Default Judgment and Enforcement of Orders

You’ve commenced an action in court and you’ve won. You’ve done the hard work and successfully obtained a judgment against someone who owes you money or goods.

But that is only half the battle – now you have to enforce that judgment.

This article will help you understand the different options for enforcing that judgment. If you‘re a defendant, this article explains what you can do if a default judgment has been entered against you.

Before reading this article, to better understand default judgments and how they are obtained, please read our article on ‘What you need to know about default judgments’.

Once you’ve obtained a judgment, what happens next? 

The court has entered a default judgment against the defendant but the defendant fails to comply with the Court orders within 28 days of the judgment being made. Now you have default judgment.

Here are some of the ways you can enforce it:

Writ for the Levy of Property

Where the judgment debtor owns property, as the judgment creditor, you can make an application to the Court for the Sheriff (a government official whose job is to execute the orders of a court) to seize and sell the judgment debtor’s property.

Examples of ‘property’ are goods, money, shares, and land (if the debt is over $20,000). The money received by the Sheriff upon the sale of the property is then used to pay the judgment debt.

The Sheriff may take personal property except essential household items and other items that are protected by bankruptcy laws. The Sheriff cannot take essential household items such as kitchen items, toiletries or a refrigerator or freezer, for example.

The Sheriff also cannot take tools that you need to earn an income and motor vehicles you need for transport unless it is above the limit set by bankruptcy laws. This limit is called the ‘indexed amount’. The indexed amount changes every financial year and it is currently (as at 29 January 2020):

  • $3,800 for tools
  • $8,000 for motor vehicles.

The indexed amount for motor vehicles is not the total value of the vehicles. The amount is the total value of the vehicles minus the sum that you owe under finance.

A writ for the levy of property is valid for 12 months. If the writ expires and you still haven’t recovered all of your money, you can apply for another writ.

Writ for the Delivery of Goods

​A writ for the delivery of goods is a court order that allows the Sheriff to:

  • seize (take) the goods and return them to the judgment creditor, or
  • recover the value of the goods by seizing other property belonging to the judgment debtor and selling it.

When the court issues a writ for the delivery of goods, it is sent to the Sheriff’s office. If you’re the judgment debtor, the Sheriff may either come to your property to seize (take) the goods, or contact you first to provide you with the opportunity to get legal advice. A writ for the delivery of goods is valid for 12 months.

Garnishee Order

There are two main types of garnishee order, against either the judgment debtor’s employer (providing access to their salary) or the bank (providing access to their account/s).

The order directs that the relevant third party, such as an employer or bank, deduct (or redirect) money from the judgment debtor’s bank account or wages to satisfy the judgment debt.

Once the court issues a Garnishee Order, the employer or bank must comply with that order.

Examination Order

In some situations, you can apply for an examination order before applying for a garnishee order or other enforcement orders.

An examination order is an order for the judgment debtor to come to court to answer questions and show documents about their financial position (like their assets and income).

This helps the judgment creditor gather more information about the judgment debtor’s financial position and helps determine what recovery options are available or if it is worth pursuing the debtor. If you do not attend court to answer the order, you may be arrested and forced to attend court and be examined on your financial situation.

Charging Order (for judgments given in the Supreme Court or the District Court of NSW)

This order creates a security or a lien over the assets (such as shares, real property, money) of the judgment debtor in favour of the judgment creditor.

It prevents the judgment debtor from dealing with the charged property, for example, it prevents them from selling these assets.

A charging order takes effect when it is made however the judgment creditor cannot commence proceedings to take the benefit of the charge for three (3) months.

Writ for the Possession of Land (for judgments given in the Supreme Court or the District Court)

This is an order to take possession of the judgment debtor’s real property (ie house or land) so that you can sell it to recover a debt.

As the judgment creditor, you may file a Notice of Motion seeking an order from the court to take possession of real property in order to sell the property to satisfy the judgment debt.

A writ for possession of real property should only be used when a writ for the levy of personal property will not raise sufficient funds to meet the judgment debt.

Bankruptcy (individual debtors)

Normally, if the judgment debt is more than $5,000, you can initiate bankruptcy proceedings against a judgment debtor by seeking an order from the Federal Circuit Court or Federal Court declaring that the judgment debtor is unable to pay their debts as and when they fall due.

