Enforcing a Judgment in NSW | Civil Litigation Lawyers
When a party (the ‘judgment creditor’) obtains a court judgment ordering another party (the ‘judgment debtor’) to return goods or pay money, there is a chance the judgment debtor will not comply with the judgment. In this situation, the judgment creditor can take steps to enforce the judgment. This is known as enforcement action. This article deals with enforcing a judgment in New South Wales.
Some judgments cannot be enforced
Before seeking to enforcing a judgment, a creditor should be aware that if the defendant does not have any way of paying the debt, then the monies will probably not be recovered.
If an individual is a Centrelink recipient and has no other income or assets, they are ‘judgment proof’. This means that a judgment cannot be enforced against them as a court will not order that a debt be deducted from a person’s welfare payment.
If a person who is judgment proof subsequently starts earning income or acquires assets, the judgment may then be enforced against them.
A judgment credit has 12 years from the date of a judgment to enforce the judgment against the judgment debtor.
Enforcing a judgment
In New South Wales, a person enforces a judgment by applying to the NSW Civil and Administrative Tribunal (NCAT). If the judgment was entered in another state, it must first be registered as a judgment of the New South Wales Local Court. There are fees payable for some types of enforcement action. These fees are added to the judgment debt, together with interest from the date of the judgment.
If a creditor doesn’t know a debtor’s financial position, they can send the debtor an Examination Notice requesting that they provide information about their income and assets. This information can be used to decide whether to take enforcement action and if so, what action to take.
If the debtor doesn’t comply fully with the Examination Notice, then an Examination Order can be issued. This is an order that the debtor must come to court to answer questions and show documents about their financial position.
One option for enforcing a judgment is through a writ. There are two types of writs that can be used to enforce a judgment.
A Writ for the Delivery of Goods
A Writ for the Delivery of Goods is used if the court ordered that goods are to be returned and they haven’t been returned. This writ authorises the sheriff to seize the goods and return them to the 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 defendant does not have the option of paying the value of the goods.
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 debtor to pay the debt.
The sheriff will charge a fee to execute a writ. The fee will be payable for each address and for each visit the sheriff makes. If the sheriff have to auction goods, a levy of 3% will be charged. The sheriff may also charge for expenses like towing a car. All these amounts are initially payable by the creditor but are added onto the amount that is recovered from the debtor.
Both these types of writs are valid for 12 months.
A garnishee order is an order for monies to be taken from a debtor’s bank account, wages, or from people who owe money to the debtor. The person the order is addressed to (such as an employer or bank) is known as the garnishee.
When a garnishee order is made on wages or salary, an employer must take an amount of money from the debtor’s wages until the whole debt is paid or until the court makes another order. The debtor must be left with a minimum amount of money per week to meet their day-to-day expenses.
A Garnishee Order for Debts is an order that is addressed to a bank or other financial institution where the debtor has an account or to anyone else who holds money on the 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 taken and sent to the creditor. If the funds do not cover the debt, another garnishee can be applied for.
Bankruptcy and winding up a company
If a judgment debt is more than $5000, an application to have the judgment debtor declared bankrupt can be made to the Federal Circuit and Family Court or the Federal Court. If the judgment debtor is a company, an application can be made to have it wound up.
To wind up a company, a creditor must show that it is insolvent (unable to pay its debts). This is done by issuing a Statutory Demand. If the debtor company does not respond within 21 days then an application for a winding up order can be made to the Supreme Court.
Action by the defendant
The defendant can respond to enforcement action in various ways.
Firstly, they can return the goods or pay the money.
Secondly, they can apply to the court to pay the debt by instalments. If the court accepts this application, the 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 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 defendant can file a defence to the claim. The court will then hear the matter.
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