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Diana Clement explores how you enforce a court’s judgment when defendants try to hide their assets and when official agencies don't show any special inclination to help enforce the decision

Diana Clement explores how you enforce a court’s judgment when defendants try to hide their assets and when official agencies don't show any special inclination to help enforce the decision

This article originally appeared in LawNews (ADLS) and is here with permission.

You’ve been to trial and you’ve won your case. But short of calling in the knee-cappers, how do you and your client enforce the court’s judgment? Expect a sigh when asking lawyers how they get defendants to pay up.

“In the end it depends on what assets they have,” says Joanna Pidgeon, a partner at Pidgeon Law and past president of ADLS. “It’s something you take into account before you even file proceedings.”

The client doesn’t do it to line the lawyer’s pocket, adds Martelli McKegg partner Andrew Steele. “If [the unsuccessful party] is all trusted up, then a judgment is pointless. It happens all the time.”

If your judgment is against a company, the fastest and easiest way to enforce it is a statutory demand, under s 289 of the Companies Act. “If they don’t pay within three weeks, you can commence liquidation proceedings. That is like a death sentence for the company,” says Steele, who is convenor of ADLS’ Civil Litigation Committee.

There are other avenues to attack companies, but nothing beats a statutory demand. “If they have any assets, the directors will be very concerned about reading that document. It will force them to come to the table.”

The power of the threat

Going in like Wyatt Earp and starting shooting isn’t always the best method, says Steele. You may not actually want to bankrupt the individual or put the company into liquidation. “You have to be careful not to kill the golden goose by bankrupting it.”

Sometimes just the threat of bankruptcy or liquidation is better than actual doing it, Steele says. “When you want to get money out of people, you normally go for the toughest approach. Bankrupting them, or liquidation, is not your goal because it doesn’t often produce money.

“If anyone thinks that company needs saving, they will negotiate with you. It’s the same for individuals. Bankruptcy against you is a serious threat. It lasts for three years. It will ruin your chances of getting credit from the bank. It will impede your being a director of a company. If you try to do those things on the sly and get caught, you can end up in jail. It’s pretty serious. Very draconian.”

Often that threat will lead to the person or company beginning to pay the debt by instalments “There is no point in crippling them financially. But if you can get paid off over time, it is better than bankrupting them and getting nothing.”

No money

If the defendant doesn’t appear to have the money to pay, you can apply for an order for examination in the High Court or District Court. “Then the registrar can springboard off that and make various other applications to grab those assets,” Steele says.

A warrant to seize enables a bailiff to take and sell property belonging to the debtor. If the debtor has no obvious assets but has a job or a benefit, attachment orders can be placed against their income.

You can’t, however, get blood out of a stone. Pidgeon cites a client who had advanced money to a company secured by a GSA (general services agreement) with a personal guarantee from the director. The business failed.

The guarantor had substantial assets held in trusts, including several properties in desirable Auckland suburbs. Summary judgment was granted in the client’s favour, but the director was adjudicated bankrupt the morning of the judgment, Pidgeon says. The guarantor chose bankruptcy rather than arranging for his trusts to advance funds to repay the debt.

Divestment and trusts

Sometimes defendants straight-out attempt to hide their assets. “Everyone has heard of bankrupts who hid all their personal assets in a garage or a container to avoid the Official Assignee,” says Steele. “Unless there is a record of something you own, you can hide it.”

It’s not unusual, he says, for defendants who see the writing on the wall to think, “Oh well, I’ll set up a trust and transfer assets into it”.

Divestments made within two years [of a judgment] can be overturned by the Official Assignee. And the Official Assignee can call up loans related to that divestment.

If the person makes moves to skip the country, they can be arrested, Steele says. “If you can satisfy a District Court judge that someone is leaving the country without paying their creditors, you can have them arrested and kept in court until their assets are secured to meet those debts.” Steele has defended a client in that situation.

System faults

It’s not a perfect system, says Steele. “The Official Assignee’s staff are underpaid, overworked and overwhelmed. If you expect them to be like Sherlock Holmes in hunting down the assets in one of the thousands of bankruptcies they have to deal with, you can think again. It’s not going to happen.”

