A judgment creditor cannot obtain a garnishee order while a bankruptcy petition against the debtor is pending, as it contravenes the principles of insolvency law regarding the priority of debts.

Introduction

[1] The question of law in the present case involves an interplay of the law of execution of judgment and the law of insolvency. A judgment creditor has to tread with prudence and care as to whether he/she wants to initiate bankruptcy proceeding first before he/she applies for garnishment or writ of execution against the judgment debtor's assets.

[2] A plaintiff who obtains a court judgment against a defendant becomes a judgment creditor by virtue of the court judgment, but that by itself does not make the plaintiff a secured creditor vis-à-vis any of the assets or properties of the defendant-judgment debtor.

[3] A judgment creditor who relies solely upon the court judgment remains an unsecured creditor of the judgment debtor. It is only when the judgment creditor obtains the execution order in the form of garnishment order, charging order or writ of execution that he/she becomes a secured creditor of the judgment debtor in respect of the asset attached or secured by such execution order.

[4] Once a judgment creditor becomes a secured creditor vis-à-vis a particular asset of the judgment debtor, he/she is still subject to the principles on priority of debts. Among the various secured creditors who have competing secured interests in respect of a particular asset of the debtor, the hierarchy of priority of debts is determined according to the time of creating the secured interest. The earlier secured interest has priority over the later secured interest.

[5] In deciding whether or not to issue an order of garnishment, the court cannot contravene a provision of the statute on insolvency.

Background Facts

[6] On 14 November 2022 Bankruptcy Notice was filed by the Judgment Creditors against the 3rd Judgment Debtor/Appellant ("JD3"). The bankruptcy petition was filed and registered as Shah Alam High court Bankruptcy Petition No BA-29NCC-2834-11/2022 [see Exhibit "JD-1" to the 3rd Judgment Debtor's Affidavit (pp 13 to 63 @ 14 to 19 in encl 9).

[7] On 28 December 2022 the Affidavit-in-Support of the ex parte Garnishee Application was filed by the Judgment Creditors.

[8] Bankruptcy Notice was served by e-mail on the 3rd JD's solicitor on 5 January 2023 and by hand on 6 January 2023.

[10] On 6 January 2023, the Judgment Creditors filed the ex parte Garnishee Application against the 3rd Judgment Debtor ("JD3").

[10] On 27 February 2023 the Supplemental Affidavit in further support of the ex parte Garnishee Application was affirmed by a Judgment Creditor and filed.

[11] On 28 March 2023 the Deputy Registrar granted the garnishee decree nisi in the form of Show Cause Order against the 1st, 2nd, 3rd and 5th Garnishees for the sum of RM3,222,550.56 ("the Show Cause Order") [see encl 6].

[12] On 8 May 2025, JD3 filed encl 8 to set aside the Show Cause Order solely on the ground that there was no full and disclosure of the material facts by the Judgment Creditors, namely, the filing of the bankruptcy proceeding against the 3rd JD.

[13] As at 23 May 2023 the bankruptcy petition was still pending and ongoing in the High court: see para 8.2 of the Judgment Creditor's Affidavit in Reply (Enclosure 13).

[14] By order dated 6 July 2023 the Deputy Registrar dismissed the 3rd JD's application in encl 8 and thereupon entered the Garnishee Order Absolute against the Garnishees. [Enclosure 24]

[15] From the parties' respective affidavits and submissions, there is no document or allegation to show that the bankruptcy petition has been withdrawn or terminated even as at this court's hear