The Law Handbook 2024

354 Section 5: Managing your money Arbitration If the amount the creditor has claimed from you in the Magistrates’ Court is less than $10000 and the dispute has not settled at the pre-hearing conference or mediation, the matter will be set down for arbitration, unless you are being sued for non- payment of local council or water rates. In matters referred to arbitration, further particulars of the creditor’s claim are not allowed. Arbitration also dispenses with a number of procedural steps, including the right to serve and file the following documents: a reply, a notice to admit any fact or the authenticity of any document, notice for discovery, interrogatories or an expert witness statement. Previously, the creditor could not seek an order for summary judgment in a matter referred to arbitration, however, it now appears that the creditor can apply for summary judgment. Where the amount of the claim is $5000 or more, each party is required to serve on the other party a list of documents that identifies each document in that party’s possession that supports the claim or defence or is injurious to the claim or defence. This must be done not less than 14 days before the date fixed for the pre-hearing conference or the date fixed for the arbitration if there was no pre-hearing conference (r 2.05 Magistrates’ Court (Miscellaneous Civil Proceedings) Rules 2020 (Vic)). An arbitration is generally an informal court hearing conducted by a magistrate. However, the way the arbitration is run will depend on the individual magistrate hearing the matter; some magistrates run arbitrations in much the same way that they run hearings. The rules of evidence which usually apply to a hearing do not apply to arbitrations. A decision made by the court in arbitration has the same effect as if it were made at an ordinary hearing. If you are going to arbitration, you may still need to seek legal advice. The major advantage of arbitration is that it is sometimes informally conducted and the costs which may be awarded are limited by legislation. However, in some circumstances, such as where the matter involves complex legal issues, a party may apply to have the dispute heard in a conventional hearing rather than through arbitration. Hearing If the dispute is not able to be settled at a pre-hearing conference or mediation, it will be set down for hearing. A hearing is conducted before a magistrate and the plaintiff must prove all the elements of its case. You must then rebut the plaintiff’s case (provide it to be untrue). The rules of evidence apply. If your matter goes to hearing, you will probably need legal assistance to help you prepare and run the hearing. Legal costs can be very high. If you lose, it is likely that you will be ordered to pay the creditor’s costs as well. See ‘Interest and costs on judgment’, below, for further information. No defence If you do not lodge a defence and there is nothing apparently incorrect about the complaint, the court will make an order against you at the request of the creditor. This decision is a court order and can be enforced in the same way as any court order. It is often called ‘judgment in default of defence’ because you have not filed a defence. The order usually includes an award of costs and may include interest (see ‘Interest and costs on judgment’). Interest and costs on judgment When a court enters a judgment against you in favour of a creditor, the court makes an order stating the amount owing for the debt, plus any interest the creditor may be entitled to claim (depending on their contract with you), plus the creditor’s legal costs. The creditor’s legal costs are calculated in accordance with the scale of costs in appendix A to the Magistrates’ Court General Rules. The amount awarded in a court order following an action for recovery of a debt is referred to as a ‘judgment debt’. Once an order is made against you, interest will begin to accrue on the debt from the date of judgment, calculated at a rate of interest set down by the Penalty Interest Rates Act 1983 (Vic). The applicable interest rate is currently 10 per cent (which it has been since 1 February 2017). Prior to this, the rate had been 9.50 per cent per annum since 1 June 2015. The rate varies from time to time (and may be found on the Magistrates’ Court website). As an example, if your judgment debt is $1000, the interest that would accrue on this amount in one year, at 10 per cent, is $100. Any offer to pay by instalments made would need to be sufficient to cover this amount.