I. INTRODUCTION
7.1 There are various anomalies between the garnishment provisions in the Supreme Court Rules, the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970. Some of these anomalies are inconsequential, eg. the attachment of “all debts due or accruing” under the Supreme Court Rules and the attachment of “all debts due, owing or accruing” under the District Court Act 1973 and the Local Courts (Civil Claims) Act, 1970. Other anomalies are significant because they generate confusion, unnecessarily complicate the garnishment process or discriminate between participants in the process at the different court levels for no apparent reason.
7.2 It is clearly desirable from the point of view of those affected by the garnishment provisions that the law be uniform where uniformity can be achieved consistently with the jurisdictional and procedural differences amongst the Supreme Court, the District Court and the Local Courts. To the extent that the law of garnishment is embodied in legislation it is dealt with separately in each jurisdiction. Moreover in the case of the Supreme Court the relevant provisions are included in the Supreme Court Rules and not in the Supreme Court Act, 1970. Consequently any reform of the garnishment provisions applying in the Supreme Court is a matter for the Supreme Court Rule Committee under its rule- making power and not a matter for Parliament.
7.3 Uniformity in the substantive law relating to the enforcement of judgment debts, including the substantive law of garnishment would be best achieved by means of a single statute which applied in all jurisdictions with jurisdictional and procedural matters dealt with in the respective Court Acts and Rules. This approach would also make reform of the substantive law a matter solely for Parliament and simplify the implementation of reform. However it is beyond the scope of this reference to recommend such fundamental change in the existing legislative framework. This is a matter for consideration under the Commission s Procedure reference (paras 1.11-1.15). Nevertheless we consider that some improvement of the present garnishment provisions is properly incidental to this reference.
7.4 At present banks are very probably the largest class of garnishee apart from employers. If the principal recommendations in this Report are implemented. it can be expected that building societies and credit unions also will be major classes of garnishee. Consequently anomalies in the law of garnishment as it applies generally in the different jurisdictions are particularly significant in the context of this reference. Therefore in this chapter we make a number of recommendations designed to achieve greater uniformity within the existing framework by removing anomalies which cannot be justified on jurisdictional or procedural grounds.
7.5 Under the Judgment Creditors’ Remedies Act, 1901 in certain cases a judgment creditor can obtain a charging order over shares belonging to the judgment debtor and can enforce the charge to satisfy the judgment debt. As a further matter incidental to the main issues raised by the reference we consider the remedy of a charging order in relation to withdrawable shares in building societies and credit unions.
II. ANOMALIES IN THE GARNISHMENT PROVISIONS
A Protection Provision
7.6 Under Rule 5(2) of Part 46 of the Supreme Court Rules, where a garnishee is served with a garnishment notice and
acts with reasonable diligence for the purpose of giving effect to the attachment but nevertheless pays to the judgment debtor the whole or any part of the debt attached or otherwise deals with the debt attached so as to satisfy, as between the garnishee and the judgment debtor, the whole or any part of the debt attached.
the garnishee may obtain a court order that
for the purposes of the garnishee proceedings the debt attached be reduced to the extent of the payment or satisfaction
There are similar provisions in the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970.1 However the District Court and Local Courts provisions apply only in relation to garnishee orders attaching moneys in bank accounts. Consequently only banks have the benefit of the provision. Other garnishees who act with reasonable diligence to give effect to the garnishee order, but nevertheless pay all or part of the attached debt to the judgment debtor or otherwise deal with it so as to discharge all or part of their liability to the judgment debtor, must comply with the order and. in effect, pay all or part of the attached debt twice.
7.7 It is clear that this protection provision is essential for banks and equally essential for building societies and credit unions, particularly in view of the extent to which their operations involve electronic procedures. For example we understand that garnishee orders on bank accounts which are accessible by automated teller present a difficulty to banks because of the inability of a garnishee bank to enter details of the attachment into the computer system immediately on service of the order.2 Consequently it is possible for the judgment debtor to have access to the account affected by the order before it can be programmed as being attached.
7.8 In Chapter 6 we recommend that building societies and credit unions should have the benefit of this protection provision (para 6.14). However we can see no reason in principle why other garnishees subjected to orders issuing out of the District Court or a Local Court should be denied the protection and be left to such remedies as they might have to recover any double payment from the judgment debtor. Indeed, given the nature of the garnishment procedure and the garnishee’s involuntary involvement in the process, we consider that the present limitation is not merely discriminatory as between banks and other garnishees but is unjust. That a situation can arise where the law, in order to assist a judgment creditor to recover a judgment debt, places an innocent third party in the position of having to pay all or part of a debt twice and either bear the loss or resort to legal proceedings for recovery is, in our view, unacceptable. Therefore we recommend that the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970 be amended to allow all garnishees the benefit of the provision which permits a garnishee who acts with reasonable diligence to give effect to the garnishee order but nevertheless pays to the judgment debtor or otherwise satisfies all or part of the attached debt to apply for an order that the attached debt is reduced to the extent of the payment or satisfaction.
