I. INTRODUCTION

2.1 Three aspects of the present law of garnishment in New South Wales are considered in this chapter

• the procedure relating to garnishee orders:
• the substantive law relating to garnishee orders so far as it is relevant for the purposes of this Report including the special provisions for the attachment of moneys in bank accounts and
• the present position of building societies and credit unions in relation to garnishee orders.

An order attaching a debt due or accruing to a judgment debtor may issue out of the Supreme Court the District Court or a Local Court (para 2.3). An order issuing out of the Supreme Court is properly termed a “garnishment notice”. However for the purpose of general discussion we have ignored the procedurally-based differences between a Supreme Court garnishment notice and a District Court or Local Court garnishee order. The term “garnishee order” therefore includes garnishment notices except where specific reference is made to the garnishment procedure in the Supreme Court.

II. THE PROCEDURE RELATING TO GARNISHEE ORDERS

2.2 Legislation to enable a judgment creditor to attach debts due or accruing to the judgment debtor was first introduced in New South Wales in 1857¹ and followed legislation introduced in England in 1854.² The procedure relating to garnishee orders is now regulated by:

• in the case of an order sought from the Supreme Court, Part 46 of the Supreme Court Rules:
• in the case of an order sought from the District Court, sections 97 to 106 of the District Court Act 1973 and Part 33 of the District Court Rules: and
• in the case of an order sought from a Local Court. sections 47 to 57 of the Local Courts (Civil Claims) Act, 1970 and Rules 47 to 50 of the Local Courts (Civil Claims) Rules.

2.3 A Supreme Court garnishee order can be sought to enforce a judgment debt resulting from proceedings in the Supreme Court.³ A Supreme Court garnishee order can also be sought to enforce a judgment debt which results from proceedings in the Supreme Court of any other State or part of the Commonwealth or in a foreign court if the interstate or foreign judgment can be and is registered in the Supreme Court⁴ A judgment creditor can apply for a garnishee order to the Registrar of the District Court or the Registrar of a Local Court if the judgment debt resulted from proceedings concluded in that Court,⁵ or the judgment debt resulted from proceedings in a court of like jurisdiction in any other State or part of the Commonwealth and the interstate judgment has been registered in the Court.⁶

2.4 An application for a garnishee order presupposes that the judgment creditor has sufficient information about the affairs of the judgment debtor to conclude that there is a debt due or accruing from a particular third party to the judgment debtor. The judgment creditor’s information may come from past dealings with the judgment debtor, eg. financial details provided on an application for credit Alternatively the judgment creditor may have summoned the judgment debtor for oral examination by the Court as to the judgment debtor’s income and assets⁷ or, where the judgment debt issues out of a Local Court, have served an examination notice on the judgment debtor requiring the judgment debtor to provide specified information.⁸

2.5 The procedure for garnishee orders issuing out of the District Court and Local Courts is broadly the same. The judgment creditor applies to the Registrar of the Court for an order and, if an order is made, the Registrar duly notifies the judgment debtor.⁹ The Registrar has discretionary power to issue the order and may refuse to do so if for some reason, such as the smallness of the judgment debt, he or she considers that the order should not be made.¹⁰ Except in the case of an order attaching the wages or salary of the judgment debtor,¹¹ the order operates to attach in the hands of the garnishee:

(a) in the case of an order issuing out of the District Court all debts which were due, owing or accruing from the garnishee to the judgment debtor when the garnishee order was made and which remain due, owing or accruing when the order is served, or

(b) in the case of an order issuing out of a Local Court, all debts due, owing or accruing from the garnishee to the judgment debtor when the order is served.¹²

2.6 Under the order the garnishee is required to pay, in accordance with the relevant Act and Court Rules,

(a) in the case of a District Court order, the debt attached by operation of the order, or

(b) in the case of an order issuing out of a Local Court, the debt due from the garnishee to the judgment debtor

or so much of the debt as may be sufficient to satisfy the judgment debt specified in the order or the balance of the amount specified after deducting any amount as may be notified in writing to the garnishee by the judgment creditor or the Registrar as having been paid or credited to the judgment creditor on account of the judgment debt.¹³ The amount payable under the order is to be paid to the Registrar, but may be paid to the judgment creditor direct if the garnishee serves notice on the judgment debtor of his or her intention to do so before payment.¹⁴ Under the District Court Rules a garnishee has 14 days within which to comply with the order.¹⁵ There is no specified time for compliance with a garnishee order issued out of a Local Court.¹⁶

2.7 If the garnishee disregards the order or only partially complies with it, it is up to the judgment creditor to take the matter further. If the judgment creditor is satisfied that the order has not been complied with, he or she may take out a summons requiring the garnishee to appear before the Court to show cause why the garnishee should not comply with the order.¹⁷

2.8 In the case of a garnishee order issuing out of the District Court. if the garnishee fails to appear in answer to the summons, or appears but does not satisfy the Court that he or she should not have to comply with the order (eg because there is no debt to attach), the Court may give judgment in favour of the judgment creditor against the garnishee for the amount of the attached debt or the unpaid balance of the judgment debt, whichever is the lesser, and the judgment creditor can proceed to enforce that judgment debt against the garnishee.¹⁸ The District Court may also hear and determine third party claims in respect of the attached debt when it appears to the Court that a third party is, or claims to be, entitled to moneys paid or payable under the garnishee order or to have some interest in the attached debt.¹⁹

