Niro Ceramic Sales & Services (M) Sdn Bhd v Guocera Sdn Bhd (BA-22NCvC-381-09/2024)

(M) SDN BHD (Company No. 199201016212/(247716-T) 2) FOSHAN NIRO CERAMIC BUILDING MATERIALS TRADING CO. LTD (Business Registration No. 440600400000552) ... PLAINTIFFS AND 1) GUOCERA SDN BHD (Company No. 197801000415 (37438-t) 2) CHENG LI YONG (NRIC No. 770624-02-5734) … DEFENDANTS 08/07/2026 10:04:30 BA-22NCvC-381-09/2024 Kand. 131 S/N 52zxzlfwcUSu/d5HRWjpxw GROUNDS OF JUDGMENT Enclosure 28 — 1st Defendant’s Application for Fortification of Undertaking as to Damages A. Introduction

These are my grounds of decision for Enclosure 28. This was the 1st Defendant’s application for fortification of the Plaintiffs’ undertaking as to damages, filed under Order 92 rule 4 of the Rules of Court 2012 and the Court’s power to regulate interlocutory injunctions and undertakings given to the Court.

Enclosure 28 was not an application for security for costs. It was not governed by Order 23 rule 1 of the Rules of Court 2012 or section 580A of the Companies Act 2016, both of which concern security for costs.

By Enclosure 28, the 1st Defendant sought an order that the 1st Plaintiff fortify its undertaking as to damages for losses said to arise from the ad interim injunction order dated 23.10.2024 and any interim injunction that might be granted under Enclosure 3. The 1st Defendant sought the same relief against the 2nd Plaintiff.

The 1st Defendant asked that fortification be provided by deposit into Court, by an unconditional on-demand bank guarantee, or by any other form considered suitable by the S/N 52zxzlfwcUSu/d5HRWjpxw Court. The 1st Defendant also asked that, if the Plaintiffs failed to provide the fortification ordered, the ad interim injunction or any interim injunction granted be discharged.

5.

Enclosure 28 was heard together with Enclosures 26, 31 and Although the four applications arose from the same commercial dispute and involved overlapping documents and submissions, I considered Enclosure 28 separately because the relief sought was different from the security for costs applications.

By the time Enclosure 28 was heard, Enclosure 3 had already been dismissed. The ad interim injunction previously granted had also been discharged and set aside, and there was no stay in force.

In interlocutory proceedings, the Court must ensure that a protective remedy remains protective in character. A shield must not become a sword. Fortification of an undertaking as to damages is meant to protect a party against loss caused by an injunction; it is not meant to impose a further burden when no injunction remains in force and no sufficient case for fortification has been shown.

Having considered the affidavits, exhibits, written submissions, oral submissions and authorities relied upon by the parties, I dismissed Enclosure 28. I awarded costs of RM4,000.00 to the Plaintiffs for this application, subject to allocatur, as part of the S/N 52zxzlfwcUSu/d5HRWjpxw global costs of RM16,000.00 awarded for Enclosures 26, 28, 31 and 33. B. Background

The Plaintiffs filed Enclosure 3 seeking interim injunctive relief against the Defendants. An ad interim injunction was earlier granted pending the hearing and disposal of Enclosure 3, and the Plaintiffs gave the usual undertaking as to damages.

Enclosure 28 was filed before Enclosure 3 was decided. It was therefore framed by reference to two matters: first, the ad interim injunction already granted on 23.10.2024; and secondly, any interim injunction that might later be granted under Enclosure 3.

The position had changed by the time Enclosure 28 came before me for hearing. Enclosure 3 had been dismissed, and the ad interim injunction had been discharged and set aside.

There was no stay of the dismissal of Enclosure 3 or of the discharge of the ad interim injunction. Although I was informed that the Plaintiffs had appealed, there was no injunction in force against the 1st Defendant when Enclosure 28 was heard.

