How To Sue Someone Who Owes You Money: A Guide For Creditors In Malaysia

In our ten years as debt recovery lawyers, Rule & Co has helped countless creditors pursue legal action to recover money owed, from the initial writ of summons to final judgement.

100% what happens in court.

Our experience has been that debt recovery litigation is only financially viable in a handful of situations, and this guide is our way to help creditors decide if their claim is worth going to court.

Here’s what to expect navigating civil procedure under the Rules of Court 2012, including:

• suing individual vs company debtors

• the pros and cons of litigation

• which court hears your claim (and why it matters)

• pre-trial steps

• the trial itself

• the court judgement and what happens after

• our role as lawyers throughout the process, and

• our professional thoughts

For individual (non-business) creditors with claims of RM5,000 and under, see our guide to the Small Claims Court which is designed to process smaller claims without the need for involvement of lawyers.

And for everyone else, feel free to skip the guide and get in touch for a free recovery assessment.

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Otherwise, let’s begin.

Suing individuals vs companies who owe you money

There are differences in civil claims against individual versus corporate debtors, some of which have a significant impact on how long the case can take:

Aspect	Individuals	Companies (Bodies Corporate)
1. Legal Representation	Can represent themselves or engage lawyer	Generally must act through a lawyer
2. Service of Writ	Served personally or via post to last known address	Served at registered office, via post, or delivery to company officer
4. Discovery & Examination	Individual debtor is examined	Company officers are examined
5. Enforcement & Contempt	Individual can be fined and / or imprisoned	Company can be fined and / or officers imprisoned

Based on the table above, the biggest difference is the party actually facing consequences - individual debtors are directly held accountable, while the Companies Act 2016 grants directors and company officers limited liability protection from a lawsuit against the company.

This is known as the 'corporate veil' and speaking from experience, some parties will absolutely take advantage of it to frustrate debt recovery efforts.

In such cases, creditors naturally wonder if the director can be sued personally, and the short answer is yes - but in a limited set of circumstances.

When a director can be personally sued

For the average creditor, three circumstances allow a company director to be personally liable:

• they continue operating while insolvent and incur debts they know cannot be repaid

• they transfer assets to avoid creditors

• they have signed a personal guarantee to be directly liable for company debts

Suing the director of a dissolved company

Our guide to director personal liability covers them in full detail, but in short, yes directors who have acted as described in the previous section can still be personally sued even if the company has been liquidated.

Suing a dissolved company / bankrupt individual

If a debtor has already been declared bankrupt or insolvent, creditors need to submit proof of debt and will be added to a list of creditors who will be paid from the debtor's seized and liquidated assets in a specific order.

Unfortunately, statutory creditors like LHDN and secured creditors like banks are paid first, which typically leaves little to no remaining monies for unsecured creditors.

Advantages of debt litigation

Even before the trial concludes, creditors can apply for several court orders:

1. Interim payments: Partial payments while the case is ongoing

2. Injunctions: Prevents the sale or disposal of assets by a debtor

3. Discovery:  Forces the debtor to hand over key documents that support your claim

And if the court finds in favour of the creditor, they can access even more powerful remedies:

1. Examination of Judgement Debtor: The court orders the debtor to come to court and answer questions about what money or assets they have.

2. Various debt enforcement methods: Seizing property and garnishing third parties 

3. Interest on the debt: The debtor must pay interest on the judgment from the day it’s issued until they pay, compensating for the delay.

While this sounds great, creditors must be prepared to take the good with the bad. 

Disadvantages of debt litigation

The biggest disadvantage of taking someone to court for money owed is the unpredictable costs. Filing fees, professional service charges, and a variety of other costs add up fast and if you lose, the court may order you to pay the other side’s costs!

On top of this, other disadvantages include:

• potentially taking years to reach a conclusion (which adds to costs)

• potential counterclaims from the debtor which could lead to a judgment against you

• an unenforceable judgement If the debtor has no assets to seize or money to garnish

Which court hears your claim

Civil claims in Malaysia are based on value, with higher-value claims heard by higher courts:

Court	Claim Value
Small Claims Court	Claims by individuals (non-business claimants) up to RM5,000
Magistrates’ Court	Up to RM100,000
Sessions Court	RM100,001 to RM1,000,000
High Court	RM1,000,001 with no upper limit

Why it matters: Although steps are largely the same across courts, costs rise significantly at higher tiers, which combined with claim limits directly affects ROI of pursuing a judgement.

More on that later - for now, let’s go over the steps in a civil procedure.

Steps in a civil procedure

We can broadly separate civil suits into three main stages:

1. Pre-trial

2. Trial

3. Judgement and post-trial

For clarity, in the sections below, we refer to the reader as plaintiff and the debtor as defendant.

Pre-trial stage (service of writ of summons)

The case starts as the plaintiff’s solicitor files a writ of summons with the relevant court.

