Enforcing a Judgment

25 July, 2022 | Nathan Tetzlaff

So you’ve had a big dispute, gone to Court, and the Court has issued a judgment in your favour.  Fantastic!  But… the other party doesn’t pay the amount that the Court has ordered them to pay.  What now?

A lot of people don’t think beyond having a judgment saying what they’re owed.  Contrary to what many people might believe, the Court does not automatically get involved in the process of squeezing money out of the people who owe you.  This is the process of enforcement.  The Court can help, but you still need to drive the process.

The steps involved are a little different depending on whether the money is owed by a company or an individual, and whether you think that they have the means to pay (or enough assets to cover the debt if these were sold).

Getting blood out of a stone

In the case of a person who simply doesn’t have the money available, for instance if they are on a benefit or are otherwise in poor financial circumstances, you may find that you are simply out of luck.

The old saying is that it’s not possible to squeeze blood out of a stone, and it’s not possible to get money from somebody that just doesn’t have it.  Ideally, when you talk to your lawyer at the very beginning of the process you should discuss whether or not the person has the ability to pay if you win the case.

One option against a poor debtor is a financial assessment hearing.  This is an application you can make to the Court to have the debtor examined by a Court registrar about their assets, income, budget, and means to pay the debt.  The registrar can order that a reasonable regular payment be made.  For a debtor with very little income this may not be a large amount, but it is at least something.  If the debtor defaults on this payment, they can be held in contempt of Court.

Options against an individual with assets or means to pay

A financial assessment hearing may be useful in this case too.

When somebody is able to make payments, and it’s just a matter of putting enough pressure on them to do this, you could try issuing a bankruptcy notice.  This is especially effective against people who are directors of companies, self-employed, or have a reputation to protect.  Being bankrupt would be a significant problem for such people.

This is a good way to get payment from a person who may not have the money but may have access to it if pushed hard enough.  (Perhaps from a trust, or from borrowing.)

Another option is to go after their assets directly.  Providing that their assets aren’t hidden or protected, for example in a trust, you may be able to apply to the Court for a sale order.  In the case of real-estate, you can obtain a charging order which prevents the property from being sold until payment has been made to you.  Beyond that, the next step is to request an order from the Court allowing you to sell the real-estate to pay the debt.

Options against a company

You can apply for orders of sale or charging orders against a company’s property in the same way as you can against an individual’s property.

The most common and generally most effective way to obtain payment of a judgment against the company is to issue a statutory demand.

This is a formal notice requiring the company to pay an undisputed amount to you.  If the company fails to make payment within 15 working days, then you can make an application to put the company into liquidation.  Providing that the company is still trading or has assets, the shareholders of the company will generally want to avoid this outcome which gives you good leverage to obtain payment of the judgment.  If the company is unwilling or unable to make payment, putting the company into liquidation gives the liquidators complete control of the company’s assets. They will sell the company’s business and property to pay off its creditors.

The risk with liquidation is that a judgment is an unsecured debt.  A liquidator will pay secured debts first, then give equal preference to all the company’s unsecured creditors.

As an unsecured creditor in a liquidation, you probably won’t receive full payment of your judgment and may not receive anything (especially if there are a lot of other creditors).  Putting a company into liquidation is a risk but has the advantage of appointing a neutral third party to make enquiries and make payments to the best of the company’s ability.  Again, consider that it’s not possible to get blood out of a stone.

There are two main things to take away from the subject of enforcement:

1. Consider how you might enforce judgment at the very start of the process. While some people go to Court on principle, it’s always good to know how you’re going to get paid in the event that you win a case.
2. There are a range of different ways to enforce a judgment against different types of debtors, which have different advantages or disadvantages.

If you need assistance enforcing a judgment, please contact litigation executive, Mikayla Sagar by email on mikayla.sagar@smithpartners.co.nz or by phoning 09 837 6890 to schedule an appointment with Nathan.