I. INTRODUCTION

6.1 In Chapter 5 we recommend reform of the law to permit the attachment of amounts standing to the credit of judgment debtors in withdrawable share accounts and deposit accounts with building societies (other than co-operative housing societies) and credit unions. In this chapter we make further recommendations for reform which we consider should be implemented if our principal recommendations are adopted. These additional recommendations take account of:-

• conditions applying to certain withdrawable share accounts and deposit accounts which we consider should be included as conditions to be disregarded for the purposes of attachment;
• the nature of the operations of building societies and credit unions and the need for special protection provisions of the kind which apply to banks;
• the fact that building societies and credit unions are organisations of which the judgment debtor will usually be a member and not merely a customer¹;
• statutory charge provisions under the respective Acts regulating building societies and credit unions;
• practical problems with the attachment of debts accruing due at District Court and Local Court level;
• the probability that garnishee orders seeking to attach withdrawable share accounts and deposit accounts with building societies and credit unions frequently would be ineffective; and
• expenses incurred by garnishees in complying with garnishee orders.

II. CONSEQUENTIAL RECOMMENDATIONS

A. Special Conditions

6.2 There are three types of conditions which may apply to a deposit account/withdrawable share account with a building society or credit union which would not be within subsection (2) of the bank account provisions (para 4.1), amended as we recommend in Chapter 4. These are:

• a condition that moneys or shares shall not be withdrawn for a specified period,
• a condition that any withdrawal is to be for a minimum amount; and
• a condition that a minimum balance is to be retained in the account.

These conditions may be within subsection (1) of the present bank account provisions. However we have recommended that these provisions be repealed and replaced with a single provision (the new account provision) which applies to accounts generally and specifies the various conditions applicable to accounts which are to be disregarded for the purpose of attachment (paras 4.3-4.5). It is therefore necessary to consider whether the above conditions should be included in the new account provision Since accounts in banks can also be subject to such conditions, what follows in paras 6.3-6.10 is equally applicable to bank accounts.

1. Non-Withdrawal Period

6.3 An account to which a non-withdrawal period applies is not the same as a fixed- term deposit account In the latter case there is a debt which accrues due on expiry of the term subject to satisfaction of any precondition to payment, stich as the presentation of a receipt Where an account is subject to a non- withdrawal period there is no debt due or accruing until demand of payment is made at some indeterminate time after the non-withdrawal period expires and any other precondition to payment, including the expiration of any notice period. is satisfied. Consequently any garnishee order served during the non-withdrawal period would be ineffective, notwithstanding that the non-withdrawal period may expire within days of the order being served and the judgment debtor could then withdraw the amount sought to be attached.

6.4 We recommend that, except in the case of an account with a Starr - Bowkett building society, a condition that moneys or shares shall not be withdrawn for a specified period be included as a condition to be disregarded for the purpose of determining whether an amount in an account is attachable. As indicated in paras 5.19 and 5.20, we consider that accounts with Starr-Bowkett building societies should be excluded from this recommendation because of the distinctive nature of these societies.

6.5 Although we recommend that a condition that moneys or shares cannot be withdrawn for a specified period should be disregarded for the purpose of attachment we also consider that, as with a notice period (paras 4.9-4.12), an unexpired non-withdrawal period should not be disregarded in determining when an attached amount is due for payment. Again, where the account is subject to both a non-withdrawal period which has not expired and a notice period. It should be clear that both conditions are to take effect for the purpose of payment. This would ensure that the contractual rights of the garnishee are not overridden and can he achieved by a provision which equates service of a garnishee order with receipt by the garnishee of a notice of withdrawal or demand for payment for the purposes of the contract between the garnishee and the judgment debtor.

6.6 Accordingly we recommend that where an amount in an account is attached, the garnishee order should be deemed to operate as a notice of withdrawal or demand of payment under the contract in respect of the account which the garnishee should be deemed to have received

(a) on the date of service of the order: or

(b) where the judgment debtor is not entitled under the contract to give notice of withdrawal or demand payment on the date of service of the order - on the date on which the judgment debtor would have become entitled to do so.

We also recommend that a deemed notice of withdrawal or demand of payment should be stated to be irrevocable while the garnishee order remains in force. This further recommendation ensures that since the garnishee order is the equivalent of a notice or demand for the purposes of the contract between the garnishee and the judgment debtor, the judgment debtor cannot exercise any right under that contract to countermand a not ice or demand to circumvent the contractual effect of the garnishee order.

6.7 These recommendations have the general effect that where an amount in an account is attached. service of the garnishee order has the contractual consequences which would have followed if the garnishee had received a notice of withdrawal or demand of payment either when the order was served or, if the judgment debtor was not then entitled to give notice oh withdrawal or demand payment, immediately the judgment debtor was entitled to do so. Therefore where moneys in an account are payable on demand and there is no non-withdrawal period or the non-withdrawal period has expired. the amount attached becomes due for payment under the contract on service of the garnishee order. If the account is subject to an unexpired non-withdrawal period after which moneys in the account are payable on demand, the amount attached becomes due for payment under the contract when the non-withdrawal period expires. If the account is subject to a notice condition and there is no non-withdrawal period or the non-withdrawal period has expired, the amount attached becomes due for payment under the contract on expiry of the notice period, commencing on the date of service of the garnishee order. However if the account is subject to an unexpired non-withdrawal period and a notice condition, the amount attached becomes due for payment under the contract on expiry of the notice period. commencing when the non-withdrawal period expires.

6.8 Our recommendations in para 6.6 take account of non- withdrawal periods and notice conditions. However they also ensure that contractual terms which depend for their operation on the receipt of a notice of withdrawal or demand of payment given or made in accordance with the contract - such as the example Starr - Bowkett rules set out in para 5.17 and the credit union rules discussed in paras 5.39-5.40 - will take effect by operation of law. It could be expected that garnishee Building societies and credit unions would take a practical approach to this problem and, for the purpose of payment under a garnishee order, give effect to the contract with the judgment debtor as if a notice or demand had been received when the order was served. However the provision we recommend overcomes the technical argument that although an amount in an account has been attached, the date on which it is due for payment to the judgment debtor (and therefore the date on which payment is required under the order) cannot be determined until a notice of withdrawal or demand of payment has been received by the garnishee in accordance with its rules.

2. Minimum Withdrawal/Minimum Balance Conditions

6.9 A garnishee order on an account subject to a condition that any withdrawal is to be for a minimum amount, or to a condition that a minimum balance is to be retained in the account, will not always be ineffective. This will happen only if, in the case of a minimum withdrawal amount, the amount to be satisfied under the order is less than the minimum withdrawal amount or, in the case of a minimum balance condition. the amount to be satisfied under the order is such that compliance with the order would reduce the balance in the judgment debtor’s account below the minimum. Nevertheless in either case the order will be ineffective unless the garnishee waives the relevant condition or statutory provision is made to disregard it.

6.10 Minimum withdrawal/minimum balance conditions facilitate the management of funds by financial institutions and also bear on the interest rate offered on the particular account It is improbable that, for any one financial institution, the incidence of garnishee orders affecting accounts subject to such conditions in the manner indicated above would have any significance for the overall operations of the institution. Therefore we consider that such conditions can be disregarded without endangering the ability of a garnishee organisation to manage its funds. So far as the payment of interest is concerned, it appears that financial institutions offering accounts of the type in question usually protect themselves against the possibility of being bound to perform the contract with the depositor/shareholder notwith-standing breach of a minimum balance condition - eg. by making it a condition of the account that if the balance for any reason falls below the minimum, the account will be closed. To the extent that a particular institution may not already do so, it would have the option of making future accounts of this type subject to whatever terms it considered appropriate to protect its interests in the event that such an account was garnisheed. Therefore we recommend that the conditions applicable to accounts which are to be disregarded for the purpose of attachment should include a condition that any withdrawal from an account is to be for a minimum amount and a condition that a minimum balance is to be retained in the account.

