You have won the case! But sometimes that is just half the job and enforcement can be a real battle. This article explains the different avenues available to you to enforce a judgment against a company.
You have done the hard work and been successful in obtaining a judgment against a debtor. Despite your demand, the company simply refuses to pay. So where to from here?
The process of enforcing a judgement, will depend on:
The amount of the judgment; and
Whether the debtor is a person or a company.
For more information on enforcing a judgment against a person, see our other article:
Enforcement Proceedings
Enforcement is a process of the court examining a director of the company to determine:
What assets the company has; and
The company’s ability to pay the judgment debt.
Depending on the outcome of the examination, as an enforcement creditor, you may then have the right to seek the court order a warrant for the:
seizure and sale of property;
redirection of debt;
redirection from a financial institution; or
order for payment by instalment.
Statutory Demand
If the judgment debt is $2,000 or more and against a company, you will have the right to issue a statutory demand to the debtor company.
A statutory demand must not be used as a form of debt collection, but rather is issued for the purpose of giving the debtor company one last chance to pay, prior to further steps being taken to wind up the company.
If the debtor company does not pay the judgment debt in full (or take steps to set aside the judgment) within 21 days of receipt of the statutory demand[1], you will then have the right as an enforcement creditor to apply to the Supreme Court to wind up the company.
Please note if you do issue an Application for Winding Up of the Company and the debtor company successfully applies to have the Application set aside in the court[2], you are highly likely to have a costs order made against you. For this reason you should always be extremely careful when issuing a statutory demand to make sure you don’t unnecessarily expose yourself to the risk of paying costs.
Winding up a Company
The process of then winding up a company involves many steps, however in summary if ultimately a company is wound up, a liquidator will be appointed to collect in all assets and determine the debts to be paid.
If you have gone to the expense of winding up a company you will be entitled to seek an order from the court for your costs[3]. In the winding up of a company, the costs of taking all of the initial steps to protect the assets will be paid as a first priority[4], then the costs of winding up[5].
In the event of liquidation of a company, a judgment debt itself is treated as an unsecured debt and you will be treated like all of the other unsecured creditors. As a result liquidating a company is not something you will want to do unless:
You’re a secured creditors; or
You believe the company has some reason not be liquidated and may pull funds from another entity.
Need Help
Enforcing a judgment using the correct steps can often result in prompt payment or a payment plan agreed to without extended delays. Like any dispute the success is often determined by the other party’s ability or preparedness to pay. In addition, these processes can be somewhat complicated if it’s not something you deal with on a day to day basis. We always recommend talking to a professional first to make sure:
time frames are met;
that you are taking all the right steps for your particular circumstances; and
that the other payer takes you and your debt seriously.
Contact Us
We are happy to provide advice tailored to your business's needs about enforcing an judgment decision. The law can be complicated, so let our experienced construction law practice give you peace of mind. Call us on 07 3128 0120 or email us at subcontractors@arbuildinglaw.com.au.
End Notes
[1] s 459F (2)(b) Corporations Act 2001
[2] Grounds for setting aside an Application to wind up a company may include disputing the actual debt or the validity of the judgment.
[3] s 466 Corporations Act 2001
[4] s 556 1(a) Corporations Act 2001
[5] s 556 1(b) Corporations Act 2001
