What is garnishee order?
This is an order which is a legal procedure by which a judgment creditor obtains control of funds in the hand of a third party (garnishee) who owes money to the judgment debtor.
You can also say that a garnishee order is an order of the court obtained by a judgment creditor, directed to attach the money of his judgment debtor which is in the hands of a third party.
With the effect, the third party is prevented from paying the money so attached to anybody, but to its as a custodian for the court until the court gives directives as to how the money is to be applied.
Another definition of garnishee order is that it is an order from court obtained by a judgment creditor, ordering the debt owing or accruing due by a third party to the judgment debtor at a time of service of the order be paid to the judgment through the court.
The order is always from the court and directed to the garnishee against the cleared fund in the account of the judgment debtor.
Parties to garnishee order
There are three parties to a garnishee order, they are;
1. Judgment Creditor
This is the person who obtained the order, and usually, the order is issued at his instance and in his favor.
2. Judgment debtor
This is the person to whom the order is against. He is the person who is owing to the judgment creditor.
This is the third party whom the order is directed to. He is the person to act on the order. For example, it is the bank, and the bank’s customer is the judgment debtor.
Types of orders
The order will originate either from a high court, or a magistrate court. When the order is from the High Court (garnishee order), it may be limited or unlimited.
That is to say that it could attach a given sum, plus the cost in the bank customer’s account or the entire balance in the customer’s account.
The garnishee summons originates from the magistrate court and will be for a limited amount plus cost.
So below are the types of a garnishee orders.
1. Garnishee Order Nisi
This is only an interim order. It is just a warning though it attaches immediately, no funds should be paid over the court.
Its basic effect is to freeze the customer’s account to the extent of the order.
When the order is made absolute, the stated sum plus cost or credit balance of the customer’s account could be safely paid over to the court in accordance with the order.
2. Garnishee order (Summons)
When the bank is served with the garnishee summons, it is expected to pay over to the court the money owed by the judgment debtor within a specified period in accordance with the order.
The bank can equally make due to appearances after consultation with her customer.
Treatment of the garnishee order UK by bank
The order is usually served on the bank’s registered head office with a copy on the branch where the account is domiciled.
However, if the order is served directly to the branch, it should use the fastest possible means to get in touch with its head office.
It should be noted that immediately an order is received, the bank’s automatic right of set-off over all the customer’s account becomes operational.
However, this right does not extend to a loan account that is not due for payment or running its course without default.
If the account concerned is in debt, it means that there is nothing to attach.
When an order is received, the bank needs to inform the customer and seek his admission of debt in writing.
Where the order is for a limited amount, the customer’s account need not be stopped.
But rather the amount involved plus cost should be transferred to a suspense account pending payment to the court.
However, if the order is unlimited, it attaches all funds in the customer’s account and the account must be stopped.
This being the case, uncleared effects when cleared should be credited to a new account opened in the customer’s name.
Attachment of funds is only against cleared funds standing in the name of the judgment debtor at the time of receipt of order.
However, it is better to open a new account for such a deposit, or place it in a suspense account especially on unlimited garnishee order UK.
Funds Not Attached
In garnishee order, UK, funds not attached are known as an uncleared instrument otherwise known as uncleared effects.
This is an instrument lodge into the account but is yet to complete the collection process.
Usually, they are not attached unless the bank treated it as paid on its lodgment.
This was the verdict in A.L underwood Ltd V. Barclays Bank Ltd. And also Fern V Bishop Barns & Co Ltd and Lloyds Bank Ltd (1980).
The joint account fund is not attached if the order is in the sole name of a party to the joint account.
This is in the case of Hirschorn V. Evans (1938).
In the same vein, a partnership account is not attached when the order is only on a partner.
Funds that are Attached
Under garnishee order UK, all credit balance standings in the name of the customer at the time the order is received whether in a current deposit account, savings deposit, or time (fixed) deposit.
Initially, a trust account is attached but the bank or trustee will explain the nature of the account and request an amended order to exclude it.
Under garnishee order NSW, solicitors’ client account is attached by the order unless it is specifically excluded.
Again it should be noted that cash deposit to customers account at another branch of the bank before the order but not yet credited to the account is attached
This may not be much of a problem now with the online banking as the deposit is expected to reflect immediately unless under constant “no network” to or system failure or break down.
It should be noted that for garnishee order nsw to be effective, the name recited in the order must agree in all respect with the name of the customer otherwise no fund is attached.
Presentation of cheques after order
Under a limited garnishee order uk, payment of a cheque (cash or clearing) after receipt of the order depends on the availability of fund after the judgment debt and cost has been deducted.
If there’s a surplus fund, the cheque should be paid otherwise, it should be returned with the inscription “Refer to drawer or Account attached”.
In the case of unlimited order in the presentation of cheques after a garnishee order nsw, cash cheque should be returned.
Clearing cheques that have not completed the clearing period should be returned even when it has been debited to the account as long as the presenting bank has not been told that the cheque is paid.