B. Protection Provisions

6.11 Our inquiries indicate that, in general the manner in which building societies and credit unions conduct their operations does not present practical difficulties for these organisations which warrant protection provisions additional to those applying to banks (paras 2.23 and 2.24).²

1. Unavoidable Withdrawal After Attachment

6.12 We were particularly concerned that, because of an organisation’ s procedures, there could be a significant delay between service of a garnishee order and the time when the garnishee could terminate withdrawals by the judgment debtor from the attached account, or between service of the order and the time when the garnishee would be able accurately to determine the amount in the account as at the date of service. Delay between the date of service of a garnishee order and the suspension of withdrawals from the account is significant because the order operates to attach the amount standing to the credit of the judgment debtor as at the date of service. Therefore, unless special provision is made, the garnishee is at risk in relation to any withdrawals made after that date. Again. any significant time lapse after service of a garnishee order issued out of the District Court or a Local Court caused by procedural delays in determining the credit balance in the judgment debtor’s account at the date of service of the order exposes the garnishee to possible court proceedings for non- compliance with the order.

6.13 Our inquiries indicate that in some cases there would be short time delays between service of a garnishee order on a building society or credit union and the suspension of withdrawals from the attached account For example the automated teller system used by those credit unions which offer cashcard facilities is a computer tape system which involves a delay of up to 48 hours before a credit union user can program the system to refuse withdrawals by a particular customer and assess the balance of the customer’s account. One building society has advised that the delay on its automated teller operations can be several days, depending on the location of the machine used.³ Again, where a customer is able to withdraw through a country or interstate agent of a garnishee, there will be some delay in terminating the facility and/or processing any agency transactions on the account. It appears that a maximum delay of 5 days is the norm for intrastate agency transactions subject to abnormal circumstances such as a postal strike. However in relation to interstate transactions, eg where a customer is using a cashcard whilst travelling, the delay in processing transactions to the customer’s account may be up to two weeks.

6.14 The Supreme Court Rules deal with the problem of unavoidable payment of an attached debt in contravention of the garnishee order by permitting any garnishee to apply to the Court for an order that the amount attached be reduced where, although the garnishee has acted with reasonable diligence to give effect to the order, all or part of the attached debt has been paid in accordance with the garnishee’s contract with the judgment debtor.⁴ However the comparable provisions under the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970 only permit a garnishee bank to apply for a reduction order.⁵ In Chapter 7 (paras 7.6-7.9) we recommend that the position should be uniform in all jurisdictions and that all garnishees should have the benefit of this protection If this later recommendation is not adopted, we recommend that the provision in the District Court Act, 1973 and the Local Court (Civil Claims) Act, 1970 under which a garnishee bank may apply for an order to reduce the attached debt in cases of unavoidable payment after attachment be extended to apply to building societies and credit unions.

6.15 For financial institutions the utility of these provisions depends on the garnishee’s withdrawal procedures being such that any need to apply for a reduction order is apparent before the garnishee is required to comply with the garnishee order or appear in court proceedings in relation to the garnishee order. Consequently any substantial delay before a garnishee, acting with reasonable diligence, could suspend withdrawals may undermine the protection intended by the provision However, since time delays involved in processing transactions on accounts with building societies and credit unions appear generally to be short, extension of the District Court and Local Courts provisions should adequately protect building societies and credit unions. We have also taken the maximum delay period by interstate transactions into account in recommending that the period for compliance with a garnishee order issuing out of the District Court or a Local Court be 21 days (para 6.35). A three-week compliance period will give banks, building societies and credit unions ample time to determine the credit balance in the Judgment debtor’s account at the date of service of the order and. if necessary, apply for a reduction order before the judgment creditor can bring any proceedings for non-compliance.

2. Passbooks

6.16 Some accounts with building societies and credit unions are subject to a condition that payments into and out of the account can be made only on presentation of a passbook in which each transaction and the adjusted balance in the account is recorded at the time of payment. When a garnishee order affects such an account there is the danger that the garnishee will make double payment of all or part of the attached debt by complying with the garnishee order and then making a further payment to the judgment debtor on presentation of the unadjusted passbook.

6.17 Provisions under the Supreme Court Rules, District Court Act 1972) and the Local Courts (Civil Claims) Act 1970 protect banks against the possibility of double payment where money can be withdrawn from a deposit account” only on presentation of a “deposit book”. We consider that these provisions, which are discussed in para 2.24, should also apply to accounts with Building societies and credit unions which are subject to a condition that withdrawals can be made only on presentation of the account-holder’s “deposit book”. It appears that “deposit book” is usually understood to describe a book containing slips on which the account-holder records the details of a deposit whereas “passbook” is usually understood to describe a book in which the amount of each deposit and withdrawal and the adjusted account balance is recorded.⁶ Building societies and credit unions use “passbook” in this sense and we consider that the existing provisions should be amended by adopting this term. We do not think that this change in terminology would cause any confusion so tar as banks are concerned. Accordingly we recommend that the provisions which apply to deposit accounts in banks which are subject to a condition that a “deposit book” must be produced before money is withdrawn be extended to apply to deposit and withdrawable share accounts with building societies and credit unions which are subject to the same condition and that the term “passbook” be substituted for the term “deposit book”.

C. Membership

6.18 We consider that the relationship between a building society or credit union and a judgment debtor member should not be terminated by the operation of a garnishee order. Therefore we recommend that so much of the amount standing to the credit of a judgment debtor in a withdrawable share account in a building society or credit union as is the minimum amount that must be maintained in the account in order that the judgment debtor retains membership of the building society or credit union should not be attachable.

D. Statutory Charge Provisions

6.19 Building societies and credit unions have the benefit of a statutory charge over a member’s shares in, and deposits with, the organisation to secure any debt which is due from the member to the organisation.

6.20 Section 57 of the Co-operation Act, 1923,⁷ which applies to Starr - Bowkett Building societies and to permanent Building societies registered under the 1923 Act or the Building and Co-operative Societies Act, 1901,⁸ states:

[(1)] A society shall have a charge upon the share or interest in the capital and on the credit balance and deposits of a member or past member and upon any dividend, interest, bonus or rebate payable to a member or past member in respect of any debt due from the member or past member to the society, and may set off any amount paid on account of that share or otherwise, or any amount credited or payable to the member or past member, in or towards payment of the debt.

(2) The charge created by subsection (1) may be enforced, at any time after 7 days’ notice to the member or past member, by the appropriation by the society of the capital, interest or deposit subject to the charge.

(3) Any share in respect of which capital has been so appropriated shall be cancelled. (emphasis added)

Section 58 of the Permanent Building Societies Act, 1967,⁹ which applies to the remaining permanent building societies, is in virtually identical terms.

6.21 Section 48 of the Credit Union Act, 1969¹⁰ states:

(1) A credit union ... shall have a charge upon the share or interest in the capital, and on the credit balance of a member or past member and upon any dividend, interest or rebate payable to a member or past member in respect of any debt due from the member or past member to the credit union ... and may set off any amount paid on account of that share or otherwise, or any amount credited or payable to the member or past member, in or towards payment of the debt.

(2) The charge created by subsection (1) may be enforced, at any time after not less than 7 days’ notice to the member or past member, by the appropriation by the credit union ... of the capital or interest subject to the charge.