2.9 In the case of a garnishee order issuing out of a Local Court if the garnishee fails to appear in answer to the summons, or appears but does not satisfy the Court that the alleged debt is bona fide in dispute, the Court may order that execution be levied against the property of the garnishee to recover the debt If, on the other hand, the Court is satisfied that there is a bona fide dispute about the alleged debt the Court is obliged to discharge the garnishee order where the debt if payable, exceeds $250 or does not exceed that amount but is not within certain categories of debt If the order is not dischargeable the Court must order a hearing of the dispute. Depending on the outcome of the hearing, the Court may give judgment in favour of the judgment creditor against the garnishee and the judgment creditor can proceed to enforce that judgment debt.²⁰ The Local Courts (Civil Claims) Act, 1970 makes no express provision for the hearing and determination of third party claims to the alleged debt. However a third party’s interests will not be in jeopardy if the order has to be discharged and in the event of a hearing, a judgment against the garnishee depends on the judgment creditor’s proving that the alleged debt is owed by the garnishee to the judgment debtor.²¹

2.10 In the case of orders issued out of either the District Court or a Local Court payment by the garnishee, whether in compliance with the garnishee order or after execution is levied by the judgment creditor against the garnishee, satisfies the judgment debt and discharges the garnishee as against the judgment debtor, to the extent of the amount paid.²²

2.11 The procedure for garnishee orders issuing out of the Supreme Court differs from the procedures to obtain and enforce garnishee orders issuing out of the District Court or a Local Court Under Part 46 of the Supreme Court Rules the judgment creditor may, with leave of the Court serve a garnishment notice on the garnishee. Leave will not be granted unless it appears to the Court that the judgment debt has not been satisfied and that there is a debt due or accruing to the judgment debtor from the garnishee. The garnishment notice must specify the amount which the Court determines is payable to the judgment creditor and must also inform the garnishee of a date (the motion date) on which the judgment creditor will apply to the Court for an order that the garnishee pay him the debt attached by the notice or so much as is necessary to satisfy the amount specified.²³ The judgment creditor must serve the garnishment notice on the garnishee, and also on the judgment debtor, at least three full days before the motion date.²⁴ When the garnishment notice is served on the garnishee it operates to attach, to the extent of the amount specified in the notice, all debts mentioned in the notice which are due or accruing to the judgment debtor from the garnishee when the notice is served.²⁵

2.12 The garnishee may pay the attached debt(s), to the extent of the attachment, into court If payment into court is made before the motion date, the garnishee may also retain out of the attached debt a prescribed amount for costs.²⁶ If, on the motion date, the garnishee disputes liability to pay the attached debt to the judgment debtor, the Court may determine the issue and make suitable orders.²⁷ The Court may also hear and determine third party claims in respect of the attached debt when it appears to the Court that third party interests are involved.²⁸ Subject to any question of the garnishee’s liability to the judgment debtor and to any third party interest in the attached debt the Court will order payment to the judgment creditor, either by the garnishee or out of moneys which the garnishee has already paid into court²⁹ When payment is made by the garnishee to the judgment creditor (whether by payment into court or pursuant to an order in the garnishee proceedings or as a result of enforcement of that order) the payment discharges the liability of the garnishee to the judgment debtor to the extent of the amount paid.³⁰

2.13 The garnishment procedure involves two distinct steps: attachment and payment The most important difference between the Supreme Court procedure and the District and Local Courts procedures is the different way in which the payment step is dealt with. A Supreme Court garnishment notice operates only to attach any debts due or accruing from the garnishee to the judgment debtor and an order for payment to the judgment creditor is made only after the garnishee has had the opportunity of a hearing on the motion date. If the garnishee chooses to appear on the motion date, the procedure permits the Court to decide whether an order for payment is appropriate in the particular circumstances and, if so, to tailor the order to those circumstances. By contrast a garnishee order issuing out of the District Court or a Local Court operates both to attach any debts due or accruing from the garnishee and to order payment There are court proceedings only if the garnishee fails to pay under the order and the judgment creditor issues a summons to show cause for non-compliance. The fact that District Court and Local Court garnishee orders order payment without regard to the circumstances of the particular case can cause practical difficulties for both garnishees and judgment creditors, particularly in relation to garnishee orders affecting accounts. In Chapter 6 we recommend certain procedural reforms to overcome these difficulties.

III. THE SUBSTANTIVE LAW OF GARNISHMENT

2.14 This section of the Report is concerned with the substantive law of garnishment only insofar as it is relevant to the issues raised by the reference and considers:

• the nature of an attachable debt and
• the legislative provisions for the attachment of moneys in bank accounts.