7.9 We do not think that adoption of this recommendation would have the practical consequence of creating a “floodgates” situation at District Court and Local Court level which might be thought to justify the present limitation. The provision would apply only where the garnishee had acted with reasonable diligence to give effect to the garnishee order. We consider that because of the expense and inconvenience involved in making an application under the provision, garnishees are unlikely to abuse the right to apply for an order where there is no reasonable prospect of convincing the Court that they had acted with reasonable diligence in the particular circumstances.
B. Content of a Garnishment Notice/Garnishee Order
7.10 Under the Supreme Court Rules and the District Court Rules:
A garnishment notice [garnishee order] shall include such particulars of the debt attached as are known to, or reasonably capable of ascertainment by, the judgment creditor and as are necessary to enable the garnishee to identify the debt including, where the garnishee is a banker or other person carrying on business at more than one place, the place of keeping of the account on which the debt is due or accruing, so far as that place is known to, or reasonably capable of ascertainment by, the judgment creditor.3
There is no similar provision in the Local Courts (Civil Claims) Act, 1970 or in the Local Courts (Civil Claims) Rules.
7.11 Several of the banks which commented on our draft report noted that often there is insufficient detail in a garnishee order seeking to attach moneys in an account to enable the relevant account to be identified easily and promptly by the garnishee bank. One commentator suggested that the provision in the Supreme Court Rules and the District Court Rules should also apply to garnishee orders issuing out of Local Courts:
Not only would judgment creditors improve their chances of recovery of judgment debts owed to them. but the resulting lessening of time which the Bank has to use in advising solicitors and other parties concerned that it is unable to comply with such orders would confer obvious benefits on the Bank in many instances. In many instances, double handling occurs due to the need for a fresh garnishee order to be issued.4
7.12 We endorse this suggestion. Accordingly we recommend that a rule as to the particulars to be included in a garnishee order be included in the Local Courts (Civil Claims) Rules in the same terms as Rule 3 of Part 33 of the District Court Rules. If this recommendation is adopted an indirect consequence may be to encourage judgment creditors to use the examination notice procedure available in Local Courts to obtain the relevant information. Greater use of the examination notice procedure would tend to lessen the frequency with which ineffective garnishee orders are served on banks and, if our principal recommendations are adopted, building societies and credit unions.
C. The Effect of a Garnishment Notice/Garnishee Order
1. The Debts Attached
7.13 A comparison of the wording of section 97(2)(a) of the District Court Act. 1973 and Rule 5(1) of Part 46 of the Supreme Court Rules with the wording of section 47(2) (a) of the Local Court (Civil Claims) Act, 1970 indicates a difference in drafting between the provisions which although possibly of no legal consequence, is a source of conclusion. Again assuming that the provisions are identical in effect despite the drafting differences, the comparison highlights a shortcoming in all the provisions which is of particular significance in relation to the attachment of moneys in accounts.
7.14 Section 97(2) of the District Court Act, 1973 states in part:
A garnishee order shall take effect upon its being served on the garnishee. and upon its being so served -
(a) except in a case to which paragraph (b) or(c) applies, shall operate to attach in the hands of the garnishee all debts which were due, owing or accruing from him to the judgment debtor at the time when the garnishee order was made and which are so due, owing or accruing at the time of service of the garnishee order; (emphasis added)
Paragraphs (b) and (c) apply in relation to garnishee orders attaching a judgment debtor’s wage or salary and are not presently relevant.
7.15 The effect of section 97(2) (a) is that a District Court garnishee order operates to attach only those debts which are due, owing or accruing to the judgment debtor when the order is made and which remain due, owing or accruing when the order is served. Consequently. if an amount is paid out of an account between the making and the service of a garnishee order on the account. the debt attached is the credit balance in the account at the time of service. However, if an amount is paid into the account after the order is made but before it is served. the increase in the credit balance in the account when the order is served is not attached because the increased amount is not the debt existing when the order was made. The rule in Clayton’s Case5 can also operate to the unnecessary detriment of a judgment creditor. Under this rule withdrawals from a current account are to be off- set against payments into the account in sequential order. For example withdrawals on the account between the time a garnishee order is made and the time it is served may wholly extinguish the debt existing when the order was made, yet the account- holder may make payments into the account before the order is served and create a new debt.
