As seen from our previous article on Debt Recovery in Malaysia (I) – Initiating Legal Action, it is practically quite straightforward to recover your debt in court.
Here are some of the more popular cases that people resort to legal process to recover their monies which are due for:-
– good sold and delivered;
– services rendered; or
– even loan given out on a friendly basis. (on legal tips to protect yourself before giving out such loan, refer to Debt Recovery in Malaysia (III)–Friendly Loan)
So long as you have kept all the substantive documents (such as purchase order, delivery order and invoices) or any form of written agreement, basically paperwork that proves that there are monies to be paid or returned, you’ll probably succeed in getting a judgment in your favor.
If the money owed is less than RM5,000, you could apply to the court to sue your debtor yourself. If it is more than RM 5,000, you have to get a lawyer to do that for you.
However, do note that you have 12 years to enforce a judgment, and only 6 years to claim any interest that you are entitled under the judgment.
In practice, we do realize that what stops many people from even commencing a debt recovery proceeding is the concern on the effectiveness of these legal tools in ensuring their hard earned monies get returned or even traced.
Methods of Enforcement
The Extreme: Bankrupt them! Wind the company up!
One of the most threatening and effective forms of enforcing a judgment will be to bankrupt a person (provided the person owed a judgment sum of RM50,000 or more) or wind up a company (provided the company owed a judgment sum of RM10,000 or more).
This is when all assets of the bankrupts shall vest in the Director General of Insolvency (DGI) for distribution among the other creditors, with priority to be given to the secured creditors. Such processes, of course, are time-consuming, costly, and uncertain whether there will be assets left to be distributed.
Judgement Debtors Summons
Judgment Debtors Summons is a court order which might be used against a person who refuses to comply with a judgment served against him in order to settle a certain amount of money under the judgment.
Basically, the court may allow the Judgement Debtor (a.k.a. guy who owes you money) time to settle the judgment debt or pay the debt by installments.
If the Judgment Debtor fails to comply with the court order, the Judgement Debtor could be arrested and imprisoned (through a committal proceeding, see below). For more detailed article, refer to Debt Recovery in Malaysia (IV): Enforcement of Judgement by Judgement Debtor Summons.
Writ of Seizure and Sale
If your debtor has a lot of valuable movable properties (except personal stuff like clothing and tools of trade) and even immovable properties (like houses or shops), such method will be suitable for quick recovery of the sum given to you in the judgment.
Writ of Seizure and Sale is basically a court order to command the court Sheriff or Bailiff to seize and sell the property of the Judgement Debtor.
There are of course strict procedural rules to be complied with which shall be best left for your appointed lawyers to deal with.
This one is interesting!
Now, if you come across any information of the Judgement Debtor’s bank or any third party (garnishee) whom might hold the Judgement Debtor’s monies, you might apply to the court for Garnishee Order to recover the monies directly from the hands of such third party provided the following preconditions are fulfilled:-
– The garnishee must be within the jurisdiction; and
– The sum must be exactly as stated on the judgment.
The best thing about this order is that the Garnishee Order would prevail over any injunctions in existence.
Also, the Garnishee cannot set off its debts even though the Judgment Debtor was owing certain sum to the Garnishee.
This is kind of like the Garnishee Order buy applies specifically to the Judgment Debtor’s investments.
For example, if you knew that Judgment Debtor owned any securities such as shares, stocks, bonds, and dividends, you may opt to apply for charging order to attach such order on the Judgement Debtor’s securities.
The securities attached could then be sold after the absolute order is obtained from the court.
Appointment of Receivers by way of Equitable Execution
This applies where the Judgment Debtor is receiving income from various sources, such as rents, profits, royalties, etc.
However, such a method is only good if the amount that is being claimed matches with the receivables.
Also, this method lacks practicality due to probable costs of appointing the receiver and security from the receiver is required.
So give this a pass if you can.
Order of Committal for Contempt of Court
As a last resort, especially for judgement obtained for less than RM50,000 (i.e. no way to bankrupt the Judgement Debtor) and where Judgment Debtor still chooses to ignore the judgment passed against him, the creditor may ask the court to make an order of committal for contempt of court, in which he could be arrested and jailed.
If the Judgement Debtor is a company, the court may order a fine to the company and jail the directors of the company.