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WEEK 11 - Enforcement of Money Orders

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Queensland University of Technology

WEEK 11 - ENFORCEMENT OF MONEY ORDERS Enforcement of ‘money orders’ has been designed to balance the competing interests of debtors and creditors. • For creditors the cost of enforcement has decreased and procedures streamlined. • For debtors, in many cases they are no longer subject to multiple enforcement procedures from the same creditor or risk unreasonable hardship. Regard is had to the living expenses of the debtor, their dependants as well as other known liabilities. 1. P RELIMINARY 1.1 Definition Contained in r 793 UCPR Enforceable money order, of a court, means: (a) a money order of the court; or (b) a money order of another court or tribunal filed or registered under an Act in the court for enforcement. Enforcement creditor means: (a) a person entitled to enforce an order for the payment of money; or (b) a person to whom the benefit of part of the order has passed by way of assignment or in another way. Enforcement debtor means a person required to pay money under an order. Enforcement warrant means a warrant issued under this chapter to enforce a money order. 1.2 Execution Execution, enforcement or debt collection is a process by which a court order is enforced and money orders can only be enforced under Ch 19 UCPR: r794 A judgment is not self-executing; action is required on behalf of the enforcement creditor to ensure recovery from an enforcement debtor. Money order must be “authenticated” by the court (ie seal attached) before it is enforceable (usually given orally first). An order may not be enforced until it has been filed: r 661(4). 1.3 Non-Parties IF made in favour of a non-party If a money order is made in favour of a non-party, they are able to enforce as though they were a party: r 795(1) IF made against a non-party If a money order is made against non-party person, they are able to enforce as though they were a party: r 795(2) IF made against a non-party Corporation If a money order is made against a non-party corporation, the officer of the corporation is liable as though the corporation were a party: r 795(3) 1.4 Conditional Orders A money order subject to a condition can only be enforced if: r 796(1). • The condition has been complied with or • The court has given leave to enforce IF person fails to satisfy the condition Unless the court orders otherwise, where a person fails to satisfy the condition of the order, the person entitled to the benefit of the order loses the benefit: r 796(2). In Talbot v Blindell the court made an order that the defendant should be relieved from forfeiture of a lease on the fulfillment of 3 conditions. The conditions were only partly performed. The court held that there was no power to compel the defendant to fulfill the conditions, and so the failure to fulfill the conditions meant that the order for relief was treated as abandoned. 2. L IMITATION P ERIODS The limitation period for judgement debts is 12 years: Limitation of Actions Act s 10(4) An enforcement creditor may commence enforcement proceedings i.e. execute the judgment without the leave of the court if it is within 6 years of the money order being made: r 799(1). Enforcement proceeding is not defined in r 793 but was considered in Credit Union Australia v McManus. Credit Union Australia v McManus (unreported, District Court 16/8/1999) • Court considered whether term ‘enforcement proceeding’ covered an enforcement hearing – which is a preliminary hearing to get info re: debtor • Arguably therefore not enforcement as such, but was preliminary to the enforcement Held: • wide term, encompasses all the processes re: enforcement of the judgment IF enforcement proceedings more than 6 years old If enforcement proceedings are more than 6 years old, leave must be obtained to commence proceedings: r 799(2)(a). IF there is a change in an enforcement debtor/creditor due to death, assignment or otherwise If there is a change in an enforcement debtor/creditor due to death, assignment or otherwise leave must be obtained to commence enforcement proceedings: r 799(2)(b). An application for leave can be made without notice to any person unless court the court orders otherwise – r 799(3). Need to file: • Application (Form 9) • Supporting affidavit The court will take into account a number of discretionary factors in an application for leave to start enforcement proceedings (r 799(4)). These include: 1. Prove the amount including interest owing at the date of the application; 2. Reasons for delay if more than 6 years; 3. If change in enforcement debtor or creditor – what is the change? 