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JUDICIAL INTERPRETATION OF THE HIGH COURT

IN APPLICATION OF THE SECURITY FOR COSTS

THAM YOON FAH

UNIVERSITI TEKNOLOGI MALAYSIA

i



THAM YOON FAH

A dissertation submitted in partial fulfillment of the

requirements for the awards of the degree of

Master of Construction Contract Management

Faculty of Built Environment

Universiti Teknologi Malaysia

SEPTEMBER 2012

ii

iii

DEDICATION

Deepest thanks to my parents, Siew How and Choy Har,

my family and friends

for their love, guidance, understanding and the countless hours of joy

we shared throughout the years.

Two small words to convey my inherit feeling in my heart:

Thank you.

iv

ACKNOWLEDGEMENT

Firstly, I would like to thank to my Supervisor, Dr. Nur Emma Mustaffa for

willing to spare out her precious time to provide me valuable advices and ongoing

support throughout my candidature to complete this research project. Without her

guidance and help in providing additional ideas, the completion of this research

project would not be a reality.

With the blessings and encouragement from lecturers, I continue my journey

of pursuing the challenges to study Master of Science in Construction Contract

Management. I am indebted to all the lecturers of this course for their kind advice

during the process of completing this master project report.

Other than that, I would also like to thank my family for supporting me to

take up this study. They have been very supportive to my ideas and kept inspiring me

besides pouring me with their unconditional love and tolerance that has been the

drive in pursuing my dreams. Without their constant support and love, I would not

become the person I am today.

Besides that, I would like to extend my sincere appreciation to everybody

who contributed to the accomplishment of this dissertation. My beloved course mates,

friends and buddies thanks for you all too. Without you all, life will become dully.

You make my university life interesting.

Lastly, a thousand thank to Universiti Teknologi Malaysia for providing such

a wonderful sanctuary for me and my fellow course mates. Thanks to you.

v

ABSTRACT

Security for costs is a fund of money paid into Court by a plaintiff to protect

defendants from unrecoverable costs associated with the plaintiff‟s action. The High

Court is guided by some considerations to make order for security for costs but the

considerations are not defined in detail and left the Court to interpret the meaning.

This has caused the Courts to give different interpretations in making the decisions.

Another issue which arise is whether the High Court has the power to grant interim

measures and make security for costs under section 11(1) of Arbitration Act 2005 in

support of an arbitration which is taking place or will take place outside Malaysia.

Besides that, section 11(1) of Arbitration Act 2005 has stated that any party

including the plaintiff may apply to the Court for interim measure which is nature is

contradictory to the general rule that is the security for costs is applied by the

defendant. Section 19 of Arbitration Act 2005 gives overlapping but not coextensive

powers to the arbitral tribunal that is baffling whether an interim order should be

sought from the High Court or the arbitral tribunal. In order to clear the doubt

regarding the application of security for costs, this research project is carried out to

determine the grounds for the High Court to order or dismiss the application for

security for costs. Legal cases are collected from year 1986 to year 2009 from

Malayan Law Journal via Lexis Malaysia website and documentary analysis was

conducted on the related cases. Finally, this research has shed some light in exposing

what are the possible reasons that the High Court may order or dismiss the

application for security for costs. From the analysis done on the cases, it is observed

that the party who apply the security for costs has to be the defendant. The High

Court has to consider all the circumstances in a particular case before making any

decisions. The High Court will order the plaintiff to furnish such security when the

High Court believes that the security is necessary.

vi

ABSTRAK

Jaminan kos adalah sejumlah wang yang dibayar ke dalam Mahkamah oleh

plaintif untuk melindungi defendan daripada kos tidak boleh dipulihkan kesan

daripada tindakan plaintif. Mahkamah Tinggi bersandarkan beberapa pertimbangan

untuk membuat perintah jaminan kos tetapi pertimbangan tidak ditakrifkan secara

terperinci dan meletakkan Mahkamah Tinggi untuk mentafsir makna. Oleh yang

demikian, Mahkamah Tinggi telah memberikan tafsiran yang berbeza dalam

membuat keputusan. Satu lagi isu yang timbul ialah sama ada Mahkamah Tinggi

mempunyai kuasa untuk memberikan langkah interim dan membuat jaminan kos di

bawah seksyen 11 (1) Akta Timbang Tara 2005 dalam menyokong timbang tara yang

sedang berlaku atau yang akan mengambil tempat di luar Malaysia. Selain itu,

seksyen 11 (1) Akta Timbang Tara 2005 menyatakan bahawa sesiapa termasuk

plaintif boleh memohon kepada Mahkamah Tinggi bagi langkah interim yang

bercanggah dengan peraturan umum iaitu jaminan kos dikenakan oleh defendan.

Situasi menjadi keliru bahawa sama ada suatu perintah interim perlu dicari daripada

Mahkamah Tinggi atau tribunal timbang tara apabila Seksyen 19 Akta Timbang Tara

2005 memberi kuasa yang bertindih tetapi tidak terperinci kepada tribunal timbang

tara. Demi menghilangkan keraguan mengenai permohonan jaminan kos, projek

penyelidikan ini dijalankan untuk menentukan alasan Mahkamah Tinggi memerintah

atau menolak permohonan jaminan kos. Kes-kes undang-undang dikumpul dari

tahun 1986 hingga tahun 2009 dari Malayan Law Journal melalui laman web

Malaysia Lexis dan analisis dokumentari telah dijalankan ke atas kes-kes berkaitan.

Akhirnya, kajian ini menemui apa sebab-sebab Mahkamah Tinggi memerintah atau

menolak permohonan untuk jaminan kos. Dari analisis kes, ia diperhatikan bahawa

pihak yang memohon jaminan kos perlu dilakukan oleh defendan. Mahkamah Tinggi

perlu mempertimbangkan segala keadaan dalam setip kes sebelum membuat

sebarang keputusan. Mahkamah Tinggi akan memerintahkan plaintif untuk

memberikan jaminan itu apabila Mahkamah Tinggi percaya bahawa jaminan adalah

diperlukan.

vii

TABLE OF CONTENTS

CHAPTER TITLE PAGE

TITLE PAGE i

DECLARATION ii

DEDICATION iii

ACKNOWLEDGEMENT iv

ABSTRACT v

ABSTRAK vi

TABLE OF CONTENTS vii

LIST OF TABLES xii

LIST OF FIGURES xiii

LIST OF ABBREVIATIONS xiv

LIST OF STATUTES xvi

LIST OF CASES xx

1 INTRODUCTION 1

1.1 Background of The Study 1

1.2 Problem Statement 3

1.3 Objective of The Study 5

1.4 Scope Of The Study 6

1.5 Significance Of The Study 6

1.6 Research Procedure 6

1.6.1 Phase 1: Preparation of Research Proposal 7

1.6.2 Phase 2: Literature Review 7

1.6.3 Phase 3: Data Collection 8

1.6.4 Phase 4: Data Analysis 8

1.6.5 Phase 5: Conclusion and Recommendation 8

viii

1.7 Research Flow Chart 9

2 ARBITRATION 10

2.1 Introduction 10

2.2 Type Of Arbitration 11

2.2.1 Ad Hoc Arbitration 11

2.2.2 Institutional Arbitration 12

2.2.3 Statutory Arbitration 13

2.2.4 Look-Sniff Arbitration 13

2.2.5 Flip-Flop Arbitration 14

2.2.6 Documents Only Arbitration 15

2.3 Arbitrator 16

2.3.1 Qualifications Of Arbitrator 16

2.3.2 Functions Of Arbitrator 17

2.3.3 Duties Of Arbitrator 17

2.3.4 Power Of Arbitrator 18

2.4 The Kuala Lumpur Regional Centre For Arbitration 19

2.5 Specific Disputes Brought To Arbitration 20

2.5.1 Determination Of Agreement 20

2.5.2 Payment And Time 20

2.5.3 Execution Of Work And Delay 21

2.6 Arbitration in Preliminary Matter 21

2.7 Costs 23

2.7.1 Cost Of The Reference 23

2.7.2 Cost Of The Award 24

2.8 Interim Measures by High Court 25

2.9 Power of arbitral Tribunal to Order Interim Measure 26

2.10 Comparison of Section 11 and Section 19 in Arbitration

Act 2005

27

2.11 Third Parties Consent 28

2.12 Security For Costs 29

2.12.1 Principles to be Adopted 31

2.12.2 Types Of Security For Costs 32

ix

2.12.2.1 Security for the Arbitrator‟s

Expenses and Fees

32

2.12.2.2 Security for the Parties‟ Costs 33

2.12.3 Problems For Arbitrators In Hearing

Applications For Security For Costs

33

2.13 Advantages Of Arbitration 35

2.14 Conclusion 36

3 CIVIL PROCEDURE IN THE HIGH COURT 37

3.1 Introduction 37

3.2 Cause Of Action 38

3.3 Limitation Act 39

3.4 Parties 39

3.4.1 Incorporated Bodies 40

3.4.2 Firms Or Partnership 41

3.4.3 Individuals Trading As Firm 42

3.4.4 Federal Or State Government 42

3.5 Costs 42

3.5.1 Cost Awarded 45

3.6 Security For Costs 47

3.6.1 Power To Order Security For Cost 49

3.6.2 Plaintiff Ordinarily Resident Out Of The

Jurisdiction

50

3.6.3 Insolvency Or Poverty Of Plaintiff 55

3.6.4 Plaintiff A Limited Company 56

3.6.5 No Security From Defendant 57

3.6.6 Counterclaiming Defendant 58

3.6.7 Security For Costs By Appellant 58

3.6.8 Discretion To Order Security For Costs 59

3.6.9 Application For Security For Costs 62

3.6.10 Manner of Giving Security 63

3.6.11 Amount of Security 64

3.6.12 Default In Giving Security 66

x

3.6.13 Payment Out To Successful Plaintiff 66

3.6.14 Procedure 67

3.7 Conclusion 67

4 RESEARCH METHODOLODY 68

4.1 Introduction 68

4.2 Approaches to Legal Research 69

4.2.1 Overview Approach 69

4.2.2 Topic Approach 70

4.2.3 Descriptive and Exploratory Approach 70

4.2.4 Analytical and Critical Approach 71

4.2.5 Historical Approach 72

4.2.6 Comparative Approach 72

4.3 Research Scope 73

4.4 Research Procedure 73

4.4.1 Phase 1: Preparation Of Research Proposal 74

4.4.2 Phase 2: Literature Review 74

4.4.3 Phase 3: Data Collection 75

4.4.4 Phase 4: Data Analysis 80

4.4.5 Phase 5: Conclusion And Recommendation 80

4.6 Research Flow Chart 81

4.7 Conclusion 82

5 JUDICIAL INTERPRETATION OF THE HIGH COURT


83

5.1 Introduction 83

5.2 Case Analysis 84

5.2.1 Case 1: Bintang Merdu Sdn Bhd v Tan Kau

Tiah @ Tan Ching Hai and Anor [2009] MLJU

585

84

5.2.2 Case 2: Jiwa Harmoni Offshore Sdn Bhd v Ishi

Power Sdn Bhd [2009] MLJU 788

88

xi

5.2.3 Case 3: Luminous Crossroads Sdn. Bhd. v Lim

Kong Huat Construction [2001] MLJU 475

92

5.2.4 Case 4: Ballast Nedam Groep Nv (M) Sdn Bhd

v Tradebond (M) Sdn Bhd [2000] 6 MLJ 416

98

5.2.5 Case 5: Government Of Sarawak v Sami

Mousawi-Utama Sdn Bhd (In Liquidation)

[1998] 3 MLJ 820

101

5.2.6 Case 6: Gateway Land Pte Ltd v Turner (East

Asia) Pte Ltd [1988] 1 MLJ 416

105

5.2.7 Case 7: Kasturi Palm Products v Palmex

Industries Sdn Bhd [1986] 2 MLJ 310

108

5.3 Summary of Decisions of High Court 111

5.4 Comparative Study 114

5.4.1 Defendant to apply security for cost against the

plaintiff

114

5.4.2 Comparison of Section 11 and Section 19 of

Arbitration Act 2005

118

5.4.3 Power to Order Security for Costs 119

5.5 Conclusion 122

6 CONCLUSION AND RECOMMENDATIONS 123

6.1 Introduction 123

6.2 Research Findings 123

6.3 Limitation Or Problem Encountered During The

Research

126

6.4 Recommendations For Further Research 127

6.5 Conclusion 128

REFERENCES 129

APPENDIX A - LIST OF CASES ANALYSED AND

COMPARED IN CHAPTER 5

131

APPENDIX B – SEMINAR PAPER 132

xii

LIST OF TABLE

TABLE NO. TITLE PAGE

4.0 Number of cases, name of cases and year of cases by use

of each keyword search in Malayan Law Journals cases

77

4.1 Cases to be analysed and compared in Chapter 5

79

5.0 The Summary of Decisions of High Court

112

6.1 The decision of the High Court and its reasons for

allowing or dismissing security for costs

124

xiii

LIST OF FIGURES

FIGURE NO TITLE PAGE

1.0 Flow Chart for Research Methodology

9

4.0 Flow Chart for Research Methodology 81

xiv

LIST OF ABBREVIATIONS

ABBREVIATIONS EXPLANATION

AC Law Reports: Appeal Cases

All ER All England Law Reports

AMR All Malaysia Reports

BCLC Building and Construction Law Cases

BLR Building Law Reports

CA Court of Appeal

Ch Cases in Chancery

Ch D The Law Reports, Chancery Division

CLJ Current Law Journal (Malaysia)

CP Law Reports, Common Pleas

CPD Law Reports, Common Pleas Division

DC District Court

FMSLR Federated Malay States Law Report

JCA Justice of Court of Appeal

KB King Bench

KLRCA Kuala Lumpur Regional Centre for Arbitration

LJCP Law Journal Reports, Common Pleas Decisions (England)

LJ Lord Justice

LJQB Law Journal Reports, Queens Bench

Lloyd‟s Rep Lloyd‟s List Reports

LNS Lawyers Reports Annotated, New Series

T Law Times Reports (England)

MLJ Malayan Law Journal

MLJU Malayan Law Journal Unreported

NZLR New Zealand Law Report

xv

QB, QBD Law Reports: Queen‟s Bench Division

TLR Times Law Reports

CITRAL United Nations Commission on International Trade Law

RCA Rule of Court of Appeal

RFC Rule of Federal Court

RHC Rules of High Court

WLR Weekly Law Report

WR Weekly Reports

xvi

LIST OF STATUTES

STATUTES PAGE


Section 6 22

Section 13(6) 30, 100

Section 13(6)(a) 30, 100, 101,

118

Section 19(1) 25

Section 24(3) 92, 93, 94, 97

Section 27 108


Section 11 4, 27, 28, 30,

89, 90, 112,

122, 124, 127

Section 11(1) 4, 25

Section 11(1)(a) 27, 118

Section 11(1)(b) 27

Section 11(1)(c) 27

Section 11(1)(d) 27

Section 11(1)(e) 27

Section 11(1)(f) 27

Section 11(1)(g) 27

Section 11(1)(h) 27

Section 11(2) 119

xvii

Section 19 5, 26, 27, 28,

30, 89, 90, 100,

118, 127

Section 19(1) 27, 29

Section 19(1)(a) 27, 29

Section 19(1)(b) 27, 29

Section 19(1)(c) 27, 29

Section 19(1)(d) 27, 29

Section 19(2) 29

Section 19(3) 118

Bankruptcy Act 1967

Section 8(1) 54

Companies Act 1948

Section 447 67

Companies Act 1965

Section 4 40

Section 169 94

Section 350 41

Section 351 48, 55, 56, 65,

86, 87, 90, 92,

94, 96, 115,

116, 117

Section 351 (1) 56, 101

Courts of Judicature Act 1964

Section 3 37

Legal Profession Act 1976

Section 123 64

xviii

Limitation Act 1953

Section 6(1) 39

Rules of High Court 1980

Order 5 rule 6(1) 40


Order 8 rule 3(1) 92, 96, 112,

125

Order 23 30, 50, 54, 92,

94, 96, 100,

115, 116, 117

Order 23 rule 1 49, 98, 115,

120

Order 23 rule 1(1) 52, 59, 64, 88,

109, 110, 114,

120, 121, 122,

126, 128

Order 23 rule 1(1)(a). 49, 50, 92, 94,

96, 99, 117,

120

Order 23 rule 1(1)(b). 49, 92, 94, 96,

99, 100, 117,

120

Order 23 rule 1(1)(c). 49, 92, 94, 96,

99, 117, 120

Order 23 rule 1(1)(d).

49, 92, 94, 96,

99, 113, 117,

125

Order 23 rule 1(2). 49, 120

Order 23 rule 1(3) 58, 91

Order 23 rule 2 64, 67, 104

Order 23 rule 3 50, 120

Order 24 43

xix

Order 27 rule 2 43


Order 27 rule 5 43


Order 32 rule 9 56

Order 33 rule 2 50

Order 36 rule 1 50






Order 59 rule 7 44

Order 59 rule 8 44

Order 59 rule 20 44

Order 62 rule 4 41

Order 73 42

Order 77 rule 1 41

Order 77 rule 9 42

Subordinate Court Rules 1980

Order 48 rule 21 87

xx

LIST OF CASES

CASES PAGE

Abdul Fattah Mogawan v MMC Power Sdn Bhd [1997] 5 CLJ1……………..…….52

Abu bin Mohamed v Voo Fui Tong [1938] MLJ 140……………………………..…63

Ace King Pte Ltd v Circus Americano Ltd & Ors [1985] 2 MLJ 75…………..……51

Adams v Colehurst (1795) 2 Anst 552………………………………………...…….51

Adarsh Pandit v Viking Engineering Sdn Bhd…………………………………....…65

Adderly v Smith (1763) 1 Dick 355……………………………………………….....51

Aeronave SPA & Anor. v Westland Charters Ltd & Ors. (1971) 1 WLR

1445...............................................................................................51, 60, 109, 111, 121

Alexandria Cotton & Trading Company (Sudan), Ltd. v Cotton Company of Ethiopia,

Ltd [1965] 2 Lloyd's List Law Reports 447…………………………………...….…95

Appah v Monseu [1967] 2 All ER 583……………………...……………………….51

Apollinaris Co v Wilson (1886) 31 ChD 632, CA (Eng)……..…………………..…57

Ashin Sdn Bhd v Datuk Bandar Kuala Lumpur & Ors [1999] 5 MLJ 663………….61

Bacal Contracting Ltd v Modern Engineering (Bristol) Ltd [1980] 3 All ER 655….65

Ballast Nedam Groep NV (M) Sdn Bhd v Tradebond (M) Sdn Bhd [2000] 6 MLJ

416…...............................................................................78, 80, 98, 113, 117, 125, 129

Bank Mellat v Helliniki Techniki SA [1984]QB 291………………………...………30

Banque des Travaux Publiques v Wallis [1884] WN 64……………………………59

Banque du Rhone SA v Fuerst Day Lawson Ltd, Promat SA (third parties) [1968] 2

Lloyd‟s Rep 153, CA (Eng)………………………………..……..…..…..…57, 60, 91

Beleggings Co Uranus NV v Bank of England [1948] 1 All ER 465, CA (Eng)…....57

Belmonte v Aynard (1879) 4 CPD 352, CA (Eng)………………...……………...…57

Bentsen Taylor, Sons & Co [1893] 2 QB 193, CA (Eng)……………..………….…63

Bintang Merdu Sdn Bhd v Tan Kau Tiah @ Tan Ching Hai and Anor [2009] MLJU

585………………………………………………...…………77, 79, 84, 112, 124, 129

xxi

Brisking Industries Sdn Bhd & Anor v. Mbf Insurans Berhad High [2008] 1 LNS

260…………………………………………………………………………...…..86, 87

Brown v Haig [1905] 2 Ch 379…………………………………………...…………57

Carnarvon Castle (1878) 38 LT 736, CA (Eng)………………………………….…52

Cf Strukturmas (Selangor) Sdn Bhd v Majlis Perbandaran Petaling Jaya [2001] 3

MLJ 344……………………………………………………......……………………62

Chellew v Brown (1923) 2 KB 844 CA………………………………………..……53

Channel Tunnel Group Ltd. v. Balfour Beatty Construction [1993] AC 334...……119

Comitato Portuario d’Importazione dei Carboni Fossili di Genova v Instone & Co

[1922] WN 260, CA (Eng)…………………………………...……………………...66

Compagnie Generale Des Eaux v Compagnie Generale Des Eaux Sdn Bhd [1993] 1

MLJ 55………………………………………………………..…………………..…53

Cook v Whellock (1890) 24 QBD 658, CA (Eng)…………………...………………55

Cowell v Taylor (1885) 31 ChD 34, CA (Eng)…………………………...…………55

Crozat v Brogden [1894] 2 QB 30 at 36, CA (Eng)………..….....53, 59, 60, 111, 121

Dartmouth Harbour Comrs v Dartmouth Hardness Corp (1886) 55 LJQB 483..….55

De St Martin v Davis & Co [1884] WN 86……………………..…………………..59

Duff Development Co Ltd v Kelantan Government (1925) 41 TLR 375………...….51

Duke de Montellano v Christin (1816) 5 M & S 503…………………………….....51

Ebury Garages Ltd v Agard 76 LJ 204…………………………………………...…47

Elf Petroleum v Winelf Petroleum [1986] 1 MLJ 177……………………..………..22

Etc v E Kong Guan [1934] MLJ 174……………………………………..…………66

Faridah Begum v Dato’ Michael Chong [1995] 2 MLJ 404……..…....50, 54, 59, 121

Gateway Land Pte Ltd v Turner (East Asia) Pte Ltd [1988] 1 MLJ 416

(Sing)..………………………………………...…..59, 78, 80, 105, 113, 114, 125, 129

Gill All Waether Bodies Ltd v All Weather Motor Bodies Ltd 77 LJ 123……...……47

Gordano Building Contractors Ltd v Burgess [1988] 1 WLR 890, CA (Eng)...……59

Government of Malaysia v Lim Kit Siang [1988] 1 CLJ 219………………..…...…38

Government of Sarawak v Sami Mousawi-Utama n Sdn Bhd (in liquidation) [1998] 3

MLJ 820………………………………..…………55, 78, 80, 101, 113, 118, 125, 129

Great Western Rly v Philips (1908) AC 101………………………………………..13

Green v Charnock (1971) 1 Ves 396………………………………………..………51

Gula Perak Bhd v Agri-Projects (M) Sdn Bhd [1989] 1 MLJ 4221…..…………….56

Gurubachan Singh v Seagrott & Campbell [1962] MLJ 309…………………..…...63

xxii

Hawkins v Rigby (1860) 29 LJCP 228……………………………………....………25

Hawkins Hill Consolidated Gold Mining Co Ltd v Want, Johnson & Co (1893) 69 LT

297…………………………………………………...…………………………...….63

Hinde v Haskew (1884) 1 TLR 94, DC (Eng)………………………………..……..56

Hitachi Shipbuilding and Engineering Co Ltd v Viafiel Compania Navira SA [1981]

2 Lloyd‟s Rep 498, CA (Eng)……………………………………………...………..53

Hogan v Hogan (No. 2) [1924] 2 Ir R 14………………………………………...….59

Hutchison Telephone (UK) Ltd v Ultimate Response Ltd [1993] BCLC 307, CA

(Eng)………………………………………………………………………..……….58

Jiwa Harmoni Offshore Sdn Bhd v Ishi Power Sdn Bhd [2009] MLJU

788………………………………………………...77, 79, 88, 112, 114, 115, 124, 129

John Barker Construction v London Portman Hotel (1996) 12 Const LJ 277...……35

Jones and Saldanha v Gurney [1913] WN 72………………………………..……..53

Kasturi Palm Products v Palmex Industries Sdn Bhd [1986] 2 MLJ

310……………………………………...…... 60, 78, 80, 108, 114, 118, 119, 126, 129

Keary Developments Ltd v Tarmac Construction Ltd & Anor [1995] 3 All ER

534………………………………………………………………………....….102, 103

Kevorkian v Burney (No. 2) [1973] 4 All ER 468, CA (Eng)……………...……..…52

K/S A/S Bani and K/s A/s Havbulki v Korea Shipbuilding and Engineering Corp

[1987] 2 Lloyd‟s Rep 445. CA (Eng)………………………………...……………..30

La Grange v McAndrew (1879) 4 QBD 210…………………………...……..…48, 97

Lek Swee Hua v American Express International Inc [1991] 2 MLJ 151…..………52

Letang v Cooper [1965] 1 QB 232………………………………………..………...38

Lewis v Haverfordwest RDC [1953] 2 All ER 1599, [1953] 1 WLR 1486…………24

Lim Kean v Choo Koon [1970] 1 MLJ 158………………………...………………..38

Low Chee Yan v Loh Kong Yew (1917) 2 FMSLR 176……………………..………65

Luminous Crossroads Sdn. Bhd. v Lim Kong Huat Construction [2001] MLJU

475………………………………………………...…....77, 80, 92, 112, 117, 125, 129

Maatschappij Voor Fondsenbezit v Shell Transport and Trading Co [1923] 2 KB 166,

CA (Eng)……………………………………………………………….....…..…57, 91

Madan Lal v Ho Siew Bee [1983] 1 MLJ 105………………………………..……..41

Mapleson v Masini (1879) 5 QBD 144 at 147, DC (Eng)………..…………53, 58, 91

Masling v Motor Hiring Co (Manchester) Ltd [1919] 2 KB 538, CA (Eng)...…...…55

Merton v Times Publishing Co Ltd (1931) 48 TLR 34, CA (Eng)……………..…...63

xxiii

Mynn v Hart (1845) 9 Jur 860……………………………………………...………..57

New Fenix Compagnie Anonyme d’Assurances de Madrid v General Accident, Fire

and Life Assurance Corp Ltd [1911] 2 KB 619, CA (Eng)…………………...…….58

Northern Regional Health v. Derek Crouch Construction Co Ltd (1984) 26 BLR

1……………………………………………………………………………………...35

Pearson v Naydler [1977] 3 All ER 531…………………...……………………..…56

Peppard and Co. Ltd v Bogoff [1962] IR 180…………………………...………..…48

Piper Double Glazing Ltd v DC Contracts (1992) Ltd [1994] 1 All ER 177, [1994] 1

WLR 777…………………………………………………………………...………..23

Pirelli Cable Works v Oscar [1983] 1 ALL ER 65.…………………………...…....39

Pooley’s Trustee v Whetham (1884) 28 ChD 38, CA (Eng)………………...………55

Procon (GB) Ltd v Provincial Building Co Ltd [1984] 2 All ER 368, [1984] 1 WLR

557, CA (Eng)……………………………………………………...………..…..64, 88

Raju Rajaram Pillai v MMC Power Sdn Bhd [2000] 6 MLJ 551…………….…65, 78

Re an arbitration between Authoreptic Steam Boiler Co Ltd and Townsend, Hook &

Co (1888) 21 QBD 182………………………….………………………….……….23

Re an arbitration between Walker & Son and Brown (1882) 9 QBD 434…...…23, 24

Re Apllinaris Co’s Trade-Marks [1891] 1 Ch 1, CA (Eng)……………...……….…52

Re B (Infants) [1965] 2 All ER 651n………………………………..………………57

Re Contract and Agency Corp Ltd (1887) 57 LJ Ch 5………………..……..….53, 59

Re Percy and Kelly Nickel, Cobalt and Chrome Iron Mining Co (1876) 2 ChD

531…………………………………………………………………………………...57

Re Smith, Bain v Bain (1896) 75 LT 46, CA (Eng)…………………..……………..62

Re Wadsworth, Rhodes v Sugden (1885) 29 ChD517. ……………...……………....64

Rhodes v Dawson (1886) 16 QBD 548, CA (Eng)………………..……………...…55

Sacker v Bessler & Co (1887) 4 TLR 17……………………………..……………..53

Salchi SPA v Ler Cheng Chye (No 2) 1 MLJ 556………………………...…………52

Seloga Jaya v Pembinaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97…...…22, 78

Serlaz v Hanson (1800) 5 Ves 261…………………………..……………………...51

Sir Lindsay Perkinson & Co. Ltd v Triplan Ltd [1973] 1 QB

609………………………………………………...…47, 48, 56, 62, 67, 106, 107, 109

Siti Juliana Suen Abdullah & Ors v Sungei Wang Properties Sdn Bhd & Ors [2009] 2

CLJ 592……………………………………………………………………...…..…..86

Skrine & Co. v MBf Capital Berhad & Anor [1998] 44 AMR 3298………....…47, 56

xxiv

Solitaire Land Sdn Bhd v Hong Leong Bank Bhd [2001] 4 MLJ 75…………...……64

Stratford & Son Ltd v Lindley No 2 [1969] 1 WLR 1547…………………...………45

Strong v Carlyle Press (No 2) [1893] WN 51…………………………...…………..58

T Sloyan & Sons (Builders) Ltd v Brothers of Christian Instruction [1974] 3 All ER

715…………………………………...……………………………………………....65

Thye Hin Enterprises Sdn Bhd v Daimler Chrysler Malaysia Sdn Bhd [2004] 5 AMR

562…………………………………………………………………...………………28

Vale v Offert (1874) 30 LT 457…………………………………………....………..62

Visco v Minter [1969] 2 All ER 714……………………………………..……….…57

Waiheke Homes v Laughland [1991] 3 NZLR 377………………………..………..95

Wee Tiang Kheng v Ngu Nii Soon & Ors [1989] 1 MLJ 252…………………….…42

Westwnberg v Mortimore (1875) LR 10 CP 438………………………..…………..53

Willmott v Freehold House Property Co (1885) 33 WR 554, CA (Eng)…..…….…66

Winterfield v Bradnum (1878) 3 QBD 324, CA (Eng)………………..…………….59

CHAPTER 1

INTRODUCTION

CHAPTER 1

INTRODUCTION

1.1 Background Of The Study

The Arbitration Act 2005 which substantially founded on the UNCITRAL

model law governs the arbitration proceedings in Malaysia.1 After 15

th of March

2006, this Arbitration Act only applies to arbitrations commencing.2 Arbitrations that

began before this date are governed by the Arbitration Act 1952.3

Jayaseelan has reported that arbitration gradually became more important in

current years as more business is operated internationally.4 The essence of the sort of

arbitration is that some dispute is referred by the parties for settlement to a tribunal of

their own choosing, instead of to a court.5 Arbitration is better than the usual legal

process because parties can determine the span of the arbitration process and

numbers of arbitrators either one or three, who are usually experts in their own field.6

It is also a more cost effective and efficient dispute resolution.7 The arbitrators are

familiar in a particular areas of business with the cases involve.8

1 Kuala Lumpur Regional Centre for Arbitration. Available at http://www.klrca.org.my/scripts/view-

anchor.asp?cat=10. (Last access on 28th March 2012) 2 Ibid. 3 Ibid. 4 Risen Jayaseelan. New Life for Arbitration. The Star 1st January 2011. 5 Anthony Walton. Russell on the Law of Arbitration. 20th Edition. London Stevens and Sons. 1982. 6 Ibid, No. 4. 7 Ibid. 8 Ibid.

http://www.klrca.org.my/scripts/view-anchor.asp?cat=10


2

Arbitration has become the dispute settlement mechanism and the norm in the

construction industry.9 This is because the popularity of arbitration clauses in

standard forms of construction contract.10

In addition, the use of arbitrator‟s skills in

technical disciplines due to the technical content of disputes.11

Next, the arbitrator

need to be empowered to open up, review and revise decisions or certificates, arising

from the architect‟s or engineer‟s judgment in administering the building contract.12

Fees, charges, disbursements, expenses and remuneration incurred by a party

or incidental to the conduct of the proceedings are examples of cost awarded by the

Courts.13

The award of costs is discretionary and the Court must make and order as

to costs to enable a party to recover such costs incidental to whom and the amount of

costs to be paid to litigant.14

The costs awarded may either be remuneration paid by

the client to his own solicitor or the costs which a litigant has to pay to another

litigant to compensate the other for the expenses which he has incurred in the

litigation.15

The general rule for security for costs is only applies against the plaintiff and

not against the defendant.16

Security for costs is an amount of money paid into the

Court by a plaintiff to protect a defendant against otherwise unrecoverable costs

either in whole or in part linked with reacting to the plaintiff‟s action.17

Hence, the

plaintiffs who start the legal proceedings are obligated to accept the resulting

responsibility for costs if their claims eventually fail. There are two exceptions which

are the defendant appealing and the defendant brings a counterclaim and is therefore

in the position of a plaintiff with regards to the counterclaim.18

9 Sundra Rajoo. Arbitration in The Construction Industry. Master Builders 1st Quarter. 2008. 10 Ibid. 11 Ibid. 12 Ibid. 13 Ravi Nekoo. Civil Procedure. 2nd Edition. Lexis Nexis. 2006. 14 Ibid. 15 Ibid. 16 Ravi Nekoo. Practical Guide to Civil Procedure in Malaysia. International Law Book Services.

