One of the biggest concerns when suing to recover a debt is whether the debtor will have the funds to pay the judgment awarded at trial. The pre-judgment garnishing order is a procedure that can resolve this problem by having funds paid into court before judgment, and (as is sometimes important) before the debtor is aware they are being sued.
How it Works
Pre-judgment garnishing orders are made by written application to the Court registry. To obtain one:
- The applicant submits a garnishing order and supporting affidavit to the court registry (typically with a copy of the Notice of Civil Claim that has been filed, but not yet served on the debtor);
- In the application materials, the applicant must identify another party that owes money to the debtor or holds funds in trust for the debtor (called the “garnishee”). The garnishee is usually a bank where the debtor has funds on deposit (which are funds owed to the debtor by the bank), but it can be any person or company that is under an obligation to pay money to the debtor;
- Once the court registry issues the garnishing order, the applicant/plaintiff serves the order on the garnishee and on the debtor with a copy of the Notice of Civil Claim setting out the claim against the debtor/defendant; and
- The garnishee is then obliged to pay the defendant’s money up to the sum identified in the order into Court where it is held until the claim against the debtor has been proven by the plaintiff.
Importantly, the applicant must know the identity of the garnishee. For example, if the garnishee is a bank, you must know the specific branches where the defendant has open account(s).
What debts are eligible?
Only claims for a “liquidated” debt can be subject to a pre-judgment garnishing order. A liquidated debt is an ascertainable sum of money that is justly due and owing after deducting any amounts owed to the defendant at the time the order is made. Liquidated debts include, among other things:
- Loans that are in default;
- Amounts owing on promissory notes;
- Outstanding rents under a commercial lease; and
- Invoices for purchaser orders that have been satisfied or services that have been provided.
In summary, your debt must be easily determinable and due at the time the order is sought. You can apply for additional pre-judgment garnishing orders if the defendant incurs more debts as the court proceedings are in progress.
The pre-judgment garnishing order is a powerful tool. It can be obtained (relatively) quickly and if it is successful, it provides assurance to debt claimants that there will be funds to pay the judgment the court grants in their favour, A claimant that obtains a pre-judgment garnishing order usually obtains a strategic advantage in the litigation which can lead to a faster and more favourable outcome.
If you have a liquidated debt claim and need to sue the debtor to recover the amounts owed, please reach out to any member of LK Law’s General Litigation Practice Group for help.
This article is intended to be an overview of the law and is for informational purposes only. Readers are cautioned that this article does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing