The power of a Court to order the Plaintiff to an action to provide security for cost was analysed in the case of Wei Her Pte Ltd v Ooi Teik Seng & Dry Cut Sdn. Bhd.
The Defendants in the present case applied to the IP Court for an order against the Plaintiff, which is a Singapore company, to provide security for costs until the final disposal of the suit. The Court allowed the application and ordered the cost to be in the cause. The Plaintiffs dissatisfied filed an appeal.
Upon appeal, the IP Court held that it was just for the IP Court to make the order for cost for the Plaintiff to provide security for cost.
The IP Court in coming to its decision reviewed Order 23 Rule 1 (1) of Rules of Court 2012, the provision of law which deals with a Court’s power in an application for security for cost, specifically where the Plaintiff may be ordered to give security for the Defendant’s cost of the action.
Order 23 Rule 1 (1) of the ROC list downs circumstances in which a Court may order the Plaintiff of action to give security for the Defendant’s cost which are where:
a) the Plaintiff is ordinarily resident out of jurisdiction;
b) the Plaintiff (not being a Plaintiff who is suing in a representative capacity) is a nominal Plaintiff who is suing for the benefit of some other person and there is reason to believe that he will be unable to pay the cost of the Defendant if ordered to do so;
c) the Plaintiff’s address is not stated in the writ or originating summons or is incorrectly stated therein; or
d) the Plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation.
The Act further states “then, if having regard to all the circumstances of the case, the Court thinks it just to do, it may order the Plaintiff to give such security for the Defendant’s costs of the action or other proceedings as it thinks just.”
In the present case, the IP Court held that considering the phrase “then, if having regard to all the circumstances of the case, the Court thinks it just to do”, of the provision, the circumstances set out in Order 23 Rule 1 (1) are not conclusive and the Court has discretion to allow and application for security for cost depending on the facts of each case.
The IP Court further held that Order 23 Rule 1 (1) followed the principle laid down by Lord Denning in Sir Lindsay Parkinson & Co. Ltd. v. Triplan Ltd. [1973] 2 All ER 273 where Lord Denning held that the Court has discretion to order security for cost which is to be exercised having regards to the circumstances of the case. His Lordship went on to enumerate the circumstances that Courts might take into account in determining an application for security for cost, which are:
(a) whether the Plaintiff’s claim is bona fide and not a sham;
(b) whether the Plaintiff has a reasonably good prospect of success;
(c) whether there is an admission by the Defendant on the pleadings or elsewhere that money is due;
(d) if there was payment into Court of a substantial sum of money;
(e) whether the application for security was being used oppressively – so as to try and stifle a genuine claim; or
(f) whether the Plaintiff’s request has been brought about by any conduct of the Defendant, such as delay in payment or delay in doing their part of the work.
Referring to the decision of Lord Denning, the Court held the enumeration of situations or circumstances in His Lordship’s decision shows that there are numerous circumstances that the Court must take into consideration in granting an order for cost and it cannot limit itself to just one circumstance. Further, having considered the circumstances the case, the Court must ask itself whether it is just to make an order for cost.
The IP Court also made reference to Mohamed Dzaiddin J decision in Kasturi Palm Products v. Palmex Industries Sdn Bhd [1985] 1 LNS 149; [1986] 2 MLJ 310, who made similar observation referring to Lindsay Parkinson & Co. Ltd. v. Triplan Ltd. [1973] 2 All ER 273 and held that numerous circumstances listed by Lord Denning went on to show that there was no single rigid requirement and the Court must consider all the different circumstances before making an order for security for cost. The discretion of the Court granting an order for security must be exercised justly by having regards to all the circumstances of the case.
The IP Court also held that it is evident from decided cases that the fact that the Plaintiff was a foreign entity does not automatically warrant the Court to make an order of cost against the Plaintiff. Similarly, the fact that the Plaintiff is a resident of a country which is a reciprocating country under the Reciprocal Enforcement of Judgments Act 1958 may be a factor the Court take into consideration in granting an order for cost, but it can’t be the sole ground in allowing or disallowing an order for security for cost
The IP Court further dissected a plethora of cases and held the applicable principles that the IP Court needs to adopt in granting an order for costs are:
(i) security for costs is not obtainable as a matter of right against a foreign Plaintiff;
(ii) the application should be made as promptly as possible
(iii) the amount asked for the security shall not be exorbitant;
(iv) even if the Plaintiff has property within jurisdiction, it is not sufficient ground for the Court to disallow security;
(v) the mere fact of Plaintiff owning property in a country which has reciprocal enforcement of judgment agreement with Malaysia, is not also a ground for the Court refusing to order security, since the enforcement is not automatic;
(vi) the Court must consider whether the application was with the oppressive intent to stifle a genuine claim of the Plaintiff but the question of oppression alone even if it exists, is not sufficient reason not to grant the order; and
(vii) it is entirely within the domain and the discretion of the Court to order security by taking into account all the circumstances of the particular case in order to achieve a balance between ensuring that protection is afforded to the Defendant and at the same time to avoid injustice to the Plaintiff by unnecessarily shutting the Plaintiff out or stultifying the Plaintiff in the conduct of its litigation.
The decision of the IP Court in the present case reinforced that the Court has discretion in granting an order for cost against Plaintiff pending the disposal of the suit. The discretion must be exercised justly taking into consideration all the circumstances of the case.
The decision certainly comes as a sigh of relief especially for potential foreign Plaintiffs whereby they would not be hindered from filing a suit in Malaysia just because they are a foreign entity.