Chapter 15: Stopping enforcement

15.1 Ways of stopping enforcement 

This chapter deals with ways of stopping enforcement action after a judgment debt is entered against you. If you haven’t already done so, we recommend that you read Chapter 13 (Judgment) and Chapter 14 (Enforcement) before proceeding. 

As outlined in 14.1 in Chapter 14, your main choices following an adverse judgment are: 

  • pay the judgment debt (see 13.2 in Chapter 13
  • appeal from the judgment (see 13.9 in Chapter 13
  • seek to pay by instalment (see 15.5 below) 
  • seek a stay of enforcement (see 15.3 below) 
  • negotiate another arrangement with the judgment creditor (see 15.4 below) 
  • do nothing — NOT recommended 
  • enter voluntary bankruptcy or a formal debt agreement (see Chapter 16). 

In cases where you were unaware of the initial statement of claim and did not file a defence, you may be able to get the default judgment set aside and argue your case at a hearing. 

You can apply for an instalment order if you agree with the judgment but cannot afford to pay it in one go. You can also try to reach an agreement with the judgment creditor to pay the judgment by instalments. 

If you need more time to pay, you can also seek a ‘stay of enforcement’, that is, a temporary hold on enforcement action. 

If you receive a bankruptcy notice or a creditor’s petition, you should get legal advice as soon as possible. Also see Chapter 16, Bankruptcy & debt agreements, for more details about your options. 

There are forms that you will need to file and serve if you want to make any of the applications discussed below. You can download these forms from the UCPR website. 

15.2 Setting aside a default judgment 

In some cases, debtors only become aware of a judgment debt after the creditor starts enforcement action (such as issuing a writ for the levy of property and obtaining garnishee orders). If you have a good defence but were unaware of the court proceeding or had a good reason for not responding to the statement of claim, you may be able to seek ‘set-aside’ of the original decision. Set-aside means the case is re-opened to let you file your defence and argue your case at a hearing. 

How to set aside default judgment 

Find out about the claim and the judgment 

First, you need a copy of the statement of claim and details of the judgment against you (date, amount claimed, the basis of claim etc.) The sheriff may be able to give you some information, or you can contact the court registry and ask for this information. 

Act quickly 

Act now. The longer you delay, the harder it is to get the court to set aside the judgment. Get legal advice if you can. 

What you must show the court 

If you want the court to set aside the judgment, and allow you to argue your case, you must provide evidence that you: 

  • have a valid reason for not responding to the statement of claim before judgment, and 
  • have a reasonable basis for defending the claim. 

What you need to do 

To apply to have a judgment set aside, you will need to prepare: 

  • a notice of motion (UCPR Form 20) — this notice should set out what you want the court to do, and 
  • an affidavit (UCPR Form 40) setting out your evidence. 

When you have completed these forms, make copies for each party (including yourself) and file them with the Local Court that issued the initial statement of claim. There is no cost for filing these documents. Once filed, you should serve copies on the other party. The court will also send the other party a notice of listing with details about the hearing and the application made (see Chapter 9 for further information about filing and service of court documents). 

The notice of motion 

We suggest you use the following orders on your notice of motion if they apply to your situation: 

  • default judgment be set aside 
  • the defendant be allowed 14 days to file a defence in the form of the document attached to this notice and marked ‘A’* 
  • a stay be imposed on the enforcement of the judgment** 
  • the application for a stay of enforcement of the judgment be dealt with urgently in chambers in the absence of the parties 
  • the costs of the motion be costs in the cause. *** 

* It is a good idea to prepare a defence (Form 7B if you are self-represented). The defence will set out your response to each of the claims made against you in the statement of claim. Attach the defence to the notice of motion to show the court that you are ready to defend the matter if the judgment is set aside. 

** If the court grants a stay, it means that the judgment creditor cannot enforce the judgment while your application to have the default judgment set aside is pending. 

*** Order 5 essentially asks for costs to be borne by the party who ultimately loses the case. 

The affidavit 

An affidavit is a sworn statement of evidence (UCPR Form 40). You must swear or affirm the truth of the affidavit before a JP (justice of the peace) or a solicitor. It should include: 

  • Your reasons for not filing a defence before the judgment was made (for example, you moved to a new house and didn’t get the initial statement of claim, you were overseas, were sick in hospital or you have discovered new evidence to support your case which was not available before); and 
  • Your defence to the claim. 