(3) Any share in respect of which capital has been appropriated pursuant to subsection (2) shall be cancelled. (emphasis added)

6.22 The significant difference between the statutory charge provisions is that the provisions which apply to building societies (para 6.20) expressly encompass any deposits of the defaulting member, whereas the provision applying to credit unions (para 6.21) does not The reference to deposits in the building society provisions is the result of recent amendment of the provisions¹¹ and removes a real doubt that the former provisions applied only to shares and amounts credited or payable in respect of shares. However a comparison of the new building society provisions with the credit union provision raises the question whether the latter provision encompasses deposits when it makes no express reference to deposits but otherwise is virtually identical. In our opinion the terms of section 48 of the Credit Union Act, 1969 are wide enough to include deposits without express reference, particularly when the section charges interest and the Act permits the payment of interest on deposits but not on share capital.¹² Furthermore, unless section 48 is so interpreted, it would offer credit unions little security for debts due from members when it is borne in mind that the shareholding of a defaulting member is likely to be of little value (para 5.35).

6.23 There is a further interpretative difficulty common to each of the statutory charge provisions. The first paragraph of each section charges the whole of a member’s share or interest in the capital of the building society/credit union (and the whole of the moneys referred to) in respect of any debt due to the organisation On the other hand the second paragraph of each section empowers the building society/credit union to appropriate “the capital interest or deposit [capital or interest] subject to the charge”. It is highly improbable that Parliament intended to authorise the appropriation of any more of the member’s share or interest in the capital of the organisation (or the member’s deposits) than is necessary to discharge the debt due to the organisation. Therefore the question is whether, since the first paragraph purports to charge the whole of the member’s share or interest in capital and the moneys referred to, the second paragraph is to be read as authorising appropriation only to the extent necessary to discharge the debt due or whether, since the second paragraph authorises appropriation of the capital or interest or deposit subject to the charge, the first paragraph is to be read as creating a charge over the member’s share capital and the moneys referred to only to the extent of the debt due, ie as creating a limited charge.

6.24 The latter interpretation is at odds with the usual operation of a charge to charge the whole of the asset(s) securing a debt- Normally the effective enforcement of a charge is possible only by sale. Consequently, unless an asset is divisible, the whole asset must be charged to enable transfer of ownership on sale. However, given the divisible nature of the particular assets covered by the statutory charge provisions, ie share capital and debts payable by the charge the notion of a limited charge is not untenable. Nevertheless we have concluded that the provisions charge the whole of the member’s share or interest in capital and the moneys referred to.

6.25 We have reached this conclusion principally because subsections (2) and (3) of section 57 of the Co-operation Act, 1923 (para 6.20) are the result of recent amendments to the section.¹³ The section did not previously authorise appropriation by the organisation Consequently it would be difficult to argue that the old section 57 created a limited charge because the argument hinges on the interaction between subsections (1) and (2) in the light of Parliament’s presumed intention. On the other hand, section 58 of the Permanent Building Societies Act, 1967 already authorised appropriation prior to its recent amendment¹⁴ and, when taken alone, raised the possibility of a limited charge. However the old section 58 was otherwise virtually identical to the old section 57, leading to the conclusion that the nature of the charge under both sections (and therefore also under section 48 of the Credit Union Act, 1969) was the same, ie unlimited. It seems unlikely that Parliament intended to alter the nature of a charge under section 57 by the inclusion of subsections (2) and (3) when the subsections otherwise operate to facilitate the enforcement of a charge and are, in this respect, in line with the other statutory charge provisions.

6.26 If our conclusion is incorrect and the provisions create a limited charge, they cause no difficulty in the context of garnishee orders. However if the provisions charge the whole of a member’s share capital and other moneys referred to, they present a common problem in relation to a garnishee order on a member’s deposit or withdrawable share account. Where a debt is due from the judgment debtor to the garnishee when the order is served, a charge will exist over the whole amount in the judgment debtor’s account Consequently the order will be ineffective to attach any amount in the account in excess of the debt due to the garnishee unless -

(a) the garnishee exercises its discretionary power to set-off or appropriate and pays the excess in compliance with the order; or

(b) in subsequent court proceedings, the court orders payment of the excess to the judgment creditor.

There is no statutory obligation on a building society or credit union. once a charge arises, to exercise its rights under the applicable provision to discharge the charge. Therefore it is not obligated to set- off or appropriate in the event of service of a garnishee order. However if it chose to do so and the amount of the debt due from the judgment debtor exceeded the amount in the account, the debt sought to be attached under the order would be extinguished.

6.27 In the case of a garnishee order issuing out of the Supreme Court, the procedure in that Court (paras 2.11-2.13) would permit the garnishee organisation to either set off or appropriate and pay any balance into court or appear on the motion date to inform the Court of the existence of the statutory charge and whether there would be any balance to the judgment debtor’s credit if the amount of the debt due to the garnishee was set off or appropriated under the applicable provision In either case the Court could make a suitable order as to payment. If the garnishee did not pay any balance into court or appear on the motion date to assert its rights in relation to the attached debt, the Court would order the garnishee to pay the attached debt to the judgment creditor and the garnishee’s statutory rights would be overridden.

6.28 If the garnishee organisation does not comply with a District Court or Local Court garnishee order, the judgment creditor has to bring proceedings against the garnishee to determine what part, if any, of the attached debt should be paid in compliance with the order (paras 2.7-2.9). The garnishee may not comply with the order because there is no attachable debt after the garnishee exercises its statutory right to set off or appropriate, or because the garnishee chooses not to exercise its statutory rights and pay any balance due to the judgment debtor. If the first situation applies the garnishee is at risk of unnecessary court proceedings to establish that there is no attachable debt. This situation is one of the reasons for our recommendation in para 6.46 that building societies and credit unions (and also banks) should be able, in appropriate cases, to serve on the judgment creditor an affidavit stating that there is no debt due or accruing instead of frequently being subjected to unnecessary court proceedings for non-compliance. If the second situation applies the judgment creditor is required to bring equally unnecessary court proceedings.

6.29 The nub of the judgment creditor’s problem is the existence of the statutory charge and the fact that, under the respective charging provisions, it is left to the discretion of the garnishee organisation whether or not it exercises its right of set-off or appropriation. Therefore we recommend that any charge upon an amount standing to the credit of a judgment debtor in an account with a building society or credit union, being a charge that is created by an Act under which the building society or credit union is registered or regulated, or by the rules of the building society or credit union, should be disregarded for the purposes of a garnishee order, but that the building society or credit union should continue to have its right to set off or appropriate all or any part of that amount.

6.30 The form of this recommendation calls for some explanation. First, the inclusion of a “charge... created by an Act under which the building society ... is ... regulated” takes account of the recent amendment to the Co-operation Act, 1923 whereby the statutory charge provision in that Act now applies to building societies which are registered under the Building and Co-operative Societies Act, 1901, but whose activities are also regulated by the 1923 Act.¹⁵ Secondly the recommendation extends to “a charge ... created ... by the rules of the building society or credit union” because the rules of many building societies and credit unions include a rule in the terms of the statutory charge provision applicable to the particular organisation. Usually such rules cross-refer to the statutory provision Where a rule does so, in our view the rule is dependent on the statutory provision and does not create an independent contractual charge over the member’s account. However, in the absence of such a cross-reference, it may be arguable that a contractual charge exists which is independent of the statutory provision and which would be unaffected by our recommended provision if it did not extend to a charge created by the rules.

