When it comes to enforcing a court judgment in Malaysia, it may be confusing as there are many options and methods, which include getting a garnishee order.
This article explains what a garnishee order is, how to get and defend against it, and the other types of execution methods.
What is a Garnishee Order?
A garnishee order is a court order that requires a third party to pay a judgment creditor money owed to the judgment debtor. This third party is known as the garnishee and usually includes a bank.
There are common questions on 'garnishee order meaning' and 'garnishee meaning', and we will explain these in simpler terms. When someone takes legal action against others, such as for debt recovery, after the hearing, they may get a court ruling/order in their favour that directs the other side to pay.
After having gotten that ruling, the winning party will then serve the order to the losing party to pay the money as directed in the order.
For example, A sues B for breach of contract under the Contracts Act 1950 for not paying back the loan given by him of RM 100. After the hearing, the Court decided in A’s favour and directed B to pay RM 100 to A.
A is called a ‘judgment creditor’ since the court ruling is in his favour, while ‘B’ is called a ‘judgment debtor’. At the same time, there is another third party, C, who owes RM100 to B.
As the ruling directs B to pay RM 100 to A, and if B, as judgment debtor fails or refuses to comply with the court orders, A can apply for a garnishee order from the Court to garnish the debts owed by C to B and direct C to pay that RM 100 to A directly. C is called the ‘garnishee’.
In the above example, garnishee order means to attach and freeze the debts owing to the judgment debtor, B and direct C to pay those amounts directly to A to pay and satisfy the judgment sum.
The third party, C can be anyone who owes money to B, and it includes the banks with which B has bank accounts.
Garnishee Proceedings in Malaysia
Under Order 45 of the Rules of Court 2012 (a rule stating court procedures in Magistrate, Session, and High Court in Malaysia), one can apply for a garnishee order when they have obtained a judgement for payment of money. That means an order directing one party to pay money to the other.
After getting an order and going back to the above example, A, as a judgment creditor, can apply for garnishee orders in Malaysia through garnishee proceedings, which are governed under Order 49 of the Rules of Court 2012.
We will explain the proceedings using the above A, B, and C examples, and there are 2 stages in garnishee proceedings, which are:
1st stage: Ex-parte stage
Here, A, as the judgment creditor, applies to the Court so that C, as garnishee, can show cause/answer why the debt owed by C to B, as a judgment debtor, should not be paid directly to A.
At this stage, A must apply by notice of application and affidavit (both are court documents) and state information that includes the following:
Details of the judgement and the amount unpaid at the time of applying
Identity of C and the fact that C owed monies to B.
During the ex-parte hearing (‘ex-parte’ means one side attends the hearing only), A will attend without the presence of B and C, and after getting the ex-parte garnishee order, A will have to send the order, notice of application, and affidavit extracted from the Court to B and C. There will be some service fees involved for the services.
From the time of service of the order, the monies owed by C to B up until the unpaid amount in the judgement are attached. That means it is being frozen and C has the obligation to withhold and not to pay over to B, despite any request by B. This includes monies in debtor's bank account.
2nd stage: Inter-Parte
During this inter-parte stage (‘inter-parte’ means both sides to attend), A and C will attend the hearing and C can either admit or dispute that it owed monies to B.
If the Court finds that C is indebted to B, it will make the ex-parte garnishee order absolute and direct C to pay the attached monies directly to A to satisfy the judgment sum.
By C following the direction of the Court and paying the money directly to A, it is a good discharge (as if the money has been paid over to B directly).
Option for Judgment Debtor
As the judgment debtor will be served with an ex-parte order, it is recommended that they consult and engage a litigation lawyer as soon as possible. There are 2 options for the judgment debtor which are:
Appeal and stay of execution of judgement
If the stay of execution is granted, it means all execution methods, including garnishee proceedings, will not be able to start or continue pending the final decision from the appeal.
If the judgment debtor is unhappy with the judgement, it can appeal against it. At the same time, it can apply for a stay of execution of the ruling, that is, to postpone the execution or enforcement of the order.
Setting aside the ex-parte order
Alternatively, the judgement debtor can apply to set aside the ex-parte order. There are a few reasons for this, including when a judgement creditor does not make full and frank disclosure when applying for an ex-parte order.
Other Methods of Enforcing Judgement
Apart from the garnishee order, when one side obtained a judgement and the other side fails to comply with the ruling, the winning side can also enforce the ruling through other methods, depending on the type of judgement.
There are a few types of court judgement, such as payment of money, delivery of movable property, and possession of immovable property. These methods are as follows:
If the Court finds there is contempt, it can reprimand, fine, or even sentence the contemnor to prison under the Subordinate Courts Act 1948.
Usually in a judgement other than for payment of money and a party disobeys the ruling of the Court, the innocent party can apply to the Court for the other to be committed for contempt of Court.
This directs the judgement debtor to appear in Court and show to the Court whether he has assets and income to pay the judgement sum. After hearing the matter, the Court can direct him, as judgment debtor to pay the sum in lump sums or instalments.
Writ of seizure and sale
In a judgement for payment of money and after the issue of this writ of seizure and sale, it authorises the court officer called ‘bailiff’ to seize the property belonging to the judgment debtor and makes a list of the inventory of the seized item before selling it off in a public auction.
The proceeds from the sale are then used to pay off the amount directed in the ruling after deducting the expenses incurred.
Writ of possession
For judgment for delivery of immovable property such as land, the Court can direct the others to give vacant possession, that’s, to surrender the land to the other side in an empty/unoccupied state.
Bankruptcy proceedings
This can only happen when the amount directed to be paid is at least RM 100,000-00 as required under the Insolvency Act 1967. Once someone is adjudged bankrupt, they are prevented from leaving Malaysia without consent from the Director General of Insolvency.
Conclusion
There are few execution methods to enforce a judgment in Malaysia, and the suitable enforcement method depends on each situation and position. A garnishee order is a good choice, especially when the judgement creditor knows of any third party who owes money to the judgement debtor.
If you have any queries or need assistance with garnishee proceedings in Malaysia, please contact us and our advocate and solicitor will assist you.
Frequently asked questions
1. What is garnishee order in Malaysia?
A garnishee order in Malaysia is a court order that allows a judgment creditor to collect money owed to them from a third party. This third party owes money to a judgment debtor and is known as the garnishee.
