Judgment Debts:

A creditor can approach the court to obtain an order for a judgment debt and unless good cause is shown why such an order should not be made, this can lead to a further order obliging the judgment debtor to pay direct to the judgment creditor the amount of the debt due to the judgment debtor or so much of it as may be sufficient to satisfy the amount of the judgment, including costs. Judgment debts can be enforced using a garnishee order, writ of execution or writ for the levy of property.  It provides enforceable and recovery actions, such as the appointment of a sheriff who can take possession of the judgment debtor’s property, chattels such as equipment, stock, furniture and vehicles, and sell these assets to satisfy the judgment debt. Professional legal advice in from a Debt Recovery and Insurance Lawyer may be of great assistance in this regard.

Firstly, garnishee proceedings may be instituted by a person who has obtained a judgment or order for the payment of money, not being a judgment or order for the payment of money into court. In New South Wales, apart from a garnishee order, a judgment debt may also be enforced by means of a writ for the levy of property or, in the case of a judgment of the Supreme Court or the District Court, a charging order. Obtaining proper legal advice from a Debt Recovery and Insurance Lawyer may be greatly beneficial if you are in the process of making an insurance claim.

The proceedings may be taken out at any time after the judgment or order has been pronounced, so long as the judgment creditor is entitled to payment. The procedure is available to an assignee of the judgment debt. The jurisdiction is equitable in nature, and the remedy is therefore discretionary. For example, an order may be refused if its effect would be to unfairly prefer a creditor over an insolvent debtor’s other creditors. It is doubtful that the judgment debtor has any right of action against a judgment creditor who wrongfully obtains a garnishee order absolute that is subsequently discharged. However, a garnishee who erroneously pays a judgment creditor in the mistaken belief that the money was due to the judgment debtor may recover the money from the judgment creditor in an action for moneys had and received. Garnishee proceedings do not lie against the Crown. A garnishee order may be made even if the debtor is serving a term of imprisonment for the same debt.

Attachment of debts is a two stage process. Under the old procedures, the first stage was to obtain, normally ex parte, a garnishee order nisi which, upon service on the garnishee, bound the debt with payment of the judgment. In some jurisdictions, the order nisi has been replaced by a summons or notice, which upon service has the same effect. Until service is effected, no rights are created in favour of the judgment creditor. Upon service of the order nisi, summons or notice, whichever is appropriate, the judgment creditor acquires a right over the debts to which the process attaches. The right does not entitle the judgment creditor to payment before the order nisi nor does it have the effect of constituting the garnish or as a creditor of the garnishee. If the garnishee pays the judgment creditor after service of the order nisi, the payment does not operate to discharge the order. However, it may cause the court to refuse to make the order absolute. If the debt has merged in a judgment, service of the order nisi does not operate as a stay of execution, nor does it disturb the priority of any pre-existing equities to which the debt may be subject. Upon service of the order nisi, summons or notice, the garnishee does not need to pay the debtor immediately, rather he or she may await the order absolute. The procedures, whether by order nisi, summons or notice, are returnable at a later date, upon which, if the garnishee disputes liability, the court generally will proceed to try any issue necessary to determine that question.However, the court will not entertain an argument from the garnishee as to the validity of the judgment creditor’s judgment against the judgment debtor.

Difficulties have arisen in attaching money held to the credit of a judgment debtor in a bank or building society account. Money held on deposit in such accounts has generally been regarded as beyond the reach of garnishee proceedings, as the customer’s right to withdraw is commonly conditional upon presentation of a passbook, withdrawal form or other similar requirement. In such circumstances, the credit balance cannot be said to be presently payable to the judgment debtor. However, it has been held that current or cheque accounts with a bank do not pose the same difficulty. In most jurisdictions, the rules have expressly extended the reach of garnishee proceedings to deposit, as well as current or cheque, accounts. Money represented by a cheque paid into a judgment debtor’s current account with a bank is not available to be attached until the cheque is cleared. Where ownership of a bank account is disputed, the proper course is to order the bank to pay the credit balance into court to abide the resolution of the dispute.

Furthermore, a judgment or order for the payment of a sum of money may be enforced by a charging order, which creates an equitable charge over stocks and shares, the beneficial interest in which is owned by the judgment debtor. In most jurisdictions, the procedure to obtain a charging order is set out in the relevant procedural legislation and rules of court. In some other jurisdictions, the stocks and shares which may be made the subject of a charge are limited to those held in ‘public’ companies. Debentures are not ‘stocks and shares’ and therefore fall outside the definition.  Shares held in trust by the judgment debtor may not be charged. Commonly, the judgment creditor first applies ex parte for an order nisi, which is served on the judgment debtor, who is given the opportunity to show cause why an order absolute should not be made. The order is discretionary and may be refused, for example, if the judgment debtor is insolvent and to make the order would create an undue preference in favour of the judgment creditor over the other creditors. A charging order may be effective against property even if the judgment debtor lacks the capacity in law to have created such a charge. However, the charging order will be refused if the shares have been forfeited, as they are then no longer owned by the judgment debtor. A charging order is subject to any prior encumbrances but it may still be made if the purported sale of shares by the judgment debtor to a third party has not been perfected by registration of a transfer. Proper legal advice in from a Debt Recovery and Insurance Lawyer may be of great assistance in this regard.

If you would like further information or wish to discuss your debt recovery matter with us please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au. 

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