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If you win your case in a New South Wales court for money owed to you, you will be awarded a judgment debt. The losing party in the court proceedings (the defendant), whether an individual or a company, then becomes a judgment debtor. This refers to the fact that they now officially owe that monetary debt to you. However, judgment debtors are not always willing to pay the judgment debt. Further, sometimes they do not have the funds or assets to settle the debt away. This means that you have to take further enforcement action on your right to be compensated. This article will explore various steps you can take to enforce your judgment debt by way of one or all of the following methods:

  • examination notice and examination order;
  • garnishee order for wages and salary or for debts;
  • bankruptcy, statutory demand and liquidation; 
  • writ for the levy of property; and
  • charging orders.

Examination of Debtor Assets: Notice and Order

Examination is a useful process of investigating the financial position of the judgment debtor after the judgment debt has been established. It typically involves one or both of these two steps:

  1. examination notice; and
  2. examination order.

Examination Notice

An examination notice is a specified court form that is filled out and then sent to the judgment debtor. It is Form 51 if they are an individual or Form 52 if the judgment debtor is a company. 

Tip: There is no filing fee for the examination notice, since it is not filed with the court. However, there must have been a judgment passed down by the court.

The examination notice asks the judgment debtor to provide details of:

  • their regular income or income from other financial sources such as rent, interest or investment dividends. Also a copy of their recent tax return;
  • property or assets they own (such as a house or motor vehicle);
  • any debts or liabilities they owe (such as loans, mortgage or credit card debts), including copies of relevant bank statements;
  • employment, including copies of their recent payslips;
  • their bank accounts, including recent bank statements;
  • their weekly living expenses; and
  • how they propose to pay the judgment debt. 

Tip: You are allowed to post the examination notice, rather than hand-deliver it. The judgment debtor has at least 28 days to sign and return the completed examination notice along with copies of the requested documents.

The information provided in an examination notice can assist you in determining the best way to get your money back. It also allows you (as a creditor) to make further inquiries about the availability and value of any assets. This can also include coming to a compromise agreement with the judgment debtor for a repayment plan.

Examination Order

Unfortunately, in practice, judgment debtors rarely complete the examination notice in its entirety, or at all. If that happens, and there is important information missing, you can apply to the court for an examination order. This requires the judgment debtor to:

  • attend court;
  • answer similar sorts of questions; and
  • provide the same documents about their financial position that were requested in the examination notice. 

Applying for an Examination Order

When applying for the examination order, you must include:

  • any additional information or documents required;
  • an explanation about their lack of response to the examination notice;
  • details of the judgement debt, including any additional interest that has accrued since that date;
  • a court document explaining your need for the order, called a notice of motion. This will include a copy of the examination notice and a sworn statement in the form of an affidavit regarding how and when the examination notice was provided to the judgment debtor (known as an affidavit of service); 
  • the judgment debtor’s location;
  • details of the individual who will be personally given (‘served’) a copy of the examination order, or the company’s registered address where it will be sent or left; and
  • the costs of filing and serving the examination order.

Tip: you will need to pay a filing fee to the Court when submitting the examination order and notice of motion. However, you can try to claim this back from the judgment debtor.

After an Examination Order is Filed

Once the examination order is filed and served, a court date will be set for when you and the judgment debtor will need to attend for the examination. Examinations are typically conducted in an informal fashion and can be done without the judge.

Tip: The examination may be at another location if the court that you selected is too far from the judgment debtor (generally over 30km). You could also ask the court to conduct the examination on your behalf. 

Suppose the judgment debtor still does not respond or arrive at court without any lawful excuse. In that case, there may be grounds to ask the court to issue a warrant for the judgment debtor’s arrest for examination.  

Garnishee Orders

A garnishee order is an order given by the court to a third party (called the ‘garnishee’) that either holds money on behalf of the judgment debtor, or owes money to them (the judgment debtor’s debtor!). There are two types of orders:

  1. garnishee order for wages and salary; or
  2. garnishee for debts.

