JNH BINA SDN. BHD. v Suhaimi Bin Sabudin (PA-37G-36-09/2022)

The judgment creditor: Suhaimi Sabudin (JC) obtained a judgment against the JD. The JC wants to enforce the judgment by Page 2 of 11 garnishee proceedings. The JC obtained a Garnishee Order to attach the progressive payments that the PDC owes to the JD. The Registrar granted that order. The JD appeals to the Judge in chambers. Should that Garnishee Order be extinguished, or should it be affirmed? THE PERTINENT FACTS [3] The PDC awarded two construction contracts to the JD. The PDC periodically paid the JD against certificates of progressive payment issued under the construction contracts. The PDC is the JD’s debtor.

The JD entered into two facility agreements with the Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank) to finance the performance of the JD’s obligations under the construction contracts. These two facility agreements were called Letters Of Assignment.

In the Letters Of Assignment, the JD agreed to assign its rights to all the payments due from the PDC under the construction contracts, to SME Bank. In other words, since SME Bank gave banking facilities to the JD, the JD assigned the payments receivable from the PDC over to SME Bank, as a form of the JD’s repayment to SME Bank. ORDER 49: GARNISHEE PROCEEDINGS [6] The provision of the Rules Of Court 2012 applicable to this Appeal is Order 49. The pertinent portions of Order 49 are set out below for reference (with my emphases added)—

Order 49. Garnishee proceedings Attachment of debt due to judgment debtor

Where a person (who is referred to as “the judgment creditor” in this Order) has obtained a judgment or order for the payment of money by some other person (who is referred to as “the judgment debtor” in this Order), not being a judgment or order for the payment of money into Court, and any other person within the jurisdiction (who is referred to as “the garnishee” in this Order), is indebted to the judgment debtor, the Court may, subject to the provisions of this Order and of any written law, order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee, or so much thereof as is sufficient to satisfy that judgment or order and the costs of the garnishee proceedings.

An order in Form 97 under this rule shall in the first instance be an order to show cause, specifying the time and place for further consideration of the matter, and in the meantime attaching such debt as mentioned in paragraph (1), or so much thereof as may be specified in the order, to answer the judgment or order mentioned in that paragraph and the costs of the garnishee proceedings. . . No appearance or dispute of liability by garnishee (O. 49, r. 4)

(1) Where on the further consideration of the matter the garnishee does not attend or does not dispute the debt due or claimed to be due from him to the judgment debtor, the Court may, subject to rule 7, make an order absolute in one of the forms in Form 99 under rule 1 against the garnishee.

An order absolute under rule 1 against the garnishee may be enforced in the same manner as any other order for the payment of money. [7] I summarise the procedure under Order 49 like this. In the first stage, the JC applies for and obtains a Garnishee Order nisi (conditional). It binds the judgment debt (which the JD owes the JC) in the hands of the garnishee: here, the PDC (who owes money to the JD). In other words, the order attaches the judgment debt. [8] This conditional order is also called a Show Cause Order. It is called a Show Cause Order because when the order is given, a hearing date is also given, for the “further consideration of the matter”. Page 4 of 11 [9] The second stage is the show cause hearing. At the show cause hearing, the Garnishee is given the procedural right to be heard i.e. to show cause as to why the Garnishee Order nisi should not be made absolute (final). After the show cause hearing, the Court decides whether the Garnishee Order should be made absolute. THE PERTINENT CHRONOLOGY OF PROCEEDINGS [10] I set out the pertinent chronology of proceedings leading up to this Appeal to Judge in chambers—

May 2022 (10.5.2022)—The JC obtained a Sessions Court judgment against the JD.

October 2022—The JC obtained the Garnishee Order nisi.

Until April 2023—The JC, the JD and the Garnishee (PDC) filed their respective affidavits for the garnishee proceeding. The JD also filed what appeared to be a pre-emptive application for an order to dismiss the JC’s application to make the Ganishee Order absolute. The JC and the JD filed affidavits and written submissions for this application.

9.5.2023—The Registrar dismissed the JD’s application.

October and November 2023—The show cause hearing took place. Page 5 of 11

December 2023—The JC and the JD filed their respective written submissions for the show cause hearing.

March 2024 (14.3.2024)—The Registrar granted the Garnishee Order absolute, for the Garnishee (PDC) to pay the JC RM833,211.99 (which was made up of the judgment sum, interest and costs).