7.16 The position appears to be the same for a garnishment notice out of the Supreme Court. Rule 5(1) of Part 46 of the Supreme Court Rules states:
Upon service of a garnishment notice on a garnishee all debts mentioned in the garnishment notice and due or accruing to the judgment debtor from the garnishee shall, subject to subrule (2), be attached and bound in the hands of the garnishee to the extent of the amount specified in the garnishment notice. (emphasis added)
The reference to subrule (2) is a reference to the protection provision set out in para 7.6 and can be disregarded for present purposes. Under the Rules a judgment creditor may, with leave of the Court, file and serve a garnishment notice “of attachment....of debts due or accruing to the judgment debtor from the garnishee”,6 and the Court may grant leave only if it appears that “there is a debt due or accruing to the judgment debtor from the garnishee”.7 Consequently it seems that the only debts which can be mentioned in a garnishment notice are those which are due or accruing when leave to issue the notice is granted.
7.17 By contrast. section 47(2) of the Local Courts (Civil Claims) Act, 1970 states in part:
A garnishee order shall take effect upon its being served on the garnishee. and upon its being 50 served -
(a) except in a case to which paragraph (b) applies or except in the case of an order to which section 48 applies, shall operate to attach in the hands of the garnishee all debts due, owing or accruing from him to the judgment debtor at the time of service of the garnishee order. (emphasis added)
Again the references to paragraph (b) and section 48 relate to garnishee orders attaching the judgment debtor’s wage or salary and are not presently relevant. It appears from the terms ot section 47(2) that a garnishee order issuing out of a Local Court attaches any debt due, owing or accruing to the judgment debtor when the order is served, irrespective of whether that debt was due. owing or accruing to the judgment debtor when the order was made. However. despite the terms of the section. we doubt that this is the case.
7.18 Section 47(1) of the Local Courts (Civil Claims) Act, 1970 empowers the Registrar to make an order “that all debts due, owing. or accruing to the judgment debtor from any person specified in the order shall be attached”. Therefore it must be those debts due, owing or accruing to the judgment debtor when the order is made which are attached by the order and, in our view, the reference to the time of service in section 47(2) merely ensures that the order does not attach any debt, or part of any debt. which the garnishee pays between the time the order is made and the time it is served.8 In other words, we consider that section 47(2), when read with section 47(1), operates in the same manner as the comparable provisions in the Supreme Court Rules and the District Court Act, 1973. Nevertheless this is not immediately apparent and if our interpretation is incorrect there is an anomaly between the operation of garnishee orders at Supreme Court and District Court level and their operation at Local Court level. However, if this anomaly does exist. it has the result that the difficulties in relation to accounts discussed in para 7.15 do not arise in the case of Local Court garnishee orders.
7.19 Whatever the precise legal effect of section 47(2) (a) of the Local Courts (Civil Claims) Act 1970, we consider that the provisions in the Supreme Court Rules and the respective Acts should operate in like manner and that this should be apparent from the terms of the provisions. Moreover we can see no good reason why debts which become due or accruing to a judgment debtor between the time a garnishee order is made and the time it is served should not be available to the judgment creditor to satisfy the judgment debt Accordingly we recommend that
(a) the effect of a garnishment notice/garnishee order as to attachment should be uniform for the different levels of the court system;
(b) a judgment creditor should continue to have to satisfy the Court or Registrar that there is a debt due or accruing to the judgment debtor from the garnishee before leave to file and serve a garnishment notice is granted or before a garnishee order is made; and
(c) a garnishment notice/garnishee order should operate to attach in the hands of the garnishee all debts due or accruing to the judgment debtor at the time the notice/order is served, whether or not any such debt was due or accruing when -
(i) in the case of a Supreme Court garnishment notice, leave to file and service the notice was granted; or
(ii) in the case of a District Court or Local Court garnishee order, the order was made.
2. The Extent of Attachment
7.20 Under Rule 5(1) of Part 46 of the Supreme Court Rules a garnishment notice operates to attach all debts mentioned in the notice “to the extent of the amount specified in the garnishment notice”. By contrast. the comparable provisions in the District Court Act. 1973 and the Local Courts (Civil Claims) Act, 1970 attach all debts due, owing or accruing without any limitation on the attachment. although what has to be paid in compliance with the order is limited by reference to the judgment debt.9 The effect of a garnishee order which attaches all debts due or accruing without any limitation on the extent of attachment
is to make the garnishee custodier for the Court of the whole funds attached. and he cannot, except at his own peril, part with any of those funds without the sanction of the Court.10
The consequence of an unlimited garnishee order is of particular significance in the case of accounts with financial institutions. Until compliance with the order the garnishee cannot deal with any part of the attached debt, notwithstanding that the amount of the debt may be in excess of the amount to be paid under the order. Consequently a bank, building society or credit union could not, eg meet a cheque or periodic payment out of excess funds.
