A creditor needs to evaluate the best way to enforce a debt by looking at the assets owned by the debtor.

Significant assets on the balance sheets are debtors who are liable to have those assets seized by a judgment creditor. The execution procedure is an attachment of debt or garnishee of debt.

An application for attachment of debt is made to the court so that an order can be made attaching a particular debt owed to the debtor by a specific third party (“garnishee”).

It is necessary in this case, for creditors to have specific information about the debtors and in most cases; the creditors will not have this information.

The creditor needs to obtain the specific details of particular prospective garnishees in order for them to attach the debts. The way in which such information is obtained is by the use of a summons for oral examination.

An application for an order for attachment of debt must be made by Affidavit accompanied by a draft form of the order sought. The creditor or its lawyer will swear the affidavit, which includes:

Details of the judgment;

• That the judgment debt is unsatisfied, either wholly or to a stated extent; and that a debt is due or accruing to the judgment debtor from the garnishee;
  
  
• That the garnishee is within the State, and
  
  
• The name, address, amount owed by the garnishee, and why the debt is owed by the garnishee to the debtor, if known

The application may be made without notice to any person and may be either before or after the examination of the judgment debtor. A Registrar has the right to refuse to make an order if he believes the remedy being sought is worthless or vexatious, or, if the amount sought to be attached is small.

Refusal by the Registrar to make an order can be appealed. The draft order should be according to the  Civil Procedure Rules .

After the Registrar has made the garnishee order, it is returned to the creditor for service on the garnishee, which must be personal and carried out within 7 days of the date of making the order.

If the garnishee disputes liability to pay the debt attached, the garnishee may make application to the Court, within 14 days of service of the order for the attachment of debt, to determine liability or to give directions for its determination.

If there is another person other than the judgment debtor who claims to be entitled to the attached debt or to a charge or lien on it, that person may make application to the Court to determine the claim of entitlement or to give directions for its determination.

Any payment made by a garnishee in compliance with, and any execution levied against a garnishee under, an order for attachment of debt is a valid discharge of the garnishee’s liability to the judgment debtor to the extent the amount is paid or levied. This is regardless of the garnishee proceedings subsequently being set aside or the order from which they arose is reversed or varied.

WHEN IS A DEBT DUE OR ACCRUING?

A debt is a sum of money which is now payable, or will become payable in the future because of a present obligation.

A debt cannot be attached if there is some condition which has to be fulfilled before it becomes payable from the garnishee to the debtor.

If the debt only becomes payable by the garnishee upon the happening of a necessary event, then it is not attachable.

ATTACHABLE DEBTS	NON-ATTACHABLE DEBTS
Bank trading accounts	An order obtained by the debtor against the garnishee for costs which are to be taxed
Accounts with financial institutions	Debts which have been assigned to a third party or which the judgment debtor has given directions to pay to a third party
Money held by the sheriff after successfully executing a warrant	Debts owed by the Crown
A judgment debt in which the debtor was a successful plaintiff (or co-plaintiff) and the garnishee was the defendant	Dividends in bankruptcy
Rental due to the debtor	Debts which are not recoverable within Victoria
	Bonuses under a life assurance policy
	Legacies
	Money of a prisoner held by police whilst the prisoner is in custody
	Money in a joint account

PRIORITY WHEN RECEIVER APPOINTED

If a receiver is appointed to a company after obtaining the attachment of but before the garnishee pays, the receiver has a better claim than the creditor. If the garnishee has already paid the creditor by the time the receiver is appointed, the receiver cannot take action against the creditor for the return of the debt.

NEED MORE INFORMATION

Behan Legal advises and assists clients on these important issues. For an appointment, call 03 9646 0344.