2002. 17 John A. Keith, Cox Hanson O‟Reilly Matheson Halifax and Nova Scotia. Security for Costs against

Fraudulent Claims: A Comparative Overview. Risk Management Counsel of Canada. 1999. 18 Ibid, No. 16.

3

The defendant may apply to the Court so that the plaintiff provide security as

to costs where the defendant feels that the strength of the defence is good and there is

a good chance of defeating the plaintiff but is worried that the plaintiff will be unable

to make payment as to the order as to costs that maybe made at the end of the trial.19

The Court or the arbitrator makes order securing the right party who is eventually

successful to recover his costs of the arbitration and securing the right of a successful

claimant to be paid the amount of the award.20

There are two types of order for

security which are security for costs and security for claims.21

If the application of

the defendant for security to costs is allowed, the plaintiff will be required to

reimburse specific amount of money into court within specified period.22

1.2 Problem Statement

The High Court is guided by the following considerations in the practice of

its discretion to order security for costs23

:

i. Is the plaintiff‟s claim bona fide? Does the plaintiff have reasonably good

prospects of success?

ii. Is there an admission by the defendant?

iii. Is the application oppressive in nature that is to stifle a genuine claim?

iv. Has the plaintiff‟s want of means been brought on by the defendant?

v. The application must be made as early as possible in the proceedings.

Each consideration should act as a guideline to the Court for ordering security

for costs. However, they left behind some unclear statements. There are issues and

uncertainties regarding to the considerations stated above. This is because the

19 Ibid, No. 13. 20 Mustill and Boyd. Commercial Arbitration. 2nd Edition. Butterworths. 1989. 21 Ibid. 22 Ibid, No. 13. 23 Ibid.

4

guideline is very general in nature and does not specifically define in detail what the

considerations are and leave the Court to interpret the meaning. This situation would

to a certain extent lead to different interpretations by the Courts in making decisions.

Furthermore, one question arises is whether the High Court has the power to

approve interim measures under section 11(1) of Arbitration Act 2005 in support of

an arbitration which is taking place or will take place outside Malaysia.24

Hence,

there is an issue showing that whether the High Court has the power to approve

security for costs outside Malaysia. Besides, there is an issue which is whether the

power of the Court determines the grounds of the Court to dismiss the application for

security for costs. In other words, will the High Court dismisses the application for

security for cost due to the arbitration is held or will be held outside Malaysia?

The Arbitration Act (Amendment) 2011 amends the Arbitration Act 2005 and

empowers the Malaysian court that practices admiralty jurisdiction to order the

retention of vessels or the provision of security, during the determination of

arbitration proceedings related to admiralty or maritime disputes.25

Above all, the

Arbitration Act (Amendment) 2011 amends section 11 of the Arbitration Act 2005.

The altered section 11 is as the following:

“11. Arbitration agreement and interim measures by the Court:

(1) A party may, before or during arbitral proceedings, apply to a High

Court for any interim measure and the High Court may make the

following orders for:…”

Section 11(1) stated that any party may apply to the High Court for interim

measures and it seems that the High Court may make orders for security for costs

24 Sundra Rajoo and WSW Davidson. The Arbitration Act 2005 UNCITRAL Model Law as applied in Malaysia. Sweet and Maxwell Asia. 2007. 25 Rahayu Partnership - Advocates & Solicitors. Ship Arrest as Security for an Arbitration Claim: Post

the Arbitration (Amendment) Act 2011. E-newsletter 2011.

5

which is contradict to the general rule that the application for security for costs is by

the defendant.26

Thus, which party is in the position to apply for security for costs? It

should be the Plaintiff or the Defendant?

Security for costs is obtained by taking action by applying interim order.

Section 19 of Arbitration Act 2005 gives overlapping but not coextensive powers to

the arbitral tribunal, the question often arises as to whether an interim order should

be sought from the court or the arbitral tribunal.27

The Arbitration Act 2005 does not

provide any guidelines in this respect.28

This will lead to another question or problem

to the arbitrators whether to approve a security for costs. On the other hand, the High

Court has no reason not to hear the application for security for costs since the Court

is given such powers in Section19 of Arbitration Act 2005. Does the Court have

reasons not to grant security for costs for the plaintiff?

There are a few of uncertainties relating to apply security for costs as

mentioned at above. These uncertainties will definitely leads to many issues and

problems. In order to find out the solution and clear the doubt regarding to the

application of security for costs, this research project is has to carry out.

1.3 Objective of The Study

The objective of this study is to determine the grounds for the High Court to

order or dismiss the application for security for costs.

26 Ibid, No. 25. 27 Ibid, No. 24. 28 Ibid.

6

1.4 Scope of the Study

This study is focused on the following:

1. Arbitration Act 1952, Arbitration Act 2005, Rules of the High Court

1980 and Companies Act 1965.

2. Legal cases reported in Malayan Law Journal and Lexis Malaysia in

relation to security for costs in Malaysia and Singapore.

1.5 Significance of the Study

Essentially, this study was expected to generate answers for the uncertain

issues that arise in arbitration specifically the issues that in relation to security of

costs. In accordance to that, the identified issues stated in sub-heading 1.2 were

analyzed based on the interpretation and judgment by the High Court. This study is

capable to assist and guide the professionals in the construction industry to have a

clear and better understanding of judicial interpretation on security for costs in

arbitration.

1.6 Research Procedure

In order to achieve the research objective, a systematic method in conducting

this research had been organized. The study process consists of five phases:

7

Phase 1: Preparation of Research Proposal

Phase 2: Literature Review

Phase 3: Data Collection

Phase 4: Data Analysis

Phase 5: Conclusion and Recommendation

1.6.1 Phase 1: Preparation of Research Proposal

The first stage of the research involves initial study and discussion with

friends and lecturers regarding what are the issues in construction industry. Initial

literature review was conducted to find the idea of the research topic. After the initial

study, the brief proposal of the research topic was created. Then, the objective and

scope of the research were fixed. Next, a research outline was prepared to discover

what type of data was required in this research. Meanwhile, the data sources were

identified as well.

1.6.2 Phase 2: Literature Review

Literature review was a fundamental phase in the research process. It was

very important to assist in carrying out the research. It was conducted to provide a

comprehensive background study of the research. Literature review and various

documentats related to the research field had been collected to achieve the research

objective. The reviews mainly focused on the Arbitration Act, Civil Procedure and

Security for Costs.

8

1.6.3 Phase 3: Data Collection

At this phase, all the data and information related to security for costs were

gathered and collected. Data collected were from the Malayan Law Journal viz the

Lexis Malaysia online database. All the legal cases related to the research topic were

classified out from the database. Important cases were collected and utilised for the

analysis at Phase 4. Data collected were mainly through documentary analysis. All

gathered data and information were documented neatly and systematically so that the

data and information can be easily be traced back.

1.6.4 Phase 4: Data Analysis

This phase of research included data analysis, data interpretation and data

arrangement. This phase converted the data collected into information that is useful

and valuable for the research. Arrangement of data tends to simplify the process

writing of the paper.

1.6.5 Phase 5: Conclusion and Recommendation

The phase 5 was the final phase of the research process. Mainly, it involved

the writing up and checking of the writing. Conclusion and recommendations were

prepared with reference to the findings during the phase of data analysis.

9

1.7 Research Flow Chart

Figure 1.0: Flow Chart for Research Methodology

RESEARCH ISSUE

The issue is the grounds that the security for costs can be obtained or

rejected is unclear.

RESEARCH OBJECTIVE

To determine the grounds of High Court to approve or dismiss securities

for costs.

LITERATURE REVIEW

Civil Procedure, Rules of the High Court 1980, Arbitration Act 2005, arbitrator, arbitration proceeding, orders for security and security for costs.

RESEARCH METHOD

Data collection:

- Legal cases related to the security for costs in arbitration - Access to UTM library electronic database (Lexis Malaysia Legal

Database) - Collect cases from Malayan Law Journal.

Data analysis: Detail study on legal cases

DISCUSSIONS

CONCLUSION & RECOMMENDATIONS

CHAPTER 2

ARBITRATION

CHAPTER 2

ARBITRATION

2.1 Introduction

The first and oldest of alternative procedures to the Courts is arbitration.29

Arbitration is a procedure whereby disputing parties bring their issue to a third party

to solve their disputes without bringing the case to the law courts.30

There are

researches show that there is reluctance on the part of commercial undertakings to

have recourse to the law to resolve their disputes.31

On the other hand, in the

construction industry, arbitration is recognized as the dispute settlement

mechanism.32

It is treated as the last approach of dispute resolution.33

The arbitration

is famous due to its confidentiality, speed, flexibility and choice of the arbitrator.34

Chapter 2 discusses about the arbitration in Malaysia. This chapter provides

an overview regarding to arbitration to the readers. There are many elements of

arbitration are reviewed in this chapter, namely, type of arbitration, scope of

arbitration agreement, arbitrator, specific disputes brought to arbitration, interim

measures, costs and the most important part is security for costs in arbitration.

29 Gary Slapper. The English Legal System. Milton Park. 2009. 30 Ibid. 31 Ibid. 32 Ibid, No. 9. 33 Ibid. 34 Ibid.

11

2.2 Type of Arbitration

There are various types of arbitration available in Malaysia. Each type of the

arbitration has their own characteristics to differentiate them from one to another.

They are as presented in the sub-headings below.

2.2.1 Ad Hoc Arbitration

At a preliminary meeting, the parties and the arbitrator will carry out the

arbitration based on the procedures decided by the parties, in default of agreement or

listed down by the arbitrator.35

There are various existing sets of arbitration rules

including their own trade association‟s rules.36

It is an institutional arbitration if an arbitration agreement specifies that the

arbitration shall be administered by an arbitral institution.37

The arbitration is ad hoc

without such stipulation.38

Therefore, ad hoc arbitration is arranged by the parties

themselves without making reference to an arbitral institution.39

However, it is up to

the parties to implement the rules of the institution even they do not submit their

disputes to such institution.40

The merit of this type of arbitration is it may be planned based on the desires

of the parties especially where a state or Government agency is involved.41

However,

35 Sundra Rajoo. Law, Practice and Procedure of Arbitration. Lexis Nexis. 2003. 36 Ibid. 37 Ibid. 38 Ibid. 39 Ibid. 40 Ibid. 41 Ibid.

12

the parties have to build a fair and appropriate procedure to both sides by adopting or

adapting to suitable arbitration rules.42

In contrast, the demerit of this type of

arbitration is that it depends on the cooperation between the parties.43

It also depends

on their lawyers with an adequate legal system in the place of arbitration.44

Another

demerit of ad hoc arbitration is the arbitral proceedings can be easily delayed. The

arbitral proceeding can be postponed by the refusal of either party to appoint an

arbitrator or raising a challenge the jurisdiction or impartiality in the arbitral

tribunal.45

2.2.2 Institutional Arbitration

An arbitral institution administers an institutional arbitration.46

The parties

may lay down in the arbitration agreement to solve their dispute by a particular

institution.47

Such institutions manage or conduct arbitration based on the institution

rules.48

The institutions provide procedural framework, specialised expertise and

services.49

The parties will have a well- tested and tried set of arbitral rules which

normally are set out in a booklet.50

There is a method in the rules to challenge and

remove arbitrators.51

The disadvantage of this type of arbitration is the institution will accuse an

administrative fee adding to fees payable to the arbitral tribunal.52

Besides, it is

42 Ibid, No. 35. 43 Ibid. 44 Ibid. 45 Ibid. 46 Ibid. 47 Ibid. 48 Ibid. 49 Ibid. 50 Ibid. 51 Ibid. 52 Ibid.

13

possible postponement due to having a level of institutional administration of the

arbitration.53

2.2.3 Statutory Arbitration

Statutory arbitration is a creature of statute. It arises where the reference to

arbitration derives from an enactment of Parliament other than the Arbitration Act

1952. The source of this arbitration is not the arbitration agreement but a section of a

particular Act of Parliament.

The court has no jurisdiction to try the dispute where a statute by clear

language requires that certain disputes be settled by arbitration. This means that only

the arbitrator as appointed under the statute can decide on the dispute. In such an

event the court cannot invoke its authority on the ground that the arbitrator has

admitted inadmissible evidence.54

Besides, a statutory provision as to the operation

of a sub-section does not remove the court of jurisdiction to determine questions as

to the applicability of the sub-section as distinct from its operations.

2.2.4 Look-sniff Arbitration

In this arbitration, the parties will list down the required specification and

explain the agreed sample to the arbitrator.55

If required, the arbitrator inspects the

53 Ibid, No. 35. 54 Great Western Rly v Philips (1908) AC 101. 55 Ibid, No. 35.

14

products which are the factor of the dispute.56

He can conduct inspection without

further reference to the parties and presence of the parties when taking such

inspection.57

There are no formal hearings.58

The arbitrator applies his own

experience and knowledge to examine the evidences placed before him and gathered

by him.59

The arbitrator has large power to discover the related evidence and

information.60

At last, the arbitrator makes an award.

2.2.5 Flip-flop Arbitration

This type of arbitration is useful only in quantum disputes.61

This method is

based on the assumption that parties being businessmen would approach their dispute

in a pragmatic manner and should be encouraged to be reasonable and realistic in the

formulation of their cases.62

The parties can formulate their respective cases

beforehand.63

Then, the arbitrator is invited to choose one of the two. He cannot

choose somewhere between the two.64

If one party overclaims or put up an

unreasonable defence, the arbitrator will less likely to choose his formulation.65

Another variant of this arbitration is where the arbitrator himself decides a figure for

the final settlement, regardless of what the parties have put forward.66

The figure

may fall between the two rival figures put forth by the parties.67

56 Ibid, No. 35. 57 Ibid. 58 Ibid. 59 Ibid. 60 Ibid. 61 Ibid. 62 Ibid. 63 Ibid. 64 Ibid. 65 Ibid. 66 Ibid. 67 Ibid.

15

2.2.6 Documents Only Arbitration

This arbitration proceeds by exchanging the written documents only. This

arbitration is common in a few groups of domestic arbitrations, particularly in small

claims cases.68

This arbitration may not solve disputes where there are conflicts of

facts because the arbitrator cannot observe a witness cross-examined.69

It is useful

when the prime consideration is limitation of costs.70

It is based on the claim

statement, defence statement, written reply by the claimant, the documents submitted

by the parties with a list of references to the documents or other evidence submitted

by them.71

The supporting documents and written submissions are delivered by the

parties or his representatives in turn to the arbitrator.72

The written submissions can

be in the form of a letter or a more formal document produces by lawyers.73

The

arbitrator proceeds right away to write his award on the basis of the submissions and

documents once these written submissions are completed.74

He may seek

clarification on any point from the parties.75

The arbitrator will conclude every

dispute without additional reference to the parties.76

68 Redfern and Hunter. Law and Practice of International Commercial Arbitration 3rd Edition. Sweet

& Maxwell. at p 301 and 329. 1999. 69 Ibid, No. 35. 70 Ibid. 71 Ibid. 72 Ibid. 73 Ibid. 74 Ibid. 75 Ibid. 76 Ibid.

16

2.3 Arbitrator

2.3.1 Qualifications of Arbitrator

Any natural person is capable in law of being the subject of a valid

appointment as arbitrator and of publishing a binding award.77

The parties must abide

by their choice if the parties choose to have their disputes resolved by a person who

is not equal to the task.78

Extreme youth or age, mental or physical infirmity, do not

deprive an arbitrator of the power to act or render his award a nullity.79

A limited company, possessing only corporate personality, cannot validly be

appointed.80

Sometime, arbitration agreement provide for a reference to a particular

trade association.81

Where the association is an incorporated body, it is usual to read

the agreement as if the reference were to persons nominated by the association from

amongst its members.82

Nor can a group of people, such as a partnership firm, be

nominated to act as an arbitrator.83

A group of people can be appointed to act as a

complete tribunal, if that is what the agreement requires.84

The constitution of the

tribunal should remain the same throughout for it is the duty of each arbitrator to

adjudicate upon the whole of the dispute.85

Incapacity on the part of an arbitrator does not deprive him of jurisdiction but

it does not follow that a party is without remedy if the arbitrator proves completely

77 Ibid, No. 20. 78 Ibid. 79 Ibid. 80 Ibid. 81 Ibid. 82 Ibid. 83 Ibid. 84 Ibid. 85 Ibid.

17

unable to conduct the reference.86

Moreover, a party who finds that the reference is

making no satisfactory headway because the arbitrator is incapable of carrying it

further may have remedies by way of injunction or concurrent action.87

2.3.2 Functions of Arbitrator

The function of an arbitrator is to resolve in a judicial manner every dispute

that has been referred to him or her by the parties.88

In executing this function, the

arbitrator is obligated89

:

i. to act fairly between the parties, avoid conscious and, so far as possible,

unconscious bias;

ii. not only to be impartial but be seen to be impartial;

iii. to pay close attention to any evidence or arguments presented by the

parties and be clearly seen to be doing so; and

iv. to keep the parties fully advised as to what he or she is doing and

proposes to do.

2.3.3 Duties of Arbitrator

The word „duties‟ denote rules that an arbitrator ought to follow. An arbitrator

has a duty to90

:

86 Ibid, No. 20. 87 Ibid. 88 Sundra Rajoo. Function, Powers and Duties of the Arbitral Tribunal. Malayan Law Journal

Articles. [2001] 2 MLJ xvii 89 Ibid.

18

i. Act judicially;

ii. Act fairly and in accordance with natural justice, that is, to be unbiased

and to provide each party a fair chance to present his case, to know the

opposing case and to meet the opposing case;

iii. Act within the terms of his or her appointment;

iv. Act efficiently; and

v. Give certainty and finality to the process.

The arbitrator is the master of the proceedings, subject to any rules that apply

and to any joint directions from the parties.91

In general terms, the arbitrator can

conduct the proceedings freely, provided each party is given proper and equal

chances to present their case.92

The arbitrator must abide by the principles of natural

justice.93

2.3.4 Power of Arbitrator

An arbitrator‟s powers are derived from three sources, namely94

:

i. Statute law;

ii. Common law; and

iii. Private law (that is, the arbitration agreement, any specific contractual

provisions and specific rules).

90 Ibid, No. 88. 91 Ibid. 92 Ibid. 93 Ibid. 94 Ibid.

19

2.4 The Kuala Lumpur Regional Centre for Arbitration

The Kuala Lumpur Regional Centre for Arbitration (hereinafter known as the

KLRCA) was set up in 1978.95

The KLRCA is set up because the developing

countries did not have adequate institutionalized arbitration processes in comparison

with America and Europe.96

This was at the time when the normal choice of

contracting parties was to include arbitration clauses for arbitration to be held in

London or in some other European countries and by reference to non-local rules.97

The rules applied to the KLRCA are the UNCITRAL rules with some

modifications which relate to the administration of the arbitration.98

Recent

amendments to the rules have been introduced on the initiative of the present

Director of the KLRCA as a result of her own experience in administering the

KLRCA.99

Now, these provide for the award of the Tribunal to be delivered within

six months of receipt of the defence or counterclaim or the time provided for delivery

of the defence or counterclaim with a provision for the extension of time by the

arbitral tribunal with the agreement of the parties or in the absence of consent, in

consultation with the Director of the KLRCA.100

The other major amendment has

been in relation to the arbitrator's fees with the rules now providing for a minimum

and maximum amount to be paid, which sum is calculated on the amount in

dispute.101

95 Ibid, No. 88. 96 Vinayak P Pradhan. Dispute Resolution and Arbitration in Malaysia. Malayan Law Journal

Articles. [1992] 2 MLJ clxxii 97 Ibid. 98 Ibid. 99 Ibid. 100 Ibid. 101 Ibid.

20

2.5 Specific Disputes Brought To Arbitration

The diverse disputes brought to arbitration are identified by Fenn and

Gameson which are equally applicable in Malaysia.102

The disputes are categorised

at the sub-heading below:

2.5.1 Determination of Agreement

The contractor or sub-contractor fail to carry on work in a competent, diligent

and satisfactory manner is one of the disputes that caused the determination of the

agreement.103

In addition, the disputes that caused by the determination of the

agreement are the employer repudiating the contract by not making progress payment,

denying contractor access to site or being insolvent and the contractor or sub-

contractor stop work on site and.104

2.5.2 Time and Payment

The disputes caused by the payment issues are listed at below105

:

i. Non-payment of variation claims by contractor or sub-contractor.

ii. Non-payment of progress claims by contractor or sub-contractor.

iii. Non-payment of amount certified in final account.

102 Ibid, No. 9. 103 Ibid. 104 Ibid. 105 Ibid.

21

iv. Extension of time costs claims by contractor or sub-contractor.

v. Liquidated and ascertained damages charged against the contractor or

sub-contractor.

vi. Retention monies not held in separate account by contractor.

vii. Validity of final account and certificate.

viii. Contractor claim sums for fluctuation of prices.

2.5.3 Execution of Work and Delay

There are disputes caused by site and execution of work issues which are

listed at below106

:

i. Sub-structure design changes and temporary support when excavations is

not sufficient

ii. Low quality of and negligent in manufacturing and supplying claims

iii. Low quality of workmanship

iv. Local authorities‟ requirements cause delays and extension of time

v. Nuisance and negligence.

2.6 Arbitration in Preliminary Matter

One must determine whether the contract contains an arbitration clause.107

If

there is an arbitration clause, the action cannot be filed in court.108

In circumstances

106 Ibid, No. 9. 107 Ibid, No. 13. 108 Ibid.

22

where an action is commenced in court regardless of the presence of an arbitration

clause, the opponent can apply for a stay of the action.109

Nevertheless, according to

section 6 of Arbitration Act 1952, the Court still has jurisdiction to hear the matter

arbitrated upon.110

In Seloga Jaya v Pembinaan Keng Ting (Sabah) Sdn Bhd111

, it was held that

the defendant must show affidavit evidence to the Court that when proceedings were

begun up to the time when the exercise of the Court‟s discretion is required for the

grant of stay. Furthermore, the defendant must show that he is prepared for the

proper conduct of arbitration. The burden is on the plaintiff to please the Court that

he must to be granted to go on with action. In this case, the judge failed to distinguish

that at such an early stage. The defendant (Contractor) was grateful to do beyond

affirming a enthusiasm to appoint an arbitrator and the defendant nearly no chance to

raise the arbitration clause before the issue of the writ.

However, if a party can satisfy the Court that the circumstances for the grant

of stay under section 6 of the Arbitration Act 1952, it does not ipso facto follow that

he will be entitled to a stay as of right, for the Court still preserve a discretion to

reject it. The parties who create a contract to arbitrate their dispute should be held to

their bargain. In this situation, an arbitrator with proficiency might capable to handle

with the issues which will happen form a decision before a judge. Hence, the order

for stay of proceedings under section 6 of the Arbitration Act 1952 was approved and

the claims brought to arbitration.

109 Ibid, No. 13. 110 Elf Petroleum v Winelf Petroleum [1986] 1 MLJ 177. 111 [1994] 2 MLJ 97

23

2.7 Costs

Costs of the arbitration are all the expenses properly incurred in the conduct

of the arbitration.112

It does not refer to the substantive amount claimed in a reference

to arbitration.113

Generally there are two types of costs which are the cost of the

reference and cost of the award. The demarcation between the costs of the reference

and costs of the award can give rise to confusion as illustrated in Re an arbitration

between Walker & Son and Brown114

where Field J said: “Common sense suggests

that the power over the costs of the reference includes a power to give the costs of

the award. If no award was made, the reference would never be finished.”

2.7.1 Cost of the Reference

The cost of the reference is the parties‟ own costs including legal costs and

fees of counsel or other representative including a lay representative.115

An example

of cost of the reference is the costs incurred in bargaining the reference to the

arbitrators will be included under this head.116

Besides, these costs are those which

the parries reasonably incur in preparing, presenting and prosecuting the claims made

or in defending against them.117

These are legal fees payable by the parties to their

lawyers together with payments to other professionals and expert witnesses.118

The

fees included the hotel and travelling expenses of the lawyers, copying charges,

telephone bill and electronic mail expenses.119

They also include any fees payable to

112 Ibid, No. 35. 113 Ibid. 114 (1882) 9 QBD 434. 115 Piper Double Glazing Ltd v DC Contracts (1992) Ltd [1994] 1 All ER 177, [1994] 1 WLR 777. 116 Re an arbitration between Authoreptic Steam Boiler Co Ltd and Townsend, Hook & Co (1888) 21

QBD 182. 117 Ibid, No. 35. 118 Ibid. 119 Ibid.

24

an arbitral institution for administration and supervision of the arbitration.120

These

are the party-related costs.121

The Arbitration Act is silent with respect to the indirect

expenses incurred by the parties themselves for example, on hotel and travelling

expenses.122

Sometimes the term costs of the reference were given a wider connotation so

as to include even costs of the award viz, all costs incurred in connection with the

arbitration.123

For instances, the court in Re an arbitration between Walker & Son

and Brown124

held that an agreement between the parties referring to costs of the

reference was to be taken as meaning all costs and not simply party costs. The power

to deal with the costs of reference includes the power to deal with the costs of award.

However, the Court in Lewis v Haverfordwest RDC125

criticized an award where the

arbitrator ruled that the losing party bear the arbitrator‟s costs of the award but want

to order that the parties are to bear their own legal costs.

2.7.2 Cost of the Award

The arbitrator‟s fees and proper expenses incurred for setting up and

administration of the arbitration is the cost of the award is. These are arbitral

tribunal-related costs. By and large, these expenses are incurred for payment of the

fees and expenses of the arbitrator and witnesses. They also include other expenses

in the arbitral proceedings and the arbitral award. This type of cost can be further

divided into three categories.

120 Ibid, No. 35. 121 Ibid. 122 Ibid. 123 Ibid. 124 (1882) 9 QBD 434. 125 [1953] 2 All ER 1599, [1953] 1 WLR 1486.

25

The first category is the arbitrator‟s own fees and expenses.126

This would

include the costs of an arbitrator stops to act but who is entitled to fees and

expenses.127

The fees would also include those of an umpire who has not been called

upon to resolve the dispute but who nevertheless sat in the proceedings pending

disagreement between the arbitrators under section 19(1) of the Arbitration Act

1952.128

The second category is the expenses and fees of any arbitral institution

involved in the arbitration such as in the appointment of arbitrators or in the hearing

of appeals. The third category is any costs subsidiary to the arbitration.129

This would

include the fees of experts, translators, interpreters and scribes for the preparation of

the transcript, photocopying, the hiring of premises for the holding of the arbitration

and the like.130

2.8 Interim Measures by High Court

The areas where the High Court can give orders are listed in section 11(1) of

the Arbitration Act 2005.131

This section stated that a party may apply any interim

measure prior to or during arbitral proceedings to a High Court.132

The High Court

make orders for133

:

(a) Security for costs.