7.21 The form of garnishee order issuing out of the District Court orders all debts to be attached “to the extent of” a specified amount,11 ie. it clearly limits the extent of the attachment despite the terms of the relevant provision in the District Court Act, 1973. A garnishee order issuing out of a Local Court orders all debts to be attached “to answer the unpaid amount of the judgment debt in this matter, that amount being $”.12 Although the Local Courts’ form is consistent with the relevant provision in the Local Courts (Civil Claims) Act 1970, it seems likely that many garnishees would assume the attachment to be limited to the amount stated in the order. Because of the forms of District Court and Local Court garnishee orders the lack in the legislative provisions of any limitation on the extent of attachment probably has little practical significance. However we recommend that the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970 be amended so that a garnishee order only operates to attach debts due or accruing to the judgment debtor “to the extent of the amount specified in the order”.
3. The Amount to be Paid
7.22 There are variations in the comparable provisions of the District Court Act, 1973 and the Local Courts (Civil Claims) Act 1970 as to what part of the attached debt the garnishee is required to pay to comply with the order. Under section 97(3) of the District Court Act 1973 a garnishee order is to specify the amount of the judgment debt and is to require the garnishee to pay, in accordance with the Act and the District Court Rules,
the debt ... attached by operation of the order or so much thereof as may be sufficient to satisfy the judgment debt ... (emphasis added)
By contrast. under section 47(4) of the Local Courts (Civil Claims) Act 1970 a garnishee order is to specify the amount of the judgment debt and is to require the garnishee to pay, in accordance with the Act and the Local Courts (Civil Claims) Rules,
the debt due from the garnishee to the judgment debtor, or so much thereof as may be sufficient to satisfy the judgment debt ... (emphasis added)
7.23 As indicated in para 7.14 a District Court garnishee order attaches all debts which were due, owing or accruing from the garnishee to the judgment debtor when the order was made and which remain due, owing or accruing when the order was served. Under the District Court Rules payment is to be made within 14 days after service.13 We have elsewhere discussed the anomalous operation of the District Court 14-day payment rule where the garnishee order attaches a debt accruing which falls due for payment after the 14 day period (para 4.10).
7.24 By contrast, a garnishee order issuing out of a Local Court attaches all debts due, owing or accruing when the order was served. In para 7.19 we express the view that. despite the different terms of the comparable District Court and Local Courts provisions, a Local Court garnishee order operates as to attachment in the same manner as a District Court order. Similarly we have concluded that, despite the reference in section 47(4) to the debt due rather than the debt attached, section 47(4) operates as to payment in the same manner as section 97(3). The reference in section 47(4) to the debt due could be understood to require the garnishee to pay an attached debt only if it was due when the order was served and not to require the payment. in due course, of any attached debt which was accruing at that time. However this reading of section 47(4) is inconsistent with the attachment of both debts due and debts accruing. Therefore we consider that the reference to the debt due simply recognises the general principle that a garnishee order cannot operate to accelerate payment of a debt and is to be understood to mean that the order is to require the garnishee to pay the attached debt when due from the garnishee.
7.25 Whatever the intended operation of section 47(4) of the Local Courts (Civil Claims) Act. 1970 it produces confusion as to what debts, of those attached, are to be paid in compliance with a Local Court garnishee order. Accordingly we recommend that section 47(4) of the Local Courts (Civil Claims) Act, 1970 be amended to make it clear that it is not merely those attached debts which are due when the order is served that are payable under a Local Court garnishee order. This should be done by substituting debt attached” for “debt due”. We consider that our recommendation in para 6.35 regarding payment under a garnishee order will avoid any confusion as to when a debt accruing is to be paid.
D. Disputed Garnishee Orders
7.26 Under the Supreme Court Rules, the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970 the respective courts are granted jurisdiction to hear and to determine issues in dispute where a garnishee contests a garnishee order. During consultations on the draft report it was suggested14 that the provisions are each so worded that, on a strict interpretation it would be open to the particular Court to distinguish between disputes as to the garnishee’s liability to pay an alleged debt and disputes as to the time for payment of an undisputed debt. and to refuse to hear the garnishee on the latter issue.
7.27 The relevant provisions are Rule 9 of Part 46 of the Supreme Court Rules, section 102(3) of the District Court Act. 1973 and section 52 of the Local Courts (Civil Claims) Act, 1970. Under Rule 9, where “the garnishee disputes liability to pay the debt attached”, the Supreme Court has jurisdiction to “hear and determine the questions in dispute”. Under section 102(3) of the District Court Act, 1973 the District Court is empowered to “hear and determine any question of the amount of the debt ... (if any) attached by the garnishee order”. Again the jurisdiction of a Local Court to deal with a contested garnishee order under section 52(4) and (5) of the Local Courts (Civil Claims) Act. 1970 arises only when the garnishee “satisfies the court that the debt alleged by the judgment creditor to be owing by the garnishee to the judgment debtor is bona fide in dispute”. Where a Local Court is not required to discharge a contested garnishee order (paras 7.29-7.31), it must “order that the question of whether the garnishee is liable to pay the debt or any part of the debt ... be set down for hearing” and, at the hearing, must give judgment against the garnishee “upon the judgment creditor proving the debt”.
