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 10:07:13 BA-22NCvC-381-09/2024 Kand. 132 S/N o1ehvFXfYkiB4CnF2dTZag GROUNDS OF JUDGMENT Enclosure 31 — 2nd Defendant’s Application for Security for

These are my grounds of decision for Enclosure 31. This was the 2nd Defendant’s application for security for costs against the Plaintiffs, filed under Order 23 rule 1 of the Rules of Court 2012, section 580A of the Companies Act 2016 and Order 92 rule 4 of the Rules of Court 2012.

By Enclosure 31, the 2nd Defendant sought security of RM65,000.00 from the 1st Plaintiff and RM65,000.00 from the 2nd Plaintiff. The 2nd Defendant also sought a stay of the Plaintiffs’ proceedings if security was not furnished, liberty to apply for further security, and costs.

3.

Enclosure 31 was heard together with Enclosures 26, 28 and Although the applications arose from the same commercial dispute and there was overlap in the affidavits and submissions, I considered Enclosure 31 separately because it was the 2nd Defendant’s own application for security for costs.

This application required the Court to balance the 2nd Defendant’s concern that she may not recover costs if she succeeds against the Plaintiffs’ right to pursue a commercial S/N o1ehvFXfYkiB4CnF2dTZag claim which has not been shown to be a sham. That balancing exercise is central to the discretion under Order 23 rule 1 and section 580A.

In applications of this nature, the Court is mindful that a shield must not become a sword. Security for costs is meant to protect a Defendant against a real risk of unrecovered costs; it is not meant to place undue pressure on a Plaintiff before the claim is tried.

Having considered the affidavits, exhibits, written submissions, oral submissions and authorities relied upon by the parties, I dismissed Enclosure 31. I awarded costs of RM4,000.00 to the Plaintiffs for this application, subject to allocatur, as part of the global costs of RM16,000.00 awarded for the four applications.

The Plaintiffs’ action concerns a commercial dispute involving allegations of employee solicitation, misuse of confidential information, interference with business relations, conspiracy, and the effect of restrictive covenants. These issues arise from alleged dealings between the Defendants and employees or former employees connected to the Plaintiffs’ business.

The 1st Plaintiff, Niro Ceramic Sales & Services (M) Sdn Bhd, is a Malaysian company. The 2nd Plaintiff, Foshan Niro S/N o1ehvFXfYkiB4CnF2dTZag Ceramic Building Materials Trading Co Ltd, is incorporated in the People’s Republic of China.

The 2nd Defendant was formerly employed by the 1st Plaintiff. The Plaintiffs allege that the 2nd Defendant was involved in conduct which assisted the 1st Defendant and harmed the Plaintiffs’ commercial interests.

The 2nd Defendant denies liability. She disputes the allegations of solicitation, misuse of confidential information, interference, conspiracy and the enforceability or effect of the relevant restrictive covenants.

Enclosure 31 was not an application to strike out the Plaintiffs’ claim or to determine the merits of the action. The merits were relevant only to the limited extent necessary for the Court to decide whether the claim appeared bona fide or whether the application for security was being used oppressively. C. The 2nd Defendant’s case

The 2nd Defendant’s application rested mainly on four matters. The first concerned the financial position of the 1st Plaintiff, the second concerned the 2nd Plaintiff’s incorporation outside Malaysia, the third concerned the alleged low prospects of success of the Plaintiffs’ claim against her, and the fourth concerned the quantum of anticipated legal costs. S/N o1ehvFXfYkiB4CnF2dTZag

As to the 1st Plaintiff, the 2nd Defendant relied on audited financial statements and corporate documents. The 2nd Defendant submitted that the 1st Plaintiff had suffered losses, that its liabilities exceeded its assets, that there was material uncertainty concerning its going concern, and that it would be unable to satisfy any adverse costs order.

As to the 2nd Plaintiff, the 2nd Defendant submitted that the 2nd Plaintiff is incorporated in the People’s Republic of China and has no known assets in Malaysia. The 2nd Defendant further submitted that the People’s Republic of China is not a reciprocating country under the Reciprocal Enforcement of Judgments Act 1958.

The 2nd Defendant also submitted that the Plaintiffs’ claim against her had low prospects of success. She relied on matters including the alleged invalidity or unenforceability of the restraint clauses, the alleged absence of actionable solicitation, and the alleged public nature of the information relied upon by the Plaintiffs.

The 2nd Defendant argued that these matters gave rise to a real risk that she would not be able to recover her costs if she successfully defended the Plaintiffs’ claim. The 2nd Defendant therefore asked the Court to order security in the total sum of RM130,000.00. S/N o1ehvFXfYkiB4CnF2dTZag D. The Plaintiffs’ case

The Plaintiffs opposed Enclosure 31. They submitted that the application was misconceived, excessive and oppressive, and that there was no credible evidence to support the belief that either Plaintiff would be unable to meet any costs order if the 2nd Defendant succeeded.