(b) Discovery of documents and interrogatories.

(c) Giving of evidence by affidavit.

(d) Appointment of a receiver.

(e) Securing the amount in dispute.

126 Ibid, No. 35. 127 Ibid. 128 Ibid. 129 Ibid. 130 Hawkins v Rigby (1860) 29 LJCP 228. 131 Ibid, No. 4. 132 Ibid. 133 Ibid.

26

(f) The preservation, interim custody or sale of any property which is the

subject-matter of the dispute.

(g) Ensuring that any award which may be made in the arbitral proceedings is

not rendered ineffectual by the dissipation of assets by a party.

(h) An interim injunction or any other interim measures.

2.9 Power of Arbitral Tribunal to Order Interim Measure

Section 19 applies unless the parties agree about it.134

This section

corresponds to article 17 of the UNCITRAL Model Law.135

Section 19 deals with the

issue of interim measures issued by the arbitral tribunal.136

This section recognises

the arbitral tribunal‟s expertise and ability to order interim measures in a particular

case where it deems crucial.137

The intention of such an order is to prevent, mitigate

or alleviate any demerits pop out during the arbitral proceedings till the publication

and enforcement of the award.138

The crux of the interim measure of protection is

speed and expediency.139

According to section 19 of Arbitration Act 2005, a party

may requests the arbitral tribunal to make an order with regards to:

(a) Security for costs.

(b) Discovery of documents and interrogatories.

(c) Giving of evidence by affidavit.

(d) The preservation, interim custody or sale of any property which is the

subject-matter of the dispute.

134 Ibid, No. 25. 135 Ibid. 136 Ibid. 137 Ibid. 138 Ibid. 139 Ibid.

27

The arbitral tribunal can ask any party to furnish proper security in

connection with the ordered interim measure.140

It follows from the arbitration

agreement that the interim measure must relate to the subject matter of the dispute

and the order may only be deal with to the parties to the agreement.141

The specific powers listed in section 19(1) are given to the arbitral tribunal

except in the unlikely situation that they have been expressly expelled by agreement

of the parties either in the arbitration agreement or by any subsequent agreement.142

Conversely, the powers of the arbitral tribunal may be extended by the rules of the

relevant arbitral institution or by the arbitration agreement or any subsequent

agreement.143

2.10 Comparison of Section 11 and Section 19 in Arbitration Act 2005

The powers listed under section 11(1)(a), (b), (c) and (f) correspond with the

parallel powers granted to Arbitral tribunal under section 19(1)(a) to (d) are drafted

in similar terms. As to the principles governing the proper exercise of the parallel

powers all other things being equal, the parties should first apply to the arbitral

tribunal for the exercise of these powers.144

In contrast, the powers listed under

section 11(1)(d), (e), (g) and (h) for the High Court are excluded from the arbitral

tribunal. These powers can be expressly confirmed by the arbitration agreement, the

rules of the relevant institutional body or the parties‟ subsequent agreement. The

arbitral tribunal has no authority to make orders as below:

(a) Appointment of a receiver.


28

(b) Securing the amount in dispute.

(c) Ensuring against dissipation of assets (Mareva type).

(d) An interim injunction or any other interim measures.

The main difference between these two sections is that the power of the

arbitral tribunal under section 19 can only be invoked after the formation of the

arbitral tribunal and up to the termination of the arbitration proceedings while the

power of the High Court under Section 11 can be invoked at any time.145

2.11 Third Parties Consent

The discretionary power of the arbitral tribunal to order interim measures has

to be limited to orders directed at the other party or parties to the arbitration since the

arbitral tribunal has no power to bind third parties.146

Thus, it is advised that a party

to make his application to the High Court under section 11 of the Arbitration Act

2005 who desires to bind a third party.147

The power of arbitral tribunal to order interim measures of protection under

section 19 is not ex officio.148

It can only be exercised after a formal application by a

party. 149

There is also no provision in Section 19 or in the Arbitration Act 2005 for

the making of ex parte applications to the arbitral tribunal and it is submitted that no

such power can be implied.150

There should in any case be no need for any ex parte

order in respect of section 19(1)(a), (b) or (c) and it is only in respect of section

19(1)(d) that the need for an urgent application for an interim order without the

145 Thye Hin Enterprises Sdn Bhd v Daimler Chrysler Malaysia Sdn Bhd [2004] 5 AMR 562. 146 Ibid, No. 25. 147 Ibid. 148 Ibid. 149 Ibid. 150 Ibid.

29

knowledge of the other party may arise.151

Again a party in this situation is advised

to make his application to the High Court, where there is power under the Rules of

High Court to make ex parte orders in cases of urgency under the stringent

conditions laid down by the Rules and case law.152

2.12 Security for Costs

Section 19 of Arbitration Act 2005 provides power to arbitral tribunal to

order interim measures. This arbitral tribunal are allowed to order interim measures

such as security for costs, discovery of documents and interrogatories, giving of

evidence by affidavit and preservation, interim custody or sale of any property which

is the subject matter of the dispute. The High Court has the same powers under

section 11.

Under section 19(2), the arbitral tribunal can order the provision of

appropriate security in connection with any measure ordered under section 19(1)

which is aimed at covering any damage arising from the unjustified issuance of such

an order.153

The extent of the security is not limited to the cost of such interim

measures but many also include the approximation of any foreseeable damage to the

other party.154

This additional power is likely only to be relevant to an order under

section 19(1)(d).155

On the other hand, the Arbitration Act 1952 does not confer the power to

order security for costs on the arbitrator but only on the High Court which is


30

empowered under section 13(6)(a) and Order 23 of RHC 1980.156

Nevertheless, it is

possible for the parties to confer such power on the arbitrator in the arbitration

agreement.157

The powers of the High Court are to be without prejudice to any power

which may be given to an arbitrator is provided under the section 13(6) of the

Arbitration Act 1952.158

However, the Arbitration Act 1952 has no provision which

allows a court of law to order security for costs of arbitration proceedings which had

been concluded but the costs of which remains to be taxed by the Registrar.159

The principle that costs follow the event is necessarily supplemented by the

further principle that the plaintiff should not be allowed to proceed with his action

without giving security for costs if there is some doubt as to whether he will be in the

position to meet the defendant‟s costs should his action fail.160

By its nature such an

order cannot be made against the defendant.161

The power of High Court to order

security for costs cannot be ousted by an express contrary agreement between the

parties.162

The court in K/S A/S Bani and K/s A/s Havbulki v Korea Shipbuilding and

Engineering Corp163

considered an order for security for costs was appropriate where

the proceedings were expensive and complex and the claimant‟s financial position

was insecure. However, the court in Bank Mellat v Helliniki Techniki SA164

declined

to make an order for security for costs where foreign parties had agreed to arbitrate in

England under the rules of the International Chamber of Commerce.

156 Ibid, No. 35. 157 Ibid. 158 Ibid. 159 Ibid. 160 Ibid. 161 Ibid. 162 Ibid. 163 [1987] 2 Lloyd‟s Report 445. CA (Eng). 164 [1984] QBD 291.

31

An order for security for costs may be approved to a claimant advancing a

counterclaim.165

In the occasion of a party unable to fulfil an order to provide

security, the High Court may order a permanent stay of the arbitration

proceedings.166

The court has power to permanently prohibit a defendant from

defending arbitration proceedings for failure to fulfil an order to secure a dispute

fund by paying it into court.167

2.12.1 Principles to be Adopted

Very often an arbitrator will be asked by a respondent to order security for

costs against a claimant.168

An arbitrator is not bound to follow the same procedure

and apply the same tests as the court in similar circumstances.169

The arbitrator must

act fairly and justly.170

However, an arbitrator will be very wise to be guided by the

same test that the court would apply.171

Security for costs is normally given against limited companies but individuals

and partnerships are usually exempt even though an arbitrator would appear to have

power to order security against an individual.172

In respect of a company, it must be

proved that the claimant would not but not merely might be unable to pay the

respondent‟s costs of the defence if the respondent was winning in its defence.173

To

defeat a claim for security, a claimant might wish to establish that it would have been

165 Ibid, No. 35. 166 Ibid. 167 Ibid. 168 Crowter. Dispute Resolution Guides: Introduction to Arbitration. LLP. 1998. 169 Ibid. 170 Ibid. 171 Ibid. 172 Ibid. 173 Ibid.

32

in this financial position if it were not for the acts of the respondent complained of in

this arbitration.174

2.12.2 Types of security for costs

There are two types of security for costs namely security for the arbitrator‟s

expenses and fees and security for the parties‟ costs. These two types are discussed

as sub-headings below:

2.12.2.1 Security for the Arbitrator’s Expenses and Fees

The arbitrator wishes to ensure that his expenses and fees are paid at the end

of the arbitration.175

It is unfortunate when both parties become insolvent or lose

interest in the arbitration.176

Therefore, the arbitrator will normally ask for his fees to

be secured in some way such as payment of a cash sum into a suitable deposit

account to the arbitrator‟s order.177

An arbitrator may obtain both parties‟ agreement

to his scale of charges and terms of engagement.178

174 Ibid, No. 168 175 Ibid 176 Ibid. 177 Ibid. 178 Ibid.

33

2.12.2.2 Security for the Parties’ Costs

The principle is that a claimant or counterclaimant takes the risk that a

respondent may not be able to pay its costs if it is successful in its claim.179

It must

weigh that risk when it decides to commence the arbitration.180

However, the

position if a respondent is different.181

The respondent did not choose to start the

arbitration and it is entitled to be sure, if it is successful in its defence and subject to

certain safeguards, that its costs will be met.182

2.12.3 Problems for arbitrators in hearing applications for security for costs

The claimant might also wish to establish that the respondent is not genuine

in suggesting it might be wholly successful in defending the action, because it has

already made an open or without prejudice offer to settle, indicating, at least under

the cover of privilege, that it accepts some liability.183

The last argument can present

almost insurmountable difficulties for an arbitrator.184

The court is different where

the judge hearing the application for security for costs is not the same with the judge

who hears the substantive action.185

The arbitrator will hear both applications for

security for costs and the case itself.186

If he becomes aware of the amount of offers

to settle, he might consider that his ability to decide the issues fairly has been

compromised.187


34

The issue was considered by the Government‟s Departmental Advisory

Committee during the passage of the Arbitration Act 1996 through Parliament and it

was suggested that this would not cause arbitrators any difficulty.188

Arbitrators have

to develop the ability to put things out of their minds and this is a particularly

important area.189

If an arbitrator or for that matter of the parties, considers he will or

may be prejudiced by hearing of any without prejudice offers, he should suggest to

the parties that another arbitrator hears and decides on the application for security for

costs.190

This can only be done by consent but it avoids the problems outlined above,

is they real or perceived.191

The maximum amount of security ordered will be the amount of the

recoverable costs of the defence, excluding the costs if any counterclaim.192

Security

will normally be given in respect of the predictable costs to be incurring up to the

first day of the hearing.193

Even if the arbitrator is persuaded that the estimate of

anticipated costs is accurate, he is entitled to order security for any lesser amount he

considers appropriate.194

It is possible for further applications for security for costs to

be made, but only with respect to subsequent periods.195

Orders for security for costs

are only amended if there has material change in circumstances justifying a departure

from the terms of the previous order.196


35

2.13 Advantages of Arbitration

The principle advantages of arbitration are that it produces a legally binding

decision by means of a process that is, if desired, totally within the control of the

parties and that it can be as flexible as necessary to suit their requirements.197

The

advantage of an arbitration clause in a construction contract is the power of the

arbitrator to open up, check and amend any certificate, decision, requirement or

notice.198

In the case of Northern Regional Health v. Derek Crouch Construction Co

Ltd199

, the Court of Appeal found that it did not possess these powers without a

specific agreement between the parties to that effect. The power vested in the

arbitrator is therefore of considerable assistance to a contractor seeking to vary an

architect‟s decision relating, for example, to an extension of time which he would not

be able to get the court to do by virtue of Crouch. The courts have nibbled away at

the inability to review an architect‟s decision over the years since Crouch was

decided. It has always been possible for the court to overturn an architect‟s decision

was made in bad faith or in excess of his powers.

The Court in John Barker Construction v London Portman Hotel200

held that

it can interfere with an architect‟s decision if the contractual machinery has broken

down or if the architect has not acted lawfully or fairly. The court found that the

architect‟s extension of time was fundamental flawed and in the view of the lapse of

time since the original decision was made, the contractual machinery had broken

down to such an extent that it would not be practicable or just for the matter to be

remitted to the architect for redetermination. As a result of this decision the court

went on to determine the length of a fair and reasonable extension of time.

197 Vincent Powell-Smith, John Sims and Christopher Dancaster. Construction Arbitration. 2nd

Edition. Blackwell Science. 1998 198 Ibid. 199 (1984) 26 BLR 1 200 (1996) 12 Const LJ 277.

36

2.14 Conclusion

At last, the literature review in this chapter is intended to provide a lot of

useful and practical information to all the readers. The information is related to

arbitration and security for costs. This information can be used as reference in the

later chapter especially the chapter 5 in the research report.

CHAPTER 3

CIVIL PROCEDURE

IN THE HIGH COURT

CHAPTER 3

CIVIL PROCEDURE IN THE HIGH COURT

3.1 Introduction

The High Court of Malaya and the High Court of Sabah and Sarawak are the

High Courts which coordinate jurisdiction and status.201

Coordinate jurisdiction

means that both High Courts have equal status and do not superior to the other.202

The section 3 of Courts of Judicature Act 1964 states that Terengganu, Selangor,

Perlis, Perak, Penang, Pahang, Negeri Sembilan, Malacca, Kelantan, Kedah and

Johor are included in the local jurisdiction for High Court of Malaya whereas Sabah

and Sarawak are included in the jurisdiction for the High Court of Sabah and

Sarawak.

In this chapter, the civil procedure in the High Court is discussed from cause

of action to the way to apply security for costs. Each subtitle below will explain the

procedure in the civil proceedings. This will give the readers an idea how the civil

proceedings works.

201 Article 121 of Federal Constitution. 202 Ibid, No. 13.

38

3.2 Cause of Action

Before starting any action in court, it is vital that the party plan to institute

civil proceedings in court has a cause of action. It means that there is a plaintiff that

may institute proceedings and that there is a defendant who may be sued.203

In the

case of Lim Kean v Choo Koon204

, Yong J stated that a cause of action take place

when there is a person who can sue and another who can be sued come into existence

plus all the facts have happened which are matter to be verified to entitle the plaintiff

to win.

The Supreme Court explained the cause of action is a declaration that a right

of plaintiff has been badly affected by the defendant‟s act in an action either at law or

by statute.205

This statement referred to Lord Diplock‟s judgment in Letang v

Cooper206

where he defined a cause of action means a truthful situation which

entitles one person to get a remedy against another person from the Court. Salleh

Abas LP speaking on before the Supreme Court went on to say that:

“In my view, the factual situation spoken of by Lord Diplock must

consist of a statement alleging that first, the respondent or plaintiff

has a right either at law or by statute and that secondly such right has

been affected or prejudicated by the appellant or defendant‟s act.”

Thus, it is essential to determine prior to the commencement of an action the

existence of a cause of action.207

The suit shall be deemed to be incomplete when

there is lack of such a cause of action.208

Consequently, if such a cause of action is

commenced, it will be dismissed.209

203 Ibid, No. 13. 204 [1970] 1 MLJ 158 205 Government of Malaysia v Lim Kit Siang [1988] 1 CLJ 219 206 [1965] 1 QB 232 207 Ibid, No. 13. 208 Ibid. 209 Ibid.

39

3.3 Limitation Act

It is important to determine whether the cause of action falls within the

prescribed limitation period.210

Section 6(1) Limitation Act 1953 presents that the

limitation period is 6 years from the day on which the cause of action occurred for

breach of contract and tort.211

However, the limitation period for tort of negligence

begins at the moment when the cause of action is occurred and not when it is

discovered.212

Similarly, the limitation period for latent injuries begins from the time

the cause of action arises and not when the injury is discovered.213

Nevertheless, the

limitation begins when the injury is sustained and not when the injury is discovered

under the Common Law.214

It was held that in the English case of Pirelli Cable Works v Oscar215

, a cause

of action in tort for negligence in the design or workmanship of a structure begun on

the day when physical damage arises to the structure. For instant, defect occurs when

there is formation of cracks, no matter no damage could have been discovered with

reasonable diligence on that date by the plaintiff.

3.4 Parties

It is essential to determine that the party suing (the plaintiff) or the party

being sue (the defendant) has the capacity to sue or to defend. The plaintiff or the

defendant must be sui juris (of the age of majority) in his right mind and acting

210 Ibid, No. 13. 211 Ibid. 212 Ibid. 213 Ibid. 214 Ibid. 215 [1983] 1 All ER 65.

40

personally or in a representative capacity.216

A party is acting personally means that

the party is pursuing his own claim.

A person who is below the age of majority and not in his right mind is

considered to be under disability.217

This type of person can only sue by his next

friend and defend by his guardian ad litem.218

Pursuant to Order 5 rule 6(1) of the

RHC 1980, any person whether or not he sues as a trustee, personal representative or

in any other representative capacity may start and continue proceedings in the High

Court by a lawyer or in person.219

Next, Order 5 rule 6(2) of the RHC 1980 provides

that a corporate may not start any proceedings other than by a lawyer unless clearly

provided by or under any written law.220

3.4.1 Incorporated Bodies

The Companies Act 1965 defines a corporation in section 4 which includes

any corporate build up or incorporated internal or external of Malaysia and includes

any overseas company.221

However, a corporation exclude222

:

i. any body corporate which is incorporated within Malaysia and is by the

Minister‟s notice in the Gazette affirmed to be a public authority or an

instrumentality or agency of the Malaysian Government or of any State or

to be a corporate that is not incorporated for commercial purposes;

ii. any corporation sole;

216 Ibid, No. 13. 217 Ibid. 218 Ibid. 219 Ibid. 220 Ibid. 221 Ibid. 222 Ibid.

41

iii. any society registered under any written law relating to cooperatives

societies; or

iv. any trade union registered under any written law as a trade union.

A body may be given corporate status by virtue of a governing statue. For

example, all companies incorporated under the Companies Act 1965 are recognized

as corporations.223

Individuals may also be given corporate status such as public

trustees.224

It is vital to note that upon the granting of a corporate status, a

corporation may sue and be sued in its name.225

Service of documents on a

corporation would fall within section 350 of the Companies Act 1965.226

Order 62

rule 4 RHC 1980 may also be used to serve documents on a corporation.227

3.4.2 Firms or Partnership

Any two or more people claim to be alleged to be liable as partners regarding

a cause of action and operate business within the authority may sue or be sued in the

same name of the firm that they are partners at the time when the cause of action

arise.228

Besides, a firm may sue or be sued in the name of the partners itself. In the

case of Madan Lal v Ho Siew Bee229

, it was held that the partnership firm‟s name is

not a legal persona. Thus, a partnership firm cannot hold a tenancy and cannot be a

party to a suit in the courts or before any tribunal.

223 Ibid, No. 13. 224 Ibid. 225 Ibid. 226 Ibid. 227 Ibid. 228 Order 77 rule 1 RHC 1980. 229 [1983] 1 MLJ 105

42

3.4.3 Individuals Trading as Firm

An individual operates business within authority in a name other than his own

may be sued in that name as if it were the name of a firm or the name in which he

operates business but may only sue in his own name as stated in Order 77 rule 9 of

the RHC 1980.230

There is no discrimination would be caused to the owner of a

business if he is sued in the name of the business.231

3.4.4 Federal or State Government

The Federal or State Government may sue or be sued in its name as stated in

the Government Proceedings Ordinance 1956 and Order 73 of the RHC 1980.232

3.5 Costs

Order 59 rule 2(2) of the RHC 1980 presents that subject to the express

provisions of any written law, the subsidiary costs to the Court‟s proceedings shall be

in the full discretion of the Court to decide by whom and to what amount of the costs

are to be provided. Order 59 rule 3(1) of the RHC 1980 provides that no party shall

be permitted to get back any costs of proceedings from any other party to the

proceedings except under an order of the Court. Order 59 rule 3(2) of the RHC 1980

stated that:

230 Ibid, No. 13. 231 Wee Tiang Kheng v Ngu Nii Soon & Ors [1989] 1 MLJ 252 232 Ibid, No. 13.

43

“if the court in the exercise of its discretion sees fit to make any

order as to the costs of or incidental to any proceedings, the court

shall, subject to this Order, order the costs to follow the event, except

when it appears to the court that in the circumstances of the case

some other order should be made as to the whole or any part of the

case.”

The exceptions to the general rule that loser has to pay costs are listed as

follow233

:

i. only a proportion of costs was awarded;

ii. costs up to a certain stage of the proceedings;

iii. no order as to costs;

iv. winner to pay loser‟s costs.

Order 59 rule 3(5) of the RHC 1980 stated that if a party on whom a notice to

disclose facts is served pursuant to Order 27 rule 2 of the RHC 1980, rejects or

ignores to declare the facts within seven days after the service of the notice on him or

or a longer period as approved by the Court, he will pay the costs of verifing the facts

unless the Court otherwise directs.234

Besides that, Order 59 rule 3(6) of the RHC 1980 stated that if a party on

whom a file of documents is served in pursuance of any provisions of Order 24 or on

whom a notice to confess documents is served under Order 27 rule 5, gives notice of

non-admission of any of the documents in relation to Order 27 rule 4(2) or 5(2) as

the case may be, he shall pay the costs of verifing the documents unless the Court

otherwise orders.235

233 Ibid, No. 13. 234 Ibid. 235 Ibid.

44

Order 59 rule 7 of the RHC 1980 provides that the Court may order any costs

to that party regarding to it shall disallowed to him and that any costs occurrence by

it to other party shall be given by him where any matter done or omission is made

inappropriately or unreasonably by or on behalf of a party.236

For example, the courts

may award costs against the advocate and solicitor personally.237

Furthermore, Order 59 rule 8 of the RHC 1980 provides that subject to the

following provisions of the rule, where in any proceedings costs are incurred

inappropriately, without reasonable cause, wasted by excessive delay or any other

default, the Court may make against any lawyer whom it considers to be responsible,

whether personally or through an agent, an order prohibit the costs as between the

lawyer and his client and:

i. directing the lawyer to repay to his client costs which the client has been

ordered to pay to other parties to the proceedings; or

ii. directing the lawyer individually to cover such other parties against cost

payable by them.238

Order 59 rule 20 of the RHC 1980 provides that a party is entitled to ask for

any costs to be taxed must start proceedings for the taxation of those costs by giving

the Registry the bills of costs and a copy with all required papers and vouchers.239

The winner will send his bill of costs to the loser and where the loser does not agree

with the bill of costs, he is entitled to have the bill of costs taxed by the Registrar.240

The Registrar may upon examination of the bill of costs disallow certain items or

may reduce the charges for certain items.241

The final amount may be lower than the

amount sought.242

236 Ibid, No. 13. 237 Ibid. 238 Ibid. 239 Ibid. 240 Ibid. 241 Ibid. 242 Ibid.

45

3.5.1 Cost Awarded

The Court may award costs of interlocutory proceedings that are243

:

i. reserved costs this is where the issue of the incidence and the amount of

costs if postponed to the end of the trial of the matter;

ii. costs in cause this is where the costs of interlocutory proceedings are to

be awarded according to the final award of costs of the action at the end

of the trial.

Therefore, the plaintiff obtains the interlocutory costs stated above as part of

his costs against the defendant, if he wins and gets an order for his costs.244

On the

other hand, if the defendant wins and obtains an order for his costs, he gets those

interlocutory costs as part of his costs of the action against the plaintiff.245

The court in the case of Stratford & Son Ltd v Lindley No 2246

, held as

follows:

“The Costs awarded to a plaintiff are:

i. Plaintiff‟s costs in cause.

If the plaintiff wins the case, he is awarded the costs of interlocutory

proceedings but if the plaintiff loses the case, he need not pay the defendant‟s

interlocutory costs.

ii. Plaintiff‟s costs in any event.

It does not matter which party wins the case, when the case is decided or

settled the plaintiff is to have the costs of the interlocutory proceedings.

243 Ibid, No. 13. 244 Ibid. 245 Ibid. 246 [1969] 1 WLR 1547

46

iii. Plaintiff‟s costs.

The plaintiff is to have the costs of the interlocutory proceedings without

waiting for the decision of the case.

The costs awarded to a defendant are:

i. Defendant‟s costs in cause.

If the defendant wins the case, he is awarded the costs of interlocutory

proceedings but if the defendant loses the case, he need not pay the plaintiff‟s

interlocutory costs.

ii. Defendant‟s costs in any event.

It does not matter which party wins the case, when the case is decided or

settled the defendant is to have the costs of the interlocutory proceedings.

iii. Defendant‟s costs.

The defendant is to have the costs of the interlocutory proceedings without

waiting for the decision of the case.”

An order for costs thrown away is often made on a successful application to

set aside a default judgment or defence and signify that the defendant must pay all

the plaintiff‟s cost which have been reasonable incurred.247

If however, the judgment

to set aside was obtained irregularly so that the defendant was entitled to have it set

aside as of right, he will be awarded „costs thrown away‟.248

Costs awarded against a

party who makes a successful application or the postponement of a hearing, are costs

of the day are.249

247 Ibid, No. 13. 248 Ibid. 249 Ibid.

47


The Court may orders the plaintiff to furnish security for the cost of action of

the defendant at any stage of the proceedings upon the application of the defendant

or other proceedings as it thinks just, where250

:

i. the plaintiff is ordinarily resident out of the jurisdiction of the court;

ii. the plaintiff is a nominal plaintiff suing for the benefit of some other

person;

iii. the plaintiff‟s address for service is intentionally not stated or misleading;

iv. the plaintiff has changed his address in the course of proceedings to evade

the consequences of litigation.

In Skrine & Co. v MBf Capital Berhad & Anor251

, Justice Gopal Sri Ram JCA,

observed:

“In our judgment, the correct approach to an application of the nature

that forms the subject matter of the appeals before us is that stated by

Lord Denning MR in Sir Lindsay Perkinson & Co. Ltd v Triplan Ltd252

,

the Master of the Rolls said:

“I do not think those observations are correct. I prefer to follow that

cases which are to be found in the notes in Ebury Garages Ltd v

Agard253

and Gill All Waether Bodies Ltd v All Weather Motor Bodies

Ltd254

. Scrutton LJ said that there were too many applications against

companies for security for costs. In his view “the powers of the section

should be carefully used”. Maugham LJ said:

250 Hamid Sultan bin Abu Backer. Janab’s Series to “Law, Practice and Legal Remedies Volume – I.

Janab (M) Sdn Bhd, 2005. 251 [1998] 44 AMR 3298 252 [1973] 1 QB 609, p. 626. 253 76 LJ 204 254 77 LJ 123

48

“The section only confers discretion on the court. There may be many

cases where a company is insolvent and yet the court would not order

security to be lodged.”

I would add Peppard and Co. Ltd v Bogoff255

case where Kingsmill

Moore J said:

“……the section does not make it mandatory to order security for

costs in every case where the plaintiff company appears to be unable to

pay the costs of a successful defendant, but that there still remains

discretion in the court which may be exercised in special

circumstances.”

Furthermore, Justice Gopal Sri Ram JCA held that section 351of the

Companies Act 1965 which administrate the matter of security for costs where the

plaintiff is a company provides inquiry in the process of determining whether

security for costs should be ordered against the plaintiff. The Court hears an

application in this regard to determine whether there is credible evidence. If there is

credible evidence supports the belief that the company will not be able to pay the

costs of a successful defendant. In this case, the learned judge applied the correct

legal test to the evidence available before him. The word „may‟ in section 351 of the

Companies Act means that the section is not mandatory. This means that allow the

judge whether to order security or not. It is discretion to be practiced in all the

situations of the case.

In Sir Lindsay Parkinson & Co Ltd v Triplan Ltd256

, it was stated that it may

be a denial of justice to order security to be given to a defendant who has no defense

to the action. It was stated in La Grange v McAndrew257

that the action may be

dismissed if the plaintiff does not furnish security for costs within the period ordered

255 [1962] IR 180, p188. 256 [1973] 1 QB 609 257 (1879) 4 QBD 210

49

by the court. It is not appropriate to ask the plaintiff to straight away give the security

for costs at the time the order is made by the Court.

3.6.1 Power to Order Security for Cost

The plaintiff may be ordered to furnish security for the defendant‟s costs of

the action or other proceeding as the court thinks just where the following cases

appear to the court:258

i. that the plaintiff is ordinarily resident out of the jurisdiction259

;

ii. that 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 that there is reason to believe that he will be unable to pay the

costs of the defendant if ordered to do so;

iii. that the address of the plaintiff is not stated in the writ or other originating

process or is incorrectly stated there260

, unless the court is satisfied that

the failure to state the address or the misstatement was made innocently

and without intention to deceive261

;

iv. that the plaintiff has changed his address during the course of the

proceedings with a view to evading the consequences of the litigation262

.

Save for any statutory grounds263

, the basis to lay down cases above are

exhaustive264

and the court has no inherent jurisdiction to order security for costs. In

addition, the Court has statutory power to order a plaintiff limited liability company

258 Civil Procedure. Halbury’s Laws of Malaysia. 2002 Reissue. Malayan Law Journal. 259 RHC Order 23 rule 1(1)(a). 260 RHC Order 23 rule 1(1)(b). 261 RHC Order 23 rule 1(1)(c). 262 RHC Order 23 rule 1(2). 263 RHC Order 23 rule 1(1)(d). 264 RHC Order 23 rule 1.

