How Garnishee Proceedings Work

1. There must be a debt due or accruing due from the garnishee to the judgment debtor. What it does is essentially to make the Defendant's bank pay to you the debt that Defendant owes you (under banking law banks are your debtor/owe you money). See Order 49 of the Rules of Court.

2. The steps are generally a writ and SOC, and if no appearance is entered by the Defendant, proceed to get a judgment in default of appearance.Or, if the Defendant enters appearance, proceed to Summary Judgment (if straightforward case, no triable issues) / Trial, obtain Judgment against Defendant.

3. Once you get the Judgment, apply for Garnishee by Notice of Application and Affidavit.

4. Court will grant an Order with a date for the Garnishee to Show Cause.

5. Serve this on the Garnishee (ASAP) and the Defendant (7 days before Hearing of Order to Show Cause).

6. Garnishee (bank) will produce a statement saying how much is in the Defendant's account that can be garnished. Sometimes where the amount in the account is not enough to cover your Judgment sum, then you can only garnish the sum that is available and recover the rest due and owing through other modes of execution.

5. On the date to show cause, in the absence of Garnishee or Garnishee/Defendant has no objection, then court will grant a Garnishee Order Absolute.

6. If the Defendant opposes, then you can forward few reasons to Court why the Garnishee Order should be made absolute, for example:-

(a) Plaintiff obtained Judgment against Defendant, Plaintiff should not be barred from enjoying the fruits of litigation.

(b) Defendant did not appeal to the Judgment.

(d) There is debt due or accruing due from the Garnishee to the Defendant, and Garnishee has no objections whatsoever to release the amount sought to be garnished to the Plaintiff.

7. If Court grants Garnishee Order Absolute, serve the sealed Garnishee Order Absolute on the Garnishee bank and the Garnishee bank will pay the Plaintiff (or its solicitors) directly.

Civil Law (Amendment) Act 2019

The Civil Law (Amendment) Act 2019 was published in the Gazette on 31 May 2019. There are a few major changes to note:

1. Persons with disabilities - refer to meaning in Persons with Disabilities Act 2008. [1]

2. Previously, if a person has died caused by wrongful act (neglect or default), under s7(2) only parents, spouse and child can claim. Now, it includes "any person with disabilities under the care" of the deceased.

3. Previously, no loss of earnings (after death of person or after personal injury) shall be considered if his age exceeds 55. With the amendment, the age is increased to 60.

4. The upper limit of multiplier for loss of future earnings in a claim for damages (for both loss of dependency and personal injury) is increased to 60.

5. In relation to personal injury, good health before injury is NO LONGER a criteria of assessing loss of earnings, as long as he was working before death.

6. Bereavement is increased to RM30,000 - and now 'spouse', 'parents' and 'child' can claim (previously only spouse can claim if deceased was married, or parents can claim if deceased was under 18 and single).

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[1] “persons with disabilities” include those who have long term physical, mental, intellectual or sensory impairments which in interaction with various barriers may hinder their full and effective participation in society;

First Time in KLHC

So what happened today was that Shermal got a call from pihak atasan, then came back with a list of printing materials with 280+ stuff on it. He threw the whole list to Yew Xian. Yew Xian was supposed to go to Shah Alam High Court with Grace as they were going to arrange some items there. But since Shermal is throwing his whole workload unto Yew Xian, he can't go. So I said perhaps I can help out.  

Then 11.30am came, Grace and I went down to 6th floor, and we saw my master Mr Toi. And he was like, "where are you going Yin Chien?" and I was like shit I forgot to ask my master's permission before I go. So I told him I'm going to SAHC to help Grace arrange some files for the trial tomorrow. And he was like, "Oh, I was thinking of asking you to go court with me this afternoon at 2pm." And so I tried to find a replacement for myself but failed. So in the end Grace went alone, and I went to KLHC with Mr Toi. I feel super bad for Grace for having to do this alone. 

The matter today was a hearing of an interlocutory injunction of GDSP. Basically the dispute between Datuk Lim Chee Wah suing on behalf of his late mother and the 2nd grandchild of the eldest son of Lim Goh Tong, Benjamin Lim, who was given 75% shares for free from his late grandpa. 

So what happened was BL kicked his grandma off the BOD, and is now trying to sell of 29/40 plots of land around Genting that belonged to the family company. What we were trying to argue is that there is a family arrangement that gives rise to quasi partnership, and the lands have special value to the family and damages is not an adequate remedy as the location and circumstances surrounding those lands are unique. 

