Have you obtained a NSW Judgement Debt in your favour and unsure how to enforce?

Written by Telekah Anderson

When a party (the “Judgment Creditor”) obtains a court judgment requiring another party (the “Judgment Debtor”) to pay money, there is a risk that the Judgment Debtor may fail to comply with the judgment. In such cases, the Judgment Creditor may initiate enforcement action to compel compliance. This article outlines the process for enforcing a judgment for an unsecured debt in New South Wales.

ENFORCING A JUDGMENT DEBT

Enforcement action refers to the legal steps a Judgment Creditor can take to compel a Judgment Debtor to comply with a court order. These steps are not automatic; the Judgment Creditor must initiate them. The enforcement process is generally governed by the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW) and a judgment is enforceable for 12 years from the date it is entered.

ENFORCEMENT OPTIONS

1. Examination

If the Judgment Creditor doesn’t know the financial position of the Judgment Debtor, they can send an Examination Notice to the Judgment Debtor requesting that they provide this information. This information can be used to decide what, if any, enforcement action to take.  

If a Judgment Debtor doesn’t fully comply with the Examination Notice, then the court can issue an Examination Order. This is an order that the Judgment Debtor must attend court to answer questions about their financial position and show documents. 

2. Garnishee Order

A garnishee order allows the Judgment Creditor to recover money directly from a third party who owes money to the Judgment Debtor; in most circumstances the third party is a bank or employer.  

There are two main types of garnishee orders:

2.1 Garnishee Order for Debts

This order directs a bank or other entity holding funds in the name of the Judgment Debtor to pay the Judgment Creditor.

A Garnishee Order for Debts is an order that is addressed to a bank or other financial institution where the Judgment Debtor has an account or to anyone else who holds money on the Judgment Debtor’s behalf – such as a real estate agent who collects rent for them. All of the money in the account at the date of the order is released and sent to the Judgment Creditor. If the funds do not cover the judgment debt, another garnishee can be applied for.

2.2 Garnishee Order for Wages or Salary

This order directs an employer to deduct payments from the Judgment Debtor’s wages and forward to the Judgment Creditor.

When a garnishee order is made on wages or salary, an employer must take an amount of money from the Judgment Debtor’s wages until the whole debt is paid or until the court makes another order. The amount deducted from the wage cannot be the entirety of the payment, the Judgment Debtor’s must be left with a minimum amount of money per week to meet their day-to-day expenses. 

3. Writ for the Levy of Property

There are two types of writs that can be used to enforce a NSW judgment and once issued both writs remain valid for 12 months.

3.1 A Writ for the Delivery of Goods

This writ authorises the sheriff to seize goods and return them to the Judgment Creditor, or to recover their value by seizing other property and selling it. An application can be made to change the order so that the Judgment Debtor does not have the option of paying the value of the goods.

3.2 A Writ for Levy of Property

A Writ for Levy of Property authorises the sheriff to seize and sell at auction personal property belonging to the Judgment Debtor to pay the judgment debt. If unsuccessful and the judgment debt is not paid in full a separate application can be made to the court in respect of real property.

The sheriff will charge a fee to execute a writ. The fee will be payable for each address and each visit the sheriff makes and any expenses incurred such as towing a vehicle following recovery. If the sheriff has to auction goods, a levy will also be charged. All these amounts are initially payable by the Judgment Creditor but are added onto the amount that is recovered from the Judgment Debtor.

4. Bankruptcy Proceedings

If the Judgment Debtor is an individual and owes more than $10,000, a Judgment Creditor can issue a bankruptcy notice in accordance with the Bankruptcy Act 1966 (Cth), potentially leading to bankruptcy proceedings.

Where the Judgment Debtor is an individual, the Judgment Creditor may be able to issue a bankruptcy notice for the full amount, or any balance of the judgment debt provided it meets the statutory minimum (currently $10,000).

By issuing a bankruptcy notice, the Judgment Debtor has 21 days from the date of service of the bankruptcy notice to pay the monies or to secure payment of the debt to the Judgment Creditor’s satisfaction. Failure to satisfy the requirements of a bankruptcy notice, can then entitle the Judgment Creditor to make an application to the Court for a sequestration order against the Judgment Debtor.

It is important to note that bankruptcy proceedings are not to be used as a “debt collection tool”. Therefore, a Judgment Creditor should be ready to proceed with bankruptcy and the court is not likely to be forgiving of numerous adjournments for things like payment arrangements.

5. Winding Up a Company  

For companies, if the debt exceeds $4,000, the Judgment Creditor can issue a statutory demand which may lead to winding up proceedings if not complied with.

Where the Judgment Debtor is a company, the Judgment Creditor may also wish to issue a statutory demand. A statutory demand is a demand made to the company (Judgment Debtor) for an outstanding debt under the provisions of the Corporations Act 2001 (Cth) or any balance of the judgment debt provided it meets the statutory minimum (currently $4,000).

Similarly to a bankruptcy notice, the Judgment Debtor has 21 days from the date of service of the statutory demand to pay the debt or secure payment. If a Judgment Debtor fails to take any steps to secure payment of the debt, then a Judgment Creditor can make an application for the Judgment Debtor to be wound up.

Similarly to bankruptcy proceedings, winding up proceedings are not to be used as a “debt collection tool”. Therefore, a Judgment Creditor should be ready to proceed with the wind-up application noting the court is not likely to be forgiving of numerous adjournments for things like payment arrangements. Particularly noting that section 459R of the Corporations Act 2001 (Cth) notes that an application for a company to be wound up in insolvency is to be determined within 6 months after it is made.  

ACTION BY THE JUDGMENT DEBTOR

The Judgment Debtor can respond to enforcement action in various ways.

First, they can return the goods or pay the judgment debt whether in one payment or by way of an agreement reached with the Judgment Creditor.

Secondly, they can apply to the court to pay the debt by instalments. If the court accepts this application, the Judgment Creditor can object to an instalment order within 14 days of being notified. If an objection is filed, the court will hear evidence about why an instalment order should or should not be granted, before making a final decision.

If a default judgment was entered and the Judgment Debtor did not receive the Statement of Claim, they can apply to set aside the judgment and seek an order to stay enforcement. If this order is granted, the Judgment Debtor can file a defence to the claim. The court will then hear the matter.

FURTHER INFORMATION OR ASSISTANCE

Please note this article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.

For any further information or assistance in enforcing a judgment, please get in touch with JHK Legal on (02) 8239 9600 or book an appointment through our website Contact.