Under the Supreme Court Rules debts due or accruing are attachable. Under the District Court Act 1973 and the Local Courts (Civil Claims) Act 1970 debts due, owing or accruing are attachable. Since the difference in terminology appears to have no legal significance,³¹ for simplicity we have adopted the phrase “debts due or accruing” in the remainder of the Report unless use of the statutory terminology is necessary.

A. Attachable Debts

2.15 A garnishee order can operate only to attach “debts due or accruing” from the garnishee to the judgment debtor. There will be an attachable debt if, when the order is made, the garnishee is under an existing obligation to pay money to the judgment debtor and that debt is then outstanding, ie “due”, or is payable some time in the future, ie “accruing”. The debt will be attached if, when the order is served on the garnishee, the relationship of debtor and creditor still exists between them and all or part of the debt remains due or accruing to the judgment debtor.³² Therefore if a garnishee pays all or part of an attachable debt between the time the garnishee order is made and the time it is served, the order will be either wholly ineffective or effective to attach only so much of the debt as remains due or accruing when the order is served.

2.16 It is essential for the effectiveness of a garnishee order that the relationship of debtor and creditor exists between the garnishee and the judgment debtor at the relevant times. If dealings between them are such that a debt will or may become due or accruing from the garnishee, either in the period between the making and service of the order or after it is served, the relationship of debtor and creditor does not exist at the relevant times and the future debt. whether it be certain or contingent cannot be attached.³³ On the other hand. where a debt exists at the relevant times but is not payable until after the order is served, the order will be effective to attach the debt as a debt accruing.³⁴ The simplest example of a debt accruing is a loan from the judgment debtor to the garnishee which is not due for repayment until after the garnishee order is served. If, say, the loan is repayable by monthly instalments, it is a debt which accrues due, to the extent of each instalment, on the monthly repayment dates and the garnishee could be obliged to comply with the order by making the instalment payments when due until either the loan was repaid in full or, if the loan exceeded the judgment debt until the judgment debt was satisfied. However since under a garnishee order “no greater right is given to the creditor than the debtor had,”³⁵ the order cannot operate to accelerate payment of the accruing debt.

2.17 It has been said, with reference to a debt allegedly due, that

[w]hether a debt sought to be attached was on the relevant day ‘due’ or ‘owing’ by the garnishee to the judgment debtor is a question whose answer is dependent upon the terms of the contract between them. The practical test ... is whether the debt was one for which on that day the judgment debtor could have immediately and effectively sued the garnishee.³⁶

Similarly the practical test in relation to a debt alleged to be accruing is whether, given the contractual arrangements between the garnishee and the judgment debtor, the debt is one for which the judgment debtor could, on a future date and subject solely to the passage of time, immediately and effectively sue the garnishee. In other words the contractual arrangements between the garnishee and the judgment debtor³⁷ are fundamental to determining whether a garnishee order is effective in any particular case.

2.18 There are two other principles of the law of garnishment which are of particular relevance in the context of the attachment of moneys in accounts with building societies and credit unions. The first relates to joint debts: the second to rights of priority.

2.19 If the debt which is payable by the garnishee is not due or accruing solely to the judgment debtor but is a joint debt it cannot be attached notwithstanding that it may be possible to determine the exact portion of the joint debt that the judgment debtor is to receive.³⁸ Therefore if the debt sought to be attached is due or accruing from the garnishee to A and B jointly and the judgment debtor is A alone or A and C jointly, the garnishee order will be ineffective. However if the judgment debt is owed jointly by two or more judgment debtors, the judgment creditor may attach any debt due or accruing to any one of the judgment debtors to satisfy the judgment debt,³⁹ including a joint debt owed to two or more of the judgment debtors.⁴⁰ Therefore if A and C are joint judgment debtors and the debt due or accruing from the garnishee is due or accruing to A alone or C alone or to A and C jointly, the garnishee order will be effective. The principle that joint debts are not attachable unless the joint creditors are also joint judgment debtors is significant in the context of this Report because accounts are often joint accounts.

2.20 The effect of a garnishee order is to place the judgment creditor in the shoes of the judgment debtor in relation to the debt sought to be attached and the judgment creditor can acquire no better rights in the debt than those of the judgment debtor. Therefore if the judgment debtor has assigned the debt (whether outright or by way of security) to a third party before the garnishee order is served, the order will be ineffective.⁴¹ Again, if the judgment debtor has charged the debt in favour of a third party before the garnishee order is served, it will be ineffective to the extent of the third party’s interest under the charge.⁴² The effect of a prior charge on the rights of a judgment creditor under a garnishee order assumes special significance in the present context because of provisions in the various Acts regulating the activities of building societies and credit unions whereby a statutory charge can exist over an account with a building society or credit union (paras 6.19-6.31).

