Debt Collection in New Zealand

The debt collection process in New Zealand begins with an assessment of the debtor’s solvency, their industry, business history, availability of documentary evidence of the debt, current court cases and enforcement proceedings, and the ability to dispute the debt. This assessment determines the strategy that will be used on the client’s behalf in the collection process.

If the debtor has no current court cases or outstanding judgments for debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (for example, return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messenger. This process involves intensive communication with the debtor in order to apply constant pressure. The main objective is to establish contact with key decision makers to achieve early recovery of the debt.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan has been agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, then it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The limitation period is 6 years. The limitation period is interrupted if the debtor acknowledges the debt, for example, a written admission or a partial payment of the debt or interest. After interruption, the limitation period begins to count again.

New Zealand law provides for judicial debt collection in abbreviated, simplified and full judicial proceedings.

The courts of first instance are the District and High Courts. The District Courts have the authority to hear cases on debt collection of up to $350,000. Cases where the amount claimed is greater are subject to consideration in the High Courts.

A judicial recovery of a debt is carried out by filing a statement of claim in the registry of the court, after which the court checks the compliance of the claim and the documents attached to it with the requirements of the procedural law and decides on the initiation of legal proceedings. If the plaintiff is not a resident of New Zealand, the court may order the plaintiff to provide security for legal costs if it considers it appropriate to do so in the circumstances of the case. The amount is determined at the discretion of the judge.

If there are reasonable grounds to suspect that the defendant intends to leave New Zealand with the intention of evading payment of the amount claimed, the court may, on the application of the creditor, detain the debtor in custody. In such a case, the court may require the creditor to provide security in the amount of US$10,000 to compensate the defendant if the plaintiff’s claim is rejected.

Once a copy of the claim and notice of commencement of proceedings has been received, the defendant has 25 working days to file a reply to the claim (or 30 working days if the defendant is outside New Zealand). In the reply, the defendant must either admit or deny the facts set out in the claim, but the defendant is not obliged to answer allegations that do not relate to the defendant. A denial of a fact set out in the claim must not be evasive. The reply must be factual. An allegation that is not denied by the defendant is taken to be admitted.

Once the reply to the claim has been received or the time for filing has expired, the court will schedule the first case management hearing. The purpose of the case management conference is to give the judge an opportunity to assist the parties to: identify, determine and clarify the issues that require determination by trial; and determine what steps need to be taken to prepare the case for hearing or trial; and ensure that the costs of the proceedings are proportionate to the subject matter of the litigation.

Depending on the circumstances of the case, after the first hearing, the court may schedule a judicial settlement hearing to give the parties to the proceedings an opportunity to negotiate a settlement of the claim or any matter. If the court finds that the parties are unable to reach a reconciliation, it shall schedule a second case management hearing. Once the objectives of the case management hearing have been achieved, the court shall approve an effective way of conducting the hearing or trial that is proportionate to the subject matter of the case.

The modes of trial available during the trial are: abbreviated trial; summary trial; full trial.

An abbreviated trial is for claims where: the case can be brought to trial quickly; the issues are relatively uncomplicated or the amount at stake is modest; the trial is likely to take no more than one day. A summary trial is for claims where the court considers that one or more of the following applies: the trial is likely to take no more than 3 days; there is some complexity surrounding the issues; the amount of money at stake is more than modest; evidence will be given by one or more expert witnesses. In all other cases, the court holds a full trial.

At trial, the court will assess the parties’ evidence, any memoranda filed, and then make a decision within a time limit fixed by the court. Any judgment debt will be subject to interest under the provisions of the Interest on Money Claims Act.

The judgment of the District Court may be appealed to the Superior Court. No appeal may be made if, before the judgment is delivered, all parties to the proceedings have agreed in writing that the decision of the Circuit Court is not subject to appeal. An appeal may be made to the Court of Appeal against the judgment of the Superior Court. The appeal period is 20 working days from the date of the judgment appealed against. Where permission to appeal is required, the time limit for obtaining permission is 20 working days from the date of the decision appealed against and the time limit for lodging an appeal is 20 working days from the date permission is granted. The judgment of the Court of Appeal shall enter into force as soon as it is delivered. If the decision of the Court of Appeal raises important questions of law, an interested party may apply for leave to appeal to the Supreme Court of New Zealand within 20 working days of the date of the judgment that the appellant wishes to appeal. Neither an application for leave to appeal nor the granting of leave is grounds for a stay of the contested decision. The decision of the Supreme Court is not subject to further appeal.

Once a judgment has entered into legal force, the creditor must initiate enforcement proceedings. A judgment issued more than 6 years ago is not subject to enforcement unless: the judge gives permission; or within 12 months immediately before the commencement of enforcement proceedings, a payment was made to the court or the creditor under the judgment. As part of the enforcement of a judgment, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the debtor’s movable and immovable property with their subsequent sale; seizing and confiscating securities; seizing and confiscating shares in the company. If the possibility of enforcing the order to seize the debtor’s property is lost due to the fault of the bailiff, the court may oblige the bailiff to compensate the creditor for losses.

An alternative option for debt collection is to use the bankruptcy procedure. A creditor may apply for a debtor to be declared bankrupt if: the debtor owes the creditor $1,000 or more; and the debtor has committed an act of bankruptcy within 3 months before the application is made; and the debt is due and payable either immediately or at a specified future date. A debtor commits an act of bankruptcy if, in New Zealand or elsewhere, he sells all or substantially all of his property; gives preference to one creditor over his other creditors; leaves or attempts to leave New Zealand; notifies any of his creditors that he has suspended or intends to suspend the payment of his debts. At this stage, if the debtor’s assets are insufficient to satisfy the creditors’ claims in full, it is possible to set aside transactions of the debtor that were made with the intent to defraud creditors. Among such transactions, the following should be highlighted: an insolvent transaction; an insolvent encumbrance; an insolvent gift; a transaction at an undervalue; a contribution of the debtor to the property of another person. Cancellation of such transactions is allowed if they were made within 6 months, 2 years or 5 years (the term depends on the circumstances) before the opening of the bankruptcy procedure. As a result of cancellation of such transactions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support on international debt collection in New Zealand, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY NEW ZEALAND

25.09.2024

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