Instalment orders – a balancing exercise

19 June 2009

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In most jurisdictions courts can allow payment of a judgment debt by instalments. An example of this is the recent case of Hellier Capital Pty Limited v Albarran [2009] NSWSC 403, where the NSW Supreme Court set out the factors that it took into account in determining whether or not an instalment order should be granted.

Facts

Albarran, an insolvency practitioner, was ordered to pay Hellier in excess of $1.6 million. Albarran however managed to obtain an instalment order, thereby allowing him to pay the debt in instalments over four years with interest applying at 9% pa. Hellier challenged the instalment order.

Decision

McDougall J held that the decision to grant, vary or rescind an instalment order depends on the specific facts of each case. However, in reaching a decision his Honour undertook a balancing exercise, identifying and weighing up the various factors in favour of the granting of an instalment order with those contrary factors suggesting otherwise.

The main factors identified by McDougall J in favour of granting an instalment order were as follows:

(a) Albarran was unable to pay the judgment debt immediately and in full, either from his own resources or from any available borrowings. The value of his available assets was uncertain as a result of an ongoing dispute with his former wife.

(b) As a result, without an instalment order, the “inevitable result” would be that Albarran would become bankrupt. This in turn would have a number of consequences.
(i) First, Albarran would be unable to make any significant contribution to payment of the judgment debt.
(ii) Secondly, Albarran would be unable to continue practising as an insolvency practitioner, and he had no training or experience to enable him to practise in any other area of accounting. On this point, McDougall J held that there is a “legitimate public interest in having trained people, who perform important work, remaining available to perform that work”.
(iii) Thirdly, Albarran would be unable to support a number of dependent children that he was responsible for.

(c) Under the instalment order, the entire judgment debt owed to Hellier, plus interest, would be paid within four years. His Honour held that in the circumstances of the case this was not an unconscionably long period of time.

(d) It appeared that Hellier’s underlying reason for challenging the instalment order was to bankrupt Albarran as soon as possible, indicating “an interest of a more vindictive nature”.

In contrast, the main factor identified by his Honour that suggested against the granting of an instalment order in this particular case was a recognised public interest in allowing a judgment creditor to “enforce the victory that they have achieved”. In this context, McDougall J acknowledged that this ordinarily meant that such a creditor should be entitled to enforce their judgment immediately, and that therefore the courts should be slow to interfere with this position.

After balancing these factors and considering the evidence, McDougall J confirmed the correctness of the instalment order.

While his Honour’s decision was based on the provisions of the NSW Uniform Civil Procedure Rules with some consideration of the equivalent Queensland provisions, it is suggested that a similar balancing exercise may be used by the courts generally when deciding if an instalment order should be granted or not.

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