2.21 It is unnecessary to elaborate on the particular situations in which the Courts have held that there is, or is not, a debt due or accruing from a garnishee to a judgment debtor. The authorities illustrating the general principles in application are collected in Ritchie’ s Supreme Court Procedure⁴³ and Chippindall & Sharp District Court Act & Rules.⁴⁴ The significant principle for present purposes is that there is no debt due or accruing from a garnishee if there is any precondition to be satisfied (other than the lapse of time) before the debt is payable to the judgment debtor, such as the presentation of a passbook⁴⁵ or receipt⁴⁶ or the giving of a period of notice for payment.⁴⁷ There is however one exception to this principle. Where money stands to the credit of a customer in a cheque account with a bank, a demand for payment by the customer is a prerequisite to the customer’s bringing an action to recover the money - ie before a debt is due from the bank to the customer, a demand for payment must be made.⁴⁸ Notwithstanding this, it is now generally accepted that service of a garnishee order is “a sufficient demand by operation of law to satisfy any right a banker may have as between himself and his customer to a demand before payment of moneys standing to the credit of a current account can be enforced”.⁴⁹ This exception has not gone unquestioned⁵⁰ and for the most part the Courts have been unwilling to extend it beyond cheque accounts.

[l]t is, to my mind, one proposition to hold that a garnishee order should be treated as equivalent to a simple demand by the judgment debtor, in a case in which a simple demand is all that is necessary in order to make the garnishee immediately liable, and quite another to say that such an order is to be taken in substitution for, and as the equivalent of, such a condition or stipulation as the production of a deposit book.⁵¹

B. Attachment of Bank Accounts

2.22 The common law principle that there is no attachable debt where some precondition to payment (other than the lapse of time) must be satisfied had the result that judgment creditors could not attach moneys in a deposit account in a bank. During the 1970’s the New South Wales Parliament legislated to redress this situation and to remove any doubt that money in a cheque account was attachable.⁵² The bank account provisions are contained in Rules 2 and 10A of Part 46 of the Supreme Court Rules section 103 of the District Court Act, 1973 and section 52A of the Local Courts (Civil Claims) Act, 1970. Rule 2 of Part 46 of the Supreme Court Rules states:

(1) A sum standing to the credit of a judgment debtor in an account in a bank shall, for the purpose of this Part, be a sum due or accruing to the judgment debtor, notwithstanding that any condition relating to demand of payment is unsatisfied.

(2) A sum standing to the credit of a judgment debtor in a deposit account in a bank shalt for the purposes of this Part be a sum due or accruing to the judgment debtor, notwithstanding that any of the following conditions applicable to the account has not been satisfied -


(a) a condition that notice is required before money is withdrawn;

(b) a condition that a personal application must be made before money is withdrawn,

(c) a condition that a deposit book must be produced before money is withdrawn: or

(d) a condition that a receipt for money deposited in the account must be produced before money is withdrawn.

The corresponding provisions in the District Court Act., 1973 and the Local Courts (Civil Claims) Act, 1970 are virtually identical and the minor drafting differences are of no present consequence. It is not necessary to elaborate on these provisions for the purposes of this part of the Report However they are discussed in Chapter 4, where we make several recommendations which are intended to clarify their operation.

2.23 The remaining provisions relating to the attachment of moneys in bank accounts are designed to protect banks in view of the nature of their operations. One provision applies to garnishee orders attaching moneys in bank accounts generally and protects a bank against the possibility that although the bank acts with reasonable diligence to give effect to a garnishee order, it nevertheless pays the whole or part of the attached debt to the judgment debtor, or otherwise deals with the debt so as to satisfy, as between the bank and the judgment debtor, the whole or any part of the debt In such a case the garnishee bank may apply for a court order that, for the purposes of the garnishee proceedings, the attached debt be reduced “to the extent of the payment or satisfaction”.⁵³ This provision protects a garnishee bank where, eg the garnishee order is served at the head office of the bank and, before the bank, acting with reasonable diligence, can take appropriate steps to give effect to the order, the branch with which the judgment debtor deals permits the judgment debtor to withdraw from an account affected by the order or meets a cheque or periodic payment out of the account.

2.24 The other protection provisions apply only to deposit accounts where it is a condition of the account that a “deposit book” must be produced when making withdrawals. They protect savings banks against the possibility of double payment by complying with the garnishee order and then making an “over-the-counter” payment on presentation of the judgment debtor’s passbook.⁵⁴ Under the provisions a bank may comply with a garnishee order on such a deposit account by paying the whole or any part of the attached debt to the Registrar and requesting the Registrar to retain the amount paid for a specified period. The specified period cannot exceed two months, commencing on the date of payment.⁵⁵ If the bank acts with reasonable diligence to give effect to the order but during the specified period a current” deposit book” is produced and as a consequence the bank pays the whole or any part of the attached debt to the judgment debtor, or otherwise deals with the debt so as to satisfy, as between the bank and the judgment debtor, the whole or any part of the debt, the bank may apply for a court order that the Registrar repay to the bank an amount equal to the amount paid out by the bank.⁵⁶ The Registrar cannot pay the judgment creditor the moneys paid into court by the bank until the period specified by the bank has expired unless, in the meantime, the Registrar is satisfied that the branch of the bank at which the judgment debtor keeps the account has recovered the “deposit book”. However if an application by the bank for repayment of moneys paid to or on behalf of the judgment debtor is pending when the moneys paid into court would be payable to the judgment creditor, the Registrar is to withhold payment until the application is finalised. If the bank’s application for repayment is successful, the judgment creditor will then receive the balance (if any) of the moneys held by the Registrar.⁵⁷

