Malaysia - Dispute Resolution Guide 2016
Legal News & Analysis – Asia Pacific - Malaysia - Dispute Resolution
13 January, 2016
Malaysia’s legal system comprises laws which have emerged from three significant periods in Malaysian history dating from the Malacca Sultanate, to the spread of Islam to Southeast Asia, and thereafter the absorption into the indigenous culture of British colonial rule which introduced a constitutional government and the common law.
The Malaysian legal system law can be classified into two general categories: written and unwritten law. “Unwritten law” refers to laws which are not enacted by the legislature and which are not found in either the federal or state constitutions. This category of law derives from cases decided by the courts and from the application of local customs, which is otherwise known as “common law.” “Written law” refers to the laws contained in either the federal or state constitutions, or codified or enacted as statutory legislation.
Islamic law, which is only applicable to Muslims, is enacted under the federal constitution. The state legislature has jurisdiction and is permitted to make (Islamic) laws pertaining to persons professing the religion of Islam. Such laws are administered by a separate court system, the Syariah Courts. The state legislature also has jurisdiction over the constitution, organization and procedure of the Syariah Courts.
The written laws are much influenced by English laws as the Malaysian legal system retains many characteristics of the English legal system. However, these laws have also been influenced by Australian and Indian laws.
Since Malaysia gained its independence in 1957, the application of the laws of England, although still frequently referred to in Malaysia, has been conditional and subject to limitations. These limitations are set out in Section 3(1) of the Civil Law Act 1956, which provides that “the said common law, rules of equity and statutes of general application shall be applied so far only as the circumstances of the States of Malaysia and their respective inhabitants permit and subject to such qualifications as local circumstances render necessary.”
Therefore, the laws of England may only be applied when there is a lacuna in the Malaysian statutes. In that event, the relevant English laws which are suitable and appropriate to the local circumstances will be applied.
The Malaysian court structure is also greatly influenced by the English court system, and is divided into the Subordinate Courts and the Superior Courts. The Subordinate Courts consist of the Magistrates’ Court, which deals with minor criminal and civil cases, and the Sessions Courts, the highest of the Subordinate Courts.
The Superior Courts comprise the High Court, the Court of Appeal and the Federal Court (which is the highest court in the land).
The Small Claims Tribunals
The Small Claims Tribunals within the Magistrate’s Court are available for claims which do not exceed MYR5,000. This tribunal is intended to simplify the collection of small debts in an informal atmosphere. Legal representation by advocates and solicitor is not allowed in the Small Claims Tribunal and the parties would have to represent themselves. As companies are required by law to be represented by solicitors in all court proceedings, the Small Claims Tribunal does not entertain claims by or against companies.
Claims are commenced by completing the prescribed form, which is then filed with the tribunal. The claimant is required to state the amount of the claim and the particulars of the claim in the prescribed form, including the relevant dates and the basis of the claim. The trial is held in a relaxed and informal manner. Although the normal rules of evidence do apply, the tribunal is unlikely to allow technical procedural arguments. The trial is normally conducted in the Malay language before a magistrate. If necessary, the parties may apply for the proceedings to be conducted in English, or for an interpreter to be present for testimony or submissions to be delivered in the Chinese language or in Tamil. At the end of the trial the magistrate makes an order, which stands as an enforceable judgment.
The Subordinate Courts are divided into two courts; namely the Magistrate’s Court and the Sessions Court. These are the lower courts that have jurisdiction to deal with minor civil and criminal cases. Appeals from decisions of the Subordinate Courts are made to the High Court.
The Magistrate’s Court
The Magistrate’s Courts deal with the vast majority of cases, both civil and criminal, and are situated in almost all major towns in Malaysia. A magistrate’s court is presided over by a magistrate, and has jurisdiction to deal with civil cases where the amount in dispute or the value of the subject matter does not exceed MYR100,000; and generally all criminal matters for which the maximum punishment does not exceed 10 years’ imprisonment or is punishable with a fine not exceeding MYR10,000. However, it is to be noted that a magistrate may not impose a term of imprisonment exceeding five years.
The Sessions Court
The Sessions Court, presided over by a judge, is the highest of the Subordinate Courts. A Sessions Court may hear any civil matters where the amount in dispute or the value of the subject matter does not exceed MYR1,000,000 and has unlimited monetary jurisdiction in respect of motor vehicle accidents, landlord/tenant disputes and distress actions. This court has jurisdiction to try all criminal offenses except those punishable with death.
The High Court
The jurisdiction of the High Court is original, appellate and supervisory.