To initiate the proceedings, the judgment creditor must lodge a bankruptcy in a proper form with the Australian Financial Security Authority (AFSA), formerly the Insolvency and Trustee Service of Australia (ITSA). The current application fee is $470.00 and all of the relevant fees and forms can be found at www.afsa.gov.au

Following personal service of the bankruptcy notice on the judgment debtor, he or she will have 21 days, in which to comply with the notice by paying the full amount of the debt or entering into a repayment arrangement, on terms satisfactory to you.

During the COVID-19 period (from 25 March 2020), however, the following temporary rules apply:

  • The debt threshold for creditors to apply for a Bankruptcy Notice against a debtor will increase from $5,000 to $20,000.
  • The time frame for a debtor to respond to a Bankruptcy Notice before a creditor can commence bankruptcy proceedings is now increased from 21 days to up to six (6) months.
  • Temporary protection period procedure available for debtors to prevent recovery action by unsecured creditors will increase from 21 days to six months.

Failure to comply with the notice or to apply to the court to set it aside will entitle a judgment creditor to present a Creditor’s Petition for an order that the judgment debtor be made a bankrupt.

One disadvantage of this enforcement method is that there may be other secured creditors who rank ahead of you, making full payment of the debt unlikely.

Statutory Demand and Winding Up a Company (for corporate debtors)

If the judgment debtor is a company and the debt is more than $2,000, the first step for you as the judgment creditor is to issue a statutory demand to the judgment debtor.

A statutory demand is a formal written demand served on a company by a creditor pursuant to section 459E of the Corporations Act 2001 (Cth).

On 24 March 2020, the Federal Government introduced, and parliament passed, the Coronavirus Economic Response Package Omnibus Bill 2020.

The Bill received Royal Assent on 25 March 2020, and came into force as the Coronavirus Economic Response Package Omnibus Act 2020 (‘the Act’). The Act provides with respect to statutory demands that:

  • The threshold at which a statutory demand can be issued is increased from $2,000 to $20,000,
  • The statutory period which a company has to respond to a statutory demand after it is served is increased from 21 days to six (6) months.

A company has 21 days (now six months during the COVID) to respond to the statutory demand, otherwise it is presumed to be insolvent and the creditor may apply to have that company wound up.

If the judgment debtor fails to pay, before you seek a winding up, you can ask the court to examine the director(s) of the company to determine what assets the company has and whether the company can pay the debt. This process is called “enforcement”.

Depending on what you find, you can ask the court to make an appropriate order, such as to seize and sell the property or negotiate with the judgment debtor to pay the debt in installments.

As a last resort, if you think that the company is insolvent, you can apply to the Federal or Supreme Court to wind up the company.

You are the judgment debtor and it’s too late! What can you do to set aside a default judgment made against you?

If a plaintiff obtains a default judgment against you as a defendant, you can negotiate with the plaintiff to see if they consent to setting aside the judgment.

If negotiations fail, you can ask the Court to set aside the judgment and you should make the application quickly as possible.

In order to do so, you have to prove the reasons why you are asking the court to set aside the judgment. The court must be satisfied that:

(a) The judgment entered was irregular, meaning that it was against the rules; or
(b) The judgment was not obtained in good faith (for example, the plaintiff was dishonest or made false allegations against the defendant); or
(c) The judgment was obtained illegally.

For example, if Josh gives false and misleading evidence to the Court in respect of the claim filed, Sarah can apply to the court to set aside the judgment.

The court must also be satisfied:

(a) There is a reasonable explanation for the defendant’s default;
(b) The defendant has an arguable case; and
(c) It is in the interests of justice to set aside the judgment.

For example, assume Sarah did not respond after being served with Josh’s claim due to compelling medical reasons. If she proves to the Court that she has a valid reason for not responding Josh’s claim, the Court would likely set aside the judgment.

Whether you are a defendant or a plaintiff, you should obtain legal advice before deciding upon the best option for you.

If you require assistance collecting money owed by a debtor, obtaining a default judgment against the debtor or enforcing a default judgment, or you would like to have a default judgment set aside, contact our experienced Commercial Litigation team at Antunes Lawyers on (02) 9964 0499 for specialist advice as to what options will be most effective for you.

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