ENFORCEMENT OF CIVIL CASE JUDGMENTS IN MALAYSIA

Transcription

1 ENFORCEMENT OF CIVIL CASE JUDGMENTS IN MALAYSIA INTRODUCTION The Malaysian Civil Judicial system is based on common law, much of which has been codified by statute. The hierarchy of courts in Malaysia is comprised of the Subordinate Courts and the Superior Courts. The Subordinate Courts comprises the Magistrates Court as the first tier and the Session Court as the second tier. The Superior Courts consists of the High Court, Court of Appeal and the Federal Court of Malaysia, which is the highest court. LAWS AND REGULATIONS GOVERNING ENFORCEMENT OF CIVIL CASE JUDGMENTS The general salient provisions governing enforcement of civil judgments in Malaysia are: i. S. 17 of the Courts of Judicature Act 1964 [Act 91]; ii. S. 4 of the Subordinate Courts Rules Act 1955 [Act 55] and iii. The Rules of Court Before 1 August 2012, the Rules of Court 2012 was known as the Rules of the High Court 1980 and the Rules of Subordinate Court Now, all references to enforcement procedures in the High Court, Sessions Court and Magistrate s Court are covered by the Rules of Court The enforcement of civil cases in Malaysia is further fleshed out in the following legislation: Debtor s Act 1967 Distress Act 1951 Specific Relief Act 1950 Hire Purchase Act 1967 National Land Code 1965 Auction States Enactments Bankruptcy Act 1967 Bankruptcy Rules 1969 Companies Act 1965 Companies (Winding-Up) Rules 1972 The Reciprocal CIVIL JURISDICTION Enforcement Of Judgments Act 1958 (REJA 1958) A Session Court may hear any civil matter involving motor vehicle accidents, disputes between landlord and tenant, and distress actions. The Session Court may also hear other matters where the amount in dispute does not exceed RM 1,000, The High Court has jurisdiction to try all civil matters but generally confines itself to matters on which the Magistrate and Session Court have no jurisdiction. These include matters relating to divorce and matrimonial cases, appointment of guardians of infants, the granting of probate of wills and testaments and letters of administration of the estate of deceased persons, bankruptcy and other civil claims where the amount in dispute exceeds RM 1,000,

2 LEGAL RESTRICTIONS Generally, there can be no execution against the Government: See Section 33(4), 35 Government Proceedings Act Also, an action on the judgment is time-barred after 12 years: Section 6(3) Limitation Act 1953; Ramani v Personal Representative of the Estate Of Vaswani, decd (No 2), (1994) 2 SLR 750. However, the court may grant leave under Para 1(a) if the applicant can show reasonably acceptable grounds. O. 46 r. 2(1) (a) of the Rules of Court 2012 states that a writ of execution may only be filed with leave of court if more than six years has lapsed from the date of the judgment/order. The granting of leave is at the court s discretion: Tio Chee Hing v Chung Khiaw Bank Ltd (1981) 1 MLJ 227. MODES OF EXECUTION If the sum remains unpaid, the parties are entitled to enforce the judgment through the following modes as provided under the Rules of Court 2012: i. Writ of seizure and sale: O. 45 r. 1(1)(a) ii. Garnishee proceedings: O. 45 r. 1(1)(b) iii. Judgment Debtor Summons: O. 45 r. 5 iv. Auction of Immovable property: O. 83 v. Prohibitory order: O. 47 r. 6 vi. Committal proceedings: O. 52 vii. Charging order: O. 50 Apart from that, the parties are also entitled to elect to bankrupt the individual or wind-up the company in order to enforce the non-judgment of judgment sum. If a foreign judgment is involved, the parties are entitled to reciprocally enforce the judgment as provided under The Reciprocal Enforcement of Judgement Act 1958 (REJA 1958). A further mode of execution is by way of court ordered possession of immovable or movable property. This may be affected under the Rules of Court 2012, as follows: i. Writ of Possession: O. 45 r. 3(1)(a), 12(3) [Form 87] ii. Writ of Distress: O. 75 iii. Writ of Delivery: O. 45 r. 4, 12(2) [Form 86] PROCEDURE FOR EXECUTION 1. Writ of Seizure and Sale According to O. 45 r 12(1), the writ must be in the Form prescribed, namely Form 84 or 85. It may be enforced against both movable and immovable property as well as against the securities. When the property to be seized is immovable property or any registered interest the seizure shall be made by an order prohibiting the judgment debtor from transferring, charging or leasing the property. 2. Garnishee Proceedings Under O. 49, the JC may garnish money the JD is supposed to receive from a third party ( garnishee ). 2