In the exercise of its original jurisdiction, it has unlimited criminal and civil powers. Any civil matter that cannot be determined by the Subordinate Courts is heard before the High Court. In criminal cases, however, save for offenses punishable by death, no case may be brought to the High Court unless an offender has been properly committed for trial after a preliminary hearing in the Magistrate’s or Sessions Court.
There are two High Courts of coordinate jurisdiction and status in Malaysia: the High Court of Malaya and the High Court of Sabah and Sarawak. These High Courts have also established other branches of the High Court in the different states of the country, which have local jurisdiction. Each High Court branch has jurisdiction where:
(a) the cause of action arose; or
(b) the defendant or one of the defendants resides or has his place of business; or
(c) the facts on which the proceedings are based exist or are alleged to have occurred; or
(d) any land the ownership of which is disputed is situated within the local jurisdiction of the Court.
The High Court of Malaya in Kuala Lumpur is further organized into the following divisions:
(a) commercial division;
(b) appellate and special powers division; (c) civil division; and
(d) criminal division.
In the exercise of its appellate jurisdiction, the High Court hears appeals from the Magistrate’s and Sessions Courts within its own jurisdiction.
In recent years, specialist courts have also been established in the Kuala Lumpur High Court for Islamic banking (Mualamat), intellectual property, admiralty and corruption matters and the New Commercial Courts (NCC) and New Civil Courts (NCvC) nationwide. Under the tracking system implemented nationwide, cases are now assigned to either the “A” track courts which deal with affidavit-based motions and applications for the “T” track courts, which deal exclusively with trials. No longer attached to a particular judge or court, cases go back into a pool after each stage of proceedings.
The Court of Appeal
The Court of Appeal has jurisdiction to hear and determine any appeal against any High Court decision on criminal matters. It also has the jurisdiction to hear and determine civil appeals where the amount of the subject matter of the claim is not less than MYR250,000, except with the leave of the Court of Appeal. This power extends to hearing appeals from any judgment or order of the High Court, whether made in the exercise of its original or its appellate jurisdiction. The Court of Appeal is the second-highest court in Malaysia and is presided over by three Court of Appeal judges.
The Federal Court
The Federal Court is the highest court in Malaysia. All proceedings are conducted by at least three Federal Court judges. The Federal Court has three jurisdictions — original, consultative and appellate — but it does not cover those matters under the jurisdiction of the Syariah Court. The Federal Court’s original jurisdiction allows it the exclusive power to deal with constitutional issues raised under Article 128(1) and (2) of the Federal Constitution, to determine whether a federal or state law is invalid. Its consultative jurisdiction allows it to determine any question referred to it by the King. The Federal Court also has the jurisdiction to hear civil and criminal appeals from the Court of Appeal. However, appeals to the Federal Court are not as of right; leave of the Federal Court is required.
The Special Court
The Special Court was established in 1993 and is provided for under Article 182 of the Federal Constitution. The Special Court hears all offenses committed by the monarchical heads of the component states of the Federation of Malaya, including His Majesty the Yang Di Pertuan Agong and all civil cases brought by or against them. It is chaired by the Chief Justice of the Federal Court who is assisted by four other members, namely the two chief judges of the respective High Courts and two other persons appointed by the Conference of Rulers.
The Industrial Court
The Industrial Court is an arbitration tribunal and is not regarded as a civil court. The Industrial Court is constituted and empowered by the Industrial Relations Act 1967. The function of the Industrial Court is to arbitrate disputes between employers and employees arising from alleged unjustified dismissals in which the employee seeks to claim for reinstatement or damages in lieu of reinstatement. An award by the Industrial Court will be enforceable in the same manner as a court order. Decisions from the Industrial Court may be quashed by way of an application for certiorari to the High Court.
The Labor Court is an administrative tribunal primarily established to resolve disputes between employers and employees relating to breaches of the terms of employment contract(s), including the payment of wages and other issues arising under the Employment Act and its subsidiary regulations. The decisions of a Labor Court are not final and may be appealed to the High Court. Any employee who wishes to bring the dispute to the Labor Court must lodge a complaint to the Director General of Labor within sixty days from the date of the act(s) giving rise to the claim.
The Syariah Court only hears matters pertaining to Islamic law and family law of persons professing the religion of Islam, including the Islamic law relating to succession, testate and intestate. However, the Syariah Court is not allowed to exercise jurisdiction over any offense punishable with imprisonment for a term exceeding three years and/or any fine exceeding MYR5,000, or whipping exceeding six strokes, or any combination thereof. The Syariah Court is not open to all advocates and solicitors of Malaysia. The court admits only Syarie lawyers, who are persons deemed to have sufficient knowledge of Islamic law.
