The first question clients ask when obtaining a favourable judgment is “how will we enforce this judgment against the debtor?”. The quickest and most effective way to enforce a judgment debt is to obtain a garnishee order from the Court. This article sets out the key elements of garnishee orders so that you can enforce your judgment debts.
Garnishee Order – What is It?
A garnishee order is an order from the Court pursuant to which the successful party in Court proceedings (Judgment Creditor) may serve a third party unrelated to the proceedings (Garnishee), an order directing the Garnishee to pay the Judgment Creditor the judgment debt instead of paying any debt owed by the Garnishee to the debtor in the Court proceedings (Judgment Debtor).
Example 1 (Bank Accounts)
Suppose a sub-contractor obtains a judgment debt against a head contractor in the sum of $100,000. The head contractor refuses to pay the judgment debt. The sub-contractor may approach the Court seeking a garnishee order over the head contractor’s bank accounts. The sub-contractor may serve the garnishee order on the Judgment Debtor’s bank. The bank is obliged to pay any moneys it holds on behalf of the head contractor to the sub-contractor until the judgment debt of $100,000 is satisfied.
Example 2 (Garnishee the Principal)
Suppose a sub-contractor obtains a judgment debt against a head contractor in the sum of $100,000. The head contractor refuses to pay the judgment debt. The sub-contractor may approach the Court seeking a garnishee order over any principal currently engaging the head contractor (regardless if it is the same principal who engaged the head contractor on the project the subject of the judgment debt). The principal is obliged to pay any moneys it owes to the head contractor to the sub-contractor until the judgment debt of $100,000 is satisfied.
Limitations
A Garnishee is only required to satisfy the garnishee order within 28 days of the Judgment Debtor serving the garnishee order and if a debt is due and payable from the Garnishee to the Judgment Creditor within that 28-day period.
If the debt from the Garnishee to the Judgment Debtor becomes due and payable after the 28-day period, the Garnishee notify the Judgment Debtor specifying the likely date that the debt will be due.
If there is no foreseeable debt that will accrue as between the Garnishee and the Judgment Debtor, the Garnishee is merely required to serve a notice of this fact on the Judgment Creditor.
Summary
A garnishee order is generally the most efficient and cost effective method to enforce a judgment debt. Generally, a Judgment Creditor is not required to provide notice to a Judgment Debtor that it is seeking a garnishee order from the Court. Accordingly, this method of enforcement is much simpler and quicker when compared with more traditional methods of enforcement including an examination order, writ for the levy of property and enforcement by the sheriff.
For more information, contract Brett Vincent, Principal, or Sasha Kolodkina, Associate, on +61 2 9261 5900