The 1st Defendant asked the Court to adjourn or defer Enclosure 28 pending the appeal in respect of Enclosure 3. I S/N 52zxzlfwcUSu/d5HRWjpxw declined to do so because the application had to be decided on the position before this Court at the time of hearing. C. The 1st Defendant’s case

The 1st Defendant’s case was that the Plaintiffs’ undertaking as to damages was insufficient unless backed by security. The 1st Defendant argued that it faced a real risk of loss if restrained by the injunction and that it might not be able to recover such loss from the Plaintiffs.

The 1st Defendant relied on the financial position of the 1st Plaintiff, Niro Ceramic Sales & Services (M) Sdn Bhd. It submitted that the 1st Plaintiff was insolvent or financially weak, that its liabilities exceeded its assets, and that it would not be able to satisfy the undertaking as to damages if ordered to do so.

The 1st Defendant also relied on the position of the 2nd Plaintiff, Foshan Niro Ceramic Building Materials Trading Co Ltd. It submitted that the 2nd Plaintiff is incorporated in the People’s Republic of China, has no known assets in Malaysia, and is incorporated in a country which is not a reciprocating country under the Reciprocal Enforcement of Judgments Act 1958.

The 1st Defendant further submitted that it had suffered or would likely suffer loss if it remained restrained by the injunctive relief sought in Enclosure 3. The alleged losses included loss of S/N 52zxzlfwcUSu/d5HRWjpxw sales revenue, manpower costs, hiring or administrative costs, and loss arising from being unable to use information concerning China tile suppliers.

The 1st Defendant submitted that it was not required to prove its losses with final precision at this stage. It argued that there was enough material for the Court to order fortification, either by deposit into Court, bank guarantee or another suitable form of security. D. The Plaintiffs’ case

The Plaintiffs opposed Enclosure 28. They submitted that the application was premature when filed because Enclosure 3 had not yet been decided.

The Plaintiffs further submitted that once Enclosure 3 was dismissed and the ad interim injunction discharged, Enclosure 28 no longer served any useful purpose. Their position was that there was no injunction left to support an order for fortification.

The Plaintiffs also submitted that the 1st Defendant had not shown a good arguable case that it had suffered, or would suffer, loss caused by the injunction. They argued that the injunction sought under Enclosure 3 was directed at preventing the Defendants from approaching, soliciting or poaching the Plaintiffs’ employees and from obtaining confidential information through those employees. S/N 52zxzlfwcUSu/d5HRWjpxw

The Plaintiffs said the 1st Defendant had not shown how it could suffer compensable loss from being restrained from conduct which the Plaintiffs alleged to be wrongful. They also submitted that several alleged losses were not properly set out in affidavit evidence and were raised only in submissions.

The Plaintiffs further argued that the 1st Defendant had not provided an intelligent estimate of loss. They submitted that the figures and categories of loss were speculative and did not give the Court a proper basis to order fortification.

As to the Plaintiffs’ financial position, the Plaintiffs denied that the undertaking was worthless. They submitted that the Plaintiffs were not shell companies and that the financial matters relied upon by the 1st Defendant did not justify the order sought. E. Applicable legal principles

The undertaking as to damages is part of the usual protection given to a party restrained by an interim injunction. If it is later found that the injunction should not have been granted, the undertaking enables the restrained party to seek compensation for loss caused by the injunction.

The Court may, in a proper case, require the undertaking to be fortified. This may be done by requiring money to be paid into S/N 52zxzlfwcUSu/d5HRWjpxw Court, a bank guarantee to be provided, or another form of security to be given.

In Keet Gerald Francis Noel John v Mohd Noor Bin Abdullah & Ors [1995] 1 MLJ 193, the Court recognised that a Plaintiff’s ability to meet the undertaking as to damages may be relevant when the Court considers interlocutory injunctive relief. Where appropriate, the Court may require security so that the undertaking is not empty in practical terms.