Steele argues that the trust issue is something legislators need to look at. “They have looked at it to a degree by the avoidance of gifting in the Insolvency Act and the ability to set aside property transfers in the Property Law Act, but I don’t think it goes far enough.”

Unsecured creditors

Angela Hansen, a partner at Heimsath Alexander, says it becomes even more difficult for unsecured creditors to recover after a liquidation.

There are many different scenarios but typically the plaintiff might be better to wait for the first or second liquidator’s report to determine if there are any funds to pursue. “A lot of the time the company won’t have anything worth pursuing, relative to the costs involved in recovery. If there are assets, the recovery can be more straightforward.

“It is more common that there won’t be anything for them or very little, and unfortunately it falls to those creditors who have the financial means to pursue matters, to explore the more challenging ways to get money out of a company. That might involve, for example, a claim via the directors. The cost of legal fees, and the unknowns about likely recovery, can make that option unattractive.”

The gravy train

Anyone who follows the Employment Relations Authority (ERA) and Employment Court or reads newspapers will see what look like fabulous awards made against employers. But do the hard-done-by workers ever see the money?

ERA decisions usually result in payment, says Emma Butcher, partner at LangtonHudsonButcher. “Employers in the ERA know it isn’t going to cost the applicant a lot to get a compliance order and that could be accompanied by a stiff penalty for non-compliance. There is a fast-track mechanism in place to punish employers who do not comply with a determination.”

Employment Court judgments can be more difficult for individual litigants to enforce, says Butcher, especially if they are out of work and without the funds to pursue the matter.

The judgments are enforced typically through the District or High Court in the same way as other civil judgments. “The extra money it takes to enforce the judgment is sometimes out of reach,” Butcher says.

Many plaintiffs can’t afford $300-plus an hour plus gst to employ a lawyer. So, they will sometimes seek support from third-party organisations such as unions, or workers advocates, or collections agencies.

One such workers’ advocate is Nathan Santesso, a non-practising lawyer. He says migrant workers in particular have difficulty enforcing judgments. In fact he hasn’t seen a case at the ERA level where the migrant’s employer has ever paid up voluntarily.

Santesso uses a range of tactics to get settlements. That might involve diplomacy or he might employ a mediator. Even where the employer goes overseas, Santesso continues to pursue them. He may serve documents on relatives here in New Zealand if he doesn’t have a forwarding address or by email if the authority in question accepts that as a means of substituted service.

“I did have a case in the authority [ERA] where the guy left and went to Africa. I think he will want to come back to New Zealand. That is why he moved his family here. He wants a normal life and doesn’t want to have this following him around.”

Another tactic may be to wave Employment New Zealand’s stand-down report at an errant employer. The list of non-compliant employers is maintained by the Labour Inspectorate. Employers on the list are barred from employing migrant labour.

ERA decisions can be enforced in the District Court if the employer won’t pay. Santesso took a less-common route when he encouraged Filipino bakery worker Josue Domingo to escalate his dispute to the Employment Court after the defendants Meng Suon and Ngan Heng (t/a Town and Country Food) took no steps to comply with the ERA’s compliance order to pay $8,000.

Santesso filed in the Employment Court for a breach of a compliance order, seeking a fine. The idea was to scare the employer with the thread of property seizure.

Section 140(6) of the Employment Relations Act 2000 empowers the court to impose a range of sanctions: a fine, sequestration and/ or imprisonment in the case of a breach of compliance order. The more frightening penalties in the Employment Court worked on the employer in Domingo’s case.

Santesso may also encourage his clients to go after the employer’s personal assets. Prior to the employment law shake-up of 2016, companies were often liquidated by their directors to avoid the payments, says Santesso.

In Brahmbhatt , Gediya , Singh and Dhamija v NZ Clean Master 2013 Limited the company was ordered to pay a penalty of $20,000. Its director Huumika Kohli was hit personally with a $10,000 penalty under s 134(2) of the Act for aiding and abetting breaches of the applicants’ employment agreements.

