Hafiz Zubir, Athirah & Co.

SEE YOU IN COURT? OKAY, BUT FIRST, SECURITY FOR COSTS.

To sue, or not to sue?

In a Plaintiff’s mind, the question probably resonated ad nauseum et ad infinitum. Being the party commencing a suit in civil court, the Plaintiff has the advantage of choice. But for a Defendant, the choices are limited. Once the summons arrives in his hands, the bitter ultimatum is to draw the shield of defence, or risk facing the inevitable alternative of judgment in default.

In some cases, the Defendant may be able to secure a way to protect his interests by shackling the Plaintiff to a bond payment. Enter Order 23 of the Rules of Court 2012 (“ROC”), the rule on security for costs. The catch: this feature is constrained under the circumstances specified in Rules 1 and 2A of Order 23, applicable only when:

(i) The plaintiff is a resident out of jurisdiction

(ii) The plaintiff is a nominal plaintiff suing for the benefit of other person

(iii) The plaintiff’s address is not stated in the writ/originating summons

(iv) The plaintiff changed his address during the proceeding to evade the consequences of litigation

(v) The actual aggrieved person assigned his rights to the Plaintiff, so he may avoid his liability for costs

(vi) The Plaintiff is able to sue because someone contributed to his costs in return for a portion of money/property that the Plaintiff may recover in the proceeding.

Security for costs is a matter under the discretionary powers of the Court. In Luminous Crossroads Sdn Bhd V. Lim Kong Huat Construction, the Court quoted the ratio in Sir Lindsay Parkinson & Co Ltd v. Triplan Ltd [1973] 2 All ER 273 to summarize the Court’s consideration in order to exercise this discretionary power: [1]

“It is trite law that under O. 23 and s. 351, the court has a discretion which must be exercised after considering all the circumstances of the particular case.. In addition, this discretion is a judicial discretion which must be exercised according to established judicial principles.”

In Salchi Spa v Ler Cheng Chye (No 2), the Court’s rationale in balancing the justice of granting an application for security of costs lies in the surrounding situations of a given case: [2]

 “Whilst the circumstances that the court ought to consider might vary from case to case it would be impossible to categorize such circumstances. It is here that the court exercises its discretion by weighing the circumstances emanating from each case and to consider whether the justice of the case requires the granting of such security for costs.”

In deciding to grant an application for security of costs, the Court may consider the following circumstances of a given case:

a) Prospect of success

If the Defendant’s defence has a high probability to succeed, this will mean that the Plaintiff will end up bearing the costs awarded by the Court.

b) Enforceability of the judgment

Malaysian law provides for reciprocal enforcement of judgments in the reciprocating countries stated in the First Schedule of Reciprocal Enforcement of Judgments Act 1958 such as Brunei, Singapore and Hong Kong. If the Defendant succeeds in his Defence against a Plaintiff who is not a resident of the reciprocating countries, enforcing the judgment against the Plaintiff would prove difficult. [3] In such situations, the Court may grant security for costs to ensure the Plaintiff would not shirk any possible liabilities.

c) The writ/originating summons does not correctly state the Plaintiff’s whereabouts

According to Order 23 Rule 1(1)(c) of the ROC, the Court shall consider the fact that the Plaintiff failed to state its address or had incorrectly stated its address in the writ/originating summons. However, the consideration is subject to Order 23 Rule 1(2) – the Court shall not require the Plaintiff to give security for costs if the misstatement was innocently made, without any intention to deceive.

d) The Plaintiff is a nominal Plaintiff

The Court will order the Plaintiff to give security for costs if it is proven that the Plaintiff is a nominal plaintiff suing for the benefit of others, and the Court believes that he will not be able to pay the costs of the Defendant if the Court orders him to do so. [4]

e) Application made within reasonable time

While it is true that an application for security for costs may be made at any given time and not merely at the earliest opportunity [5], the Defendant must tread cautiously so as not to cause inordinate, inexplainable delay in filing the application [6], which may cause it to be dismissed by the Court.

f) Quantum of security

The quantum prayed for is unique on a case-to-case basis. For cases delving deep into technicalities or require specialized knowledge, such as intellectual property or construction cases, a higher quantum would be acceptable, as opposed to straightforward cases. The court may also consider if there have been many interlocutory applications being disposed in the proceeding, causing costs in the cause to skyrocket.

As a final note, the circumstances that warrant security for costs are flexible and the Court would look at what circumstances would bring justice to the case at hand. Nonetheless, just because a Defendant can, does not mean a Defendant should. The Court realizes that an application for security of cost can be a double-edged sword; so the Court would also probe into the probability that a Defendant is simply manipulating the mercy of the law into an oppressive tool to stifle a genuine claim. [7]

 


[1] Luminous Crossroads Sdn Bhd v Lim Kong Huat Construction [2002] 5 CLJ 1015

[2] Salchi Spa v Ler Cheng Chye (No 2) [1999] 1 LNS 16716

[3] Yu Gouqin V. Yap Kwee Yin [2020] 1 LNS 507

[4] Order 23 1(1)(b)

[5] Adarsh Pandit v Viking Engineering Sdn Bhd [1996] 1 LNS 350

[6] Ooi Meng Khin v Amanah Scotts Properties (KL) Sdn Bhd & Ors and another appeal [2013] 5 MLJ 773

[7] Luminous Crossroads (supra)

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