In Samsung C&T Corp UEM Construction JV Sdn Bhd v Global Wall (M) Sdn Bhd and other appeals [2024] 6 MLJ 795, the Court of Appeal considered the principles on fortification and referred to the approach in Alta Trading UK Ltd (formerly Arcadia Petroleum Ltd) and others v Bosworth & others [2021] 4 WLR 72. The applicant must show a good arguable case of loss caused by the injunction, an intelligent estimate of that loss, and a sufficient risk that the undertaking will not be met unless fortified.

Energy Ventures Partners Ltd v Malabu Oil & Gas Ltd [2015] 1 WLR 2309 is relevant on causation. The loss relied upon must be loss which would not have been suffered but for the injunction, although the Court is not required at this stage to conduct a full assessment of damages.

I also bear in mind the principle that submissions are not evidence. In Ng Hee Thoong & Anor v Public Bank Bhd S/N 52zxzlfwcUSu/d5HRWjpxw [1995] 1 MLJ 281, the Court made clear that material facts should be placed before the Court by evidence and not merely asserted from the Bar.

These authorities show that fortification is not automatic. The Court must be satisfied that the order is needed, that it is tied to loss caused by the injunction, and that the amount or form of security sought is justified by the evidence.

The Court must also consider the position as it exists when the application is heard. Where the injunction has already been discharged and there is no stay, the Court must be slow to grant fortification unless a proper evidential and procedural basis is shown.

Fortification is a protective remedy. It should not be punitive, and it should not be used to impose pressure for its own sake. In this sense, a shield must not become a sword. F. Analysis F1. Nature of Enclosure 28

Enclosure 28 was concerned with fortification of an undertaking as to damages. It was not concerned with protecting the 1st Defendant against unrecovered legal costs.

For that reason, the Court had to focus on loss said to have been caused by the injunction. The Plaintiffs’ financial position S/N 52zxzlfwcUSu/d5HRWjpxw and the 2nd Plaintiff’s foreign incorporation were relevant only after the Court was satisfied that there was a proper basis to require fortification.

I did not dismiss Enclosure 28 merely because it had been filed before Enclosure 3 was decided. A party may, in a proper case, ask for fortification while an injunction application is pending.

The difficulty here was that the position had changed before Enclosure 28 was heard. By then, Enclosure 3 had been dismissed and the ad interim injunction had been discharged. F2. No injunction in force

The main reason for dismissing Enclosure 28 was that there was no injunction in force when the application was heard. Enclosure 3 had been dismissed and the ad interim injunction no longer restrained the 1st Defendant.

There was also no stay. The filing of an appeal did not revive the ad interim injunction and did not place the 1st Defendant under any present restraint.

The purpose of fortification is to support an undertaking where an injunction is operating, or is about to operate, and where the restrained party has shown that added protection is needed. That purpose was no longer present before this Court. S/N 52zxzlfwcUSu/d5HRWjpxw

Once Enclosure 3 was dismissed and the ad interim injunction was discharged, there was no continuing restraint which required future protection by way of fortification. The losses said to arise from a continuing injunction therefore did not arise in the way the 1st Defendant had put its application. F3. Pending appeal

I considered the 1st Defendant’s request to adjourn Enclosure 28 until after the appeal relating to Enclosure 3. I declined that request because there was no order staying the dismissal of the injunction application.

If the appellate court restores or grants an injunction, that court may impose any terms it considers appropriate. Those terms may include fortification if the evidence then justifies it.

It would not be right for this Court to keep Enclosure 28 unresolved merely because an appeal was pending. The Court had to decide the application on the facts and orders then before it.

The 1st Defendant is not shut out from taking any step available in law if the position changes. The dismissal of Enclosure 28 simply reflects the position that, before this Court, there was no injunction in force requiring fortification. S/N 52zxzlfwcUSu/d5HRWjpxw F4. Financial position and foreign incorporation

I accepted that the financial position of the 1st Plaintiff was relevant. I also accepted that the 1st Defendant was entitled to rely on the financial documents and the matters it said showed that the 1st Plaintiff might not be able to satisfy the undertaking.

