Malaysia’s legal system provides a cost-effective small claims procedure to individuals, sole proprietors and partnerships to make claims for small debts below RM5,000.
Access to Justice
The small claims procedures provides for a quick and affordable way for individuals to take small disputes to court. This is significant as there are some 8.4 million businesses (sole proprietors or partnerships) registered with the Companies Corporation of Malaysia as at December 2021.
It is also worth noting that microenterprises comprise a significant part of the Malaysian economy, with 1.2 million microenterprises representing 97.4 of all establishments in Malaysia.
Source: SME Corp
Law for small claims procedure
The procedure for small claims is provided in Order 93 of the Rules of Court 2012. The small claims procedure is available in the Magistrates Court only and for claims below the amount of RM5,000. While the usual jurisdiction for claims in the Magistrates Court is up to RM100,000, the small claims procedure is a special procedure available for individuals without legal representation and for claims that are below RM5,000.
The small claims procedure provides a cost-effective way of recovering small amounts of debts as parties represent themselves in the Magistrates Court without the attendance of lawyers.
The small claims procedure applies to only individuals who intend to commence legal proceedings in court. This would include partners of business partnerships. A legal entity, such as a company or a limited liability partnership (LLP) will not be able to commence a small claims procedure in court, although a company or an LLP may be sued as a defendant in a small claims procedure.
The person suing is known as the Plaintiff, whereas the person/entity being sued is known as the Defendant.
Procedure in court
The process to file a small claim in the Magistrates Court is as follows:
1. First, the Plaintiff should go to the Magistrates’ Court which are the nearest to the address of the Defendant and inform the court staff at the Magistrates’ Court Registry that he/she wishes to file a small claim.
2. Next, the Plaintiff will be given Form 198, in which he/she is to fill in the amount and particulars of the claim. The particulars should be filled in with sufficient details on how the claim arose, for instance:
(a) Describe how and when he/she was approached by the Defendant;
(b) Describe the agreement between him/her and the Defendant (whether the order was placed through WhatsApp or email or phone call etc.);
(c) Describe how the Defendant refused to make payment despite his/her reminders and demands;
(d) Provide the breakdown of the calculation of the RM5,000, if possible; and
(e) Include any other relevant information.
3. Upon payment of a prescribed fee (currently RM20), four copies of Form 198 will be filed in the court.
4. Thereafter, the court will inform the Plaintiff of a hearing date and seal the Form 198. The Plaintiff must serve a copy of the sealed Form 198 to the Defendant. The Plaintiff must do so either:
(a) In-person, by delivering a copy of the filed Form 198 to the Defendant or an officer of the Defendant at their last known address (do ask them to acknowledge receipt on a duplicate copy); or
(b) By sending a copy of the filed Form 198 to the Defendant via prepaid registered post to their last known address (do keep the proof of delivery).
5. Upon receipt of the Plaintiff’s Form 198, the Defendant may file their Defence and Counterclaim (if any) in Form 199. If the Defendant files a Counterclaim, the Plaintiff is entitled to file a Defence to the Counterclaim via Form 200.
6. If the Defendant’s counterclaim exceeds RM5,000, the small claims procedure will no longer apply, and the entire case (both the claim and the counterclaim) will proceed as a normal civil claim and be transferred to the Magistrates, Sessions or High Court, depending on the amount of the counterclaim. There, parties can be represented by their respective lawyers.
7. After filing and serving the claim in Form 198, two things may happen:
(a) If the Defendant does not file its Defence in Form 199 or does not show up on the hearing date, then the court can pronounce a judgement in favour of the Plaintiff or may adjourn the hearing to enable the Defendant to file its Defence;
(b) If the Defendant files its Defence in Form 199, then the court will fix one or several hearing date(s) to hear both parties.
8. During the hearing(s), parties will be required to present evidence to support their case. The court may also ask for further particulars from the parties. In the above example, among the important documents that should be presented are:
(a) Purchase orders, delivery orders, invoices, accounting books, proofs of delivery;
(b) WhatsApp or other instant messaging messages, emails, letters;
(c) Photos or recordings.
9. If the Plaintiff successfully proves his/her case, the court will give judgment in his/her favour. The court can also award costs to the successful party up to a maximum of RM100.
Enforcement of judgments
Upon obtaining judgment from the Magistrates’ Court, it must be delivered to the Defendant either by hand or by prepaid registered post. If the Defendant has received the judgment but still refuses to pay the sum plus the costs adjudged by the court, the Plaintiff can file a notice to show cause in Form 208 to court and serve it on the Defendant.
Upon serving Form 208 on the Defendant, the Magistrates’ Court will then fix a date to examine the Defendant, or the representative of the Defendant (if the Defendant is a company) on the reason of non-compliance with the judgment or order.
Depending on the circumstances of each case and the court’s discretion, after the examination, the Magistrates’ Court may allow:
- More time for the Defendant to pay, or pay the debt by instalments, based on the circumstances of the case;
- Order for a writ of seizure and sale to be issued against the Defendant; or
- Order the judgment debtor (Defendant) to be committed to prison.
The small claims procedure provides a cost-effective way for individuals, sole proprietors and partners of business partnerships to recover small debts below RM5,000. While parties may still seek the advice of lawyers when pursuing or defending a small claim, the parties will have to be self-represented in the small claims proceedings at the Magistrates Court.