Since 2010, the Global Law Experts annual awards have been celebrating excellence, innovation and performance across the legal communities from around the world.
posted 7 months ago
Introduction
The recent Court of Appeal case of Affin Bank Berhad v Energypeak Fze [2023] 1 LNS 2429 clarified and upheld the well-established position that a Garnishee Order to Show Cause issued against a Garnishee (usually a bank) will only affect/ freeze debts in existence at the date of service of the said Order, and any deposits/ monies subsequently paid into the Judgment Debtor’s bank account cannot be subject to the said Order.
Garnishee Proceedings in Malaysia (Order 49 of the Rules of Court 2012)
Garnishee proceedings are an enforcement method available to a Judgment Creditor (“JC”) that has obtained a monetary judgment against a Judgment Debtor (“JD”). A JC may pursue to reclaim the sum owed via a third party (usually a bank) who is indebted to the JD, known as a Garnishee.
First Stage
The JC will need to obtain a Garnishee Order to Show Cause from the Court, which shall be served on the Garnishee personally.
When a Garnishee Order to Show Cause is served on the Garnishee, it operates as an injunction, i.e. it binds the debt in the hands of the Garnishee, that is, it creates a charge in favour of the JC; and the sum outstanding from the Garnishee to the JD is frozen/ attached until the second stage where the order is made absolute or is discharged.
Second Stage
In the event the Garnishee fails to enter appearance or fails to prove that there is no debt due and owing to the JC, the Court will grant a Garnishee Order Absolute, wherein the Garnishee will be liable to make payment to the JC by releasing the monies in the JD’s bank account to the JC, to satisfy the monetary judgment.
Background Facts
Sessions Court
Energy Peak Fze, the Judgment Creditor (“JC”) obtained a summary judgment for a sum of RM 208,051.20 against Infinity Global Palm Oil Sdn Bhd, the Judgment Debtor (“JD”).
Subsequently, the JC filed an application to garnish funds from JD’s accounts with Affin Bank Berhad (“Garnishee Bank”).
On 21.6.2021, the JC served the Garnishee Order to Show Cause (“GOTSC”) on the Garnishee Bank.
On 23.6.2021, the Garnishee Bank replied to the JC, stating that the JD has an account with them with a credit balance of RM9.81 and this amount would be attached/ frozen until further orders from the Sessions Court.
On 21.9.2021, the Sessions Court did not grant a Garnishee Order Absolute due to insufficient funds in the account, as the credit balance is only RM 9.81.
High Court
Dissatisfied with the decision of the Sessions Court, the JC appealed to the High Court. The High Court expressed its view that the Sessions Court had erred in its judgment and held that a Garnishee Order Absolute should have been made effective on 21.9.2021.
The High Court directed the Garnishee Bank to file an affidavit exhibiting JD’s Statement of Account from 18.6.2021 until 14.9.2021 (Note: the GOTSC was served on the Garnishee Bank on 21.6.2021).
On 21.3.2022, the High Court directed the Garnishee Bank to include additional sums that came into the JD’s account after the GOTSC was served, after having satisfied itself that there were 3 additional sums that had come into the account of JD after service of GOTSC.
The High Court was influenced by the preposition of “from” under Order 49 Rule 3(2) of the Rules of Court 2012, which provides that “such an order shall bind in the hands of the garnishee as from the service of the order on him any debt specified in the order.”
The High Court held that there is a continuing obligation on the Garnishee to continuously and continually freeze/ attach monies that may be credited into the JD’s account after the date of service of the GOTSC.
Grounds of Judgment of the Court of Appeal
The Garnishee Bank sought leave to appeal to the Court of Appeal, and leave was duly granted. The issue before the Court of Appeal is whether a GOTSC could freeze/ attach funds credited to the account after the GOTSC was made.
The Court of Appeal overturned the High Court’s decision and set aside the order for additional funds.
The Court of Appeal held as follows:
The Court of Appeal allowed a Garnishee Order Absolute to be entered for the sum of RM11.81, which was confirmed by the parties as the sum owing by the Garnishee to the JD as at the date of the service of the GOTSC.
Conclusion
The Court of Appeal’s decision in Affin Bank Berhad (supra) is consistent with the principle enunciated in many cases before the Courts including Bumiputra-Commerce Bank Bhd v Top-A Plastic Sdn Bhd [2008] 5 MLJ 34 (Court of Appeal) and Transpacc Property Management Sdn Bhd v Badan Pengurusan Bersama Pangsapuri Aman Larkin & Anor [2022] MLJU 1015 (High Court) – A Garnishee Order to Show Cause (“GOTSC”) should only affect the debts in existence at the date of service and not subsequent deposits.
This decision is particularly relevant for financial institutions especially banks, that often act as Garnishees. It provides clarity on their obligations when responding to a GOTSC, particularly regarding the amounts that need to be frozen/ attached and potentially paid out. In any event, it is prudent for banks to notify their clients immediately upon service of a GOTSC.
About the authors
Chew Jin Heng
Associate
Dispute Resolution
Halim Hong & Quek
[email protected]
Esther Lee Zhi Qian
Pupil-in-Chambers
Dispute Resolution
Halim Hong & Quek
[email protected]
posted 2 days ago
posted 2 days ago
posted 3 days ago
posted 4 days ago
posted 4 days ago
posted 4 days ago
posted 4 days ago
No results available
ResetFind the right Legal Expert for your business
Sign up for the latest legal briefings and news within Global Law Experts’ community, as well as a whole host of features, editorial and conference updates direct to your email inbox.
Naturally you can unsubscribe at any time.
Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.