claim is it gets things started. Once the applicant or plaintiff files the statement of claim with the court and serves you (the defendant) with it, the dispute has entered the court system so all parties are technically “going to court.” The case will then be listed for hearing.

The statement of claim sets out the details of the dispute, including why the applicant is taking legal action, as well as the facts of the case, like the nature and amount of the debt owed and what the creditor is asking for. A statement of claim can usually be served personally or by post.

What you should know about the statement of claim process

Once you’ve received a statement of claim, you should act quickly to get professional advice to help you defend the claim or respond appropriately.

If you ignore it, the plaintiff (the creditor who initiated the proceeding) could ask the court to have you defaulted and to make a judgement debt order. Similarly, if you don’t respond to a statement of claim within the given notice period (usually 28 days), the court will order you to pay the sum owed to the plaintiff.

The plaintiff can ask the court to enforce the judgement in various ways. For example, they can seek to have a writ of possession issued over land you own, in a court. They could ask for a writ of possession issued over a delivery of goods to you. Other enforcement measures could be payment of money owed, a writ for the levy property, a garnishee order, or a charging order.

While every case is different, generally you, the defendant, could respond to the claim in a number of ways.

• Settle – If you agree with the claim, you could negotiate with the plaintiff to attempt to settle the matter and have them withdraw the statement of claim. You could negotiate to pay the full amount at a later date or pay it in instalments. Settling means you’ll avoid proceeding in court and there will be no judgement against you.
• Pay – You could pay the full amount owed, file a notice of payment to let the court know, and avoid a judgement while stopping the proceedings.
• File a defence – You can file a defence if you don’t agree you owe some or all of the claim. This involves your lawyer filing a document known as a defence, which outlines why you don’t agree with the claim. This must be done within 28 days of you receiving the statement of claim.
• Ask for more information – You could also ask for more information during the process if you need clarification.

Other options could be available depending on the court the proceeding was commenced in. If you do nothing, you could have a default judgement against you, without your case being heard in court. How you respond to a statement of claim can have a significant impact on the future of your business.

Take action today

If you receive a statement of claim, acting quickly and getting expert advice is vital as you need to respond within a strict time frame. While being served with a statement of claim is a serious matter, you do have different options. You could try negotiating with the creditor, pay up, or file a defence. Getting legal advice as early as possible lets you understand your options and take action quickly.

Australian Debt Solvers is one of Australia’s fastest growing insolvency firms, and we’re experts in all areas of corporate restructuring and insolvency for struggling businesses, including commercial legal advice. If you need legal advice for insolvency, commercial disputes, or litigation, contact us now on 1300 789 499.