The other side, represented by Izral & Partnership, were basically saying that LCW has no locus to sue as his late mother's POA did not give him such authority. And in any case, LCW cannot make an affidavit based on what is personal to his mother as it wouldn't have been in his knowledge. 

It's definitely an eye-opening experience. And I'm really grateful that my master was willing to let me tag along to KLHC.

When we got back to the office, the bag that I borrowed from Iris got accidentally locked. And she didn't know her own password. We were dismayed but obviously the problem has to be solved cos Iris is having a court case tomorrow. So me and Michael tried the number combinations one by one (1000 combinations) but it still wouldn't open. Then everyone gave up and were resolved to get one of the Abangs to cut it open the next day. I really felt super bad at this point of time. 

Then I went back down, tried all the numbers again from 1-1-0. And when I reached 1-1-8, it suddenly clicked open! Imagine my excitement! Everybody was saying I should go buy toto hahaha. So problem solved, and the bag was reset to 0-0-0.

I owe Iris a meal for giving her a heart attack! XD

It was an eventful day, but thank God it ended on a positive note.

Land Acquisition Cases

Article 13(1): Accordance with Law

Ng Chin Siu & Sons Rubber Estate Sdn Bhd v Pentadbir Tanah Hilir Perak & Anor 

[2013] MLJU 1590 COURT OF APPEAL (PUTRAJAYA) 

Issue: Form D and E (mandatory procedure under LAA) issued to wrong entity. 

Held: It was of no consequence that the respondents had in fact substantially complied with the essential provisions of the Land Acquisition Act 1960, that the appellant was not prejudiced because it was fully aware of the whole acquisition exercise or that it was open to the appellant to seek the remedy of a higher compensation for the said land. All these do not detract from the fact that the acquisition was not made in accordance with law and thus ipso facto null and void by virtue of Article 13(1) of the Federal Constitution.

Ee Chong Pang & Ors v The Land Administrator Of The District Of Alor Gajah & Anor [2012] MLJU 1366 COURT OF APPEAL (PUTRAJAYA)

Issue: Appellants contended that as a result of the failure of the State Authority to publish in the Gazette Form A, the land acquisition exercise was not carried out in accordance with the law. Thus the land acquisition by the State Authority was contrary to Article 13(1) and should be declared null and void.

Judge's Opinion: In this regard, we are in agreement with the view expressed by Gopal Sri Ram JCA (as he then was) in his dissenting judgment in Ng Kim Moi (P) & Ors v Pentadbir Tanah Daerah, Seremban, Negeri Sembilan Darul Khusus (Negeri Sembilan Township Sdn Bhd & Anor, proposed intervenors) [2004] 3 MLJ 301 where his lordship said (at p. 328):

[74] The draft judgment of my learned brother accepts in entirety the appellants' contention that Form A was never issued and that Form E was never served. However, my learned brother has gone on to hold that issuance of Form A is not mandatory despite the imperative language of s 4(1). With respect, this approach disregards well settled principles of statutory construction. We are here dealing with a statute which is aimed at the prevention of arbitrary escheatment of proprietary rights, the protection of which the supreme law of the Federation guarantees as a fundamental right. To read mandatory provisions in such a statute in a generous and favourable manner towards those whose duty is to ensure their due observance is to condone and promote maladministration in a manner so important as the deprivation of property. It is a message from the judicial arm of the Government to bureaucrats that due compliance with mandatory provisions of the Act will produce no consequences for them. I am therefore unable in the face of compelling authority as I have found and cited in this judgment to accept an ipse dixit based on no authority that compliance with s. 4(1) is not mandatory.

Held: Based on the above judicial authority, the issuance of Form A under section 4(1) of the Act is mandatory and the failure of the State Authority to comply with this mandatory provision can only mean that the land acquisition exercise is not in accordance with the law.

S KULASINGAM & ANOR v COMMISSIONER OF LANDS, FEDERAL TERRITORY & ORS [1982] 1 MLJ 204 

Issue: Tamil Association land to be acquired for building hockey stadium. It was argued that Article 13(1) FC would render any law providing for deprivation of property without a pre-acquisition hearing invalid.