I further accepted that the 2nd Plaintiff is incorporated in the People’s Republic of China. I also accepted that the People’s Republic of China is not a reciprocating country under the Reciprocal Enforcement of Judgments Act 1958.

Those matters assisted the 1st Defendant’s argument but did not decide the application. Fortification is not ordered merely because one Plaintiff is outside Malaysia or because another Plaintiff is said to be under financial pressure.

The Court must first be satisfied that there is loss, or likely loss, caused by the injunction and that there is a sufficient reason to secure the undertaking. In the present case, that foundation was not established because the injunction had already been discharged.

I also took into account that the materials before me did not show that the Plaintiffs were empty corporate vehicles. The materials referred to business operations, receivables, inventories and trading activity, and I was not persuaded that S/N 52zxzlfwcUSu/d5HRWjpxw the undertaking should be treated as worthless on the evidence before me. F5. Alleged loss and causation

The 1st Defendant relied on alleged loss of sales revenue, manpower costs, hiring or administrative costs, and loss arising from being unable to use information relating to China tile suppliers. These complaints were not enough, on the material before me, to justify fortification.

The alleged losses were closely tied to disputed issues in the main action and in the injunction application. Those issues include whether the information was confidential, whether any information was already public, whether there was solicitation of employees, and whether the relief sought restrained lawful competition or only wrongful conduct.

It would not be appropriate to decide those contested matters in an application for fortification. Those matters are better dealt with at trial or, where relevant, in the appeal concerning Enclosure 3.

I was also not satisfied that the 1st Defendant had provided an intelligent estimate of the loss for which fortification was sought. The law does not require exact proof at this stage, but the Court still needs enough material to assess whether the amount sought is fair and necessary. S/N 52zxzlfwcUSu/d5HRWjpxw

The alleged categories of loss were not sufficiently particularised. I was not persuaded that there was a good arguable case of loss caused by an injunction in force at the time Enclosure 28 was heard.

The causation requirement was also not met for future loss. Since there was no injunction in force, there was no continuing restraint from which future loss could properly be said to arise.

I also considered the Plaintiffs’ argument that certain allegations of loss were raised in submissions rather than clearly set out in the affidavits. To the extent this was so, I was not prepared to treat assertions in submissions as a proper substitute for evidence. F6. Alleged past loss during the ad interim period

I also considered whether fortification should be ordered because the 1st Defendant said it had suffered loss during the period when the ad interim injunction was in force. That point required separate consideration because a discharged injunction may still give rise to issues under the undertaking.

Enclosure 28, however, was not an application for an inquiry or assessment under the undertaking as to damages. It was an application to fortify the undertaking in relation to injunctive relief which was no longer in force. S/N 52zxzlfwcUSu/d5HRWjpxw

If the 1st Defendant contends that it suffered loss during the ad interim period, the proper course, if available in law and supported by evidence, would be an application directed to the undertaking itself. Such an application would require the necessary evidence and the proper procedure for inquiry or assessment.

I was not prepared to treat Enclosure 28 as an application for assessment of damages under the undertaking. The Court should not grant fortification for an injunction already discharged simply because a different remedy may be sought at a later stage.

This conclusion does not finally determine whether the 1st Defendant suffered any loss during the ad interim period. It only decides that Enclosure 28, as presented before this Court, did not justify an order for fortification. F7. Effect of the other applications

I also considered the fact that Enclosure 28 was one of several applications filed by the Defendants. The 1st Defendant had filed Enclosure 26 for security for costs, while the 2nd Defendant had filed Enclosures 31 and 33. S/N 52zxzlfwcUSu/d5HRWjpxw

Each Defendant was entitled to file an application if there was a proper legal basis. I did not dismiss Enclosure 28 because other applications had been filed.

