Enforcement of judgement debts
When all alternative avenues for collecting long outstanding debts have failed, organisations will need to decide whether it is commercially viable to take legal recourse against a debtor to recover an outstanding amount. Legal action will ordinarily take the form of obtaining a judgement against the debtor.
Obtaining a judgement prior to taking any other form of action will ensure that any disputes regarding the amount outstanding are resolved.
Once a judgement is obtained, there are a number of ways that it may be enforced. These include:
- Obtaining a warrant from the Court to seize property. This procedure entitles the Sheriff to attend the debtor’s premises and seize assets, which are then sold to satisfy the judgement debt.
- Summons for oral examination. The judgement debtor may be summonsed to appear before the Registrar of the Court to be examined regarding what income, assets and available cash the debtor has to satisfy the judgement debt.
- Attachment of earnings order. The Court may make an order that the debtor’s employer make payments to the creditor from the debtor’s earnings in satisfaction of the judgement debt.
- Attachment of debt (garnishee). The Court may order that all debts due to the judgement debtor from another party be paid directly to the creditor in satisfaction of the judgment debt. This may also include money in a bank account.
In relation to debts due by corporations, judgement debts may also be enforced by way of obtaining a winding up order from either the Supreme or Federal Court, provided the debt is for an amount of at least $2,000.
The first step is to issue a Statutory Demand against the debtor company. The onus is on the debtor company to either pay the debt, come to a suitable arrangement with the creditor, or to apply to the Court to have the Statutory Demand set aside. One of these options must be taken within 21 days of service of the Demand, failing which the debtor will be deemed insolvent and the creditor may go ahead with winding up proceedings.
A Statutory Demand may be set aside, by application to the Court, if there is a genuine dispute over the debt or if the demand notice is defective.
A creditor may nominate the Official Liquidator of his or her choice. However, should no Official Liquidator be nominated, the Court will choose a Liquidator based on a rotation basis.
Once the application to wind up the company is filed with the Court, it ordinarily takes between four to eight weeks for the application to be heard. In certain circumstances, a Provisional Liquidator may be appointed at any time after the filing of the application, should the Court consider that the company’s assets are at risk.