Cover All the Angles Before You Lend
David John Addington · April 20th, 2007
Obtaining a Judgment, whether in the Supreme Court of Bermuda or the Magistrates’ Court, is really only half the battle when proceeding against a Debtor. The successful enforcement of a Judgment can be more difficult to attain; but there are things which businesses, individuals and lenders can do to lay a foundation for dealing with bad debts at the outset. For example, when considering making a loan. The key is to have as much information as possible. Have a comprehensive form prepared to work from. If you are doing business with someone, whether an individual, a company or a firm or advancing them any kind of credit, information that you will want to gather will include full names and addresses, telephone and other contact information. Discover if you are dealing with an individual or a limited liability company or perhaps someone “trading as (a firm)”, or perhaps it is a partnership. If you are a lender or advancing credit or goods you might wish to consider security and guarantee arrangements and some formal evidence of the debt in the form, perhaps, of a promissory note. Where is an individual employed? What work he does he do? What is his or her income? Does the would-be borrower have any other creditors or judgments registered against him or her? Anybody entering into this sort of relationship would be well advised to seek the professional assistance of an Attorney who could advise what documentation, searches and safeguards should be employed in any given situation in order to limit your exposure.
If the worst happens and you have to begin litigation in order to recover a debt, you should first of all give thought as to how any Judgment might be enforced. The Courts will not normally take any initiative in the enforcement of its Judgments in ordinary civil matters. On the other hand, a person who has obtained a Judgment may enlist the aid of the Court in various ways to enforce the Judgment or Order, and so secure the benefit of success in the litigation.
Judgments and also Orders of the Court are usually determinations of rights in the actual circumstances in which the Court has cognisance, and they give some particular relief capable of being enforced. Here we consider a Judgment for the payment of a sum of money.
Under the Supreme Court Act of 1905 a Judgment is a charge on land. If the land is sold the Judgment must be cleared off and the basic premise is “first in time first in right”. The matter is also dealt with in the Real Estates Assets Act 1787. A search for judgments can be made at the Supreme Court Registry on payment of the appropriate fee. Judgments (for the payment of money) do not take precedence over legal mortgages. Obviously the earlier you obtain a Judgment the earlier you can set about enforcing it and hopefully secure an advantage. The message here is do not sit on your rights. If there is a problem developing you should deal with it promptly. A debtor may be hesitant or embarrassed. You should get him to discuss it and talk about the problems and try and work out a solution. An Attorney can help you with this and early action is better than cold trails.
Enforcement of Judgments may be set about in a number of different ways. In most cases the procedure is roughly the same, although different terminology might be used, in both the Supreme Court and the Magistrates’ Court. Judgments are normally good for 20 years but Rules of Court can impose certain restrictions upon enforcement. For example, a Writ of Execution to issue after a period of 6 years has elapsed since Judgment will require the leave of the Court. A Writ of Execution is sometimes alternatively known as a Writ of Fieri Facias which roughly translated means “cause it to be done”. It is a judicial writ directed to the Bailiff’s department to satisfy a Judgment from the debtor’s property, by which is meant both real (land) and personal. In its original form, the writ directed the seizure and sale of goods and chattels only, but eventually was enlarged to permit levy on real property too.
The Bailiff (known as the Deputy Provost Marshal General in the Supreme Court) on a successful execution of property in the Supreme Court is entitled to a fee known as poundage and the manner in which the writ is executed is a matter for the Bailiff under the ultimate direction of the Court. If the Bailiff is unable to ascertain property which he may seize, your Attorney may suggest applying to the Court for leave to conduct an examination of the debtor as to his means, assets and liabilities. This is an examination said to be “in aid of execution”. An alternative is in the issue of a Judgment Summons which can result in the examination of the debtor in a summary form and possibly the making of an order for payment by instalments.
Instalments may be ordered at source in the case of an Attachment of Earnings Order for which procedure, if it started off in the Supreme Court, it must be transferred to the Collecting Office of the Magistrates’ Court. Another possibility is that, if there is a debt which is due to the debtor from a third party, the Court may order the payment of that debt direct to the Judgment Creditor by-passing the Judgment Debtor. This is a procedure known as a Garnishee Order.
Other possibilities of recovering debts may include bankruptcy, and, in the case of a limited liability company an order for its winding up and appointment of a Liquidator. However such procedures are not in themselves approved methods of collection on a Judgment and the circumstances of every individual case would dictate the methods suitable or best to be employed. For these reasons, it is always best to seek professional assistance and advice in taking any steps in litigation in the Courts of Bermuda. There is no substitute for the experience of a professional who has encountered the problems and the pitfalls previously. Having said that, the Magistrates’ Court in its civil jurisdiction (up to $25,000) is a user friendly forum as a “small claims” court.
In conclusion, money spent on obtaining professional advice before entering into any legal relationship is money very well spent at the outset. Good commercial and legal advice at inception can save a great deal of expenditure later on when things get difficult. In other words, prevention is better than cure! Further, an experienced professional may be able to suggest ways of resolving, with the parties, disputes and other problems of indebtedness, helpful to both sides of the issue; perhaps avoiding the need for litigation and the procedure for the enforcement of judgments all together and that may be a consummation devoutly to be wished!