The Tribunal for Consumer Claims
The Tribunal for Consumer Claims only hears matters affecting consumers. It may hear matters where the amount of the dispute does not exceed MYR25,000. However, parties are allowed to bring the dispute to the tribunal notwithstanding that it exceeds the monetary limits of the tribunal, if an agreement is made between the parties in writing consenting to such dispute being adjudicated by the tribunal. The tribunal cannot hear matters concerning land, disputes of entitlement under a will or settlement, and goodwill and trade disputes concerning trade secrets or intellectual property. The tribunal’s decision is final and binding and will be deemed a decision of a Magistrate’s Court, and can be enforced accordingly.
The Tribunal for Homebuyer Claims
The Tribunal for Homebuyer Claims was formed under the Housing Developers (Control and Licensing) (Amendment) Act 2002 to hear complaints by purchasers against developers or a first buyer of the property. Purchasers who signed their sale and purchase agreements on or after 1 December 2002 can now circumvent the usually protracted and costly court process by filing their claims with the tribunal for a nominal fee of MYR10. Jurisdiction of the tribunal is limited to claims where the total amount claimed does not exceed MYR50,000, unless both parties agree otherwise in writing.
The jurisdictional powers of the court are determined principally by reference to the place the cause of action arose; the place where defendant (or one of the defendants) resides or has his business; the place where the events on which the proceedings are based exist or are alleged to have occurred, or in the interests of justice. If the prospective defendant resides or has its place of business outside Malaysia, leave of court is required to serve him outside jurisdiction. The grant of leave is discretionary, and the courts will in particular consider the jurisdiction in which the dispute is most appropriately to be tried, in the interest of all parties and the ends of justice.
Language and the Courts
All proceedings in the courts are carried out in the national language, Malay. All documents filed must also be written in the Malay language, although in practice most legal practitioners tend to file copies of any particular document in the Malay language with an English translation. It is quite common that upon oral application by counsel, the judges may indulge practitioners who request permission to speak in English.
There has been an introduction of e-courts equipped with computer recording transcript (CRT) system to facilitate speedier disposal of trials. Judges can now focus on just listening to the evidence without judges and counsels having to take down notes of proceedings manually. The CRT system also ensures that no evidence is lost due to selective transcription of notes or paraphrasing by note-takers.
Further, there is a queue management system (QMS) with self-service and user-friendly kiosks where lawyers can key in their case numbers and record their attendance. With the use of QMS, there is computerization of case registration, and lawyers can now wait for an electronic call-up of their cases.
Aside from that, lawyers also have the option of conducting case managements with court registrars by telephone conference now, though the most recent development was in March 2011, when the pilot project on e-filing was introduced. Through e-filing, lawyers are able to upload their documents and file them online, with service kiosks installed at various locations throughout Malaysia to facilitate e-filing of court documents destined for any court, even interstate.
A practicing lawyer in Malaysia is known as an advocate and solicitor, although some specialize in advocacy. There is no division of the legal profession in Malaysia.
Advocates and solicitors have exclusive rights of audience in court. Their conduct and, to some extent, their remuneration are governed by the Legal Profession Act 1976 (LPA).
All advocates and solicitors are members of the Malaysian Bar and are answerable for their conduct to the Bar Council. Advocates and solicitors owe legal and professional duties not only to their clients but also to the courts to act fairly and honestly. The Bar Council is established for the proper management of the affairs of the Malaysian Bar, as well as to ensure its members comply with the LPA.
All advocates and solicitors have rights of audience before all courts except the Small Claims Tribunal, the Penghulu’s Court and the Syariah Courts. For rights of audience before the Syariah Courts, advocates and solicitors must obtain a separate qualification.
Foreign lawyers are generally not granted rights of audience. There are, however, exceptions provided in Section 28A of the LPA whereby the attorney general may issue a special certificate for admission of any qualified foreign lawyer as an advocate and solicitor of the High Court of Malaya and in Section 18 of the LPA whereby the court may admit a foreign lawyer to serve as co-counsel if that foreign lawyer is a person who, if he was a citizen of or a permanent resident in Malaysia, would be eligible to be admitted as an advocate and solicitor of the High Court. Further conditions are that:
(a) for the purpose of that particular case the lawyer must have, in the opinion of the court, special qualifications or experience of a nature not otherwise available amongst advocates and solicitors in Malaysia; and
(b) he has been instructed by an advocate and solicitor in Malaysia.
Procedure for Claims
Commencement of Proceedings
The plaintiff commences an action by issuing an originating process such as a writ of summons or an originating summons, containing details of the parties and a brief statement of the plaintiff’s claim. The mode of commencing an action depends on the nature of the claim and the relief sought. The Rules of Court 2012 sets down the procedure for the conduct of proceedings commenced at the High Court and Subordinate Courts.