Held: Acquisition could not be impugned on any ground of natural justice since the legislation imposed no obligation for any inquiry and hearing in respect of the acquisition. The legislature can by clear words exclude the principles of natural justice in the absence of specific constitutional guarantees and Article 13(1) in no way vitiates the provisions of the Land Acquisition Act. 

In a Nutshell: Federal Court negatived right to pre-acquisition hearing under the LAA as a matter of natural justice, saying that there is nothing in the legislation imposing any such obligation in contrast to the specific provisions for an inquiry and hearing in respect of the quantum of compensation payable. 

However, MP Jain said that, "Any argument that if one provision of a statute specifically stipulates natural justice and another provision therein is silent, then natural justice is impliedly excluded in the latter case, is now NOT accepted in other common law jurisdictions." See SL Kapoor v Jagmohan AIR 1981 SC 136; Swadeshi Cotton Mills v Union of India AIR 1981 SC 818.

In India, Swadeshi Cotton Mills v Union of India AIR 1981 SC 818, the court observed:

"The audi alteram partem rule ... is a very flexible, malleable and adaptable concept of natural justice. To adjust and harmonize the need for speed and obligation to act fairly, it can be modified and the measure of its application cut short in reasonable proportion to the exigencies of the situation. Thus, in the ultimate analysis, the question (as to what extent and in what measure) this rule of fair hearing will apply at the pre-decisional stage will depend upon the degree of urgency, if any, evident from the facts and circumstances of the particular case."

In Canada, in Nicholson v Haldimand Norfolk Regional Board of Commissioners of Police, a probationary constable in a municipality was dismissed without a hearing. There was a statutory provision requiring hearing only for those who crossed the probationary period, but not for one who was yet on probation. Still, the Supreme Court of Canada ruled that the probationer must be treated ‘fairly’. The consequences of dismissal to the concerned person were serious. The dismissal was thus quashed by the court. The moral of the case is that when a statute provides for hearing in one situation, but not in another, the court can still read the right of hearing in the latter situation on the ground of fairness. 

Also, it is submitted that once the word ‘law’ in art 13(1) is read broadly so as to include natural justice therein, then natural justice becomes a constitutionally-guaranteed procedural safeguard and will have to be implied in every statute falling within the scope of art 13. The Constitution being the supreme law of the land, it will be beyond Parliament to dilute the effect of art 13 and exclude natural justice when a person is being deprived of his property.

Banking Law Past Year Q&A

Discuss the principals, tests, standards, evolution in judicial changes in dishonest assistance to hold a banker liable as constructive trustee.

In the constructive trustee and beneficiary relationship, the bank is liable as a constructive trustee if has express notice about a person’s breach of trust and is involved in the said breach.  

The trust exists without any formality as long as these is a fiduciary relationship between the constructive trustee and the beneficiary’s property. Constructive means in real fact no trust is created. But going to court the court look at the facts and building a trust. The reason the court invokes constructive trust is unconscionability.

The case of Barnes v Addy lays down two heads of liability for constructive trustee: one based on receipt of trust property (knowing receipt) and the other on assisting with knowledge in a dishonest and fraudulent design (knowing assistance). As the question is with regards to dishonest assistance, the answer will focus solely on this topic.

In the case of Rowlandson v National Westminister Bank, a grandmother by will left undated cheques for the benefit of her grandchildren. Somehow one of the trustees (uncle of beneficiaries) transferred the funds into his personal account. The bank is held liable for knowing assistance. If there had only been receipt of cheques, there is no trust responsibility of bank. However, since there is a trust account, bank has fiduciary relationship with the beneficiaries of the account.

Thus the elements of knowing assistance are: existence of trust, dishonesty of trustee, assistance of 3^rd party (bank) and bank’s level of knowledge.

Initially, Baden v Societe Generale identified 5 categories of knowledge subject to much debate.

These 5 categories are

I. Actual knowledge

Ii. Knowledge but for willfully shutting one’s eye

Iii.. knowledge but for willfully failing to inquire when reasonable man would inquire

Iv. Knowledge of circumstances that would indicate breach to reasonable man

V. Knowledge that would put honest and reasonable man on inquiry

123 is actual knowledge, while 45 is constructive notice.

In Selangor United Rubber v Craddock, the bank gave a loan to the company to buy its own shares. This is prohibited under Companies Act 1965. Bank clerk was present when handed the loan cheque but he did not know what was happening. Even though it did not have actual knowledge of Craddock’s fraud, the bank had failed to make inquiry as a prudent banker would have. Applying the constructive notice, the court held that the bank was liable for knowing assistance. This is a harsher test for bankers.