The Plaintiffs submitted that the 1st Plaintiff was not an empty company. They relied on the existence of continuing business operations, inventories, receivables, cash or banking facilities, and trading activities to show that the 1st Plaintiff remained a commercial entity.

As to the 2nd Plaintiff, the Plaintiffs accepted that it is incorporated outside Malaysia. They submitted, however, that foreign incorporation alone does not compel an order for security because the Court must still decide whether it is just to make the order.

The Plaintiffs further submitted that their claim against the 2nd Defendant was bona fide and meritorious. They argued that the disputed issues concerning solicitation, confidential information, interference, conspiracy and restrictive covenants should be determined at trial and not in an application for security for costs. S/N o1ehvFXfYkiB4CnF2dTZag

The Plaintiffs also objected to the amount sought. They contended that RM130,000.00 was excessive, insufficiently justified, and should be considered together with Enclosure 26, where the 1st Defendant sought a further RM130,000.00 from the Plaintiffs.

The Plaintiffs also complained about the form of the prayers. They submitted that the prayers sought payment directly to the 2nd Defendant and that, if any security were ordered, it should instead be paid into Court or held by a stakeholder. E. Applicable legal principles

Order 23 rule 1 of the Rules of Court 2012 empowers the Court to order security for costs in the circumstances stated in the rule, including where a Plaintiff is ordinarily resident out of the jurisdiction. The rule expressly requires the Court to consider whether, having regard to all the circumstances of the case, it is just to order security.

Section 580A of the Companies Act 2016 provides that where a company is the Plaintiff in any action or proceeding, and it appears by credible testimony that there is reason to believe that the company will be unable to pay the Defendant’s costs if the Defendant succeeds, the Court may order the company to give sufficient security for costs. The power is discretionary and must be exercised with care. S/N o1ehvFXfYkiB4CnF2dTZag

In Skrine & Co v MBF Capital Bhd & Anor [1998] 3 MLJ 649, the Court explained that the statutory inquiry requires credible testimony and a reason to believe that the Plaintiff company will be unable to pay the Defendant’s costs. The Court is not required to make a final finding of insolvency, but the material relied upon must be credible and sufficient.

In North Plaza Sdn Bhd v United Securities Sdn Bhd [2010] 1 MLJ 631, the Court of Appeal considered the relevance of a Plaintiff company’s financial position. The case shows that serious financial weakness may support an order for security, but the conclusion still depends on the evidence and the circumstances before the Court.

In Tan Sri Abdul Aziz Zain & Ors v United Overseas Land Ltd & Ors [1998] 4 CLJ 321, the Court recognised that the discretion must be exercised after considering all relevant matters. These matters include whether the claim is bona fide, whether the application is oppressive, whether the order may stifle a genuine claim, and whether the amount sought is fair.

In Porzelack KG v Porzelack (UK) Ltd [1987] 1 All ER 1074, the Court cautioned against turning a security-for-costs application into a trial of the action. A detailed review of the merits is generally not suitable unless the case is plain and obvious. S/N o1ehvFXfYkiB4CnF2dTZag

In Aeronave SPA & Anor v Westland Charters Ltd & Ors [1971] 3 All ER 531, the Court recognised that the difficulty of enforcing a costs order against a foreign Plaintiff is a relevant consideration. That principle assists the Court in weighing the risk of non-recovery, but it does not remove the Court’s discretion.

In Faridah Begum bte Abdullah v Dato’ Michael Chong [1995] 2 MLJ 404, the Malaysian Court also recognised that foreign residence and enforcement concerns may support an order for security. The Court must still ask whether the order is just on the facts of the particular case.

From these authorities, I take the following principles. The Court must consider the Plaintiff’s financial position, foreign residence or incorporation, ease of enforcement, whether the claim is genuine, whether the application is oppressive, whether the amount sought is fair, and whether the order may place an unfair burden on the Plaintiff.

The jurisdiction is protective, not punitive. A Defendant is entitled to seek protection against a real risk of unrecovered costs, but the Court must ensure that the remedy remains a shield and does not become a sword. F. Analysis F1. Nature of Enclosure 31 S/N o1ehvFXfYkiB4CnF2dTZag

Enclosure 31 was the 2nd Defendant’s own application for security for costs. It was not a fortification application and was not concerned with the undertaking as to damages given in the injunction proceedings.

The question before the Court was whether the 2nd Defendant had shown enough to justify an order protecting her against the risk of unrecovered costs. That question had to be answered under Order 23 rule 1 and section 580A, with the Court’s discretion exercised after considering all relevant matters.