4. That the applicant is entitled to enforce the order; 5. That the enforcement debtor against whom enforcement is sought is liable to satisfy the order. Leave is granted at judicial discretion (unfettered discretion) World Square Pty Ltd v Taylor – must also show that the applicant is entitled to enforce the order and that it is not unjust/inequitable/unfair towards the debtor. No leave granted in this case as there had been discussions between the parties where the payment period had been extended, therefore the applicant was not able to turn around and insist enforcement otherwise. 3. C OSTS OF E NFORCEMENT The costs of enforcement can be added to the judgement debt: r 797(1). r 797 Amount recoverable (2) Interest on an order debt is recoverable as part of the money order. the order. Separate enforcement of costs can be ordered: r 798 r 798 A person entitled to enforce an order with costs may enforce the order and, when the costs become payable, enforce payment of the costs separately. Interest is also recoverable: r 797(2). Interest on a debt under judgement or order is set at 10% p.a: Reg 4 Supreme Court Regulations 2008. 4. EQUITABLE AND C OMMON L AW R EMEDIES – T HE H ISTORICAL D ISTINCTION Equitable remedies: • In personam operate against the person. A person can be ordered to do or refrain from doing some particular act. • Must serve person subject to the order and give time for compliance before execution can be undertaking. But no demand for compliance necessary: s 86 Supreme Court Act • If requirements not complied with, judgment debt can object and have execution procedure set aside at judgment creditor’s expense Common law remedies: • Enforceable immediately after time for judgement – execution can proceed immediately • No requirement for service or time for compliance before execution Distinction abolished by the UCPR, but effect remains (in terms of which process you may start, contempt proceedings only available for equitable remedies, application for warrant for money orders). 4.1 Applying for an enforcement Warrant A single enforcement warrant will be used regardless of the manner of enforcement: r 817. Need to file: • Application • Warrant • Statement by creditor (affidavit of debt) (Form 74). Requirements of enforcement warrant: r 820(1): • Debtor’s name • Date warrant expires • Amount • Other relevant details Types of Warrants: • an enforcement warrant in Form 75 for the seizure and sale of property in part 4 (rr828 to 838); • an enforcement warrant in Form 76 for redirection of a debt in part 5 division 1 (rr839 to 846); • an enforcement warrant in Form 77 for redirection of a debt being a redirection from a financial institution in part 5 division 2 (rr847 to 854); • an enforcement warrant in Form 78 for redirection of earnings in part 6 (rr855 to 867); • an enforcement warrant in Form 82 for payment of an order debt by instalments in part 7 (rr868 to 873) • an enforcement warrant in Form 84 for a charging order or stop order in part 8 (rr874 to 880); • an enforcement warrant for the appointment of a receiver in part 10 (rr883 to 888); The Statement by the creditor needs to include: • the date the money order was obtained; • the amount for which the order was made; • details of any part payment made; • the costs of previous enforcement procedures for this order debt; • interest due; o any other information that may be relevant to calculate the amount payable; • the daily amount of accruing interest; and • any other necessary information for the warrant being sought. 817 Procedure (1) A person applying for an enforcement warrant must file— (a) an application attaching the enforcement warrant the person wants the court issue; and (b) if the person is an enforcement creditor, a statement in the approved form sworn by the enforcement creditor, or the enforcement creditor’s agent or solicitor, not earlier than 2 business days before the date of the application disclosing the following — (i) the date the money order was made; (ii) the amount for which the order was made; (iii) the date and amount of any payment made under the order; (iv) the costs incurred in previous enforcement proceedings in relation to the order debt; (v) any interest due at the date the statement is sworn; (vi) any other details necessary to calculate the amount payable under the order at the date the statement is sworn and how the amount is calculated; (vii) the daily amount of any interest that, subject to any future payment under the order, will accrue after the date the statement is sworn; (viii)any other information necessary for the warrant being sought. (2) An enforcement creditor may apply for an enforcement warrant without notice to another party. (3) A copy of the enforcement warrant must be filed. (4) Subject to this chapter, it is not necessary to request an enforcement hearing before applying for an enforcement warrant. (5) Unless the court or a registrar directs otherwise, an application for an enforcement warrant or an application for renewal of an enforcement warrant must be dealt with by the registrar without a formal hearing. The amount recoverable under the warrant must include: • Unpaid costs of any previous enforcement proceeding of the same money order • Costs relating to the enforcement warrant • Amount of interest