50

to give security for costs. Similar power may be conferred by other statutory

provisions.265

3.6.2 Plaintiff Ordinarily Resident Out of the Jurisdiction

Where the plaintiff is typically resident out the jurisdiction, the Court has

power to order him to give security for costs.266

Ordinary resident is different with

permanent residence, occasional residence or temporary residence. Their differences

are depending on the fact and degree. It does not depend on the duration of the

residence but depend on the manner of a person‟s life is actually ordered. It must be

noted that it is for the defendant to establish that the plaintiff is typically resident out

of the jurisdiction.267

The courts will consider the ease which a judgment for costs could be

enforced in the foreign jurisdiction in making a choice whether to order that security

for costs or not. The Court orders security for costs against the plaintiff when the

plaintiff does not have property within the jurisdiction.268

However, the mere fact

that the plaintiff has property in a country which has a reciprocal enforcement of

judgments with Malaysia is not a reason for the Court to refuse ordering security for

costs as the enforcement is not automatic.269

265 RHC Order 23 is without prejudice to any statutory provision empowering the court to require

security for costs: Order 23 rule 3. 266 RHC Order 23 rule 1(1)(a). At common law, the early practice of the courts was not to order

security for costs against a plaintiff ordinarily resident out of the jurisdiction. 267 If necessary the court may order the trial of a preliminary issue or question under RHC Order 33

rule 2 and by consent of the parties, such an issue or question may be tried before a Registrar under RHC Order 36 rule 1. 268 Ace King Pte Ltd v Circus Americano Ltd [1985] 2 MLJ 75. 269 Faridah Begum bte Abdullah v Dato’ Michael Chong [1995] 2 MLJ 404.

51

Security for costs will not be ordered against a plaintiff who is bound to live

abroad on public service against a plaintiff who makes a provisional decision to go

and live abroad, at any rate so long as he has not left the jurisdiction270

, nor even if

he is about to leave271

or is abroad272

, but it will be ordered if he goes to reside

permanently abroad, even after the institution of the action.273

Foreign ambassadors

are not ordered to give security274

, although their servants are275

. It may also be

ordered where the plaintiff is an alien under sentence of deportation.276

Security may

be ordered against a foreign state or sovereign.277

In Ace King Pte Ltd v Circus Americano Ltd & Ors278

, Zakaria Yatim J

observed:

“Since the plaintiffs are resident out of the jurisdiction of the court, I

think it is appropriate that they provide security for costs.”

Next, in Aeronave SPA & Anor. v Westland Charters Ltd & Ors.279

, Lord

Denning M.R. said:

“It is usual practice of the court to make a foreign plaintiff give

security for costs. But it does so, as a matter of discretion, because it

is just to do so. After all, if the defendant succeeds and gets an order

for his costs, it is not right that he should have to go to a foreign

country to enforce the Order.”

270 Appah v Monseu [1967] 2 All ER 583. 271 Adams v Colehurst (1795) 2 Anst 552. 272 Green v Charnock (1971) 1 Ves 396. 273 Ibid. 274 Duke de Montellano v Christin (1816) 5 M & S 503 275 Adderly v Smith (1763) 1 Dick 355 276 Serlaz v Hanson (1800) 5 Ves 261. It is otherwise if he is merely imprisoned: Baddeley v Harding

(1821) 6 Mad 214. 277 Duff Development Co Ltd v Kelantan Government (1925) 41 TLR 375 278 [1985] 2 MLJ 75 279 (1971) 1 WLR 1445.

52

Where the sole plaintiff or all the plaintiffs are resident abroad, security may

be ordered. In the case of Salchi SPA v Ler Cheng Chye (No 2)280

, it was held that

security for costs cannot be ordered as of right from a foreign plaintiff under the

Order 23 rule 1(1) of RHC 1980. It can only be ordered if the Court thinks it just to

order such security in the situations of the case. The circumstances that the Court has

to take into consideration may differ from each case. It would not be possible to

classify such situations. The situation be considered by the Court in this case was the

order made in an earlier related judgment that the defendant pay the full amount of

RM300,000 into court with costs.

Further, following Abdul Fattah Mogawan v MMC Power Sdn Bhd281

, it was

held that if a foreign plaintiff‟s impecuniosities had been brought about by the action

of the defendant. This conduct could make up unique situations for the Court‟s

deliberation in rejecting the application of security for costs.

The court has discretion to order security of costs in an action involving

plaintiff‟s resident outside the jurisdiction even if some co-plaintiffs are resident

within the jurisdiction and there is no inflexible rule of practice to the contrary.282

Thus, security for costs can be ordered against a plaintiff who resides out of the

jurisdiction even if a co-plaintiff is resident within the jurisdiction.283

Where the plaintiff, although ordinarily or even permanently resident out of

the jurisdiction, can show that he has substantial assets or property within the

jurisdiction which can be reached by judicial process, security will not be ordered.284

In Kevorkian v Burney (No. 2)285

, an order for security was refused where property

280 1 MLJ 556 281 [1997] 5 CLJ1 282 For the position where the claims of the co-plaintiffs are separate see the Carnarvon Castle (1878)

38 LT 736, CA (Eng). For the position where the plaintiff resident within the jurisdiction is a nominal

plaintiff joined for the purpose of escaping security for costs see Jones and Saldanha v Gurney [1913]

WN 72. 283 Lek Swee Hua v American Express International Inc [1991] 2 MLJ 151 284 Re Apllinaris Co’s Trade-Marks [1891] 1 Ch 1, CA (Eng) 285 [1973] 4 All ER 468, CA (Eng)

53

the subject matter of the action had been deposited under court order within the

jurisdiction. The same rule applies to a foreign company286

. It must be shown that the

assets or property are in permanent or certain nature and those they can be available

for costs.287

Thus, security is not ordered if the defendant has money of the plaintiff

in his hands288

or admits the claims289

or in the plaintiff has an unsatisfied judgment

against the defendant290

. Security for costs will not be ordered against a defendant if

he made a counter-claim where the plaintiff has obtained a Mareva injunction against

him straining him from removing his assets out of the jurisdiction where they would

exceed the amount of any likely costs.291

A plaintiff company which is not registered

in Malaysia would not be considered to be in the jurisdiction even if it has

established goodwill, reputation and presence locally.292

If the plaintiff returns to and resides within the jurisdiction after the order for

security has been made, it is depending on the Court‟s discretion whether the order

should or should not be set aside.293

In Chellew v Brown294

, it was stated that the fact that the plaintiff had

misstated his address is no reason for making an order for security for costs.

Nevertheless, the Court may not order security for costs if there is no proof showing

that the plaintiff resides out of authority. The Court will be unfavourable to order

security for costs if the plaintiff can show that he possesses tangible assets within the

jurisdiction of the court. Generally, the Court shall stay all proceedings until the

plaintiff gives security for costs. The Court also may dismiss the plaintiff‟s action

when the plaintiff fails to furnish security for costs after an order has been made by

286Ibid, No. 258. 287 Sacker v Bessler & Co (1887) 4 TLR 17. 288 Crozat v Brogden [1894] 2 QB 30 at 36, CA (Eng) 289 Mapleson v Masini (1879) 5 QBD 144 at 147, DC (Eng) 290 Re Contract and Agency Corp Ltd (1887) 57 LJ Ch 5. 291 Hitachi Shipbuilding and Engineering Co Ltd v Viafiel Compania Navira SA [1981] 2 Lloyd‟s Rep

498, CA (Eng) 292 Compagnie Generale Des Eaux v Compagnie Generale Des Eaux Sdn Bhd [1993] 1 MLJ 55 293 Westwnberg v Mortimore (1875) LR 10 CP 438 294 (1923) 2 KB 844 CA

54

the Court. The power to order security for costs is not a mandatory power which

must be exercised according to the circumstances of the case.

Further, in the case of Faridah Begum v Dato’ Michael Chong295

, the

defendant applied under Order 23 of the RHC 1980 for an order for security for costs

to be given by the plaintiff because the plaintiff who were from Singapore was

ordinarily resident out of jurisdiction, had failed to state her permanent address, did

not have sufficient assets within jurisdiction and was a bankrupt.

The plaintiff raised a preliminary objection that an order for security for costs

would amount to a debt probable under section 8(1) of the Bankruptcy Act 1967 and

as such would fall foul of the RHC 1980 as the Official Assignee, being an aggrieved

party, was not joined as a party. The plaintiff also claimed that she had property in

Malaysia and was a director of two local companies and that as Singapore was listed

in the Reciprocal Enforcement of Judgment Act 1958, a judgment could be enforced

with ease.

In ordering the plaintiff to pay RM15,000.00 into court as security for costs,

it was held that the mere bankruptcy of plaintiff is not a satisfactory reasons for

ordering security for costs against it. Besides, the court is not allowed from ordering

security for costs under Order 23 of the RHC 1980 merely by reason of the plaintiff‟s

bankruptcy. Hence, the Court may order security for costs after considering to all the

situationss of the case and the Court finds it just to do so.

The plaintiff‟s land in this case was subject to several encumbrances,

including an alleged sale and two companies were inactive and had no substantial

assets. Although ease of enforcement is a factor to be considered, enforcement of

judgments in Singapore is not automatic and the mere fact that the plaintiff is

295 [1995] 2 MLJ 404

55

resident in Singapore is not a ground for refusing security for costs. On top of that,

the plaintiff fail to disclose her Singapore address weighed against her.

The court avoided any attempt at a detailed investigation into the merits of

the case as that should only be done in basic and clear cases, unlike the present case,

where the issues involved were complex and the final outcome for from clear. If the

plaintiff is a company, the provisions of section 351 Companies Act 1965 must be

adhered to plaintiff is a registered company or there is rationale that the company

will not be able to pay.

3.6.3 Insolvency or Poverty of Plaintiff

A plaintiff who is insolvent might not be ordered to furnish security for

costs.296

The party who is will be ordered to give such security if the party is a

nominal plaintiff, a limited liability company and an appellant in the Court of Appeal

or the Federal Court.297

This is because the plaintiff is an undischarged bankrupt298

or

his bankruptcy is possible or even probable299

or his trustee in bankruptcy in suing in

his official name300

. There is English authorities hold that security will not be

ordered where a receiver has been appointed and a corporation is insolvent.301

However in Malaysia, the liquidator may be ordered to give security for costs where

circumstances call for such security.302

There are situations where security will not

be ordered. For example, where the next friend of a minor is impecunious303

, where

296 Cowell v Taylor (1885) 31 ChD 34, CA (Eng) 297Ibid, No. 258. 298 Cook v Whellock (1890) 24 QBD 658, CA (Eng) 299 Rhodes v Dawson (1886) 16 QBD 548, CA (Eng) 300 Pooley’s Trustee v Whetham (1884) 28 ChD 38, CA (Eng) 301 Dartmouth Harbour Comrs v Dartmouth Hardness Corp (1886) 55 LJQB 483. 302 Government of Sarawak v Sami Mousawi-Utama n Sdn Bhd (in liquidation) [1998] 3 MLJ 820 303 Masling v Motor Hiring Co (Manchester) Ltd [1919] 2 KB 538, CA (Eng)

56

the plaintiff is a defaulter in the stock exchange304

and where the plaintiff‟s action is

being financed by a third party305

.

3.6.4 Plaintiff a Limited Company

The Court306

may307

requires adequate security to be provided for those costs

where the plaintiff is a limited company, in any action or other legal proceeding and

it appears that the company will be not able to pay the costs of the defendant if

winning in his defence,. At the same time, the Court may stay all proceedings until

the plaintiff gives such security.308

Ordinary, the application for security must be

supported by credible testimony, usually by reasonably showing that the company

will not be able to pay the costs of the successful defendant. Thus, the affidavit

should exhibit the annual accounts field by the company or state, if it be the fact, that

no accounts or proper annual returns have been filed or that the company has ceased

trading or that it has lost its substratum.

The court may order the company in liquidation to furnish security for costs

where the limited company is a co-plaintiff with a natural person.309

Where the

plaintiff company is in liquidation, it might be ordered to pay a lesser sum than

would otherwise be ordered.310

304 Hinde v Haskew (1884) 1 TLR 94, DC (Eng) 305 Ibid, No. 258. 306 A Registrar has jurisdiction under RHC Order 32 rule 9 to order security of costs under the

Companies Act 1965 (Act 125) section 351. 307 The power is discretionary, not mandatory: Sir Lindsay Parkinson & Co. Ltd v Triplan Ltd [1973]

2 All ER 273, CA (Eng). For the principles applicable to an application for security for costs, see

Skrine & Co v MBf Capital Bhd [1998] 3 MLJ 649. 308 Companies Act 1965 section 351(1). Gula Perak Bhd v Agri-Projects (M) Sdn Bhd [1989] 1 MLJ 4221. 309 Pearson v Naydler [1977] 3 All ER 531. 310 Ibid.

57

3.6.5 No Security from Defendant

A defendant cannot be ordered to furnish security for costs of an action.311

His position in this respect is not similar with a plaintiff since he is exercising his

right to defend himself.312

A foreign defendant will not be ordered to give security

because the foreign plaintiff has been ordered to do so.313

Then, a foreign shareholder

who apposes a winding up petition will not be ordered to furnish security for costs.314

On a stake holder‟s interpleaded issue, neither party will be ordered to give

security315

; nor will a defendant raising the issue of domicile on which he is made

plaintiff on the trial of the preliminary issue316

.

Additionally, a defendant may be ordered to give security if he obtains leave

to have the conduct of a cause317

and claims a right to property and applies to be

admitted as a defendant in an action318

. Security for costs of inquiries after trial may

be ordered319

but security may be required of the defendant who makes an

interlocutory application by summons or motion.320

Though, in the case of Classic

Video Distribution Sdn Bhd v Asia Television Ltd321

, where security for costs was

ordered against the defendants who had put in an application, it will strike off the

writ of summons.

311 Maatschappij Voor Fondsenbezit v Shell Transport and Trading Co [1923] 2 KB 166, CA (Eng). 312 Banque du Rhone SA v Fuerst Day Lawson Ltd, Promat SA (third parties) [1968] 2 Lloyd‟s Rep

153, CA (Eng), where the defendant was defending a claim on a dishonoured bill. 313 Beleggings Co Uranus NV v Bank of England [1948] 1 All ER 465, CA (Eng) 314 Re Percy and Kelly Nickel, Cobalt and Chrome Iron Mining Co (1876) 2 ChD 531. 315 Belmonte v Aynard (1879) 4 CPD 352, CA (Eng) 316 Visco v Minter [1969] 2 All ER 714. 317 Mynn v Hart (1845) 9 Jur 860 318 Apollinaris Co v Wilson (1886) 31 ChD 632, CA (Eng). 319 Brown v Haig [1905] 2 Ch 379. 320 Re B (Infants) [1965] 2 All ER 651n. 321 [1988] 3 MLJ 421

58

3.6.6 Counterclaiming Defendant

The plaintiff does not necessarily place himself in the position to be liable to

give security for costs where the defendant makes a counterclaim.322

The

fundamental question is whether the counterclaim is a form of defence, in which case

the defendant is merely defending himself or it amounts to a cross-action, in which

case he is in the position of a plaintiff sue his own claim.323

Thus, where the claim and the counterclaim arise out of the same transaction

and the counterclaim is actually the defence to the action, security will not typically

be ordered from the defendant who is resident abroad or a limited liability

company.324

On the other hand, where the defendant who is resident out of the

jurisdiction puts forward a counterclaim in a matter totally distinct from the claim, he

may be ordered to furnish security for costs of the counterclaim.325

Indeed, security

may be ordered if a defendant resident abroad or a limited liability company takes

proceedings which in substance are more than merely defensive proceedings.326

3.6.7 Security for Costs by Appellant

Security for costs must be lodged together with the filing of the notice of

appeal in the Federal Court or the Court of Appeal to order further security to be

322 RHC Order 23 rule 1(3). 323 Ibid, No. 258. 324 Mapleson v Masini (1879) 5 QBD 144, DC (Eng), where the counterclaim was is respect of breaches of the contract sued on by the plaintiff. 325 New Fenix Compagnie Anonyme d’Assurances de Madrid v General Accident, Fire and Life

Assurance Corp Ltd [1911] 2 KB 619, CA (Eng) (Cross-action by foreign company). 326 Strong v Carlyle Press (No 2) [1893] WN 51 (counterclaim); Hutchison Telephone (UK) Ltd v Ultimate Response Ltd [1993] BCLC 307, CA (Eng) (counterclaim involved far-reaching issues which

were time-consuming and expensive to explore and it was just and equitable to order that security for

costs be provided.)

59

given for the costs of an appeal.327

There is not necessary to require deposit security

for costs if the appeal is brought by the Government of Malaysia or any State

Government.328

3.6.8 Discretion to Order Security for Costs

The court may order security for costs in the cases in which the power to do

so exist, consider to all the circumstances of the case and it thinks it just to do so.329

Therefore, the court has power whether or not to order security for costs, both under

the Rules of the High Court and under its statutory powers.330

Beside, there is a

power to set aside an order for security for costs if the plaintiff can prove a material

change of circumstances.331

Hence, if there is a high likelihood that the defendant

will fail in his defence, he may be refused security332

and if he admits his liability333

.

Even where the defendant counterclaims334

, admits an amount equal to the security

that would have been ordered335

, an order for security for costs would be oppressive

to the plaintiff if given all the circumstances336

or if the plaintiff has an unsatisfied

judgement against the defendant337

. Under the court‟s discretionary power, it is

doubtful that security for costs will be ordered while there is pending a summons for

summary judgment338

.

327 RCA rule 17; RFC rule 56(1). 328 RCA rule 17 second proviso; RFC rule 56(1). 329 RHC Order 23 rule 1(1). 330 Faridah Begum bte Abdullah v Dato’ Michael Chong [1995] 2 MLJ 404. 331 Gordano Building Contractors Ltd v Burgess [1988] 1 WLR 890, CA (Eng). 332 Crozat v Brogden [1894] 2 QB 30 at 33, CA (Eng), per Collins LJ. 333 De St Martin v Davis & Co [1884] WN 86. 334 Winterfield v Bradnum (1878) 3 QBD 324, CA (Eng). 335 Hogan v Hogan (No. 2) [1924] 2 Ir R 14. 336 Gateway Land Pte Ltd v Turner (East Asia) Pte Ltd [1988] 1 MLJ 416 (Sing). 337 Re Contract and Agency Corp Ltd (1887) 57 LJ Ch 5. 338 The practice laid down in Banque des Travaux Publiques v Wallis [1884] WN 64, no longer

prevails, since without knowing what the defendant‟s defence is, the plaintiff may recover final

judgment.

60

Hence, the former inflexible rule of practice that a plaintiff ordinarily resident

abroad will be ordered to furnish security for costs must now defer to the

discretionary power of the court.339

In Kasturi Palm Products v Palmex Industries

Sdn Bhd340

, the court ordered security for costs against the plaintiff not merely

because the plaintiff was foreign but it was just to do so. Nevertheless, it is general

rule of practice that the court will require a plaintiff ordinarily resident abroad or a

limited company is not able to pay the costs of a successful defendant to give

security for costs341

. There is no rule or practice that a plaintiff resident abroad suing

on a dishonoured bill of exchange will not be required to give security342

.

The following are the circumstances acted as the guidelines which should be

considered by the Court on granting or refusing security for costs:343

i. whether the plaintiff‟s claim is made in good faith and is not a sham;

ii. whether the plaintiff has a good view of success;

iii. whether there is an admission by the defendant on the pleadings or

otherwise that money is due;

iv. whether there is a substantial payment into court or an open offer of a

substantial amount;

v. whether application for security was being used oppressively, for example

so as to stifle a genuine claim;

vi. whether the plaintiff‟s want of means, especially in the case of a limited

company, has been brought about by any conduct by the defendant, such

as delay in payment, or in doing his part of the work; and

vii. whether the application for security is made at a late stage of the

proceedings.

339 Aeronave Spa v Westland Charters Ltd [1971] 1 WLR 1445, CA (Eng) overruling Crozat v

Brogden [1894] 2 QB 30. 340 [1986] 2 MLJ 310 341 Aeronave Spa v Westland Charters Ltd [1971] 1 WLR 1445, CA (Eng) 342 Banque du Rhone SA v Fuerst Day Lawson Ltd, Promat SA (third parties) [1968] 2 Lloyd‟s Rep

153, CA (Eng). 343 Ibid, No. 258.

61

In the exercise of its discretion, the Court needs to judge the following

factors344

:

i. the degree of ease by which a judgment may be enforced against a foreign

plaintiff;

ii. the financial position of a plaintiff. If the plaintiff is impecunious and an

order for security for costs might stifle the plaintiff‟s claim, the court

might decide that no order should be made;

iii. the registration in Malaysia of the plaintiff company where it is a foreign

company.

In Ashin Sdn Bhd v Datuk Bandar Kuala Lumpur & Ors345

, the third

defendant signifies that it would give the first opportunity to anybody who would

submit a proposal for privatisation and development of a piece of land. The plaintiff

was the first to submit an application for the development plan. In breach of the

representation, the first and third defendants invited the plaintiff for a tender exercise

which the plaintiff did together with the second defendant. The plaintiff argued that it

is an unfair practice by the first defendant in the award of the tender to the second

defendant. Then, the plaintiff made a claim against the defendants. The claim

includes expenses for the preparation of the development plan and a declaration that

the award of tender to the second defendant was null and void. After that, the second

defendant filed an application to compel the plaintiff to provide security for cost

because there is no account had been provided by the plaintiff since its incorporation

and it was insolvent. The deputy registrar made an order so that the plaintiff provides

RM37,000 as the security for costs. The plaintiff appealed.

The Court held that it had not been shown the accounts are provided since

incorporation. There is no discovery had been sought by the second defendant nor

any other challenge made to this averment. Apparently, the first and third defendants

must have been satisfied with the plaintiff‟s production of the accounts and the

344 Ibid, No. 258. 345 [1999] 5 MLJ 663

62

plaintiff‟s impecuniosities. The plaintiff‟s situation could not be an issue because the

plaintiff was allowed to tender. The request for costs is definitely oppressive upon

the plaintiff. The Court must always be wary of the unseen agenda of a party to

litigation to find an order for security for costs in order to thwart litigation. In the

present case, the Court was unsatisfied that the reasons given merited an award for

security for costs. Another factor considered was that neither the first nor the third

defendants had required security for costs. Based on the facts presented, if all any

party might have a reason to seek security, it would be the first or third defendant

because the allegation seemed to be that it was the second defendant that influenced

these other two parties.

3.6.9 Application for Security for Costs

Although an application for security for costs may be made at any stage of

the proceedings346

, it should be made as quickly as possible. The application should

not be made too late or too near to the trial unless there is a sensible explanation for

the delay.347

A late application for security for costs would not be tantamount to stifle

a valid claim.348

The argument is that an application for security for costs is to be

treated as stifling a valid claim would be most effective where the application is

made as soon as the suit is filed and served.349

The security for costs is applied by summons at chambers350

. It may be made

before the summons for directions, although the Court may wish to know what the

defence to the claim is or it may be made on the summons for discretion, since the

right to security is not ignored by service of the defence or afterwards by notice

346 Re Smith, Bain v Bain (1896) 75 LT 46, CA (Eng). 347 Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] 2 All ER 273, CA (Eng) 348 Cf Strukturmas (Selangor) Sdn Bhd v Majlis Perbandaran Petaling Jaya [2001] 3 MLJ 344. 349Ibid, No. 340. 350 Vale v Offert (1874) 30 LT 457

63

under the summons for discretions.351

The court may order security352

up to a certain

stage in the proceedings with liberty to apply for further security353

. Usually, the

application should be done by a written request to the plaintiff‟s solicitor354

. It should

be supported by an affidavit355

apart from where the residence of the plaintiff out of

the jurisdiction is stated on the writ. The summons or affidavit should point out the

sum of security required356

. The sum of security for costs should be calculated in a

bill to prove how that amount is made up.357

The amount of the security may be

increased during the proceedings358

since there is no rule limiting the number of

application for security359

.

3.6.10Manner of Giving Security

Security for costs must be provided in the manner, time and terms directed by

the Court.360

The order for security for costs becomes unnecessary where an

undertaking to provide the whole or part of the cost or a specified sum in lieu of

security is accepted by the other party.361

Security is normally ordered to be given by

a bond362

or by requiring a specified sum to be paid into the Court or within a

351 Ibid, No. 350. 352 For forms of order for security for costs see 13 Atkins Court Forms (1992 issue) 219, Forms 4, 5. 353 Abu bin Mohamed v Voo Fui Tong [1938] MLJ 140. See also Gurubachan Singh v Seagrott &

Campbell [1962] MLJ 309 where the court opined that the test for ordering further security is whether

the appeal and the conduct of the appellant are reasonable. 354 For a form of request see 13 Atkins Court Forms (1992 issue) 217, Form 1. The right to and the

amount of the security may be agreed without an order or of course it may be embodies in a consent

order. 355 For a form of supporting affidavit see 13 Atkins Court Forms (1992 issue) 218, Form 3. 356 Ibid, No. 258. 357 Ibid. 358 Bentsen Taylor, Sons & Co [1893] 2 QB 193, CA (Eng). 359 Merton v Times Publishing Co Ltd (1931) 48 TLR 34, CA (Eng). 360 RHC Order 23 rule 2. 361 Hawkins Hill Consolidated Gold Mining Co Ltd v Want, Johnson & Co (1893) 69 LT 297. 362 Ibid, No. 258.

64

specified period363

. All further proceedings in the action are to be stayed until the

security is given as ordered.364

A trial court is required to balance the challenging interests of the parties in

deciding whether or not to order the payment of security for costs.365

Where a trial

court has allowed a sum equal to 10% of the estimated costs as security for costs, an

appellate court should be slow to disturb the discretion exercised by the trial court

unless it can be shown that the trial court had not acted in accordance with

established legal principles.366

3.6.11Amount of Security

The amount of security for costs to be given is in the discretion of the Court.

This means that the Court will fix an amount that it thinks just to do so, having

consider to all the situations of the case.367

The costs should be calculated by the

applicant on a party and party basis but not on a security basis.368

The amount of

security for costs is calculated in several methods depending on the situations as

discussed below.

First of all, in the case of a plaintiff resident out of the jurisdiction, the usual

approach is to fix the sum at about two-thirds of the estimated sum accumulated up

363 Such money is not „property recoverd or preserved‟ so as to give the solicitor a charge upon it for

the amount of his costs under the Legal Profession Act 1976 section 123: Re Wadsworth, Rhodes v Sugden (1885) 29 ChD517. 364 For a form of order, see 13 Atkins Court Forms (1992 issue) 219, Form 4. 365 Ibid, No. 258. 366 Solitaire Land Sdn Bhd v Hong Leong Bank Bhd [2001] 4 MLJ 75. 367 RHC Order 23 rule 1(1). See Procon (GB) Ltd v Provincial Building Co Ltd [1984] 2 All ER 368,

[1984] 1 WLR 557, CA (Eng). 368 Ibid, No. 258.

65

to the stage of the proceedings for which security is ordered.369

The Court is more

convenience if it is informed what the estimated costs is attached with a skeleton bill

of costs as a ready guide.370

Another situation where the foreign plaintiff has no address or property in

Malaysia, it would be appropriate to follow the formula of Zainun Ali JC in Adarsh

Pandit v Viking Engineering Sdn Bhd 371

by ordering the plaintiff to pay a quarter of

the sum as claimed as security for costs.372

In the event of a plaintiff limited company liable to furnish security for costs,

a sufficient amount will be ordered373

and it should be for the feasible amount of

costs considering the chance of the case collapsing. The amount is still in the

discretion of the court. The excess of the defendant‟s counterclaim over the

plaintiff‟s claim should be disregarded where there is a counterclaim put forward by

the defendant.374

Security may be ordered for past costs. In the case of Low Chee Yan v Loh

Kong Yew375

, it was held that a security ordered will cover the past costs when the

appellant resides outside the jurisdiction of the court and the appellant has no

immovable property within the jurisdiction. The proceedings have put the defendant

to a heavy payment in costs which at present seem to be irrecoverable and the suit is

brought at the instigation of creditors and the appellant is merely a puppet.

369 See T Sloyan & Sons (Builders) Ltd v Brothers of Christian Instruction [1974] 3 All ER 715 at 720

per Geoffrey Lane J. 370 Ibid. 371 [1998] 2 AMR 1009 372 Raju Rajaram Pillai v MMC Power Sdn Bhd [2000] 6 MLJ 551 at 568 per A Malik Ishak J. 373 See the Companies Act 1965 (Act 125) section 351 and Bacal Contracting Ltd v Modern Engineering (Bristol) Ltd [1980] 3 All ER 655. 374 Ibid, No. 258. 375 (1917) 2 FMSLR 176

66

Besides, security may be ordered for future costs.376

It is doubtful whether

security will be ordered for past costs unless the application is made punctually. It

will be even more doubtful when it is made late, since the plaintiff may be lulled into

incurring costs by the client that security will not be required from him.

3.6.12Default in Giving Security

If a plaintiff does not furnish security for costs when ordered by the Court,

the action may be stayed until security is given or dismissed for want of

prosecution.377

3.6.13Payment out to Successful Plaintiff

A successful plaintiff is entitled to have paid out to him the money which he

has paid into court as security for costs, even though that an appeal is pending.378

376 Willmott v Freehold House Property Co (1885) 33 WR 554, CA (Eng). 377 Etc v E Kong Guan [1934] MLJ 174. 378 Comitato Portuario d’Importazione dei Carboni Fossili di Genova v Instone & Co [1922] WN

260, CA (Eng).

67

3.6.14 Procedure

Generally, the defendant writes to the plaintiff enquiring whether the plaintiff

is ready to give security for costs before an application is made to the Court for

security for costs. If the plaintiff agrees, then there is no need an application. The

application is done by summons in chambers supported by an affidavit setting out the

reasons which the application is made. The decision for the application is wholly

within the discretion of the court whether or not to make the order. The discretion

will be exercised after considering all the circumstances of the case as the court

thinks just to do so. If the security for costs is ordered, it must be given in the manner,

time and terms.379

In Sir Lindsay Parkinson v. Triplan Ltd380

, the Court of Appeal

stated:

“That even where there is credible evidence that a limited company

would be unable to pay the costs of a successful defendant, ht court

still has a discretion under section 447 of the Companies Act 1948 as

to whether to make an order for security for costs. In considering

whether to make such an order the court (i.e the master) had to have

regard to all the circumstances of the case.”

