Admissions in Debt Recovery

Why are admissions important in debt recovery?

The importance of admissions in debt recovery should not be understated.

This is because they may substantiate a creditor’s claim by establishing the debtor's acknowledgment and acceptance of debts. When a debtor admits to a debt, such an admission can be used in court to establish liability without the creditor having to prove the debt.

In certain cases, summary procedures may be adopted to accelerate debt recovery. This includes, among others, filing a summary judgment application under Order 14 of the Rules of Court 2012 (“ROC”) and an application for a judgment premised on admissions under Order 27 rule 3 of the ROC.

Some key examples of admissions that can strengthen your debt recovery case:

1. Part Payments

Where part payments are made in respect of a debt, this may constitute an admission of indebtedness and liability. This is especially so where the part payments are made without any contemporaneous objections or complaints by the debtor. This can be seen in the following cases:

• in L.K Insulation Engineering (M) Sdn Bhd v Apex Energy Sdn Bhd [2017] 1 LNS 733, the High Court held that making part payments without raising objections is contextually consistent with an admission of the amount claimed. Justice Lee Swee Seng (now FCJ) stated at pages 20 to 21 of the judgment:

“[53]  The Defendant after being given a hardcover binder totalling 460 pages of Invoices and the Scaffolding-Erection Job Order, Scaffolding-Job Completion Certificate, Photo Report-Job Completion Certificate and Scaffolding-Manpower Supply supporting documents certified by the Plaintiff’s former solicitor’s vide their letter dated 25.8.2016 (page 478, Exhibit E, Affidavit in Support) did not dispute any of the documents but made a part payment of RM219,930.71 to the Plaintiff (page 479, Exhibit F, Affidavit in Support). Human nature being what it is, we tend to act consistent with what we believe to be true. The Defendant making part payment after receipt of the documents asked for must be contextually consistent with admission of the amount claimed.”

• in Tec D (Malaysia) Sdn Bhd & Anor v Refinenetworks Sdn Bhd [2022] 1 LNS 2168, the High Court held that as the defendant made part payments without disputing the invoices, this amounted to a clear admission of indebtedness. It was held at pages 14 to 15 of the judgment as follows:

“[36]  It is undisputed that the Defendant had acknowledged receiving the products and the Defendant did not raise any objections at the material time when it was received.

[37]    It is undisputed that the Defendant had continued to keep in possession the products despite having knowledge that the products are not in accordance to the specification, inaccurate and incorrect. Hence, the Defendant cannot now claim goods are not according to specification, inaccurate and incorrect and refuse to pay the Plaintiffs the balance amount. The Defendant’s conduct binds them.

[38]    The Defendant had also not disputed that they have made part payments and the Defendant had made further payments even after the Letter of Demand was issued on 27.02.2020. The said payments were made on 05.03.2020, 06.04.2020 and 01.06.2020, though the Defendant had complained, alleging that the products delivered was not according to specification, inaccurate and incorrect. It is apparent that the Defendant did not dispute the invoices and had made part payments. This to my mind is a clear admission of indebtedness. In the case of Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331 where the Federal Court held that: -

“(1) A reasonable man in the respondent’s position would be entitled to assume that the appellant had agreed to the imposition of the 14-day period as it did not merely remain silent by not objecting to it but had in fact made payment on some invoices. The appellant should not be allowed to question the validity of the indorsement after seven months as it would be unconscionable and inequitable for it to do so.””

2. Failure to Respond / Deny to Formal Correspondence

Where a party fails to deny a demand and/or formal correspondence, this can amount to an implied admission of indebtedness. This can be seen in the following case:

• in BHS Book Printing Sdn Bhd v Penerbitan IMT Sdn Bhd [2016] 1 AMR 753, the High Court held that the failure of a party to deny a solicitor’s demand amounts to an implied admission. Wong Kian Kheong JC (now JCA) stated at pages 764 to 765 of the report as follows:

“(f) the defendant did not deny the plaintiff's demand dated January 28, 2015. In a commercial relationship, the failure of a party to deny a solicitor’s demand by the opposing party amounts to an implied admission. I rely on two Court of Appeal cases as follows:

(i)      in David Wong Hon Leong v Noorazman b Adnan [1996] 1 AMR 7 at 13–14; [1995] 4 CLJ 155 at 159, Gopal Sri Ram JCA (as he then was) gave the following judgment:

During argument, we registered our surprise at the learned judge’s reluctance to enter judgment for this sum of RM100,000. After all, the appellant had failed to respond to the letter of December 17. If there had never been an agreement as alleged, it is reasonable to expect a prompt and vigorous denial. But, as we have pointed out, there was no response whatsoever from the appellant.