The Court was, however, entitled to consider whether the combined effect of the applications would place unnecessary pressure on the Plaintiffs before trial. This was particularly relevant where the injunction had already been refused and discharged.

I made no finding that the 1st Defendant acted in bad faith. I was nevertheless careful to ensure that an application for fortification was not used to impose a further burden when there was no injunction left to secure.

A shield must not become a sword. Where an injunction has been discharged and no stay is in force, fortification should not be used to create an additional burden unless the legal and evidential requirements are clearly met. F8. Whether a lesser order should be made

I considered whether a smaller or conditional order should be made. I also considered whether fortification should be ordered against only one of the Plaintiffs.

I declined to do so because the issue was not merely the amount or form of security. The more basic problem was that S/N 52zxzlfwcUSu/d5HRWjpxw there was no injunction in force and the evidence did not establish a sufficient case for fortification.

I also considered whether the application should be adjourned rather than dismissed. I was not persuaded that an adjournment was appropriate, as it would leave the application pending on the chance that an appellate court might later grant different relief.

The dismissal of Enclosure 28 does not prevent the appellate court from imposing terms if it restores or grants an injunction. It also does not decide any properly brought application concerning damages under the undertaking. G. Decision

I accepted that the 1st Defendant had raised matters which were relevant. The financial position of the 1st Plaintiff, the foreign incorporation of the 2nd Plaintiff, and the enforcement concerns relating to the People’s Republic of China were all considered.

Those matters were not enough to justify fortification in the present circumstances. There was no injunction in force, no stay, and no sufficient evidence of loss caused by a continuing injunction. S/N 52zxzlfwcUSu/d5HRWjpxw

I was also not satisfied that the 1st Defendant had provided an intelligent estimate of the loss for which fortification was sought. The evidence did not allow the Court to make a fair and reasoned order for fortification.

The Court’s role was to ensure that protection, where justified, remained proportionate to the risk shown by the evidence. On the facts before me, the protection sought by the 1st Defendant would not have operated as a necessary safeguard but as an unnecessary burden after the injunction had already been discharged.

A shield must not become a sword. I therefore declined to exercise the Court’s discretion in favour of the 1st Defendant.

Enclosure 28 was dismissed after considering all relevant matters before the Court. The decision was based on the position before me at the hearing of Enclosure 28. H. Conclusion

For the reasons stated above, Enclosure 28 was dismissed. This dismissal should not be read as a finding that the 1st Defendant’s concerns were irrelevant.

The finding was that, on the material before the Court and in view of the dismissal of Enclosure 3, those concerns did not S/N 52zxzlfwcUSu/d5HRWjpxw justify an order for fortification. The undertaking as to damages was not being used to support any injunction then in force.

I ordered costs of RM4,000.00 to the Plaintiffs, subject to allocatur. This formed part of the global costs of RM16,000.00 awarded for Enclosures 26, 28, 31 and 33, which were heard together.

Nothing in these grounds should be taken as a final decision on the merits of the Plaintiffs’ claim, the 1st Defendant’s Defence and Counterclaim, or the 2nd Defendant’s Defence. The main factual and legal issues remain for trial, and any issue concerning damages under the undertaking must be pursued through the proper procedure. Dated 7 July 2026 -sgd-ANITA BINTI HARUN JUDICIAL COMMISSIONER HIGH COURT OF MALAYA SHAH ALAM SELANGOR DARUL EHSAN S/N 52zxzlfwcUSu/d5HRWjpxw To the parties’ solicitors: For the 1st & 2nd Plaintiffs : Iris Lim & Justin Voon Tian Yu (Messrs Justin Voon Chooi & Wing) For the 1st Defendant : Shanice (Messrs Rahmat Lim & Partners) For the 2nd Defendant : 1) Peter Neik Xiang Sheng (Messrs Neik & Partners) 2) Teo Xin Yee (Messrs Ting Asiah & Co.) S/N 52zxzlfwcUSu/d5HRWjpxw