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Enforcement Procedures
Most litigation will involve three issues being liability, quantum and enforcement. Unfortunately, insufficient or no consideration is given to the issue of whether a judgment will ultimately be enforceable and the correct procedure to follow. The issue of enforcement should be considered well before proceedings are issued.
In New Zealand the District and High Courts both have their own enforcement procedures and rules.
District Court Enforcement Procedures
A judgment creditor has several methods of enforcing a District Court judgment once it has been sealed by the Court. Listed below are some of the main methods of enforcement.
Discovery (Examination)
A judgment creditor may use the discovery processes under the District Court Rules 1992 (Rules 577 to 583) to aid execution against a defendant (also know as the judgment debtor in respect to monetary awards) whose financial status is unknown.
The discovery process enables the plaintiff to require the defendant to attend Court to be examined as to his or her financial means by a Deputy Registrar. The purpose of the examination process is to obtain information relating to the defendant’s financial status, including his or her assets, liabilities, income and ability to pay.
A without notice to the judgment debtor application for examination can be made to the Court, where a defendant fails to attend and be examined by a Registrar. The application is then sealed by a deputy Registrar and served by a Court bailiff. The examination is held before a Deputy Registrar. The judgment creditor is entitled to claim costs for the examination. An arrest warrant can be issued, if the defendant fails to appear to force the defendant to be brought before a Judge or Deputy Registrar to be examined.
Once the defendant has been examined, both parties have an opportunity to comment on the next steps. The Court can order various methods of enforcement of the judgment debt, such as attachment orders, distress procedures or charging orders. The Court may also make an order that the debt be paid by installments to the judgment creditor.
Attachment Orders
An attachment order is a mechanism by which regular payments can be deducted from a judgment debtor’s salary and paid directly to the judgment creditor. A benefit payable by Work and Income New Zealand may also be subject to an attachment order.
The general practice is to apply on a without notice basis. The judgment creditor will need some evidence as to the judgment debtor’s employer. An attachment order is subject to other criteria. The attachment order must specify an amount (protected earnings rate), which is the minimum sum that must be left for the judgment debtor to pay for rent, mortgage, food etc. An attachment order may also be subject to orders made under the Family Proceedings Act 1980, deductions under the Child Support Act 1991 or student loan payments. An attachment order is useful where the judgment creditor has sufficient information about the judgment debtor’s financial status.
Sale orders
A sale order may be issued where there is specific information about assets owned by the judgment debtor. A check of the judgment debtor on the Personal Property Securities website (www.ppsr.govt.nz) may provide useful information.
A sale order authorises a Court bailiff to seize specific assets owned by the judgment debtor and then sell them with the proceeds of sale being provided to the judgment creditor to satisfy any judgment debt. A Court bailiff will require an indemnity from the judgment creditor where a sale order is issued. The judgment creditor’s indemnity records that the judgment creditor will pay any costs or damages claims issued against the bailiff, if there are any issues regarding ownership of any seized goods.
A sale order may be returned “nulla bona” (the judgment debtor has no assets). A returned sale order with nulla bona is an act of bankruptcy under s26 of the Insolvency Act 2006. A judgment creditor can use this to bypass issuing a bankruptcy notice and proceed with an application for an order adjudicating the judgment debtor bankrupt. The nulla bona should be exhibited to an affidavit sworn by a Court bailiff and appropriate wording should be used in the creditor’s application to record the nulla bona as an act of bankruptcy.
Charging Orders
A charging order may be obtained over a judgment debtor’s property, shares or money held under a trust. A charging order is useful when there is knowledge that the judgment debtor has property that can be sold or is in the process of being sold. There is no power of sale in the District Court following a charging order.
A charging order is Final at first instance where it is sought against land. The order is an Interim charging order until a further order is made where it is obtained against other assets. An Interim order must be served on any affected persons. The judgment creditor may then apply for the order to be made Final, where no steps are taken.
