Great, Judgment was awarded in your favour – now how to enforce it?

This article sets out some enforcement options available to you where you have been awarded Judgment as a result of bringing a claim through the New Zealand Court system for the recovery of a debt owed to you. You will now want to enforce your Judgment.

The Court orders different types of Judgments, however in this article we are purely focusing on a Judgment awarded against a person, not a company, i.e., where the Judge awards Judgment in your favor for a sum of money to be paid by another person (the defendant).

A Judgment can also include such things as an order made in the Disputes Tribunal for the recovery of funds or a costs award of some kind.

Once Judgment is awarded to you (which we will now refer to as the judgment debt), you as the plaintiff/creditor become the judgment creditor and the defendant/debtor becomes the judgment debtor.

There are many enforcement options available depending on your knowledge of what assets the judgment debtor may own and how much you wish to spend on legal costs. It is important to note that the Courts do provide a scale of recoverable costs associated with the legal costs incurred in enforcing any judgment debt. You will not always be able to recover the full amount of your legal costs, but certainly a good percentage of your costs.

Before taking any action to enforce the judgment debt, you may be able to communicate with the judgment debtor, who may enter into a payment arrangement with you.

Enforcement action must be taken within six years from the date of the Judgment. The rationale behind this is so that the judgment debtor does not live in fear of a judgment debt hanging over their head for life. However, a Judgment may be extended beyond the six years with the leave of the Court, but only with very good reason. Entering into a payment arrangement over a period of time which extends beyond the six years is an acceptable reason for not enforcing the Judgment within the six years and you will more often than not be able to extend the Judgment beyond the six years.

It is however highly recommended that when you have been awarded Judgment you take enforcement action immediately, unless of course you have entered into a payment arrangement with the judgment debtor (as mentioned above).

It is important to seek legal advice at the enforcement stage so that we can give you the best advice on what type of enforcement action should be taken and the estimated costs of such enforcement. Below are some enforcement options available to judgment creditors.

1. Financial Assessment Hearing

A financial assessment hearing is beneficial where you do not know what assets a judgment debtor has. An application is made to the Court for a date for a financial assessment hearing and the Court issues a summons which is served on the judgment debtor ordering the judgment debtor to appear at hearing before a Registrar. It is an informal hearing where the Registrar, or a solicitor on your behalf, examines the judgment debtor as to their financial means. It is a cost-effective way to examine a judgment debtor to find out a judgment debtor’s assets.

Prior to the hearing the judgment debtor is required by the Court to complete a statement of financial position and must include at least three months of bank statements. This enables the Registrar to assess what type of payments the judgment debtor is able to make in order to satisfy the judgment debt.

If the judgment debtor does not turn up to a financial assessment hearing, the Registrar may issue a warrant for the judgment debtor’s arrest. This means that if the Bailiff catches up with the judgment debtor at any time, the Bailiff can arrest the judgment debtor and take them to Court to appear before a Registrar immediately.

The consequences of not attending the financial assessment hearing at the time specified on the summons is noted on the summons served on the judgment debtor so it should be no great surprise to the judgment debtor when the Bailiff arrests them. The risk of being arrested is a great deterrent to not attending the hearing.

At the financial assessment hearing the Registrar will assess whether the judgment debtor has any means of paying the judgment debt and may make an order that the debt attach to the judgment debtor’s wages/salary or benefit.

If upon examination of the judgment debtor’s finances it is obvious the judgment debtor does not have any assets or any means of paying the judgment debt, even by small instalments, you may wish to leave the enforcement of the judgment debt for 6 or 12 months and make an application for a further financial assessment hearing to determine whether the judgment debtor’s financial means have altered in any way.

The application for a financial assessment hearing does not involve large legal fees so it is not uncommon for a judgment creditor to make more than one application over a period of time.

2. Attachment Order

If you already know that the judgment debtor is employed, you can bypass the financial assessment application and make an application for an Attachment Order. Once the application is filed the Court then makes the Attachment Order. The Attachment Order is sent to the judgement debtor’s employer ordering them to deduct a certain amount from the judgement debtor’s salary/wages to pay to you. An Attachment Order can also be made where the judgement debtor is a beneficiary. The Court will make an Order that WINZ deduct a certain percentage from the defendant’s benefit either weekly or fortnightly.

