Tan See Meng v Able Oils & Fats Sdn Bhd (W-02(IM)(NCC)-1240-07/2022)

KIAN HUAT OIL MILLS SDN BHD … APPELLANTS HEARD TOGETHER WITH

KIAN HUAT OIL MILLS SDN BHD … APPELLANTS HEARD TOGETHER WITH

KIAN HUAT OIL MILLS SDN BHD … APPELLANTS In the High Court of Malaya at Kuala Lumpur Suit No.: WA-22NCC-246-06/2022 Between Able Oils & Fats Sdn Bhd (formerly known as Able Export Sdn Bhd) … Plaintiff

And

Tan See Meng

Tan See Nong

Lim Peck Hong

Sawit Raya Sdn Bhd Kian Huat Oilmills Sdn Bhd … Respondents CORAM: RAVINTHRAN N. PARAMAGURU, JCA. MARIANA BINTI YAHYA, JCA. LIM CHONG FONG, JCA. GROUNDS OF JUDGMENT INTRODUCTION [1] These are interlocutory applications for security for costs pending the hearing of appeal in the Court of Appeal. [2] The First to Third Appellants are Malaysian citizens while the Fourth and Fifth Appellants are Malaysian incorporated private limited companies. [3] The Respondent is also a Malaysian incorporated private limited company. [4] We heard the applications on 2nd February 2022 and unanimously decided as follows:

We order the Fourth Appellant to pay security of costs of RM50,000.00 in total in respect of all three pending appeals referred in Enclosures 31, 37 and 34 within one month from today. We also ordered the Fifth Appellant to pay security of costs of RM50,0000.00 in total in respect of all three pending appeals referred to in Enclosures 31, 37 and 34 within one month from today. If such security is not given within the stipulated time, the Respondent is at liberty to apply to strike out Appeals no. 1240, 1544 and 2041.

Case management fixed on 4th March 2024. The pending appeals to be heard after this date.

We dismiss the application for security for costs against the First, Second and Third Appellants. No order as to costs.

As for the First to Third Appellants, the appeals are adjourned until the Fourth and Fifth Appellants pay the amount of RM50,000.00. If security for costs is not paid by 4th March 2024, all three appeals by the Fourth and Fifth Appellants will be struck out. As for appeals by the First to Third Appellants, the date to hear the appeals will be fixed by the Court. [5] We now provide the grounds of our decision below. BACKGROUND [6] The First to Third Appellants are shareholders of the Fourth and Fifth Appellants. [7] The Fourth Appellant is in the business of sale of edible oils and also operates a factory that filters and recycles oil for its business. The Fifth Appellant is dormant but is the registered proprietor of the land that houses the factory operated by the Fifth Appellant. [8] By a call option agreement entered into between the First to Third Appellants and the Respondent (“Agreement”) for purposes of the continuing of the aforementioned business and factory operation. [9] By reason of a dispute that arose between the First to Third Appellants and the Respondent in respect of the Agreement, the Respondent on 2nd June 2022 commenced Kuala Lumpur High Court suit no. WA-22NCC-246-06/2022 (“Suit”) against the Appellants. [10] Upon further applications of the Respondent pursuant to the Suit, the High Court had made the following orders on 1st July 2022, 12th August 2022 and 4th October 2022 respectively (“Decisions”): [11] The Appellants are dissatisfied with the Decisions of the High Court and hence lodged Civil Appeal Nos. W-02(IM)(NCC)-1240-07/2022, W- 02(IM)(NCC)-1544-08/2022 and W-02(IM)(NCC)-2041-10/2022 in this Court. [12] The Respondent thereafter on 18th May 2023 applied for security for costs vide Enclosures 31, 37 and 34 pursuant to Appeals no. 1240, 1544 and 2041 respectively. FINDINGS OF THIS COURT [13] The provisions on security for costs in the Court of Appeal are prescribed in Section 44(1) of the Courts of Judicature Act 1964 (“CJA”) and Rules 17(1) and/or Rule 105 of the Rules of the Court of Appeal 1994 (“RCA”) as follows: Section 44 Incidental directions and interim orders

In any proceeding pending before the Court of Appeal any direction incidental thereto not involving the decision of the proceeding, any interim order to prevent prejudice to the claims of parties pending the hearing of the proceeding, any order for security for costs, and for the dismissal of a proceeding for default in furnishing security so ordered may at any time be made by a Judge of the Court of Appeal.

Every application under subsection (1) shall be deemed to be a proceeding in the Court of Appeal.

