Credit Management: A Brief Description of Litigation Or Legal Process & Workflow
Below demonstrates the various stages of the litigation process that the Credit Manager or Controller will usually have to go through:
1. Letter of Demand
On the instructions of the Company, the lawyer writes a Letter of Demand (LOD) to the debtor. The letter informs the debtor that they should settle the debt within a stipulated time (usually 7 days) failing which legal action will be instituted against them. (The lawyer can be an in-house lawyer)
2. Filing of Writs or Summons
If the debtor does not comply with the Letter of Demand, the Company will instruct the lawyer to prepare a summons and a statement of claims for filing with the Court Registry. The ‘sealed’ summons would be extracted from the Court within three (3) weeks from the date of filing. Thereafter this sealed copy of the summons is served on the debtor.
3. Service of Summons
- The sealed summons is served on the debtor not less than 14 days before the day fixed for the return or Mentioned Date of the case. This date is fixed by the Court and it is written on the summons.
- In the event that the debtor avoids acceptance of the summons, it is possible to apply to the Court for substituted service. Before this application to be made, it has to prove that 3 attempts must be made to serve on the debtor.
- When the application is approved by the Court, steps taken to notify the debtor can be through publication of the summons in the local newspaper.
4. Judgement
- If the debtor does not appear in Court on the date fixed by the Court, judgement in default of appearance shall be entered against them. However, if they appear in Court and disputes the claims, the Court may order them to file and serve a defence (usually 2 weeks). The Court then fixes a day for hearing where the Court will make its judgement concurrently. However, if debtor defence is weak or raises no disputes application for Summary Judgement (Order 014/026A) can be obtained.
- After the judgement is made and drawn up it will be served on the debtor where the sum awarded has to be paid within 14 days.
5. Execution Proceedings
In the event that the debtor does not adheres to the summons to pay the sum awarded, execution proceedings commences. There are various modes of execution processes in which payment for the sum awarded can be obtained, namely:
a) Writ of Seizure and Sale
i) Application is made to the Court for such a writ and when issued, the Court Bailiff has the authority to take into possession of goods of the debtor and conduct a sale by public auction to to realise the sum awarded to the judgement creditor.
b) Garnishee Proceedings
i) This proceedings is only appropriate if the judgement creditor knows of any debt or money due and payable to the debtor by a third party. This third party is called ‘garnishee’ and any remittance of such money shall be paid to the judgement creditor to offset the sum awarded by the Court.
c) Judgement Debtor Summons (J.DS)
i) This proceedings is only appropriate if the judgement creditor has little knowledge of the assets or financial position of the judgement debtor so as to decide on the appropriate form of execution to satisfy the judgement debt, the judgement debtor will be cross-examined by the judgement creditor’s solicitors to his assets or funds and his means of satisfying the judgement debt.
d) Bankruptcy/Winding-up Proceedings
i) This action entails the application to the Court to appoint an officer called the Official Assignee (O.A.) to manage the overall debtor’s business and supervise the distribution of assets among the Creditors. The O.A. will then make its recommendation based on whatever is available from the debtor and distribute it fairly without preference (parri passu) to the unsecured creditor.
Workflow:
During the progress of the litigation process, the Credit Manager will need to update senior management of the progress. A sample of the litigation progress report is attached below.
With this litigation progress report, management may able to measure the performance of their solicitors and the speed the case is heading.
Progress Status Report:
|
Progress in Legal Proceeding |
Notice of Demand Sent |
Writ or Summons Filed |
Application of Substitue Service |
Summon Served |
Defence Filed |
Application for Order 14 |
Hearing of Order 14 |
Full Hearing Fixed |
Judgement Extracted |
|
Name of Deliquent Debtors |
Continued after column Judgment Extracted: (due to insufficient space)
|
Writ of Seizure or Sale |
Date of Execution |
Bankruptcy notice filed |
|
Name of Deliquent Debtors |
(Order 14 is a process for the solicitor to obtain a summary judgement against the debtor by justifying that the debtor is having a “sham” defence. This normally involves affidavits and supports like delivery orders of our goods or services , purchase orders from debtors, contracts or agreements signed )
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March 23, 2006
Tags: Credit management, Legal process, work flow
Posted in: CREDIT MANAGEMENT/CONTROL
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