1. ) Berjaya Air Sdn Bhd v 1. ) Malaysia Airports Sdn Bhd (BA-22NCvC-110-03/2022)

BERJAYA AIR SDN BHD [COMPANY NO. : 198901008226 (185528-K)]

CHAILEASE INTERNATIONAL FINANCIAL SERVICES CO LTD [COMPANY NO. : 1767817] ….. PLAINTIFFS

MALAYSIA AIRPORTS SDN BHD [COMPANY NO. : 199101020335 (230646-U]

CIVIL AVIATION AUTHORITY OF MALAYSIA ….. DEFENDANTS GROUNDS OF JUDGMENT (Security for Costs) Introduction

In this suit whereby the 2nd Plaintiff, being a foreign company registered in British Virgin Islands and as the substantive plaintiff, claims for damages of US$4,412,447 (or equivalent to approximately RM20 million) against the Defendants in respect of an aircraft accident, at the application of the 1st Defendant this Court on 11 July 2023 ordered the 2nd Plaintiff/foreign company to pay security for costs in the amount of RM100,000 (or equivalent to about US$21,000) to be held by the 1st Defendant’s solicitor as stakeholder pending the final disposal of the action.

Alternative was also given for the 1st Plaintiff, a Malaysian company who is the nominal plaintiff in this action, to provide a written undertaking to pay the costs of action in the event the Defendants succeed in their defence at the trial and the 2nd Plaintiff/foreign company fails to pay the Defendants the costs of action awarded in 2 favour of the Defendants in such future contingent event.

Neither of the Plaintiffs has provided the security for costs or the alternative undertaking as to costs.

By Notice of Appeal dated 9 August 2023, the 2nd Plaintiff, as the foreign company who is the substantive plaintiff here, has appealed against this Court’s decision dated 11 July 2023. Background facts

The Plaintiffs’ claim is premised on an alleged incident that occurred on 18.3.2019, where it was contended that the Plaintiffs had suffered losses from the collision between the 1st Plaintiff’s Aircraft and the 1st Defendant’s Escort Vehicle.

It was pleaded in the Statement of Claim that the 2nd Plaintiff is a company incorporated in British Virgin Islands with its registered office at P.O Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

The Plaintiffs contend that the 2nd Plaintiff holds beneficiary interest in the Aircraft as the Aircraft has been mortgaged and assigned to the 2nd Plaintiff as security for repayment of financing provided by the 2nd Plaintiff.

At all material times, the 1st Defendant denies and put the Plaintiffs to strict proof that they have the necessary title to sue with respect to the Collision in the Suit.

On 5.10.2022, the 1st Defendant’s solicitors requested RM150,000.00 as security for costs from the Plaintiffs’ solicitors, which was not agreeable by the Plaintiffs.

By a Notice of Application dated 3.2.2023 (Enclosure 17) (“Application”), the 1st Defendant applied for an order that the 2nd Plaintiff to pay in the sum of RM150,000.00 or any other sum as directed by the Court as security for costs on inter alia the following grounds:- (a) the 2nd Plaintiff is a foreign company incorporated in the British Virgin Islands and as such there is a real risk that costs in the event of a successful defence would not be recoverable against it; (b) the 2nd Plaintiff is a nominal plaintiff who has no bearing and/or legal interest in the outcome of this action. 3 Law on security for costs

An application for security for costs is premised upon Order 23 Rule 1(1)(a) of the Rules of Court 2012 where an order for security for the plaintiff’s costs may be made if the court finds that it falls under any of the circumstances appearing in sub-rule (1(1)(a) to (d):- “1. (1) Where, on the application of a defendant to an action or other proceedings in the Court, it appears to the Court—

(a) that the plaintiff is ordinarily resident out of the jurisdiction;

(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;

(c) subject to paragraph (2), that the plaintiff’s address is not stated in the writ or originating summons or is incorrectly stated therein; or

(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, it may order the plaintiff to give such security for the defendant’s costs of the action or other proceedings as it thinks just.”