The purpose of an affidavit is to set out the evidence that supports your arguments. So, for example, if the judgment creditor sued you for goods supplied, your evidence may be that the goods were not supplied or, if they were, perhaps they were not of the right quality and caused you loss. You may have documents (such as photos) that support your defence (if so, attach these to the affidavit). 

There are rules about format and content of affidavits; so, it is essential to seek legal advice about this (see also Rules of evidence, 12.6 in Chapter 12, for some basic guidance on the rules of evidence). 

You should attend court on the allocated hearing date and be prepared to answer any questions the registrar might have about your application. If the registrar is satisfied that (a) you have a good reason for not filing a defence and (b) good arguments in defence of the substantive matter, they will set aside the default judgment. The registrar will also order a stay of the previous judgment until a magistrate considers your defence at hearing (see Chapters 9–12 for further information about Local Court hearings). 

If the registrar does not think you have sufficient grounds to set aside the judgment, your application will be dismissed. In these cases, the judgment creditor can proceed to enforce the judgment against you. In these cases, you can make an application to pay by instalments to stop further enforcement proceedings. 

Cost considerations 

When making these applications, it’s important to remember that the court can make a costs order against you. Cost orders may include: 

  • an order to pay the plaintiff’s costs for attending the hearing and any enforcement action they have already taken — in cases where your failure to file a defence was your fault 
  • an order that the plaintiff pays your costs for the application — in cases where the plaintiff didn’t correctly serve the statement of claim 
  • ‘costs in the cause’ — this means that the question of costs will be determined when the matter is all over (that is, where set-aside is successful, and the matter is re-opened for determination) 
  • ‘each party bear their own costs’. 

You should seek legal advice before applying to set aside default judgment. In cases with poor prospects of success, it may be more sensible to cut your losses and pay the debt, hence minimising overall costs and interest. 

15.3 Stay of enforcement 

A stay of enforcement is a court order which stops enforcement action for a defined period. A stay may be suitable in cases where you need a little more time to get the money (for example, you might be waiting for a tax refund, or for a client to pay you for a job). To seek a stay of enforcement, you will need to complete, file and serve the following forms: 

  • notice of motion (UCPR Form 20) and 
  • affidavit (UCPR Form 40) 

Once filed, you should serve a copy on all other party/parties, and the court will advise parties of the date and time for hearing of the application. 

Generally, you will seek the following orders in your notice of motion: 

  • That the court grant a stay of proceedings in this matter. 
  • That the stay be granted for a period of x days to allow the defendant to …* 
  • That the notice of motion for stay of proceedings be dealt with on an urgent ex-parte basis, in chambers.** 
  • That each party bear their own costs. 
  • Such other orders as the court thinks fit. 

* Give the amount of time you need and the reason why you need it. For example, ‘I require 28 days for my tax refund of $5600 to be processed and paid by the Australian Taxation Office’. 

** You may be lucky enough to avoid a hearing if you’re asking for a short reprieve and have good reasons. 

Your accompanying affidavit will set out the evidence you rely on in support of your application (with any documentary evidence attached). 

In cases where the judgment creditor has already started enforcement action, the registrar may make a temporary order to halt enforcement, pending determination of the stay application. 

The judgment creditor may object to your application, especially if they think you are stalling or trying to hide or dispose of assets. You should be prepared to defend your matter with oral submissions and ensure you supply good evidence of your reasons. 

See the Legal Aid NSW website for further information about staying enforcement applications. 

15.4 Reaching an agreement with the judgment creditor 

Before or after judgment, you can try to reach an agreement with the judgment creditor to pay the debt by instalments. When you are negotiating with the other party, say that your discussions are about settlement and are ‘without prejudice’. Put ‘without prejudice’ on any letter, email or text message you send to the plaintiff about settlement. Using ‘without prejudice’ means that the other party cannot use what you discuss in settlement negotiations as evidence in a hearing (if the matter does not settle). 

If you make a deal that enables you to pay the debt by instalments, you will need to agree on: 

  • the amount due (you may have paid some off already) 
  • the amount of each instalment 
  • how frequently you will pay the instalments and when you will pay the first instalment. 

It is also a good idea to agree on how you will pay the instalments (for example, by direct debit to the nominated bank account of the judgment creditor). 

Once you reach an agreement, you should complete a consent order form (UCPR Form 44) setting out the agreement you have reached. An example of specific consent orders recording this type of agreement can be found on the Legal Aid NSW website. You and the other party should sign the consent order form and file it with the court. 

15.5 Applying to pay by instalment 

Overview of the instalment application process 

If you can’t agree to an instalment plan, you can make an application to the court requesting an instalment order. You can make this application before or after judgment. 

