Our client, a family trust, lent a large sum to a Queensland company under a written loan agreement.
The company’s director signed a personal guarantee. If the company didn’t pay, he would.
The company made one part-payment, then stopped. It went into liquidation, and the director couldn’t be found. ezylegal got judgment against the company, tracked the director down, got the court’s permission to serve him by email and WeChat, and won judgment against him personally for the full debt, plus interest and costs.
At a glance
- Problem: A company stopped repaying a business loan and went into liquidation. The director who guaranteed the loan avoided being served.
- Claim against: The borrowing company, and its director as personal guarantor.
- Legal basis: Breach of a written loan agreement, and the director’s personal guarantee, to recover the debt.
- Result: Default judgment against the company, then against the director personally, for the full debt plus interest and costs, followed by enforcement against his property.
A loan, a guarantee, and a default
The loan agreement set out four repayment instalments, interest on anything overdue, and the right to demand the whole balance if a payment was missed. The director personally guaranteed every dollar.
The company paid part of the first instalment and nothing after that. Written demands went unanswered.
Judgment against the company
ezylegal filed a claim in the Queensland Magistrates Court against both the company and the director.
The company didn’t defend, and the court entered default judgment against it within weeks. Not long after, the company went into liquidation. ezylegal lodged our client’s claim with the liquidator, but the real target was now the director’s guarantee.
Finding a director who didn’t want to be found
The director couldn’t be served in person. ezylegal sent process servers to every address we could find, and searched the electoral roll, company records and property titles. Each attempt failed.
What we did have was an email address and a WeChat account the director had used to talk to our client about the loan. ezylegal filed affidavit evidence of every attempt to find him, along with written submissions, and applied for substituted service. The court ordered that he could be served by email and by WeChat message.
The outcome
Once served, the director had his chance to respond. He didn’t.
ezylegal applied for default judgment against him, and the court ordered him to pay the full debt personally, plus interest and our client’s legal costs. ezylegal then applied for an enforcement warrant to seize his property and pay the judgment.
How default judgment works
When you file a claim in the Queensland Magistrates Court, it has to be served on the other side. From then, they have 28 days to file a notice of intention to defend. That’s a formal document saying they dispute the claim, with their defence attached.
If they don’t, you can ask the court for default judgment. For a debt or a fixed amount like a repair bill, the court registrar can enter it on the papers, without a hearing. You don’t need to go to court or give evidence in person.
The judgment covers the amount claimed, plus interest and a set amount for legal costs.
What default judgment means for the other side
A default judgment is a court order to pay, and it has real consequences for the person who ignored the claim:
- The debt becomes enforceable. If they still don’t pay, the court can issue an enforcement warrant to seize and sell their property, or redirect money from their wages or bank account.
- They can be ordered to explain their finances. The court can summons them to an enforcement hearing, where they must disclose their income, assets and debts under oath.
- Interest keeps adding up. Interest runs on the judgment until it’s paid in full.
- It doesn’t go away quickly. In Queensland, a judgment can be enforced for up to 12 years.
- It can affect their credit. Court judgments are public records and can show up on credit reports, making it harder to borrow.
- Bigger debts can lead to bankruptcy or winding up. If the debt is $10,000 or more, a creditor can use the judgment to start bankruptcy proceedings against a person. A company that doesn’t pay can be served with a statutory demand and wound up.
The other side can apply to have a default judgment set aside, but they have to act quickly, explain why they didn’t respond, and show they have a real defence. Ignoring a court claim almost always makes things worse.
Can I go after a director personally if their company can’t pay?
Yes, if the director signed a personal guarantee. A guarantee makes the director responsible for the company’s debt, even if the company goes into liquidation.
Without a guarantee, a company’s debts usually stay with the company. That’s why lenders, landlords and suppliers often ask directors to guarantee them personally. If you have one and the company stops paying, you can sue the director directly. A court can even let you serve them by email or a messaging app if they can’t be found.
If you’re facing something similar
If you’ve lent money to a business and it has stopped paying:
- check whether your loan agreement includes a personal guarantee from a director
- keep the signed agreement, every payment record and all messages, including on WeChat or WhatsApp
- send a formal written demand to the company and the guarantor
- search ASIC to check whether the company has gone into liquidation
- act quickly, before the business’s assets disappear
Get advice early, because time limits apply. Read more about debt and contract disputes.
ezylegal operates on a no-win, no-fee* basis across consumer, commercial and insurance disputes, so you’re not weighing the cost of a lawyer against the cost of walking away.