3.7 Conclusion

At the end of this chapter, the readers should gain an overall idea regards to

the civil proceedings in the High Court. The most important part of this chapter is to

guide the readers to understand the security for costs. This chapter is helpful to the

readers in the chapters later which are discussed in this research report.

379 RHC Order 23 rule 2 380 (1973) 1 QB 609

CHAPTER 4

RESEARCH METHODOLOGY

CHAPTER 4

RESEARCH METHODOLOGY

4.1 Introduction

Research methodology is a process used to gather information that supports

the thesis statement, answers the research questions and achieves the stated objective.

The research methodology section is similar to an instruction booklet. It describes the

data collection instruments and procedures used in the research. The section should

be clearly written so that other researchers who are interested to conduct a research

with similar scope would be able to follow the procedure in this research. Therefore,

this chapter provide an overview of the research process. Here, it discusses the

considerations preliminary to beginning legal research, basic approaches to legal

research and the steps in the research process.

As pointed out in Chapter 1, the objective of this research is to determine the

grounds for the High Court to order or dismiss the application for security for costs.

With the intention to achieve the research objective, an organized process to conduct

this study has been designed.

69

4.2 Approaches to Legal Research

The approaches to the research process are depending on the amount of

knowledge of the researcher possess concerning the areas of law involved in the

research problem and depending on whether the researcher starts with a known

primary source.381

Legal approach may differ in their purpose, method and nature.382

However, a legal research involves the use of several studies combined together.383

The types of approaches used in this research are discussed in the sub-headings

below:

4.2.1 Overview Approach

A research can be started by overview approach when the writer has a little

knowledge about the areas of law for the research topic. This approach began with

the research process in secondary sources to gain basic understanding of the areas of

law. The secondary sources gave an overview of the areas of law related to this

research. This background reading helps to focus on later research and to generate

more key terms to use.

381 Carol M. Bast and Margie Hawkins. Foundations of Legal Research and Writing. 4th Edition. Clifton Park, NY :Delmar Cengage Learning. 2010. 382 Anwarul Yaqin. Legal Research and Writing. Malaysia: Malayan Law Journal Sdn Bhd. 2007. 383 Ibid.

70

4.2.2 Topic Approach

The second approach is topic approach which narrows the scope of research

at the outset to a single topic. This type of approach can be pursued beginning either

in primary sources or secondary sources. The danger with focusing the research at

the beginning may miss important matters in another area of law.

When the researcher has an adequate amount of knowledge in the areas of

law for this research, the researcher can begin the research process in primary

sources to quickly locate relevant primary sources. When the researcher searches for

a legal case, the researcher can begin examining the outline of a particular topic in a

digest. Then, if the researcher searches for statues or administrative regulations, the

researcher can begin researching in the index to those statues or regulations.

Knowledgeable researcher has another option to perform focused research in

secondary sources. Even a knowledgeable researcher would be glad to quickly locate

a law review or legal periodical article on point. The article usually saves the

researcher time by summarizing the law in the area and citing relevant authority. The

researcher can pull the cited authority, read it, update it and pursue another avenue of

research.

4.2.3 Descriptive and Exploratory Approach

Descriptive approach seeks to find out what happened.384

It involves the

ascertainment of the state of affairs in respect of any problem, issue or question.385

384 Ibid, No. 382. 385 Ibid.

71

This research is carried out to ascertain and describe the attitude of the High Court in

determining the grounds to order or reject the application of security for costs.

Besides, this research aims to describe facts, situations or events as they are seen or

perceived by the researcher.

On the other hand, this research is done like an exploratory study where this

study works on a relatively unstudied topic or area of knowledge with the purpose of

finding out unknown or partly known facts. The goal of this research is to develop

credible explanation to the readers.

4.2.4 Analytical and Critical Approach

Analytical approach involves a careful examination and evaluation of

something in order to understand or explain it or draw inferences and conclusions

from it.386

This research focuses on analysis of facts and legal cases of security for

costs which like an examination of rules, principles, cases, concepts and theories. In

addition, this research analysed and examined the nature, purpose and adequacy of

law in arbitration.

Critical approach allows the researcher to point to the inadequacies or

expresses the researcher‟s own opinion of a particular area of study.387

Indeed, this

research requires critically assessing various issues involved along with whatever

other purpose it might seek to serve.

386 Ibid, No. 382. 387 Ibid.

72

4.2.5 Historical Approach

Historical approach involves an objective study of the past facts, events or

institutions.388

A study of the past where the purpose of a research study is to find out

the origin or trace the development of anything that has some relationship with

law.389

Historical approach enables a researcher to understand the historical

development of law in a specific area in order to assess the utility or adequacy of the

law as it exists now or the need to change and reform.390

Where the present legal

provisions or principles have raised meaningful questions, a historical approach often

becomes necessary to explore the circumstances in which the present situation came

about. After that, the study considers whether any further changes are needed to meet

new problems and uncertainties.391

4.2.6 Comparative Studies

A researcher may find it worthwhile to examine similarities and

dissimilarities between two situations existing within the same legal system. The

objectives of comparative research are to present information in two or more

different existing factual contexts, to examine merits and demerits in a comparative

perspective and to compare views, ideas, values, concepts, rules, principles, theories

or any other condition that has some bearing on law and its institutions.392

388 Ibid, No. 382. 389 Ibid. 390Ibid. 391 Ibid. 392Ibid.

73

4.3 Research Scope

The objective of this project is to determine the grounds for the High Court to

order or dismiss the application for security for costs. The study is made based on the

law cases reported in Malaysia which related within the area of security for costs.

The law cases are collected within the period from year 1986 to year 2009. Indeed,

there is not much legal cases can be found which mention about security for cost for

arbitration. From these law cases, analysis is done by way of indirect cases which

have demonstrated issues in the circumstances the High Court application of security

for costs in arbitration.

All the law cases collected from year 1986 to year 2009 is done through

documentary analysis of Malayan Law Journal via Lexis Malaysia website.

Accordingly, the finding of the analysis may be done as regards to the reasons or

circumstances that the security for costs will be granted or rejected with the

preceding court decision.

4.4 Research Procedure

Basically, this research is conducted in five major phases which are:

i. Phase 1: Preparation of Research Proposal

ii. Phase 2: Literature Review

iii. Phase 3: Data Collection

iv. Phase 4: Data Analysis

v. Phase 5: Conclusion and Recommendations

74

4.4.1 Phase 1: Preparation of Research Proposal

The preparation of research proposal is compulsory to be done at the

beginning of this research. At first, the issue of research had been identified in order

to determine the research title. This was arisen from the intensive reading of books,

journals and articles which could easily be obtained from the UTM main library.

Meanwhile, all relevant factual information pertaining to the research issue were

gathered and studied. Then continue with brainstorm in order to determine other

sources of relevant information. If this research does not start researching without

gathering all relevant information, the researcher may spend hours researching a

question that have been answered by reviewing pertinent documents. After

identifying the research issue, the research title had been determined. This was

followed by objectives, scope and significance of the research.

4.4.2 Phase 2: Literature Review

Literature review is crucial in the research process and it is very important to

assist in carrying out the research. It is conducted to provide a comprehensive

background study of the research. When the research issue and objectives had been

identified, various documentation and literature review related to the research field

has been gathered to achieve the research objective. The reviews mainly focus on the

Arbitration Act 2005, Civil Procedure and Security for Costs.

A good beginning in researching is to read a textual explanation of that area

of law. Use the key words that have identified to locate relevant topics in the legal

encyclopaedias. Besides, the law review and legal periodical articles may give more

specific information. Index to Legal Periodicals is a good source to use in locating

these articles either by subject or by author. The researcher has to familiarize with

75

resources available in library including treatises and hornbooks. A legal textbook

covering area the area of law of this research may be another good place to start.

Generally, the sources of literature review were collected from the readings

materials in printing form or obtained from the internet. For example, books, journals,

articles, newspapers and on-line journal and e-book. Most of the sources were

collected from the UTM main library. In addition, dictionaries and encyclopedias

were used to explain the terms that are difficult to understand. As reading about the

research topic, a checklist of the publications to review is made. The lists of primary

and secondary sources are kept and finding tools for federal, state and local

jurisdiction.

4.4.3 Phase 3: Data Collection

This phase is vital because it described how the data was collected to achieve

the research objective. After discovering all the background and relevant issues

through literature reviewing, previous court cases which are related to the research

issue had been collected. The cases were collected from the Malayan Law Journals

via UTM library electronic databases which is the Lexis Malaysia Legal Databases.

The cases which were related to security for costs had been sorted out from the

Malayan Law Journals cases.

This step is to review all the information that had gathered and use it to

identify key terms and issues. The key terms are words central to a legal research

problem that can be used by the researcher to begin researching in print indexes or to

formulate a query in computer-assisted legal research. The key terms can be used to

start the research in the indexes to secondary or primary sources. A legal thesaurus is

helpful at this point. The key terms could be used to access information in the

76

descriptive word indexes of the digests. These lists as below can also be used at a

preliminary stage in this research to generate key terms393

:

i. The parties involved;

ii. The places where the facts arose and the objects or things involved;

iii. The acts or omissions that form the basis of action or issue;

iv. The defence to the action or issue;

v. The relief sought.

The keywords for this research are security for costs and Arbitration Act

2005. These keywords had been used to search the related cases through Lexis

Malaysia Legal Database in order to achieve the research objective. Identification of

key terms is a very important step in this research.

At this stage, the researcher should double-check to ascertain that the most

current version of statute or constitutional provision is obtained. For those which are

in print volumes, the researcher checks the hardbound volumes, pockets part,

advance sheet and session law services. The researcher makes sure any references in

the citatory indicating a change in the law or any relevant case law interpretations.

Next, the researcher analyzes how much of an impact the case has on the research.

The researcher notes the year of the decision the court authoring the decision and

whether the case is mandatory or persuasive authority.

393 Ibid, No. 381.

77

Table 4.0: Number of cases, name of cases and year of cases by use of each keyword

search in Malayan Law Journals cases.

Keywords Number

of Cases

Name of Cases Year of

Cases /

Reference

No

Arbitration

Act 2005

and

Security

for Cost

8 Open Type Joint Stock Co Efirnoye ('Efko') v

Alfa Trading Ltd

[2012] 1

MLJ 685

Infineon Technologies (M) Sdn Bhd v Orisoft

Technology Sdn Bhd (Previously Known As Orisoft Technology Bhd) and Another

Application

[2011] 7

MLJ 539

Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd v Sunway City Berhad

[2011] MLJU 140

Bintang Merdu Sdn Bhd v Tan Kau Tiah @ Tan Ching Hai And Anor

[2009] MLJU 585

Jiwa Harmoni Offshore Sdn Bhd v Ishi

Power Sdn Bhd

[2009]

MLJU 788

Merino-O.D.D. Sdn Bhd v Pecd Construction

Sdn Bhd

[2009]

MLJU 671

Taman Bandar Baru Masai Sdn Bhd v Dindings Corporations Sdn Bhd

[2009] MLJU

0793

Borneo Samudera Sdn Bhd v Siti Rahfizah Bt

Mihaldin & Ors

[2008] 6

MLJ 817

Arbitration

Act 1952

and

Security

for Cost

16 Lembaga Kemajuan Terengganu Tengah v Mendza Builders Sdn Bhd

[2012] MLJU 281

Infineon Technologies (M) Sdn Bhd v Orisoft Technology Sdn Bhd (Previously Known As

Orisoft Technology Bhd) And Another Application

[2011] 7 MLJ 539

Sundra Rajoo A.L Nadarajah v Chong Lee

Siong

[2009]

MLJU 0666

Taman Bandar Baru Masai Sdn Bhd v Dindings Corporations Sdn Bhd

[2009] MLJU

0793

Visage Engineering Sdn Bhd v Smart Frame Sdn Bhd

[2009] MLJU

0665

Sanwell Corp v Trans Resources Corp Sdn

Bhd & Anor

[2002] 2

MLJ 625

Luminous Crossroads Sdn. Bhd. v Lim Kong Huat Construction

[2001] MLJU 475

Jurumurni Sdn Bhd v Ppc Glomac Sdn Bhd [1999] MLJU 398

78

Government Of Sarawak v Sami Mousawi-

Utama Sdn Bhd (In Liquidation)

[1998] 3

MLJ 820

Usahabina v Anuar Bin Yahya [1998] MLJU 176

Sim Sim Construction-Kujaya Joint Venture V Antah Biwater Jv Sdn Bhd

[1996] MLJU 234

Pembenaan Leow Tuck Chui & Sons Sdn

Bhd v Dr Leela' S Medical Centre Sdn Bhd

[1995] 2

MLJ 57

Seloga Jaya Sdn Bhd v Pembenaan Keng

Ting (Sabah) Sdn Bhd

[1994] 2

MLJ 97

Maeda Construction Co Ltd v Building Design Team & Ors

[1991] 3 MLJ 24

Klockner Industries-Anlagen Gmbh v Kien Tat Sdn Bhd & Anor

[1990] 3 MLJ 183

Kasturi Palm Products v Palmex Industries Sdn Bhd

[1986] 2 MLJ 310

Arbitration

and

Security

for Cost

16 CMS Energy Sdn Bhd v Poscon Corporation [2009] MLJU

1209

Sukatno v Lee Seng Kee [2009] MLJU 84

Vovici Corporation v Mcsb Data Systems Sdn Bhd

[2008] MLJU 443

Badrul Zaman bin P.S. Md. Zakariah v Mohd

Aris bin Chonin and Others

[2006]

MLJU 340

J.R. Links Educational Consultants Sdn Bhd

And Others v Orix Leasing Malaysia Berhad (Dahulunya Dikenali Sebagai United Orix

Leasing Berhad)

[2006]

MLJU 155

Tan Ah Tong v Perwira Affin Bank Bhd & Ors

[2002] 5 MLJ 49

Ballast Nedam Groep Nv (M) Sdn Bhd v Tradebond (M) Sdn Bhd

[2000] 6 MLJ 416

Raju Rajaram Pillai (T/A Dhanveer

Enterprise) v Mmc Power Sdn Bhd & Anor

[2000] 6

MLJ 551

Mendip Plywood Ltd v Kts Timber Industries

Bhd

[1998]

MLJU 92

Abdul Fattah Bin Mogawan & Anor v Mmc Power Sdn Bhd & Anor

[1997] MLJU 335

Woh Hup (Pte) Ltd v Property Development Ltd

[1991] 3 MLJ 82

Gateway Land Pte Ltd v Turner (East Asia)

Pte Ltd

[1988] 1

MLJ 416

Kasturi Palm Products v Palmex Industries

Sdn Bhd

[1986] 2

MLJ 310

Bangkok Bank Limited v Wiel Brothers Cotton Inc

[1977] 2 MLJ 134

79

Ratnam v Cumarasamy & Anor [1962] 1

MLJ 330

Manasseh v The Attorney-General And Mustapha Bin Ahmad ... Third Party

[1949] 1 MLJ 257

After reading all the cases listed above, it was found that there were seven

cases were related to this research project. The cases are listed in table 3.2. These

seven cases were analysed and compared each another in Chapter 5. These cases are

important and specifically chosen due to the following reasons:

i. These cases fall within the scope of this research as described in sub-

heading „4.3 Research Scope‟.

ii. The judgments are delivered based on different principles and rationales

which might be interesting to this research.

iii. These cases range from year 1986 to 2009 so that the trend of the

judgments can be observed over the years.

iv. The language used in these cases is simple and easy to comprehend.

The other cases are not analysed because of the following reasons:

i. These cases are not fall within the scope of this research.

ii. These cases do not specify security for costs as the type of interim

measures or injunction.

iii. The arbitration agreement contains arbitration rule other than Arbitration

Act 1952 and Arbitration Act 2005.

Table 4.1: Cases to be analysed and compared in Chapter 5.

No. Name of Cases Year of Cases /

Reference No

1. Bintang Merdu Sdn Bhd v Tan Kau Tiah @ Tan Ching

Hai and Anor

[2009] MLJU 585

2. Jiwa Harmoni Offshore Sdn Bhd v Ishi Power Sdn Bhd [2009] MLJU 788

80

3. Luminous Crossroads Sdn. Bhd. v Lim Kong Huat

Construction

[2001] MLJU 475

4. Ballast Nedam Groep Nv (M) Sdn Bhd v Tradebond (M) Sdn Bhd

[2000] 6 MLJ 416

5. Gateway Land Pte Ltd v Turner (East Asia) Pte Ltd [1988] 1 MLJ 416

6. Government Of Sarawak v Sami Mousawi-Utama Sdn Bhd (In Liquidation)

[1998] 3 MLJ 820

7. Kasturi Palm Products v Palmex Industries Sdn Bhd [1986] 2 MLJ 310

4.4.4 Phase 4: Data Analysis

During this phase, the previous court cases under Malayan Law Journal has

been collected were filtered in order to make sure that the cases were discussing the

ground to grant or refuse to the application of security for costs. Then, case study on

the related legal cases was conducted to make critical analysis and review in the

dissertation. The type of methodology used is document analysis.

4.4.5 Phase 5: Conclusion and Recommendations

The full research report is prepared and wrote in this final phase. When all the

data had been gathered and analysed, all the findings of the research were

documented and written in a proper way. This is to allow the readers to be aware of

and gain information from this research. Moreover, the entire process of the study

was reviewed with the purpose to identify whether the research objective had

achieved or vice versa. Then, conclusion was made and the problems encountered

throughout this research were listed down. At last, the recommendations for future

research were suggested for researchers who are interested to explore the field which

is similar to this research.

81

4.5 Research Flow Chart

Figure 4.0: Flow Chart for Research Methodology

RESEARCH ISSUE

The issue is the grounds that the security for costs can be obtained or

rejected is unclear.

RESEARCH OBJECTIVE

To determine the grounds of High Court to approve or dismiss securities

for costs.

LITERATURE REVIEW

Civil Procedure, Rules of the High Court 1980, Arbitration Act 2005,

arbitrator, arbitration proceeding, orders for security and security for costs.

RESEARCH METHOD

Data collection:

- Legal cases in relation to the security for costs in arbitration - Access to UTM library electronic database(Lexis Malaysia

Legal Database) - Collect cases from Malayan Law Journal.

Data analysis: Detail study on legal cases

DISCUSSIONS

CONCLUSION & RECOMMENDATIONS

82

4.6 Conclusion

This chapter illustrates and explains the whole process of conducting this

research. Along the way in preparing this research report, the erromatical and

grammatical check has been done to avoid unnecessary mistakes. Finally, the full

and complete research report is ready to be submitted after it has been nicely binded

and documented.

CHAPTER 5

JUDICIAL INTERPRETATION

OF THE HIGH COURT

IN THE APPLICATION OF

SECURITY FOR COSTS

CHAPTER 5

JUDICIAL INTERPRETATION OF THE HIGH COURT IN THE

APPLICATION OF SECURITY FOR COSTS

5.1 Introduction

This chapter is the core chapter for this study as it is concerns with the

analysis of law cases relating to judicial interpretation of the High Court regarding to

the application of security for costs. This chapter is crucial in the context of

explaining the attainment of the research objective.

The relevant law cases chosen in this research are limited to those reported in

Malayan Law Journal and Lexis Malaysia Website. The study is made based on the

law cases reported in Malaysia and Singapore which related with the area of security

for costs. The law cases are collected within the period from year 1986 to year 2009.

Indeed, there is not much legal cases can be found which mention about security for

costs in arbitration proceedings.

84

5.2 Case Analysis

There are a total of seven law cases are collected from the Lexis Malaysia.

The law cases are reviewed and analysed as follow:

5.2.1 Case 1: Bintang Merdu Sdn Bhd v Tan Kau Tiah @ Tan Ching Hai and

Anor [2009] MLJU 585

a) Facts of the case

The landowner was the claimant of properties which by an agreement had

been handed over to the developer, the respondent in the arbitration proceedings. The

landowner's complaint was that the developer was in breach of its obligations and did

not complete its obligation and had terminated the contract without the landowner's

rights to claim for damages. The developer denies the claimant's claims.

After that, an arbitrator was appointed. Directions were given by the

arbitrator and hearing was fixed. The primary complaint of the developer before this

court is that during the course of hearing, the landowner served a witness statement

of his witness, an engineer, on the day of hearing. After the engineer gave evidence,

the developer requested the cross-examination of the engineer to be deferred to

enable the developer to seek assistance of an expert to look into the contents of the

said witness statement to assist in the cross-examination. The arbitrator refused on

the grounds that the engineer was not giving evidence as an expert.

85

The respondent requested the arbitration proceedings to be stayed pending the

respondent's proposed application for the removal of the arbitrator. The arbitrator

refused and proceeded with the hearing. The respondent took the position that it will

not participate in the proceedings, though not at that state, withdrawing itself totally.

The respondent filed suit to set aside the arbitration award and obtain security for

costs.

b) Issues of the case

The central issue is whether the arbitrator can be removed and the award set

aside on the grounds of misconduct for refusing the adjournment. In respect of the

suit of setting aside of arbitrator‟s award, there is an appeal for security for costs. The

deputy registrar ordered security for costs of RM393,187.50. The High Court has to

decide whether the amount is excessive and whether arguments of law and related

issues sufficiently complex to warrant sum ordered.

c) Findings of the High Court

On this issue, the Judge agrees with the learned counsel for the respondent

that the amount awarded for security for costs in the sum of RM393,187.50 by the

deputy registrar is totally wrong on the fact and the law. Furthermore, the sum is

excessive in any event. On the facts of the case, there should not be any order for

security for costs and that too in the sum stated above. Deputy Registrar should not

just be carried away by the volumes of documents filed in such cases as most of them

are only formal in nature and the real issue is in the affidavits filed. Filing excessive

documents is at the peril of the parties and that does not mean they are entitled to

additional costs. Ordinarily, an application in any form of Originating process which

is disposed off by affidavit evidence should not exceed RM10,000.00 inclusive of all

items relating to taxation unless exceptionally the arguments of law and related

issues are extremely complex.

86

The Judge refers to the case of Brisking Industries Sdn Bhd & Anor v. Mbf

Insurans Berhad High394

. The Court held that:

“As a general rule, a plaintiff ordinarily resident in Malaysia, cannot

be subject to an application for security for costs purely on the

grounds of impecuniosities. However, when the plaintiff is a

corporate entity section 351 of Companies Act 1965 will apply. That

does not mean security for costs will be granted as of right. It is only

a discretionary relief. Such discretion will not be ordinarily exercised

in favour of the applicant unless the justice of the case demands so.

In this case, the relationship between the defendants and plaintiffs is

one of insurer and insured. For insurer, to make such an application

against the insured who has lost everything in the fire must be seen

totally as an act which lacks bona fide and the court ought not to

entertain the application on the facts of this case.”

In Siti Juliana Suen Abdullah & Ors v Sungei Wang Properties Sdn Bhd &

Ors395

where it was stated:

“The plaintiffs' seeking a getting up fee of RM20,000 for an

interlocutory application which was consented to, surely is not only

excessive but oppressive and ought not be entertained. I would have

thought that all things being equal and as a general rule a contested

application in respect of procedural points or directions from court,

the getting up fees should not exceed RM2,000. Often applications

which involve issues on law and fact but relating only to mundane

matters should not exceed RM5,000. If there is some level of

complexity, then it should not exceed RM10,000,00 unless the

subject matter involved in respect of the application not the suit

proper is one which is extremely crucial taking into consideration the

394 [2008] 1 LNS 260 395 [2009] 2 CLJ 592

87

quantum of the claim as the case may be. Such application in my

view must be very rare.”

Registrars must take note that it is not desirable to grant excessive getting up

fees for interlocutory applications. This jurisprudence must not be forgotten. Support

for the proposition is found in the Subordinate Court Rules 1980, Order 48 rule 21.

d) Discussion

There should be no security for costs received by the respondent. This is

because the respondent was the claimant or plaintiff of the arbitration proceedings.

As we can see in the case of Brisking Industries Sdn Bhd & Anor v. Mbf Insurans

Berhad High396

cited by the Court and the Court stated a general rule that a plaintiff

typically resident in Malaysia, cannot be subject to an application for security for

costs purely on the ground of impecuniosities. This means that the plaintiff should

furnish security for costs but not seeking it. In addition, section 351 of Companies

Act 1965 will not apply because the respondent is not a corporate body but the

landowner.

The amount of security for costs ordered to be given is in the diplomacy of

the Court. The Court will fix such amount as it thinks just to do so, having consider

to all the situations of the case. It can be noted that the High Court has flexibility in

fixing the amount of security for costs as the High Court may deemed it fit. It is of

great convenience to inform the court what the estimated costs are and for this

purpose a skeleton bill of costs usually affords a ready guide.

396 [2008] 1 LNS 260

88

The circumstances of the case are listed in Order 23 rule 1(1) of RHC 1980.

The case of Procon (GB) Ltd v Provincial Building Co Ltd and others397

as per

discussed in Chapter Two has listed the four circumstances same as in the Order 23

rule 1(1). Costs should be assessed by the applicant on a party and party basis and

not on an indemnity basis.398

Thus, filing excessive documents is at the peril of the

claimants and that does not mean they are entitled to additional costs. This is because

the additional costs do not fall in either circumstance listed in Order 23 rule 1(1).

The maximum amount of security ordered will be the amount of the

recoverable costs of the defence, excluding the costs if any counterclaim. Even if the

arbitrator is persuaded that the estimate of anticipated costs is accurate, the High

Court is entitled to order security for any lesser amount he judged accordingly. In the

present case, the amount of the security should be not more than RM5,000 because

the application do not involve issues on law and fact but only relating to ordinary

matters that is whether the arbitrator can be removed and the award set aside inter

alia on the grounds of misconduct for refusing the interruption.

5.2.2 Case 2: Jiwa Harmoni Offshore Sdn Bhd v Ishi Power Sdn Bhd [2009]

MLJU 788


The plaintiff is the claimant in the arbitration proceeding relating to a sub-

contract work with the defendant as the contractor. The plaintiff is claiming a sum

more than RM16 million. At the same time, the defendant also claims by way of set-

397 [1984] 2 All ER 368. 398 Ibid, No. 258.

89

off and counterclaim in the sum of more than RM7 million. In this application, the

plaintiff is claiming security for costs in respect of the arbitration in the sum of half a

million and a sum of more than RM16 million to secure the amount in dispute. The

plaintiff made this application due to the terrible financial standing of the defendants.

The defendant opposes the application.

The defendant says that the plaintiff is the claimant and he is not entitled to

security for costs even though the defendant has raised a counterclaim. Besides, the

defendant argue that the powers to order for security to court has already been given

to the arbitrator in section 19 of Arbitration Act 2005 and the application must not as

a general rule be made to the High Court in the first instance.


There are two issues in the case. The first issue is which party is in position to

apply security for costs. Another issue is regarding the powers to order security for

costs in Section 11 and Section 19 of Arbitration Act 2005 has overlapped. The

Court has to determine which section should be referred in this case.


In the instant case, the plaintiff is the claimant and seeking for security of

costs which militates against established principles. The principle is where a

defendant is always has a right to defend himself and should not be called to give

security for costs. As a general rule, the principle remains the same, if the defendant

raises a set-off and counterclaim.

90

After the Judge has read the originating motion, affidavits and submissions of

the parties in detail, he takes the view the plaintiff's application must be dismissed.

He explains that the powers granted to court pursuant to section 11 are powers which

are not meant to be invoked by a party to arbitration proceedings. It must be applied

with maximum concern and caution to guarantee and support the arbitration

mechanism and not do any act which will stifle the arbitral process. In addition,

when such powers are also vested with the arbitrator, the application must first be

made before the arbitrator.

The case laws relating to grounds when the court will order for security for

costs are well settled and will apply to any application for security for costs before

the arbitrator. As a general rule, a plaintiff ordinarily resident in Malaysia, cannot be

subject to an application for security for costs purely on the grounds of

impecuniosities. However, when the plaintiff is a corporate entity, section 351 of

Companies Act 1965 will apply. That does not mean security for costs will be

granted as of right. It is only a discretionary relief. Such discretion will not be

ordinarily exercised in preference of the applicant unless the justice of the case

demands so.

For reasons stated above, the Judge dismisses the plaintiff's originating

summons with costs. The costs is fixed in the sum of RM10,000.00 to be paid by the

plaintiff to the defendant. In respect of the defendant's application enclosure 8, it will

be appropriate to be struck out with no order as to costs.

d) Discussion

Overlapping of powers in the conduct of the powers to order security for cost

as stipulated both under Section 11 and Section 19 of the Arbitration Act 2005 has

been discussed by the Court in this case. This case reflects that the powers of the

High Court should always be used to support but not to stifle the arbitral process.

91

The Court should respect the decision made by the arbitrator and provide more space

for arbitrator to make decision. This means that the disputing parties should refer the

application of security for costs to the arbitral proceedings before they go to the High

Court.

There is a principle where a defendant cannot be ordered to furnish security

for costs of an action.399

The defendant‟s position in this respect is quite different

from that of a plaintiff since he is exercising his right to defend himself.400

In other

words, the defendant should not be called to furnish security for costs. Thus, the

plaintiff in the present case goes against the established principle by seeking security

for costs.

