Mohd. Azmi FJ:

This is an appeal against the decision of the High Court in refusing to allow a Garnishment Order nisi to be made absolute against the garnishee, the respondent herein. The Order nisi was obtained ex parte on 11 January 1983 and was discharged by the Court on 21 February 1984.

The facts leading to the garnishment proceedings are not seriously in dispute. On 20 December 1982, the garnishor (appellant/judgment creditor) obtained a judgment by default in the sum of RM18,700 against a housing developer - Syarikat Seri Belian Sdn. Bhd. (judgment debtor) vide Kuantan High Court Civil Suit No. 289/1982. The sum adjudged was in respect of progress payments made towards the purchase of a shophouse held under title H.S.(D) No. 885 in Pulau Sebang, Malacca, which the judgment debtor had agreed to refund when the garnishor gave up her rights to complete the sale and purchase agreement. This arrangement enabled the judgment debtor to resell the property at an increased price of RM35,000 to Tay Bin Lam and Chong Yin Thye (hereinafter referred to as "third parties") and thereby made an extra profit of RM15,000 on this particular property. In settling the purchase price, the third parties paid RM10,000 to the judgment debtor and the balance of RM25,000 was raised by way of a loan obtained from the garnishee under a financial arrangement between the judgment debtor and the garnishee on the security of a first legal charge of the property. It was this sum of RM25,000 in the hands of the garnishee that the garnishor sought to attach by way of garnishment under O. 49 r. 1 RHC, 1980, to satisfy the judgment obtained against the judgment debtor which inclusive of accrued interest and expenses had then come to RM19,744.74.

In discharging the garnishment order nisi, the learned Judge principally relied on two letters (Ex. B and C) which purported to support the garnishee's contention that when the ex parte order was made on 11 January 1983, there was in existence a debt due and owing to it from the judgment debtor and as such it was entitled to set-off against the debt attached by the garnishor the debt owing to it which at all material times was alleged to be more than RM25,000. On the law of right of set-off by a garnishee, the learned Judge rightly relied on the following passage in the Supreme Court Practice 1979 White Book at p. 778:

Set-off or Counterclaim - A garnishee cannot set-off against the debt attached, a debt owing to him from the judgment creditor (garnishor) (Sampson v. Seaton Railway [1875] LR 10 QB 28; but he can avail himself of a set-off against the judgment debtor, which existed when the order nisi was made (Nathan v. Giles [1814] 5 Taunt. 558; Sampson v. Seaton Railway, supra; Sampson v. Seaton [1875] LR 10 QB at p. 593).

In Tapp v. Jones, Blackburn J said at p. 593:

It is obviously just that if a cross debt were due to the garnishee at the date of attachment there should be a right of set-off in his favour, and I should strive hard to give effect to it if I could, though there would be difficulties in the way.

Having regard to the clear position of the law on the subject, the only issue which we have to determine is whether when the garnishment order nisi was made on 11 January 1983, there existed a debt due to the garnishee from the judgment debtor that could be set-off. To satisfy ourselves that there was indeed a cross debt in existence at the material date, we propose first to examine the two letters relied upon by the learned Judge and indeed by the garnishee, and we think it would be helpful to reproduce them in extenso. The first letter (Ex. B) is undated and written by the third parties to the manager of the garnishee. It is in the following terms:

Dear Sir,

Re: Mukim of Pulau Sebang, H.S.(D) No. 885

We refer to the above matter.

We have purchased the property from Syarikat Seri Belian Sdn. Bhd., and have taken a loan of RM25,000 from your finance company to pay the balance of the purchase price