When the action is begun by a writ at the High Court level, a statement of claim which sets out concisely the material facts supporting the plaintiff’s cause of action may either be attached to the writ when it is served to the defendant or within 14 days from the date of service of the writ.
A High Court writ must be served on the defendant within six months from its date of issuance by the registry of the High Court, either by personal service or by an AR registered post. Where such modes of service cannot be effected, and upon application by the plaintiff, the court may order substituted service of the writ, usually by means of advertisement in the mainstream local newspapers and posting at the court notice boards. A defendant residing out of jurisdiction may only be served with leave of court.
Notice of Intention to Defend
Where the defendant has been duly served with a writ, the defendant has 14 days (depending on the defendant’s place of business/residence) after the service of the writ to give notice of intention to defend and enter an appearance to the suit, failing which, the plaintiff will be at liberty to obtain judgment in default of appearance. The defendant can at any time apply to have this judgment in default set aside. For service out of jurisdiction, the defendant would usually be given a reasonable period of time (usually stipulated as
21 days) to enter an appearance.
If the defendant wishes to challenge the jurisdiction of the court from which the writ was issued or if there are any irregularities in the writ and/or its service, the defendant may apply for leave to enter a conditional appearance and thereafter apply to the court to set aside the writ or for any other appropriate relief.
If an unconditional appearance is entered, the defendant will have 14 days from the expiry of the time limited for entry of appearance to file and serve a defense (and counterclaim, if any). If the defendant fails to do so, the plaintiff may seek judgment in default of a defense against the defendant. It should be noted that where both parties are represented by a solicitors, rules of etiquette require the plaintiff’s solicitors to give seven days’ notice to the defendant’s solicitors before any attempt is made to enter judgment in default of a defense against the defendant.
After a defense is filed, the plaintiff is entitled to file a reply to the defense (and defense to counterclaim, if applicable) within 14 days from the date of service of the defense.
After the defendant has given notice of his intention to defend the claim, and if there appears to be no arguable defense to the action and no triable issues, the plaintiff may apply to the court for summary judgment. This application is made by a notice of application supported by an affidavit verifying the facts of the claim and deposing to a belief that there is no arguable defense and that there are no triable issues.
The onus is on the defendant to show that there are issues which are more appropriately determined after a full trial (e.g., where there exists a dispute of facts, equivocal documentary evidence or difficult questions of law). If the defendant fails to raise any “triable issues,” the court may, at its discretion, summarily grant final judgment for the plaintiff. Applications may also be made for the court to determine a question of law or construction of a document, on a summary basis, if this will finally determine the issues in dispute between the parties.
These summary procedures may take between six and 12 months from the commencement of the action to complete, which is considerably quicker than a full trial. Even if the application fails, the plaintiff would still be entitled to proceed with its claim in a full trial.
The statements of claim, defence and reply (counterclaim and defence to counterclaim) are called pleadings. The system of pleadings amounts to a formal exchange of factual allegations aimed at defining the issues of dispute between the parties. Every pleading must contain no more than the material facts on which the party relies.
The court has wide powers to allow the amendment of pleadings at any stage, and to order the provision of particulars of pleadings where insufficient details have been provided.
Admissions and Interrogatories
A party may either formally admit in its pleadings, or in writing, to the veracity of facts alleged by its opponent.
Interrogatories are questions answerable on oath which a party may, with the leave of the court, serve on its opponent. In the first instance the answers are given by affidavit but if the party interrogated omits to answer some of the questions or gives insufficient answers, the court may order a further answer to be given either by affidavit or by oral examination. Although the interrogatories proposed must be relevant to the action, the definition of “relevance” is very wide .The questions may relate to any matter which goes to support the interrogator’s case and/or to impeach or destroy his opponent’s case. Thus, answering interrogatories is another form of discovery, and is sometimes described as “discovery of facts.”
Pre-Trial Case Management
At any time before any action or proceedings are tried, the court may direct parties to attend a pre-trial case management relating to the matters arising in the action or proceedings. During these sessions, the court would assess the nature of the dispute and give specific directions and time frames for the parties to comply with in order to narrow the issues to be tried and ensure that a trial is conducted as efficiently as possible. The Rules of Court 2012 sets out an inexhaustive list of directions which the courts may make to secure the just, expeditious and economical disposal of the action or proceedings.