26.3.2024—The JD filed a Notice Of Appeal To Judge In Chambers against the Registrar’s decision.

30.4.2024—The Garnishee complied with the Garnishee Order absolute by paying the sum garnished to the JC. THE JD’s ARGUMENT [11] From the JD’s written and oral submissions in this Appeal, I gleaned that the JD’s submissions circle around the argument that the PDC (the Garnishee) does not owe a debt to the JD. Instead, the PDC owes a debt to SME Bank, since the JD has assigned all the payments due from the PDC to the JD, to SME Bank. [12] The JD relies on the principles propounded in two Federal Court cases on garnishee proceedings—(1) Malaysian International Trading Corporation Sdn Bhd v RHB Bank Bhd [2016] 2 MLJ 457 (FC); [2016] 2 AMR 133; [2016] 2 CLJ 717; [2016] 2 MLRA 175, and (2) Tan Way Boon & Ors v Omar Marican Holdings Sdn Bhd & Ors [1991] 1 MLJ 122 (HC); [1990] 2 CLJ 700; [1990] 2 MLRH 279. Page 6 of 11 [13] The principle in Malaysian International Trading Corporation (supra) that the JD relies on is that for the JC (garnishor) to obtain a Garnishee Order absolute against a garnishee, the JC must establish that the money sought to be attached (garnished) “belongs to the JD”. [14] The proposition in Tan Way Boon (supra) that the JD relies on is that a Garnishee Order can only attach debts which the JD himself is “free to deal with” when the Garnishee Order nisi is obtained or served. [15] The JD submits that the Letters Of Assignment were made in August 2022 (24.8.2022), which was before the date that the Garnishee Order nisi was granted in October 2022 (26.10.2022). Thus, at the time that the Garnishee Order nisi was granted, the debts due and owing by the PDC to the JD were already assigned to SME Bank. The JD argues that there was no longer any debt owed by the PDC to the JD, for the JC to garnish. MY FINDINGS [16] These are my findings against the JD’s argument. First—the principle that the JD relies on in Malaysian International Trading Corporation (supra) is well established. The money sought to be garnished must necessarily belong to the JD. In this Appeal, the money sought to be garnished i.e. the PDC’s debt or payments due to the JD are in fact money that belongs to the JD. [17] This principle does not support the JD’s argument that the PDC’s debt or payments due to the JD are not garnishable. Instead, applying this principle brings me to the conclusion that the PDC’s debt or payments due to the JD are indeed garnishable. Just because the JD Page 7 of 11 entered into a contractual agreement with SME Bank to assign the money to SME Bank—does not mean that the money does not belong to or no longer belongs to the JD. On the contrary, the money must belong to the JD in the first place, before the JD can (have to right to) assign the money to SME Bank. [18] Second—the proposition that the JD relies on in Tan Way Boon (supra) is subject to the facts of each case. The Federal Court in Malaysian International Trading Corporation, which referred to Tan Way Boon, stated that the proposition is “subject to the facts there” i.e. subject to the facts which occurred in Tan Way Boon [this is found at paragraph [57] of the Malaysian International Trading Corporation judgment]. [19] The proposition, again, is that the money sought to be garnished should be money which the JD is free to deal with. On the facts peculiar to Tan Way Boon, the Federal Court held that a party who has obtained an equitable right to the money, such as an equitable assignee, has priority over the garnishor. [20] I am of the view that it would not be just and fair that in every case where the JD has contractually assigned the debts due to the JD, to a third party—the JC (garnishor) will necessarily lose out to the third party. For one thing, a savvy JD will strategically assign the debts due to the JD, to a third party, whenever the JC has obtained judgment against the JD, and the JC is executing on a judgment debt against the JD. [21] Also, by doing this (assigning the debts due to the JD, to a third party), the JD can effectively eliminate the usually-productive garnishee proceeding as a mode of execution proceedings against the JD. It would Page 8 of 11 in effect prohibit the JC from pursuing garnishee proceedings at all against the JD. [22] Third—by applying this proposition, the party that may be prejudiced is the third party assignee—here: SME Bank. But SME Bank has not come forward to intervene in this garnishee proceeding, to either pursue or preserve any asserted rights over the money. It appears, however, that it is merely the JD who is asserting SME Bank’s rights to the money on SME Bank’s behalf. [23] Contractually, the PDC owes money to the JD. Under another contract, the JD owes money to SME Bank. The JC has succeeded to enter judgment against the JD. It would be unfair and unjust to deny the JC the right to execute the judgment against the money that the PDC owes the JD, just because the JD has contractually agreed to use that money to pay its debt to SME Bank. Particularly when SME Bank is not even asserting their rights over that money. [24] Accordingly, I am compelled to find that the JD’s assertion here is simply a strategy to evade paying the JC the judgment sum due. [25] Fourth—the JC’s judgment against the JD was granted in May 2022 (10.5.2022). One of the Letters Of Assignment was made in August 2022 (24.8.2022), after the judgment was obtained against the JD. In my view, it would not be right for the JD to be allowed to pre-empt or circumvent the JC’s garnishee proceeding for the satisfaction of the judgment sum, simply by assigning the debts due to the JD, to a third party whom the JD owes. Page 9 of 11 [26] Fifth—the PDC avers in its affidavit filed in this garnishee proceeding that the debt (progressive payments) that it owes the JD is not garnishable because that debt is now payable to SME Bank. The JD correspondingly asserts that the PDC’s debts payable to the JD are no longer debts due to the JD, but are now debts due to SME Bank. In other words, the PDC does not have a debt due to the JD, and hence there is no debt money to garnish. [27] Contradictorily, however, the JD has made the admission, on several instances—in its affidavit filed for this garnishee proceeding, in its witness statement used in the show cause hearing, and in representations made in e-Review (Case Management) minutes—that the PDC owes money to the JD; that there are progressive payments due and payable by the PDC to the JD. The JD made the admission in these instances—

