Based on recent authorities, it is likely that a creditor could garnish National Housing Trust (NHT) contribution refunds which are due to a contributor in order to satisfy debts owed by the contributor.
A garnishee order, also known as an “attachment” order, requires a third party (garnishee) to pay any money they have for a debtor directly to that debtor’s creditor. For example, a creditor may garnish an employee’s unpaid salary to satisfy a debt owed to the creditor. This is possible because the salary, once earned, is a debt due from the employer to the employee. Similarly, money in a savings account at a bank is a debt owed by the bank to its customer.
Money in a pooled fund, such as a pension fund or the NHT, is not a debt owed by that fund to the member unless a withdrawal process exists and has been initiated. For that reason, a garnishee order cannot normally be secured against the NHT as there is no way to “carve out” one contributor’s entitlement from another, and there cannot be a lien or charge attached to the entire fund. However, once the contributor requests a refund to which they are entitled, that refund becomes a debt from the NHT that is subject to garnishing like any other debt. A creditor can, therefore, apply to court to have the NHT pay the refund to it, and not the contributor.
If the contributor refuses to apply for the NHT refund, the creditor may be able to do so on his behalf if the debtor has given it a Power of attorney. Powers of Attorney are routinely included in mortgage instruments. The mortgagee may be able to elect to have its debtor’s refund paid directly into the debtor’s account with the mortgagee. If, however, there is no power of attorney, the Court can authorise the creditor to elect to receive a refund on the debtor’s behalf.
Our Firm recently secured an order from the Supreme Court authorising our client, who was owed money, to request on behalf of its debtor, to withdraw approximately J$20,000,000 of the debtor’s pension contributions from his former employer’s pension fund to satisfy the debt owed to the client. Our client secured judgment against the debtor in 2015 but the debtor failed to pay to satisfy the judgment. The only asset that could satisfy the debt was approximately J$30,000,000 of accumulated employee and employer contributions in the pension scheme of the debtor’s former employer (he was terminated in 2016). The debtor was entitled to withdraw the money by the rules of the pension scheme but refused to elect to make the withdrawal to pay our client. The Court was satisfied that the debtor was essentially hiding the money in the fund and granted an order which authorised our client to make the election to withdraw the money from the pension scheme. Once the election was made, the attachment order was made against the pension fund trustees who were mandated to pay the money directly to our client.
This process has been used before in the United Kingdom. In a well-known case, a creditor applied for an order requiring his judgment debtor to elect to draw down a lump sum from his pension in order to enable the judgment creditor to garnish the proceeds. The pension trustees were then mandated to pay the judgment debtor’s pension contributions directly to the judgment creditor. The UK Court, in granting the order, held that there was a strong principle and policy of justice that debtors should not be allowed to hide assets in a pension fund which they had a right to withdraw from the fund and which were needed to pay creditors. The legislation relied on in the UK case is similar to our Jamaican legislation.
There is no reason in principle why a similar order could not be made in respect of NHT contribution refunds. Presently, refunds are available for contributions made in 2013 and earlier.
A debtor could not, therefore, protect his refunds from his creditors simply by refusing to elect to withdraw them. Creditors, with or without the assistance of the Court, could still get the money that the debtor is trying to hide.
Amanda Montague is an Associate Attorney-at-Law at Myers, Fletcher and Gordon and is a member of the firm’s Litigation Department. Amanda may be contacted via amanda.montague@mfg.com.jm or www.myersfletcher.com . This article is for general information purposes only and does not constitute legal advice.
