“The garnishee is under no obligation to continuously and continually monitor each affected account and to further attach subsequent amounts that may be banked into the account of the JD with the garnishee bank after the date of the service of the garnishee order to show cause (‘GOTSC’) ... The amount attached as at the date of the service of the GOTSC is "frozen" and that which is frozen cannot admit of fresh funds nor be depleted of existing funds.”
 
- Per Lee Swee Seng JCA
 
The Court of Appeal in a unanimous decision delivered by Lee Swee Seng JCA (Supang Lian JCA and Mohd Nazlan Ghazali JCA concurring) in Affin Bank Berhad v Energypeak FZE [2024] 2 CLJ 1, allowed an appeal by the bank and reversed the decision of the High Court. The High Court held that the garnishee bank was obliged to continuously freeze any funds that may be credited into the judgment debtor's account after the date of the service of the Garnishee Order to Show Cause. The Court of Appeal's decision affirms a long-standing legal principle that a Garnishee Order to Show Cause, when issued against a garnishee, typically a bank, has the effect of freezing only debts existing at the time of the service of the order. Any subsequent deposits or funds added to the judgment debtor’s bank account after the service of the Garnishee Order to Show Cause are not subject to the order.
 
As the case originated in the Sessions Court, the Court of Appeal functions as the final court of appeal, and its decision is therefore not subject to further appeal.
 
Relevant Facts
 
The judgment creditor sought to garnish funds from the judgment debtor's accounts maintained with the garnishee bank, Affin Bank Berhad and obtained a Garnishee Order to Show Cause. Despite the Garnishee Order to Show Cause being served, a Garnishee Order Absolute was not issued as the Sessions Court found there was no amount in the judgment debtor’s account that can be subjected to a Garnishee Order Absolute.
 
Dissatisfied, the judgement creditor appealed to the High Court. The High Court, relying on Order 49 rule 3(2) of the Rules of Court 2012, held that there was a continuing obligation on the garnishee bank to freeze subsequent amounts entering the judgment debtor’s account after the service of the Garnishee Order to Show Cause.
 
The High Court took the view that the preposition “from” in Order 49 rule 3(2) of the Rules of Court 2012 that reads “Such an order shall bind in the hands of the garnishee as from the service of the order on him any debt specified in the order or so much thereof as may be so specified” means that any monies going into the judgment debtor’s account after the Garnishee Order to Show Cause was served are to be attached as well.
 
In coming to its decision, the High Court compared Order 49 rule 3(2) of our Rules of Court 2012 with the corresponding provisions in the United Kingdom Civil Procedure Rules, in particular Part 72.6, where the preposition “at” is used in the relevant part thereof which reads “The bank … must disclose to the creditor … the amount of the balance (in the account) at the date it was served with the order, if it is less than the amount specified in the order”. Based on the comparison, the learned High Court Judge concluded that that the Malaysian position on garnishment is substantially different from the position in the United Kingdom, such that in Malaysia there is an obligation on the garnishee to continuously and continually attach monies that may be credited into the judgment debtor’s account after the date of service of the Garnishee Order to Show Cause.
 
The Court of Appeal’s Decision
 
The Court of Appeal allowed the bank’s appeal and held that the High Court Judge had erred when he departed from the well-established position in, inter alia, Top-A Plastic Sdn Bhd & Ors v Bumiputra Commerce Bank Bhd [2006] 3 CLJ 460 HC and more recently in Transpacc Property Management Sdn Bhd v Badan Pengurusan Bersama Pangsapuri Aman Larkin & Anor [2022] 9 CLJ 794 HC. These cases held that a Garnishee Order to Show Cause attaches only debts existing at the date of service of the Garnishee Order to Show Cause.
 
The Court also clarified that a Garnishee Order to Show Cause does not impose an obligation on the garnishee bank to continually monitor and freeze subsequent amounts after the service of the order. The Court further emphasised that the order only freezes debts existing at the time of service of the Garnishee Order to Show Cause and does not extend to subsequent deposits of funds into the judgment debtor’s account.
 
According to Justice Lee Swee Seng, the garnishee provisions in our Rules of Court 2012 are in pari materia with the provisions of the Rules of the Supreme Court 1883 of the United Kingdom, the latter of which were substantially overhauled by the Civil Procedure Rules.
 
In the Court of Appeal’s view, the emphasis in our Rules of Court 2012 was on the effective date of the attachment or freezing of the sum due or accruing due from the garnishee to the judgment debtor and the expression “from the service of the order on him” in Order 49 rule 3(2) was used to indicate that nothing could be done to the sum attached or frozen until a further order is given by the court after hearing the garnishee in the Garnishee Order to Show Cause.
 
On the other hand, the Civil Procedure Rules sought to simplify the rules, giving focus on what the garnishee is required to do upon being served with the Garnishee Order to Show Cause, that is to file an affidavit stating “the amount of the balance at the date it was served with the order.”
 
It would, in the Court of Appeal’s opinion, be reading too much into the amendments to conclude that the Civil Procedure Rules now allow only the balance as at the date of the service of the Garnishee Order to Show Cause to be attached when previously, the amount to be attached included all further sums paid into the account of the judgment debtor with the garnishee until the Garnishee Order Absolute is made. This is particularly when the English cases decided prior to the Civil Procedure Rules have consistently held that a garnishee order only affects debts in existence at the date the Garnishee Order to Show Cause is served on the garnishee (Heppenstall v Jackson and Barclay’s Bank Ltd [1939] All ER 10 and Holt v Heatherfield Trust Ltd and G & T Bridgewater Ltd [1942] 1 All ER 404.)
 
Hence, the Court of Appeal concluded that the learned High Court Judge had erred in determining that the word “at” instead of “from” in Part 72.6 of the Civil Procedure Rules indicates that the position in the United Kingdom is substantially different from the position under Order 49 rule 3(2) of our Rules of Court 2012 and that the word “from” in Order 49 rule 3(2) means that Malaysian courts, unlike in the United Kingdom, should not take a static approach to determining the amount to be attached and should not be confined only to consider the amount in a judgment debtor’s account as at the time the Garnishee Order to Show Cause is served on the garnishee.
 
Conclusion
 
This Court of Appeal decision is particularly important for financial institutions, especially banks, acting as garnishees. It provides clarity on their obligations when responding to a Garnishee Order to Show Cause, specifically regarding the freezing and payment of amounts to the judgment creditor, erasing doubts and uncertainties that arose from the High Court’s decision in this case as to their responsibilities in such situations.
 
Case Note by Karen Tan (Senior Associate) of the Dispute Resolution Practice of Skrine.