In this context, we recall to mind the following passage in the judgment of Edgar Joseph Jr J in Tan Cheng Hock v Chan Thean Soo [1987] 2 MLJ 479 at 487:

…

Earlier, in his judgment, he said:

'Now there are cases – business and mercantile cases in which the courts have taken notice that, in the ordinary course of business, if one man of business states in a letter to another that he has agreed to do certain things, the person who receives that letter must answer it if he means to dispute the fact that he did so agree.'

…

(ii)     David Wong Hon Leong has been affirmed by Hasan Lah JCA (as he then was) in Jetara Sdn Bhd v Maju Holdings Sdn Bhd [2007] 3 AMR 1 at 10; [2007] 3 CLJ 41 at 55.”

3. Express Statements of Admissions

Where express statements are made by a party admitting to the debts, this will quite obviously amount to an admission of debt. This can be seen in the following case:

• in Strateq Data Centre Sdn Bhd v Synergycentric Sdn Bhd [2017] 1 LNS 2140, the High Court held at pg. 7 to 8 of the judgment as follows:

“[14]  It is to be noted that the defendant does not deny the existence of the email dated 26.4.2017. What the defendant is saying is that the email could not in any way be construed as an admission but was only a discussion between the employees of the defendant and that of the plaintiff.

[15]   With respect, I cannot assent to this argument. To begin with, there was no affirmative assertion on the part of Wan Rashid to the effect that Faradila was not authorised to issue the email. Secondly, the email was a reflection of the deliberation made by the management committee of the defendant and not written on the frolic of her own. Finally, there was a clear admission of debt with the phrase:

Total outstanding as at 23 March 2017 is RM2,586,371.93.

…

[17]   In the circumstances, the email dated 26.4.2017 was a clear and unequivocal admission from the defendant as not only the debt but also the amount stated therein. The acknowledgment of debt is further strengthened by the defendant’s act in asking for time to pay the amount.”

4. Judicial Admissions

   
   

Where admissions of debt are found in a party’s pleadings, these will constitute judicial admissions which stand on a higher footing than evidentiary admissions.  This can be seen in the following cases:

• in the Federal Court case of Yam Kong Seng v Yee Weng Kai [2014] 4 AMR 395, it was held at page 403 of the report as follows:

"[16] The above averment was in response to para 12 of the statement of claim wherein the appellants averred that the company and the respondent had confirmed in writing of the amount owing and payable to them. It is trite law that a judicial admission made in a pleading stands on a higher footing than evidentiary admission (Sartor’s Law of Evidence) with the respondent’s admission therein be made the foundation of the rights of the parties (Satish Mohan Bilal v. State of UP [1986] AIR All 126). Any failure on the part of the respondent to rebut the admission to avoid the legal consequences of his admission would entitle the appellants to enter judgment against him.

[17]  Having perused the defence in particular para 8, we find that there is clear judicial admission of the debt owed…

[18]… With there being judicial admission by the respondent sufficient to hold him liable to the amount claimed the answer to the first question of law in this appeal must be answered in the positive.”

• in the Court of Appeal case of YK Fung Securities Sdn Bhd v James Capel (Far East) Ltd [1997] 4 CLJ 300, it was held at page 332 of the report as follows:

“For the record, however, we must state that it is the opinion of this court that once a party to litigation has admitted a fact in his pleadings he shall not be heard to contend the contrary in the trial and in any appeal therefrom.”

Application of Estoppel

Where admissions are given on a debt, the debtor may be estopped from raising contentions that are inconsistent with (and depart from) the said admissions. (See the Federal Court case of Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 AMR 2871; the High Court case of BHS Book Printing Sdn Bhd (supra); the High Court case of Sykt Pakar Kayu & Perdagangan Sdn Bhd v Maa-sk Sdn Bhd [1986] CLJ (Rep) 694; and the High Court case of HTC Global Services MSC Sdn Bhd v Kompakar Ebiz Sdn Bhd [2009] 3 AMR 52)

Conclusion

Ultimately, the existence of admissions may simplify issues in dispute and may even enable creditors to obtain judgments without full trial. Identifying and relying on admissions at an early stage can therefore assist in the expeditious resolution of a claim.

This article was written by Polwin Sua Shiang-Nian. For any inquiries, please contact us.