Payments owed to a judgment debtor are garnishable despite prior assignment to a third party, provided they belong to the debtor at the time of garnishment.

JUDGMENT

(Appeal Against Garnishee Order)

Kenneth St James J:

Prelusion

[1] JNH Bina Sdn Bhd (JD) performs construction works for the Perbadanan Pembangunan Pulau Pinang/Penang Development Corporation (PDC). The PDC makes progressive payments to the JD for the works.

[2] The judgment creditor: Suhaimi Sabudin (JC) obtained a judgment against the JD. The JC wants to enforce the judgment by garnishee proceedings. The JC obtained a Garnishee Order to attach the progressive payments that the PDC owes to the JD. The Registrar granted that order. The JD appeals to the Judge in chambers. Should that Garnishee Order be extinguished, or should it be affirmed?

The Pertinent Facts

[3] The PDC awarded two construction contracts to the JD. The PDC periodically paid the JD against certificates of progressive payment issued under the construction contracts. The PDC is the JD's debtor.

[4] The JD entered into two facility agreements with the Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank) to finance the performance of the JD's obligations under the construction contracts. These two facility agreements were called Letters Of Assignment.

[5] In the Letters Of Assignment, the JD agreed to assign its rights to all the payments due from the PDC under the construction contracts, to SME Bank. In other words, since SME Bank gave banking facilities to the JD, the JD assigned the payments receivable from the PDC over to SME Bank, as a form of the JD's repayment to SME Bank.

Order 49: Garnishee Proceedings

[6] The provision of the Rules of 2012 applicable to this Appeal is O 49. The pertinent portions of O 49 are set out below for reference (with my emphases added)-

Order 49. Garnishee proceedings

1. Attachment of debt due to judgment debtor

(1) Where a person (who is referred to as "the judgment creditor" in this Order) has obtained a judgment or order for the payment of money by some other person (who is referred to as "the judgment debtor" in this Order), not being a judgment or order for the payment of money into Court , and any other person within the jurisdiction (who is referred to as "the garnishee" in this Order), is indebted to the judgment debtor, the Court may, subject to the provisions of this Order and of any written law, order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee, or so much thereof as is sufficient to satisfy that judgment or order and the costs of the garnishee proceedings.

(2) An order in Form 97 under this rule shall in the first instance be an order to show cause, specifying the time and place for further consideration of the matter, and in the meantime attaching such debt as mentioned in para (1), or so much thereof as may be specified in the order, to answer the judgment or order mentioned in that paragraph and the costs of the garnishee proceedings.

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No appearance or dispute of liability by garnishee (O 49 r 4)

4. (1) Where on the further consideration of the matter the garnishee does not attend or does not dispute the debt due or claimed to be due from him to the judgment debtor, the Court may, subject to r 7, make an order absolute in one of the forms in Form 99 under r 1 against the garnishee.

(2) An order absolute under r 1 against the garnishee may be enforced in the same manner as any other order for the payment of money.

[7] I summarise the procedure under O 49 like this. In the first stage, the JC applies for and obtains a Garnishee Order nisi (conditional). It binds the judgment debt (which the JD owes the JC) in the hands of the garnishee: here, the PDC (who owes money to the JD). In other words, the order attaches the judgment debt.

[8] This conditional order is also called a Show Cause Order. It is called a Show Cause Order because when the order is given, a hearing date is also given, for the "further consideration of the matter".

[9] The second stage is the show cause hearing. At the show cause hearing, the Garnishee is