To make this application, you must complete a notice of motion to pay by instalments – individual (UCPR Form 46) as soon as possible. 

This application is considered by the court’s registrar, who will decide whether you can pay by instalments. 

If your application is successful, make sure you pay all the instalments when they are due. If you don’t, the judgment creditor can take steps to enforce the judgment (see Chapter 14). 

If your application is unsuccessful, you have 14 days to file a notice of motion — objection to instalment order or refusing instalment application (UCPR Form 50). See the Legal Aid NSW website for a sample of this form. 

Similarly, if your application is successful, the judgment creditor has 14 days to file a notice of motion objecting to the instalment order or order refusing instalment application (UCPR Form 50). If you or the judgment creditor object, the court lists the matter for hearing at which both parties can argue about the instalment application. 

Application to pay by instalment 

These are the steps you will need to take to complete the instalment application: 

  • complete a notice of motion to pay by instalment (UCPR Form 46) 
  • work out how much you can afford to pay the judgment creditor by regular instalments (weekly, fortnightly or monthly) 
  • put together a statement of your financial affairs, providing an accurate and complete summary of your financial position 
  • swear or affirm the truth of the statement of financial affairs before a justice of the peace or a solicitor 
  • file the completed notice of motion in the Local Court. 

See Chapter 18 for a sample notice of motion to pay by instalment. 

What can you afford to pay? 

You need to work out how much you can afford to pay by regular instalments. It needs to be an amount that you can keep paying on time, without fail, until the judgment debt and any interest are paid. 

Think about a realistic period within which to pay off the debt. The shorter the period, the more likely the court will be to accept your proposal. Generally, three years is about the maximum that the court will allow, depending on the amount of the debt and your circumstances. 

A financial counsellor may be able to help you prepare a budget and work out what you can afford. 

The court’s decision 

The registrar of the Local Court will decide your application, which might take a few days. 

If the registrar accepts the application, they will make an instalment order and notify you and the judgment creditor of this order. 

Rejecting your offer 

Typical reasons why the registrar might reject your application are: 

  • the amount you have offered is too low 
  • you appear to be able to pay more 
  • the affidavit has unreasonable inconsistencies and discrepancies, which lead the registrar to question its validity. 

The effect of the registrar’s refusal will have different consequences if this is your first or subsequent application. 

First instalment application 

If this is your first instalment application, the judgment is stayed until the court decides whether to allow you to pay by instalments. That means that the judgment creditor cannot take any steps to enforce the judgment from when you apply until the court makes its decision (which includes deciding on any objections made to the registrar’s decision). 

Second or subsequent application 

There is no stay for any application you make after the first one unless the registrar decides in your favour. 

Instalment application hearings 

After the registrar makes their (in chambers) decision about an instalment application, both parties have 14 days to ‘object’ to the decision (by filing UCPR Form 50). 

If you are unhappy with a refusal by the registrar, you need to complete and file a notice of motion — objection to an order refusing to grant an instalment order (UCPR Form 50). The Legal Aid NSW website has instructions on how to complete this form. 

If either party objects, the court lists the matter for a hearing and will advise parties of listing details. 

At the hearing, you can argue for the instalment order you want. Make sure you have all the documents and any other evidence you need to back up your statement of financial affairs and your argument about what you can afford to pay by instalments at the hearing. 

The court will then decide. If the court accepts your application, it will stay enforcement. If the court does not allow your application, the judgment creditor will be able to enforce the judgment. 

You can still try to negotiate with the judgment creditor at or before the hearing and try to reach an agreement to pay by instalments. If you do, you must inform the court of the agreement and file consent orders as set out above. 

15.6 Can I stop a garnishee order? 

If the judgment creditor is enforcing the judgment debt by garnishee order, you can immediately stay its operation by making an instalment application (provided it is your first application). Follow the procedure set out in Applying to pay by instalment, in 15.5 above. 

If you have already made an unsuccessful application to pay by instalments, you can make another application. If this subsequent application is successful, it will stop the garnishee order from operating from the date the instalment order is made. 

In some cases, the garnishee order may still apply but only for the amount approved by the court. 

15.7 Bankruptcy 

Going into voluntary bankruptcy is an option of last resort to stop enforcement of your debts. Also, if you have significant assets, a creditor to whom you owe more than $10,000 can apply for a bankruptcy notice to attempt to force you into bankruptcy (see Chapter 16, Bankruptcy & debt agreements, for more information).