A Garnishee Order can only be applied for once a case is resolved and a judgment is decided against the other side.

Garnishee Order for Wages and Salary

A garnishee order for wages and salary is where the third-party, the garnishee, is the judgment debtor’s employer. Once the employer receives an officially stamped copy of the garnishee order, they will be required (by the court) to pay a portion of the judgment debtor’s wage or salary into your account directly. This is subject to the conditions that the:

  • judgment debtor must be left with a prescribed minimum amount in their bank account for living expenses (which is $527.40 per week as at 1 October 2020). This means that you may only receive the judgment debtor’s total weekly salary less the minimum amount until the debt is paid;
  • employer can take an additional $13.00 as an administration fee out of the judgment debtor’s account, which is separate to any debt owed to you; and
  • the judgment debtor may apply to the court to pay you by instalments, which (if granted) will apply to the garnishee order for wages and salary.

Although you only need to provide a copy of the garnishee order to the employer, the judgment debtor will likely notice when their regular payroll is less than expected. However, they will have to apply to the court to raise any issues or complaints, since their employer will have to obey the instructions of the Garnishee Order.

Tip: If the employee is a public servant employed by the Federal Government, there may be other rules or limitations attached to the garnishee order or processes to follow.

Garnishee Order for Debts

A garnishee order for debts is broader and can be sent to individuals or companies, the garnishee, who owe money to, or hold funds on behalf of, the judgment debtor. This is except for their employer, see above on garnishee orders for wages and salary. 

Here are the types of debts that you generally can and cannot get a garnishee order for:

Permissible Debts to Garnishee
Debts Which May be Prohibited to Garnishee

Bank accounts holding the judgment debtor’s funds (generally)

Pension payments in a bank account

Rent held by a real estate agent on behalf of the judgment debtor

Centrelink payments or other Government support benefits

Rent owed (or due to be owing) by a tenant of the judgment debtor

Superannuation fund of the judgment debtor

Money and other receivables owed to the judgment debtor by a customer/purchaser for goods or services

Amounts invested in shares or capital by the judgment debtor or their stockbroker/financial institution

Loan repayments owed (or due to be owing) to the judgment debtor

Lawyers holding funds on trust to assist the judgment debtor

Funds held on trust by an administrator/executor of an estate where a final account of distribution has been determined.

Pending insurance payouts or other contingent debts that may not arise.

Order Against Judgement Debtor’s Bank Account

The most common order is against the judgment debtor’s bank account (especially if this information was given to you in the examination notice or examination order). Similar conditions to a garnishee order for wages and salary will apply to a garnishee order for debts in a bank account, including that the:

  • judgment debtor’s bank account must be left with a prescribed minimum amount in their bank account for living expenses (which is $527.40 per week as of 1 October 2020 plus $20.00). This means that if the bank account balance is below $547.40, the bank does not need to comply with the garnishee order; 
  • bank can take an additional $13.00 as an administration fee out of the judgment debtor’s account, which is separate from any debt that they owe to you; and
  • the judgment debtor may apply to the court to pay you by instalments, which (if granted) will apply to the garnishee order for debts.

Tip: Since you do not need to notify the judgment debtor, you may consider getting a garnishee order against their bank account early on before they withdraw any funds. Then, if the judgment debt is not fully paid, you can get another garnishee order for wages and salary or for another type of debt.

Applying for a Garnishee Order

When applying for a garnishee order, you will need a sworn/signed statement (‘affidavit’) supporting your application (‘notice of motion’) for the garnishee order, incorporating the:

  • details of the case and the value of the judgment, plus any interest that has accrued since then or instructions for payment by instalment;
  • name and contact details of the judgment debtor;
  • name and contact details of the garnishee, including the financial relationship they have with the judgment debtor; and
  • details of relevant costs that you have incurred since the judgment, such as legal fees, service fees or filing fees for previous enforcement action (for example, an examination order) or the application for the garnishee order.