IV. ACCOUNTS WITH BUILDING SOCIETIES AND CREDIT UNIONS

2.25 Although building societies may have non- withdrawable share capital,⁵⁸ virtually all the share capital of New South Wales building societies is withdrawable, ie members of a building society may, subject to the legislation regulating the society and to its rules, apply to withdraw their shares in the society and obtain a refund of their subscriptions. At present the bulk of funds held by building societies is held as withdrawable share capital although building societies also hold substantial sums on deposit (paras 5.8 and 5.25). The share capital of credit unions is similarly withdrawable, although the bulk of funds held by these organisations represents deposits by members (para 5.34). In this part of the Report we consider to what extent if at all, the present law relating to the attachment of debts applies to withdrawable share accounts and deposit accounts with building societies and credit unions.

A. Common Law

1. Withdrawable Share Accounts

2.26 Under the common law money available to a member of a building society or credit union by the withdrawal of shares will be liable to attachment only when the relationship between the organisation and the member has become that of debtor and creditor. The mere fact that the member has the right to withdraw his or her shares does not create this relationship. Since the rules of building societies and credit unions invariably require a member to make some form of written application to withdraw shares, the essential debtor/creditor relationship will not arise until the member does so and also satisfies any other preconditions to withdrawal which may be imposed by legislation the rules of the particular organisation and the specific terms of the member’s account.

2. Deposit Accounts

2.27 So far as ordinary deposits with building societies and credit unions are concerned the common law operates to similar effect where withdrawal is subject to any precondition to payment to the depositor other than the lapse of time, such as the presentation of a passbook or receipt. Although a deposit is a debt it is not due or accruing until any preconditions to payment are satisfied, except possibly in a case where the only precondition is “a simple demand for payment” (para 2.21).

2.28 In some instances deposits with a building society or credit union may be liable to attachment depending on the withdrawal procedures of the particular organisation For example some building societies and credit unions take fixed- term deposits. When a deposit is made the depositor may nominate an account into which the deposit plus outstanding interest is to be paid on expiry of the term and will receive some form of receipt recording the terms of the deposit If no account has been nominated, payment at the end of the term is conditional on presentation of the receipt document or on the organisation’ s receiving further instructions as to how the deposit is to be dealt with A deposit for a fixed term is a debt which accrues due on expiry of the term if the depositor is not required to satisfy any precondition to payment on that date and, as a debt accruing, is liable to attachment.⁵⁹ Therefore, where a depositor has nominated an account into which the deposit is to be paid on expiry of the term, there is no precondition to payment by the organisation on that date and the deposit will be liable to attachment.⁶⁰

B. Bank Account Provisions

2.29 The existing bank account provisions (para 2.22) apply only in relation to an account or deposit account ”in a bank”. Consequently the provisions can affect accounts with building societies and credit unions only if these types of organisation can be characterised as banks.

2.30 The Supreme Court Rules and the respective Acts do not define “bank” for the purposes of the provisions. Therefore the meaning of the term must be derived from case law. Usually the issue is posed in terms of whether the putative bank “carries on the business of banking”. Recent English authority diverges from Australian authorities on the activities essential to the business of banking. The prevailing English test appears to be that adopted by the Court of Appeal in United Dominions Trust Ltd v Kirkwood⁶¹ namely, that the business of banking is carried on if the putative bank conducts current accounts, pays cheques drawn on itself and collects cheques for its customers and these activities constitute its principal business. In borderline cases reputation as a bank may be decisive.⁶² In Australia the description of the business of banking taken to be authoritative is that given by Mr Justice Isaacs in Commissioners of the State Savings Bank of Victoria v Permewan, Wright & Co Ltd.⁶³

The essential characteristics of the business of banking... may be described as the collection of money by receiving deposits upon loan, repayable when and as expressly or impliedly agreed upon, and the utilisation of the money so collected by lending it again in such sums as are required. These are the essential functions of a bank as an instrument of society It is, in effect a financial reservoir receiving streams of currency in every direction, and from which there issue outflowing streams where and as required to sustain and fructify or assist commercial, industrial or other enterprises or adventures.

If that be the real and substantial business of a body of persons, and not merely an ancillary or incidental branch of another business, they do carry on the business of banking.⁶⁴

2.31 It is apparent that Mr Justice Isaacs’ description of banking business is capable of including financial institutions other than recognised banks. Indeed in United Dominions Trust Ltd v Kirkwood⁶⁵ the English Court of Appeal in concluding that the description was no longer definitive insofar as it made no mention of the keeping of current accounts and the provision of cheque facilities, commented that if it were still the law building societies would all be bankers.⁶⁶ However, in the light of the High Court’s decision in Australian Independent Distributors Ltd v Winter,⁶⁷ it may not follow from Mr Justice Isaacs’ description of banking business that building societies and other organisations are banks merely because they take deposits and make loans.