For example, it is the legal duty of each party and its solicitor to make full disclosure of those documents that are or have been in his possession or control, which are relevant to the issues in the action, and on which the party making disclosure will rely, or which would lead the opponent to a relevant course of inquiry, even if they are helpful to the opponent’s case. This process of discovery normally takes place pursuant to a direction given by the judge at case management to file common agreed and disputed bundles and is achieved by an exchange of bundles of documents between the parties.
Privileged documents are exempt from disclosure. For example, communications with legal advisers for the purpose of obtaining legal advice are privileged. Documents tending to incriminate a party are also privileged. Certain communications are privileged when litigation was contemplated or pending (e.g., between solicitors and non- professional agents or a third party).
Documents containing matters confidential to a party and not otherwise privileged must be disclosed, but the court may order a controlled method of disclosure to protect confidentiality.
Discovery is an important part of litigation procedure, and its extent and expense in commercial actions can be considerable. Settlement of actions often occurs at this stage both for this reason and because the discovery process can bring to light information which may have an important bearing on the strengths and weaknesses of the parties’ positions.
Where discovery by a party is considered inadequate, application for further or more specific discovery may be made to the court. Failure to comply with an order for discovery can ultimately result in dismissal of the action or striking out of the defense. The judge would usually direct the counsel for the parties to prepare statements of agreed facts and issues to be tried as well as witness statements during case management. Depending on the expediency of and level of cooperation between solicitors for the parties, pre-trial directions usually take between two and three case management sessions which may span a period of up to six months from the close of pleadings.
Trial dates will only be fixed once the judge is satisfied that all pre- trial directions given have been complied with and are subject to availability of free court dates.
It is worth noting that in an effort to clear a persistent backlog of cases in the courts, a new system which is known as management judge unit (MJU) was implemented to provide a system of case management not only pre-trial, but for all actions and interlocutory applications filed in court. Each division — namely the civil, commercial and criminal units — are now headed by a managing judge appointed by the chief justice. The respective judges will then oversees his/her unit in each court (High Courts and subordinate courts), and is assisted by a pool of registrars.
Discovery Prior to the Proceedings
Generally, the courts have the discretion to order discovery of documents prior to pleadings. This, however, would only be done in very rare or exceptional circumstances. Although the authorities have not stated specific circumstances when early discovery will be allowed, they have indicated that where it is essential to meet the objectives of certain interlocutory orders, it will be allowed.
Discovery from Non-parties
Discovery can also be sought prior to commencement of proceedings from non-parties to the dispute. Traditionally, this order is sought when it is necessary to obtain information to ascertain the identity of a potential defendant, so that proceedings may be brought against him.
Production of Business Books and Bankers’ Books
The court can order the production of business books or copies thereof for inspection. A party may apply to the court for an order allowing him to “inspect and take copies of any entries in a banker’s book for any purposes of the proceedings.” The court may so order, whether or not the bank or any other party is summoned.
Production of Computer Evidence
Despite its emerging trend and importance, there are still no established rules governing the discovery and production of electronic evidence in court proceedings. The general practice is for electronic evidence to be produced through traditional means of documentary printouts or transcripts, and the Malaysian Evidence Act 1950 has been amended to set out rules governing the admissibility of such evidence.
Documents produced by a computer or a statement contained in such document are admissible as evidence of any fact stated if the document was produced by the computer in the course of its ordinary use, whether or not the person tendering the same is the maker of such document or statement. In the event of challenge, however, the party intending to adduce such evidence may be required to tender a certificate duly executed by a person who either before or after the production of the document by the computer was responsible for the management of the operation of that computer, or for the conduct of the activities for which that computer was used.
By providing such a certificate, it is presumed that the computer producing the evidence is in good working order and was operating properly in all respects.
Notwithstanding the relative ease by which computer-generated evidence may be admitted in court proceedings, the court may still draw any reasonable inference from circumstances relating to the document to estimate the weight, if any, to be attached.
Withdrawal and Discontinuance
An action may in most circumstances be withdrawn or discontinued unilaterally by the plaintiff. However, the plaintiff may have to bear the legal costs of the defendant if the action is withdrawn or discontinued at a later stage of the proceedings. Withdrawal or discontinuance is not a bar to a subsequent action on the same cause of action, unless the withdrawal or discontinuance has been applied “with no liberty to file afresh.”
Interim Remedies Interlocutory Injunctions
Interlocutory injunctions may be sought to either restrain the defendant from doing an act, to compel the defendant to take certain steps or to preserve the status quo until the rights of the parties have been finally determined at trial. Such interim remedies are particularly important due to the protracted court process whereby an action may take up to two years to reach trial stage.