It is the discretion of the court to require security for costs under O.23 which has to be exercised after considering all the circumstances of the particular case. In Kasturi Palm Products V. Palmex Industries Sdn Bhd [1985] 2 MLRH 213, [1986] 2 MLJ 310, [1985] 1 LNS 149 it was held by Mohamed Dzaiddin J (later CJ) that: “Order 23 Rule 1(i) 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, for example, an inflexible or rigid rule that a plaintiff resident abroad should provide security for costs." (Supreme Court Practice 1985 Vol. p.384). In exercising its discretion, it is clear that the Court will 4 have regard to all the circumstances of the case. For the circumstances, see per Lord Denning M.R. in Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] 2 All ER 273. However, in Aeronave SPA & Anor v Westland Charters Ltd and Ors [1971] 3 All ER 531, Lord Denning M.R. in his judgment at p.533 stated as follows: "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. …" Application of principles to the facts of the present case

In the present case, there is no dispute that the 2nd Plaintiff is a foreign company incorporated in the British Virgin Islands which resides outside the jurisdiction of this Court.

Abdul Malek Ahmad J (later PCA) in the High Court in Compagnie Generale Des Eaux v. Compagnie Generale Des Eaux Sdn Bhd [1992] 1 MLRH 573, [1992] 2 CLJ Rep 311, [1993] 1 MLJ 55 held that a company not registered in Malaysia would be considered not within the jurisdiction even if it had established goodwill, reputation and presence locally.

The fact that the plaintiff is a foreign company without substantial assets within our jurisdiction per se does not automatically warrant an order of security for costs against them in respect of their action; all relevant factors must be considered together before the Court exercises its discretion under O. 23.

In the present case, the 1st Defendant has filed its Defence and it has not made any counterclaim against the Plaintiffs. The absence of a defendant’s counterclaim is a factor which, in the absence of countervailing circumstance, tends to lean in favour of granting an order of security for costs against a plaintiff who falls within the 5 description of any of the limbs (a) to (d) of O.23 r.1(1).

The country of domicile of the plaintiff is also a relevant factor to be considered, especially where that foreign country does not have a reciprocal enforcement of judgments agreement with Malaysia. In the absence of countervailing circumstance, foreign domicile is a factor which tends to lean in favour of granting an order of security for costs against a plaintiff who falls within the description of any of the limbs (a) to (d) of O.23 r.1(1).

British Virgin Islands, the 2nd Plaintiff’s country of residence, is not a country which has a reciprocal enforcement of judgments agreement with Malaysia and thus it will be extremely difficult for the 1st Defendant to recover judgment or relief if the 1st Defendant is successful in its claim. The enforcement of the costs order is not automatic and the 1st Defendant will have to engage in cross-border litigation to recover the costs ordered by this Honourable court. See Section 3 of the Reciprocal Enforcement of Judgments Act 1958 and First Schedule of the Act.

The immediately foregoing factor was also decided in the case of Yu Gouqin v Yap Kwee Yin [2020] MLRH 448, [2020] MLJU 616, [2020] 1 LNS 507. In that case, the High Court Judge in allowing the defendant’s application for security of costs of RM100,000.00 to be paid by the plaintiff, took into considerations, inter alia, that the plaintiff is a citizen in China and that China is not one of the countries under the Reciprocal Enforcement of Judgments Act 1958. Accordingly, the defendant will have extreme difficulties to recover costs or any relief allowed. The Court in the case of Yu Gouqin had this to say:- “Finally but not in the least the Plaintiff has stated that she is from Qingdao China. It has been established that China is not named as a participant in the list of reciprocal countries under the Reciprocal Enforcement Judgment Act 1958. This will make it extremely difficult for the Defendant to recover costs or any other relief allowed to her should a judgment be given in her favour in the main suit later."

Further, upon perusing the affidavits filed by the Plaintiffs, it is evident that the 2nd Plaintiff has no assets within the jurisdiction. In CMA CGM v Ban Hoe Leong Marine Supplies Sdn Bhd & Ors [2012] 8 CLJ 601, Tengku Maimun J (as Her Ladyship then was) held as follows: 6 “What is certain is that the Plaintiff is a foreign company and has no assets within the jurisdiction and the court is empowered to order security for costs if it is appropriate in the circumstances of the case (Fulcrum Capital Sdn Bhd v Dato’ Samsuddin Abu Hassan Rahaz Sdn Bhd & Anor (Interveners) & Another [2001] 5 CLJ 73). Given that the Plaintiff is a foreign company with no assets within the jurisdiction, I am of the view that it is appropriate that the Plaintiff be ordered to pay security for costs.”

