Late payment interest
Should payment be late, interest would in practice be awarded at the discretion of the court on the basis of existing court rates, commencing from the time the debt became overdue. Late payment interest may also be regulated by the parties' contract provided that the agreed rate is not so high as to be deemed a penalty (which is illegal at common law). This second option is however not commonly relied upon.
The law provides no rule as to collection costs, which would thus be considered similarly.
Orchestrated negotiation first
Even though the law in New Zealand is business-friendly and domestic tribunals are effective, amicable settlement opportunities should always be considered as an alternative to formal proceedings. In addition, before starting legal proceedings against a debtor, assessment of assets is important as it allows verification as to whether the company is still active and whether recovery chances are at good. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed becomes impossible to enforce a debt (see below).
As a Member State of the Commonwealth, New Zealand is a constitutional monarchy falling under the authority of the Queen Elizabeth II. The country's legal system is built upon British law and it is structured around common law principles, equity and statutes. The judiciary system essentially divides into sixty-three District Courts (which have jurisdiction in first instance over all civil disputes up to NZD 200,000), specialized courts (dealing with employment, environment-related disputes, etc.) and a High Court (dealing with large business claims in first instance and as a Court of Appeal in certain non-business-related matters). The Court of Appeal then reviews the claims brought against decisions rendered in first instance by a District Court or by the High Court. The Supreme Court finally reviews decisions rendered in second instance, provided that a leave for appeal has been granted to this purpose.
Prior to commencing ordinary legal action, the parties may use a simplified procedure before the Disputes Tribunal provided that the claim is below NZD 20,000. These proceedings are normally more efficient than ordinary proceedings because they are informal, confidential, quicker and cheaper than ordinary proceedings insofar as a Referee mitigates the parties' claim and thus avoids judges and lawyers. If the amicable phase fails or if the debtor questions the claim, the option of starting legal proceedings remains, a claim must be filed with the District Court (or with the High Court depending on the amounts at stake) and, if admitted, must be served to the debtor. The latter is given a month to bring a defence (twenty-five days if the claim is brought before the High Court). The court then considers the parties’ claims and often encourages the parties to reach a compromise prior to furthering the proceedings. When the dispute cannot be settled by the parties only, the judges increasingly attempt to mitigate disputes in court (Judicial Settlement Conference) but if no compromise may be reached the courts may proceed with formal hearings. The courts typically award remedies in the form of equitable compensation, damages, specific performance, attachment (i.e. freezing and seizure) orders, declarations (of a right, of the law, etc.), as well as mandatory and prohibitory injunctions. Punitive damages may be awarded although they remain rare in practice.