Preliminary thoughts on the COVID-19 law gazetted today
The legislation for COVID-19 was just gazetted today after the Royal Assent a week ago on 16 October 2020. There are 59 sections in total covering modifications to the legislation pertaining to the Public Authorities Protection Act 1948, the Insolvency Act 1967, the Hire-Purchase Act 1991, the Consumer Protection Act 1999, the Distress Act 1951, the Housing Development (Control and Licensing) Act 1966, the Industrial Relations Act 1967, the Private Employment Agencies Act 1981, the Land Public Transport Act 2010, the Commercial Vehicles Licensing Board Act 1987, the Courts of Judicature Act 1964, the Subordinate Courts Act 1948, and the Subordinate Courts Rules Act 1955.
All obligations for inability to pay since the governmental COVID-19 restrictions started in April 2020, under contract, hire-purchase, debt-repayment, are by this legislation, put on hold until 31.12.2020 for debtors to have some breathing space in handling the prospect of debt collectors coming a-knocking to breathe down their necks.
Creditors to give Time (For Contractual Obligations affected by COVID-19)
The Act provides that the inability of any party to perform their contractual obligations due to COVID-19 shall not give rise to the other party exercising their rights under the contract. The categories of contract include any work related to contracts for supply services, performance contracts, professional services, leases and tenancies of non-residential properties whether landed or stratified, contracts for goods obtained under hire-purchase and credit arrangements.
Moratorium
At first glance it appears that no creditor can sue for inability to pay, as the COVID-19 ACT 2020 extends a moratorium for debtors until 31.12.2020. Different categories of legislation modified above, have differing start and end dates for the moratorium. After a further look at the clauses of the Act, it is seen that this is only in respect of the inability to pay arising as a result of the COVID-19 pandemic. This might give a line to debt recovery options for creditors to go after shady debtors.
As for those who bought goods under credit arrangements, the debtor who bought things on credit and cannot pay, can return the items to perhaps cancel out the debt. The question arises what happens then when these items have depreciated in value upon purchase, as the debt value would not be paid back in full by the return of the goods.
Mediation
It must be noted that Section 7 to Section 12 seems to provide that a client may renege on the monthly professional fee due to their service provider if during the Covid period their inability to comply with payment obligations resulted from actions taken by the Government under the Prevention of Diseases Act. And it appears that the sole and only resolution to that breach as seen in Section 9, is for the parties to come to mediation and achieve settlement.
Is Mediation the Only Option Then?
Failure or Success of Mediation: if aggrieved creditors are seeking dispute resolution in respect of breach of contract for inter alia, unpaid debts, breach of hire-purchase and credit arrangements, it appears that under Section 9, their only option is binding mediation settlement. One complication though, in the event of inability to pay resulting in contract breach, if parties cannot agree and no settlement is reached, the question then arises whether reneging the contract plus failure of mediation settlement necessarily results in reference for dispute resolution to the Honourable Courts of Malaya. The COVID-19 Act cannot, in the interests of justice and equity, fully cancel out the jurisdiction of the Courts, at best what it can do, is to give debtors with a genuine inability to pay due to COVID-19 reasons, some breathing space. For all else, the Courts of Law await you and your dispute resolution processes.
Appoint a lawyer for all your legal advisory, assistance and representation needs where your COVID-19 debt recovery options or debt defence needs are concerned. You may look at the Malaysian Bar Directory online to find lawyers in active private practice who may be the best fit for you.Be safe in this new normal. Best regards from Messrs Varghese and Co