The writ is then served by hand or post on the defendant, who then has 14 days to file a Memorandum of Appearance which means they intend to contest the claim.

From there, both parties submit written arguments to the court consisting of:

• the plaintiff’s Statement of Claim

• the defendant’s Defence (and potential Counterclaim)

• the plaintiff’s Reply (if needed)

Everyone then attends a Pre-Trial Case Management session where the court ensures everything is in order and gives directions for the case to proceed efficiently.

Possible early decisions

There are two situations in which the court may decide during the pre-trial stage:

1. If the defendant does not enter an appearance within 14 days the plaintiff can apply for a judgment in default

2. If the defendant’s defence has no legal basis the plaintiff can apply for a summary judgment

These are known as ‘short-cut judgements’ as they significantly cut down time taken to secure a court order, but if neither circumstance presents itself, then to trial we go 🙂

Trial

Both sides appear in court to present their case before a judge who reviews all evidence which can include:

• witness statements

• cross-examination of witnesses

• documents and other supporting evidence

• expert witnesses (if needed)

• site visits or inspection of items related to the claim

We’ll spare the technical details, but there is a structured flow in the Rules of Court 2012 that ensures both sides present their evidence and arguments properly.

What matters is the more complex the case, the more evidence and the longer it takes.

The court also has full discretion to postpone the session to another day, meaning every trial takes as long as the judge feels is necessary.

Eventually however, the court will deliver a decision.

Court judgement

What happens next depends on whether the court rules for the plaintiff or the defendant.

For the plaintiff

The defendant (now a judgement debtor) is usually ordered to pay the amount owed plus legal costs, and interest typically starts accruing from date of judgement until full payment.

As plaintiff (now judgement creditor) you have several options to enforce the judgment:

• compelling the debtor to answer questions about their assets and how they can pay

• various enforcement methods to recover the debt based on assets the debtor has

Keep in mind: The debtor may apply for a stay of execution to delay payment or appeal, temporarily pausing enforcement.

For the defendant

Your claim is dismissed and you may have to cover the defendant’s legal costs.

Additionally, if the defendant filed a counterclaim, the court may also decide in their favour, ordering you to pay any amounts owed or granting the relief they requested.

If dissatisfied, you can similarly file a notice of appeal to have the matter heard at a higher court.

Appealing a court decision

To appeal a court decision, a notice of appeal must be filed within 14 days of the judgement.

As new evidence is generally not allowed, this is only advisable if it can be proven the judge made a mistake based on existing arguments.

And even when you try that you might still lose.

Also crucial is that filing an appeal does not stop the original court order, so if the court has ordered you to pay the defendant’s legal costs, you still have to unless the court grants a stay of execution.

For readers still interested in litigation after reading all this, here’s a quick sales pitch!  

How Rule & Co helps take legal action to recover debt

Our role as your legal representatives starts long before the trial starts and continues long after a verdict is delivered.

Rudi Cheu’s biceps reporting for duty.

Before filing a case

We start by evaluating the facts of your case carefully to:

• check if your claim has a good chance of success

• highlight any possible defenses or counterclaims the other party might raise

• advise you on what to expect and whether going to court makes sense

If you decide to proceed, we file the documents to start your case following the deadlines above.

During the Case

Unless the court specifically requires your presence, we can manage everything while keeping you updated, including:

• filing all paperwork including claims, replies, and defenses

• gathering documents, coordinating statements, and arranging for expert witnesses

• attending pre-trial meetings and representing you in court (do note that your attendance as a witness may be required in some circumstances)

After the Case

If the court decides in your favour, we attempt to get you paid as soon as possible by:

• filing paperwork to enforce the judgment, and

• working with Sheriffs or bailiffs to seize and sell assets

• applying for further court orders to enforce the debt if needed

Basically, we make sure you avoid delays and put this matter behind you once and for all. 

Which is why throughout the case, we keep in touch with the other side to explore any opportunities for a quick, out-of-court settlement.

Suing someone who owes you money is risky

Successfully suing a debtor and obtaining a court judgement opens doors to more powerful enforcement methods like garnishee orders and committal proceedings.

That said, the process of suing is long, costly, and risks backfiring, and in our opinion, should only be considered if three conditions are satisfied:

• the debt is over RM100,000 

• the debtor has the means to pay, and

• they have no legally sound defence

And since we believe in using the minimum amount of force, even if all three conditions are met, civil claims should still be a last resort after pre-trial negotiations have been exhausted (any contractors reading this need to head over to our CIPAA guide).

That’s all from us, and we wish you a smooth debt recovery 🙂

Let Rule & Co help you take legal action against debtors

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If you’ve sent reminders and been ignored or simply don’t want the hassle of chasing payments, Rule & Co is a debt recovery law firm that focuses on helping creditors recover debts via legal strategies that minimise upfront cost, maximise recovery, and protect your reputation.