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DEBT RECOVERY THROUGH THE COURTS

By:


Bryan Lui (Co-Managing Partner) [bryanlui@luibhullar.com]


Harneshpal Karamjit Singh (Co-Managing Partner) [harnesh@luibhullar.com]


Chandni Anantha Krishnan (Partner) [chandni@luibhullar.com]



Let's start by saying that we at Lui Bhullar make an effort to avoid litigation also known as the court process when it comes to Debt Recovery however we have to acknowledge the reality that litigations are unavoidable at times.


Is there a"minimum" amount of money owed before a letter of demand and/or legal action can be taken?


The answer is NO. It is your money and you have the right to have it paid to you.


Is there a time limit?


Yes, 6 years from the time the money is owed to you.


The suggested first step at Lui Bhullar would be to send a letter of demand at the earliest practical time. Although it is not a compulsory step, it is a good practice to do so to show that the creditor has taken all reasonable steps to recover its money without using the court process.


The response of the Debtor is a good indication of whether it is viable to pursue the debt recovery via the courts. Usually, if the ongoing business relationship between parties is of value, the letter of demand will be taken seriously and parties ought to avoid escalating the matter if they could pay.


Now, what if the letter of demand is ignored?


The creditor would now have to decide whether it is commercially viable to pursue the debt through the courts. The practice at Lui Bhullar would be to do some background searches on the debtor and determine whether they are able to pay or whether they have outstanding debts or even whether they have receivables that could be quantified in monetary terms.


What if I cannot locate the debtor?


You could pursue the debt through the courts. The Courts in Malaysia have the power to summon the debtor to examine their financial status. However, do keep in mind whether it is commercially viable to do so.


Our advice is don't throw good money after bad money.


If the factors above indicate that a court process is a viable option, then the next step would be to pass all relevant documents to your lawyer to enable them to draft the statement of claim which will be filed in court. The creditor will be referred to as the Plaintiff and the debtor will be referred to as the Defendant.


The court in which your claim will be filed will be dependent on the amount of money involved, such as below:


  • Up to RM5,000.00 : Magistrates Court / Small Claim Procedure (by Individuals only)

  • Up to RM100,000.00 : Magistrates Court (Individuals and Companies)

  • Up to RM1,000,000.00 : Sessions Court (Individuals and Companies)

  • Above RM1,000,000.00 : High Court (Individuals and Companies)


The defendant will then be served the statement of claim and writ in which they have to respond and/or enter an appearance within 14 days. Should Defendant fail to respond within the given time, Plaintiff can then obtain a Judgement In Default.


Judgment In Default is basically the court granting the Plaintiff all that they ask for without them needing to prove their case.


In the absence of a Judgement in Default, where the Defendant files his/her appearance, you still have the option of filing a Summary Judgement. A Summary Judgement is basically a time and cost-saving method of getting a judgment however this only works if the court is of the opinion that the Debtor/ Defendant does not have a sustainable defense.


Taking away the possibility of a Judgement in default and Summary Judgement, you will now have to proceed to trial wherein witnesses will be called to testify.


After getting a judgment out of the whole process, let's discuss enforcement. Enforcement is basically the way to give effect to the judgment you have painstakingly obtained through the courts.


Amongst the different ways,


  • Garnishee Proceedings – an order for monies and receivables belonging to the debtor held with any third parties including the banks to be paid directly to you

  • Judgment Debtor Summons – an order for the debtor to explain its failure to repay the debts and abide by the court judgment.

  • Writ of Seizure and Sale – a writ to have the properties of the debtor to be sold via an auction to repay the debt


Right, we cannot end the discussion without bringing up the possibility of a Settlement Offer. This can happen at any stage of the whole process, however, you would need to consider a few factors.


  • Are there any methods of enforcement should the debtor fail to pay?

  • How much would this save you in terms of time and cost?

  • How much would you need to compromise?

  • Is this a tactic to buy time?

  • When will you be paid?

  • Will this affect your other receivables and business operations?



On condition that most if not all the boxes are ticked in a positive manner, by all means, you should accept the settlement offer preferably in the presence of a lawyer.



WHAT CAN LUI & BHULLAR DO FOR YOU?


Our services range from high-volume, pre-legal debt collection to every aspect of litigation and insolvency action. We regularly advise on:


  • Pre-legal Collection includes lettering, telephone debt collection, and trace and collect

  • Legal Collection* including Court proceedings, mediation, enforcement and negotiation

  • Payment Agreements include installment monitoring, chasing defaults, and regular installment assessments

  • Insolvency Action* includes bankruptcy, winding up, advice on debtor’s petitions

  • General Debt Recovery Advice including Pre-Action Debt recovery, compliance, process review, credit control, and credit management advice


Now that you have read the summary of what we have to say to our clients in terms of debt recovery, do not hesitate to drop us a message or call should you have further questions.


We are also open to your proposals should you have any.


Do get in touch with us at admin@luibhullar.com for any queries regarding this Write-Up.


Lui Bhullar's Official WhatsApp: +60143000960



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