3 The application to garnish is made vide ex parte notice of application supported by an affidavit (Form 98). Thereafter, the Court will issue a Garnishee Order to show cause (Form 97), O. 49 r.1. If the garnishee does not attend court to show cause against the order, then the garnishee order is made absolute: O. 49, r. 4. If the garnishee attends court, the Court can either decide the matter summarily or fix the matter for trial: O. 49, r Judgment Debtor Summons Again, the procedure is by way of Notice of Application supported by an affidavit [Form 95] as provided under O. 48 Rules of Court The objective is to give an opportunity to the judgment debtor to pay the judgment debt by instalments commensurate to his means. Even a judgment debtor himself could apply to the court to pay the judgment debt by instalments. Alternatively, the defendant can under O. 14, admit the Plaintiff s claim and propose to pay by instalments and the court may so order if the plaintiff accepts the proposal. 4. Auction of Immovable Property This mode is governed by sections 256 to 269 of the National Land Code 1965 and O. 83 Rules of Court The relevant Auction States Enactments are as follows: Auction Sales Enactment F.M.S Cap (No. 2 of 1929) Auction Sales (Extension to Terengganu) Ordinance 1955 (F.M No. 58 of 1955) Auction Sales Enactment Johore (En. No. 117) Auction Sales Enactment Kelantan (En. No. 28 of 1930) Auction Sales Enactment Perlis (En. No. 7 of 1337) Auctioneer Enactment Kedah (En. No. 8) Auction Sales Rules Selangor, Negeri Sembilan & Pahang Miscellaneous Licences (Auctioneers & Valuers) Regulations An application for the auction of immovable property is by way of Originating Summons supported by an affidavit. The Registrar will appoint the auctioneers and fix a reserve price for the said property. The auctioneer must have taken out a proclamation for sale to advertise the said property. The Registrar in his capacity as Sheriff handles public auctions and she/he is assisted by the auctioneer and the bailiff. Interested bidders have to deposit their bank drafts before the auction. 3

4 5. Prohibitory Order The prohibitory order is a court order prohibiting the judgment debtor (owner) from dealing with his land which is subject to execution by way of seizure and sale by a judgment creditor. The judgment debtor must either be a registered proprietor of the land in question or must have an interest in his own right. The execution creditor may present the prohibitory order to the appropriate registering authority for registration in the appropriate register of titles, and the registering authority shall register the prohibitory order. Upon registration, the land or interest therein shall be deemed to have been seized. After obtaining the prohibitory order, the judgment creditor can proceed to obtain the order for sale to auction the piece of land to recover the same: O. 47 r Committal Proceedings For committal proceedings, the relevant provisions can be found under O. 52. The judgment creditor has to file an application for leave to commence committal proceedings, vide an ex parte notice of application supported by an affidavit. If leave is granted, the judgment creditor must file an application for an order of committal and serve it on the contemnor. There must be eight clear days between service of the notice and the hearing date. 7. Charging Order A charging order is an order imposing a charge on securities for e.g. shares The procedure is by way of ex parte notice of application supported by affidavit. The share in question has to be specified. The order to show cause must be served on the judgment debtor at least 7 days before the time appointed for consideration of the matter: O. 50, r. 4. Once an order to show cause has been made, the judgment debtor cannot sell or transfer his shares: O. 50, r Bankruptcy Proceedings A person may be adjudged bankrupt if the total judgment debt exceeds RM 30, The proceedings may be commenced if the judgment debtor has not complied with the judgment or order made against him. The debtor could be debt to individuals or companies. The judgment debtor will be adjudged bankrupt once a receiving order and adjudication order (ROAO) is recorded against him. Once a debtor has been adjudged bankrupt, other creditors will file the Proof of Debt form and Proxy to be 4

