An unpaid invoice from another company rarely stays a simple accounting problem. The longer it sits unresolved, the tighter the pressure on your cash flow, the harder it becomes to recover the full amount, and the narrower your legal options become. At some point, the commercial conversation ends and a formal legal process begins.
This article walks through the debt recovery process in NSW — from deciding whether to sue through to enforcing whatever judgment you obtain. It covers the court options, the procedural steps the system will impose on you in sequence, and the post-judgment tools available when a company still does not pay. What this process will not automatically produce is payment: a judgment is a legal entitlement, not a bank transfer. Enforcement is a separate phase, and it often requires more effort than the litigation itself.
Prerequisites
Before you file anything, make sure you have the following in order:
- A documented debt. Contracts, purchase orders, invoices, delivery records, and written acknowledgment of the debt from the other party. Verbal agreements are harder to prove; written records are essential.
- A clear amount. The sum claimed must be ascertainable. Liquidated debts (a fixed amount due under a contract) are far simpler to pursue than unliquidated claims requiring the court to assess damages.
- Evidence of default. Bank statements, email chains, or other records confirming the other company has not paid by the due date.
- A letter of demand already sent. Courts expect creditors to have given the debtor a formal written demand before litigation. This also sometimes resolves the debt without proceedings. A letter of demand should specify the amount, the basis of the debt, and a deadline for payment.
- Time still available under the limitation period. Under s 14 of the Limitation Act 1969 (NSW), the limitation period for a contract debt is six years from the date the cause of action first accrues — typically when the payment fell due. Miss this window and your claim is statute-barred.
- A preliminary assessment of the debtor's capacity to pay. A judgment against a shell company with no assets or a company already heading into insolvency may be unenforceable in practice. Factor in the cost of proceedings against the realistic prospect of recovery.
The limitation period is the single most common reason good claims fail. Note the date the debt fell due and calculate your six-year deadline before you do anything else.
Choose the right court
NSW has three tiers of court that handle debt recovery claims. The amount owed determines which court you can use.
Small Claims Division of the Local Court
Claims up to $20,000 fall within the Small Claims Division of the Local Court. The procedure is simplified and costs orders are limited, which makes it accessible without a lawyer — though legal advice before filing is still worthwhile. The trade-off is that the streamlined process also limits the complexity of claims that can be properly argued.
General Division of the Local Court
Claims between $20,001 and $100,000 sit in the General Division of the Local Court. This is the most common venue for trade debts and unpaid invoices in the small-to-medium business range. Costs orders follow the usual rule — the successful party is generally awarded costs — so the exposure if you lose is real.
District Court
Claims from $100,001 up to $1,250,000 are heard in the District Court under the District Court Act 1973 (NSW) as amended. The procedure is more formal, timelines are longer, and the costs of running the matter are correspondingly higher.
Supreme Court
Claims exceeding $1,250,000 go to the Supreme Court. At this level, commercial litigation is essentially always run by lawyers and the evidentiary and procedural requirements are substantial.
File and serve a statement of claim
The process formally begins when you, as plaintiff, file a statement of claim in the appropriate court and serve it on the defendant company.
The statement of claim must set out:
- the identity of the parties
- the facts that give rise to the debt (the contract, the goods or services provided, the amount due, the date it fell due)
- the amount claimed, including any interest accrued
- the relief sought (judgment for the debt and costs)
Filing fees are payable at the time of lodgement. Once filed, you must serve the document on the defendant company in the manner required by the Uniform Civil Procedure Rules 2005 (NSW). For a company, service is typically effected by leaving the documents at the company's registered office or by personal service on a director.
What you receive: A filed statement of claim stamped by the court registry, and a court date if applicable.
The defendant's response
Once served, the defendant company has a set period (under the UCPR) to file a defence. The defence sets out whether the company admits or denies each allegation and, if applicable, raises any cross-claim against you.
- If the defendant files no defence, you can apply for default judgment — often the fastest outcome in straightforward debt matters.
- If the defendant admits the debt but disputes the amount, the matter may resolve quickly or proceed to a hearing on quantum.
- If the defendant files a defence and cross-claim, you will need to file a defence to the cross-claim in turn. The matter then proceeds to directions and, eventually, a hearing.
This stage is where disputes that looked simple often become complicated. A defendant in financial difficulty may file a defence largely to buy time. Legal advice at this point is important.
Discovery, subpoenas, and evidence
Before a hearing, the parties exchange documentary evidence relevant to the claim. This process — called discovery — requires both sides to produce documents they have or had in their possession that are relevant to the issues in dispute.
Either party may also issue subpoenas to third parties (banks, accountants, suppliers) requiring them to produce documents or attend to give evidence.
Each party then files their evidence, usually in the form of affidavits sworn by witnesses who can give direct evidence about the debt — for example, a director or accounts manager who can speak to the contract, the invoicing, and the non-payment.
Common stumble: Parties often underestimate the document preparation required at this stage. If your records are incomplete, inconsistent, or poorly organised, discovery will expose the gaps. Maintain contemporaneous records from the moment a commercial relationship begins.
Attend the hearing
At the hearing, both sides present their evidence and submissions before a magistrate or judge. The court then delivers judgment, either at the end of the hearing or in a reserved decision delivered later.