Applications are made by way of a notice of application supported by an affidavit and may be made either ex parte or inter partes. An ex parte injunction rder must be followed by an inter partes hearing within 21 days, after which the ex parte order will automatically lapse. Generally, the following must be established by the applicant in order to obtain an interlocutory injunction:
(a) that there is a serious question to be tried;
(b) that damages would not be adequate to compensate the applicant if the injunction is not granted; and
(c) that on a balance of convenience, an injunction ought to be granted
Mareva injunctions are granted to prevent the removal or dissipation of a defendant’s assets before the satisfaction of any potential court order/judgment in favor of the plaintiff. Alternatively, the injunction may compel the defendant to provide security for the plaintiff’s claim. This form of relief may even be available to enforce an arbitration award or an order for costs. Third parties such as banks who have notice of a Mareva injunction order are also bound by it.
An applicant must establish four basic requirements in his application for a Mareva injunction:
(a) that he has a good arguable case;
(b) that the defendant has assets within the jurisdiction; and
(c) that there is a real risk that the assets may be dissipated.
It should be noted that very strong evidence is required before a judge will be prepared to make such an order due to its severe consequences for the defendant. A plaintiff is also obliged to make full and frank disclosure of all material facts, to give an undertaking to pay damages to the defendant as a result of the injunction if it is ultimately found to have been wrongly ordered, and similarly to give an undertaking to pay any expenses reasonably incurred by third parties, such as banks, as a result of the injunction.
Anton Piller Order
An Anton Piller order is granted where there is a grave danger the defendant will dispose of or destroy incriminating evidence in the defendant’s possession or control before trial, and its continued existence is necessary for the plaintiff’s case. This order is usually made ex parte and enables the plaintiff and/or its representatives to enter the defendant’s premises to search for, inspect and seize or make copies of materials so that they may be preserved until trial.
Because of the draconian nature of the order, the courts have indicated that it will only be granted where it is “essential” to do so in the interests of justice, and the applicant must prove:
(a) an extremely strong prima facie case;
(b) the damage, actual or potential, must be very serious for the applicant;
(c) there is clear evidence that the defendants have in their possession incriminating documents/things;
(d) there is a real possibility that they may destroy such material before an inter partes application can be made; and
(e) this is an appropriate case for which an order should be made.
Such an order may also compel the disclosure of names and addresses of suppliers or customers, as are commonly sought in actions concerning infringement of intellectual property rights and abuse of confidential information.
Other Interim Remedies
Restraint of Foreign Proceedings
The court may also grant an injunction to restrain a party from pursuing foreign proceedings in appropriate circumstances. The governing principles for the grant of such an order are as follows:
(a) the jurisdiction is to be exercised when the “ends of justice” require it;
(b) where the court grants an injunction restraining proceedings in a foreign jurisdiction, the order is directed at the parties, not the foreign court;
(c) an injunction will only be issued restraining a party who is amenable to the jurisdiction of the court, against whom the injunction will be an effective remedy; and
(d) the jurisdiction must be exercised with caution.
Order for Detention, Custody or Preservation of Property
The court can grant an order for the detention, custody or preservation of any property which is the subject matter of an action, or as to which any question may arise, or for the inspection of any property in the possession of a party to an action. The scope of the rule is limited by the interpretation of “property” which has been held to refer to “physical items capable of inspection” only.
Order for the Sale of Perishable Property
The court can make an order for the sale of perishable property.
In the case of a claim for the recovery of movable property, where the opposing party does not dispute its title but claims a lien over it, the court may order the property to be returned to the claimant on provision of sufficient security.
A party is generally not entitled to recover costs of any court proceedings unless it has obtained an order of the court, which makes such provision. “Costs” are the fees and expenses incurred by the parties to the proceedings. The court has discretion to award costs on any basis it sees fit, but in general, this discretion is exercised according to the following principles:
(a) costs should follow the event and be awarded to the successful party, except where it appears to the court some other order should be made;
(b) where the successful party has caused any unnecessary increase in the length or cost of the proceedings, he may be deprived of part or all of his costs; and
(c) where a successful party raises unreasonable or improper issues or allegations, the court may not only deprive him of his costs but order him to pay the whole or part of the unsuccessful party’s costs.
If the court makes no order as to costs, each party will bear his own costs. The court may deal with the question of costs “at any stage of the proceeding or after the conclusion of the proceedings.”
Costs are generally quantified through the process of taxation of costs by the registrar of the High Court. The parties may agree on costs as an alternative, or there may be fixed costs in certain situations.
The successful party rarely obtains full reimbursement for all his costs. The proportion is generally about one-third to one-half of the actual costs incurred.