7.28 If our recommendation in para 6.37 as to serving notice of an attached debt which is due after the initial 21 day compliance period is adopted, we anticipate that the potential for disputes to arise about the time of payment of an attached debt will be reduced significantly. However it is possible that a garnishee who complies with an order by serving a notice may incorrectly state the date on which the attached debt falls due for payment The mistake may be simply a clerical error or it may reflect uncertainty about the precise date for payment caused by the particular contractual arrangements between the garnishee and the judgment debtor. If the garnishee does not notify the judgment creditor of any error in the notice in time to forestall premature proceedings, the only information available to the judgment creditor will be the incorrect information in the notice. Consequently proceedings could be brought in which the time of payment of the attached debt was disputed. Therefore we recommend that the provisions in the Supreme Court Rules, District Court Act, 1973 and Local Courts (Civil Claims) Act, 1970 under which the respective courts are granted jurisdiction to hear and determine issues in dispute when a garnishee contests a garnishment notice/garnishee order should be amended to make it clear that the court’s jurisdiction extends to disputes as to the time of payment of an attached debt.
E. Local Courts’ Limited Jurisdiction
7.29 In Chapter 2 (paras 2.8-2.9) we outlined the existing procedures in the District Court and in Local Courts when a garnishee fails to comply with the garnishee order and the judgment creditor summonses the garnishee to show cause for non-compliance. It will be recalled that. in the case of a garnishee order issuing out of a Local Court if the garnishee appears and satisfies the Court that there is a bona fide dispute about the debt sought to be attached. the Court is obliged to discharge the garnishee order if the debt in dispute exceeds $250 or does not exceed that amount but is not within certain categories of debt If the order is not dischargeable the Court must order a hearing of the dispute. The effect of the existing provisions is that a Local Court garnishee order must be discharged unless it seeks to attach an alleged debt of S250 or less which, if payable, is for a wage or salary, is payable out of a bank account or is a debt of a prescribed class. It appears that to date no debts of a particular class have been prescribed for the purpose of these provisions. These restrictions on jurisdiction by reference to the amount and type of debt in dispute have applied since the Courts of Petty Sessions (Civil Claims) Act 1970 (now renamed the Local Courts (Civil Claims) Act. 1970) came into operation.
7.30 It appears that the $250 limit no longer serves any useful purpose. Originally, under section 12(1) of the Courts of Petty Sessions (Civil Claims) Act. 1970. the monetary limit on the jurisdiction of Courts of Petty Sessions was $500 and section 12(2) enabled a defendant to an action in which the amount claimed exceeded $250 to transfer the action to a District Court The $250 limit in the garnishment provisions appears to have been imposed to prevent the transfer of disputes concerning garnishee orders to the District Court The monetary limit on the jurisdiction of Local Courts is now $5,000.15 Section 12(2) was repealed in 198016 and the transfer of proceedings to the District Court is governed by Part IIIA of the Act. in particular section 21B. Under section 21B the District Court may, on application of a party to an action pending in a Local Court, order that the action be removed to the District Court. Since the defendant to an action pending in a Local Court can no longer transfer the action to the District Court as of right we can see no reason for retaining the $250 limit, particularly in view of the current monetary limit on the jurisdiction of Local Courts.
7.31 We can find no explanation for the restriction on the jurisdiction of a Local Court to hear disputes about garnishee orders by reference to the type of debt involved. Under the Local Courts (Civil Claims) Act, 1970 Local Courts have (and have always had) jurisdiction to hear and determine an action for the recovery of a debt where the amount claimed does not exceed the monetary limit on the Courts’ jurisdiction.17 The Act imposes certain restrictions on jurisdiction apart from the monetary limit.18 However, in view of the Courts’ jurisdiction in relation to debts generally, we can see no reason why jurisdiction to hear and determine a dispute about a debt sought to be attached should be restricted to particular classes of debt. Therefore we recommend that the jurisdiction of Local Courts to hear and determine disputed garnishee orders be restricted only to the extent that their jurisdiction to hear and determine any action to recover a debt is restricted and that the restrictions on jurisdiction by reference to the amount of the debt and the type of debt alleged to be owing to the judgment debtor be removed.
III. SECTION 27 OF THE JUDGMENT CREDITORS’ REMEDIES ACT, 1901
7.32 In Chapter 5 we recommend that moneys which are available to a judgment debtor by the withdrawal of shares in a building society (other than a co-operative housing society) or a credit union should be attachable. However we acknowledge that this recommendation disregards the legal nature of withdrawable share accounts and the fact that. historically, the procedure of garnishment has been the mode of appropriating property of the judgment debtor in the form of debts, not shares. We have therefore considered the availability to a judgment creditor of the remedy of a charging order over the shares of a judgment debtor member of a building society or credit union.