5 entitled to share in any distribution from the estate of the bankrupt. The distribution of the estate is according to the priority of the creditors' claim. 9. Winding up Winding up is also known as "liquidation", when a company cannot pay its debt and when it falls due, a company is insolvent. Under s. 211 of the Companies Act 1965, there are two types of winding up ie by the court and voluntarily. Procedure for winding up by the Court is provided under Section 218 (1)(a) - (n) Companies Act The most common ground in which the company may be wound up by the court is under section 218(1)(e) where the company is unable to pay its debt. Section 218(2)(a) defines an inability to pay its debts as such: if the company is indebted in a sum exceeding RM500 and a demand has been made to pay the sum and the company has for 3 weeks neglected to pay the sum. Whereas voluntary winding up can be divided into 2 categories, namely members voluntary winding up and creditors voluntary winding up 10. Enforcement of Foreign Judgments / Reciprocal Enforcement of Judgments The relevant law for this mode of execution is The Reciprocal Enforcement of Judgements Act 1958 (REJA 1958) read together with O. 67 of the Rules of Court REJA 1958 does not apply to all foreign judgments but only to judgments in the superior courts of the United Kingdom and countries specified in the first schedule to the Act: Section 3 REJA; Re Suppiah (Tara Rajaratnam, Judgment Creditor) (1989) 2 MLJ 479 at 481 per LC Vohrah J. In Re A Judgment Debtor (No 2716 of 1938) (1939) 1 AII ER 1 at 6, it was held that in relation to s. 6 of the Foreign Judgments Reciprocal Enforcement Act 1933 (in pari material with sect 7 of the REJA 1958; where a judgment is registrable under the Act, the only thing the holder of such a judgment is entitled, to do is to register it, and, after registering of course, he obtains the rights which the Act expressly says shall follow upon registration. Therefore, it is understood from this Act the only method of enforcing foreign judgment should be by registration. The procedure is by way of Originating Summons supported by affidavit annexing the judgment obtained in the Superior Court of a country in the First Schedule to register in the High Court. 5

6 No appearance needs to be entered to an Originating Summons and the application is heard ex parte: The Development Bank Of Singapore Ltd v Furniture Industries Pte Ltd & Ors (1992) 2 CLJ Writ of Possession The relevant law for this mode of execution can be found in Sections 7 and 8 of the Specific Relief Act 1950 read together with O. 89 and O. 45 r. 3 Rules of Court Under O. 89 and O. 45, r. 3, the application is made vide ex parte notice of application supported by an affidavit (with particulars of any sub-letting or actual possession by other occupiers and whether requisite notice given to them of the proceedings). Once the application is granted, the order commands the Sheriff to enter into the land and take possession of the immovable property. The writ may also include provision for enforcing the payment of money, usually rental arrears and legal costs and for that purpose; the writ will command seizure and sale of any movable property of the defendant to satisfy the party of the monetary judgment. 12. Writ of Distress The relevant law is the Distress Act 1951 read together with section 7 Specific Relief Act 1950 and O. 75 Rules of Court The application for Warrant of Distress is made vide ex parte notice of application supported by an affidavit (affirmed by either landlord or his duly authorised agent). It is a requirement of this mode of execution that the relationship of landlord and tenant must exist, both when the rent becomes due and when the distress is levied and the rent must be in arrears. The writ of distress need not be served on the tenant. Instead, it is addressed to the bailiff for execution and the entire process is carried out ex parte. The element of surprise is expected because if the order is made known, the execution might not be fruitful. 13. Writ of Delivery The relevant laws are ss. 16, 16a, 17A, 17B, 19 and 20 of the Hire Purchase Act 1967 read together with O. 45 r.4 Rules of Court A writ of delivery is for the recovery of movable property or its assessed value where a judgment or order for the delivery of any movable property or payment of their assessed value to the judgment creditor has not been complied with. It may include provisions for enforcing the payment of any money adjudged or ordered to be paid by the judgment. 6