In Faridah Begum bte Abdullah v. Dato’ Michael Chong [1995] 2 CLJ 951, [1995] 2 MLRH 72 Ariffin Zakaria J. (later CJ) in a case involving a foreign plaintiff held inter alia that (a) ease of enforcement is a relevant factor to be considered, but it is not the governing or dominant factor; (b) the Court should only embark into the investigation upon the merits in plain and obvious cases and not in cases where the issues involved are complex. As a corollary, difficulty of enforcement is also a relevant factor to be considered, though it is not a governing or dominant factor.

Here, the foreign 2nd Plaintiff, being a company incorporated in the British Virgin Islands, in our present case has not produced any documentary evidence to show it has any property or substantial asset within Malaysia. This factor, in the absence of countervailing circumstance, tends to lean in favour of granting an order of security for costs against a plaintiff who falls within the description of limb (a) of O.23 r.1(1).

Neither has the 2nd Plaintiff produced any documentary evidence to show it has active business activities or operations in Malaysia. There does not seem to be a transparent system of official company searches available in the British Virgin Islands. These factors, in the absence of countervailing circumstance, tend to lean in favour of granting an order of security for costs against a plaintiff who falls within the description of limb (a) of O.23 r.1(1).

Although the 1st Plaintiff is a company resident in Malaysia, the 1st Plaintiff is a nominal plaintiff here. Moreover, from the pleadings and affidavits, it appears that there is a possibility that each of the plaintiffs may be ordered to pay a portion of the 1st Defendant’s costs and/or the outcome as to costs is unpredictable. 7

In the circumstances, there is real risk that if the 1st Defendant were to succeed in his defence at the full trial in future, the 1st Defendant might not be able to recover his costs of suit from the foreign 2nd Plaintiff.

In the circumstances, the 1st Defendant is entitled to have a fund available within the jurisdiction of this Honourable Court against which it can enforce a judgment for costs if it were to succeed in defending the 2nd Plaintiff’s claim.

Following the decision of the learned judge in Faridah Begum bte Abdullah v. Dato’ Michael Chong [1995] 2 CLJ 951, [1995] 2 MLRH 72 this Court should only embark into the investigation upon the merits in plain and obvious cases and not in cases where the issues involved are complex. Although there are other decisions of the High Court which as a general rule considered the merits and demerits of the plaintiff’s case when deciding whether or not to exercise the discretion on security for costs, this Court finds the approach of the learned judge in Faridah Begum bte Abdullah v. Dato’ Michael Chong [1995] 2 MLJ 404, [1995] 2 CLJ 951, [1995] 2 MLRH 72 to be preferable. The same approach was also adopted by various decisions of the court including (a) Goldquest International Ltd v. The Leong Kiat [2003] 1 MLRH 189, [2003] 2 CLJ 402, [2003] MLJU 132 ([Abdul Malik Ishak J (later JCA)]; (b) Raju Rajaram Pillai v. MMC Power Sdn Bhd [2000] 1 MLRH 489, [2000] 4 CLJ 189, [2000] 6 MLJ 551 ([Abdul Malik Ishak J (later JCA)]. The reasons include:

In our present case, the pleadings and the affidavits adduced up to this stage show that the merits or demerits of the Plaintiffs’ claims here are not plain and obvious. As such, this Court will not delve into the details and complexities of the issues and disputes on merits or demerits of the case when considering this application for security for costs.

In the circumstances, this is a proper case to order the Plaintiff to pay security for costs of suit here. Quantum of security for costs

On the quantum of security for costs, the Plaintiffs in the Statement of Claim has claimed for USD4,412,447 in this civil aviation case on events which happened at the airport runway, the control tower, etc.

Although the quantum of security for costs to be ordered depends on the particular facts and circumstances of each case, the Court can consider the relevant factors in O.59 r. 16(1) regarding the assessment of costs when assessing the quantum of security for costs. In doing so, the Court at the stage of security for costs can only assess based on the probabilities of the relevant factors, as the trial of the action has not commenced or completed. After assessment of the probabilities of the relevant factors under O.59 r.16(1), the Court will also have to take into consideration the uncertainties at this stage, the extent of risks of successful defendant’s inability to recover costs, and the fact that the amount of security for costs should not be exorbitant or in terrorem having regard to the nature of the claims and the value of the subject matter in the action. The amounts awarded in past decided cases of similar nature and magnitude may be used as general guide but not binding upon the Court in the case at hand.

