If you win a lawsuit in Malaysia but the loser doesn't pay, here's what you can do

THIS IS THE PERSONAL OPINION OF THE COLUMNIST. The opinions, beliefs and viewpoints expressed by the author do not necessarily reflect ASKLEGAL's position on the issue, nor should it be reflective of the regular content published by ASKLEGAL. We do not make any claims on the legal accuracy of this article.

by Carly Yap | carly@chernco.com.my  | CHERN & CO.

Yes, you have won the suit, and yes, the Judge has pronounced the Judgment in your favour. But what happens when the losing party refuses to pay up?

In this event, you ought to consider taking out Garnishee Proceedings to enforce the Court Judgment.

What is a Garnishee Proceeding?

Briefly speaking, a Garnishee Proceeding is one of the many modes of enforcement for a Judgment Creditor to recover monies due and owing under a Court Judgment against a Judgment Debtor, from third parties.

In a given scenario, there are two parties in a legal proceeding, namely Party A and Party B. Party A wins the case, and the Court has ordered Party B to pay RM100,000.00 to Party A. Hence, Party A is now known as the 'Judgment Creditor', and Party B known as the 'Judgment Debtor'. The RM100,000.00 ordered by the Court is called the 'Judgment Sum'.

When the Judgment Debtor fails or refuses to pay, you as the Judgment Creditor may choose to enforce the Judgment by applying for a 'Garnishee Order' to garnish the amount awarded under the Judgment against third parties called 'Garnishees'. In some instances, there might be only one Garnishee. Most commonly, Garnishees are merchant banks where the Judgment Debtor holds an account with. In other situations, a Garnishee can also be a third party who has debts owing to the Judgment Debtor.

How does a Garnishee Proceeding work?

In an application for a ‘Garnishee Order’, you may name more than one Garnishee in the proceedings. There are two stages to the application, namely;

• The 1st stage is an application for Ex-Parte Garnishee Order, and;
• The 2nd stage is for Garnishee Order Absolute.

“Ex-parte” in this context simply means that the Court Order can be obtained without the presence of the Judgment Debtor and the Garnishee at the hearing.

Once your lawyers obtain the Ex-Parte Garnishee Order, it will be served on the Garnishee to “show cause” at the hearing for the Garnishee Order Absolute. By this stage, the Garnishee, such as the bank, will typically inform you as to whether debts are owing to the Judgment Debtor and whether the amount is sufficient to satisfy the Judgment Sum. Also note that by this time, any bank account(s) garnished by the Ex-Parte Garnishee Order would have been suspended, and the Judgment Debtor will not be able to have any access to his or her monies.

Provided that there is no dispute at the Garnishee Order Absolute stage, the Court will generally make the Garnishee Order Absolute for the banks to release the amount garnished directly to you.

What happens if your bank account is Garnished?

Now, what if you are on the other side, the Judgment Debtor and your bank have just informed you that your account is now frozen? In that case, please be advised that the bank is only allowed to garnish the amount stated in the ex-parte Garnishee Order. If the monies in your account are in excess, the bank can only freeze a portion of your account, and not the entire sum. Further, the bank cannot release the amount garnished in your account to the Judgment Creditor until and unless a Garnishee Order Absolute has been obtained.

As always, it’s vital to seek expert advice before beginning the legal process to enforce Court Judgments. Besides, there are other options for a Judgment Creditor to enforce and recover Judgment Sum other than Garnishee Proceedings. In that respect, consult a qualified lawyer to advise you on the most feasible and options for you to recover your Judgment Sum OR to defend against any enforcement proceedings against you.

Carly Yap is a Senior Lawyer with the Litigation Division of CHERN & CO. – A Commercial law firm specializing in all aspects of corporate & commercial laws. Her primary areas of practice in civil litigation include commercial, land and insolvency. She can be reached at carly@chernco.com.my