Small Claims Procedure in Malaysia

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What happens when you have a dispute with another party and the sum involved is minimal? Will engaging a lawyer to represent you in court cost more than your actual claim?

In Malaysia, there are myriads methods or avenues that could potentially save you from paying excessive legal cost if you claim and the sum involved is minimal. We have discussed the use of Consumer Claims Tribunal in one of our articles. (Read more on Consumer Claims Tribunal here in case you missed it) Today, we will be discussing another alternate avenue in solving your dispute i.e. Small Claims Procedure.

What is Small Claims Procedure?

Small claims procedure (Small Claims) is an alternate avenue where individuals who have dispute amongst them can invoke in the magistrate court[1] without the need of a lawyer. However, there are certain pre-requisite that needs to be fulfilled before an individual can invoke small claims procedure, namely:

  1. The amount or value in dispute/ subject matter between the parties must not exceed RM5,000.00[2]; and
  2. The parties cannot be represented by a lawyer except in circumstances where the defendant is legally required to be represented by an authorized person[3].

It must be noted that while the rules prohibit the use of a lawyer in court if an individual/ micro-SMEs were to initiate a suit based on small claims procedure, it does not prohibits the individual/ micro-SMEs from seeking advice from a lawyer.

The relevance of small claims procedure in Malaysia to SMEs

SMEs are businesses that have a sales turnover of RM50 Million or less or where the business only have 200 employees or less in the company [4]. Data collected by SME Corporation Malaysia in 2018 indicate that a whopping 98.5% of business establishment in Malaysia is considered an SME[5].

However, not all SMEs are capable of churning out a sales turn over or RM50 Million nor do they have 200 employees under their employment. Some SMEs, for example, is manned by an individual who is earning just enough to keep the enterprise afloat. This group of SMEs are defined as micro-SMEs. More often than not, these are the SMEs that will have problems maintaining a legal dispute because:

  1. Legal cost is more than the amount recoverable; and
  2. Business or enterprises can potentially abuse this issue by targeting micro-SMEs as chances of a legal claim being brought against them are minimal because of the above factor.

The small claims procedure was initially set up to assist individuals in minor disputes provided that the above prerequisite conditions are met. It provides an inexpensive, simple and less time-consuming alternative to a lengthy, costly and complicated court process. The procedure has since able to assist micro-SMEs in the sense that now micro-SMEs does not need to write off their claims that is less than RM5,000.00 as bad debts. It also enables micro-SMEs to assert their legal rights and ensure that errant parties cannot escape from the long arms of the law.

Procedure in filing Small Claims

  1. Obtain Form 198 from the registrar of the Magistrate Court.
  2. State the amount and particulars to the claim [6].
  3. Signed/ thumbprint it[7] and file 4 copes with the registry of Magistrate Court along with RM10.00 as filing fees[8].
  4. Extract the sealed copies of Form 198 and serve it upon the Defendant via personal service or by prepaid registered post to the defendant’s last known address[9].
  5. The defendant who receives Form 198 will then have to file their defence and counterclaim (if any) under Form 199 within 14 days upon receiving the claim[10] to dispute the claim and if there is a counterclaim, the plaintiff may file a defence to the counterclaim under Form 200[11]. The signage and service are similar to those of Form 198[12].

Therefore, to prevent unwanted or unforeseen legal suits, always seek a lawyer’s advice before establishing a micro-SMEs as it could potentially assist you in protecting your business/ enterprise in terms of the running of your business and risk management in the long run.

Need to seek legal advice regarding Small Claims Procedure in Malaysia? Consult our lawyer today!

[1] Order 93 Rule 1(1), Rules of Court 2012.
[2] Order 93 Rule 2, Ibid.
[3] Order 93 Rule 7, Ibid.
[6] Order 93 Rule 3(2), Ibid. 
[7] Order 93 Rule 4(1), Ibid.
[8] Order 93, Rule 5(1), Ibid.
[9] Order 93 Rule 5(2), Ibid.
[10] Order 93 Rule 6(1), Ibid.
[11] Order 93 Rule 6(5), Ibid.
[12] Order 93 Rule (3) – (4), Ibid.

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