Business operators seriously concerned about getting paid may be able to quickly freeze a debtor's assets

In the running of your business you may find that you have serious concerns about getting paid by a debtor.

In certain circumstances the Court can order that the debtor’s assets be ‘frozen’ until a final judgment can be made about the debt. In urgent situations the Court can make an order before you have time to put together all the documents needed for a full Court case against your debtor. You do not have to watch helplessly as your debtor wastes money or disappears while you wait for a Court order.

The effect of a Court order freezing a debtor’s assets is to prevent the debtor from selling or otherwise disposing of any property without the Court’s approval. That includes bank accounts, land, vehicles or any other assets.

An example is the Court freezing the assets of David Tua’s management company; a company run and owned by his trainer (Kevin Barry) and manager (Martin Pugh). Those assets were frozen until the dispute over Tua’s boxing income could be resolved.

Obviously a Court order freezing assets is an extremely useful tool if you are owed money and are concerned about getting paid. However, the Court is careful in making such an order because of the serious restrictions it imposes on people.

To get such an order you need to be able to show the Court that:

1. The debtor resides or carries on business in New Zealand.
2. The debtor owns assets in New Zealand.
3. You have a good arguable case that the debtor owes you money.
4. There is a risk that the debtor is going to dispose of the assets without paying the debt.
5. There is no good reason that the Court should not make such an order. For example, a good reason might be that you owe the debtor a larger sum of money than he owes you.

You will also need to communicate to the Court (usually through your lawyer) that you will be responsible for any unnecessary damage to the debtor that arises from the order freezing the assets. The Court will also want to know about other people that might be affected by such an order, such as other creditors, or innocent parties to contracts signed by the debtor.

If the amount justifies getting a lawyer to assist and you act decisively you can secure the means of repayment.

Good legal firms operate a policy of brief initial telephone discussions so you can get a basic idea where you stand. It’s always worth a quick call to sort out your options.