In a recent appeal, Kuala Lumpur High Court upheld the decision of the Senior Assistant Registrar to dismiss the Defendants’ Security for Costs Application with costs. Consequently, this decision reaffirms that our Courts will not order Security for Costs as of right against a foreign Plaintiff, but only if the Court thinks it just to order, depending on the case’s circumstances. The relevant factors regarding Security for Costs (“SFC”) are thus especially pertinent.
The foreign Plaintiff here successfully resisted the appeal. Our Jonathan Khaw represented the foreign Plaintiff (“our Client”) in this matter.
Our Client had commenced this present proceeding against the Defendants to recover losses of approximately SGD 2 million, which, our Client claims, was caused by a fraud perpetrated by the Defendants. Hence, in this Application, the Defendants had relied on the three (3) following grounds to seek for SFC amounting to RM200,000 from our Client:
- Our Client is a foreign litigant;
- Our Client does not have any assets in Malaysia; and
- RM200,000 is fair and reasonable.
Jonathan Khaw cited that our Client has a reasonably good prospect of success in this action. By the alleged fact that they have lost SGD2 million, this Application praying for further sum against our Client is thus oppressive.
The High Court dismissed the Defendants’ Application with costs.
While the Court has the discretion to order Security for Costs, such discretion must be exercised justly, and due consideration must be given to the circumstances of the case. In particular, the Court considered the factor of foreign residency of our Client with no assets in Malaysia. But, the Court clarified that such factors alone would not be sufficient to order SFC. It would only be relevant had the Defendants furnished more convincing reasons supporting their Application.
Here, the Court found that the Defendants have not led evidence to discharge the burden of convincing the Court as to why there is a risk that they will not be able to recover the costs if our Client’s suit is dismissed. First, there is Reciprocal Enforcement of Judgment (“REJA”) between Malaysia and Singapore in which our Client has assets, meaning the Defendants can seek recourse via REJA to enforce our Court’s judgment there. Second, the business profile search report does not indicate that our Client is in poor financial standing. Most importantly, it does not suggest that the Defendants are at risk of not being paid this suit’s costs if our Client loses the claim in the future.
The Court held that when it is not established that the Defendants do not suffer such risk of being unpaid, the burden of proof will never be shifted to our Client. Further, the Court agrees with Jonathan Khaw that our Client’s action is a genuine claim and that the Defendants’ Application has the tendency to oppress and stifle our Client’s claim.
The Court held that these factors were of critical significance and thus dismissed the Defendants’ Application.
In this case, the High Court found that the Defendants, at the outset, had failed to prove on the balance of probability that there is a risk that they will be unable to recover the costs if our Client’s suit is dismissed. Significantly, there is nothing to suggest that our Client will not furnish costs if they failed in their action against the Defendants. The Defendants were ordered to pay costs and dismissed their appeal. This case highlights the importance of presenting clear evidence to the Court when making or opposing an application for Security for Cost.
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