After a long legal process, a judgment is entered in your favour. However, a judgment is only good when it is satisfied, otherwise it is an empty one. Sometimes the judgment can only be satisfied after it is enforced, and the winning party has to decide how to enforce it.
There are different methods for different forms of assets.
If you do not know the assets of the judgment debtor, you cannot take proper action to enforce the judgment. To obtain information in relation to the assets of a judgment debtor, he/ she can be orally examined about his/ her assets. The Court can order the judgment debtor to disclose the property and financial resources he/ she has that could be used for satisfying the judgment. The court may also order the judgment debtor or officer to produce any documents pertaining to his/ her assets for the examination. The court also has the power to make an order prohibiting the judgment debtor from leaving Hong Kong, if it is shown with probable cause for believing that the judgment debtor is about to leave Hong Kong, and satisfaction of the judgment can be delayed. If the judgment debtor fails to appear, the Court may order to arrest him and be brought before the court for examination on the day following the day of arrest.
Writ of Fieri Facias
You can apply to Bailiff’s office to recover the debt by seizing goods and chattels of the judgment debtors to satisfy the judgment. The bailiff will take an inventory of all items seized. If the judgment debtor fails to settle the debt plus the estimated costs for the execution within 5 working days, the seized items will be sold by public auction. The proceeds at auction will then be used to settle the money due to you after defraying the necessary execution charges.
However, Bailiffs act upon your instructions. Bailiffs will not trace the judgment debtor or his/ her assets for you. They will only seize the properties belonging to the judgment debtor. If they seize the properties wrongly, and they belong to third party, you may be liable for the Bailiff’s wrongful seizure of the properties.
Garnishee proceedings is often used to freeze the bank accounts of the judgment debtor and recover the judgment sum directly from that bank accounts.
If the Court is satisfied that the judgment debtor owns a bank account, a temporary order (legally known as order nisi) shall be made directed to the garnishee to give any reasons to object to the application, i.e. why the debt due to the judgment debtor should not be used to satisfy the judgment. The garnishee order nisi will then be served on the garnishee and judgment debtor, with a hearing date for the parties to attend to make a formal garnishee order (absolute). In the absence of any valid ground, the formal garnishee order will be made at the hearing. The garnishee then pays the amount specified in the garnishee order to the judgment creditor.
The court may impose a charge on the property of the judgment debtor to secure the payment of the judgment. It is called a charging order, similar to creating a mortgage on the debtor’s property, and it can be on the debtor’s real properties and securities, or payment held by the Court for the judgment debtor.
If the judgment debtor fails to satisfy the judgment debtor after the charging order is made, further action can be applied to take over the charged property and sell it, subject to any prior right that other third party may have over that property (such as other mortgagee).
Similar to garnishee order, a temporary order will be made and, unless there are valid grounds, the order will be made absolute after a hearing.
Bankruptcy/ Winding Up
Final resort for enforcement of a judgment would be to apply for winding up or bankruptcy of the judgment debtor due to inability to pay. Bankruptcy applies to natural person while winding up applies to body corporate.
There are separate procedures for bankruptcy and winding up, but both involve a statutory demand duly served on the judgment debtor, and failure to satisfy the demand within the statutory 21-day period.
Applying for bankruptcy or winding up involves issuing a petition pursuant to the applicable form, and pay a deposit with the Official Receivers’ Office. A hearing will be fixed and the Court will hear from the debtor or his other creditors on why bankruptcy or winding up order should not be made. Once the order is made, the financial affairs will be controlled by the authorities (trustee-in-bankruptcy/ liquidator) and the assets realized will be used to satisfy the debts. However, the chance of recovery of a judgment debt after bankruptcy/ winding up is low because the assets of a judgment debtor is often very limited. It is most often that there are no assets left to satisfy any debt after liquidation/ bankruptcy process unless there are further assets which can be recovered from a third party on any ground, such as undervalue transactions that are to be set aside or unfair prejudice towards creditors.
Our team at Hugill & Ip has extensive experience in dealing with Dispute Resolution issues – so kindly get in touch with us to find out how we can help.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.