The garnishee is then required to pay the amounts to you (less any deductions or withheld amounts) within 14 days.

Each garnishee (whether an employer, bank or other third party) must be provided (‘served’) with their own specific garnishee order. You may need to apply for subsequent garnishee orders if the first one does not satisfy the judgment debt.

Non-Compliance with the Garnishee Order

If the third-party garnishee (for example, employer or bank of the judgment debtor) does not pay the amounts to you in breach of the garnishee order, you may apply to the court for judgment against the garnishee themselves. 

The garnishee may provide a reason for their non-compliance, which generally may be that there is no:

  • current debt, wage or salary; or
  • debt, wage or salary that is likely to accrue.

The Court may, at its discretion, decide to change or cancel the garnishee order if appropriate. This may occur if the court believes that the amount of debt, wage or salary is too small, or the judgment debt is almost fully repaid.

Bankruptcy and Liquidation

Bankruptcy

If the judgment debt remaining unpaid is $10,000 or more, you can apply to make the judgment debtor bankrupt (if they are an individual).

To commence bankruptcy proceedings, you will have to apply to the Australian Financial Securities Authority (AFSA). Additionally, you must provide a copy of the lodged bankruptcy notice to the judgment debtor at least 21 days before taking further action, to give them one last chance to repay the judgment debt.

If they still fail to pay the debt, you can commence bankruptcy proceedings, which if successful, may result in:

  1. the salary of the now bankrupt judgment debtor being used to repay the judgment debt; or
  2. a court appointing a trustee to take control of the judgment debtor’s assets to sell them off to repay the judgment debt.

Tip: Once the judgment debtor becomes bankrupt, they default on other loans or obligations to third parties. Some of those third parties may be able to claim a higher priority on repayment on their debts than your own, meaning you could still lose out.

Statutory Demand

A statutory demand is a formal notice you send to a company requiring the payment of a debt, including a judgment debt, in a format that federal laws prescribe.

Once a company receives a statutory demand, it has 21 days to:

  1. pay the debt; or
  2. apply to set aside the statutory demand.

If the incorporated judgment debtor does not do either of the above, or seek any temporary relief, then the company will be presumed insolvent (‘unable to pay its debts when they are due’). This will allow you to take further action, including liquidation.

Liquidation

Liquidation is similar to bankruptcy, but for companies, where the unpaid judgment debt is $2,000 or higher. As part of the liquidation process, an administrator or liquidator (‘controller’) is appointed to take control of the company, and then the appointed controller will:

  1. identify all assets and liabilities of the company;
  2. take steps to wind up its operations; and
  3. sell the company’s assets to pay off any debts owed to third parties.

Tip: Similarly to bankruptcy, other creditors may have a higher priority to claim the judgment debtor’s assets in liquidation. Alternatively, any money from the sale of assets may need to be shared with other creditors, meaning only a portion of the judgment debt may be repaid.

Writ for the Levy of Property

A writ for the levy of property is a court order requiring the local sheriff to seize and sell personal property of the judgment debtor to satisfy the judgment debt. 

You obtain the writ by applying to the court and paying the sheriff’s fee. Then the sheriff will attend the property of the judgment debtor and identify (‘tag’) items that may be seized and sold at auction at a later date. However, the sheriff cannot seize all property, with some common examples below:

Included Property

Excluded Property

Real estate or land (for a judgment debt over $10,000), provided it is encumbrance free

Real estate or land (for a judgment debt equal to or less than $10,000) or encumbered land (mortgaged)

Non-essential household furniture or items, personal electronic equipment

Kitchen and bedroom furniture and clothes (considered essential)

Cash, money, securities or bonds

Other assets that are rented or under finance

Personal motor vehicles (over a certain value), boats.

Equipment or items used by the judgment debtor in their job (including computers, tools or vehicles), as these ‘tools of the trade’ and could be considered essential for the judgment debtor to earn a living (up to a certain value).