2.32 In Australian independent Distributors Ltd v Winter the question was whether a co-operative society registered under the Industrial and Provident Societies Act 1923-1958 (SA) carried on banking business in contravention of the Act The society carried on its deposit-taking business in a manner common to building societies. On joining the society a member was issued with a passbook. Moneys deposited with the society were treated as subscriptions for withdrawable shares in the society and interest was paid on fully-paid shares. The passbook contained an account of all deposits and withdrawals of capital and interest payments. One of the objects of the society was to obtain funds from members for the purpose of making loans to members to enable them to acquire land or buildings to be used as a residence or residence and business. The society had no power to lend money for other purposes or to non-members, but was empowered to borrow money from members or others on deposit or otherwise. In a joint judgment the High Court held that the society did not carry on banking business. The Court applied Mr Justice Isaacs test and considered it apparent that the second essential characteristic, ie the utilisation of money taken on deposit by lending it in such sums as are required, was absent.

The power to lend money conferred upon the Society by Rule 7 was limited to the making of loans to its members to enable them to acquire land or buildings to be used for residential or business and residential purposes and in fact none of the Society’s moneys was used for the making of loans for that or any other purpose. Having regard to that circumstance, Chamberlain J. held, and rightly held, that the Society had not carried on the business of banking’..⁶⁸

2.33 It is unclear whether the Court’s decision rested on the fact that the society was empowered to lend only to its members and for a particular purpose or the fact that, although the society had power to lend, it had not actually done so. Weaver and Craigie take the view that the decisive element in the Court’s reasoning was that the society was empowered to lend only to members.⁶⁹ However in our view it is equally arguable that the circumstance to which the Court was referring was the fact that the society had made no loans, in which case the decision is slight authority for the proposition that a putative bank does not carry on the business of banking where it is empowered to lend, and lends, only to its members. It seems clear that whatever the scope of a putative bank’s power to lend, if in fact no loans are made and if lending is an essential characteristic of the business of banking, it cannot be said to carry on banking business. On the other hand Mr Justice lsaacs’ description of a bank as an instrument of society” which receives “streams of currency in ever’,’ direction” and lends “where and as required to sustain and fructify or assist commercial. industrial or other enterprises or adventures does suggest that a putative bank does not carry on banking business unless its services are available to the public at large and it lends for numerous purposes. Certainly recognised banks have these features. On this basis neither building societies nor credit unions carry on the business of banking, if only because they cannot make loans to the public at large but only to members.

2.34 In view of the uncertainty of definition which currently surrounds the term “bank”, we have assumed for the purposes of this Report that building societies and credit unions cannot be characterised in law as banks and that the bank account provisions therefore have no application to deposit and withdrawable share accounts with these types of organisation.⁷⁰ This assumption is consistent with the common belief that building societies and credit unions are not banks. and also has regard to the existence of a State legislative framework within which these organisations, unlike recognised banks, must operate.

1. Common Law Procedure Act. 1897 (20 Vic No 31) ss27- 33 (Supreme Court). The procedure was made available out of District Courts and Courts of Petty Sessions in 1881 - Small Debts Recovery Act. 1881 ss3-10.

2 Common Law Procedure Act 1854 (UK) ssLXI- LXVII.

3. Ritchie’s Supreme Court Procedure (Butterworths 1984) Vol 1 Supreme Court Rules, Introductory Note to Pt46.

4. Service and Execution of Process Act 1901 (Cth) ss20-21 and Supreme Court Act, 1970 s22 (interstate judgments): Foreign Judgments (Reciprocal Enforcement) Act, 1973 and Administration of Justice Act, 1924 PtII (foreign judgments).

5. District Court Act, 1973 ss4 (“action”) and 97: Local Courts (Civil Claims) Act, 1970 ss4 (“court”) and 47.

6. Service and Execution of Process Act 1901 (Cth) ss20-21: District Court Act, 1973 s8(2): Local Courts (Civil Claims) Act, 1970 s7.

7. Supreme Court Rules, Pt43; District Court Act, 1973 ss90-94: Local Courts (Civil Claims) Act, 1970 ss41-46.

8. Local Courts (Civil Claims) Act, 1970 s43A.

9. District Court Rules, Pt33 r2: Local Courts (Civil Claims) Rules, r47.

10. District Court Act, 1973 s97; Local Courts (Civil Claims) Act, 1970 s47.

11. The special provisions of each of the Acts relating to the attachment of a judgment debtor’s wages or salary are not relevant for present purposes.

12. District Court Act, 1973 s97(2); Local Courts (Civil Claims) Act, 1970 s47(2).

13. District Court Act, 1973 s97(3); Local Courts (Civil Claims) Act, 1970 s47(4). We note that it is not necessary for the purposes of this Chapter to consider the apparent differences in the operation of garnishee orders issuing out of the District Court and the Local Courts. However these differences and other aspects of the general garnishment provisions in the respective Acts and the Supreme Court Rules are discussed in Chapter 7, where we make recommendations directed to achieving uniformity of the law of garnishment as it applies in each jurisdiction so far as this is appropriate in view of procedural differences between the.