6.31 The practical effect of the recommended provision would be to oblige the garnishee organisation to set off or appropriate 50 much of the amount in the judgment debtor’s account as is necessary to pay the debt due to the organisation unless it was willing to look to other means of recovering the debt from the judgment debtor. We consider that adoption of our recommendation would not be detrimental to building societies or credit unions. A statutory charge arises only when there is a debt due from a member, ie when there is a debt presently payable by the member. Conversely, the charge ceases to exist once the debt due is paid. Therefore any additional security in respect of moneys which were payable by the judgment debtor but not yet due, which the garnishee organisation might gain by not exercising its right to set off or appropriate immediately a debt became due from the judgment debtor, would be lost if the judgment debtor paid the debt due. In other words, the effect of our recommendation would be to place the garnishee in the same position as it would be in if the judgment debtor had paid the debt due personally. If the judgment debtor paid the debt the statutory charge would lapse and the judgment debtor would be free to withdraw the credit amount in the account unless some other condition applying to the account precluded withdrawal. Where some other condition did preclude withdrawal, the garnishee order would remain ineffective despite our recommendation unless the condition in question was one which was to be disregarded for the purpose of attachment.

E. Debts Accruing Due

6.32 The law does not limit the period for which a garnishee order may operate in respect of a debt accruing due. For example a fixed-term deposit with a bank within the scope of the present provisions applying to bank accounts is attachable as a debt accruing notwithstanding that at the date of service of the garnishee order, the fixed term may have a substantial period to run On the principle that the judgment creditor stands in no better position than the judgment debtor in relation to the attached debt the garnishee should not be required to pax’ under the garnishee order until such time as the deposit term has expired. Where the garnishee order issues out of the Supreme Court, the garnishee bank may appear on the motion date to put the facts before the Court to prevent an order requiring payment to the judgment creditor before the attached debt is due (paras 2.11-2.13). However, if the garnishee order issues out of the District Court compliance with the order is required within 14 days of service. If the garnishee bank does not comply within that time, the judgment creditor may summon the bank to show cause why the order should not be complied with (paras 2.7 and 2.8). There is no period of compliance stipulated for garnishee orders issued out of a Local Court.¹⁶ However, if the garnishee bank does not comply with the order more or less immediately the judgment creditor may issue a summons to show cause (paras 2.7 and 2.9).

6.33 It is impossible to know to what extent the 14-day compliance Rule in the District Court may have operated to cause accelerated payment of an accruing debt or the frequency with which garnishees not obligated to pay an accruing debt in the immediate future have been subjected to District Court or Local Court proceedings to determine the respective rights of the garnishee and the judgment creditor in relation to payment of the debt The judgment creditor has to be satisfied that the garnishee has not complied with the order before he or she can summon the garnishee. In most cases there will be some communication between the garnishee and the judgment creditor before the judgment creditor takes out a summons. If the parties co-operate and are reasonable, the expense and inconvenience of unnecessary court proceedings should be avoided. Nevertheless the risk of unnecessary proceedings remains.

6.34 The problem of debts accruing is a general one and is not limited to the attachment of fixed-term deposits with banks. However it appears that it has arisen with some frequency by banks since several banks have evolved informal practices to try to avoid unnecessary court proceedings. It is also likely to be a significant problem for building societies and credit unions, not only in relation to fixed-term deposit/share accounts, but also in relation to accounts which are subject to a notice or non- withdrawal period (paras 4.9 and 6.3-6.7) and attached debts which are not due for payment until some time to be determined under the rules of the garnishee organisation (paras 5.17-5.18 and 5.39-5.40).

6.35 A garnishee becomes involved in garnishee proceedings without choice and should be subjected to the minimum inconvenience and expense necessary to enable the judgment creditor to enforce his or her rights without disregard of the rights of the garnishee. Therefore we recommend that, in the case of a District Court or Local Court garnishee order that is not expressed to be for the attachment of any wage or salary, the garnishee be required to make payment in accordance with the order

(a) within 21 days after service of the order or;

(b) in the case of any attached debt that is due for payment to the judgment debtor after the 21 day period - not later than the date on which the debt is due for payment.

The purpose of this recommendation is to clarify the time for payment under garnishee orders other than those which attach the judgment debtor’s wage or salary. Where the attached debt is due at the time of service of the order or falls due within the 21 day period, the garnishee would be required to make payment under the order before the 21 day period expires. If the attached debt falls due after that period expires, the garnishee would have the option of making early payment, whether within the 21 day period or at some other time before the debt is due, or making payment on the due date.

6.36 The above recommendation is limited to garnishee orders that are “not expressed to be for the attachment of any wage or salary. There are special provisions in the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970 which deal with garnishee orders that attach a wage or salary.¹⁷ Under the District Court Rules a garnishee employer is required to make payment under such an order within 14 days after the wage or salary is due for payment to the judgment debtor.¹⁸ There is no comparable provision in the Local Courts (Civil Claims) Rules. Although this reference is not concerned with garnishee orders attaching a judgment debtor’s wage or salary, we consider that a time for payment under such orders should be specified and that, in view of our recommendation in para 6.35, this should also be dealt with in the relevant legislation Therefore we recommend that, in the case of a District Court or Local Court garnishee order expressed to be for the attachment of any wage or salary, the garnishee be required to make payment in accordance with the order within 14 days after the wage or salary is due for payment to the judgment debtor. We consider that 14 days is ample time to allow an employer to make payment and do not recommend that the period be 21 days. The 21 day period for other garnishee orders is intended to ensure that garnishee banks, building societies and credit unions have adequate time to process garnishee orders on accounts (paras 6.12-6.15). Although the period may be over-generous for other non-employer garnishees, we are not disposed to distinguish further between different types of garnishee order.

6.37 If our recommendation in para 6.35 is adopted, we recommend that where an attached debt is due for payment to the judgment debtor after the initial 21 day compliance period, the garnishee be required to serve on the judgment creditor, before the 21 day period expires, a notice which sets out

(a) the date on which the attached debt is, or is likely to be, due; and

(b) where the amount of the attached debt is less than the unpaid amount of the judgment debt specified in the garnishee order - the amount of the attached debt.

6.38 The requirement that the notice state when the accruing debt is, or is likely to be, due takes account of situations where the garnishee cannot give the exact date on which the debt is due - eg because of rules stich as those discussed in paras 5.17-5.18 and 5.39-5.40. If the garnishee fails to comply with the order by the date stated in the notice, the judgment creditor would have grounds for being satisfied that the order had not been complied with and for seeking to summon the garnishee to show cause for non- compliance. If the date stated is well into the future, the judgment debt may be satisfied in the meantime. If this occurs and the garnishee is not notified before the garnishee pays the attached debt, the rights of the judgment debtor in respect of the excess amount paid to the judgment creditor would be protected under existing provisions of the respective Acts.¹⁹

6.39 The amount of the attached debt is to be disclosed in a notice only if it is less than the unpaid amount of the judgment debt- In this situation disclosure is desirable because the amount of the attached debt may be so insignificant relative to the unpaid amount of the judgment debt that it would not be worthwhile for the judgment creditor to pursue the matter further if the garnishee does not pay the attached debt when it falls due. However, where the attached debt is sufficient to cover the unpaid amount of the judgment debt and this can be inferred from non-disclosure, we consider that it is an unnecessary invasion of the judgment debtor’s privacy to require disclosure of the actual amount of the attached debt.

6.40 The notice procedure is intended to avoid unnecessary court proceedings. To this end we also considered the desirability of not allowing the judgment creditor to take out a summons for non-compliance before the date stated in the notice as the date on which the attached debt is. or is likely to be, due. This would ensure that a garnishee who served a notice was at no risk of unnecessary court proceedings. However it would also prevent a judgment creditor obtaining a summons in a situation where the judgment creditor had reason to believe that the information given in the notice was incorrect. For this reason we think it would be inadvisable to prevent a summons issuing before the date stated in the notice. The costs penalty a judgment creditor could expect to incur if the judgment creditor brought unnecessary proceedings despite a notice (paras 6.58-6.60) should be an adequate deterrent against such proceedings. As a deterrent to abuse of the notice procedure by a garnishee, we recommend that it be an offence for a person to make a false statement in a notice, knowing the statement to be false.