Under O.58 r.16(1), the particular circumstances to be considered in assessment of costs are as follows: “(a) the complexity of the item or of the cause or matter in which it arises and the difficulty or novelty of the questions involved;

(b) the skill, specialized knowledge and responsibility required of, and the time and labour expended by, the solicitor or counsel; 10

(c) the number and importance of the documents, however brief, prepared or perused;

(d) the place and circumstances in which the business involved is transacted;

(e) the importance of the cause or matter to the client;

(f) where money or property is involved, its amount or value;

(g) any other fees and allowances payable to the solicitor or counsel in respect of other items in the same cause or matter, but only where work done in relation to those items has reduced the work which would otherwise have been necessary in relation to the item in question.”

In our present case, the claims and disputes relate to a collision which happened on a runway or taxiway in an airport, and civil aviation and airport control procedures are likely to be involved. Full trial of the Plaintiffs’ claims is likely to be lengthy, complex and costly.

The total amount of the Plaintiffs’ claims in the present action is equivalent to about RM20 million based on the current exchange rate of US$1 = RM4.60.

The subject matter in the present case is of importance to both the Plaintiffs and the 2nd Defendant.

At the trial, counsel conducting the examination and cross-examination of witnesses on civil aviation and airport control issues would probably need skill and specialised knowledge in these fields.

Now, we do a comparison with past decided cases.

In the case of CNLT (Far East) Bhd (dalam likuidasi) v JCT Ltd [2018] MLJU 1079, [2018] MLRHU 861 the High Court ordered for the plaintiff to pay a sum of RM120,000.00 as security for costs. In CNLT (Far East) case, Lau Bee Lan J. (later JCA) held as follows: “[24] Weighing the balance to be struck as between the Plaintiff and the Defendant, I am of the view that it is fair, reasonable and just to 11 order security for costs in favour of the Defendant as per the terms stated in para 2 above. The sum of RM120,000.00 ordered is only 2.4% of the Plaintiff’s total claim of USD1,250,000.00. As to the quantum of security for costs awarded, the following cases illustrate the range:

(i) Raju Rajaram Pillai v MMC Power Sdn Bhd & Anor [2000] 4 CLJ 189, the High Court reaffirmed the decision of the Senior Assistant Registrar in granting Security for Costs amounting to RM80,000.00 for a claim involving RM319,219.29, i.e. 25% of the total claim; and

Perhaps, clarification regarding the use of the amounts ordered as security for costs in the past decided cases is desirable here. In referring to the amounts in the past decided cases and in expressing the amount of security for costs as a percentage of the value of the subject matter in the case, the Court did not intend to lay down any guide or precedent that the amount of the security for costs should fall within certain range of percentages of the total amount of claims or total value of the subject matter in dipsute.

When expressing the amount of security for costs as a percentage of the value of the subject matter in the case, one must understand that the value of the subject matter in the case is only one of the seven particular circumstances listed in O.59 r.16(1) for assessing the costs, and that even the seven circumstances listed therein are non-exhaustive. Although the value of the subject matter is an important factor, it is not the sole or governing factor.

In looking at percentages, one must not overlook the economy of scale where in a case involving very huge value of the subject matter, the quantum of assessed costs of action will be a very low percentage of the value of the subject matter, and in contrast, in a 12 case involving a small value of the subject matter, the quantum of assessed costs of action will be a high percentage of the value of the subject matter.

Moreover, the complexity and length of trial is not always proportionate to the value of the subject matter. One should not assume that a civil action involving a huge amount in dispute is necessarily more complex and lengthier than a civil action involving a relatively smaller amount in dispute.

Taking the nature and extent of allegations and pleaded allegations, the value of the subject-matter in the claim and all other factors into account, this Court considers that after the trial the likely costs of action would probably be not less than RM200,000.

Taking into consideration the uncertainties at this stage regarding the future final outcome of the action and bearing in mind that the amount of security for costs is not to be exorbitant or too burdensome as to stifle the Plaintiffs’ claims here, this Court has ordered security for costs in the amount of RM100,000.