7 CAPACITY BUILDING AND TRAINING OF JUDICIAL OFFICERS The Chief Registrar s Office, Federal Court of Malaysia as well as the Judicial and Legal Training Institute of Malaysia conducts continuous training with regard to the enforcement of judgments for both judicial officers and bailiffs. The module of the courses is reviewed every year in line with the recent developments. The courses are compulsory for both judicial officers and bailiffs. Judicial officers are given training in the exercise of their power as Sheriffs of the High Court and Subordinate Court. As for the judicial officers, this execution course is a prerequisite for their promotion. The appraisal training is held with the assistance of the judges and senior officers who are experts in their field. RECENT DEVELOPMENTS / INNOVATIONS IN ENFORCEMENT OF CIVIL JUDGMENT Courts are essential for entrepreneurs because they interpret the rules of the market and protect economic and contractual rights. An efficient, speedy and transparent court enforcement system encourages and facilities new business relationships because businesses then know they can rely on the courts for the speedy resolution of any commercial disputes. From studies done by the World Bank Group in the Doing Business in 2015, globally, Malaysia stands at 29 in the ranking of 189 economies on the ease of enforcing contracts. One of the Enforcement of Contract Indicator Measures is time to enforce the judgment. The following is a brief overview of the recent developments / innovations in this field: Uniformity of Practice Among the States in Malaya A recent Practice Direction with regards to the auction of immovable property was issued by the Registrar of the High Court of Malaya in It provides for uniformity and standardization and puts into place sound and transparent procedure resulting in speedy disposal of auction cases. Public Auction Held in a Specific Room Only bidders are allowed to enter the room. The conduct of the bidders in the room is closely monitored. The procedure for registering, bidding and signing of the contract of sale is fast and transparent. Auction Laws Reform The Law Reform Division of the Attorney-General s Chambers began preliminary research on this area since 2012 with the purpose of identifying problematic issues including lacunae/loopholes, inadequacies and inconsistencies in the law. Industry players and stakeholders have been consulted to determine the feasibility of a specific Federal Law to govern auctions in Malaysia. 7

8 Insolvency Law Reform Since 2010, the Malaysian Department of Insolvency (MDI) has been studying ways to simplify and improve the process and administration of bankruptcy matters. These include to streamlining the process and procedure in bankruptcy cases. For example, under the present law, a court order is required to transfer bankruptcy proceedings and for the bankrupt to carry on business or to be involved in the management of companies. The proposed amendment will reduce the involvement of the courts in the administration of bankruptcy matters and gives the DGI powers to do the same. A further proposed amendment allows the DGI to stipulate a timeframe for the filing of proofs of debts. Under the present law, there is no deadline for judgment creditors to file proofs of debt. Consequently, there are creditors who do not file their proof of debt, or delay filing their proof of debt until after the receiving order and adjudication order is made. The proposed amendments would also make the payment of dividends Shariah-compliant when Islamic finance institutions are involved, as well as expand the prosecutorial and enforcement powers of MDI officers by allowing them to prosecute and/or compound offences under the Act. The proposed amendments also provide a rescue mechanism for bankrupts to get their financial affairs in order before a receiving order and adjudication order is made, where the judgment debtor may enter into a voluntary arrangement with his creditors which is binding on both parties or come up with a debt repayment plan. As of now, a bankrupt may obtain a discharge by the court or from the DGI. Automatic discharge from bankruptcy has been suggested where an automatic discharge may be given after a pre-determined period of time to the bankrupt. These will help to cut down on the backlog of cases in the courts and speeds up the discharge process. Reforming the Corporate Insolvency Regime Reform The Corporate Law Reform Committee (CLRC), established by the Companies Commission of Malaysia, is spearheading the review of the Companies Act 1965 with the objective of creating a legal and regulatory structure that will facilitate business and to promote accountability and protection of corporate directors and members taking into account the interest of other stakeholders. 8

9 To this end, the CLRC is looking at ways of modernising the law, reducing the costs of compliance, reducing duplication and conflicts that exist between the various corporate regulatory bodies, simplifying the existing operational processes of a company and simplifying the current legislative language in the Act. E-bidding in Public Auction for Immovable Property There is currently an on-going study which commenced from the year As online auctions are relatively new to Malaysia, the challenges and risks have to be studied before any changes in the procedure and law can be implemented. CONCLUSION Malaysia recognizes the need for speedy and efficient enforcement of civil case judgments which is relevant pertinent in the context of Dynamic Regional Economic Integration. Towards this end, Malaysia is striving to improve its enforcement of civil judgment mechanism to promote and facilitate the needs of individual litigants and the business community as a whole. Malaysia further acknowledges the importance of cooperation among enforcement of civil judgment agencies among the ASEAN community. 9