6.41 The notice procedure is intended to ensure the disclosure of information which is relevant to the judgment creditor’s decision to summon the garnishee for non-compliance once the initial 2l day compliance period has expired. Disclosure is achieved most effectively by requiring service of the notice on the judgment creditor and we consider that filing a notice in addition to service is unnecessary. However if the notice procedure is implemented, we recommend that under the District Court and Local Courts (Civil Claims) Rules:

• a garnishee should be required to serve a notice at an address for service to be stated in the garnishee order;
• the form of garnishee order should provide for the judgment creditor to insert an address for service; and
• service by post and use of the document exchange system should be permitted.

We note that the last recommendation calls for no amendment of the District Court Rules, since the current rules already make appropriate provision for service by post or the document exchange system. However the form of affidavit which must be filed in the District Court when a judgment creditor applies for a summons against a garnishee should be amended to take account of the notice procedure.²⁰ It wilt in any event require amendment if our recommendation in para 6.35 is implemented. The matter of costs in relation to a notice is dealt with in paras 6.6 1-6.65.

6.42 The object of our recommendations in paras 6.35 and 6.37 is to ensure that the contractual rights of garnishees are protected without unnecessary court proceedings so far as this is possible while not disregarding the rights of judgment creditors. However, where a debt accrues due for payment after the recommended 21 day compliance period. it may well he in the interests of both the judgment debtor and the garnishee for the garnishee to accelerate payment under the order. On the one hand. it is in the judgment debtor’ s interest to avoid liability for interest accruing on the unpaid judgment debt - at least where interest on the judgment debt would exceed any interest that the judgment debtor would receive if the attached debt were not paid until the due date. On the other hand, it is in the garnishee’s interest to avoid the administrative inconvenience of having to ensure that it duly complies with the order when required in the future or, if it fails to do so. the inconvenience and expense of possible court proceedings. However there is a difficulty in the way of early payment where the attached debt accruing is a fixed-term deposit.

6.43 The difficulty arises because the interest payable to the depositor shareholder on a fixed-term deposit is determined by the length of the term. Consequently when a garnishee order attaching a fixed-term deposit is served the judgment debtor may have be en paid or credited with interest at a rate in excess of the rate which would be payable if the term of the deposit expired on the date the garnishee, with the agreement of the judgment debtor, terminates the deposit to allow early payment under the order. As a practical matter the garnishee will consider accelerated payment only if there is some adjustment for any excess interest paid or credited to the judgment debtor. However it is the amount attached on service of the garnishee order which dictates the amount the garnishee is required to pay in compliance with the order and the garnishee and the judgment debtor cannot vary their contractual situation after that date so as to vary the amount payable under the order. Consequently the garnishee could not make early payment in compliance with the order unless the balance to the judgment debtor’s credit after any adjustment for excess interest was sufficient to enable the garnishee to pay the amount that the garnishee was required to pay prior to the adjustment.

6.44 When accelerated payment of a debt accruing is in the interests of the garnishee and the judgment debtor the law should facilitate early payment if this is practical and is not likely to prejudice the judgment creditor. We have therefore considered the problem of excess interest in detail. The sort of provision required would he extremely complex because the concept of excess interest is itself complex and the provision would need to be limited to permit a deduction only in appropriate cases, ie only in those cases where all amounts standing to the credit of the judgment debtor when early payment was made were insufficient to cover the excess interest without resort to the attached amount. Because of the type of limitation required and the ease with which the balance in an account on any given day can be varied by the account-holder, possible abuse of the provision would also be a problem. On the other hand. it is unlikely that there would he many cases in which early payment of an attached fixed-term deposit is not possible because excess interest cannot be recovered without resort to the attached amount. It appears that the attachment of fixed term deposits is not common and the problem of excess interest will arise only in some of these cases. We have therefore concluded that on balance, the small number of cases where the problem will arise does not justify a provision of the kind necessary to solve the problem.

F. Inoperative Garnishee Orders

6.45 It is apparent that garnishee orders served on building societies and credit unions frequently would be ineffective because of various provisions in the legislation regulating building societies and credit unions or the rules of particular organisations and because the judgment debtor often would be a debtor of the garnishee. A garnishee order affecting an account with a Building society or credit union could also be ineffective simply because it sought to attach an amount in a joint account where the account-holders were not joint judgment debtors (para 2.19). In such cases, where the garnishee order issues out of the District Court or a Local Court, the garnishee is at risk of court proceedings to establish that there was no debt due or accruing to the judgment debtor in the particular circumstances. Where the order issues out of the Supreme Court, the garnishee has to appear on the motion date to inform the Court of the situation if it wishes to avoid an order for payment to the judgment creditor. The garnishee would usually recover costs in relation to such proceedings in the Supreme Court and the District Court and possibly also in a Local Court (paras 6.58-6.60). Nevertheless the unrecoverable expense and inconvenience involved in court proceedings should not be discounted, particularly for the large building societies and credit unions likely to be more frequently subjected to garnishee orders. Nor should the expense and inconvenience to the judgment creditor of unsuccessful proceedings be ignored.

6.46 We consider it is desirable to institute a procedure to minimise the inconvenience and expense which garnishees and judgment creditors incur where garnishee orders are ineffective because there was no debt to be attached. Accordingly we recommend that where a garnishee under a District Court or Local Court garnishee order believes that there was no debt due or accruing to the judgment debtor when the order was served, the garnishee should be able to serve on the judgment creditor an affidavit to that effect which summarises the factual basis of the garnishee’s claim. The requirement that the garnishee summarise in the affidavit the factual basis of the garnishee’s claim is intended to ensure that the procedure is not abused and is used only where the garnishee has reasonable grounds to believe that there was no debt to be attached. If this recommendation is implemented, as with the notice procedure (para 6.41) we recommend that under the District Court and Local Courts (Civil Claims) Rules

• the garnishee should be required to serve the affidavit at the address for service to be stated in the garnishee order;
• service by post and use of the document exchange system should be permitted; and
• the form of affidavit to be filed in the District Court when a judgment creditor applies for a summons against a garnishee should be amended to take account of the procedure.

6.47 As with the notice procedure recommended in para 6.37, this recommendation is limited to the District Court and Local Courts. It has not been extended to the Supreme Court because of the different garnishment procedure in that court- Like the notice procedure, the object of the affidavit procedure is the disclosure of information which is relevant to the judgment creditor’s decision to summon the garnishee for non-compliance. The judgment creditor is very likely to incur a costs penalty if the judgment creditor brings proceedings where there was no debt to be attached (paras 6.58-6.60).²¹ Consequently where an affidavit is served, a reasonable judgment creditor would summon the garnishee only if the information in the affidavit did not substantiate the garnishee’s claim or the judgment creditor had some other good reason to doubt the truth of the claim. However, unlike the notice procedure, the affidavit procedure is optional. Although service of an affidavit would particularly benefit judgment creditors by putting them on notice that proceedings for non-compliance may well be unsuccessful we are not disposed to recommend that the procedure be mandatory. The procedure assumes that there was no debt to be attached. Where there is no attached debt, it is not possible to relieve the garnishee who uses the procedure of the expense involved in doing so by way of prescribed costs. Because the garnishee is an involuntary participant in the garnishment process and the judgment creditor has chosen this means of enforcement we consider that the garnishee should be free to decide whether it is in the garnishee’s best interests to use the procedure.