Furthermore, as a general rule, the principle remains the same if the

defendant raises a set-off and counterclaim. Where the defendant makes a

counterclaim, he does not necessarily place himself in the position of a plaintiff so as

to be liable to provide security for costs.401

The crucial question is whether the

counterclaim operates as a defence, in which case the defendant is merely defending

himself or it amounts to a cross-action, in which case he is in the position of a

plaintiff prosecuting his own claim. Thus, where the claim and the counterclaim arise

from the same matter or transaction and the counterclaim is in fact the defence to the

action.402

399 Maatschappij Voor Fondsenbezit v Shell Transport and Trading Co [1923] 2 KB 166, CA (Eng). 400 Banque du Rhone SA v Fuerst Day Lawson Ltd, Promat SA (third parties) [1968] 2 Lloyd‟s Rep 153, CA (Eng), where the defendant was defending a claim on a dishonoured bill. 401 RHC Order 23 rule 1(3) 402 Mapleson v Masini (1879) 5 QBD 144, DC (Eng).

92

5.2.3 Case 3: Luminous Crossroads Sdn. Bhd. v Lim Kong Huat Construction

[2001] MLJU 475

a) Backdrop of the case

The facts of this case is the applicant, Lim Kong Huat Construction

(hereinafter known as Lim) applies for an order for security for costs into court until

the final disposal of the notice of motion filed by Luminous Crossroads Sdn. Bhd.

(hereinafter known as Luminous) for extension of time to set aside.

The learned counsel for Luminous resists Lim's application. This is because

the learned counsel for Luminous argued that Lim harshly stifle a genuine claim by

Luminous under section 24(3) of the Arbitration Act 1952 in the form of security.

Moreover, the argument advanced for Luminous is that this is a privilege accorded

only to a defendant and it is never available to a plaintiff. The learned counsel stated

that Lim has originated in an arbitration proceeding by making claim against

Luminous and so it was submitted that Lim is the plaintiff and Luminous is the

defendant. The learned counsel relied on section 351 of the Companies Act 1965 in

support of his contention herein. He added that there is no provision of law allowing

Lim as the plaintiff to apply for security for costs. Further, he submitted that security

for costs can only be ordered if one of the conditions as stated in Order 23 rule 3(1)(a)

to (d) of the RHC 1980 is satisfied and he concluded that Lim has not fulfilled any of

these conditions.

On the other hand, the learned counsel for Lim is of the view that Luminous

had commenced the notice of motion before this court by using Form 9 in the RHC

1980. Hence, Luminous is the plaintiff while Lim is the defendant, in which case

Lim is entitled to apply for security for costs under Order 23 of the RHC 1980 and

section 351 of the Companies Act 1965 while security for the arbitrator's award

93

under section 24(3) of the Arbitration Act 1952. The grounds for Lim's application

are as follows:

i. the business address of Luminous has changed;

ii. Luminous has not submitted any accounts to the Registrar of Companies;

iii. Luminous does not have sufficient assets; and

iv. Luminous has not paid the arbitration costs.

In respect of the security for the arbitrator's award, he relied on section 24(3)

of the Arbitration Act 1952 and added that there would be no injustice to Luminous.


The issue in this case is both disputing parties are claiming that they are the

defendant. They claimed that only the defendant is entitled to the application of

security for costs and security for arbitrator‟s award. The Court has to decide who the

defendant is. After that, the Court only makes order for security for costs and

security for arbitrator‟s award.


A party is to be identified as a plaintiff or a defendant by reference to the title

of the parties in the matter filed and heard in the court before the arbitrator. In the

matter before the Court, Luminous has initiated a mode of proceedings by way of

originating motion which is based on Order 8 rule 3(1) of the RHC 1980 Form 9.

Upon a proper perusal of the title in this case, the Court found that Luminous is

obviously the party commencing the proceeding. Therefore, Luminous is the plaintiff

while Lim is the defendant. The Judge unable to accept the contention which relies

on the arbitration proceedings wherein Lim was making a claim as plaintiff against

94

Luminous as defendant and that they have respectively continued as such in the

originating motion before the Court.

For the first application, the Court held that the Order 23 is broader in scope

in that an order for security for costs may be made in favour of a defendant against

both individual and corporate plaintiffs while the section 351 of the Companies Act

1965 is specifically confined to a plaintiff company registered under that Act.

However, the principles enunciated in Order 23 and section 351contain common

features where the party against whom security for costs may be ordered is the

plaintiff. In other words, only the defendant is entitled to make an application for

security for costs. In the circumstances, the Judge hold that Lim as defendant is

entitled under Order 23 and section 351 to make the present application against

Luminous as plaintiff for security for costs.

From the facts and circumstances of this application, the Order 23 rule 1(1)(a)

to (c) of the RHC 1980 do not apply. The contention revolves around Order 23 rule

1(1) (d) of the RHC 1980 that is that Luminous, as plaintiff, has changed its address

during the course of the proceedings with a view to evading the costs of the litigation.

There is no dispute that Luminous has changed its address. Besides that, there is no

record that Luminous has ever filed their statutory financial reports and accounts

under section 169 of the Companies Act 1965, neither has it shown any record of its

assets. Finally, it is not disputed that Luminous has not settled its share of the

arbitration costs. In the circumstances, the Judge of the view that the above facts and

circumstances would require the exercise of discretion under Order 23 and section

351 to make an order for security for costs.

The second issue concerns the security for payment of the arbitrator's award.

This is regulated by section 24(3) of the Arbitration Act 1952. Section 24(3) provides

the Court a discretion to order security for the payment of an arbitrator's award.

Apparently, it seems that there has been no judicial decision in which section 24(3)

has been ventilated or considered. Therefore, the Court refer to two cases.

95

Firstly, an English case, Alexandria Cotton & Trading Company (Sudan), Ltd.

v Cotton Company of Ethiopia, Ltd.403

. Section 23(3) of the English Arbitration Act

1950 which is in pari materia with section 24(3). The sole factor which the Judge

took into consideration in deciding whether or not to exercise the discretion in

section 23(3) is the prejudice which the buyers may suffer if the court orders

payment into court of the award sum. The Court dismissed the buyers‟ appeal and

security was ordered in the form of payment into court as the buyers would not suffer

any prejudice.

The second case referred by the Court is Waiheke Homes v Laughland404

. The

court did not make an order for the payment of money into court as the plaintiff was

in a "shaky financial position" and would be unable to pay if an order were made.

Further, if the order were enforced and the plaintiff was wound-up, this would

prevent them from continuing with the substantive application unless a liquidator

was disposed to do so and even then its application would be rendered nugatory. The

court was also of the opinion that the defendants would suffer no prejudice if an

order was not made and balanced this factor with the prejudice which the plaintiff

will suffer that is the fatal consequences of an irreversible winding-up. This was

considered to be the real risk of injustice in that case and the application for payment

into court was dismissed accordingly. Therefore, the crucial issue here is still the

exercise of a discretion by reference to the specific situations of each individual case

and that the Court's first consideration is to achieve justice between the parties.

It is to be observed that the exercise of discretion by the courts in England

and in New Zealand is exclusively dependent upon the facts and situation of each

case. After having considering the facts and circumstances of the two cases with the

instant case, the Court orders security for the payment of the arbitrator's award.

403 [1965] 2 Lloyd's List Law Reports 447 404 [1991] 3 NZLR 377.

96

The Court hold that Luminous had to pay a sum of RM30,000 by way of

security for costs within 30 days from the date of this order of security for the

payment of the arbitrator's award,.

d) Discussion

From this case, we learn that a party is to be identified as a plaintiff or a

defendant by reference to the title of the parties in the matter filed and heard in the

court before the arbitrator. The plaintiff is the one who initiated the proceedings by

way of originating motion based on Order 8 rule 3(1) of the RHC 1980 Form 9. It is

unacceptable to identify a party who has originated in an arbitration proceeding as

the plaintiff. Once a party is identified as a plaintiff, the other party is the respondent.

Furthermore, this case stated that the scope of ordering security for costs in

Order 23 of the RHC 1980 is broader compare to the section 351 of the Companies

Act 1965. This is due to a defendant can made security for costs against both

individual and corporate plaintiffs under Order 23 of the RHC 1980 but only against

a plaintiff company registered under the Companies Act under the section 351 of the

Companies Act 1965. The common features of Order 23 and section 351 is the

principles enunciated where the party against whom security for costs may be

ordered is the plaintiff.

Again, it can be noticed that the court will consider all the circumstances of

the application of security for costs based on Order 23 rule 1(1)(a) to (d) of the RHC

1980. In the present case, the plaintiff has changed its address during the proceedings

with a view to avoid the consequences of the litigation. The plaintiff‟s action is one

of the circumstances stated in Order 23 rule 1(1)(d) of the RHC 1980. The Could will

make an order for security for costs against the plaintiff under Order 23 and section

351 even there is no dispute that the plaintiff has changed its address and there is no

97

record that the plaintiff ever filed their statutory financial reports, accounts and assets

under the Companies Act 1965.

The security for payment of the arbitrator's award is regulated by section 24(3)

of the Arbitration Act 1952. It is found that there has no judicial decision been

considered relating to section 24(3). It is to be observed that the exercise of

discretion by the courts in England and in New Zealand is entirely dependent upon

the facts and circumstances of each particular case. In Malaysia, one of the factors

that the Court has to consider is the financial position of a plaintiff. If the plaintiff is

impecunious and an order for security for costs might break the plaintiff‟s claim, the

court might decide that no order should be made.405

Hence, the Court in this case

orders security for the payment of the arbitrator's award because the plaintiff is not

insolvent and the order does not stifle the plaintiff‟s claim.

In La Grange v MaAndrew406

, a case discussed in Chapter 3, the Court held

that it is in appropriate to ask the plaintiff to immediately furnish the security for

costs at the time the Court make the order. Thus, the Court in the present case, order

the plaintiff within thirteen days from the date of this order of security for the

payment of the arbitrator's award, the plaintiff will be ordered to pay security for

costs.

405 Ibid, No. 258. 406 (1879) 4 QBD 210.

98

5.2.4 Case 4: Ballast Nedam Groep Nv (M) Sdn Bhd v Tradebond (M) Sdn

Bhd [2000] 6 MLJ 416


The respondent (Tradebond) was the claimants in a reference under an

arbitration agreement and the applicant (Ballast) was the respondents in the

reference. At the commencement of the arbitration proceedings, Tradebond was

intended to call only one witness. The respondent's witness tendered documents

which were not made by him and the documents were ruled inadmissible. Then,

the proceedings were then postponed to the last day of hearing where the

appellant's witnesses from Holland were to testify. The respondent applied for a

further postponement to call more witnesses as the evidence adduced was

hearsay. The appellant objected to the postponement as it would incur additional

cost on their part. The arbitrator suspend the case and directed that the appellant

apply to court for security for costs. The senior assistant registrar discharged the

application for security for costs. The appellant appealed against the dismissal

of their application. The appellant's application for security for costs was based

on Order 23 rule 1 of the RHC 1980 and it was contended that the respondent

would be unable to pay the costs of the appellant.


The Court in this case has to deal with the issue whether the appellant is

entitled for security for costs if he is directed by arbitrator to apply security for costs.

99


The Court dismisses the appellant‟s appeal. This is because the appellant

failed to show that his case fell under Order 23 rule 1(1)(a) to (d) of the RHC and

despite the contention that the respondent would be unable to pay costs, the appellant

failed to show that the respondent were „a nominal plaintiff‟ in the arbitration

proceedings under rule 1(1)(b) which stated that 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 that there is reason to believe that he will be unable

to pay the costs of the defendant if ordered to do so. Thus, the respondent was not

qualified under sub-rule (1) to be ordered to give security for costs and there was no

question of considering all the situation of the case, it was just to make the order.

Furthermore, the conduct which the respondent was blamed was their last-minute

wish to call additional witnesses which led to the postponement of the arbitration

proceedings and the application for security for costs.

Another reasons that the Court dismisses the appellant‟s appeal is that the

appellant does not make the application for security for costs based on their own free

will but based on the arbitrator‟s direction. It had not been shown that the arbitrator

had power to direct the appellant to apply for security for costs and that the

appellants were bound by the direction to apply for security for costs. The appellant

applied their own mind to the direction and to all the circumstances, considered that

it was in their interest to apply for security for costs.

d) Discussion

Literature review in Chapter 3 indicates that for a plaintiff to be liable to be

ordered to give security for costs under Order 23 sub-r (1) of RHC 1980, the

plaintiff‟s case must fall under any one of paras (a) to (d). Furthermore, even if the

case of a plaintiff falls under any one of those paragraphs, he is to be ordered to give

100

security for costs only 'if, having regard to all the circumstances of the case, the court

thinks it just to do so'. A nominal plaintiff in the arbitration proceedings under rule

1(1)(b) of RHC 1980 has two characteristics. First, a nominal plaintiff is a plaintiff

who is suing for the benefit of some other person. Secondly, a nominal plaintiff

might not able to pay the costs of the defendant if ordered to do so. A nominal

plaintiff is still being ordered to give security for costs solely on the ground of his

insolvency or poverty.407

From the present case, it can be noticed that the appellant failed to obtained

security for costs from the respondent because the appellant failed to show that the

respondent was a nominal plaintiff specifically acting on the second characteristic.

Thus, the respondent is not qualified under rule 1(1)(b) of RHC 1980 to be ordered to

give security for costs. Then, there is not necessary to consider all the circumstances

of the case to make the order of security.

The case shows that the arbitrator has no power to direct the appellant to

apply for security for costs. This is because the Arbitration Act 1952 does not confer

the power to order security for costs on the arbitrator. However, the High Court is

empowered such power under section 13(6)(a) of the Arbitration Act 1952 and Order

23 of RHC 1980. In practice, the parties can confer such power on the arbitrator in

the arbitration agreement.408

This is recognized by section 13(6) of the Arbitration

Act 1952.409

However, the Arbitration Act 1952 does not has provision in which

allows a court of law to order security for costs of arbitration proceedings which had

been concluded but the costs of which remains to be taxed by the Registrar.410

Now,

the parties do not have to do so anymore because the new Arbitration Act 2005

provides such power on the arbitrator under section 19.

407 Ibid, No. 258. 408 Ibid, No. 35. 409 Ibid. 410 Ibid.

101

5.2.5 Case 5: Government Of Sarawak v Sami Mousawi-Utama Sdn Bhd (In

Liquidation) [1998] 3 MLJ 820


The applicant in this case is the Government of Sarawak while the respondent

is the Sami Mousawi-Utama Sdn Bhd which is under liquidation. The respondent

claimed against the applicant, a sum of RM17million for consultation fees under a

consultancy service agreement (hereinafter known as the agreement). The applicant

argued that the claim was not a good arguable case because the terms and other

provisions in the agreement described the services to be rendered by architects or

engineers or surveyors. Since the respondent had not been registered as such under

the relevant legislation, it therefore cannot claim the fees prohibited by the legislation.

On the other hand, the respondent argued that the services rendered were for

consultancy services and not services rendered by architects or engineers or

surveyors. Upon the argument, the claim for consultation fees was referred for

arbitration. Pending the arbitration, the applicant applied for security for costs under

section 13(6)(a) of the Arbitration Act 1952 and section 351(1) of the Companies

Act 1965 to be furnished by the respondent.


This is the case where the application for security for costs against company

under liquidation. The factor to be considered is whether security for costs could be

ordered when a court appointed liquidator launches an action.

102


The Court allows the application for security for costs. The matters adverted to

in Keary Developments Ltd v Tarmac Construction Ltd & Anor, though not

exhaustive, should weigh one way or the other regarding the exercise or the

discretion to grant security for costs depending on which side of the scale they all

add up. It is inaccurate to say that no security for costs could ever be ordered when a

court-appointed liquidator launches an action. The fact that the liquidator was court

appointed is entirely irrelevant. Security for costs could still be ordered in

exceptional circumstances.

The terms and other provisions in the agreement imposed an obligation to pay

professional fees. The facts cast doubt on the prospect of the respondent's successful

prosecution of the claim and suggest a high degree of probability that the

respondent's claim may fail.

The contributors or shareholders of the respondent stand to benefit if the

action is successful while remaining unaffected by the consequence of a failed action.

On the other hand, the applicant would not be able to recover any cost if the action

should fail. Thus, an order for security for costs will not have the effect of stifling the

action and the facts justify the making of the order. Coupled with several other

factors considered by the court, the application for security for costs by the applicant

was allowed.

For the reasons stated above, the Judge held that there should be security for

costs. As for the amount, all the fees have to contribute equally from both plaintiff

and respondent. The retainer fee for the arbitrators is the sum of RM150,000. A

further fee of RM12,000 per day is payable. Since there are not many issues for

arbitration, it should not take considerable time to complete the arbitration. Therefore,

assuming that the arbitrators do not employ information technology, the Judge would

103

expect them to employ the use of secretaries to take down the notes of evidence. If

the secretaries are hired, the Judge does not think the case should take more than 20

days which would mean a fee of RM240,000. In addition, there are pocket expenses

like hotel accommodation which the parties will have to disburse the arbitrators and a

conservative sum of RM10,000 would be required . The total of these four types of

costs are RM400,000. Therefore, a sum of RM200,000 for security for costs must be

provided by the respondent which shall be in the form of cash to be paid into the

Registry of the High Court, Kuching within 45 days from the date of this order.

However, there will be liberty to apply regarding any other form of security which

any party may desire in place of the cash payment of RM200,000.

d) Discussion

The primary remedy for a party facing a claim by a company in liquidation is

an order for security for costs. However, security for costs could still be ordered in

exceptional circumstances. It is found that security for costs could ever be ordered

when a court-appointed liquidator launches an action. This is due to the decision to

approve or not to approve an order for security for costs is unfettered in the sense

that the discretion is not subject to anything in the nature of a statutory bias in favour

of making an order. But it must also be remembered that Parliament must have

envisaged that an order for security for costs may be made against a company that

would find difficulty in providing security.

The Court allows the application for security for costs. The matters adverted to

in Keary Developments Ltd v Tarmac Construction Ltd & Anor411

, though not

exhaustive, should weigh one way or the other regarding the exercise or the

discretion to grant security for costs depending on which side of the scale they all

add up. It is inaccurate to say that no security for costs could ever be ordered when a

court-appointed liquidator launches an action. The fact that the liquidator was court

411 [1995] 3 All ER 534

104

appointed is entirely irrelevant. Security for costs could still be ordered in

exceptional circumstances.

The contributors or shareholders of the respondent stand to benefit if the

action is successful while remaining unaffected by the consequence of a failed action.

On the other hand, the applicant would not be able to recover any cost if the action

should fail. Thus, an order for security for costs will not have the effect of stifling the

action and the facts justify the making of the order. Coupled with several other

factors considered by the court, the application for security for costs by the applicant

was allowed. For the reasons stated above, the Judge held that there should be

security for costs.

Where security for costs is required to be given, it must be provided in the

manner, time and terms as directed by the Court.412

For example, security is an order

to give a specified sum to be paid into court within a specified period. In the present

case, all the fees have to contribute equally from both plaintiff and respondent. The

fees included the retainer fee for the arbitrators, further fee for arbitrator, pocket

expenses such as hotel accommodation and conservative sum. The total of these four

types of costs are RM400,000. Since the plaintiff and the respondent share the cost,

RM400,000 is divided into half which is a sum of RM200,000. Hence, RM200,000 is

the sum of money for security for costs must be furnished by the respondent. The

manner of giving security shall be in the form of cash to be paid into the Registry of

the High Court, Kuching while the time to perform is within 45 days from the date of

this order.

412 RHC Order 23 rule 2.

105

5.2.6 Case 6: Gateway Land Pte Ltd v Turner (East Asia) Pte Ltd [1988] 1

MLJ 416


This is a Singapore case where the owner of a building project, Gateway

Land Pte Ltd (the applicants), seek three orders against the main contractor, Turner

(East Asia) Pte Ltd (the respondents). The first order is that the respondents within

14 days from the date of the order to be made hereon provide security for the

applicant‟s costs of a pending arbitration between the applicants and the respondents

in the sum of $500,000.00 or such other sum as the Court deems fit. Secondly, that in

the meantime all further proceeding in the said arbitration should be stayed except

the proceedings relating to the giving of such security for costs. The third order is

that the costs of this application be paid by the respondents to the applicants.

The application is made under section 388(1) of the Companies Act (Cap. 50)

which provides as follows:

"Where a corporation is plaintiff in any action or other legal

proceeding the court having jurisdiction in the matter may, if it

appears by credible testimony that there is reason to believe that the

company will be unable to pay the costs of the defendant if

successful in his defence, require sufficient security to be given for

those costs and stay all proceedings until the security is given."

Under the terms of the contract, the parties have referred the dispute to

arbitration and a three-member arbitration panel has been agreed upon by them. The

points of claim, points of defence or counterclaim and points of reply have already

been filed. During the hearing of this application, the arbitration proceedings were at

the stage where the parties were obtaining directions.

106

The respondents strongly resist the order for security for costs even though

they are in financial difficulties. They argue that if security is ordered, they will

certainly not be able to proceed further in the arbitration proceedings. However, they

forcefully contend that they have a bona fide claim and a good case against the

respondents. Another consideration put forward for the respondents is that as the

respondents are the main contractors, their claims in the arbitration proceedings are

of great concern to the sub-contractors. The sub-contractors are in support of the

respondents' claims against the applicants. If arbitration proceedings were to come to

a grinding halt, these other innocent people will suffer.

Taking all these circumstances together, counsel for the respondents submits

that the application for security for costs was oppressive to the respondents. He relies

on Sir Lindsay Parkinson & Co Ltd v Triplan Ltd413

. In that case, Triplan, a small

company which had carried out sub-contract work for Parkinsons, the main

contractor, a large public company, issued a writ for outstanding balances due to

them. The proceedings were stayed and the dispute went to arbitration. Shortly

before the hearing of the arbitration, Parkinsons, having found out that Triplan was in

financial difficulties, applied to the High Court for security for costs of the

arbitration under section 447 of the Companies Act 1948. It was submitted for

Parkinsons that once it was shown that Triplan would be unable to pay the costs if

Parkinsons were successful, the court had no discretion but had to order security. The

Court of Appeal rejected the argument and held that section 447 of the Companies

Act was not mandatory but gave the court a discretion which was to be exercised

having regard to all the circumstances of the particular case. Lord Denning M.R. and

Cairns L.J. gave some circumstances which a court could consider whether or not to

order security for costs against a company. In the case before them, they included the

fact that:

a) the application for security was made shortly before the date fixed for the

hearing of the arbitration;

413 [1973] QB 609

107

b) the probable inability of Triplan to meet an order for costs was likely to

be dependent on the failure to recover the sums which were being claimed

in that very arbitration; and

c) an order for security might well result in Triplan being unable to proceed

at all with its bona fide claim.


The issue in this case is whether the Court should order security for costs.


The Court held that the arbitration proceedings should proceed without

security for costs and an order for security for costs would be oppressive to the

respondents. Another consideration put forward for the respondents is that as the

respondents are the main contractors, their claims in the arbitration proceedings are

of great concern to the sub-contractors. They are in support of the respondents'

claims against the applicants. If arbitration proceedings were brought to an end, these

other innocent people will suffer. Thus, the Court dismisses the application for

security for costs.

d) Discussion

The Court believes that the order for security for costs would be oppressive to

the respondents. There are several harsh situations to the respondent. First, the

respondent is in financial difficulties. They are not able to precede further in the

arbitration proceedings. However, they have a bona fide claim and a good case

against the respondents. This can be shown in the case of Sir Lindsay Parkinson &

108

Co Ltd v Triplan Ltd414

. One of the circumstances gave by Lord Denning M.R. and

Cairns L.J. which a court could consider whether or not to order security for costs

against a company is an order for security might well result in Triplan being unable

to proceed at all with its bona fide claim. Next, the respondent‟s claims in the

arbitration proceedings will affect to the sub-contractors because the sub-contractors

are in support of the respondents' claims against the applicants. If arbitration

proceedings were to come to an end, the sub-contractors will suffer. Thus, the Court

dismisses the application for security for costs and the arbitration proceedings should

proceed without security for costs.

5.2.7 Case 7: Kasturi Palm Products v Palmex Industries Sdn Bhd [1986] 2

MLJ 310


The plaintiff firm operates business in India and its managing partner is an

Indian national who also resides there. The plaintiff has filed an application for leave

of this Court pursuant to section 27 of the Arbitration Act 1952 to enforce the

arbitration award which was adjudicated by the Arbitrators in London pursuant to the

Rules of Arbitration and Appeal of Federation of Oils, Seeds, Fats, Association

(FOSFA).

The defendants while contesting its legality, applied for an order for security

for costs on the ground that the plaintiff was ordinarily resident out of the jurisdiction

of the court. In fact, the defendants' solicitors had written to the plaintiff's solicitors

asking for a sum of $15,000.00 as security for cost. The defendants' application is

414 [1973] QB 609

109

supported by the affidavit of the Marketing Director of the company. According to

him, the defendants are resisting the main application on three main grounds that is

the award is null and void, that it was procured by suppression of material facts and

thirdly the enforcement of the award is contrary to public policy and the laws of

Malaysia.


In the present case, the Court has to decide whether or not it is just to order

security for costs.


Order 23 Rule 1(1) of RHC 1980 provides that the Court may order security

for costs “if, having regard to all the circumstances of the case, the Court thinks it

just to do so.” These words have the effect of conferring upon the Court the real

discretion and indeed the Court is bound, by virtue thereof, to consider the

circumstances of each case and in the light thereof to determine whether and to what

extent or for what amount a plaintiff may be ordered to provide security for costs. It

is no longer.415

For example, an inflexible or rigid rule that a plaintiff resident abroad

should provide security for costs.416

In exercising its discretion, it is clear that the

Court will have regard to all the circumstances of the case as listed by Lord Denning

M.R. in Sir Lindsay Parkinson & Co Ltd v Triplan Ltd417

. However, in Aeronave

SPA & Anor v Westland Charters Ltd and Ors418

, Lord Denning M.R. in his

judgment at p.533 stated as follows:

415

Supreme Court Practice 1985 Vol. 1 p.384. 416 Ibid. 417 [1973] 2 All ER 273 418 [1971] 3 All ER 531

110

“I agree ... that the rule does give a discretion to the court. In 1894 in

Crozat v. Brogden Lopes L.J. said that there was an inflexible rule

that if a foreigner sued he should give security for costs. But that is

putting it too high. It is the usual practice of the courts to make a

foreign plaintiff give security for costs. But it does so, as a matter of

discretion, because it is just to do so. After all, if the defendant

succeeds and gets an order for his costs, it is not right that he should

have to go to a foreign country to enforce the order .... The ordinary

rule still remains, that it is a matter of discretion. ...”

In the present case, the question is simply whether or not to order security for

costs? The Judge has to consider the fact that the plaintiff is ordinarily resident out of

this jurisdiction. Admittedly, under Order 23 Rule 1(1) of RHC 1980, security for

costs cannot now be ordered as of right from a foreign plaintiff, but only if the Court

thinks it just to order depending on the circumstances of the case.

His Lordship, after referring to Order 23 rule 1(1) of RHC 1980, dealt with

the merits of the case and ordered that security for costs be furnished by the plaintiff .

However, for the present application, the Judge is satisfied that the defendants should

be entitled to an order sought for. Accordingly, the Judge orders the plaintiff to

deposit a sum of $10,000.00 into Court being security for costs before the next

hearing date.

d) Discussion

It is common for the defendant to apply to court for an order for security for

costs against a foreign plaintiff for the purposes of securing payment of costs at the

end of the trial. From this case, it can be observed that the Court is bound to consider

the circumstances of a case to determine the extent and amount of security for costs

provided by a plaintiff. The security for costs is not ordered as of right for a foreign

111

plaintiff but only if the Court thinks it just to order depending on the circumstances

of the case. Such an order is therefore discretionary.

The circumstances that the court might consider are including but not limited

to: whether the plaintiff‟s claim is bona fide and not a sham; whether the company

has a reasonably good prospect of success; whether there is an admission by the

defendant on the pleadings or elsewhere; whether the application for security was

being used oppressively so as to try and stifle a genuine claim.

The former inflexible rule of practice that a plaintiff ordinarily resident

abroad will be ordered to give security for costs must now yield to the discretionary

power of the court.419

However, the Court in the present case ordered security for

costs against the plaintiff because it was just to do so and not merely because the

plaintiff was foreign. Nevertheless, as a matter of discretion, it is general rule of

practice that the court will require a plaintiff ordinarily resident abroad who are not

able to pay the costs of a successful defendant to give security for costs.420

5.3 Summary of Decisions of High Court

From all the cases that have been analyzed and reviewed, the High Court‟s

decisions and reasons to grant (/) or dismiss (X) the application of security for cost is

summarised in the Table 5.0 below.

419 Aeronave Spa v Westland Charters Ltd [1971] 1 WLR 1445, CA (Eng) overruling Crozat v

Brogden [1894] 2 QB 30. 420 Aeronave Spa v Westland Charters Ltd [1971] 1 WLR 1445, CA (Eng)

112

Table 5.0: The Summary of Decisions of High Court

.No. Case Name

High

Court’s

Decision

Reasons

1. Bintang Merdu

Sdn Bhd v Tan

Kau Tiah @ Tan

Ching Hai and

Anor

[2009] MLJU 585

X

i. Filling excessive documents does not

means the respondent are entitled to

security for costs.

ii. The sum of security for costs is

excessive in any event.

2. Jiwa Harmoni

Offshore Sdn Bhd

v Ishi Power Sdn

Bhd

[2009] MLJU 788

X

i. The powers granted to court pursuant to

section 11 are powers which are not

meant to be oppressively invoked by a

party to arbitration proceedings and to

stifle the arbitral proceedings. When

such powers are also vested with the

arbitrator, the application must be first


ii. It is wrong for the plaintiff to seek for

security for costs because the defendant

is always at the liberty to defend

himself and the plaintiff is the claimant.

3. Luminous

Crossroads Sdn

Bhd v Lim Kong

Huat Construction

[2001] MLJU 475

/

i. A party who initiated a mode of

proceedings by way of originating

motion which is based on Order 8 rule

3(1) of the RHC 1980 Form 9 is the

plaintiff of the case.

