Introduction
Many people believe that winning a case means they will automatically receive payment and that the matter is concluded. However, this is not the case. If the opposing party (the judgment debtor) does not willingly make payment, the judgment creditor is left with nothing more than a court order stating their entitlement to payment. In such situations, it is important not to delay; steps can be taken to enforce or execute the judgment to recover the outstanding amount. Below, we will explore some of the common enforcement methods.
Judgement Debtor Summons
At the request of the judgment creditor, the court may require the judgment debtor to appear before it and provide sworn testimony. If the judgment debtor fails to attend, the court can issue an arrest order to compel their appearance. During the examination, the judgment debtor must disclose details about their assets, and the court may permit the judgment sum to be paid either in a lump sum or in installments. However, non-compliance with the court’s order can result in the judgment debtor being arrested and imprisoned. The success of a judgment debtor summons largely depends on the judgment debtor’s cooperation.
Writ of Seizure and Sale
If you are aware of the judgment debtor's valuable assets (whether movable or immovable), you may request the court to issue an order for seizure and sale. This order empowers a bailiff to confiscate and auction off the assets to recover the judgment sum. However, certain items are exempt from seizure, such as the judgment debtor’s clothing, personal belongings, or tools essential for their livelihood.
Garnishee Proceedings
Garnishee proceedings allow a judgment creditor (JC) to recover money owed to the judgment debtor (JD) from a third party, whether an individual or a company. Through this process, the money owed to the JD is redirected to the JC instead. This method is particularly effective when the JC knows which banks hold the JD's funds, especially in savings or current accounts, as the funds in a bank account represent a debt the bank owes to the account holder.
To initiate garnishee proceedings, the JC must file an ex parte notice of application (NOA) and a supporting affidavit in court. The court will then issue an order to show cause (order nisi), requiring the JD or the garnishee to explain why the garnishee order should not be finalized. If the court finds it appropriate, it will issue a final order (order absolute). Garnishee proceedings are considered one of the fastest and most efficient methods for a JC to recover their money.
Charging Order
A charging order is the imposition of a charge on the JD’s ‘stock’ which includes stock options, shares, debentures, and debenture stock as well as any dividend of or interest payable on such stock. Once a charging order absolute is obtained, the JC would need to institute separate proceedings for the sale of the stocks or interests, since the charging order is not an order for sale.
The procedure for obtaining a charging order is similar to obtaining a garnishee order. First, the JC would need to file in court an ex parte NOA for an order to show cause supported by affidavit. On receipt of the relevant documents and fee, the court will fix a date for the hearing of the application and will grant an order to show cause if it thinks fit. After the hearing of the application, the court may then make the order absolute if there is no cause to the contrary.
Appointment of Receiver by way of Equitable Execution
This method involves appointing a receiver to collect income generated from the judgment debtor’s (JD) assets and forward it to the judgment creditor (JC). It is particularly suitable when the JD earns income, such as rental proceeds, from their assets.
An application to appoint a receiver is made through a notice of application (NOA). When deciding whether it is just or convenient to appoint a receiver, the court will consider factors such as the amount claimed by the JC, the anticipated income to be collected by the receiver, and the estimated costs of the receiver’s appointment.
Bankruptcy Proceedings
With the passing of the Insolvency (Amendment) Bill 2020, the minimum threshold for initiating bankruptcy proceedings has been increased to RM100,000. Bankruptcy proceedings remain one of the most effective enforcement methods against individuals who refuse to pay a judgment sum. A judgment debtor is considered to have committed an act of bankruptcy if they fail to respond to a bankruptcy notice within seven days. Once declared bankrupt, all of the debtor’s assets are transferred to the Director General of Insolvency (DGI), who is responsible for managing them. The DGI will oversee the sale or disposal of the assets, with the proceeds distributed among creditors, prioritizing secured creditors over unsecured ones.
Winding-up Proceedings
Winding-up proceedings are similar to bankruptcy proceedings but are specifically applicable to companies. Recently, it was announced that the statutory demand threshold for filing a winding-up petition will remain permanently at RM50,000.00.
Before initiating a winding-up petition against a debtor company, the judgment creditor must issue a statutory notice of demand under Section 466(1)(a) of the Companies Act 2016. If the debtor company fails to settle the judgment sum within 21 days of receiving the notice, the judgment creditor may apply to the court to wind up the company.
Once the court issues a winding-up order, a liquidator is appointed to take control of the company. The liquidator will handle the company’s assets, including selling them and distributing the proceeds among the creditors, with secured creditors given priority over unsecured creditors.
Committal Proceedings
Committal proceedings may be brought against a JD who disobeys the court’s order or judgment, and it is a way of punishing the disobedient JD (contemnor) by way of fine of imprisonment. Committal proceedings is suitable when the JD is able to pay the judgment sum but is unwilling to do so.
It must be noted that committal proceedings only serve as a last resort and if the JC has other effective and available recourse such as enforcing the monetary judgment by way of garnishee proceedings, the JC should resort to that recourse instead of applying for leave to institute committal proceedings.
Before an order for committal is granted, the JC must first obtain leave (permission) from the court to initiate committal proceedings. An application for leave may be made ex parte by way of NOA. The Rules of Court state that within 14 days after the leave is granted, the JC must make an application for an order of committal by way of NOA. After the hearing of the application, the court may then make an order of committal against the JD and fine and/or jail the JD for contempt of court.
Conclusion
Enforcing a court judgment is a crucial step in ensuring that the judgment creditor’s rights are upheld and the judgment sum is recovered. As highlighted, there are various enforcement methods available, each tailored to specific circumstances, whether targeting the debtor’s assets, income, or compliance with court orders. Judgment creditors must act promptly and choose the most appropriate enforcement method based on the debtor's financial situation and available resources. While some methods, like garnishee proceedings or writs of seizure and sale, may provide quick results, others, such as bankruptcy or winding-up proceedings, address more complex scenarios. Ultimately, the effectiveness of enforcement relies on timely action, strategic decision-making, and a clear understanding of the legal options available
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