As mentioned above, the Registrar at a financial assessment hearing also has the power to make an Attachment Order.

3. Charging Order

If you already know the judgment debtor owns property, you may register a charging order over the judgment debtor’s property. If you do not know whether the judgment debtor owns any property, this is the sort of information which will be disclosed at any financial assessment hearing.

We can assist you with undertaking a search with Land Information New Zealand to see whether the judgment debtor owns any property.

Once a charging order is registered against the judgment debtor’s property, the judgement debtor is unable to deal with their property at all without paying the judgment debt. A judgment debtor cannot even re-finance their property without dealing with the judgment debt.

If a judgment debtor owns property, we highly recommend registering a charging order. Even if the judgment debtor does not sell the property or re-finance the property for many years, you are assured of having your judgment debt paid at some stage.

A Charging Order only lasts two years and then it will expire and must be renewed in order to be able to rely on the security for payment of the judgment debt that it offers.

4. Bankruptcy

This is an enforcement option where an application is made through the High Court. A request to issue a bankruptcy notice is filed with the High Court closest to where the judgment debtor resides. The bankruptcy notice is sealed by the High Court and a copy is sent back to your legal provider to attend to personal service on the judgment debtor. The judgment debtor has 10 working days to pay the judgment debt which by this stage also includes the judgment creditor’s legal costs. If the judgment debtor does not pay within 10 working days, the judgment creditor then files an application for the adjudication of the judgment debtor. The Court inserts a hearing date on the application, signs it and sends it back to us, again for personal service of the application on the judgment debtor.

If the judgment debtor ignores the request for payment in the application and does not attend the High Court hearing, then the Court will adjudicate the judgment debtor bankrupt.

Once a judgment debtor is declared bankrupt, the Official Assignee contacts the judgment debtor and investigates what assets they may have. The Official Assignee has the power to take possession of assets and sell them in order to pay the judgment debt. There are certain belongings of the judgment debtor which the Official Assignee is not allowed to touch i.e., tools needed for the judgement debtor’s work (up to a certain value) and necessary household furniture and effects.
The consequences of bankruptcy are serious to any judgment debtor and affects the judgment debtor’s credit rating, making it difficult to obtain credit, borrow money from a bank or other lending institution. A bankrupt is unable to leave New Zealand, be a director in a company, take part in the management of a business or be self-employed. Depending on the terms of any trust deed, superannuation schemes may also be investigated by the Official Assignee (Kiwi Saver is protected from creditors while they remain in the fund).

The bankrupt can earn an income, but the Official Assignee will decide whether the bankrupt needs to make regular payments to help repay the judgment debt. In other words, the bankrupt cannot earn too much otherwise the Official Assignee will order the bankrupt to pay any excess earnings to any creditors.

Bankruptcy can also affect the judgment debtor’s/bankrupt’s partner because the Official Assignee will either try to sell the judgment debtor/bankrupt’s share of any joint assets or all of the assets and give the bankrupt’s partner his/her share of the assets once sold.

Tax refunds from before or during the bankrupt’s bankruptcy are assets and become the property of the Official Assignee.

As a result of the seriousness of the consequences of bankruptcy there are times where a judgment creditor is aware that the bankrupt has no assets but proceeds with bankruptcy anyway because of how difficult and limiting it can make a bankrupts’ life. In other words, it can sometimes become a matter of principle.

Bankruptcy lasts for three years at which time the bankrupt is then discharged. However, the stigma of bankruptcy can last a lifetime.

5. Warrant to Seize Property

The judgment creditor can make an application to the Court for a warrant to seize property. The warrant enables a Court Bailiff to enter the judgment debtor’s property and to take property that the Bailiff believes belongs to the judgment debtor and sell it to pay the judgment debt. The Court Bailiff will visit the judgment debtor and ask them to pay the full amount of the judgment debt. The Bailiff has the power to take the judgment debtor’s personal property if they do not pay.

The seized property is held on to for 7 days after which time it will be sold at public auction and the money from the sale of the property will go to paying any seizure and storage costs and then the debt owed by the judgement debtor.

In Summary

One or more of the above enforcement options may be made at any one time. You are not limited to just one option. If you have been awarded Judgement need assistance on how to proceed. Please contact us.