Charging order (in the context of litigation)

Section 106(1)(c) of the Civil Procedure Act 2005 (NSW) (Act) provides that a judgment debt may be enforced by means of a charging order (NB: only judgment debts of the Supreme or District Courts of NSW).

A charging order is a court order that attaches to property of a judgment debtor (to the extent of a judgment debt). The order creates a security over specific assets owned by a judgment debtor and it restrains a judgment debtor from dealing with the assets.

The nature of a charging order was discussed by Master Allen in ANZ Banking Group Ltd v Greig [1980] 1 NSWLR 112 as being a “hypothecation” that does not involve any passing of property from the charge. Further, in Andersons Solicitors v Schigulski [2004] SASC 21 a charging order was described as “a right of realisation by judicial process in case of non-payment of a debt”. More recently Hallen J in Galbally & O’Bryan v Easton [2016] NSWSC 77 summarises the nature of a charging order as doing “no more than secure[ing] the judgment debt… and merely protects the interests of the judgment creditor to the extent necessary to satisfy the judgment”.

A judgment creditor may apply to a court by way of notice of motion pursuant to rule 39.44 of the Uniform Civil Procedure Rules 2005 (NSW) and it may be heard in the absence of the parties (ex tempore).

As a charging order is not an execution process, once it has been obtained and a judgment debtor has failed to pay a debt, proceedings need to be commenced to take the benefit of the charge and these must not be commenced within 3 months of the date of the charge order: section 126(4) of the Act. The proceedings should be commenced by way of Summons.