14. District Court Act, 1973 s105; Local Courts (Civil Claims) Act, 1970 s55.

15. District Court Rules, Pt33 r3(2) and District Court Form 83.

16. Local Courts (Civil Claims) Rules, rr47-50 and First Schedule Pt2 Form 48.

17. District Court Act, 1973 s102(1) and (2); Local Courts (Civil Claims) Act, 1970 s52(1) and (2).

18. District Court Act, 1973 s102(3).

19. District Court Act, 1973 s104. A garnishee has a duty to inform the Court of any third party claim of which the garnishee is aware - Plunkett v Barclays Bank Ltd [1936] 2 KB 107: Richards v Jager [1909] VLR 140.

20. Local Courts (Civil Claims) Act, 1970 s52(3),(4) and (5).

21. Id, s52(5).

22. District Court Act, 1973 s105(2): Local Courts (Civil Claims) Act, 1970 s54.

23. Rules 3 and 8.

24. Rule 4.

25. Rule 5.

26. Rule 6.

27. Rule 9.

28. Rule 10.

29. Rules 7 and 8.

30. Rule 11.

31. See Chapter 1, note 5.

32. Supreme Court Rules. Pt46 r3(1) and (3)(b) and r5(1): District Court Act. 1973 s97(1) and (2)(a): Local Courts (Civil Claims) Act, 1970 s47(1) and (2)(a): Webb v Stenton (1883) 11 QBD 518: O’Driscoll v Manchester Insurance Committee [1915] 3 KB 499. These provisions in the Supreme Court Rules and the respective Acts are discussed further in Chapter 7, paras 7.1 3-7.18.

33. Webb v Stenton (1883) 11 QBD 518.

34. Tapp v Iones (1875) LR 10 QB 591: Re Cowan’s Estate: Rapier v Wright (1880) 14 Ch D 638.

35. Tapp v Jones (1875) LR 10 QB 591 at 593.

36. Bank of New South Wales v Barlex Investments Pty Ltd (1964) 81 WN Pt2 (NSW) 281 at 283.

37. So far as the law of garnishment generally is concerned, it is misleading to suggest that the question of whether there is an attachable debt rests solely on the existence of a contract between the judgment debtor and the garnishee. The essential relationship of debtor and creditor can be created in other ways - eg a judgment in damages gives rise to a debtor/creditor relationship between the unsuccessful defendant and the plaintiff and the amount of damages payable by the defendant constitutes an attachable debt (Holtby v Hodgson (1890) 24 QBD 103). Again, for the purposes of garnishment a debtor/creditor relationship can arise between a trustee and a beneficiary as a consequence of the terms of the trust or the trustee’s default in the performance of the trust(Webb v Stenton (1883) 11 QBD 518 at 526 and 530: In re Greenwood: Sutcliffe v Gledhill [1901] 1 Ch 887). However in the specific context of this reference the relationship of debtor/creditor will arise, if at all, by virtue of contractual arrangements between the particular building society or credit union and its judgment debtor depositor. The text reflects this fact.

38. Macdonald v The Tacquah Gold Mines Company (1884) 13 QBD 535: Beasleyv Roney [1891] 1 QB 509: Lloyd v Jacobs (1887) 3 WN (NSW) 144.

39. Miller v Mynn (1859) 28 LJQB 324.

40. D J Colburt & Sons Pty Ltd v Ansen [1966]2 NSWR 289.

41. Edmunds v Edmunds [1904] P 362: W J Adams & Co Ltd v Blencowe (1929) 46 WN (NSW) 150: Holt v Heatherfield Trust Ltd [1942] 2 KB 1.

42. Hirsch v Coates 18 CB 757, 139 ER 1568: In re London Pressed Hinge Company Limited: Campbell v London Pressed Hinge Company Limited [1905] 1 Ch 576 at 581-582: Badeley v Consolidated Bank (1888) 38 Ch D 238: In re General Horticultural Company: Ex parte Whitehouse (1886) 32 Ch 1) 512.

43. Vol 1 Supreme Court Rules. Pt46 r3. Notes at 2976-2977.

44. Notes to s97. District Court Act. 1973, at 1118-1119.

45. Re Australia and New Zealand Savings Bank Limited: Mellas v Evriniadis [1972] VR 690 (overruling Chubb v Emery [1933] VLR 125): Bagley v Winsome and National Provincial Bank Ltd [1952] 2 QB 236: Music Masters Pty Ltd v Minelle and Bank of New South Wales Savings Bank Ltd [1968] Qd R 326: Bank of New South Wales Savings Bank Ltd v Fremantle Auto Centre Pty Ltd and Poland [1973] WAR 161 (overruling Dalston Development Pty Ltd v Dean and Commonwealth Savings Bank of Australia [1966] WAR 36): F D Armer, “Garnishee of Savings Bank Deposits” (1970) 44 Australian Law Journal 73: C R Craigie. “Garnishee of Savings Bank Deposits - A Reply” (1970) 44 Australian Law Journal 277.