A judgment creditor who wishes to enforce a charging order over land must have the charging order transferred to the High Court. Charging orders expire after two years. Enforcement steps must be taken within that two year period. Otherwise, an application for renewal will need to be made within the two year period. The Court will require an explanation as to why the order was not enforced within that period.
High Court Enforcement Procedures
The High Court Enforcement Procedures can be found at The High Court Rules 2008 (“HCR”) Rules 17.1 to 17.92.
Liquidated demand - A judgment creditor can seal judgment for the liquidated amount, together with interests, costs and disbursements provided they have obtained judgment on a liquidated demand. The judgment creditor must file a memorandum setting out the amount claimed and how that amount is calculated, together with any submissions in support of the claim if there is a claim costs and\or disbursements.
Land/chattels – A judgment creditor may seal judgment by default for recovery of possession of the land or chattels, together with costs to the date of sealing judgment when proceedings are for recovery of land or chattels, and a statement of defence has not filed within the required period.
Unliquidated demand - The proceeding shall be tried for the purpose of assessing damages if the relief claimed is payment of an unliquidated demand and the judgment debtor does not file a statement of defence within the required number of days.
The High Court has a number of methods of enforcement. They include charging orders, sale orders, possession orders, arrest orders and sequestration orders.
Charging orders
Charging orders may be obtained as Final against land in the first instance or as an Interim charging order for other assets.
The Court may grant leave to issue a charging order where the judgment debtor is either making away with his property or about to leave New Zealand. A high standard of proof is required. The charging order is usually made on a without notice basis, supported with a very detailed affidavit.
Sale Orders
Enforcement of a charging order is through a sale order (HCR 17.62 to 17.79 and form E7). A sale order may be executed at any time after judgment for a sum of money that has been sealed by the High Court.
A sale order authorises an officer of the Court (Sheriff) to seize chattels and sell them and if necessary the judgment debtor’s estate in land in order to satisfy a judgment debt.
What documents need to be filed
The following documents need to be filed in the appropriate High Court in which judgment was obtained:
- Sale order
- A written request that the sale order be issued
- An affidavit in support
An up to date copy of the certificate of title also needs to be filed with the Court.
Conditions of sale
Chattels and land seized under a sale order are to be sold at the place the sheriff thinks best which may, with the judgment debtor’s consent, be at the place the chattels were seized or in the case of land, on the land to be sold.
Sale of the chattels and land must be advertised in such newspaper(s) as the sheriff deems sufficient. Notices for the sale of land must be first published at least 15 working days before the date of the intended sale. Notices for the sale of other chattels must be advertised at least 5 working days before the date of the intended sale. The contents of the notices of sale must contain the information specified in rule 17.73 (that the sale is made on behalf of the judgment creditor, and must specify the chattels, or the land intended to be sold and the name of the sheriff executing the writ and the name of the solicitor for the judgment creditor).
A copy of the notices of sale must be served by the sheriff on the judgment debtor at least 7 working days before the sale.
All sales under a sale order shall be by public auction or with the consent of the parties, or by order of the Court made on the application of either party, by private treaty.
Where land and chattels of the same judgment debtor are seized under the same sale order, unless that judgment debtor wishes otherwise or the Court otherwise directs, the chattels are to be sold first. The Court may, notwithstanding the judgment debtor’s desires, direct that the land be sold first or contemporaneously with a specified chattel or class of chattels. Where the proceeds of the chattels or land first sold are insufficient to satisfy the execution, the rest of the property taken is to be sold. The judgment creditor’s solicitors prepare a settlement statement. The proceeds of sale are paid into the Court trust account.
Disposal of proceeds
The Court distributes the proceeds of moneys or sale of property in the following manner:
- Prior claims
- Execution expenses;
- Payment of judgment debt to judgment creditor;
- Surplus to judgment debtor.
There are other judicial bodies (Employment Relations Authority, Disputes Tribunal and Residential Tenancies Tribunal) where judgments may be obtained and enforced. Such judgments are sealed as orders of the District Court and then enforced as a judgment of the District Court.
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