Methods of enforcing a monetary judgment obtained in your favour
As a first step, you should write to the person or company that owes you money (the judgment debtor) and request that they make payment of the judgment amount to you by the time specified in the judgment (which is usually 28 days).
In the event that the judgment debtor does not make payment of the judgment amount to you, steps can be taken to enforce the judgment.
Methods of enforcing a judgment include the following:
- Examination Notice – a document served on the judgment debtor that requires them to answer questions regarding their financial circumstances and provide copies of documents to the judgment creditor.
- Examination Order – if the judgment debtor fails to provide sufficient answers or documents as specified in the Examination Notice, then you may make an application to the Court for an Examination Order directing the judgment debtor to attend Court for examination under oath as to their financial capacity to satisfy the judgment debt.
- Writ of Execution – authorises and directs the Sheriff’s Office to attend the judgment debtor’s address, seizeproperty owned by the judgment debtor and sell it at auction to satisfy the judgment debt.
- Garnishee Orders – an order directing that money belonging to the judgment debtor and held by some other person (for example, a bank or employer) be paid in satisfaction of the judgment debt.
It may also be possible to commence bankruptcy proceedings (against an individual debtor) or serve a Creditor’s Statutory Demand for Payment of Debt (against a company) to enforce a judgment debt.
Before you can commence bankruptcy proceedings, the judgment debtor must commit an ‘act of bankruptcy’. The most common act of bankruptcy is a failure to comply with a Bankruptcy Notice. An act of bankruptcy can occur when a Bankruptcy Notice is served on the judgment debtor and the judgment debtor fails to make payment of the judgment debt within 21 days after the date of service.
Once the judgment debtor has committed an act of bankruptcy by failing to comply with the Bankruptcy Notice, the judgment creditor can file a Creditor’s Petition in the Federal Court or Federal Circuit Court, seeking a Sequestration Order declaring the judgment debtor bankrupt. Once a sequestration order is made, a Trustee in bankruptcy is appointed to manage the bankrupt’s estate and the judgment debtor’s assets are distributed to creditors according to priority. Bankruptcy generally lasts for a period of three years but can be extended in certain circumstances.
Creditor’s Statutory Demand for Payment of Debt
A Creditor’s Statutory Demand for payment of a debt may be served on the registered office of a judgment debtor company. In the event that the judgment debtor fails to satisfy the debt (or make an application to set aside the Creditor’s Statutory Demand) within 21 days of issue of a Statutory Demand, an application may be made to the Court for the company to be wound up on the grounds of insolvency. A liquidator will then be appointed to conduct preliminary investigations into the affairs and conduct of the Company.
In the event that the company makes an application to the Court to set aside a Creditor’s Statutory Demand, it will have to show the Court that there is a genuine dispute about the amount or existence of the debt (for example, it has an offsetting claim) or that there is a defect in the Statutory Demand. There may be costs consequences where you serve a Creditor’s Statutory Demand on a company which is subsequently set aside on the basis that it is defective or where there is a genuine dispute about the amount or existence of the debt.
It depends on the circumstances of each individual case and each judgment debtor as to the best method of enforcing a judgment debt. Of course, if the judgment debtor does not have any assets, it may be futile to enforce the judgment. In New South Wales, a judgment creditor generally has a period of 12 years from the date of a judgment to enforce it, so it may be worth keeping track of a judgment debtor, in the event that their circumstances change.
It is also important to remember that in New South Wales, interest generally continues to accrue on a judgment debt from the date it was entered to the date it is ultimately paid (in accordance with the Uniform Civil Procedure Rules).
The information contained in this article is not to be taken as legal advice. Please contact us if you require specific information or advice.