113

ii. Plaintiff is found breaking the Order 23

rule 1(1)(d) of the RHC 1980 where he

has changed his address during the

course of the proceedings.

4. Ballast Nedam

Groep NV (M)

Sdn Bhd v

Tradebond (M)

Sdn Bhd

[2000] 6 MLJ 416

X

i. The appellant failed to show that the

plaintiff was „a nominal plaintiff‟ in the

arbitration proceedings under Rule

1(1)(b).

ii. The appellant were instructed by the

arbitrator to make the application for

security for costs. This means that the

appellant did not make the application

based on his own free will.

5. Government of

Sarawak v Sami

Mousawi-Utama

Sdn Bhd (in

liquidation)

[1998] 3 MLJ 820

/

i. Security for costs could be ordered

when a court-appointed liquidator

launches an action.

6. Gateway Land Pte

Ltd v Turner (East

Asia) Pte Ltd

[1988] 1 MLJ 416

X

i. Security for costs would be oppressive

to the respondents because they were in

financial difficulties.

ii. The plaintiff had a bona fide claim

against the respondent.

iii. The respondent‟s claims in the

arbitration proceedings will affect the

sub-contractor because the sub-

114

contractors were in support of the

respondents‟ claims against the

applicants.

7. Kasturi Palm

Products v

Palmex Industries

Sdn Bhd

[1986] 2 MLJ 310

/

Plaintiff is ordinarily resident out of the

jurisdiction. The Court orders security for

costs depending on the circumstances even

under Order 23 Rule 1(1) stated that

security for costs cannot be ordered as of

right from a foreign plaintiff.

5.4 Comparative Study

There are several important points have been highlighted and they are

discussed as the subheadings below:

5.4.1 Defendant to apply security for cost against the plaintiff

In Gateway Land Pte Ltd v Turner (East Asia) Pte Ltd421

, it can be noticed

that the applicant is required the respondents to provide security for costs. The Court

in this case seems to be like ordering such security from the respondents which is in

contrast with the Jiwa‟s case. Generally, the Court orders the plaintiff of a particular

case to provide such security but not the defendant. This rule had been clearly stated

421 [1988] 1 MLJ 416

115

in the section 388(1) of Companies Act (Cap 50, 1985 Ed) and section 351 of

Companies Act 1965. Both sections are the same as section 447 of the United

Kingdom Companies Act where the Malaysian and Singaporean High Court would

exercise the same discretion as that obtained in the High Court in England.

Then in the case of Jiwa Harmoni Offshore Sdn Bhd v Ishi Power Sdn Bhd422

,

the High Court explained that the plaintiff is the claimaint and seeking for security

for costs which militates against established principles. A defendant is always has the

right to defend himself and should not called to give security for costs. As a general

rule, if the defendant raises a set-off and counterclaim, the principle remains the

same.

The rules regulating security for costs in any action or proceeding are to be

found in Order 23 of the RHC 1980 which for purposes of completeness is

reproduced as follows:

“1. Security for costs of action, etc (Order 23 rule 1)

(1) Where, on the application of a defendant to an action or other

proceeding in the High Court, it appears to the Court:-

(a) that the plaintiff is ordinarily resident out of the jurisdiction; or

(b) that 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 that there is reason to believe that

he will be unable to pay the costs of the defendant if ordered to do

so; or

(c) subject to paragraph (2), that the plaintiff's address is not stated in

the writ or other originating process or is incorrectly stated therein;

or

422 [2009] MLJU 788

116

(d) that the plaintiff has changed his address during the course of the

proceedings with a view to evading the consequences of the

litigation, then, if, having regard to all the circumstances of the

case, the Court thinks it just to do so, it may order the plaintiff to

give such security for the defendant's costs of the action or other

proceeding as it thinks just.

(2) The Court shall not require a plaintiff to give security by reason

only of paragraph (1)(c) if he satisfies the Court that the failure to

state his address or the mis-statement thereof was made innocently

and without intention to deceive.

(3) The references in the foregoing paragraphs to a plaintiff and a

defendant shall be construed as references to the person

(howsoever described on the record) who is in the position of

plaintiff or defendant, as the case may be, in the proceeding in

question, including a proceeding on a counterclaim.”

A pertinent observation may be made of Order 23 in that the

provisions there under apply to enable a defendant to apply for security for

costs against a plaintiff, whether an individual or a body corporate such as a

company registered under the Companies Act 1965. Similar provisions have

been enacted in section 351 of the Companies Act 1965 in the following terms:

“351. Security for costs.

(1) Where a company is plaintiff in any action or other legal

proceeding the court having jurisdiction in the matter may, if it

appears by credible testimony that there is reason to believe that

the company will be unable to pay the costs of the defendant if

successful in his defence, require sufficient security to be given for

those costs and stay all proceedings until the security is given.

117

Costs.

(2) The costs of any proceeding before a court under this Act shall be

borne by such party to the proceeding as the court may, in its

discretion, direct.”

Unlike Order 23 which is broader in scope in that an order for security for

costs may be made in favour of a defendant against both individual and corporate

plaintiffs, section 351 of the Companies Act 1965 is specifically confined to a

plaintiff company registered under that Act. However, the principles enunciated in

Order 23 and section 351 above contain certain common features, in particular, the

party against whom security for costs may be ordered is the plaintiff. In other words,

only the defendant is entitled to make an application for security for costs.

A party has to be identified as a plaintiff or a defendant by reference to the

title of the parties in the matter filed and heard in the particular court, for instant in

the case of Luminous Crossroads Sdn. Bhd. v Lim Kong Huat Construction423

.

This discussion goes deeper and further when the Court in the case of Ballast

Nedam Groep Nv (M) Sdn Bhd v Tradebond (M) Sdn Bhd424

, dismisses the

appellant‟s appeal and granting the respondent's appeal as to costs. This is because

the appellant failed to show that his case fell under Order 23 rule 1(1)(a) to (d) of the

RHC and despite the contention that the respondent would be unable to pay costs, the

appellant failed to show that they were „a nominal plaintiff‟ in the arbitration

proceedings under rule 1(1)(b). The respondent was thus not qualified under sub-rule

(1) to be ordered to give security for costs, and there was no question of considering

whether, having consider to all the circumstances of the case, it was just to make the

order.

423 [2001] MLJU 475 424 [2000] 6 MLJ 416

118

5.4.2 Comparison of Section 11 and Section 19 of Arbitration Act 2005

Both the old and the new Act of Arbitration do contain express framework for

curial intervention by Malaysian Courts over arbitrations seated in Malaysia to

varying degrees. Specifically, both Acts (Section 13(6)(a) of the old Act and Section

11(1)(a) of the new Act) confer upon Malaysian Courts powers to order security for

costs in relation to arbitral proceedings.

Neither Act specifies a test to be applied in the exercise of such powers. On

applications for security for costs under the old Act, Malaysian Courts apply ordinary

principles used in litigation, for example where a claimant resides out of Malaysia or

being a corporation is impecunious, regardless of whether the security is sought in

the context of ongoing arbitration proceedings or applications to enforce an award

(Kasturi Palm Products v. Palmex Industries Sdn Bhd425

; Government of Sarawak v.

Sami Mousawi-Utama Sdn Bhd (in liquidation)426

). The position is untested under

the new Act but it is unlikely that a different approach will be adopted.

Whilst the old Act does not restrict an arbitral tribunal‟s power to order

interim relief it does not expressly confer the same either. Therefore, an arbitral

tribunal‟s capacity to order security for costs in arbitrations governed by the old Act

is dependant on the source of its powers.

Section 19 of Arbitration Act 2005 expressly provides that in the absence of

an agreement to the contrary, arbitral tribunals may make various types of

preservation orders which expressly include orders of security for costs. Section 19(3)

of the new Act specifically provides for their enforceability by Malaysian Courts as

arbitral awards to emphasise the binding nature of such orders. Both Acts recognise a

dichotomy between applications by parties for preservation orders, including security

425 [1986] 2 MLJ 310 426 [1998] 3 MLJ 820

119

for costs to an arbitral tribunal and court. However, Section 11(2) of the new Act

expressly preserves findings of fact made in an arbitral tribunal‟s ruling relevant to

any application to court as conclusive.

This and the general framework of the new Act, indicates a local leaning

towards the “less interventionist” approach by courts propounded in Channel Tunnel

Group Ltd. v. Balfour Beatty Construction427

. Recent judicial decisions in Malaysia

made in respect of the old Act, whilst correctly not excluding court intervention

entirely, have considered this approach with approval.

5.4.3 Power to Order Security for Costs

After conducting the case analysis, it can be observed that the High Court in

the cases of Luminious, Ballast and Kasturi has referred to a same legislation which

is the Order 23 rule 1 (1) of RHC 1980. This legislation stated the cases where the

plaintiff may be required to furnish security for costs of the defendant of the action or

other proceeding as the court thinks just, namely where it appears to the court:428

i. that the plaintiff is ordinarily resident out of the jurisdiction429

;

ii. that 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 that there is reason to believe that he will be unable to pay the

costs of the defendant if ordered to do so;

iii. that the address of the plaintiff is not stated in the writ or other originating

process or is incorrectly stated there430

, unless the court is satisfied that

427 [1993] AC 334 428 Ibid, No. 258. 429 RHC Order 23 rule 1(1)(a). 430 RHC Order 23 rule 1(1)(b).

120

the failure to state the address or the misstatement was made innocently

and without intention to deceive431

;

iv. that the plaintiff has changed his address during the course of the

proceedings with a view to evading the consequences of the litigation432

.

As discussed in Chapter 3, the grounds set out above are exhaustive433

and

the court has no inherent jurisdiction to order security for costs. Furthermore, the

Court has statutory power to order a plaintiff limited liability company to give

security for costs. Further, similar power may be conferred by other statutory

provisions.434

If the defendant is able to show that the plaintiff is fall within the cases

stated in the Order 23 rule 1 (1), the defendant‟s application for security for costs

may be granted by the High Court.

After the High Court is satisfied that the plaintiff is fall within the cases, the

High Court will consider all the circumstances in the case. The following guidelines

have been laid down as to the circumstances which the court ought to consider on

granting or refusing security for costs435

:


ii. whether the plaintiff has a reasonably good prospect of success;

iii. whether there is an admission by the defendant on the pleadings or

otherwise that money is due;

iv. whether there is a substantial payment into court or an open offer of a

substantial amount;

v. whether application for security was being used oppressively, for example

so as to stifle a genuine claim;

431 RHC Order 23 rule 1(1)(c). 432 RHC Order 23 rule 1(2). 433 Ie in RHC Order 23 rule 1. 434 RHC Order 23 is without prejudice to any statutory provision empowering the court to require

security for costs: Order 23 rule 3. 435 Ibid, No. 258.

121

vi. whether the plaintiff‟s want of means, especially in the case of a limited

company, has been brought about by any conduct by the defendant, such

as delay in payment, or in doing his part of the work; and

vii. whether the application for security is made at a late stage of the

proceedings.

In practising of its discretion, the High Court has also taken into account the

following factors436

:

i. the degree of ease by which a judgment may be enforced against a foreign

plaintiff;

ii. the financial position of a plaintiff. If the plaintiff is impecunious and an

order for security for costs might stifle the plaintiff‟s claim, the court

might decide that no order should be made;

iii. the registration in Malaysia of the plaintiff company where it is a foreign

company.

The High court may order security for costs in the cases in which power to do

so exists, only if, after considering to all the circumstances of the case, it thinks it just

to do so.437

Thus, the High Court has discretion whether or not to order security for

costs, both under the Rules of the High Court and under its statutory powers.438

Thus,

the former inflexible rule of practice that a plaintiff ordinarily resident abroad will be

ordered to give security for costs must now yield to the discretionary power of the

court.439

436 Ibid, No. 258. 437 RHC Order 23 rule 1(1). 438 Faridah Begum bte Abdullah v Dato’ Michael Chong [1995] 2 MLJ 404. 439 Aeronave Spa v Westland Charters Ltd [1971] 1 WLR 1445, CA (Eng) overruling Crozat v

Brogden [1894] 2 QB 30.

122

5.5 Conclusion

In the nutshell, the High Court will grant the application of security for costs

when the plaintiff is found breaking the Order 23 rule 1(1) of the RHC 1980. The

security for costs still could be ordered when a court-appointed liquidator launches

an action. Besides, the High Court will approve the application when it is proven that

the plaintiff is ordinarily resident out of the jurisdiction. The Court orders security

for costs depending on the circumstances even under Order 23 Rule 1(1) stated that

security for costs cannot be ordered as of right from a foreign plaintiff.

On the other hand, the High Court will dismiss the application for security for

cost because filling excessive documents does not means the respondent are entitled

to security for costs . The appellant will not obtain security for costs if he failed to

show that the plaintiff was „a nominal plaintiff‟ in the arbitration proceedings under

Rule 1(1)(b). Another reason why the High Court dismisses the application of

security for costs is when the appellant was instructed by the arbitrator to do so. The

appellant had to apply for this security based on his own free will. The next reason

for the High Court to dismiss the application for security for costs is such security is

oppressive to the respondents due to financial difficulties. In addition, the security

for costs is not granted because the plaintiff had a bona fide claim against the

respondent.

From the case analysis, it is found that it is wrong for the plaintiff to seek for

security for costs because the defendant is always at the liberty to defend himself and

the plaintiff is the claimant. The sum of security for costs is has to be calculated and

submitted to the High Court for examination. Lastly, the powers granted to court

pursuant to section 11 of Arbitration Act 2005 are powers which are not meant to be

oppressively invoked by a party to arbitration proceedings and to stifle the arbitral

proceedings. When such powers are also vested with the arbitrator, the application

must be first made before the arbitrator.

CHAPTER 6

CONCLUSION

AND

RECOMMENDATIONS

CHAPTER 6

CONCLUSION AND RECOMMENDATIONS

6.1 Introduction

The title of this study is „Judicial Interpretation of the High Court in

Application of the Security for Costs‟. As mentioned earlier in the introduction, the

objective of this study is to determine the grounds for the High Court to order or

dismiss the application for security for costs.

This chapter is the final chapter that attempts to summarise the findings of the

research based on the analysis. On top of that, the problems faced during conducting

the research and suggested future research were added into this chapter to let reader

to spot the opportunity in conducting a research in the same area but with different

scope. Generally, it can be concluded that the research managed to achieve its

objective.

6.2 Research Findings

All the law cases related to security for costs are collected from Malayan Law

Journal via Lexis Malaysia website. There are seven cases which are related to this

124

study had been analysed and reviewed. The High Court‟s decisions and reasons to

grant (/) or dismiss (X) the application of security for cost are written down. The

High Court‟s decision and reasons are the research findings of this study. The

research findings in this study are summarised in Table 6.1 below.

Table 6.1: The decisions of the High Court with its reasons for allowing or

dismissing security for costs.

No. Case Name

High

Court’s

Decision

Reasons

1. Bintang Merdu

Sdn Bhd v Tan

Kau Tiah @ Tan

Ching Hai and

Anor

[2009] MLJU 585

X

i. Filling excessive documents does not

means the respondent are entitled to

security for costs .

ii. The sum of security for costs is

excessive in any event.

2. Jiwa Harmoni

Offshore Sdn Bhd

v Ishi Power Sdn

Bhd

[2009] MLJU 788

X

i. The powers granted to court pursuant to

section 11 are powers which are not

meant to be oppressively invoked by a

party to arbitration proceedings and to

stifle the arbitral proceedings. When

such powers are also vested with the

arbitrator, the application must be first


ii. It is wrong for the plaintiff to seek for

security for costs because the defendant

is always at the liberty to defend

himself and the plaintiff is the claimant.

125

3. Luminous

Crossroads Sdn

Bhd v Lim Kong

Huat Construction

[2001] MLJU 475

/

i. A party who initiated a mode of

proceedings by way of originating

motion which is based on Order 8 rule

3(1) of the RHC 1980 Form 9 is the

plaintiff of the case.

ii. Plaintiff is found breaking the Order 23

rule 1(1)(d) of the RHC 1980 where he

has changed his address during the

course of the proceedings.

4. Ballast Nedam

Groep NV (M)

Sdn Bhd v

Tradebond (M)

Sdn Bhd

[2000] 6 MLJ 416

X

i. The appellant failed to show that the

plaintiff was „a nominal plaintiff‟ in the

arbitration proceedings under Rule

1(1)(b).

ii. The appellant were instructed by the

arbitrator to make the application for

security for costs. This means that the

appellant did not make the application

based on his own free will.

5. Government of

Sarawak v Sami

Mousawi-Utama

Sdn Bhd (in

liquidation)

[1998] 3 MLJ 820

/

Security for costs could be ordered when a

court-appointed liquidator launches an

action.

6. Gateway Land Pte

Ltd v Turner (East

Asia) Pte Ltd

[1988] 1 MLJ 416

X

i. Security for costs would be oppressive

to the respondents because they were in

financial difficulties.

ii. The plaintiff had a bona fide claim

126

against the respondent.

iii. The respondent‟s claims in the

arbitration proceedings will affect the

sub-contractor because the sub-

contractors were in support of the

respondents‟ claims against the

applicants.

7. Kasturi Palm

Products v

Palmex Industries

Sdn Bhd

[1986] 2 MLJ 310

/

Plaintiff is ordinarily resident out of the

jurisdiction. The Court orders security for

costs depending on the circumstances even

under Order 23 Rule 1(1) stated that

security for costs cannot be ordered as of

right from a foreign plaintiff.

6.3 Limitation or Problem Encountered During the Research

There were several problems encountered during performing this research.

The first problem is finding the right issues and objective for this research. The

researcher has to search and read a particular topic thoroughly in order to tackle the

issues. This process occupied a high percentage of time at the beginning of this

research.

The major problem in writing up this project report is the time constraint. The

period to complete this research is only eight weeks. Every process in this study has

to be done very fast, particularly during the process of data collection which involves

assembling and categorization legal cases from law journals. This limitation has led

127

to less cases being found to support the findings. Furthermore, there was also

difficulty in finding cases which were related to security for costs particularly those

cases decided in Malaysia courts. If there is ample time offered, the study can be

completed in a more comprehensive way.

Another problem encountered during this research is there are only few of

books that discussed about security for costs even though there are a lot numbers of

books related to arbitration and civil procedures. The source not only the books but

also the articles, journals and work papers.

6.4 Recommendations for Further Research

The following are some recommendations and suggestions for future research:

i. This research discusses the reasons of the High Court for granting the

application of security for costs where the cases were brought to

arbitration before the Court. Perhaps, future research can change the

scope where the cases were brought to mediation before the Court.

ii. Security for costs is one of the orders of interim measures. The future

research can be carried out to discuss other types of orders of interim

measure as listed in section 11 and section 19 of Arbitration Act 2005.

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6.5 Conclusion

The party who apply for security for costs has to be the defendant of a

particular case. When a defendant applies for security for costs, the High Court will

either grant or dismiss the application. The defendant has to prove that the plaintiff

falls within the Order 23 rule 1(1) of RHC 1980. After that, the High Court will

consider all the circumstances of the cases. The High Court will order such security

to be furnished by the plaintiff when the High Court believes that such security is

necessary and just to do it. The plaintiff has to furnish the security for costs as

directed by the High Court in the manner, time and terms. All further proceedings in

the action are to be stayed until the security is given as ordered.

In the nutshell, the High Court will grant the application of security for costs

when the plaintiff is found falling within the Order 23 rule 1(1) of the RHC 1980.

The security for costs still could be ordered when a court-appointed liquidator

launches an action. Besides, the High Court will approve the application when the

plaintiff is proven ordinarily resident out of the jurisdiction. The Court orders

security for costs depending on the circumstances even under Order 23 Rule 1(1)

stated that security for costs cannot be ordered as of right from a foreign plaintiff.

Conversely, the High Court will dismiss the application for security for cost

because filling excessive documents does not means the respondent are entitled to

security for costs . The appellant will not obtain security for costs if he failed to show

that the plaintiff was a nominal plaintiff in the arbitration proceedings under Rule

1(1)(b). Another reason why the High Court dismisses the application of security for

costs is when the appellant was instructed by the arbitrator to do so. The appellant

had to apply for this security based on his own free will. The next reason for the

High Court to dismiss the application for security for costs is such security is

oppressive to the respondents due to financial difficulties. In addition, the security

for costs will not be granted because the plaintiff had a bona fide claim against the

respondent.

REFERENCES

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REFERENCES

Bast, C.M. and Hawkins, M. (2010). Foundations of Legal Research and Writing. 4th

Edition. Clifton Park, NY :Delmar Cengage Learning.

Civil Procedure. Halbury‟s Laws of Malaysia. 2002 Reissue. Malayan Law Journal.

Crowter (1998). Dispute Resolution Guides: Introduction to Arbitration. LLP.

Hamid Sultan bin Abu Backer (2005). Janab‟s Series to “Law, Practice and Legal

Remedies Volume – I.” Janab (M) Sdn Bhd.

Jayaseelan, R (2011). New Life for Arbitration. The Star.

Keith, J.A., Hanson, C., Halifax, O.M. and Scotia, N. (1999). Security for Costs

against Fraudulent Claims: A Comparative Overview. Risk Management

Counsel of Canada.

Kuala Lumpur Regional Centre for Arbitration. Available at

http://www.klrca.org.my/scripts/view-anchor.asp?cat=10. (Last access on 28th

March 2012)

Mustill and Boyd (1989). Commercial Arbitration. 2nd

Edition. Butterworths.

Nekoo, R. (2002). Practical Guide to Civil Procedure in Malaysia. International Law

Book Services.

Nekoo, R. (2006). Civil Procedure. 2nd

Edition. Lexis Nexis. 2006.


130

Powell-Smith, V., Sims, J. and Dancaster, C. (1998). Construction Arbitration. 2nd

Edition. Blackwell Science.

Pradhan, V.P. (1992). Dispute Resolution and Arbitration in Malaysia. Malayan Law

Journal Articles. [1992] 2 MLJ clxxii

Rahayu Partnership - Advocates & Solicitors. Ship Arrest as Security for an

Arbitration Claim: Post the Arbitration (Amendment) Act 2011. E-newsletter

2011.

Rajoo, S. (2001). Function, Powers and Duties of the Arbitral Tribunal. Malayan

Law Journal Articles. [2001] 2 MLJ xvii

Rajoo, S. (2003). Law, Practice and Procedure of Arbitration. Lexis Nexis.

Rajoo, S. (2008). Arbitration in The Construction Industry. Master Builders 1st

Quarter.

Rajoo, S. and Davidson, WSW (2007). The Arbitration Act 2005 UNCITRAL Model

Law as applied in Malaysia. Sweet and Maxwell Asia.

Redfern and Hunter (1999). Law and Practice of International Commercial

Arbitration 3rd

Edition. Sweet & Maxwell. at p 301 and 329.

Slapper, G. (2009). The English Legal System. Milton Park.

Walton, A. (1982). Russell on the Law of Arbitration. 20th Edition. London Stevens

and Sons.

Yaqin, A. (2007). Legal Research and Writing. Malaysia: Malayan Law Journal Sdn

Bhd.

APPENDIX

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APPENDIX A

LIST OF CASES ANALYSED AND COMPARED IN CHAPTER 5

NO. NAME OF CASES

1. Bintang Merdu Sdn Bhd v Tan Kau Tiah @ Tan Ching Hai and Anor [2009]

MLJU 585

2. Jiwa Harmoni Offshore Sdn Bhd v Ishi Power Sdn Bhd [2009] MLJU 788

3. Luminous Crossroads Sdn. Bhd. v Lim Kong Huat Construction [2001]

MLJU 475

4. Ballast Nedam Groep Nv (M) Sdn Bhd v Tradebond (M) Sdn Bhd [2000] 6

MLJ 416

5. Gateway Land Pte Ltd v Turner (East Asia) Pte Ltd [1988] 1 MLJ 416

6. Government Of Sarawak v Sami Mousawi-Utama Sdn Bhd (In Liquidation)

[1998] 3 MLJ 820

7. Kasturi Palm Products v Palmex Industries Sdn Bhd [1986] 2 MLJ 310

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APPENDIX B

SEMINAR PAPER



By

Tham Yoon Fah Department of Quantity Surveying

Faculty of Built Environment

Universiti Teknologi Malaysia

Abstract: Security for costs is a fund of money paid into Court by a plaintiff to protect defendants from unrecoverable costs associated with the plaintiff‟s action. The High Court is guided by some

considerations to make order for security for costs but the considerations are not defined in detail and

left the Court to interpret the meaning. This has caused the Courts to give different interpretations in

making the decisions. Another issue which arise is whether the High Court has the power to grant interim measures and make security for costs under section 11(1) of Arbitration Act 2005 in support

of an arbitration which is taking place or will take place outside Malaysia. Besides that, section 11(1)

of Arbitration Act 2005 has stated that any party including the plaintiff may apply to the Court for

interim measure which is nature is contradictor to the general rule that is the security for costs is applied by the defendant. Section 19 of Arbitration Act 2005 gives overlapping but not coextensive

powers to the arbitral tribunal that is baffling whether an interim order should be sought from the High

Court or the arbitral tribunal. In order to clear the doubt regarding the application of security for costs,

this research project is carried out to determine the grounds for the High Court to order or dismiss the application for security for costs. Legal cases are collected from year 1986 to year 2009 from Malayan

Law Journal via Lexis Malaysia website and documentary analysis was conducted on the related cases.

Finally, this research has shed some light in exposing what are the possible reasons that the High

Court may order or dismiss the application for security for costs. From the analysis done on the cases, it is observed that the party who apply the security for costs has to be the defendant. The High Court

has to consider all the circumstances in a particular case before making any decisions. The High Court

will order the plaintiff to furnish such security when the High Court believes that the security is

necessary.

Keywords: Arbitration Act, Civil Proceedings, Security for Costs, Application, Circumstances,

Reason to order or dismiss.

1.0 INTRODUCTION Arbitration has become the dispute settlement mechanism and the norm in the construction industry

(Jayaseelan, 2001). This is because the popularity of arbitration clauses in standard forms of

construction contract (Rajoo, 2008). In addition, the use of arbitrator‟s skills in technical disciplines

due to the technical content of disputes. Next, the arbitrator need to be empowered to open up, review and revise decisions or certificates, arising from the architect‟s or engineer‟s judgment in

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administering the building contract. The essence of the sort of arbitration is that some dispute is

referred by the parties for settlement to a tribunal of their own choosing, instead of to a court (Walton,

1982). Arbitration is better than the usual legal process because parties can determine the span of the arbitration process and numbers of arbitrators either one or three, who are usually experts in their own

field (Jayaseelan, 2001). It is also a more cost effective and efficient dispute resolution. The arbitrators

are familiar in a particular areas of business with the cases involve.

Fees, charges, disbursements, expenses and remuneration incurred by a party or incidental to the

conduct of the proceedings are examples of cost awarded by the Courts (Nekoo, 2006). The award of

costs is discretionary and the Court must make and order as to costs to enable a party to recover such

costs incidental to whom and the amount of costs to be paid to litigant. The costs awarded may either be remuneration paid by the client to his own solicitor or the costs which a litigant has to pay to

another litigant to compensate the other for the expenses which he has incurred in the litigation.

The general rule for security for costs is only applies against the plaintiff and not against the defendant (Nekoo, 2006). Security for costs is an amount of money paid into the Court by a plaintiff to protect a

defendant against otherwise unrecoverable costs either in whole or in part linked with reacting to the

plaintiff‟s action (Keith, Halifax and Scotia, 1999). Hence, the plaintiffs who start the legal

proceedings are obligated to accept the resulting responsibility for costs if their claims eventually fail. There are two exceptions which are the defendant appealing and the defendant brings a counterclaim

and is therefore in the position of a plaintiff with regards to the counterclaim (Nekoo, 2002).

The defendant may apply to the Court so that the plaintiff provide security as to costs where the defendant feels that the strength of the defence is good and there is a good chance of defeating the

plaintiff but is worried that the plaintiff will be unable to make payment as to the order as to costs that

maybe made at the end of the trial (Nekoo, 2006). The Court or the arbitrator makes order securing the

right party who is eventually successful to recover his costs of the arbitration and securing the right of a successful claimant to be paid the amount of the award (Mustill and Boyd, 1989). There are two

types of order for security which are security for costs and security for claims. If the application of the

defendant for security to costs is allowed, the plaintiff will be required to reimburse specific amount

of money into court within specified period.

2.0 PROBLEM STATEMENT The High Court is guided by some considerations in the practice of its discretion to order security for

costs (Nekoo, 2006):

i. Is the plaintiff‟s claim bona fide? Does the plaintiff have reasonably good prospects of success?

ii. Is there an admission by the defendant?

iii. Is the application oppressive in nature that is to stifle a genuine claim?

iv. Has the plaintiff‟s want of means been brought on by the defendant? v. The application must be made as early as possible in the proceedings.

Each consideration should act as a guideline to the Court for ordering security for costs. However,

they left behind some unclear statements. This is because the guideline is very general in nature and does not specifically define in detail what the considerations are and leave the Court to interpret the

meaning. This situation would to a certain extent lead to different interpretations by the Courts in

making decisions.

Furthermore, one question arises is whether the High Court has the power to approve interim

measures under section 11(1) of Arbitration Act 2005 in support of an arbitration which is taking

place or will take place outside Malaysia (Rajoo and Davidson, 2007). Hence, there is an issue

showing that whether the High Court has the power to approve security for costs outside Malaysia. Besides, there is an issue which is whether the power of the Court determines the grounds of the Court

to dismiss the application for security for costs. In other words, will the High Court dismisses the

application for security for cost due to the arbitration is held or will be held outside Malaysia?