7.33 Under section 27 of the Judgment Creditors’ Remedies Act. 1901 if a judgment debtor under a judgment of the Supreme Court or the District Court:
(a) has any stock or shares of or in any public company (whether incorporated or not), or any deposit in any bank of New South Wales, standing in his name in his own right, or in the name of any person in trust for him; or
(b) has or is entitled to any equity of redemption or other equitable interest,
the judgment creditor may apply to the Supreme Court or to a Judge of the District Court for an order that the stock, shares, bank deposit or equitable interest, as the case may be, be charged with payment of the amount of the judgment debt plus interest.19 If a charging order is made it operates initially as an order to the judgment debtor to show cause to the Court why the order should not be made absolute. Where the order charges stock or shares or a bank deposit it also operates to restrain the company in which the stock or shares are held, or the accountant and cashier of the bank holding the deposit, from permitting the transfer or disposal of the charged property.20 If the judgment debtor does not, within the time stated in the order, show sufficient cause to the Court why the property should not be charged, the charging order is made absolute.21
7.34 A charging order entitles the judgment creditor to those remedies to which the judgment creditor would have been entitled had the charge been created by the judgment debtor rather than the Court.22 However the judgment creditor cannot take any proceedings to enforce the charging order until at least three months after the order was first made.23 The judgment debtor cannot take advantage of the time restriction on enforcement by disposing of the charged property in the meantime because any such disposition is invalid as against the judgment creditor.24 The remedies potentially available to the judgment creditor are an order for sale of the charged property or, possibly, an order for foreclosure, although an order for sale or foreclosure may be unavailable if the freedom of the judgment debtor to dispose of the charged property is restricted.25
7.35 Section 27 raises several issues.
- Does the section apply to shares in building societies and/or credit unions?
- Should a charging order be the sole remedy available in respect of withdrawable shares, or an alternative remedy to attachment?
- Insofar as this reference proceeds on the basis that. from the point of view of judgment creditors, deposits with building societies and credit unions should be treated in like manner to deposits with banks, it is arguable that the section should be amended to permit charging orders over deposits in building societies and credit unions in like manner to deposits in banks “of New South Wales” or to exclude deposits in such banks.
- Should section 27 and its ancillary provisions be amended to give the remedy of a charging order a more general and precise application than at present?
A. Does Section 27 Apply to Shares in Building Societies and Credit Unions?
7.36 Section 27 applies to “shares of or in any public company (whether incorporated or not)”. Its application to shares in building societies and credit unions depends on whether a building society or credit union is a “public company” and if so, whether “shares” includes shares which are withdrawable. We have concluded that the section probably applies to withdrawable shares in a building society or credit union but that this is by no means certain. Since we have also concluded that a charging order should not be the sole means of execution available to a judgment creditor in respect of withdrawable shares (para 7.38) and that reform of the charge provisions of the Judgment Creditors’ Remedies Act, 1901 generally warrants consideration (para 7.42), we consider that it is unnecessary to set out our reasons for concluding that section 27 probably applies to withdrawable shares.26
B. Should a Charging Order be the Sole Remedy in respect of Withdrawable Shares or an Alternative Remedy to Garnishment?
7.37 Although a charging order is the usual means of enforcing a judgment debt against assets in the form of shares, we consider that a judgment creditor should not be limited to this method of enforcement in respect of withdrawable shares. Inquiries made of the Registrar of the District Court in Sydney and of the Supreme Court Registry indicate that charging orders under section 27 are rarely sought by judgment creditors. One reason suggested for this was that the procedure is relatively cumbersome and expensive.27 Also a charging order is available only on application to the Supreme Court or the District Court,28 whereas garnishee orders can be obtained to enforce judgment debts resulting from proceedings in a Local Court.
7.38 As indicated in para 7.36 we have concluded that section 27 probably applies to withdrawable shares in building societies and credit unions. If this conclusion is correct and our recommendations that such shares be made liable to garnishment are adopted. section 27 would provide an alternative means of enforcing a judgment debt issuing out of the Supreme Court or the District Court where the judgment debtor held withdrawable shares in a building society or credit union and restrictions on the withdrawal of those shares did not prevent the Court from making a suitable order to appropriate to the judgment creditor 50 much of the judgment debtor’s share capital as might be necessary to satisfy the judgment debt. However it is not certain that section 27 does apply to withdrawable shares in building societies and credit unions. Nevertheless we are not disposed to recommend that the section be amended to ensure that it does so. We consider that the special nature of withdrawable shares and the practical similarity between withdrawable share accounts and deposit accounts makes garnishment the more appropriate means of enforcing a judgment debt against assets of this type.