Payment into Court
A defendant may at any stage in the action pay into court a sum for which he considers he is at risk as to liability, or for which he would be prepared to dispose of the action. A payment into court then puts the plaintiff at risk, because if he does not accept the amount paid in before the commencement of the trial and obtains no more than that amount upon judgment at the trial, he will be liable for all his own legal costs and the defendant’s legal costs, on a “party and party” basis, from the date of the payment into court.
The payment into court is usually not brought to the attention of the trial judge until after the court’s decision is pronounced, and when the question of the award of costs is being considered.
The court can also make an order requiring a party to proceedings to make an interim payment of such amount as may be specified. This is a payment on account of any debt, damages or other sum (excluding costs) where it may be unjust to make the party wait until the end of the trial before obtaining any relief.
Security for Costs
Upon the application of the defendant, a foreign plaintiff without assets in Malaysia or a Malaysian company that is insolvent may be
required to give security for the proportion of the defendant’s costs that it may have to pay if it is unsuccessful in the action. Security can be given by a payment into court or by bond. More than one application for security may be made by a defendant during the course of an action. There is no requirement for a defendant to give security, except where a counterclaim is made by a foreign defendant without assets in the jurisdiction, or by an impecunious Malaysian company defendant.
For the court to exercise its discretion as to whether security for costs should be provided, the circumstances must fall within one of the following prescribed categories:
(a) the plaintiff is ordinarily resident out of the jurisdiction;
(b) the plaintiff has no assets within the jurisdiction;
(c) the plaintiff is a nominal plaintiff suing for the benefit of some other person and there is reason to believe it will be unable to pay the costs of the defendant if ordered to do so;
(d) the address of the plaintiff is not stated in the originating process, or is incorrectly stated; or
(e) the plaintiff has changed its address during the course of the proceedings with a view to evading the consequences of the litigation.
The court can then make an order “in such manner at such time, and on such terms (if any) as the court may direct,” but it must have regard to all the circumstances of the case, including the merits of the case, in deciding whether it is just to make an order that security be given. It should be noted that the mere fact that the plaintiff is a foreigner is not by itself sufficient to warrant an order.
With limited exceptions, an appeal is possible at every stage of litigation. Appeals from the Small Claims Court are to the Magistrate’s Court. Appeals from the Industrial Court are by way of certiorari to the High Court.
Appeals from the High Court are to the Court of Appeal. However, appeals from the Registrars of High Court are to a High Court Judge in chambers. Thereafter if there is a further appeal, it will be referred to the Court of Appeal.
Appeals from the Court of Appeal are to the Federal Court. Appeals to the Federal Court require the leave of the court.
An appeal is usually by way of a re-hearing, but fresh evidence is only allowed to be admitted with leave of court. The Appellate Courts will rarely interfere with a decision based on the exercise of the lower court’s discretion, or with a trial judge’s view of the facts based on his perception of the witnesses, unless that exercise of discretion or perception was clearly wrong.
Enforcement of Judgments and Orders
A judgment or order takes effect from the time it is pronounced but can only be enforced upon extraction of a sealed copy of the judgment or order from court.
The principal methods of enforcement of judgment debts, or the carrying out of orders of the court, are as follows:
Writ of Seizure and Sale
A writ of seizure and sale entails sealing the defendant’s premises and seizing the goods and chattels belonging to the defendant, with a view to auctioning them off. The proceeds will go toward satisfaction of the judgment sum.
Any debt owing to the defendant from any other person, or monies in a bank standing to the defendant’s credit, can be attached for payment to the plaintiff. This is known as a garnishee order nisi. Once the garnishee order has been made absolute, the monies will be paid directly to the plaintiff.
Judgment Debtor Summons
If the defendant is an individual, he can be summoned to court to be examined as to its means and ability to satisfy the debt. After examination, the court may make an order directing the defendant to pay a stated monthly sum. A warrant of arrest may be issued against the defendant if he fails to appear despite being served a summons to appear.
A winding-up petition may be lodged to wind up a defendant company on grounds that it is unable to pay any undisputed debt exceeding MYR500.
A bankruptcy petition may be lodged if the defendant is an individual and the judgment debt exceeds MYR30,000. The defendant can be adjudicated as bankrupt on grounds that he is unable to pay the judgment debt.
A charging order is available only when the defendant has a legal/ beneficial interest in shares, debentures or debenture stocks in any company registered under any written law, or government stock.
Instead of winding up a defendant company, the court may on an application appoint a receiver, by way of “equitable execution.” In deciding the application, the court will have regard to whether it is just or convenient that the appointment be made having regard to the amount claimed by the judgment creditor, the amount likely to be obtained by the receiver, and the probable cost of his appointment.