The Arbitration Act (Amendment) 2011 amends section 11 of the Arbitration Act 2005. The altered

section 11 is:

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“11. Arbitration agreement and interim measures by the Court:

(1) A party may, before or during arbitral proceedings, apply to a High Court for

any interim measure and the High Court may make the following orders for:…”

Section 11(1) stated that any party may apply to the High Court for interim measures and it seems that

the High Court may make orders for security for costs which is contradict to the general rule that the application for security for costs is by the defendant. Thus, it should be the Plaintiff or the Defendant

to apply for security for costs?

Security for costs is obtained by taking action by applying interim order. Section 19 of Arbitration Act 2005 gives overlapping but not coextensive powers to the arbitral tribunal, the question often arises as

to whether an interim order should be sought from the court or the arbitral tribunal (Rajoo and

Davidson, 2007). This will lead to another question to the arbitrators whether to approve a security for

costs. On the other hand, the High Court has no reason not to hear the application for security for costs since the Court is given such powers in Section19 of Arbitration Act 2005.

3.0 LITERATURE REVIEW

3.1 Costs

Costs of the arbitration are all the expenses properly incurred in the conduct of the arbitration (Rajoo, 2003). It does not refer to the substantive amount claimed in a reference to arbitration. Generally there

are two types of costs which are the cost of the reference and cost of the award. The demarcation

between these two types of costs can give rise to confusion as illustrated in Re an arbitration between

Walker & Son and Brown (1882) 9 QBD 434 where Field J said: “Common sense suggests that the power over the costs of the reference includes a power to give the costs of the award. If no award was

made, the reference would never be finished.”

In Piper Double Glazing Ltd v DC Contracts (1992) Ltd [1994] 1 All ER 177, the cost of the reference is defined as the parties‟ own costs including legal costs and fees of counsel or other representative

including a lay representative. The Re an arbitration between Authoreptic Steam Boiler Co Ltd and

Townsend, Hook & Co (1888) 21 QBD 182 case gave an example of cost of the reference which is the

costs incurred in bargaining the reference to the arbitrators will be included under this head. Besides, these costs are those which the parries reasonably incur in preparing, presenting and prosecuting the

claims made or in defending against them (Rajoo, 2003). Next, the arbitrator‟s fees and proper

expenses incurred for setting up and administration of the arbitration is the cost of the award (Rajoo,

2003). These are arbitral tribunal-related costs. By and large, these expenses are incurred for payment of the fees and expenses of the arbitrator and witnesses. They also include other expenses in the

arbitral proceedings and the arbitral award.

3.2 Power to Order Interim Measure

The areas where the High Court can order interim measures are listed in section 11(1) of the

Arbitration Act 2005 (Jayaseelan, 2011). This section stated that a party may apply any interim

measure prior to or during arbitral proceedings to a High Court. On the other hand, section 19 of the Arbitration Act 2005 deals with the issue of interim measures issued by the arbitral tribunal (Rahayu,

2011). This arbitral tribunal are allowed to order interim measures such as security for costs,

discovery of documents and interrogatories, giving of evidence by affidavit and preservation, interim

custody or sale of any property which is the subject matter of the dispute. This section recognises the arbitral tribunal‟s expertise and ability to order interim measures in a particular case where it deems

crucial. The main difference between these two sections is that the power of the arbitral tribunal under

section 19 can only be invoked after the formation of the arbitral tribunal and up to the termination of

the arbitration proceedings while the power of the High Court under Section 11 can be invoked at any time.


Very often an arbitrator will be asked by a respondent to order security for costs against a claimant

(Crowter, 1998). An arbitrator is not bound to follow the same procedure and apply the same tests as

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the court in similar circumstances. An arbitrator will be very wise to be guided by the same test that

the court would apply. Security for costs is normally given against limited companies but individuals

and partnerships are usually exempt even though an arbitrator would appear to have power to order security against an individual (Crowter, 1998). In respect of a company, it must be proved that the

claimant would not but not merely might be unable to pay the respondent‟s costs of the defence if the

respondent was winning in its defence. To defeat a claim for security, a claimant might wish to

establish that it would have been in this financial position if it were not for the acts of the respondent complained of in this arbitration.

Under section 19(2) of Arbitration Act 2005, the arbitral tribunal can order the provision of

appropriate security in connection with any measure ordered under section 19(1) which is aimed at covering any damage arising from the unjustified issuance of such an order (Rahayu, 2011). The

extent of the security is not limited to the cost of such interim measures but many also include the

approximation of any foreseeable damage to the other party as shown under section 19(1)(d).

In Skrine & Co. v MBf Capital Berhad & Anor [1998] 44 AMR 3298, Justice Gopal Sri Ram JCA,

observed:

“In our judgment, the correct approach to an application of the nature that forms the subject matter of the appeals before us is that stated by Lord Denning MR in Sir

Lindsay Perkinson & Co. Ltd v Triplan Ltd [1973] 1 QB 609, p. 626, the Master of

the Rolls said:

“I do not think those observations are correct. I prefer to follow that cases which are to be found in the notes in Ebury Garages Ltd v Agard 76 LJ 204 and Gill All

Waether Bodies Ltd v All Weather Motor Bodies Ltd 77 LJ 123. Scrutton LJ said that

there were too many applications against companies for security for costs. In his

view “the powers of the section should be carefully used”. Maugham LJ said: “The section only confers discretion on the court. There may be many cases where a

company is insolvent and yet the court would not order security to be lodged.”

I would add Peppard and Co. Ltd v Bogoff [1962] IR 180, p188. case where

Kingsmill Moore J said: “……the section does not make it mandatory to order security for costs in every case

where the plaintiff company appears to be unable to pay the costs of a successful

defendant, but that there still remains discretion in the court which may be exercised

in special circumstances.”

Furthermore, Justice Gopal Sri Ram JCA held that section 351of the Companies Act 1965 which

administrate the matter of security for costs where the plaintiff is a company provides inquiry in the

process of determining whether security for costs should be ordered against the plaintiff. The Court hears an application in this regard to determine whether there is credible evidence. If there is credible

evidence supports the belief that the company will not be able to pay the costs of a successful

defendant. The word „may‟ in section 351 of the Companies Act means that the section is not

mandatory. This means that allow the judge whether to order security or not. It is discretion to be practiced in all the situations of the case. In Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] 1

QB 609, it was stated that it may be a denial of justice to order security to be given to a defendant who

has no defence to the action.

It is stated in Halbury’s Laws of Malaysia (2002) and RHC Order 23 rule 1(1), the plaintiff may be

ordered to furnish security for the defendant‟s costs of the action or other proceeding as the court

thinks just where the following cases appear to the court:

i. that the plaintiff is ordinarily resident out of the jurisdiction;

ii. that 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 that there is

reason to believe that he will be unable to pay the costs of the defendant if ordered to do so;

iii. that the address of the plaintiff is not stated in the writ or other originating process

or is incorrectly stated there, unless the court is satisfied that the failure to state the

address or the misstatement was made innocently and without intention to deceive;

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iv. that the plaintiff has changed his address during the course of the proceedings with a

view to evading the consequences of the litigation.

RHC Order 23 rule 1(1) allow the court may order security for costs in the cases in which the power to

do so exist, consider to all the circumstances of the case and it thinks it just to do so. Therefore, the

court has power whether or not to order security for costs, both under the Rules of the High Court and

under its statutory powers. Beside, the case of Gordano Building Contractors Ltd v Burgess [1988] 1 WLR 890, CA (Eng) showed that there is a power to set aside an order for security for costs if the

plaintiff can prove a material change of circumstances. Even where the defendant counterclaims,

admits an amount equal to the security that would have been ordered, an order for security for costs

would be oppressive to the plaintiff if given all the circumstances or if the plaintiff has an unsatisfied judgement against the defendant. Under the court‟s discretionary power, it is doubtful that security for

costs will be ordered while there is pending a summons for summary judgment.

Halbury’s Laws of Malaysia listed the following are the circumstances acted as the guidelines which should be considered by the Court on granting or refusing security for costs:


ii. whether the plaintiff has a good view of success; iii. whether there is an admission by the defendant on the pleadings or otherwise that

money is due;

iv. whether there is a substantial payment into court or an open offer of a substantial

amount; v. whether application for security was being used oppressively, for example so as to

stifle a genuine claim;

vi. whether the plaintiff‟s want of means, especially in the case of a limited company,

has been brought about by any conduct by the defendant, such as delay in payment, or in doing his part of the work; and

vii. whether the application for security is made at a late stage of the proceedings.

In addition, in the practice of its discretion, the Court needs to judge the following factors:

i. the degree of ease by which a judgment may be enforced against a foreign plaintiff;

ii. the financial position of a plaintiff. If the plaintiff is impecunious and an order for

security for costs might stifle the plaintiff‟s claim, the court might decide that no order should be made;

iii. the registration in Malaysia of the plaintiff company where it is a foreign company.

3.3.1 Types of security for costs

There are two types of security for costs namely security for the arbitrator‟s expenses and fees and

security for the parties‟ costs. The first type of security for costs is security for the arbitrator‟s

expenses. The arbitrator wishes to ensure that his expenses and fees are paid at the end of the arbitration (Rajoo, 2003). It is unfortunate when both parties become insolvent or lose interest in the

arbitration. Therefore, the arbitrator will normally ask for his fees to be secured in some way such as

payment of a cash sum into a suitable deposit account to the arbitrator‟s order. An arbitrator may

obtain both parties‟ agreement to his scale of charges and terms of engagement. The second type of security for costs is security for the parties‟ costs. The principle is that a claimant or counterclaimant

takes the risk that a respondent may not be able to pay its costs if it is successful in its claim (Crowter,

1998). It must weigh that risk when it decides to commence the arbitration. However, the position if a

respondent is different. The respondent did not choose to start the arbitration and it is entitled to be sure, if it is successful in its defence and subject to certain safeguards, that its costs will be met.

3.3.2 Plaintiff Ordinarily Resident Out of the Jurisdiction

RHC Order 23 rule 1(1)(a) stated where the plaintiff is typically resident out the jurisdiction, the Court

has power to order him to give security for costs. Ordinary resident is different with permanent

residence, occasional residence or temporary residence. Their differences are depending on the fact

and degree. It does not depend on the duration of the residence but depend on the manner of a person‟s life is actually ordered. It must be noted that it is for the defendant to establish that the

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plaintiff is typically resident out of the jurisdiction. The courts will consider the ease which a

judgment for costs could be enforced in the foreign jurisdiction in making a choice whether to order

that security for costs or not. The Court of case Ace King Pte Ltd v Circus Americano Ltd [1985] 2 MLJ 75 orders security for costs against the plaintiff when the plaintiff does not has property within

the jurisdiction. However, in the case of Faridah Begum bte Abdullah v Dato’ Michael Chong [1995]

2 MLJ 404, the mere fact that the plaintiff has property in a country which has a reciprocal

enforcement of judgments with Malaysia is not a reason for the Court to refuse ordering security for costs as the enforcement is not automatic.

Halbury’s Laws of Malaysia (2002) assured that security for costs will not be ordered against a

plaintiff who is bound to live abroad on public service against a plaintiff who makes a provisional decision to go and live abroad, at any rate so long as he has not left the jurisdiction, nor even if he is

about to leave or is abroad, but it will be ordered if he goes to reside permanently abroad, even after

the institution of the action. Foreign ambassadors are not ordered to give security, although their

servants are. Security may be ordered against a foreign state or sovereign.

Where the sole plaintiff or all the plaintiffs are resident abroad, security may be ordered. In the case of

Salchi SPA v Ler Cheng Chye (No 2) 1 MLJ 556, it was held that security for costs cannot be ordered

as of right from a foreign plaintiff under the Order 23 rule 1(1) of RHC 1980. The court has discretion to order security of costs in an action involving plaintiff‟s resident outside the jurisdiction even if

some co-plaintiffs are resident within the jurisdiction and there is no inflexible rule of practice to the

contrary. Thus, the Judge in the case of Lek Swee Hua v American Express International Inc [1991] 2

MLJ 151said that security for costs can be ordered against a plaintiff who resides out of the jurisdiction even if a co-plaintiff is resident within the jurisdiction.

Where the plaintiff, although ordinarily or even permanently resident out of the jurisdiction, can show

that he has substantial assets or property within the jurisdiction which can be reached by judicial process, security will not be ordered. In Kevorkian v Burney (No. 2) [1973] 4 All ER 468, CA (Eng),

an order for security was refused where property the subject matter of the action had been deposited

under court order within the jurisdiction. The same rule applies to a foreign company. It must be

shown that the assets or property are in permanent or certain nature and those they can be available for costs. A plaintiff company which is not registered in Malaysia would not be considered to be in the

jurisdiction even if it has established goodwill, reputation and presence locally. If the plaintiff returns

to and resides within the jurisdiction after the order for security has been made, it is depending on the

Court‟s discretion whether the order should or should not be set aside. Hence, the former inflexible rule of practice that a plaintiff ordinarily resident abroad will be ordered

to furnish security for costs must now defer to the discretionary power of the court. In Kasturi Palm

Products v Palmex Industries Sdn Bhd [1986] 2 MLJ 310, the court ordered security for costs against

the plaintiff not merely because the plaintiff was foreign but it was just to do so. Nevertheless, it is general rule of practice that the court will require a plaintiff ordinarily resident abroad or a limited

company is not able to pay the costs of a successful defendant to give security for costs as showed in

the case of Aeronave Spa v Westland Charters Ltd [1971] 1 WLR 1445, CA (Eng). Banque du Rhone

SA v Fuerst Day Lawson Ltd, Promat SA (third parties) [1968] 2 Lloyd‟s Rep 153, CA (Eng) showed that there is no rule or practice that a plaintiff resident abroad suing on a dishonoured bill of exchange

will not be required to give security.

3.3.3 Insolvency or Poverty of Plaintiff

The Court in the case of Cowell v Taylor (1885) 31 ChD 34, CA (Eng) did not order the plaintiff who

is insolvent to furnish security for costs. The party who is ordered to give such security is the nominal

plaintiff, a limited liability company and an appellant in the Court of Appeal or the Federal Court. This is because the plaintiff is an undischarged bankrupt or his bankruptcy is possible or even

probable or his trustee in bankruptcy in suing in his official name. There is English authorities hold

that security will not be ordered where a receiver has been appointed and a corporation is insolvent.

However in Malaysia, the liquidator may be ordered to give security for costs where circumstances call for such security. There are situations where security will not be ordered. For example, where the

next friend of a minor is impecunious, where the plaintiff is a defaulter in the stock exchange and

where the plaintiff‟s action is being financed by a third party.

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3.3.4 No Security from Defendant

The principle that costs follow the event is necessarily supplemented by the further principle that the plaintiff should not be allowed to proceed with his action without giving security for costs if there is

some doubt as to whether he will be in the position to meet the defendant‟s costs should his action fail

(Rajoo, 2003). By its nature such an order cannot be made against the defendant. The power of High

Court to order security for costs cannot be ousted by an express contrary agreement between the parties.

In the case of Maatschappij Voor Fondsenbezit v Shell Transport and Trading Co [1923] 2 KB 166,

CA (Eng), a defendant cannot be ordered to furnish security for costs of an action. His position in this respect is not similar with a plaintiff since he is exercising his right to defend himself. A foreign

defendant will not be ordered to give security because the foreign plaintiff has been ordered to do so.

Then, a foreign shareholder who apposes a winding up petition will not be ordered to furnish security

for costs. On a stake holder‟s interpleaded issue, neither party will be ordered to give security; nor will a defendant raising the issue of domicile on which he is made plaintiff on the trial of the preliminary

issue.

Additionally, a defendant may be ordered to give security if he obtains leave to have the conduct of a cause and claims a right to property and applies to be admitted as a defendant in an action. Security

for costs of inquiries after trial may be ordered but security may be required of the defendant who

makes an interlocutory application by summons or motion. Though, in the case of Classic Video

Distribution Sdn Bhd v Asia Television Ltd, where security for costs was ordered against the defendants who had put in an application, it will strike off the writ of summons.

3.3.5 Counterclaiming Defendant

RHC Order 23 rule 1(3) stated that the plaintiff does not necessarily place himself in the position to be

liable to give security for costs where the defendant makes a counterclaim. The fundamental question

is whether the counterclaim is a form of defence, in which case the defendant is merely defending

himself or it amounts to a cross-action, in which case he is in the position of a plaintiff sue his own claim. An order for security for costs may be approved to a claimant advancing a counterclaim (Rajoo,

2003).Thus, where the claim and the counterclaim arise out of the same transaction and the

counterclaim is actually the defence to the action, security will not typically be ordered from the

defendant who is resident abroad or a limited liability company. On the other hand, where the defendant who is resident out of the jurisdiction puts forward a counterclaim in a matter totally

distinct from the claim, he may be ordered to furnish security for costs of the counterclaim. Indeed,

security may be ordered if a defendant resident abroad or a limited liability company takes

proceedings which in substance are more than merely defensive proceedings.

3.3.6 Procedure and Application for Security for Costs

Generally, the defendant writes to the plaintiff enquiring whether the plaintiff is ready to give security for costs before an application is made to the Court for security for costs. If the plaintiff agrees, then

there is no need an application. The application is done by summons in chambers supported by an

affidavit setting out the reasons which the application is made. The decision for the application is

wholly within the discretion of the court whether or not to make the order. The discretion will be exercised after considering all the circumstances of the case as the court thinks just to do so. If the

security for costs is ordered, it must be given in the manner, time and terms.

Although an application for security for costs may be made at any stage of the proceedings, it should be made as quickly as possible. The application should not be made too late or too near to the trial

unless there is a sensible explanation for the delay. A late application for security for costs would not

be tantamount to stifle a valid claim. The argument is that an application for security for costs is to be

treated as stifling a valid claim would be most effective where the application is made as soon as the suit is filed and served. The security for costs is applied by summons at chambers as shown in the case

of Vale v Offert (1874) 30 LT 457. It may be made before the summons for directions, although the

Court may wish to know what the defence to the claim is or it may be made on the summons for

discretion, since the right to security is not ignored by service of the defence or afterwards by notice under the summons for discretions. The court may order security up to a certain stage in the

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proceedings with liberty to apply for further security. Usually, the application should be done by a

written request to the plaintiff‟s solicitor. It should be supported by an affidavit apart from where the

residence of the plaintiff out of the jurisdiction is stated on the writ. The summons or affidavit should point out the sum of security required. The sum of security for costs should be calculated in a bill to

prove how that amount is made up. The amount of the security may be increased during the

proceedings since there is no rule limiting the number of application for security.

3.3.7 Manner of Giving Security

RHC Order 23 rule 2 stated that security for costs must be provided in the manner, time and terms

directed by the Court. The order for security for costs becomes unnecessary where an undertaking to provide the whole or part of the cost or a specified sum in lieu of security is accepted by the other

party. Security is normally ordered to be given by a bond or by requiring a specified sum to be paid

into the Court or within a specified period.

All further proceedings in the action are to be stayed until the security is given as ordered. In the

occasion of a party unable to fulfil an order to provide security, the High Court may order a permanent

stay of the arbitration proceedings (Rajoo, 2003). The court has power to permanently prohibit a

defendant from defending arbitration proceedings for failure to fulfil an order to secure a dispute fund by paying it into court (Rajoo, 2003).It is not appropriate to ask the plaintiff to straight away give the

security for costs at the time the order is made by the Court.

3.3.8 Amount of Security

The maximum amount of security ordered will be the amount of the recoverable costs of the defence,

excluding the costs if any counterclaim (Crowter, 1998). Security will normally be given in respect of

the predictable costs to be incurring up to the first day of the hearing. Even if the arbitrator is persuaded that the estimate of anticipated costs is accurate, he is entitled to order security for any

lesser amount he considers appropriate. The amount of security for costs to be given is in the

discretion of the Court. This means that the Court will fix an amount that it thinks just to do so, having

consider to all the situations of the case listed in RHC Order 23 rule 1(1). The costs should be calculated by the applicant on a party and party basis but not on a security basis. The amount of

security for costs is calculated in several methods depending on the situations as discussed below.

First of all, in the case of T Sloyan & Sons (Builders) Ltd v Brothers of Christian Instruction [1974] 3 All ER 715 at 720 per Geoffrey Lane J, a plaintiff resident out of the jurisdiction, the usual approach

is to fix the sum at about two-thirds of the estimated sum accumulated up to the stage of the

proceedings for which security is ordered. The Court is more convenience if it is informed what the

estimated costs is attached with a skeleton bill of costs as a ready guide. Another situation where the foreign plaintiff has no address or property in Malaysia, it would be appropriate to follow the formula

of Zainun Ali JC in Adarsh Pandit v Viking Engineering Sdn Bhd [1998] 2 AMR 1009 by ordering the

plaintiff to pay a quarter of the sum as claimed as security for costs. In the event of a plaintiff limited

company liable to furnish security for costs, a sufficient amount will be ordered under section 351 Companies Act 1965 and it should be for the feasible amount of costs considering the chance of the

case collapsing. The amount is still in the discretion of the court. The excess of the defendant‟s

counterclaim over the plaintiff‟s claim should be disregarded where there is a counterclaim put

forward by the defendant.

4.0 Research Methodology In order to achieve the research objective, a systematic method in conducting this research had been

organized. The study process consists of five phases as discussed below:

4.1 Phase 1: Preparation of Research Proposal

The first stage of the research involves initial study and discussion with friends and lecturers

regarding what are the issues in construction industry. Initial literature review was conducted to find

the idea of the research topic. After the initial study, the brief proposal of the research topic was created. Then, the objective and scope of the research were fixed. Next, a research outline was

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prepared to discover what type of data was required in this research. Meanwhile, the data sources were

identified as well.

4.2 Phase 2: Literature Review

Literature review was a fundamental phase in the research process. It was very important to assist in

carrying out the research. It was conducted to provide a comprehensive background study of the research. Literature review and various documentats related to the research field had been collected to

achieve the research objective. The reviews mainly focused on the Arbitration Act, Civil Procedure

and Security for Costs.

4.3 Phase 3: Data Collection

At this phase, all the data and information related to security for costs were gathered and collected.

Data collected were from the Malayan Law Journal viz the Lexis Malaysia online database. All the legal cases related to the research topic were classified out from the database. Important cases were

collected and utilised for the analysis at Phase 4. Data collected were mainly through documentary

analysis. All gathered data and information were documented neatly and systematically so that the

data and information can be easily be traced back.

4.4 Phase 4: Data Analysis

This phase of research included data analysis, data interpretation and data arrangement. This phase converted the data collected into information that is useful and valuable for the research. Arrangement

of data tends to simplify the process writing of the paper.

4.5 Phase 5: Conclusion and Recommendation

The phase 5 was the final phase of the research process. Mainly, it involved the writing up and

checking of the writing. Conclusion and recommendations were prepared with reference to the

findings during the phase of data analysis.

5.0 Comparative Study

5.1 Defendant to apply security for cost against the plaintiff

In Gateway, it can be noticed that the applicant is required the respondents to provide security for

costs. The Court in this case seems to be like ordering such security from the respondents which is in contrast with the Jiwa‟s case. Generally, the Court orders the plaintiff of a particular case to provide

such security but not the respondent. This rule had been clearly stated in the section 388(1) of

Companies Act (Cap 50, 1985 Ed) and section 351 of Companies Act 1965. Both sections are the

same as section 447 of the United Kingdom Companies Act where the Malaysian and Singaporean High Court would exercise the same discretion as that obtained in the High Court in England.

Then in the case of Jiwa, the High Court explained that the plaintiff is the claimaint and seeking for

security for costs which militates against established principles. A defendant is always has the right to defend himself and should not called to give security for costs. As a general rule, if the defendant

raises a set-off and counterclaim, the principle remains the same.

Unlike Order 23 which is broader in scope in that an order for security for costs may be made in

favour of a defendant against both individual and corporate plaintiffs, section 351 of the Companies Act 1965 is specifically confined to a plaintiff company registered under that Act. However, the

principles enunciated in Order 23 and section 351 above contain certain common features, in

particular, the party against whom security for costs may be ordered is the plaintiff. In other words,

only the defendant is entitled to make an application for security for costs. A party has to be identified as a plaintiff or a defendant by reference to the title of the parties in the matter filed and heard in the

particular court, for instant in the case of Luminous.

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5.2 Comparison of Section 11 and Section 19 of Arbitration Act 2005

Both the old and the new Act of Arbitration do contain express framework for curial intervention by Malaysian Courts over arbitrations seated in Malaysia to varying degrees. Specifically, both Acts

(Section 13(6)(a) of the old Act and Section 11(1)(a) of the new Act) confer upon Malaysian Courts

powers to order security for costs in relation to arbitral proceedings.

Neither Act specifies a test to be applied in the exercise of such powers. On applications for security

for costs under the old Act, Malaysian Courts apply ordinary principles used in litigation, for example

where a claimant resides out of Malaysia or being a corporation is impecunious, regardless of whether

the security is sought in the context of ongoing arbitration proceedings or applications to enforce an award (Kasturi case and Government of Sarawak v. Sami case). The position is untested under the

new Act but it is unlikely that a different approach will be adopted. Whilst the old Act does not restrict

an arbitral tribunal‟s power to order interim relief it does not expressly confer the same either.

Therefore, an arbitral tribunal‟s capacity to order security for costs in arbitrations governed by the old Act is dependant on the source of its powers.

Section 19 of Arbitration Act 2005 expressly provides that in the absence of an agreement to the

contrary, arbitral tribunals may make various types of preservation orders which expressly include orders of security for costs. Section 19(3) of the new Act specifically provides for their enforceability

by Malaysian Courts as arbitral awards to emphasise the binding nature of such orders. Both Acts

recognise a dichotomy between applications by parties for preservation orders, including security for

costs to an arbitral tribunal and court. However, Section 11(2) of the new Act expressly preserves findings of fact made in an arbitral tribunal‟s ruling relevant to any application to court as conclusive.

This and the general framework of the new Act, indicates a local leaning towards the “less

interventionist” approach by courts propounded in Channel Tunnel Group Ltd. v. Balfour Beatty Construction [1993] AC 334. Recent judicial decisions in Malaysia made in respect of the old Act,

whilst correctly not excluding court intervention entirely, have considered this approach with approval.

5.3 Power to Order Security for Costs

After conducting the case analysis, it can be observed that the High Court in the cases of Luminious,

Ballast and Kasturi has referred to a same legislation which is the Order 23 rule 1 (1) of RHC 1980.

This legislation stated the cases where the plaintiff may be required to furnish security for costs of the defendant of the action or other proceeding as the court thinks just.

The grounds set out in Order 23 rule 1 (1) of RHC 1980 are exhaustive and the court has no inherent

jurisdiction to order security for costs. Furthermore, the Court has statutory power to order a plaintiff limited liability company to give security for costs. Further, similar power may be conferred by other

statutory provisions. If the defendant is able to show that the plaintiff is fall within the cases stated in

the Order 23 rule 1 (1), the defendant‟s application for security for costs may be granted by the High

Court.

After the High Court is satisfied that the plaintiff is fall within the cases, the High Court will consider

all the circumstances in the case. The guidelines have been laid down as to the circumstances which

the court ought to consider on granting or refusing security for costs are stated in sub-headings 3.3.The High Court may order security for costs in the cases in which power to do so exists, only if,

after considering to all the circumstances of the case, it thinks it just to do so. Thus, the High Court

has discretion whether or not to order security for costs, both under the Rules of the High Court and

under its statutory powers. Thus, the former inflexible rule of practice that a plaintiff ordinarily resident abroad will be ordered to give security for costs must now yield to the discretionary power of

the court.

6.0 CONCLUSION

In the nutshell, the High Court will grant the application of security for costs when the plaintiff is

found breaking the Order 23 rule 1(1) of the RHC 1980. The security for costs still could be ordered when a court-appointed liquidator launches an action. Besides, the High Court will approve the

application when it is proven that the plaintiff is ordinarily resident out of the jurisdiction. The Court

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orders security for costs depending on the circumstances even under Order 23 Rule 1(1) stated that

security for costs cannot be ordered as of right from a foreign plaintiff.

On the other hand, the High Court will dismiss the application for security for cost because filling

excessive documents does not means the respondent are entitled to security for costs . The appellant

will not obtain security for costs if he failed to show that the plaintiff was „a nominal plaintiff‟ in the

arbitration proceedings under Rule 1(1)(b). Another reason why the High Court dismisses the application of security for costs is when the appellant was instructed by the arbitrator to do so. The

appellant had to apply for this security based on his own free will. The next reason for the High Court

to dismiss the application for security for costs is such security is oppressive to the respondents due to

financial difficulties. In addition, the security for costs is not granted because the plaintiff had a bona fide claim against the respondent.

From the case analysis, it is found that it is wrong for the plaintiff to seek for security for costs

because the defendant is always at the liberty to defend himself and the plaintiff is the claimant. The sum of security for costs is has to be calculated and submitted to the High Court for examinat ion.

Lastly, the powers granted to court pursuant to section 11 of Arbitration Act 2005 are powers which

are not meant to be oppressively invoked by a party to arbitration proceedings and to stifle the arbitral

proceedings. When such powers are also vested with the arbitrator, the application must be first made before the arbitrator.

ACKNOWLEDGEMENT

Firstly, I would like to thank my Supervisor, Dr. Nur Emma Mustaffa for willing to spare out her

precious time to provide me valuable advices and ongoing support throughout my candidature to

complete this research project. Other than that, I would like to thank my family for being supportive to my ideas, loving me and their tolerance has been the drive in pursuing my dreams. My beloved course

mates, friends and buddies thanks for you all too. Besides that, I would like to extend my sincere

appreciation to everybody who contributed to the accomplishment of this dissertation. Lastly, a

thousand thank to Universiti Teknologi Malaysia for providing such a wonderful sanctuary for me and my fellow course mates.

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Keith, J.A., Hanson, C., Halifax, O.M. and Scotia, N. (1999). Security for Costs against Fraudulent

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