To Stay Or Not To Stay An Execution

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To Stay Or Not To Stay An Execution

August 21, 2020 Corporate & Commercial Disputes Litigation Advisory & Strategy 0

To kick start this article, let us briefly look at a scenario:

  1. A and B settle their dispute in court.
  2. A lost.
  3. A was ordered by the court to comply with a court order, which is, as we all would know by now, is in favor of B.
  4. Miffed, A filed an appeal.

During this time i.e. when the appeal process is underway, is A required to comply with the court order?

The short answer is yes, unless A applies for a stay of execution and succeeds in getting one.

What is a stay of execution

A stay of execution is an order temporarily restrain one party from enforcing his right (arising from a court judgment in the lower courts) against another party until any appeal against the court judgment heard and disposed of by the Court of Appeal.  

The law

The general rule

In Re Kong Thai Sawmill (Miri) Sdn Bhd; Lim Beng Sung v Kong Tai Sawmill (Miri) Sdn Bhd & Ors (No 2), the court noted that it will only grant a stay of execution if a party: 

  1. Can prove/ justify that there are special circumstances to do so;
  2. The special circumstances are related to the enforcement of the judgment or order that is being appealed; and
  3.  The party who applies for a stay undertakes to pay damages to the other party is the appeal is dismissed.

Why? This is to ensure that the successful party is not deprived of the fruits of their litigation. 

What are “special circumstances”?

In Leong Poh Shee v Ng Kat Chong, the court noted that:

“Special circumstances, as the phrase implies, must be special under the circumstances as distinguished from ordinary circumstances. It must be something exceptional in character, something that exceeds or excels in some way that is usual or common.”

Furthermore, the court also noted that there is no set definition of what constitutes “special circumstances”- it all depends on the facts of the case before the court.

Example of factors that constitute “special circumstances”

  • The appeal will be rendered nugatory i.e. futile if the stay is not granted. However, it must be noted that nugatoriness cannot be used as a standalone reason to ask for a stay of execution. 
  • If the appeal is allowed, the party who applied for a stay cannot be reinstated to his or her original position.

Example of factors that do not constitute “special circumstances”

  • Where the party applies for the stay as to give themself time to satisfy the judgment or alleviate their financial problem i.e. stall time satisfies the judgment order.
  • If there is a risk that if the stay is allowed, the party who applied for the stay may dispose of their assets, defeating the judgment order.

Example

In Pewira Affin Bank Bhd v Lim Ah Hee @ Sim Ah Hee, the court noted that an application for a stay cannot be applied to prevent a winding-up proceeding. This is because:

  1. Winding up proceedings are not governed by ROC (instead, it is governed by Winding-Up Rules and Insolvency Act)
  2. The focus being the judgment debtor, not the debt and the object is to appoint a receiver in the person of the Official Assignee over the assets of the debtor and to convert the status of the debtor into a bankrupt with certain disqualification and disabilities, the most important being the loss of control over his properties to the Official Assignee.
  3. Unlike an execution proceeding,  a winding-up proceeding is a proceeding by way of petition just like divorce, winding up or election to name a few, bears the characteristics of a fresh proceeding, unlike an execution proceeding.

In Ambank (M) Berhad v Mujur Zaman Sdn Bhd & Ors, the court noted that a stay should be granted in cases involving land, and especially in situations involving the auctioning or the sale of such land. This is because:

  1. If a stay was not granted, there is a real likelihood that one party who the case in the lower courts would proceed with the auction of the land in question. Thus the party who applied for a stay might lose the said lands even before the disposal of their appeal and the appeal would, therefore, be rendered nugatory; 
  2. The party who applied for a stay would sustain serious and irreparable damage as the loss of the said land may be irrecoverable; and
  3. The loss of the said lands might not be adequately compensated by damages even though the party who won the matter in the lower court has the capacity to pay the party who is applying for a stay.

 

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