I. INTRODUCTION
3.1 In this chapter we consider recent changes in United Kingdom law which enable the attachment of moneys in deposit accounts and withdrawable share accounts with building societies and credit unions. Apart from the existing New South Wales provisions for the attachment of moneys in bank accounts, no other Australian jurisdiction appears to have implemented or considered any generally applicable reform of the common law relating to the attachment of moneys in bank and other accounts. However under the Rules of the Family Law Court (the Family Law Rules) moneys in accounts with banks, building societies and credit unions may be attached to effect compliance with certain orders of the Court. The relevant provisions in the Family Law Rules are also considered in this chapter.1
3.2 There is an administrative form of garnishment available to the Commissioner for Taxation to enable the Commissioner to recover unpaid tax liabilities.2 As a result of recent amendments to Commonwealth taxation legislation,3 moneys lodged by a defaulting taxpayer with a building society or credit union, whether by way of deposit or as withdrawable share capital, are attachable by the Commissioner. The taxation procedure is administrative rather than judicial and the provisions are extremely wide - eg they permit the attachment of moneys which may become due to the taxpayer (para 2.16). Therefore we have concluded that discussion of these provisions would serve little useful purpose since they raise issues beyond the scope of this reference.
II. RECENT REFORM IN THE UNITED KINGDOM
3.3 Until 1982 United Kingdom law made provision for the attachment of moneys in a deposit account in a bank in terms similar to subsection (2) of the New South Wales provisions for the attachment of moneys in bank accounts (para 2.22), although certain bank accounts were excluded from the provision.4 There was no United Kingdom provision comparable to subsection (1) of the New South Wales provisions. In 1982 new legislation came into operation which extends application of the provisions to deposit accounts with institutions other than banks, including building societies and credit unions, and to withdrawable share accounts.5 It appears that the new provisions have not yet been judicially considered.
3.4 The United Kingdom provision concerning the attachment of moneys in accounts is in the following terms:
40. (1) Subject to any order for the time being in force under subsection (4), this section applies to the following accounts, namely -
(2) In determining whether, for the purposes of the jurisdiction of the High Court to attach debts for the purpose of satisfying judgments or orders for the payment of money, a sum standing to the credit of a person in an account to which this section applies is a sum due or accruing to that person and, as such, attachable in accordance with rules of court any condition mentioned in subsection (3) which applies to the account shall be disregarded.
(3) Those conditions are -
(a) any condition that notice is required before any money or share is withdrawn:
(b) any condition that a personal application must be made before any money is withdrawn
(c) any condition that a deposit book or share- account book must be produced before any money or share is withdrawn: or
(d) any other prescribed condition.
(4) The Lord Chancellor may by order make such provision as he thinks fit, by way of amendment of this section or otherwise, for all or any of the following purposes. Namely-
(5) Any order under subsection (4) shall be made by statutory instrument subject to annulment in pursuance of a resolution of either I-louse of Parliament.
(6) In this section ‘deposit-taking institution’ means any person carrying on a business which is a deposit-taking business for the purposes of the Banking Act 1979.6
3.5 By virtue of subsection (6) and the provisions of the Banking Act 1979 (UK) the deposit- taking institutions within section 40 include building societies within the meaning of the Building Societies Act 1962 (UK) (both terminating and non-terminating building societies) and credit unions within the meaning of the Credit Unions Act 1979 (UK), as well as various other types of organisation such as friendly societies and insurance companies.7 The only additional condition which has been prescribed for the purposes of subsection (3) is a condition in terms similar to paragraph (d) of subsection (2) of the present New South Wales provisions relating to bank accounts, namely, “any condition that a receipt for money deposited in the account must be produced before any money is withdrawn.”8 Under the English Supreme Court Rules a garnishee order attaching moneys in an account with a Building Society or credit union cannot operate to reduce the amount standing to the judgment debtor’s credit below one pound.9 The reason for the one pound limit is that “in many cases an account- holder would cease to be a member of the garnishee building society or credit union if his or her account balance fell below one pound.10 The limitation therefore protects a judgment debtor’s membership in most but not all, cases.