Ungoed Thomas J held that imposing liability on constructive trustee not only involve actual but also constructive knowledge. Court applied 4 5 of the categories of knowledge. A similar situation existed in Karak Rubber Co Ltd.

Later, in Belmont Finance v Williams Furniture, the court criticized Selangor United Rubber, and said that for a constructive trustee to be liable, he must know of the fraudulent design. The level of knowledge required is 123 in Baden (actual knowledge).

This is brought one step further in Lipkin Gorman v Karpnale. In this case, a partner of a firm had drawn money from client’s account and used it for gambling. The branch manager was aware that the partner had been gambling and had accounts in other banks. He recorded notes of meeting with the partner and told him that he did not believe the partner’s gambling activities were controlled activity. At one time, draft payable to firm fell in the hands of partner, and he endorsed it direct to the club for gambling. Pf sought to recover the money from the bank and the club. It was held that for one to be held liable for knowing assistance, there must be 123 + dishonesty or conscious impropriety or lack of probity on part of the bank.

However, things changed in Royal Brunei Airlines v Philip Tan. In this case,  appellant appointed Borneo Leisure Travel Sdn Bhd (BLT) to act as its general travel agent for the sale of passenger and cargo transportation. BLT was supposed to account to the airline all the amounts received from the sale of tickets. One Mr Tan = the managing director and principal shareholder of BLT, permitted the use of money for its ordinary purposes, paying salaries, overheads and other expenses and keeping down its bank overdraft. BLT went into arrears and proved to be insolvent, airline brought action against respondent to recover unpaid money.

Principles that arise from this case are:

I. Dishonesty is a necessary ingredient of accessory liability - use objective std - see the circumstances known to the 3P at the time, look at personal attributes of 3P (experience and intelligence) - other banks same scenario, dishonest or not?

Ii. Not necessary to show trustee dishonest - depart from Belmont case, as trustee will be liable in any case even if acted innocently.

Iii. ‘knowingly’ be avoided - Baden’s 5 point scale best forgotten

Twinsectra v Yardley used a combined test, and followed in CIMB Bank Bhd v Maybank Trustees Bhd and other appeals

Lord Hutton (Twinsectra case) - Combined test :

Combination of objective test and subjective test,

1) Defendant's conduct was dishonest by the ordinary standards of reasonable and honest man

2) He himself realised that by those standards his conduct was dishonest

However, later Barlow Clowe v Eurotrust restated the objective test in Royal Brunei Airlines. The court held that a solicitor who helped his client commit a breach of trust is dishonest, notwithstanding that he himself did not realize that others would have considered his acts as dishonest. He was living by a different moral code, who took exaggerated notion of dutiful service to his client. The key passage in judgment said that dishonest assistance requires a dishonest state of mind on the person who assisted the breach. This dishonest state of mind can be knowledge that the transaction is one he cannot participate in, or suspicion combined with a conscious decision not to make an inquiry. Thus, dishonest state of mind is subjective, but the STANDARD BY WHICH THE COURT DECIDES WHETHER IT IS DISHONEST IS OBJECTIVE.

Where Goods Perish In Transit

Loan Agreement Cum Assignment (15 marks)

Discuss the legal position of loan agreements cum assignments, and any problems which may arise in relation thereto, with reference to the relevant case law.

What is LACA?
LACA usually arises where there is no separate individual title yet, and a financial institution cannot issue a charge, so it gives borrower a loan on the execution of LACA.

Issues:

#1 WHETHER ABSOLUTE OR CHARGE ONLY?

S4(3) Civil Law Act states that for a loan to constitute LACA:                                                               

• the assignment must be absolute 

Nouvau Mont Dor (M) Sdn Bhd v Faber Development Sdn Bhd
-          whether or not an agreement is an absolute one, not purporting to be by way of charge only, within the meaning of s 4(3) of the CLA
-          gather from 4 corners of the instrument itself

• the assignment must be in writing & signed by the assignor
• assignee must give notice to the debtor
• not purporting by the way of charge

If by way of charge, assignor qualified to sue housing developer.
But if absolute assignment, problematic for the buyer if developer defaulted.

#2 WHETHER ASSIGNOR HAS RIGHTS TO SUE?