6.48 We have been prompted to recommend the affidavit procedure because of the frequency with which garnishee orders on accounts with building societies and credit unions, and also banks, are likely to be ineffective.²² However our recommendation is not restricted to garnishee orders on accounts - any garnishee could use the procedure when appropriate. Since the purpose of the procedure is to minimise unnecessary proceedings in situations where there was no debt to be attached, we can see no reason why it should not be available to all garnishees.

6.49 We recognise that a provision to allow a garnishee to serve an affidavit to the effect that there was no debt to be attached may seem unnecessary when a garnishee who was so-minded could do this anyway or could disclose the relevant information to the judgment creditor in a less formal manner than by affidavit However we see value in a statutory provision which draws attention to the possibility and desirability of disclosure in an appropriate case, and in a manner which gives weight to the garnishee’s claim. It might also he thought that there is little to motivate a garnishee to use the procedure when it involves additional expense. However a garnishee would be motivated to use the procedure when the expense of doing so is less than the unrecoverable expense which the garnishee would be likely to incur if proceedings for non-compliance were brought by the judgment creditor. We deal with the matter of costs in relation to the procedure in paragraphs 6.66-6.70.

G. Duty of Confidence

6.50 Although the notice and affidavit procedures we recommend in paras 6.35 and 6.46 are novel we consider that they would benefit garnishees, judgment creditors and the courts by minimising court proceedings. However they also involve disclosure to the court and the judgment creditor of information concerning the affairs of the judgment debtor which the garnishee may be under a duty to keep confidential. We particularly have in mind the banker’s duty of secrecy.²³ Practically the procedures are not available to a garnishee if their use would put the garnishee at risk of being liable in damages to the judgment debtor for breach of confidence. In the case of the affidavit procedure (para 6.46), it is also possible that the information required to be disclosed to substantiate the garnishee’s claim included confidential information about the affairs of a third party.

6.51 A contractual duty of confidence is subject to the operation of the general law.²⁴ Consequently there is no actionable breach of confidence where a person is compelled by law to disclose confidential information. In our opinion this general principle would protect a garnishee who served a notice concerning a debt accruing against liability for any breach of confidence caused by disclosing the information required to be disclosed in the notice. Under our recommendations in paras 6.35 and 6.37 a garnishee is required, within 21 days after service of the garnishee order, to either pay the attached debt in accordance with the order or, if the attached debt is not due until after the 21 day period, serve on the judgment creditor a notice disclosing the information specified. Therefore, if the attached debt is not due until after the 21 day period, the garnishee would be compelled by law to serve a notice, although as a practical matter the garnishee could avoid doing so by waiving his or her contractual rights and paying the debt within the 21 day period.

6.52 However the affidavit procedure we recommend in para 6.46 is optional and it cannot be argued that the garnishee is compelled by law to disclose confidential information. Therefore we recommend that a garnishee who serves an affidavit be relieved of all liability in respect of any disclosure of information in the affidavit if the disclosure was reasonable for the purposes of the affidavit.

H. Costs

1. General Costs Provision

6.53 Under the present provisions relating to the attachment of debts, where a garnishee order issues out of the District Court or a Local Court and the garnishee complies with the order by payment to the Registrar or the judgment creditor without any court proceedings, the garnishee generally is not entitled to make any deduction from the attached debt for any expense incurred in complying with the order.²⁵ By contrast, under the Supreme Court Rules, a garnishee who pays the attached debt into court before the motion date may retain out of the attached debt a prescribed sum for costs.²⁶ The current prescribed sum is $11.00.²⁷ Where the amount paid into court is calculated on the footing that the attached debt is reduced by the prescribed sum for costs, the effect of the rule is that the garnishee’s liability to the judgment debtor is discharged to the extent of the amount actually paid plus the prescribed sum for costs.²⁸ We can see no reason in principle why, in the case of garnishee orders issuing out of the District Court or a Local Court, the garnishee rather than the judgment debtor should be required to bear the whole expense involved in complying with the order.

6.54 It maybe that the lack of provision for costs where court proceedings are not involved is based on the assumption that, since the garnishee is merely required to pay the Registrar or the judgment creditor instead of the judgment debtor, the garnishee will incur no expense additional to whatever expense would have been incurred by payment to the judgment debtor. Whilst this assumption may be correct in some instances it is questionable as a general proposition, particularly in relation to the attachment of accounts. It is probable that it would be more expensive fora garnishee bank, building society or credit union to process a garnishee order than to process a withdrawal request from a customer - eg. because action has to be taken to suspend withdrawals or recover a passbook. Again, any garnishee required to comply with a garnishee order by serving notice of an attached debt which is due after the initial 21 day compliance period would incur additional expense.

6.55 In our view all garnishees under District Court and Local Court garnishee orders should be entitled to deduct a prescribed amount for costs incurred in complying with the order. However, if it is not considered appropriate to allow prescribed costs to all garnishees, such costs should be allowed in relation to the attachment of moneys in accounts with banks, building societies and credit unions. In the nature of the case these organisations are likely to be frequently subjected to garnishee orders and the expense of complying with such orders will be a recurring one, particularly for banks and the large permanent building societies.

6.56 We have also considered whether a provision for costs should, like the recent United Kingdom legislation (para 3.6), allow for different sums for costs in different situations and also take account of the possible insolvency of the judgment debtor. We have concluded that there is no necessity for varying sums for costs, particularly by reference to the amount of the judgment debt to be satisfied. The amount of the judgment debt would seem to be largely, if not entirely irrelevant to the question of the costs likely to be incurred by the garnishee in complying with the order. We have also concluded that a garnishee should be entitled to deduct and retain prescribed costs in the event of the judgment debtor’s insolvency. We can see no reason why the garnishee, as a debtor of the insolvent judgment debtor, should be denied costs in the interests of the judgment debtor’s creditors, particularly when, under the relevant insolvency legislation,²⁹ a judgment creditor required to pay moneys received under a garnishee order to the trustee in bankruptcy or, as the case may be, the liquidator of the judgment debtor is entitled to deduct the taxed costs of the attachment from the amount otherwise payable. The amount prescribed would also be insignificant in the context of distribution among the creditors of the insolvent judgment debtor.

6.57 For the above reasons we recommend that provision be made in the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970 to permit a garnishee to deduct a prescribed amount for costs incurred in complying with the garnishee order. Where the prescribed amount is deducted, the garnishee’s liability to the judgment debtor should be discharged to the extent of the amount paid by the garnishee in compliance with the order plus the amount for costs. If it is not considered appropriate to allow costs to all garnishees, then prescribed costs should be allowed in relation to garnishee orders attaching moneys in accounts. We note that our recommendation in para 6.65 should be taken into account in considering this recommendation.

2. Costs in Proceedings

6.58 Both the Supreme Court and the District Court have adequate power to award costs in garnishment proceedings,³⁰ although the situation is somewhat different from the usual situation as to costs. Normally costs follow the event, ie the party who is successful in the proceedings is usually awarded costs.³¹ In garnishment proceedings the general rule is that costs are not awarded.³² However they may be awarded in an appropriate case, eg a garnishee may be awarded costs where the garnishee has been obliged to appear before the court to establish that there was no debt to be attached.³³

6.59 A Local Court has only limited powers to award costs. However in defended proceedings it may order one party to the proceedings to pay the other party an amount “for or towards the reasonable professional costs incurred by that other party in having a barrister or attorney.., acting on behalf of that other party.³⁴ It is arguable that where a garnishee disputes a Local Court garnishee order and the Court orders a hearing (para 2.9), the Court could exercise this power to award an amount for professional costs to the judgment creditor or the garnishee as appropriate in the circumstances.³⁵ However the Director of Local Courts Administration has expressed serious reservations as to the applicability of this costs power to garnishment proceedings³⁶ and certainly it is not immediately obvious that it is applicable.