on the order debt 820 Issue and enforcement of enforcement warrant (1) An enforcement warrant must state— (a) the name of the enforcement debtor; and (b) the date, within 1 year after the warrant’s issue, the warrant ends; and (c) the amount recoverable under the warrant; and (d) any other details required by these rules. (2) The amount recoverable under the warrant must include— (a) unless the court orders otherwise, the unpaid costs of any previous enforcement proceeding of the same money order; and (b) the costs relating to the enforcement warrant; and (c) the amount of interest on the order debt. (3) The registrar must give the enforcement warrant to the enforcement creditor to be enforced, unless the warrant is an enforcement warrant for the seizure and sale of property. 4.2 Renewal of enforcement warrant The life of a warrant is 1 year – it can be renewed for 1 year periods and needs to be resealed and reissued in order to be used as a basis for enforcement: r 821 821 Renewal of enforcement warrant (1) On an application made to the court before an enforcement warrant ends, the court may renew the warrant from time to time, for a period of not more than 1 year at any one time, from the date the warrant ends. (2) If the court renews an enforcement warrant, the registrar must give a copy of the court’s order to the enforcement creditor or, if the original warrant was an enforcement warrant for the seizure and sale of property, the enforcement officer. (3) A renewed enforcement warrant must be stamped with the seal of the court to show the period for which the warrant has been renewed. (4) The priority of a renewed enforcement warrant is decided according to the date the warrant was originally issued. (5) The production of an enforcement warrant purporting to be stamped with the seal of the court and showing the period for which the warrant has been renewed is sufficient evidence for all purposes of the warrant having been renewed for the period. Service is required on the enforcement debtor (or officer of the corporation or partner in partnership) as soon as practicable for an end of trial enforcement hearing; or at least 14 days before the hearing for any other enforcement hearing: r 808 4.3 Application for stay of enforcement A stay of enforcement can be ordered: r 800 • File Application • File supporting affidavit • Personally serve – 3 business days before hearing 800 Stay of enforcement (1) A court may, on application by an enforcement debtor— (a) stay the enforcement of all or part of a money order, including because of facts arising or discovered after the order was made; and (b) make the orders it considers appropriate, including an order for payment by instalments. (2) The application must be supported by an affidavit stating the facts relied on by the enforcement debtor. (3) The application and affidavit must be served personally on the enforcement creditor at least 3 business days before the hearing of the application. In assessing whether to order a stay of enforcement the courts have a wide discretion and consider factors including: • balance interests of all parties • need exceptional circumstances to have enforcement stayed, eg • agreement b/w parties to delay execution • where enforcement of debt would require payment contrary to court order • where related proceedings are still going which may have an impact on the debtor or creditor • onus is on applicant to prove exceptional circumstances • will not grant stay merely because the debtor is insolvent or where there is a cross claim b/w the parties Examples of where court has ordered a stay: Veal v Warner 86 ER 699 • stay granted as the execution had been taken out contrary to an agreement between the parties that they would delay enforcing the judgment • Court held Def. was quite within his rights to apply for a stay as it was contrary to existing agreement with creditor Re A Debtor (1912) 1 KB 53 • Court granted stay where bankruptcy notice that was issued required payment that was otherwise in accordance with the judgment State Bank v Parry • third party proceedings that had yet to be finalised • court held the Def would be prejudiced if the 3rd party proceedings could not be pursued therefore a stay of enforcement was ordered Galic v Scordilis • Stay granted as one of the parties were waiting for costs to be assessed • Short stay of 14 days for assessment National Australia Bank Limited v Peters (unreported, District Court, Robin QC DCJ) A stay of enforcement had been ordered and was allowed to continue, while instalments were being paid by the judgment debtor, so as to prevent an act of bankruptcy occurring. Campbell v Turner (No 2) [2007] QSC 362 An application for a stay was made pending the assessment or agreement of costs. The stay was granted because there was a real risk of loss to the defendants if the judgment sum was paid and expended before the costs were assessed and paid. Chen v Chan [2008] VSCA 2 A stay of enforcement was ordered where there was a real