3.6 The new United Kingdom legislation also enables the Lord Chancellor, by order, to describe a sum which a deposit-taking institution subjected to a garnishee order may deduct from the attached debt towards the clerical and administrative costs of complying with the order.11 In making such an order the Lord Chancellor may prescribe different sums in different cases and, in particular. may prescribe sums differing according to the amount of the judgment debt to be satisfied under a garnishee order. However a sum so prescribed may not be deducted or, if it is deducted, may not be retained by a garnishee in a situation where the judgment debtor is insolvent and, under legislation comparable to section 118 of the Bankruptcy Act 1966 (Cth) and section 455 of the Companies (New South Wales) Code, 1981, the judgment creditor would be required to pay moneys received pursuant to the garnishee order to the trustee in bankruptcy or, as the case may be. the liquidator of the judgment debtor.
3.7 The United Kingdom legislation is general legislation which is intended to apply to a wide range of financial institutions irrespective of the particular nature of their financial operations. Although subsections (3)(d) and (4) permit ready reform of the law should the legislation prove inadequate or inappropriate in specific cases. it does not otherwise take account of particular problems which might arise in attempting to attach moneys in accounts with building societies and credit unions. However the inclusion of building societies and credit unions as “deposit-taking institutions” does indicate that the United Kingdom legislature saw no legal or policy reason why moneys in deposit or withdrawable share accounts with these institutions should not, in general. be liable to attachment. The inclusion of withdrawable share accounts within the provisions is of particular significance since it disregards the legal nature of these accounts and treats a sum credited to a withdrawable share account in the same way as a sum credited to a deposit account.
3.8 Three features of the United Kingdom provisions have influenced certain of the recommendations which we make in Chapters 4 and 6. They are:
- section 40(4)(a) which permits particular types of account to be excluded from the provisions (para 4.16):
- the limitation on the operation of a garnishee order on an account in a building society or credit union which ensures that there remains a minimum amount credited to the account (para 6.18): and
- the provisions discussed in paragraph 3.6 whereby an amount for costs may be prescribed which the garnishee would be entitled to deduct from the attached debt before complying with the garnishee order (paras 6.54-6.58).
III. FAMILY LAW RULES
3.9 Rule4 of Order 33 of the Family Law Rules enables the attachment of debts and other moneys to satisfy certain Family Court orders for the payment of money, eg maintenance orders and orders for costs. Under Rule 4 —
(4) The following moneys may be the subject of a garnishment order
(18) An amount standing to the credit of a respondent in an account in a bank, building society, co-operative housing society or similar society, credit union or credit society, or investment fund or corporation, that is payable to the respondent on call or on notice shall subject to sub- rule (19), for the purposes of this rule, be a debt due to the respondent notwithstanding that any condition relating to the account or a demand or notice for payment under the account is unsatisfied.
(19) Where an amount referred to in sub- rule (18) is made the subject of an order under this rule then, unless the court otherwise orders, the first- mentioned order only operates to require payment of the said amount when any necessary period of notice has expired, but service on the garnishee of the order for payment of the said amount shall be deemed to be the giving of that notice.
3.10 Rule 4 came into operation on 2 January1985 and incorporates provisions formerly in Regulation 134 of the Family Law Regulations.12 Subrules (4) and (18) repeat with some minor amendments, subregulations (4) and (18) of Regulation 134. However subrule (19) is a new provision It has the effect that where an amount in an account subject to a notice condition is attached, the attached amount is not due for payment under the garnishment order until it would have been due for payment had the respondent (who, in the context of this Report is the equivalent of a judgment debtor) given notice of withdrawal when the order was served. In other words, subrule (19) ensures that the contractual right of the garnishee to withhold payment until the applicable notice period has expired is not overridden by the garnishment order. This new provision is of interest because it supports our view that although a notice period should be disregarded for the purpose of attachment it should not be disregarded for the purpose of payment under a garnishee order (paras 4.9-4.12).
3.11 Under Rule 4 a sum standing to the credit of a respondent in a bank, building society or credit union is attachable under subrule (4)(a) or, by virtue of subrule (18), under subrule (4) (c) only if the sum is payable to the respondent” on call or on notice”. The Full Court of the Family Court considered this requirement in Paleopoulos and Paleopoulos,13 a case which dealt with Regulation 134.