6.60 Whilst we recognise the general policy underlying the costs provisions in the Local Courts (Civil Claims) Act, 1970, we consider that a Local Court should have adequate and obvious power to award professional costs in garnishment proceedings. We also consider that because of the nature of garnishment proceedings the exercise of any such power should not be restricted by reference to the amount in issue between the parties, as is the case with a Local Court’s general power to award professional costs in defended proceedings.³⁷ It seems particularly inappropriate to deny costs to a garnishee because the amount in issue (be it the amount of the alleged debt to the judgment debtor or the unpaid amount of the judgment debt) is less than a certain amount when the garnishee is an involuntary participant in the garnishment process. Accordingly we recommend that Local Courts be given power to order a party to proceedings for non-compliance with a garnishee order to pay an amount for or towards the reasonable professional costs incurred by the other party in connection with the proceedings irrespective of the amount in issue between the parties and that the provision be included in the section of the Local Courts (Civil Claims) Act, 1970 which deals with such proceedings. We make further recommendations regarding the power of Local Courts to award costs in paras 6.69 and 6.70.

3. Notice Procedure

6.61 In para 6. 37 we recommend that where a debt attached under a District Court or Local Court garnishee order is due for payment to the judgment debtor after the initial 21 day compliance period we recommend in para 6.35, the garnishee should be required to serve on the judgment creditor, within that period, a notice giving relevant details of the accruing debt. Two aspects of the notice procedure involve costs considerations: the expense incurred by a garnishee in preparing and serving a notice and the enforceability of the procedure.

6.62 Under the notice procedure the garnishee must prepare a notice containing specified information and serve it on the judgment creditor within 21 days of service of the garnishee order. The expense involved in actually preparing a notice is minimal because the information called for has to be determined anyway to assess the effect of the garnishee order. In other words, it is the sort of expense we consider justifies the general costs provision we recommend in para 6.57. We have also recommended that service of a notice by post or the document exchange system should be permitted (para 6.41). If garnishees have the option of serving a notice by post, we do not consider that they should be entitled to deduct a prescribed amount for service in addition to the general costs deduction we recommend. Service by post is simple and the cost involved is insignificant Although garnishees should be able to tise other, more expensive, modes of service if they wish, the expense involved should be borne by the garnishee and not passed to the judgment debtor by way of prescribed costs. For these reasons we make no recommendation for additional costs in respect of a notice.

6.63 The notice procedure as recommended is mandatory. Therefore some sanction on a garnishee who fails to serve a notice when required to do so is desirable to ensure compliance. Given the nature of the garnishment process, it is not appropriate to impose a direct statutory penalty such as a fine, on a defaulting garnishee. However compliance can be encouraged indirectly by way of costs disincentives.

6.64 We anticipate that where a garnishee fails to serve a notice and the judgment creditor brings premature proceedings for non-compliance, the court would take the garnishee’s default into account when exercising its discretionary power as to costs and, if otherwise appropriate, impose a costs penalty on the garnishee. Conversely we anticipate that where a garnishee duly serves a notice and the judgment creditor brings premature proceedings despite the notice, the court would take this into account and the judgment creditor would incur a costs penalty if this were otherwise appropriate. However the inducement to comply with the notice requirement to avoid a costs penalty in any subsequent proceedings depends on the likelihood of there being proceedings. If there is little risk of this, the inducement is minimal Yet the very absence of a notice tends to minimise the risk of subsequent proceedings. The service of a notice precludes the possibility that there was no debt to be attached. In the absence of a notice the judgment creditor may not be prepared to risk the expense and inconvenience of bringing proceedings for non- compliance only to discover that there was no debt to be attached.

6.65 In para 6.57 we recommend that a garnishee under a District Court or Local Court garnishee order should be entitled to deduct a prescribed amount for costs incurred in complying with the order. As a further inducement to compliance with the notice procedure we recommend that a garnishee who is required to serve a notice regarding an attached debt which is due after the initial 21 day compliance period should not be entitled to deduct from the attached debt the amount prescribed for costs unless the notice has been served as required.

4. Affidavit Procedure

6.66 Different considerations apply where a garnishee serves an affidavit claiming that there was no debt to be attached (para 6.46). First, the expense involved in preparing an affidavit will not be insignificant However, since the procedure assumes that there is nu attached debt, it is not possible to shift the expense to the judgment debtor by way of prescribed costs. Secondly, one of three situations will arise after an affidavit has been filed:

• the judgment creditor does not summon the garnishee for non-compliance;
• the garnishee is summoned and in the subsequent proceedings the garnishee’s claim that there was no attachable debt is established; or
• the garnishee is summoned and in the subsequent proceedings it is established that there was an attachable debt.

6.67 Ideally the garnishee, as the involuntary third party in the garnishment procedure. should not have to bear the expense of the affidavit procedure in the first situation. However. as we have pointed out, it is not possible to shift the expense to the judgment debtor. In the absence of proceedings there is also no practical way of recovering appropriate costs from the judgment creditor. On the other hand the affidavit procedure is optional. Presumably the garnishee, in deciding to use the procedure, would balance the expense of doing so against the unrecoverable expense which the garnishee would be likely to incur in proceedings for non-compliance. The first situation assumes that use of the affidavit procedure has averted proceedings for non-compliance, ie. the garnishee is in a better position than the garnishee would have been in if the judgment creditor had brought proceedings. In this situation we consider it is not unreasonable for the garnishee to bear the expense involved in using the procedure.

6.68 The second and third situations assume that the judgment creditor brings proceedings despite the garnishee’s affidavit. In these situations the ability of the garnishee to recover costs in relation to an affidavit depends on the power of the particular Court to award stich costs in an appropriate case. Moreover, since the judgment debtor is not a party, any costs in relation to an affidavit can be awarded, if at all, only against the judgment creditor.³⁸

6.69 The District Court may order costs against any party to garnishee proceedings. However, in the absence of an order, costs do not follow the event and the parties must bear their own costs.³⁹ Consequently in District Court proceedings the garnishee could not recover costs in relation to an affidavit unless the Court so ordered. However it can be assumed that the Court would award these costs in an appropriate case. On the other hand, the costs provisions in the Local Courts (Civil Claims) Act, 1970⁴⁰ would not permit a Local Court to order the judgment creditor to pay any costs in relation to an affidavit. Nor would such costs be covered by our recommendation in para 6.60 regarding professional costs. Therefore we recommend that the power of a Local Court to order the payment of costs against a party to proceedings for non-compliance with a garnishee order extend to ordering payment of an amount for or towards the reasonable expenses incurred by the other party in connection with the garnishee order. This additional power would enable a Local Court to order a judgment creditor to pay an amount in relation to an affidavit if this was appropriate. It would also enable the Court to make an order against either party where that party’s conduct in connection with the garnishee order had been stich as to involve the other party in expense additional to professional costs - eg. the additional costs incurred by a garnishee bank where the garnishee order fails to identify the judgment debtor’s account adequately (para 7.11).

6.70 In para 6.60 we recommend that the Local Courts’ costs provision be included in the section of the Local Courts (Civil Claims) Act, 1970 dealing with proceedings for non-compliance with a garnishee order rather than in the Division of the Act dealing with costs and expenses generally. In view of this recommendation we recommend that the new costs provision also empower a Local Court to order payment by one party of an amount for or towards witnesses’ expenses incurred by the other party. This will avoid any question as to whether the general power of a Local Court to order payment of an amount for witnesses expenses⁴¹ is intended to apply in relation to proceedings for non-compliance with a garnishee order when there is a specific costs provision for stich proceedings.

