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  • Writer's pictureGavin Jayapal

Garnishee proceedings: The need for full and frank disclosure


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Garnishee proceedings are relatively straightforward. If one possesses a judgment, one may seek to garnish monies owed to the Judgment Debtor by a third party.


To illustrate this, imagine that Duke owes Lassie RM100. Lassie (Judgment Creditor) takes judgment against Duke (Judgment Debtor) and serves it on his solicitors. Duke refuses to pay up. He lodges an appeal against the decision and further files an application to stay execution.


Lassie is not keen on waiting. She is aware that Duke maintains an account with The Bank of Doughnut (Garnishee), with a balance of RM1,000.


Lassie would be entitled to enforce the judgment by taking out a garnishee application, causing The Bank of Doughnut to pay a sum of RM100 to her, as opposed to Duke. The balance of RM900 would still be Duke’s.


Lassie would also be able to garnish any sum that Duke’s other debtors may owe him.


The Law


Garnishee applications are subject to O. 49 of the Rules of Court 2012. The Rules envisage a two-stage process. The first stage involves an ex-parte application to the Court, wherein particulars of the Garnishee are to be provided. The Judgment Creditor must also explain how they obtained these particulars.


Once the Ex-Parte Order has been obtained, it (Order) together with all cause papers are to be served on both the Judgment Debtor and the Garnishee. The parties are to then return for an inter-partes hearing (affidavits and submissions exchanged, etc.).


Setting-aside the Ex-Parte Order


An option then becomes available to Duke, being the Judgment Debtor. He is entitled to have the Ex-Parte Order set-aside, pursuant to O. 32, r. 6 of the Rules of Court 2012. In Loo Chay Meng v Ong Cheng Hoe [1990] 1 MLJ 445, VC George J (retired JCA) stated:

In as much as O 49 is silent, say, in respect of the form the application for a garnishee order should take, it is equally silent in respect of the court's jurisdiction to set aside an ex parte order made in the O 49 application. However, just as O 32 r 1 provides the answer as to what form should be used in making such an application, O 32 r 6 provides the answer as to the extent of the court's jurisdiction in respect of ex parte orders. 'The court may set aside an order made ex parte' says r 6 and it is of general application and in my judgment it may and should be applied in O 49 proceedings where relevant.
Having concluded as I have done that the order made on 13 April 1988 was an ex parte order, it follows that the court has jurisdiction provided by O 32 r 6 to have it set aside.
In the instant case, O 32 r 6 gives the court the jurisdiction to set aside the ex parte order absolute. Alternatively, if O 32 r 6 is not applicable in an O 49 situation, then the court has the jurisdiction to set aside the order invoking its inherent jurisdiction. I will now hear arguments on the merits.

The need for full and frank disclosure at the Ex-Parte stage


The inexorable march of questions: Does Lassie need to make full and frank disclosure to the Court, prior to the Ex-Parte Order being entered?


In Castle-Inn v Bumiputera Commerce [2009] 1 MLJ 542, the Court of Appeal emphasised that any ex-parte application would require full and frank disclosure:

[23] A similar sentiment was shown by Steve Shim J (later CJ (Sabah and Sarawak)) in Yeoh Kee Aun, at p 514 to the effect that where there is a failure to disclose material facts within his knowledge in an ex parte application by a party or where there is any material misrepresentation, it will result in the court setting aside the ex parte order obtained.
[24] I would respectfully add that the raison d’tere, for the aforesaid established general rule of law, is that an ex parte application is an application uberrimae fidei ie of the utmost good faith and the court has to rely on the unilateral version of the applicant who must candidly and faithfully tell the truth, the whole truth and nothing but the truth. Anything short of that utmost good faith will invariably render the ex parte application fundamentally flawed and on that ground alone, result in the inevitable setting aside of the ex parte order so obtained.

Refer also:

Ravindra Ramachandran v Thang Mun Seong [2010] MLJU 267

Arthur Anderson v Interfood [2005] 6 MLJ 239


Refusing to divulge particulars may amount to an abuse of the Court process. In Sibu Slipway v Yii Chee Ming [2017] 1 MLJ 368, the COA, speaking through Nallini Pathmanathan JCA (presiding FCJ) stated:


[22] We were however, of the view that since we concurred with the learned High Court judge that the factual matrix of this case amounted to an abuse of process of the court, the pertinent issue before us was whether the court could invoke its inherent jurisdiction to set aside, rescind or grant a permanent stay of the three winding up petitions.
[23] The issue of material non-disclosure or suppression of material facts inthe course of court proceedings is of fundamental importance in the administration of justice. It is not possible for this court to gloss over facts that disclose deliberate attempts to mislead the court into granting the winding up orders. Apart from causing prejudice to the respondents, and breaching the rules of natural justice, these acts or omissions amount to an abuse of process of the court.

The need for full and frank disclosure in garnishee applications


Garnishee application are subject to these same rigorous strictures. In Chung Fai Engineering v Maxwell Engineering [2003] HKCU 1019, Burrell J sitting in the Hong Kong High Court set-aside an ex-parte garnishee order for, inter alia, a failure to make full and frank disclosure:


3. The 'garnishee to show cause' was listed on 28 July 2003 for a three-day hearing. The directors of the garnishee have attended court for the purpose of cross-examination. However, at the 11th hour, the garnishee issued a summons to set aside the garnishee order nisi. Ms Teresa Cheng, SC, on their behalf, relies on two grounds for the setting aside. First, that Maxwell did not comply with the requirement of full and frank disclosure at the time of the ex parte order nisi. Second, that, even accepting Maxwell's allegations at their highest, there is no 'debt' due from the garnishee to the judgment debtor for the purposes of garnishee proceedings.
...
12. In my judgment, the garnishee has made out a good case of nondisclosure which would enable the court to set aside the order under Order 32, rule 6. However, the primary reason for setting it aside is that Maxwell's own case does not demonstrate that any debt, within the meaning of Order 49, rule 1, is due to the judgment debtor.
13. Of course, the court is very conscious of the fact that, seven years after the contract and three years after the trial, Maxwell have still not received any money. Their cause need not be a lost one. Other avenues leading to a just result may be available.

Conclusion


In a situation such as that outlined above, it is important for Lassie to inform the Court, at the Ex-Parte stage, that Duke has lodged an appeal and an application to stay execution.


A Judge hearing the Ex-Parte application may be of the opinion that the stay application ought to be heard first, pending disposal of the garnishee application. This would be simply due to the fact that if the stay application is successful, the garnishee order would be set-aside.


Failing to make mention of salient facts would be to conceal material information. It would be a subset of misleading the Court and would, ultimately, amount to an abuse of process.


In such a situation, if full and frank disclosure has not been made, Lassie would run the serious risk of having Duke succeed in his application to set-aside the Ex-Parte Order, together with a potentially heavy order as to costs.


On a personal note, I have encountered this situation twice. In both situations, 2 separate courts agreed that the Ex-Parte Garnishee Order was suitable to be set-aside, due to a lack of full and frank disclosure.


Practitioners would do well to consider how onerous this obligation is, even in so pedestrian an application.


GAVIN JAYAPAL

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