7.39 Our view is reinforced by recent changes to the law relating to charging orders in the United Kingdom whereby shares in building societies cannot be made the subject of a charging order. The new United Kingdom legislation is outlined in para 7.41 and is the result of recommendations made by the United Kingdom Law Commission in a 1976 report on charging orders. The Commission recommended that withdrawable shares in building societies should not be liable to charging orders, both because this was opposed by the building societies and because
on the whole we do not think that their inclusion would be appropriate. Although the making of a deposit with a Building Society may make the depositor a shareholder, he realises his asset, not through any dealing with his shares as such, but simply by withdrawing his deposit. We therefore feel that if it is desired to make this asset more readily amenable to execution process (a point on which we express no view), it might be better to do so by bringing the account within the scope of a garnishee order (even though the relationship between the Building Society and its depositor-members may not strictly be one of debtor and creditor).29
C. Should Section 27 be Amended so that Deposits in Banks Stand on the Same Footing as Deposits in Building Societies and Credit Unions?
7.40 Section 27 enables a charging order to be made over “any deposit in any bank of New South Wales”. If deposits in banks, building societies and credit unions are to be treated in like manner for the purposes of garnishment, then we can see no reason why they should not be treated in like manner for the purposes of section 27. On this basis the section might be amended to either encompass deposits in building societies and credit unions or exclude deposits in banks. We consider that bank deposits should be excluded from the section.30 However, in view of our conclusion that reform of the charging provisions under the Judgment Creditors’ Remedies Act, 1901 generally warrants consideration (para 7.42) and because of the limited use which is made of this remedy at present (para 7.37), we make no recommendation for amendment at this stage.
D. Should Section 27 and its Ancillary Provisions be Otherwise Amended?
7.41 Clearly it is outside the terms of this reference to consider the general application of the charging order provisions of the Judgment Creditors’ Remedies Act. 1901. However we have already indicated the uncertain scope of section 27 in the present context (para7. 36). We also note that the English provision on which section 27(1)(a) was based has been amended over the years. The present comparable legislation is the Charging Orders Act 1979 (UK) which gives effect to recommendations made by the United Kingdom Law Commission in its 1976 report on charging orders).31 Under this legislation securities of certain specified kinds, including government stock and stock in any body (other than a building society) incorporated within England or Wales, may be made subject to a charging order.32 The terms “government stock” and “stock” are widely defined and, in particular, “stock” includes shares, debentures and any securities of the body concerned.33 By contrast, debentures are not within section 2734 and government and semi-government securities are also outside the section.
7.42 We make no recommendations to rectify the shortcomings of the Judgment Creditors’ Remedies Act, 1901 so far as they bear directly on the terms of this reference because we believe that reform of the charging order remedy generally warrants consideration. This is within the scope of the Commission’s Procedure reference, which is discussed in Chapter t (paras 1.11-1.15). The proposals put forward in the Commission’s 1975 Working Paper “Draft Proposal Relating to the Enforcement of Money Judgments”, involved repeal of the Judgment Creditors’ Remedies Act, 1901 and also provided for the enforcement of a judgment debt by a charging order over” any property of the judgment debtor. As indicated in Chapter 1 (para 1.12) further work on the enforcement of judgment debts under the Procedure reference awaits the Australian Law Reform Commission’s report on a model judgment debt recovery system under that Commission s Debt Recovery reference.
FOOTNOTES
1. District Court Act, 1973 s103(3); Local Courts (Civil Claims) Act, 1970 s52A(3).
2. Letter dated 15 February 1985 from Mr I M Gripper, Chief Solicitor, State Bank of New South Wales.
3. Supreme Court Rules, Pt46 r3(6); District Court Rules, Pt33 r3
4. Letter dated 13 December 1984 from Mr G R Herron, Senior Manager, Legal Administration, NSW Division, Westpac Banking Corporation.
5. Devaynes v Noble; Clayton’s Case 1 Mer 529, 572; 35 ER 767, 781.
6. Part 46 r3(1)(a).
7. Part 46 r3(3)(b).
8. See also Universal Guarantee Pty Ltd v Derefink [1958] VR 51.
9. District Court Act. 1973 s97(2) (a) and (3); Local Courts (Civil Claims) Act, 1970 s47(2) (a) and (4).
10. Rogers v Whiteley [1892] AC 118 at 122. per Lord Watson.
11. District Court Rules. Pt47 r2 and Form 83.
12. Local Courts (Civil Claims) Rules. r3 and First Schedule Pt2 Form 48.
13. Part 33 r3(2).
14. Letter dated 15 February 1985 from Mr F I Bailey. Assistant General Manager, Commonwealth Bank Australia.
15. Courts of Petty Sessions (Civil Claims) Amendment Act. 1982 s5 and Schedule 1.
16. Courts of Perry Sessions (Civil Claims) Amendment Act. 1980 s5 and Schedule 1(2).
17. Section 12.
18. Section 19.
19. The power of a Judge of the District Court to make a charging order under s27 (the terms of which reflect the old District Courts system) derives from ss184. 187( 1)(a) and 188(2) of the District Court Act. 1973.