Where a judgment or order requires a person to do an act within a specified time, or not to perform such act, and he defies/disobeys the order, a committal order may be issued by the court whereby the party in contempt may be fined, and/or may be committed to prison.
Recognition and Enforcement of Foreign Judgments
Certain foreign judgments are enforceable in Malaysia by virtue of the Reciprocal Enforcement of Judgments Act 1958 (REJA). However, before a foreign judgment can be enforceable, it has to be registered. The registration of foreign judgments is only possible if the judgment was given by a superior court from a country listed in the First Schedule of the REJA. Those countries include the United Kingdom, Singapore, New Zealand and India.
To register a foreign judgment under the REJA, the judgment creditor has to apply for the same within six years after the date of the foreign judgment. Any foreign judgment coming under the REJA shall be registered unless it has been wholly satisfied, or it could not be enforced by execution in the country of the original court.
If the judgment is not from a country listed in the First Schedule to the REJA, the only method of enforcement at common law is by securing a Malaysian judgment. This involves suing on the judgment in the local courts as an action in debt. Summary judgment procedures (explained above) may be used to expedite the process.
Malaysian parties remain relatively unaware of ADR methods and are therefore cautious, due principally to their lack of knowledge, experience and understanding of the mediation process. The Financial Mediation Bureau (FMB) was set up by the Central Bank of Malaysia in 2005 to replace the Insurance Mediation Bureau established in 1991. The Financial Mediation Bureau provides an independent and impartial method in resolving disputes between insurers and policyholders.
The independence of the mediator is guaranteed by the council of the bureau, whose membership consists of people representing public and consumer interests and representatives of its members.
The mediator can investigate and decide on a complaint, dispute or claim between the insured and the insurer.
There are no statutory provisions governing mediation in Malaysia. It is therefore likely that any mediation process undertaken will apply by any rules that the parties themselves have agreed upon. The FMB acts on rules provided for the insurance industry by the Central Bank of Malaysia.
The existence of the FMB has shown that there is potential for mediation in Malaysia. Since then, the Bar Council of Malaysia has established the Malaysian Mediation Centre (MMC), with the objective of promoting mediation as a means of ADR. The ADR Committee of the Bar Council is responsible for the proper functioning and implementation of the MMC’s objectives. The MMC is currently based in Kuala Lumpur, but the Bar Council has indicated that further centers will be established in other states if and when the need arises.
At present, the MMC has on its panel a total of 290 accredited mediators who are trained to provide professional mediation services for a minimal fee (which is calculated based on the quantum of the claim).
The types of cases which the MMC has handled over the years are as follows: family disputes; partnership/joint ventures, probate and estate matters; construction disputes; sale and purchase of property; medical disputes; sale or supply of goods and services/title of goods.
The mediator(s) of the MMC are subject to a code of conduct while the parties are bound by the mediation agreement which they enter into. The mediator and all parties are subject to the mediation rules of the MMC.
Malaysian Arbitration Act 2005 and Arbitration (Amendment) Act 2011
The Malaysian Arbitration Act 2005 was passed by Parliament and received the Royal Assent on 30 December 2005. Prior to the 2005 Act, arbitration in Malaysia was governed by the Arbitration Act 1952 and the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards Act 1985.
The Malaysian Arbitration Act 1952 was outmoded and unsuitable for the effective resolution of modern commercial disputes. The 2005 Act brings Malaysia in line with modern international practice of treating arbitration as the preferred method of resolving international disputes, and was conceived to keep pace with global developments based on, though not identical to, the United Nations Commission on International Trade Law Arbitration (UNCITRAL) Model Law.
The Arbitration Act 2005 was subsequently complemented by the Arbitration (Amendment) Act 2011 that came into force on 1 July 2011.
The 2011 Act addresses various teething difficulties and uncertainty in the 2005 Act
The 2011 Act has also brought Malaysian arbitration legislation closer to the UNCITRAL Model Law.
Among the key amendments are the following:
Sections 10 and 11 on the court’s jurisdiction to order security for satisfaction of any award given in arbitration with respect to admiralty matters as well as to allow courts to grant interim relief in aid of foreign arbitrations.
Sections 38 and 39 on the recognition and enforcement of both domestic and foreign arbitrations awards and to provide clarity as to the previous provisions relating to the grounds for refusing to recognize and enforce an award.
The 2005 Act, alongside the 2011 Amendment Act, provides a coherent legislative framework and greater clarity and
ultimately encourage arbitration as an alternative dispute resolution within
With the 2011 Act, Malaysia has become even more arbitration friendly and one can anticipate even less intervention by the courts.
For further information, please contact:
Wynn Pakdeejit, Partner, Baker & McKenzie
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