I did not dismiss Enclosure 31 merely because the 1st Defendant had filed Enclosure 26. The 2nd Defendant was entitled to bring her own application as a separate Defendant facing claims made against her.

The existence of Enclosure 26 was, however, relevant when considering the practical burden on the Plaintiffs. The Court is not required to ignore the combined effect of related applications when deciding whether the order sought is fair. F2. The 1st Plaintiff’s financial position

I accepted that the 1st Plaintiff’s financial position was relevant. I also accepted that the 2nd Defendant was entitled to rely on the audited financial statements and the matters said to show that the 1st Plaintiff was financially weak. S/N o1ehvFXfYkiB4CnF2dTZag

I did not treat the 2nd Defendant’s financial concerns as irrelevant. The audited materials raised matters which the Court had to consider, including losses, liabilities, alleged going-concern concerns and the alleged excess of liabilities over assets.

However, financial pressure does not by itself require security to be ordered. The Court must still decide whether there is credible testimony giving reason to believe that the 1st Plaintiff will be unable to pay the 2nd Defendant’s costs if the 2nd Defendant succeeds.

On the evidence before me, I was not satisfied that the 1st Plaintiff had been shown to be an empty company or a company without real commercial activity. The materials before the Court referred to continuing operations, inventories, receivables, cash or banking facilities, and trading activities.

The 1st Plaintiff was also not shown to be in liquidation or wound up. That distinction mattered, because cases involving companies in liquidation or companies with no evidence of continuing business are different from the present case.

I accepted that the 1st Plaintiff faced financial pressure. I was not satisfied, however, that this was enough to justify ordering security in the amount sought, or in any lesser amount, when all matters were considered. S/N o1ehvFXfYkiB4CnF2dTZag

The Court should be slow to equate financial pressure in an ongoing commercial enterprise with inability to meet costs. This is especially so where there is evidence that the company continues to trade and where the claim before the Court is not shown to be a sham. F3. The 2nd Plaintiff’s foreign incorporation

I 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.

I further accepted that enforcement of a Malaysian costs order against a foreign company may be more difficult. That was a relevant matter and it weighed in favour of the 2nd Defendant’s application.

However, foreign incorporation is not an automatic answer to the application. Order 23 rule 1 requires the Court to decide whether it is just to order security after considering all circumstances.

The 2nd Plaintiff was not shown to be a nominal party added only to avoid costs. It is pleaded as a substantive party in a commercial dispute involving alleged confidential information and business dealings connected to the Plaintiffs’ operations. S/N o1ehvFXfYkiB4CnF2dTZag

I, therefore treated the 2nd Plaintiff’s foreign incorporation and enforcement risk as relevant but not decisive. Those matters did not, by themselves or together with the financial complaints against the 1st Plaintiff, justify the order sought. F4. Merits of the Plaintiffs’ claim against the 2nd Defendant

The 2nd Defendant submitted that the Plaintiffs’ claim against her has low prospects of success. She relied on the alleged invalidity of the restraint clauses, the alleged absence of solicitation, and the alleged public nature of the information relied upon by the Plaintiffs.

I considered those submissions. They raised matters which may be relevant at trial, but they were disputed and required proper consideration of the evidence.

The Plaintiffs’ claim against the 2nd Defendant includes allegations of solicitation or poaching of employees, misuse of confidential information, interference with business or contractual relations, conspiracy, and breach of contractual obligations. The 2nd Defendant denies those matters, but that denial does not make the Plaintiffs’ claim a sham.

Applying the caution in Porzelack, I did not consider it proper to decide those disputed matters in an application for security for costs. The Court should not conduct a trial within an interlocutory application. S/N o1ehvFXfYkiB4CnF2dTZag

I was not satisfied that the Plaintiffs’ claim against the 2nd Defendant was frivolous, vexatious or abusive. I therefore treated the claim as sufficiently bona fide for the limited purpose of deciding Enclosure 31.

This finding does not mean that the Plaintiffs will succeed at trial. It only means that, at this stage, the claim was not shown to be so plainly hopeless that it should affect the Court’s discretion in favour of ordering security. F5. Quantum and combined burden

The 2nd Defendant sought RM65,000.00 from each Plaintiff. The total amount sought under Enclosure 31 was therefore

I accepted that the 2nd Defendant was entitled to seek protection for her own costs. I also accepted that defending a commercial claim involving confidential information, solicitation, interference and conspiracy may involve legal costs.

The difficulty was that the amount sought had to be assessed fairly. The Court had to consider whether the amount was properly justified, whether it was proportionate to the issues, and whether it would place an unfair burden on the Plaintiffs.