In the considered opinion of this Court, this amount of RM100,000 as security for costs is not so burdensome as to stifle the Plaintiff’s claims for about RM20 million in this action. It is also the considered opinion of this Court that any foreign company who is not prepared to place an amount of RM100,000 with a neutral stakeholder as security for costs to pursue a very huge claim of RM20 million in our courts would most probably be a foreign country who has no sincere intention to honour its obligation to pay costs of action here in the event it loses at the full trial. Summing up of the factors to be considered in an application for costs against a foreign plaintiff

Although the amounts involved in security for costs are generally a small fraction of the amount or value in dispute in the civil actions, there has been a growing trend of excessive number of contests to requests for security for costs and consequently quite a number of appeals against decisions on security for costs. In view of such growing trend which is rather unhealthy or undesirable, it is perhaps pertinent to set out a summary of the factors to be considered in an application for security for costs against a foreign plaintiff. 13

Where the defendant has made a counterclaim against the foreign-plaintiff in the suit and the defendant’s counterclaim involves some issues and questions which are intertwined with or inextricably connected with some issues and questions raised in support of or in defence to the plaintiff’s claims in the suit, this factor by itself would warrant a dismissal of the defendant’s application for security for costs: see Crabtree (Insulation) Ltd v. GPT Communications Systems (1990) 59 BLR 43 (English Court of Appeal); the same principle was applied by the Singapore Court of Appeal in Jurong Town Corporation v. Wishing Star Ltd [2004] 2 SLR (R) 427 and by Gunalan Muniandy JC (now JCA) in Tiara Pasir Sdn Bhd v. Skill City Investment Ltd [2015] MLRHU 454. On this factor regarding the defendant’s counterclaim, the law on security for costs does not make any difference between local plaintiff or foreign plaintiff.

Where the foreign-plaintiff has substantial assets or properties within the jurisdiction or has significant business activities within the jurisdiction, this factor by itself would warrant a dismissal of the defendant’s application for security for costs unless the defendant can show that the foreign plaintiff is likely to dispose of or cease the same before the conclusion of the full trial, in which case the other factors would also have to be considered.

The fact that the plaintiff is a foreign company without substantial assets or significant business activities within our jurisdiction is a factor which, in the absence of countervailing circumstance, tends to lean in favour of granting an order of security for costs against a plaintiff who falls within the description of limb (a) of O.23 r.1(1).

The fact that the plaintiff is a foreign company which is domiciled in a country which has no reciprocal enforcement of judgment treaty or arrangement with Malaysia is a factor which, in the absence of countervailing circumstance, tends to lean in favour of granting an order of security for costs against a plaintiff who falls within the description of limb (a) of O.23 r.1(1).

For several reasons summarised in paragraph 26 above, the preferred approach in dealing with application for security for costs is that the Court should only embark into the investigation upon the merits in plain and obvious cases and not in cases where the issues involved are complex. 14 Manner giving security and alternative

The amount of the security for costs is to be held by the 1st Defendant’s solicitor in an interest-earning fixed deposit client’s account and is to be released or disbursed in accordance with this Court’s subsequent order.

However, if the 1st Plaintiff provides a written irrevocable undertaking to the Defendants that if this Court awards the costs of action against the 2nd Plaintiff in favour of the Defendants after the full trial and decision of this action, the 1st Plaintiff shall pay the entirety of the said awarded costs to the Defendants in the event of the 2nd Plaintiff’s failure or neglect to pay the same to the Defendants within fourteen (14) days of such costs award, then the Defendants are adequately protected against the risk of the foreign company/the 2nd Plaintiff’s non-payment of the costs of action and there would be no necessity for cash security for costs to be provided.

This alternative order is also a way of verifying the reliability or unreliability of the foreign co-plaintiff’s ability and willingness to pay the costs awarded if it eventually fails in the full trial. If the foreign company’s own Malaysian co-plaintiff cannot trust the foreign company, who teams up together to pursue the claims in our court, to honour the foreign company’s future payment obligation on costs of action or for indemnity to the Malaysian co-plaintiff, there is no credible basis for the Malaysian courts to hold that there would not be any real risk of the foreign company’s refusal or failure to pay the eventual costs awarded if the foreign company eventually fails in its action here. Conclusion

In conclusion, this Court on 11 July 2023 ordered as follows:-

For the Plaintiffs : Khor Wei Wen Messrs Tay & Partners (Kuala Lumpur)

For the 1st Defendant : Foo Siew Yin Messrs Shaikh David & Co. (Kuala Lumpur) For the 2nd Defendant : Amin Othman Messrs Hafarizam Wan & Aisha Mubarak (Kuala Lumpur)