The long-awaited COVID-19 legislation (Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Bill 2020) was tabled for first reading in the Dewan Rakyat on 12 August 2020. The Bill seeks to provide temporary relief to those who may have had their rights impacted by the pandemic. In this article, we highlight some of the key proposals of the Bill.
Inability to perform contractual obligations
The Bill provides that the inability of any party to perform their contractual obligations due to COVID-19 shall not give rise to the other party exercising their rights under the contract. The categories of contract include any work related to:
- construction or supply of construction material, equipment or workers;
- performance bond granted pursuant to a construction contract;
- professional services contract;
- lease or tenancy of non-residential property;
- event contracts;
- contract by a tourism enterprise; and
- religious pilgrimage-related contract.
In the event of any dispute due to the inability to perform any contractual obligations, the Bill provides that disputes may be settled by way of a mediation. This is voluntary and not mandatory.
Notwithstanding the above, the Bill contains a saving provision which provides that any forfeited deposit, terminated contract or commencement of legal proceedings which have been carried out between 18 March 2020 until the date of publication of the Act shall be deemed to have been validly terminated or carried out.
Extension of limitation periods
The purpose of the Limitation Act 1953 is to provide for a time limit in which an action must be brought within. For example, Section 6 of the Limitation Act 1953 provides that actions in contract and tort will have to be brought within 6 years from the date on which the cause of action accrued.
Under the Bill, any limitation period under Section 6 of the Limitation Act 1953 which expires during the period from 18 March 2020 to 31 August 2020 shall be extended to 31 December 2020.
Insolvency Act 1967
The Bill provides that a creditor shall not be entitled to present a bankruptcy petition against a debtor under the Insolvency Act 1967 unless the debt owing by the debtor is at least RM 100,000. This proposal is in line with proposed amendments to the Insolvency Act 1967 to increase the minimum debt threshold for bankruptcy from RM 50,000 to RM 100,000.
However, the provisions under the Bill will not be applicable to debtors who have pending proceedings, actions or matters under the Insolvency Act 1967 before the publication of the Act.
Industrial Relations Act 1967
The Bill proposes to exclude the time period between 18 March 2020 to 09 June 2020 from calculating the period under the following provisions of the Industrial Relations Act 1967:
- Section 9(3) of the Industrial Relations Act 1967 – for an employer or a trade union of employers to accord recognition of a claim or notifying the trade union of the grounds for not according recognition.
- Section 9(4) of the Industrial Relations Act 1967 – for a workman to make a report to the Director General in relation to the recognition of his claim.
- S20(1A) of the Industrial Relations Act 1967 – for a workman to file a representation of unfair dismissal to the Director General.
Private Employment Agencies
The Bill proposes that the period of 18 March 2020 to 9 June 2020 shall be excluded from the calculation of the period for an application to renew a license under the Private Employment Agencies Act 1981.
Distress Act 1951
Distress proceedings are a form of action that can be taken by a landlord to recover unpaid rental from their tenants. The Bill proposes that a warrant of distress cannot be issued for rent that is in arrears from 18 March 2020 to 31 August 2020. However, a warrant of distress that was issued prior to the publication of the Act will remain valid.
Courts of Judicature Act 1964 and Subordinate Courts Act 1964
The Bill seeks to introduce new provisions to the Courts of Judicature Act 1964 and Subordinate Courts Act 1964 which enables the Chief Justice to issue any directions in relation to the business of the Court as may be necessary, if the Chief Justice is of the opinion that it is necessary in the interest of the dispensation of justice, public health and other sufficient reason.
The Bill also proposes for the Chief Justice to have the power to modify any provision of the rules of court or suspend the application of such rules of court as is necessary to ensure that the administration of justice is carried out.
The highlights above are only some of the features of the Bill. There are other proposals in the Bill relating to the Hire Purchase Act 1967, the Public Authorities Protection Act 1948, and the Consumer Protection Act 1999 among other things.
While the objective of the Bill to provide temporary relief is commendable, there seems to be little clarity as to why relief is being offered in certain areas and not others. For example:
- Private employment agencies will be given an extension of time to renew their licenses, but similar extensions are not afforded to other business licenses.
- The limitation period for unfair dismissal claims have been extended, but certain avenues under the Employment Act 1955 (e.g. complaints to the Director General of Labour) have been left out completely.
The delay in getting this Bill drafted and tabled is also unfortunate, given that businesses have been reeling from the impact of COVID-19 and the subsequent movement control orders since early this year. While some parts of the Bill intend to have retrospective affect, parties may already have had to incur unnecessary legal costs in enforcing their rights due to non-compliance with statutory timelines.
Further, if the Bill is not passed quickly, it could have the unintended effect of encouraging parties to commence litigation before any rights are altered by the Act. Creditors with debts of less than RM 100,000 may now be incentivised to immediately commence bankruptcy proceedings before the debt threshold is raised. This may go against the very spirit and purpose of the Bill.
This article was written by Donovan Cheah and Natalie Ng. Donovan is an advocate and solicitor of the High Court of Malaya. He is a Fellow at the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and the Asian Institute of Alternative Dispute Resolution. He is also a registered foreign lawyer with the Singapore International Commercial Court.
Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory. Have a question? Please contact us.