1. Although building societies and credit unions may lend only to members, their power to take deposits is not restricted to taking deposits only from members - Co-operation Act, 1923 s66(1) as amended by Co-operation (Amendment) Act, 1985 s5 and Schedule 3 cl(15)(a), operative 1 September 1985 (NSW Government Gazette No 122 3(1 August 1985 at 4545): Permanent Building Societies Act, 1967 s20(1) (as amended by Permanent Building Societies (Amendment) Act, 1985 s5 and Schedule 2 cl(8). operative 1 September 1985 (NSW Government Gazette No 122 30 August 1985 at 4545)) and(7) and 127 (inserted by Permanent Building Societies (Amendment) Act, 1985 s5 and Schedule 10 cl(2). operative as before stated): Credit Union Act, 1969 536(1) (as amended by Credit Union (Amendment) Act, 1984 s5 and Schedule 3 cl (5)(a), operative 1 July 1985 (NSW Government Gazette No 98 28 June 1985 at 3000)) and (4).

2. Inquiries were made of the Permanent Building Societies Association (NSW) Ltd, the Association of Central Credit Unions Ltd and also the State Government Employees Credit Union Ltd, which is a large credit unions and offers a wide range of deposit accounts and facilities to its members. The Permanent Building Societies Association (NSW) Ltd circularised its members to endeavour to identify any particular practical problems which might arise in relation to automated teller facilities.

3. Illawarra Mutual Building Society Ltd.

4. Part 46 r5(2).

5. District Court Act, 1973 s103(3): Local Courts (Civil Claims) Act, 1970 s52A(3).

6. The Oxford English Dictionary (1933 ed, 1961 reprint) Vol VII at 529 (‘Passbook ... 1. The account-book supplied by a bank to a person having a current or deposit account, in which entries are made of all sums deposited and drawn, so that the customer may at any time see what is his balance at the bank ...”): The Macquarie Dictionary (1981) at 1265 (‘passbook... n.1.a bank book....3. a record of payments made to a building society”) and 173 (“bankbook ... n.a.book held by a depositor in which a bank enters a record of his account...“).

7. As amended by the Co-operation (Amendment) Act, 1985 s5 and Schedule 3 cl(11) (note 1).

8. Co-operation Act, 1923 ss41 (A)(1) and (3) and 42(1), (7) and (8) and Third Schedule (as amended by the Co-operation (Amendment) Act, 1985 s5 and Schedule 8 (note 1)). Previously building societies remaining registered under the Building and Co-operative Societies Act, 1901 did not have the benefit of a statutory charge, although a comparable provision may have been included in a particular society’s rules so as to create a contractual charge to secure any debt due to the society.

9. As amended by the Permanent Building Societies (Amendment) Act. 1985 s5 and Schedule 5 cl(6) (note I).

10. As amended by the Credit Union (Amendment) Act, 1984 s5 and Schedule 12 cl(26) (note 1). The amendments made are technical drafting amendments which in no way alter the substance of the section.

11. Notes 7 and 9.

12. Sections 12 and 49 as amended by Credit Union (Amendment) Act, 1984 s5 and Schedule 2 cl(10) and Schedule 4 cl(1) respectively (note 1).

13. Note7.

14. Note 9.

15. Note 8.

16. It may be that in practice the Registrar ol a Local Court would not issue a summons until some reasonable. period had elapsed since service of the garnishee order.

17. District Court Act, 1973 ss97(2)(a) and (b) and 98-101; Local Courts (Civil Claims) Act, 1970 ss47(2)(a) and (b) and 48-51.

18. Part 33 r3(3).

19. District Court Act, 1973 s106: Local Courts (Civil Claims) Act, 197t) s56.

20. District Court Act, 1973 s102(1) and District Court Rules. Pt33 r4, Pt47 r2 and Form 89.

21. So far as Local Court proceedings are concerned this statement assumes that the power of a Local Court to award costs in garnishment proceedings is put beyond question by adoption of our recommendation in para 6.60.

22. In the case of banks garnishee orders will be ineffective because there is no debt to be attached where. eg the account affected by the order is a joint account and the account- holders are not joint judgment debtors (para 2.19) or the bank is entitled to combine the affected account with another account held by the judgment debtor and combination results in extinction of the debt sought to be attached.

23. G A Weaver & C R Craigie. The Law Relating to Banker and Customer in Australia (Law Book Co 1979) at 166-173.

24. Parry-Jones v Law Society [19681] All ER 177; Brayley v Wilton [1976] 2 NSWLR 495, aff’d Brayley v Wilton (unreported) C of A No 13 of 1977 (19/4/77); Crowley v Murphy [1981] 52 FLR 123: Tournier v Natiorial Provincial and Union Bank of England [19241] KB 461. The last case deals specifically with the bankers duty of secrecy. Bankes LJ (at 473) stated:

On principle I think that the qualifications [of the contractual duty of secrecy implied in the relation of banker and customer] can be classified under four heads: (a) Where disclosure is under compulsion of law: (b) where there is a duty to the public to disclose: (c) where the interests of the bank require disclosure: (d) where the disclosure is made by the express or implied consent of the customer. (emphasis added)

One bank has suggested that the third head maybe one on which banks could rely in relation to disclosures of confidential information in a notice or affidavit However, as there is virtually no authority as to the precise scope of this qualification, we do not think it could be safely relied on.

25. The exceptional case is an order which attaches continuotisly the judgment debtor’s salary or wages where the garnishee may deduct 10% from each amount otherwise payable under the order - District Court Act, 1973 s100: Local Courts (Civil Claims) Act, 1970 s50.

26. Part 46 r6(2)(a).

27. Schedule G. Fable 6. para 58A.

28. Part 46 r6(3) and r11(1)(a).

29. Bankruptcy Act 1966 (Cth) s118: Companies (New South Wales) Code, 1981 s455.

30. Supreme Court Act, 1970, s76 and Supreme Court Rules, Pt46 r12(2) and(3): District Court Act, 1973 s148A and 148 B (inserted by District Court (Procedure) Amendment Act, 1984 s5 and Schedule 3 cls(54) and (59) - operative 1 July 1985 (NSW Government Gazette No. 93 14 June 1989 at 2996) and District Court Rules, Pt33 r6.

31. Supreme Court Act, 1970 s76 and Supreme Court Rules. Pt52 r11; District Court Act, 1973 s148B (note 30) and District Court Rules, Pt39 r1A (inserted NSW Government Gazette No 93 14 June 1989 at 2631 and 2669 - operative 1 July 1985).

32. Davidson v Secombe (1892) 9 WN (NSW) 1.

33. Willis v Municipality of Five Dock (1895) 11 WN (NSW) 112: Dean v Dwyer (1924) 41 WN (NSW) 67: see also Supreme Court Rules. Pt46 r12(2).

34 Local Courts (Civil Claims) Act, 1970 s35 (subject to s36).

35. Where a hearing is ordered the judgment creditor is “deemed to have filed a plaint and summons to commence an action... against the garnishee” (Local Counts (Civil Claims) Act, 1970 s52(9)). Therefore it is arguable that where a garnishee contests liability for the debt alleged to be owing to the judgment debtor, the garnishee is a defendant who” defends an action commenced by the filing of an ordinary summons” for the purposes of s35 (note 34). an ordinary summons being any summons other than a default summons or a special summons (Local Courts (Civil Claims) Act, 1970 s23).

36. Letter dated 15 October 1985.

37. local Courts (Civil Claims) Act. 1970 s36.

38. Hart v Muir (1889) 6 WN (NSW) 62.

39. District Court Rules. Pt33. r6.

40. Sections 33-38.

41. Local Courts (Civil Claims) Act. 1970 s38.