20. Judgment Creditors’ Remedies Act. 1901 s28.
21. Id, ss28 and 31.
22. Id. s27(2).
23. id. s27(3).
24. Id. s30.
25. The authorities are unclear as to whether an order for foreclosure can he granted. Halsburys Law’s of England (4th ed 1976) Vol 17 at 353 (para 569 fn2) states that the judgment creditor’s remedy is sale. not foreclosure. The relevant authorities are considered in Dalston Development Pty Ltd v Dean [1967] WAR 176 (at 178-179) where it was held that neither an order for sale nor for foreclosure in respect of a charging order over shares in a company was available where the order would he inconsistent with restrictive provisions on transfer contained in the company’s articles.
26. For any reader who may wish to pursue this matter, the authorities and references relevant to our conclusion are: On whether building societies and credit unions are “public companies. see in re Stanley: Tennant v Stanley [1906] 1 Ch 131 esp at 134: Brownlie v Russell (1882-83)8 App Case 235 at 248-249: In Re Griffith: Carry Griffith (1879)12 Ch D 655: Nicholls v Rosewarne 6 CB (NS) 480 at 493, 141 FR 544 at 549: Macintyre v Connell 20 LJ Ch 284 at 288: In re Sharp: Rickett v Sharp (1890) 45 Ch D 286 at 289 and 290: Permanent Building Societies Act. 1967 (as amended by Permanent Building Societies (Amendment) Act 1985, in particular ss28- 30, 33, 82-84A and 108: Co-operation Act, 1923 (as amended by Co-operation (Amendment) Act, 1985 in particular ss39. 41 A. 45. 60, 76, 83 and 121): Building and Co-operative Societies Act, 1901 in particular ss52-54 and, in relation to building societies remaining registered under this Act, s42(8) of the Co-operation Act, 1923 and Permanent Building Societies Act. 1985 s127 and Schedule 3 (inserted by Permanent Building Societies (Amendment) Act, 1985 s5 and Schedule it) cl(2) and Schedule 11): and Credit Union Act. 1969 (as amended by Credit union (Amendment) Act, 1984) in particular ss21, 23, 26, 69, and 95. On whether “shares” encompasses withdrawable shares see Cuthhertson v Graham 43 Sc LR 17 at 20: The Oxford English Dictionary 1961 Vol 19 at 630 (“share”): and Webster’s Third New International Dictionary (1965) at 2(187 (“share”).
27. Mr Neaves, then Registrar of the District Court, Sydney.
28. Under the Supreme Court Rules (Pt47 r1) an application for a charging order must be made by motion in the proceedings in which the judgment or order giving rise to the judgment debt is made or given, which practically limits significantly the availability of a charging order as a means of execution There is no similar constraint in the District Court (see District Court Rules. Pt5 Div3 and Pt6 Div1.)
29. The Law Commission. Charging Orders (Law Com No 74 (1976) Cmnd 6412) at 26 (para 84).
30. Our reasons for this conclusion are:
Application of the section to bank deposits is uncertain because of the uncertainty surrounding the term “bank” (paras 2.10-2.34).
* It is not clear what constraints are placed on the operation of the provision by the requirement that any deposit sought to be charged be in a “bank of New South Wales”. It may be that it applies only in respect of deposits in banks incorporated in this State. in which case the provision would discriminate as between these banks and any banks operating within the State but incorporated elsewhere.
* In relation to a deposit in a bank a charging order operates to restrain “the accountant and cashier of such bank from permitting the transfer or disposal thereof”: Judgment Creditors’ Remedies Act, 1901 s28(c). Any accountant or cashier so restrained who transfers or disposes of the deposit before the order is discharged or made absolute by the Court is liable to the judgment creditor for the amount of the deposit or 50 much of it as would have been sufficient to satisfy the judgment debt. Judgment Creditors’ Remedies Act, 1901 s29. In our view these provisions are inappropriate in todays automated banking world.
31. Note 29.
32. Charging Orders Act 1979 (UK) s2. Units of any unit trust in respect of which a register of unit holders is kept within England and Wales are also among the prescribed types of securities and “unit trust” is widely defined so that it includes. eg cash management and real property trusts. Such interests would seem to be already caught by s27(1) in that a judgment debtor holding units in an investment unit trust would have a vested equitable interest in the trust fund proportionate to his or her unit holding and therefore an equitable interest chargeable within s27(1)(b).
33. Id, s6.
34. Sellar v Charles Bright & Co Ltd [1904] 2 KB 446.
35. Appendix B. Draft Money Judgments Enforcement Bill, ss49-51.
