When it comes to litigating liquidated claims, there is a common scenario which results in a Judgment debt being obtained. We hope the below segment will be of use in considering how to enforce (and hopefully recover) a Judgment debt. We have split the article into three parts which we will publish over the coming weeks.
The common scenario is – Party A commences proceedings against Party B and serves their Statement of Claim on Party B and when the period of time lapses (28 days after service) Party A makes an application and obtains Judgment by default.
Now that we have a Judgment debt, the next step is to enforce it and obtain payment from the Judgment debtor. This is often more difficult than actually obtaining the Judgment debt and it is usually at this stage of the process in which those of our clients who are less familiar with litigation will ask the question, “What should we do now?”
In the minds of experienced litigators, a plan for recovery may be already mapped out, but for those unfamiliar with the options available, an explanation and consideration of the options is usually required.
THE ENFORCEMENT OPTIONS
The most common enforcement options utilised in New South Wales are as follows:
- Examination Notice;
- Garnishee Order;
- Writ for Levy of Property; and
- Bankruptcy Notice (for individual debtors) or Creditor’s Statutory Demand (for company debtors).
1. Examination Notice
An examination notice is best characterised as a tool, used to obtain information about the judgment debtor’s financial position.
Financial information the judgment creditor can obtain includes details of employment and pay, assets (such as bank account balances and property owned), and debts.
The process begins with the judgment creditor serving an examination notice on the judgment debtor. The examination notice contains specific questions for the judgment debtor to answer and requests the judgment debtor to produce documents. The judgment debtor is given 28 days to respond.
If the judgment debtor fails to respond within 28 days, the judgment creditor may apply to Court for issue of an Examination Order.
An Examination Order directs the debtor to attend Court to answer the financial questions posed in the examination notice and to produce financial documents. If the judgment debtor fails to attend Court, a warrant for their arrest may be issued.
This process is applied regardless of whether the judgment debtor is an individual or a company, and in the case of a company the officer of the company is treated as if they were the judgment debtor individually.
Once armed with the debtor’s financial information the judgment creditor will be in a better position to determine which enforcement option to implement for the greatest chance of recovery of the judgment debt.