risk that the appellants would be bankrupted if enforcement went ahead. This was considered, by the court, to be exceptional circumstances warranting the stay, especially where there was no urgency for enforcement, from the respondent's position. Examples where court has refused to order a stay: Marine and General Life Insurance v Drainage Board • the mere fact that the Def was insolvent was not sufficient to stay the enforcement Warrick v Bruce • Witnesses at trial were charged with perjury so a stay was sought to allow finalisation of charges • Refused as a ‘dangerous precedent’ would be set to have ppl rely on criminal proceedings as a basis for a stay of enforcement Scott Constructions • Court looked at nature of court’s discretion in granting a stay • Application on 2 grounds – serious appeal on foot that would reduce original judgment to nothing if successful, counter claim had yet to be heard • Court emphasised the onus is on the applicant to show special circumstances warranting a grant of a stay of enforcement • The mere fact that an appeal was pending was not in itself enough • Re: counter claim, the fault of the applicant who had not diligently pursued the counter-claim therefore it was the applicant’s fault. They could not rely on this to seek a stay of enforcement 4.4 Where to enforce Enforcement warrants are usually, though not necessarily, enforced in the court districts to which they relate: r 801 e.g. if judgment made in Supreme Court but amount is within District Court – the money order can be enforced out of the District Court. Note fees then, will only be DC fees rather than SC fees – this may be cheaper 801 Where to enforce money order (1) If the amount payable under an enforceable money order of the Supreme Court is— (a) within the jurisdiction of a Magistrates Court—the order may be enforced in a Magistrates Court; or (b) within the jurisdiction of the District Court but not within the jurisdiction of a Magistrates Court—the order may be enforced in the District Court. (2) If the amount payable under an enforceable money order of the District Court is within the jurisdiction of a Magistrates Court, the order may be enforced in a Magistrates Court. (3) An enforceable money order of the District Court or a Magistrates Court may be enforced in the Supreme Court if the Supreme Court so orders. (4) Unless the court in which a money order was made orders otherwise, the costs of the order’s enforcement are recoverable only on— (a) if the amount payable under the order is within the jurisdiction of a Magistrates Court—the scale of costs prescribed for Magistrates Courts; or (b) if the amount payable under the order is within the jurisdiction of the District Court—the scale of costs prescribed for the District Court. The money order needs to be filed in the court where you want to enforce it: r 802. 802 Enforcing money order in different court (1) To enforce an enforceable money order of the Supreme Court, the District Court or a Magistrates Court in another court under rule 801, the order must be filed in the other court. (2) If an enforceable money order is to be filed under this rule in the District Court or a Magistrates Court, then, unless the court in which it is to be filed orders otherwise, the enforceable money order must be filed in the District Court, or a Magistrates Court, for the district— (a) where the enforcement debtor resides or carries on business; or (b) closest to the court that made the enforceable money order. (3) Rule 826 applies to an enforceable money order filed under this rule. 5. T ACTICS OF D EBT C OLLECTION 5.1 Judgement debtor The judgment debtor's incentive is to delay payment, conceal assets, make the execution process as expensive and as difficult as possible. The objective being simply to avoid payment of the debt as long as possible. The Judgement Debtor may seek a stay in various ways • Seek a stay of execution pending an appeal [r 761]. However, the general situation is that an appeal will not result in an automatic stay of execution, unless the Court of Appeal otherwise orders. • Stay is available from a judge at first instance [r 761]. • r 800 could be utilised (above) – relief against judgments and orders. The Judgement Debtor would have to argue that facts have arisen after the judgment which entitle them to relief or which may, if known earlier, have resulted in a different judgment. In these circumstances a Court or Judge may grant appropriate relief, including relief in relation to execution. 