In its affidavit in reply dated 20.3.2023 (Enclosure 8), the JD’s director—while endeavouring to make the point that it has to pay many creditors as part of its cost of performing the construction contracts— averred that the PDC is indebted to the JD in the form of the progressive payments that the PDC is contractually obligated to pay the JD. This is an admission that the PDC’s progressive payments are the PDC’s debt due to the JD.

In the JD’s witness statement, lodged for the show cause hearing, the JD’s witness stated, at Q&A 6, that not the entire amount that the JC seeks to garnish is “due payment” from the PDC. Only part of it is. This can only mean that the JD Page 10 of 11 admits that the PDC’s progressive payments in fact constitutes due payment from the PDC to the JD.

In Q&A 15 of the witness statement, the witness avers that the PDC’s progressive payments to the JD are used as operational cost to perform the construction contracts and to run its business (and hence argues that this money should not be garnished, as the JD will be adversely affected if the money is garnished). While this averment can be considered, it in fact discloses that the PDC’s progressive payments to the JD are debts due to the JD. These payments constitute the JD’s revenue, from which the JD incurs its cost of doing business. This money in fact belongs to the JD, and it is money which the JD is free to deal with.

In the 14.2.2023 e-Review session, the JD asked the Court (the Registrar) not to attach the “PDC’s accrued payments, which belong to” the JD. In the 17.2.2023 e-Review, the JD asked the Court not to attach the PDC’s “due payments to the JD”. These statements disclose that the JD admits that the PDC owes a monetary debt to the JD. It puts paid to the JD’s assertion that the PDC does not owe a debt to the JD, such that there is no money to garnish. CONCLUSION [28] For these reasons, I dismiss the JD’s Appeal by way of a Notice Of Appeal To Judge In Chambers against the decision of the Registrar, after the show cause hearing, to make the Garnishee Order absolute. I Page 11 of 11 affirm the Garnishee Order absolute. As for costs, I order the JD to pay the JC costs of RM7K by 14.10.2024. Costs are subject to the allocatur. Dated: 29 November 2024 KENNETH ST JAMES Judge Penang High Court Counsel/Solicitors: For the Judgment Creditor – Ong Chin Wen [Messrs. Ong Jaya & Co. (Butterworth)] For the Judgment Debtor – Ernest Azad [Messrs. Ernest Azad & Associates (Kuala Lumpur)] Legislation referred to:

Order 49 of the Rules Of Court 2012. Cases referred to:

Malaysian International Trading Corporation Sdn Bhd v RHB Bank Bhd [2016] 2 MLJ 457 (FC); [2016] 2 AMR 133; [2016] 2 CLJ 717; [2016] 2 MLRA 175.

Tan Way Boon & Ors v Omar Marican Holdings Sdn Bhd & Ors [1991] 1 MLJ 122 (HC); [1990] 2 CLJ 700; [1990] 2 MLRH 279.