Homebuyer buys property from developer, no individual separate title yet. Bank would want them to execute deed of assignment. Assign rights of purchaser under SPA to the bank. Equitable interest, but is contractual right. Because no separate individual title, purchaser cannot create a charge in favour of bank.

Although the purchaser signed SPA, rights invested in bank. Confer power of attorney on the lender so that lender given power to deal with property on your behalf, able to sell property on default of repayment. That’s why issue arise when default on housing developer, does purchaser still have locus standi to bring case against developer without concurrence of bank?

Does assignor have right to sue developer in case of developer late delivery/faulty workmanship?

• If absolute assignment under s4(3), only the assignee can sue the developer/debtor, not the assignor (cos already assigned all his rights and has no more right to sue).
• Assignor has to persuade the assignee to personally sue the developer or sue in the name of the assignor. In most cases, the assignee bank will be reluctant to do so and it is always a time-consuming process to get the assignee to agree to this course of action, much to the advantage of the developer
• However, Look at Housing Developer (Control and Licensing) Amendment Act - purchaser has right to sue developer if default unless in assignment expressly stated need to get consent of assignee.
• FC in Nouvau Mont Dor (M) Sdn Bhd v Faber Development Sdn Bhd [1984] 2 MLJ 268 and Hipparion (M) Sdn Bhd v Chung Khiaw Bank Ltd [1989] 2 MLJ 149 held: clause in question is absolute assignment clause under s 4(3) CLA, notwithstanding would later be converted into a legal charge under the National Land Code 1965 (“NLC”) upon issuance of the individual title.
• unfair to the assignor if the assignee refuses to sue the developer
• especially when thousands of apartment and condominium units without individual strata titles were sold in Malaysia, and loans were secured by LACA similar to the one in Nouvau Mont Dor
• takes years before strata titles are issued when the assignments are then converted into a legal charge under the NLC which would then confer the assignor now a chargor the right to have direct recourse against the developer.

What if assignor default in loan repayment?

• absolute assignee bank can dispose of the property by way of assignment to a third party with notice to the developer and without the concurrence of the assignor borrower – assignor rights not guaranteed

What about assignment given by company?

• Requires registration as a charge under s 108(3)(e) of the Companies Act 1965 because it is an equitable mortgage (see Chuah Eng Khong v Malayan Banking Berhad [1998] 3 MLJ 97); otherwise the charge will be void against the liquidator and any creditor of the assignor. (s 108(1) Companies Act 1965.)

#3 WHETHER SHOULD BE TREATED AS EQUITABLE CHARGE / EQUITABLE MORTGAGE?

Should not be treated as equitable charge. Difference lies in document of title.

FC: there was title in Arunasalam Chetty (equitable charge), in Chuah Eng Kong & Phileo - no title - mortgage - no legal estate - cannot have said to have acquired equitable charge, where there is title, and it is possible to create a charge.

Chuah Eng Kong v Malayan Banking - LACA under which a borrower assigns absolutely his rights, title and interest under SPA is equitable mortgage. Different from an equitable charge where IDT has already been deposited with the lender.

Malayan Banking v Zahari Ahmad - NLC does not prohibit the creation of equitable charges and based on a body of authorities, Malaysia land law recognize equitable charges. In this case, the loan agreement and the deed of assignment between the parties created an equitable charge both in form and substance; the bank was an equitable charge as the IDT was yet to be issued.

FINALLY。。。

Phileo Allied Bank v Bupinder Singh (FC) - described as equitable mortgage

Court should give effect to contract between parties, in relation to whether lender needs to get an order from court to sell the property. By POA, assignee has been given the power to handle the property, without need to get an order from court – can sell by private treaty.

LACA not possible to create charge yet cos no issuance of IDT, so should be treated as equitable mortgage, bank only acquire equitable interest, no title.

In conclusion, the latest position of LACA under the Malaysian land law is being recognised as an equitable mortgage but ONLY enforceable contractually. Under an absolute assignment, the rights, title and interest of the assignor in respect of the property under the sale and purchase agreement are transferred to the assignee.

Thus, the assignee is entitled to do anything once notice of default and notice of remedy has been issued to the assignor, including selling the property without obtaining a judicial order. However, by not requiring the sale to be judicially endorsed, the interests of the borrower would be left unprotected in the event of a default as the courts can no longer protect the borrower from any wrongful sale of the land.