Tip: If the judgment debtor jointly owns an asset (for example, a car), then the corresponding portion of the money received from the sale will be collected by the sheriff, whilst the balance will be paid to the other owner.

Applying for the Writ

In order to apply for the writ, you will need:

  • details of the judgment debtor’s address and property (such as from an examination notice or order);
  • a sworn/signed statement (‘affidavit’) supporting your application for the writ; and
  • money to pay the sheriff’s fees. 

Timing of Writ

Once the sheriff attends the judgment debtor’s premises, there is a period of time before the auction to allow them to contact the court to either:

  • pay off the judgment debt directly or negotiate with you;
  • dispute the amount or validity of the judgment debt and have it ‘set aside’; or
  • ask the court to pay the judgment debt by instalments.

Generally, without any of the above factors, the writ applies for a period of 12 months until any assets sold fully pay for the judgment debt. After that, you can apply to the court for a further writ. 

Tip: If the judgment debtor refuses to allow the sheriff entry to their premises which prevents them from seizing any goods, you may need to make a further application to the court allowing the sheriff (and police) to use force to enter the premises.

Charging Orders

A charging order is a right that the Supreme Court of NSW grants allowing you to secure the judgment debt against a specific asset of the judgment debtor, and eventually take ownership of that asset to satisfy the judgment debt. 

The types of assets that can be subject to a charging order include:

  • stocks and shares in a public company;
  • a deposit held by a bank or financial institution (including if on trust for the judgment debtor); or
  • a beneficial, indirect or conditional ownership (‘equitable interest’) in property.

If a charging order secures an asset, then:

  1. the judgment debtor will not be able to sell or transfer the asset without permission or subject to any rules the charging order dictates, from the date that you make an order;
  2. third parties dealing with the asset must also obey the charging order whilst it is in effect;
  3. you may apply to the court to invalidate any sale or transfer that contradicts the requirements of the charging order;
  4. to take ownership of the asset, you must commence new proceedings to enforce the charging order; and
  5. you must wait three months from the granting date of the charging order before you can commence proceedings to take ownership of the asset. 

Applying for a Charging Order

To apply for a charging order, you will need a sworn/signed statement (‘affidavit’) supporting your application (‘notice of motion’) for the charging order. 

However, unless the court says otherwise, you may not need to:

  • involve the judgment debtor in the application process; and
  • notify (‘serve’) the judgment debtor a copy of the application before the court hears it.

Tip: A charging order can be useful to secure your right to the judgment debt against a particularly valuable asset. However, due to the need to take further action, there is a greater risk that the asset could decrease in value or disappear before you can enforce your right when compared to other enforcement actions.

Key Takeaways

Enforcing a judgment debt can be a complicated, consuming and costly process. It is important to choose the correct enforcement options based on:

  • the information you know about the judgment debtor’s property ownership, financial position and sources of income;
  • the likelihood of the judgment debtor’s co-operation; 
  • any time-pressure or urgency for recovering the judgment debt; 
  • whether the judgment debtor is an individual or company; and
  • whether the judgment debtor owes money to other third parties.

Taking prompt action once a court grants a judgment debt in your favour can improve your chances of success. However, knowing what steps to take and the fees involved will help you navigate the enforcement process. If you need help with enforcing your debt in a New South Wales Court, contact LegalVision’s debt recovery lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is examination?

It is a useful process of investigating the financial position of the judgment debtor after the judgment debt has been established. Usually, it involves an examination notice or an examination order.

What is a garnishee order?

It is an order given by the court to a third party, the garnishee, that either holds money on behalf of the judgment debtor, or owes money to them. The two types of orders include a garnishee order for wages and salary or
garnishee for debts.

What is a charging order?

It is a right that the Supreme Court of NSW grants you to secure the judgment debt against a specific asset of the judgment debtor. This allows you to eventually take ownership of that asset to satisfy the judgment debt. 

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