Residential tenancies

Tenancy Tribunal orders can be especially hard for landlords to enforce. “Typically, you have to enforce [the order] for about 90% of the time,” says Cody Knight, a director of C.I.A. Collections, a company used by many landlords.

The most common method of enforcement is by way of attachment order, says Knight. That enables an employer or Work & Income to transfer money from the debtor’s wages or benefit to the landlord.

Another option, as with all civil debts, is garnishee proceedings to collect the money from the tenant. Often, however, landlords are paid off at $5 a week and if the former tenant loses his or her job or moves on or off a benefit, the process stops.

Calling the Mongrel Mob

Lawyers need to be careful about not going too far in enforcing judgment. Calling in the Mongrel Mob is generally not an option.

“As lawyers, we are really obliged to refer only to proper methods available to enforce judgments,” says Steele. “We are supposed to uphold the rule of law. I know that sounds quaint and rather sugary-sweet. But the reality is if you don’t, the rule of law starts to unravel and it becomes like the Wild West.”

He adds: “Another common thing you see, and younger lawyers do it when they are a bit naïve, is threaten disclosure of something unsavoury such as not paying tax or cheating the benefits system, in order to coerce the person who owes them money to pay up.

“Lawyers sometimes fall into that trap. But it’s blackmail and it’s no better than sending the Mongrel Mob around, to be honest.”

Diana Clement is a freelance journalist. This article originally appeared in LawNews (ADLS) and is here with permission.

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Unfortunately there are preceding circumstances, just as bad. Companies such as builders or building suppliers know full well the costs of litigation, the time it takes and likely diffused decision that results. So any damage or rip off less than say $40k is not viable to pursue. Within the trade it is now common to hear the catchcry , in response to complaints and protests, “see you’s in court then.”


I understand your point however, (a) all builders/suppliers should put clauses in their contracts which give them the right to claim an indemnity for their legal costs if they have to sue a debtor to recover the debt; and (b) the Construction Contracts Act provides a streamlined process for recovering construction debts. I'm sure there are many lawyers who would help builders on a contingency basis if their is a straightforward claim against a debtor if the client knows that the debtor has assets. That being said, if the debtor is well advised there are always methods of dragging things out.


The picture of this article enforces some wrong stereotypes. To depict someone that tries to hide assets I would have rather chosen someone wearing a fancy suit and silk tie.


I agree - the pic adds nothing to the story, but does add something to existing prejudices. I sent a heads up to Gareth Vaughan. I also checked the media standards authority, but that does not seem applicable to a blog


Does it? I honestly thought that was the dude that was owed money.


I thought it may be who might be employed to go after the money? A la Mr T in other words.


That's how I interpreted it, too... the guy you'd hire to go and collect money on your behalf...


As I've written before, fifty bucks to a well-spoken, but front-toothless man in a lowered XD Falcon works wonders.....
It may not be recommended, but it seems to be effective.


What an appalling story. I am completely naive and imagined that enforcement of contracts of any description was relatively straight forward, excepting of course tenancy contracts which our various red and blue gummints have mucked around with in some paternalistic, well meaning but ultimately stupid manner.
What a colossal cost we must be paying with multitudes of courts, commissions, ombudsmen, tribunals etc which all give the impression of "fair do's" for ordinary citizens and genuine traders, but which in the end are legal mirages mainly concerned with their own survival, comfort and expanded empires.
NZ seems poorly served by a legislature full of hot air but seemingly incapable of passing succinct laws that are actually enforceable. We seem to be ruled increasingly by ad hoc edicts which ultimately put the Rule of Law at peril. The RMA being the classic example of vague, good intentions which just throw the ordinary citizen "under a bus" driven by bureaucrats and their high sounding tribunals who have no intention of enforcing "the" law.
We are slowly sliding into rule by dictate, or perhaps chaotic anarchy where the chap with no front teeth, driving the lowered XD, seems to offer our best "protection".
I'm depressed already!