46. C & E Lewis Ltd v Gribben [1955] NILR 51.

47. Ibid.

48. Joachimson v Swiss Bank Corporation [1921] KB 110.

49. Id, at 121. per Bankes LJ.

50. Eg Re Australia and New Zealand Savings Bank Limited; Mellas v Evriniadis [1972] VR 690 at 696-697. In this decision, where a judgment creditor unsuccessfully sought to attach money’s in a savings account, the Victorian Supreme Court extensively reviewed the authorities relating to garnishee orders on bank accounts. It is to he noted that the exception also disregards the necessity that there he a debt due or accruing to the judgment debtor when the garnishee order is made. Ii there is no debt due to a current account- bolder until demand for payment is made and it is service of the order which operates as the demand for payment, there can be no debt due to the judgment debtor when the order was made and hence no debt capable it attachment at that time.

51. Bagley v Winsome and National Provincial Bank Ltd (1952) 2 Q13 236 at 244-245. per Jenkins LJ.

52. Supreme Court Act, 1970 s122 and Fourth Schedule, Pt46 r2: District Court Act. 1973 s103: Courts of Petty Sessions (Civil Claims) Amendment Act. 1975 Schedule 1 cl(74).

53. Supreme Court Rules. Pt46 r5(2): District Court Act, 1973 s103(3): Local Courts (Civil Claims) Act, 1970 s52A( 3). In the case of the District Court Act, 1973 and the Local Courts (Civil Claims) Act, 1970 this provision applies only in relation to the attachment of money in bank accounts. The comparable provision in the Supreme Court Rules is of general application. ie the Supreme Court may make an order reducing the amount of the attached debt in the case of any garnishee who acts with reasonable diligence to give effect to the garnishee order but nevertheless wholly or partially discharges his or her obligations to the judgment debtor in relation to the attached debt.

54. In Chapter 6 ( para 6.17) we discuss the terms “deposit book” and “passbook” and recommend that the latter term be substituted in these provisions.

55. District Court Act, 1973 s103(4): Local Courts (Civil Claims) Act, 1970 s52A(4): Supreme Court Rules. Pt46 r10A(1). In the case of the Supreme Court Rules references to the Registrar in para 2.24 should he read is references to the Court.

56. District Court Act. 1973 s103(5): Local Courts (Civil Claims) Act, 1970 s52A(5): Supreme Court Rules. Pt46 r10A(2).

57. District Court Act. 1979 s103(6): Local Courts (Civil Claims) Act, 1970 s52A(6) Supreme Court Rules. Pt46 r10A(3).

58. Co-operation Act, 1923 ss55 and 82(3)(c); Permanent Building Societies Act, 1967 ss52(1) and 31 and Schedule 1(h).

59. Matinee Megrah & F R Ryder. Paget’s Law of Banking (Butterworths 8th ed 1972) at 155.

60. We note that this conclusion may not be correct in relation to a fixed-term deposit which is payable in maturity to a nominated account if the deposit was made with a building society before 1 September 1985, or with a credit union before 1 July 1985, and the term of the deposit has not expired - see Co-operation Act, 1923 ss66(11) and 42(1), (7) and (8) and Third Schedule, amended by Co- operation (Amendment) Act, 1985 Schedule 3 cl(15)(h) (operative 1 September 1985. NSW Government Gazette No 122 30 August 1985 at 4545); Permanent Building Societies Act, 1967 s20(5). repealed by Permanent Building Societies (Amendment) Act, 1989 Schedule 2 c18(b) (operative 1 September 1985, NSW Government Gazette No 122 30 August 1985 at 4545); Credit Union Act, 1969 s12(7)(a), repealed by Credit Union (Amendment) Act. 1984 Schedule 2 cl(10)(b) (operative 1 July 1985. NSW Government Gazette No 98 28 June 1985 at 3000).

61. [1966] 2 QB 431.

62. Ibid. See also Megrah & Ryder. note 59. At 8-14; G A Weaver & C R Craigie. The Law Relating to Banker and Customer in Australia (Law BookCo 1975) at21-23.

65. (1915) 19 CLR 457.

64. Id. at 470-471. This passage was quoted with approval by Rich J in Melbourne Corporation v The Commonwealth. (1947) 74 CLR 11 at 64-65 and applied by the High Court in Australian Independent Distributors Led v Winter (1964)112 CLR 441: see also Weaver & Craigie. Note 61 at 2l-27. In First Chicago Australia Ltd v Yango Pastoral Co Pty Ltd [1977] 2 NSWLR 581. Glass JA (at 589) considered that the essential characteristics of banking had been defined in the State Savings Bank of Victoria case and Australian Independent Distributors Ltd is Winter. However Mahoney JA remarked (at 598-599) that the High Court’s statement in the State Savings Bank of Victoria case, if read in the light of later decision may be seen as a statement done of the kinds of activities of banking rather than a definition of the concept of banking. The decision of the English Court of Appeal in United Dominions Trust Ltd is Kirkwood [1966] 2 QB 431 appears not to have been referred to in First Chicago Australia Ltdv Yango Pastoral Co Pty Ltd.

65. [1966] 2 QB 431.

66. Id. at 445-446. per Lord Denning MR and at 457-458. per Harman LJ.

67. (1964) 112 CLR 443.

68. Id. at 455.

69. Weaver & Craigie. note 62 at 17.