3.12 In Paleopoulos and Paleopoplos a bank sought to have a garnishment order attaching money in a savings bank account set aside on the ground that the money was not payable on call or on notice” because withdrawal from the account was conditional on the presentation of a signed withdrawal form and passbook and therefore it was not attachable under either subregulation (4) (a) (subrule (4) (a)) or subregulation (18) (subrule (18)). At first instance14 Mr Justice Smithers dismissed the bank’s application. His Honour reviewed various authorities supporting the common law position that the money was not a debt due or accruing because withdrawal was subject to presentation of the account-holder’s passbook. He then considered the possible meanings of” on call” and “on notice” and concluded that the words “on call or on notice”
....are intended to distinguish between money held by an institution for repayment to the customer, on the one hand without any delay beyond that which is a consequence of the need for compliance with the method of withdrawal provided, and on the other hand only after the passing of a previously agreed period of time after notification by the customer that the money is required. In other words the subregulation is worded consistently with an intention to encompass all money in one of the institutions described which is payable immediately or after a period stipulated in a notice, no matter what method of payment is required by the conditions of the contract between the institution and the customer.15
On appeal, the Full Court upheld Mr Justice Smithers’ decision and reasoning.16 The Full Court’s decision went some way to clarifying the scope of subrules (4) (a) and (18). However the operation of Rule 4 in relation to moneys held in accounts remains uncertain in some respects.
3.13 In Paleopoulos and Paleopoulous17 the Court was concerned only with conditions as to the “method of payment’ required by the terms of the contract between the garnishee bank and the respondent, ie conditions that required the presentation of a signed withdrawal form and a passbook Consequently it is not clear whether Mr Justice Smithers’ statement is to be taken to limit the conditions to be disregarded under subrule (18) to conditions relating to the method of payment or whether other conditions relating to the account in question are also to be disregarded. For example certain accounts with banks, building societies and credit unions are payable on call or on notice subject to conditions as to the method of payment, but. also subject to conditions that a minimum balance is to be retained in the account and that withdrawals are to be made in minimum amounts. Depending on the amount to be satisfied under a garnishment order, in some cases minimum balance/minimum withdrawal conditions would have the result that, although there was an amount payable on call or on notice when conditions relating to the method of payment were disregarded, the garnishee would not he required to pay to the judgment debtor the actual amount to be satisfied under the garnishment order if the judgment debtor demanded payment of that amount. Consequently there would be no attachable debt by virtue of subrule (18) unless the minimum balance minimal withdrawal conditions were also to be disregarded under that subrule. On the other hand, it seems clear from Mr Justice Smithers’ statement that, in certain circumstances, a deposit for a fixed term is not attachable under Rule 4. Where moneys have been deposited for a fixed term, withdrawal is subject to, say, presentation of a deposit receipt and the term has not expired when the garnishment notice is served. the amount of the deposit will not be attachable under either subrule 4(a) or by virtue of subrule (18), subrule 4(c) because the amount is not payable on call or on notice until the term of the deposit has expired. Nor is the amount otherwise attachable under subrule 4(c) as a debt due or accruing because payment is subject to presentation of the deposit receipt.
3.14 It is also doubtful whether Rule 4 is effective to permit the attachment of an amount standing to a respondent’s credit in a withdrawable share account where the amount is payable to the respondent on call or on notice. The term account” is capable of encompassing a withdrawable share account and subrule (18), whatever its precise scope. at least requires that conditions as to the method of payment be disregarded. Therefore it would seem that amounts in some types of withdrawable share accounts could be attached under Rule 4. However we are aware of at least one instance where a Court of Petty Sessions discharged a Regulation 134 garnishment order which sought to attach an amount standing to the respondent’s credit in a withdrawable share account with a building society.18 The reasons for the Court’s decision were that the procedure of garnishment is not a satisfactory way to levy execution on property in the form of shares and the references to “moneys” and “money” in subregulation (4) (which recur in subrule (4)) indicated the inapplicability of Regulation 134 to shares. Further, and “most importantly’, the respondent’s rights in relation to the shares held did not extend to certainty of withdrawal because of the rules of the garnishee building society. To the extent that the decisive factor in the Court’s decision was that the amount in question was not payable “on call or on notice”, it is undoubtedly correct.19
3.15 Since it seemed likely that building societies and credit unions in this State would have some experience of Family Court garnishment orders, we inquired of the Permanent Building Societies Association (NSW) Ltd whether such orders had caused its members any practical difficulties which ought to be taken into account for the purposes of this reference. The Association was not aware of any practical problems and wrote to its members in this respect. The limited response to the Association’s circular suggests that either Family Court garnishment orders on building societies are rare or they cause the garnishees little practical difficulty.
