You have fought a legal battle and successfully secured a monetary judgment from the Court. However, the victory is hollow if the opposing party refuses to comply.
As a Judgment Creditor, what can you do next?
Methods of Enforcement
There are a number of ways to enforce a monetary judgment, for example:
- Writ of Seizure & Sale – seizing and auctioning off the debtor’s properties, moveable (like furniture) and immovable (like property)
- Garnishee Order – an order that monies be taken out directly from the debtor’s bank
- Judgment Debtor Summons (JDS) – hauling the debtor to Court to answer why the judgment has not been paid and the Court making additional orders towards the settlement
- Bankruptcy/Winding Up – to adjudge a person bankrupt or shut down a company. Monetary thresholds apply.
Read more about each of them here.
Practical Considerations
Each method has its own implications and considerations. When deciding which enforcement method to pursue, there are several practical considerations to keep in mind.
Consideration #1 – Cost
As some enforcement methods require more steps, naturally the cost involved will be higher and such cost may vary depending on the complexity of the chosen method. For example, a Writ of Seizure & Sale (of immovable properties) may entail higher costs due to multiple steps involved, such as the seizure of assets and auctioning off the debtor’s immovable properties. The costs can escalate especially if multiple auctions are required to be held.
Consideration #2 – Time
Certain enforcement methods can take longer than others to yield results. For example, whilst Judgment Debtor Summons (which involves hauling him or, if a company, its directors to court) may sound enticing, it can be time consuming particularly if the service of the cause papers on the involved parties is challenging.
Depending on the urgency of the situation, you have to weigh the potential time investment of each enforcement method to determine which method fits your needs best.
Consideration #3 – Effectiveness
You need to understand the debtor’s operations and sensitivities to assess what impacts the debtor’s compliance most, as that will determine the effectiveness.
If the debtor is actively in business with active cash flow in their accounts, garnishee proceedings might be a suitable option. Conversely, if their business relies heavily on customer traffic, methods like Writ of Seizure and Sale might do the trick since the debtor may want to avoid the negative publicity that comes with the very public presence of a Court Bailiff.
Consideration #4 – Other risks & impact
Diminished Recovery Value
Even though enforcement can proceed successfully, in reality, the assets ultimately recovered may sometimes fall short of satisfying the judgment debt. This can happen if the debtor is insolvent or lacks sufficient assets where you may end up recovering a fraction of the debt or nothing at all.
The recovery value may be diminished for instance, in a Writ of Seizure and Sale, where the items you are able to auction off may yield a low value; or in garnishee proceedings, where the garnished account may hold insufficient funds.
These are common challenges that a judgment creditor faces, since it may be challenging to find out whether a debtor has sufficient funds in their accounts, or to predict the exact amount you can recover from the auctioned items.
Impact on Business Relationships
Pursuing enforcement methods may strain business relationships as you may be perceived by business partners as being overly litigious or confrontational. Whilst it is important to recover debts that are overdue and owing, it is also important to balance commercial interests and minimize collateral damage.
Therefore, before deciding to proceed with enforcement, it is important to assess the chances of recovery and potential impact on your business image.
All in all, there is no one-size-fit-all approach. Choosing the correct method can either help effectively recover a judgment debt or result in wasting more resources.
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This article was written by Tiffany Chin (Associate) from Donovan & Ho’s dispute resolution practice.
Donovan & Ho is a law firm in Malaysia. Our dispute resolution provides advice and legal representation in the civil and industrial courts. We also represent clients in both domestic and international arbitration, as well as other forms of alternative dispute resolution. Our experienced lawyers are also able to assist in commercial and civil disputes (such as debt recovery, shareholders’ or directors’ disputes, breach of contract and claims for injunctive relief), constructive disputes (arbitration and/or adjudication proceedings, disputes relating to delays, liquidated damages, defects and rectification work) and employment disputes (unfair dismissal claims, judicial review proceedings, and employment-related civil claims). Have a question? Please contact us.