When Judgment Debtor Summons Go the Distance: Discovery, Instalments and a Double Trip to the Federal Court

The Court of Appeal recently clarified on discovery and instalment orders under the Debtors Act, including why bare claims of impecuniosity are no shield, and when courts may have gone too far in crafting payment terms. A practical read for practitioners and younger lawyers navigating enforcement proceedings

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Judgment debtor summons (JDS) proceedings are usually routine affairs. An examination before the registrar, a few bank statements, and the occasional polite promise to pay. But in a recent case we handled, what began as a standard JDS developed into a full-scale appellate journey, culminating in two separate sets of Federal Court leave motions. Both were dismissed. Along the way, the Court of Appeal delivered important and clarifying guidance on two issues that often arise but rarely receive sustained judicial attention.

This article touches on those two areas.

Discovery in JDS: Verifying the “I Have No Assets” Defence

The judgment debtors in our case had, by their own admission, received over RM36 million in 2017. By the time enforcement began, they claimed these funds had been fully spent and that they were now without means.

We applied under section 4 of the Debtors Act 1957 for production of documents including five years of bank statements, tax filings, EPF records and documents to prove the expenses they alleged. The Registrar allowed the request. However, the High Court Judge reversed that decision, holding that the JDS regime only allowed discovery of presently existing property and that historical documents were irrelevant.

The Court of Appeal disagreed, and effectively found that Section 4 DA 1957 envisions a twofold inquiry: not only into the judgment debtor’s current ability to pay, but also the disposal that the debtor has made of such property.

In doing so, the Court confirmed that the JDS process is a fact-finding exercise of the severest kind and is not limited to tracing assets that remain in the debtor’s name. The objective is to put the judgment creditor in the fullest position of information, especially when the debtors' story strains credibility.

In sum, the Court of Appeal agreed that a judgment creditor is entitled to obtain information to confirm or refute the debtor's bare claim of impecuniosity, otherwise to confine discovery only to current assets would render the JDS regime toothless. Any debtor could evade liability simply by claiming the money is gone.

Also addressed was section 138 of the Income Tax Act 1967. The debtors resisted disclosure of their tax documents by invoking statutory secrecy. The Court held that the prohibition applied only to disclosure by third parties, such as tax agents or the IRB, and not to the taxpayer themselves.

Instalment Orders: Discretion, but Not Unfettered

After completing the JDS examinations, we applied for immediate part-payments based on amounts the debtors had admitted to having. These were RM70,000, RM5,000 and RM50,000 respectively, with liberty to pursue the balance. Instead, the Registrar issued an instalment order of her own motion. This required a joint payment of RM100,000, followed by RM50,000 monthly. It was not what either party had requested. The High Court Judge upheld the Registrar's decision.

We appealed, arguing that the Court had no jurisdiction to vary the terms of the original judgment by crafting a new instalment regime where none was sought.

The Court of Appeal agreed.

“The discretion of the Court...under section 4(6) is not absolute. The Court should not go beyond the terms of execution requested by the [judgment creditor].”

“It is unfair if any variation or modification on the original judgment has been made by an order of the court without any request or consent by the [judgment creditor].”

The Court also highlighted the potential consequences of instalment orders, particularly where they may preclude bankruptcy proceedings. This follows the decision in Mohd Kamal bin Omar v United Overseas Bank (M) Bhd, where such orders were treated as variations of the original judgment. As the Court of Appeal observed:

“The impact of an instalment order is far-reaching. It creates an obstacle for the [judgment creditor] to file bankruptcy proceedings against the [judgment debtors].”

Ultimately, the Court allowed our appeal and reinstated the immediate payment orders we had originally sought, grounded in the debtors’ own admissions during examination.

Conclusion

These decisions, though unreported, provide useful clarification on two grey areas in post-judgment enforcement. They affirm that discovery under JDS is not confined to what is currently visible and that courts should not impose instalment structures unless specifically asked. The regime under section 4 of the Debtors Act is intended to protect creditors, not allow judgment debtors to shield themselves behind vague claims and limited disclosure.

For practitioners, especially younger lawyers dealing with enforcement, these decisions offer a reminder. The JDS process remains a powerful tool when used properly. It also reinforces that courts must act within the limits of what is sought, particularly where it affects a creditor’s right to enforce a judgment in full.