Enclosure 26, filed by the 1st Defendant, also sought RM130,000.00 from the Plaintiffs. If Enclosures 26 and 31 had S/N o1ehvFXfYkiB4CnF2dTZag both been allowed as prayed, the Plaintiffs would have had to provide RM260,000.00 as security for costs.

I did not hold that separate Defendants can never seek separate security. Each application must be considered on its own grounds, but the Court is not required to ignore the combined burden created by multiple applications.

In my view, the combined amount sought was a relevant practical matter. It showed that the orders sought would impose a substantial financial requirement before trial, despite the Plaintiffs’ claim not having been shown to be a sham.

I was also not satisfied that the 2nd Defendant’s skeletal bill of costs sufficiently justified the amount sought. The material did not persuade me that RM130,000.00 was fair and necessary at this stage of the proceedings.

I considered whether a lower amount should be ordered. I declined to do so because the issue was not only the amount, but whether security should be ordered at all in the circumstances before the Court. F6. Alleged oppression and stifling

The Plaintiffs alleged that Enclosure 31 was a tactical step intended to burden their claim. I was not prepared to make a S/N o1ehvFXfYkiB4CnF2dTZag finding that the 2nd Defendant acted in bad faith in filing the application.

The absence of bad faith, however, does not mean that the Court must grant security. The Court must still guard against orders which may place unnecessary pressure on a party pursuing a claim that has not been shown to be abusive.

The Plaintiffs did not place detailed evidence showing that an order for security would certainly stop them from proceeding with the claim. Even so, the Court remained entitled to consider fairness, proportionality and the combined burden of the applications.

Security for costs is a protective remedy. In applying that remedy, the Court must ensure that a shield does not become a sword, particularly where the substantive dispute remains to be tried.

On the facts before me, I was not persuaded that ordering security in favour of the 2nd Defendant would be fair. The financial and foreign-incorporation points were relevant, but they did not outweigh the other matters considered. F7. Mode of security

The Plaintiffs also objected to the prayers because security was sought to be provided to the 2nd Defendant. They submitted S/N o1ehvFXfYkiB4CnF2dTZag that security should instead be paid into Court or held by a stakeholder. I did not dismiss Enclosure 31 solely because of the form of the prayers. Order 23 rule 2 gives the Court power to direct the manner, time and terms on which security is to be provided.

If I had been minded to order security, the Court could have directed payment into Court or another suitable form of security. Since I declined to order security, it was unnecessary to make any further order on the mode of security.

I accepted that the 2nd Defendant had raised matters which were relevant. The 1st Plaintiff’s financial condition, the 2nd Plaintiff’s incorporation in the People’s Republic of China, and the enforcement concerns under the Reciprocal Enforcement of Judgments Act 1958 were all considered.

I also considered the 2nd Defendant’s submission that the Plaintiffs’ claim against her was weak. I was not persuaded that the merits were so plain that the claim could be treated as a sham or an abuse for the purpose of this application.

The issues raised in the pleadings remain disputed. They include solicitation of employees, confidential information, business interference, conspiracy, and the effect of the contractual provisions relied upon by the parties. S/N o1ehvFXfYkiB4CnF2dTZag

I was not satisfied that the evidence showed the Plaintiffs to be empty corporate vehicles or plainly unable to satisfy future costs orders. I was also not satisfied that the 2nd Plaintiff’s foreign incorporation made security automatic.

The amount sought, the existence of the 1st Defendant’s similar application, and the combined burden on the Plaintiffs were important matters. In my judgment, those matters weighed against the order sought.

A shield must not become a sword. On the evidence before me, the protection sought by the 2nd Defendant would have imposed a substantial burden on the Plaintiffs without sufficient justification.

I, therefore declined to exercise the Court’s discretion under Order 23 rule 1 of the Rules of Court 2012 and section 580A of the Companies Act 2016 in favour of the 2nd Defendant. Enclosure 31 was dismissed after considering all relevant matters before the Court. H. Conclusion

For the reasons stated above, Enclosure 31 was dismissed. The dismissal should not be read as a finding that the 2nd Defendant’s concerns were irrelevant. S/N o1ehvFXfYkiB4CnF2dTZag

The finding was that those concerns did not justify an order for security for costs on the evidence and circumstances before the Court. This was especially so given the disputed merits, the evidence of continuing commercial activity, the amount sought, and the combined burden created by the related security application.

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 2nd Defendant’s Defence, or the 1st Defendant’s Defence and Counterclaim. The main factual and legal issues remain for trial. Dated 7 July 2026 -sgd-ANITA BINTI HARUN JUDICIAL COMMISSIONER HIGH COURT OF MALAYA SHAH ALAM SELANGOR DARUL EHSAN S/N o1ehvFXfYkiB4CnF2dTZag 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 o1ehvFXfYkiB4CnF2dTZag