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Chasing debtors across Tasman is worth the effort

By Callum Reid, Partner

First published in the NBR 5 February 2009

With the strengthening ties between New Zealand and Australia, it’s not surprising that investments sometimes become entangled and turn sour.

So how do you enforce a New Zealand judgment against an Australian debtor?

The prospect of registering a judgment in another country can be daunting. But the good news is that registering a New Zealand money judgment in Australia is neither difficult nor cost prohibitive.

If proper due diligence is undertaken to ascertain what assets a judgment debtor has in Australia, then the process for enforcing the judgment can be quite straightforward. 

A treaty designed to streamline the process was signed in July 2008 between the New Zealand and Australian Governments on Trans Tasman Court Proceedings and Regulatory Enforcement.  Among other things, it aims to expand the range of court judgments that can be enforced across the Tasman and to simplify the process. The Australian and New Zealand governments have just announced that the new legislation will be enacted as soon as possible following the global financial crisis and the likely increase in the number and complexity of legal disputes.

In the meantime, the Australian Foreign Judgments Act 1991 remains the guiding light if you are trying to recover money from an Australian debtor. The Act applies primarily to the registration of money judgments (i.e. a judgment under which money is payable) and includes taxes, fines and penalties.

After obtaining a judgment from a New Zealand court, the judgment creditor has six years to apply to register the judgment.  In New South Wales, most New Zealand money judgments can be registered with the Supreme Court of NSW.  It is also possible to register such judgments in the Supreme Courts of other States and Territories.

Before registering a New Zealand judgment, it’s wise to find out whether the judgment debtor has local assets to satisfy the judgment. There are several ways to check the solvency of a debtor.  Most Australian law firms can undertake searches throughout Australia relating to property titles, and director and/or shareholder searches.  Credit agencies also offer basic credit checks which can be provided as a same day service.  Court databases can often be reviewed on-line to determine what, if any, proceedings are already in progress against the debtor. 

This may allow you to contact other creditors to share information or alternatively determine where you sit as a secured or unsecured creditor.

Once you are satisfied the debtor has sufficient assets in Australia to justify continuing with registration, you can file a summons in the Common Law Division of the NSW Supreme Court.  The summons is accompanied by draft minutes of order and a detailed affidavit in support of the application.   Most applications are dealt with on the papers and it is unnecessary to appear. These are uncomplicated standard documents.

Some practical difficulties can crop up with the affidavit, which must be completed by the lawyer who files for registration. If the judgment is expressed in New Zealand dollars and is then registered in Australian dollars, the affidavit must confirm the prevailing exchange rate at 11am - at least two days before the application is filed. At least three authorised foreign exchange dealer quotes confirming the currency exchange rate are required.  The Supreme Court Registrar will then average these rates to set the judgment exchange rate.  The practicalities of obtaining written exchange rate conversions can sometimes be time consuming and some agencies may charge a small fee for providing the quotes. However, a firm experienced in this area will know which agencies can easily supply this information. The costs incurred in obtaining the conversion, can also be included in the registered judgment together with interest, if payable under the New Zealand judgment.

Once the application and affidavit are filed, the Registrar will notify you when the application for registration is granted.  The judgment creditor isn’t required to attend these proceedings. Each application must be accompanied by a filing fee (currently AUS$685 for individuals and AUS$1370 for corporations).  You can recover the filing fee as part of the total amount sought from the judgment debtor.
After obtaining registration, you must prepare a Notice of Registration and personally serve it on the judgment debtor.  It must include the time within which the debtor may file a notice of a motion for an order setting aside the registration - normally 14 days. 

The process of registration only becomes litigious if the debtor takes steps to set aside the registration.  If no steps are taken within the fortnight, the judgment is registered in the Supreme Court of NSW. 

If the debtor refuses to satisfy the judgment, you can take steps to enforce the judgment in line with Supreme Court rules.

Before enforcing the judgment, it may be worth applying for an examination order. This requires the debtor to answer questions about his or her financial situation (on oath).    An examination order is especially useful when the initial searches relating to assets reveal limited information. (An examination order can only be made after the judgment is registered and the notice of registration has been served).

The examination order requires the debtor to provide location and amount of assets, income, and amounts of funds held in bank accounts.  It also allows the judgment creditor to ascertain what, if any, assets exist which can be used to satisfy the judgment.

For example, if you find out that the debtor is currently running a business and owns a residential property, you could enforce the judgment by way of a writ of execution, specifically a writ for the levy of property.  This will allow the sheriff to attend the debtor’s place of business and/or place of residence and take the debtor’s property to be sold off at a public auction to satisfy the judgment.

In difficult economic conditions, it is often a natural tendency to write off recovery of Australian debts as being too costly and time consuming.  However, on closer examination, the opposite is true.  It is prudent business practice to examine the possibility of registering and enforcing a New Zealand Court judgment in Australia.

Callum Reid is commercial law specialist in Duncan Cotterill’s Sydney office. c.reid@duncancotteriill.com; www.DuncanCotterill.com

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.