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disputes

Garnishee proceedings explained

Key Takeaway

Garnishee proceedings are a debt recovery method where a judgment creditor can obtain money owed from a third party (garnishee) who holds funds belonging to the judgment debtor. Disputes Tribunal orders for payment can be enforced this way after being filed in the District Court, which then uses its specific powers for attachment of earnings or debts.

Understanding Garnishee Proceedings in New Zealand

Garnishee proceedings, also known as attachment of debts, are a legal mechanism used by a judgment creditor to recover money owed by a judgment debtor. This involves obtaining an order that directs a third party, known as a garnishee, to pay money directly to the judgment creditor instead of to the judgment debtor [Source: District Courts Act 1947, s 92(1)]. A judgment creditor is a person or entity to whom a debt is legally owed, usually after a court or tribunal has made an order for payment. A judgment debtor is the person or entity legally ordered to pay the debt. A garnishee is a third party who owes money to the judgment debtor or holds funds on their behalf.

Disputes Tribunal Orders and Enforcement

The Disputes Tribunal is designed to provide a quick and informal way to resolve disputes without the need for lawyers. If a Disputes Tribunal Referee makes an order for the payment of money, this order is not directly enforced by the Tribunal itself [Source: Disputes Tribunals Act 1988, s 18(1)(a)].

To enforce an order for payment made by the Disputes Tribunal, the judgment creditor must file a certified copy of the order in a District Court [Source: Disputes Tribunals Act 1988, s 56(1)]. Once filed, the order may be enforced in all respects as if it were a judgment of that court [Source: Disputes Tribunals Act 1988, s 56(2)]. This means that the enforcement mechanisms available to the District Court, including garnishee proceedings (attachment of debts) or attachment of earnings, become available to the judgment creditor.

The Process of Attachment of Debts (Garnishee Order)

After a Disputes Tribunal order has been filed and registered in the District Court, the judgment creditor can apply to the District Court for an attachment of debts order. The process typically involves:

  1. Application: The judgment creditor applies to the District Court for an order attaching the debt owed by the garnishee to the judgment debtor [Source: District Courts Act 1947, s 92(1)]. The application must identify the garnishee and the debt they owe to the judgment debtor.
  2. Order Nisi: The court may make an interim order, known as an order nisi, which provisionally attaches the debt. This order typically requires the garnishee to appear in court to show cause why they should not pay the amount directly to the judgment creditor [Source: District Courts Act 1947, s 92(1)].
  3. Service: The order nisi must be served on both the garnishee and the judgment debtor [Source: District Courts Act 1947, s 92(2)]. This informs them of the proceedings and gives them an opportunity to respond.
  4. Garnishee's Response: If the garnishee admits the debt and does not dispute the order, they may pay the amount directly to the judgment creditor as directed by the court. If the garnishee disputes that they owe money to the judgment debtor, or if the judgment debtor disputes the attachment, a hearing may be scheduled [Source: District Courts Act 1947, s 94(1)].
  5. Order Absolute: If the court is satisfied that the garnishee owes money to the judgment debtor and there is no valid reason not to proceed, it will make an order absolute. This final order directs the garnishee to pay the specific amount to the judgment creditor [Source: District Courts Act 1947, s 94(2)]. Payment by the garnishee under an order absolute discharges their debt to the judgment debtor to that extent [Source: District Courts Act 1947, s 93].

Attachment of Earnings

Attachment of earnings is a specific type of attachment order that can be used when the judgment debtor is employed. An order for attachment of earnings requires an employer (the garnishee in this context) to deduct a specified amount from the judgment debtor's wages or salary and pay it directly to the judgment creditor [Source: District Courts Act 1947, s 84(1)].

Certain protections are in place for the judgment debtor, such as the protected earnings rate. This is the minimum amount of net earnings that a judgment debtor must be left with after any deductions for an attachment of earnings order [Source: District Courts Act 1947, s 87(1)]. The protected earnings rate is set by regulations and ensures that the debtor retains sufficient funds for basic living expenses [Source: District Courts Act 1947, s 87(2)].

Jurisdiction for Attachment Orders

Attachment orders are typically issued by:

  • District Courts: For the enforcement of District Court judgments or Disputes Tribunal orders that have been filed and registered with the District Court [Source: District Courts Act 1947, s 3(1)].
  • High Court: For the enforcement of High Court judgments, attachment of debts is governed by the High Court Rules [Source: High Court Rules 2017, Rule 17.58]. The process is similar to that in the District Court, with an interim order followed by a final order [Source: High Court Rules 2017, Rule 17.60].

Costs Involved

Several costs may be associated with enforcing an order through garnishee proceedings:

  • Disputes Tribunal Fees: An application fee is payable when lodging a claim with the Disputes Tribunal [Source: Disputes Tribunals Act 1988, s 53].
  • District Court Filing Fees: Fees are payable to file the Disputes Tribunal order with the District Court for enforcement. Further application fees are charged for applying for an attachment of debts or attachment of earnings order.
  • Service Costs: Costs associated with serving the court orders on the garnishee and judgment debtor.

What to Expect

For the Judgment Creditor: The process can be effective for recovering debts, particularly if the judgment debtor has known assets or a steady income and a cooperative garnishee. However, it requires a formal application process and adherence to court procedures. There is no guarantee of recovery if the judgment debtor has no attachable assets or income, or if the garnishee successfully disputes the debt.

For the Judgment Debtor: An attachment order means that funds or income you expect to receive will be diverted to your creditor. This can significantly impact your financial situation. It is important to engage with the court process if you believe an error has been made or if the protected earnings rate for an attachment of earnings order has not been applied correctly.

For the Garnishee: If you receive an attachment order, you must comply with it. Failure to comply can result in you being held personally liable for the amount specified in the order [Source: District Courts Act 1947, s 94(3)]. It is important to understand your obligations under the order and, if unsure, seek independent legal advice.

When to Seek Independent Legal Advice

Individuals involved in garnishee proceedings, whether as a judgment creditor, judgment debtor, or garnishee, may find the legal process complex. It is recommended that they seek independent legal advice to understand their rights and obligations fully. Assistance can be obtained from Community Law Centres (https://communitylaw.org.nz/) which provide free legal advice, or from a qualified legal professional.

Key Resources