5.2 Examples of problem Judgement Debtors and how to get around them Example 1: Debtors who evade service Solution: Orders for substituted service (r 116) – show a reason why it is impracticable to serve a document in a way required under ch 4. Typically this would mean showing: (a) despite using reasonable effort, you are unable to effect personal service; (b) the method proposed is likely to cause the proceeding to come to the knowledge of the defendant; These strategies largely accord with the common law rules in Porter v Freudenberg Example 2: Debtors who travel between jurisdictions Solution: serve a copy of the claim or application in each jurisdiction Example 3: Debtors who conceal assets Solutions: Searches and oral examination • r 805 Enforcement hearing; • r 808 Enforcement Hearing Summons • r 809 Financial Position Statement • r 810 Subpoena to third parties • r 815 Threat of Contempt 5.3 Judgement creditor The judgment creditor’s incentive is to receive payment as quickly as possible, locate hidden assets, and invoke the most simple and inexpensive debt recovery procedures possible. 6 P RE -JUDGEMENT S TEPS Before commencing it is always necessary to ask 3 questions: 1. Is the defendant worth pursuing? 2. Are there sufficient recoverable assets to make the risk of litigation worth the effort? 3. What procedures are available to monitor the continued existence of assets? 6.1 Locating the defendants assets The defendant’s assets can be located via: • Titles office search (CITEC) • Motor vehicle security register search\Main Roads search • Register of shipping • Bills of sale search • Bankruptcy search • Credit referencing agencies – Dunn and Bradstreet; White Mercantile Gazette • Private inquiry agents – legal and illegal information – list categories • Legal  Surveillance;  Electoral roll;  ASX records. • Illegal  Tax records;  Bank records;  Bugs; • Social security records • The debtor may be the sole beneficiary under a trust. In this situation the court may make an order that the trustee make a distribution in favour of the creditor. Exempt Property Some property is classed as exempt property. Categories of “exempt property” include bedding, tools of trade, food, clothes, Dictionary Sch4 UCPR refers to Supreme Court Act Schedule 2 Dictionary which states that “exempt property” means property that is NOT divisible among the creditors of a bankrupt under the Bankruptcy Act 1966 (Cth) s 116(2) and Reg 6.03, 6.04. See later for Bankruptcy Regulations 6.2 Preserving the defendant’s assets Pre-Judgement Security for Costs Applications A security for costs application is brought on behalf of a defendant to ensure that the plaintiff has sufficient assets to cover the defendant’s costs: r 670 Mareva Injunctions/Freezing Orders A discretionary interlocutory court order restraining a party from removing from the jurisdiction of the court, or otherwise dealing with, assets which are the subject of the injunction: Mareva Compania Naviera v International Bulkcarriers (The Mareva) Mareva • Def owed ship hire charges to Pl. • Pl knew Def could not pay the money owing • Pl knew Def had $ in a bank a/c in London and was concerned that the Def would move the $ out of the a/c – wanted to ensure the money would still be there once judgment was handed down and to be enforced Held • Debt was due and owing • Jurisdiction to grant the injunction even though there wasn’t a judgment and enforcement order on foot Basis of jurisdiction: Jurisdiction is based on the need to prevent judgments from being rendered ineffective by removal or dissipation of the assets and therefore preventing an abuse of process: Jackson v Sterling Industries. To be granted a Mareva Injunction an applicant must show: • Real risk of assets disposed of • Balance of convenience favours grant • Application and supporting affidavits • Served on defendant, unless court orders otherwise (and often the court will order otherwise because otherwise the defendant may deal with the assets before the injunction is given) Supporting affidavit includes: • Full & frank disclosure • Particulars of claim (amount) • Why believe defendant has assets (cannot be a mere fishing expedition) • Why believe risk to assets • Plaintiff must give an undertaking as to damages – ie for damaged suffered by defendant as a result of the Mareva injunction if the plaintiff loses its claim Rule 260 has attempted to codify the law dealing with Mareva orders n.b. only partial, therefore general law re: mareva injunctions still applies: 260 Mareva orders (1) The court may grant an order of a type that restrains someone from removing assets from Australia or dealing with assets either in or out of Australia (a mareva order). (2) A mareva order may be granted whether or not the respondent is a party to an existing proceeding. (3) On application, the court may grant a mareva order if— (a) the order is to be ancillary to a judgment or other order already given or made in favour of the applicant; or (b) the court is satisfied the applicant has an existing or prospective cause of action that is justiciable within Australia. (4) The supporting affidavits should include the following information— (a) the nature and value of the respondent’s assets, so far as is known to the applicant, in and out of Australia; (b) why the applicant believes— (i) the respondent’s assets may be removed from Australia; or (ii) the dealing with the assets should be restrained by order;
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