If judgment is made in your favour, you hold a judgment debt — a court order that the defendant company owes you a specified amount, plus any costs and interest ordered. That is not the same as receiving the money.
Common stumble: The gap between judgment and payment. Many creditors assume obtaining judgment is the end of the process. In reality, a judgment in your favour simply gives you enforcement tools. Whether those tools produce payment depends on the debtor's financial position.
Enforce the judgment
Enforcement is the phase most creditors underestimate. The options available under the Civil Procedure Act 2005 (NSW) and the UCPR include the following.
Voluntary repayment
The existence of a judgment often produces payment without further steps. A judgment against a company is a matter of record, creates pressure on the company's credit standing, and removes any realistic basis for continued non-payment. Where the debtor has the means to pay and simply needed a final prompt, this is the least costly outcome.
Writ for levy of property
If the judgment debtor has identifiable property — equipment, vehicles, stock, or real estate — you can apply to the court for a writ for levy of property. The writ authorises the sheriff to seize and sell the property at public auction. The proceeds satisfy the judgment debt, after the sheriff's costs and auction expenses are deducted. You will need to identify the property and confirm it is unencumbered (or that your claim ranks above any security interest registered against it).
Garnishee order
A garnishee order is a court directive that intercepts money owed to the judgment debtor by a third party — most commonly a bank holding the debtor's funds, or a customer who owes the debtor money. Under the Civil Procedure Act 2005 (NSW), a garnishee order attaches to debts that are due or accruing from the garnishee to the judgment debtor at the time of service. Payment must generally be made within 14 days of service.
To use this option effectively, you need to know which bank the debtor uses, or which customers owe them money. If that information is unavailable, the order may be ineffective in practice.
Appointing a receiver/manager
If you are a secured creditor — meaning you hold a registered security interest over the debtor company's assets — you may be entitled to appoint a receiver/manager. The receiver/manager's primary objective under s 420A of the Corporations Act 2001 (Cth) is to take control of and realise the company's assets to repay the secured debt. The section imposes a duty of care on the receiver to obtain the best price reasonably obtainable for property at the time of sale — this duty runs both to the secured creditor and to unsecured creditors.
Appointing a receiver is a significant step with costs and reputational implications for the debtor company. It is most appropriate where the debt is substantial, you hold a registered security, and the debtor's assets are sufficient to make recovery viable.
Appointing an administrator
If you hold a charge over the whole, or substantially the whole, of a company's property and that charge has become enforceable, s 436C of the Corporations Act 2001 (Cth) permits the secured party to appoint a voluntary administrator. The administrator takes control of the company's operations and may carry on the business, sell assets, or sell the business as a going concern. This option is generally available only to secured creditors and is not appropriate for unsecured trade debtors.
Common stumbles in enforcement:
- Not knowing the debtor's asset position before choosing an enforcement method. A garnishee order against a depleted account or a writ against encumbered assets wastes time and costs. Do a preliminary assessment of the debtor's financial position — ASIC company searches, PPSR searches, and AFSA bankruptcy register searches — before selecting your enforcement tool.
- Delay between judgment and enforcement steps. Debtors in financial difficulty can dissipate assets quickly. Move to enforcement promptly once judgment is obtained.
- Overlooking insolvency. If the debtor company is already insolvent or about to enter administration, debt recovery proceedings may need to be stayed. The calculus changes entirely — your options at that point are as a creditor in the insolvency process, not as a judgment creditor.
How Artificer Legal can assist
Debt recovery from a company moves through two distinct legal phases — the litigation to obtain judgment and the enforcement of that judgment — and each has its own procedural requirements, tactical decisions, and potential hazards.
An Artificer Legal practitioner can assist by:
- reviewing the underlying contract and debt documentation to assess the strength of the claim before proceedings commence
- drafting the letter of demand and advising on whether mediation or negotiation is a realistic first step
- preparing and filing the statement of claim in the correct court for the amount at issue
- managing the exchange of pleadings, discovery, and evidence, and attending directions hearings
- advising on the defendant's defence and any cross-claim, and preparing the response
- representing you at the hearing
- identifying the most effective enforcement mechanism given the debtor's known financial position
- preparing garnishee order applications, writs for levy of property, and — where appropriate — advising on secured creditor options under the Corporations Act 2001 (Cth)
- conducting ASIC, PPSR, and AFSA searches to inform enforcement strategy
The one thing that drives everything else
The single factor most likely to determine whether your debt recovery attempt succeeds is whether you act before the limitation period expires. The six-year window under s 14 of the Limitation Act 1969 (NSW) runs from the date the debt fell due, not from the date you decided to pursue it. Claims that miss the window cannot be revived — the right of action is extinguished entirely. Identify that deadline before you take any other step.
Beyond timing, the process itself is sequential: you cannot enforce a judgment you do not have, and you cannot obtain a judgment without filing and serving the right documents in the right court. The courts in NSW are tiered by claim amount — Small Claims (up to $20,000), General Division of the Local Court (up to $100,000), District Court (up to $1,250,000), and Supreme Court above that — and choosing the wrong tier can result in your matter being transferred, delayed, or your costs capped. Evidence preparation, particularly documentary records of the contract and non-payment, is the foundation on which everything else rests. Courts do not recover debts on the basis of what parties say they are owed; they do so on the basis of what the evidence shows.