3.16 The general approach taken in Rule 4(18) to enable the attachment of moneys in accounts with various institutions departs significantly from that adopted in the United Kingdom provisions and also the existing New South Wales provisions for the attachment of moneys in bank accounts. We are not persuaded that a provision modelled on Rule 4(18), but taking account of the present uncertainties and limitations of that provision, would be preferable to the format of the existing bank account provisions. We have concluded that any reform of the New South Wales provisions should follow the format of the existing provisions and identify, in the manner of subsection (2) (para2.22), each of the types of conditions which are to be disregarded for the purpose of attachment. We consider that this approach tends to greater certainty in the operation of the provisions.
FOOTNOTES
1. Order 33 r4. These provisions of the Family Law Rules are substantially the same as the provisions in reg 134 of the former Family Law Regulations (Statutory Rules 1975 No 210 (Cth) as amended). The Family Law Rules (Statutory Rules 1984 No 425 (Cth) and new Family Law Regulations (Statutory Rules 1984 No 426 (Cth)) came into operation on 2 January 1985 - Family Law Rules, Order 1 r2(1) and Family Law Regulations. regs 2 and 78. A regulation in substantially the same form as former Family Law reg 134 has been adopted tot the purpose of enforcing maintenance orders in New South Wales - Maintenance Act Regulations. reg 16.
2. Eg. Income Tax Assessment Act 1936 (Cth) s218.
3. Taxation Laws Amendment Act 1984 (Cth) s119(b) and also ss18(a) and (b). 194, 223(d) and 373(a) and (b).
4. Administration of Justice Act 1956 (UK) s38.
5. Supreme Court Act 1981 (UK) ss40 and 40A County Courts Act 1959 (UK) ss143 and 143A.
6. Supreme Court Act 1981 (UK). Section 143 of the County Courts Act 1959 (UK) is in the same terms.
7. Jacob et al, The Supreme Court Practice 1982. Vol 1. Fifth Cum Suppl, para 48/1/8A.
8. Supreme Court 049 r1(3).
9. Id, r1(4).
10. Letter from the lord Chancellors Department dated 11 June 1985.
11. Supreme Court Act 1981 (UK) s40A: County Courts Act 1959 (UK) s143 A.
12. Note 1.
13. [1980] FLC 90-838.
14. Paleopoulos and Paleopoulos [1979] FLC 90-704.
15. Id. at 78.555.
16. [1980] FLC 90-838. at 75.299.
17. [1979] FLU 90-704; [1980] FLC 90-838 (Full Court).
18. Transcript of proceedings. Franze v Franze: United Permanent Building Society Ltd (Garnishee). Court of Petty Sessions Balmain, No 38 of 1978. 18 January 1980.
19. Counsel for the respondent to the application for discharge of the order argued that a practical approach should be taken to the operation of Regulation 134 and that. looked at in that light. an investment in withdrawable shares was clearly the type of debt and right which could and should be the subject of a garnishment order. The Court recognised that “it may well be that the legislature wished to include all manner of investment in building societies as being the proper subjects of garnishment orders under reg 134 but I am of the view that this is a technical matter as put by counsel for the applicant and that being so I must have close regard to the legal application of the words used in the regs.” Id, third page of transcript of proceedings.
20. Three of the Association’s fourteen members replied. They indicated that they had experienced no practical difficulties because they had either never or only rarely been subjected to a Family Court garnishment order.