Every order made under subsection (1) may, upon application by the aggrieved party made within ten days after the order is served, be affirmed, varied or discharged by the Court. Rule 17 Entry of Appeal

Notice of appeal may be given by filing within the time limited for bringing the appeal four copies of the notice of appeal in the Registry of the High Court at the place where the judgment, order or decision complained of was made or given by paying the prescribed fee. The Court may on the application by the respondent, in any case where it thinks fit, order security for costs to be given, and may order security to be given for the payment of past costs relating to the matters in question in the appeal: Provided that no order for the payment of security for costs shall be made if the appeal is brought by the Government of Malaysia or any State Government.

The appellant shall, on the date of filing the notice of appeal in the Registry of the High Court, send by registered post one copy of the notice of appeal to the Registry.

A list of appeals of which notice has been filed herein shall be kept in each Registry of each High Court and a consolidated list thereof shall be kept by the Registrar at Putrajaya.

The Registrar of the High Court shall on receiving four copies of the notice of appeal and the prescribed fee and on the security required by sub rule (1) being lodged in Court enter the appeal in the list of appeals, stating therein the title of the cause or matter, the name of the appellant and his solicitors, if any, and the date of such entry, and shall inform the Registrar at Putrajaya of such entry.

The Registrar shall on receipt of information of the entry of an appeal enter the like particulars in the consolidated list of appeals and shall allocate a number to the appeal and shall inform the appellant's solicitor and the Registrar of the High Court who entered the appeal of the number so allocated which shall thenceforth form part of the title of the appeal. Rule 105 Inherent powers of the Court For the avoidance of doubt, it is declared that nothing in these Rules shall be deemed to limit or affect the inherent powers of the Court to make any order as may be necessary to prevent injustice or to prevent an abuse of the process of the Court. [14] Generally, security for costs of appeal is sought by the respondent in defending against the appellant’s appeal. In Ooi Meng Khin v. Amanah Scotts Properties (KL) Sdn Bhd & Ors And Another Appeal [2013] 5 MLJ 773 CA, Mohd Hishamudin JCA held as follows with emphasis added by us: “[20] In our judgment, on the facts, we accept the three grounds submitted by the appellants in urging us to dismiss the motions as being valid grounds. Whatever may have been the law and practice in the United Kingdom, we, on our part, however, accept Menon v Abdullah Kutty as good and binding authority to dismiss the motions on the said three grounds. This case, cited by the appellants, concerned an application for further security for costs made under r 18(1) of the Federal Court (Civil Appeals) (Transitional) Rules 1963. Rule 18(1) provides: Entry of appeal 18(1) Notices of appeal may be given by filing within the time limited for bringing the appeal four copies of the notice of appeal in the Registry of the High Court at the place where the judgment, order or decision complained of was made or given by paying the prescribed fee and by lodging in Court at the same time the sum of five hundred ringgit as security for the costs of the appeal: Provided that the Court may at any time, in any case where it thinks fit, order further security for costs to be given, and may order security to be given for the payment of past costs relating to the matter in question in the appeal: Provided further that no deposit by way of security for costs shall be required if the appeal is brought by the Government of Malaysia or any State Government. (These transitional 1963 Rules of the Federal Court were subsequently replaced by the Rules of the Federal Court 1980 vide PU(A) 33/1980, that came into force on 1 June 1980.) It is pertinent to note that the provisions of this r 18(1) are exactly similar as the provisions in r 17(1) of the present Rules of the Court of Appeal. The reason for the application for further security for costs in this case cited is the same as in the present case, that is to say, the impecuniosity of the appellant. In Menon v Abdullah Kutty, Raja Azlan Shah FJ (as he then was) in delivering the judgment of the Federal Court said: Rule 18(1) of the Federal Court (Civil Appeals) (Transitional) Rules 1963 gives this court a discretion to order further security for costs of an appeal 'at any time, in any case where it thinks fit', Thus this is a discretionary remedy to be exercised in accordance with well-known principles. This court is not bound by any hard and fast rules, but has to look at all the circumstances of the case (see Abu bin Mohamed v Voo Fui Tong & Anor [1938] 1 MLJ 140)…” [15] Furthermore in, Ling Khee Ming v. Ling Shew Kue @ Ling Chai Yuen & Anor [2018] 1 LNS 1139 (CA), Hamid Sultan bin Abu Backer JCA held as follows with emphasis added by us: “[11] Rule 17 of RCA 1994 makes provision for the Court of Appeal in deserving cases to order further security of costs for the payment of past costs. The threshold to satisfy this part of the rule is high and it will usually be exercised in a case where plaintiff or defendants on the face of record has no merit or appears to be vexatious. It is not sufficient just to demonstrate to the court that the appellant is impecunious to meet with costs, as such an approach will not be sufficient to balance with the jurisprudence relating to access to justice. That is to say that the poor, needy inclusive of natives, costs related to costs on party to party basis ordered by the trial court. … [15] When making an application for security for costs under Rule 17 of RCA 1994, it is incumbent upon the applicant to satisfy one of the requirements set out in Order 23 rule 1 of RC 2012, failing which it may not be a fit application for the Court of Appeal to exercise its jurisdiction as stated in the said rules. That is to say, the test for a 'fit' application necessarily must satisfy the criteria in Order 23 of RC 2012 per se. The strict provision of Order 23 has everything to do with access to justice, the Federal Constitution and the right of appeal under the legislation. Thus, Rule 17 of RCA 1994 must be read together with Order 23 of RC 2012 to appreciate the underlying jurisprudence for security for costs as well as access to justice. Ultimately, the decision whether or not to allow an order for security for costs as well as the quantum is entirely vested with the discretion of the court. The said discretion cannot be arbitrarily exercised.” [16] The provision of security for costs in Rule 17 RCA must hence be read with Order 23 of the Rules of Court 2012 (“RC”) which prescribes:

Order 23 Security for costs

Where, on the application of a defendant to an action or other proceedings in the Court, it appears to the Court-

that the plaintiff is ordinarily resident out of the jurisdiction;

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;

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

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.

The Court shall not require a plaintiff to give security by reason only of subparagraph (1)(c) if he satisfies the Court that the failure to state his address or the misstatement thereof was made innocently and without an intention to deceive. The provision in Order 23 RC are nonetheless still subject to additional considerations laid down by the English Court of Appeal of Sir Lindsay Parkinson Co Ltd v. Triplan Ltd [1973] 2 All ER 273 adopted in Luminous Crossroads Sdn Bhd v. Lim Kong Huat Construction [2002] 5 CLJ 100. These are:

Whether the claim is bona fide with good prospect of success;

(ii) Whether there is an admission in the pleadings or elsewhere that the money is due;

(iii) Whether there is payment into court of a substantial sum of money (Order 22A Rule 5(1) RC);

(iv) Whether the application for security for costs is being used to stifle a genuine claim; and

Whether the want of means of the Plaintiff is a result of the conduct of the defendant. These additional considerations were formulated for applications for security for costs in the High Court but we are of the view that they are also relevant to applications for security for costs in this Court subject to the necessary modification thereto to relate to appeals. See also Kasturi Palm Products v. Palmex Industries Sdn Bhd [1986] 2 MLJ 310. [17] That notwithstanding where it involves a body corporate incorporated under the Companies Act 2016 (“CA”), we add that Rule 17 RCA must also be read with Section 580A CA which prescribes: 580A Security for costs

Where a company is the plaintiff in any action or other proceedings and if it appears by a credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if the defendant is successful in his defence, the Court may order the plaintiff to give sufficient security for all the costs and to stay all action or proceedings until the security is given.

The Court may direct the costs of any action or proceedings to be borne by the party to the action or proceedings. [18] In Skrine & Co v. MBF Capital Bhd & Anor & Other Appeals [1998] 3 CLJ 432 (CA), Gopal Sri Ram JCA (later FCJ) held as follows when dealing with the equivalent predecessor provision in Section 351 of the Companies Act 1965 as follows with emphasis added by us: “[1] Section 351 of the Companies Act 1965 provides for a two-stage inquiry into whether security for costs should be awarded where the plaintiff is a company. The first step is for the court to determine whether there is credible evidence that the company will be unable to pay the defendant's costs, and the second is to ascertain whether that evidence supports the belief that the company will be unable to do so. … [3] A company need not have ready access to cash in order to satisfy a court that it is able to pay the costs of an action it brings, in the event of a failure. It need only satisfy the court that it has sufficient assets to satisfy an order of costs against it. The appeal on the issue of security for costs therefore failed.” See also Haidokota (M) Sdn Bhd v. Tan Tiam Chai [2008] MLJU 654. [19] Subject to the above requirements, it is ultimately still the discretion of this Court on whether it is just and reasonable to order security for costs on the peculiar facts and circumstances. [20] The Respondent here contended that the First to Third Appellants ought to pay security for costs because all the three appeals have no good prospect of success. Furthermore, the disposal of these appeals is likely to be protracted by reason of the bankruptcy of the First Appellant on 24th March 2023 and the Judicial Management Order (“JMO”) obtained against the Fourth Appellant on 12th January 2023 with no visibility and certainty on outcome. This will invariably subject the Respondent to having all the three appeals hanging over the Respondent unnecessarily without finality. [21] Besides the impecuniosity of the First and Fourth Appellants, the Respondent contended that it is prejudicial and unfair to the Respondent if the Appellants are allowed to continue to pursue the appeals to put the Respondent to be further out of pocket on costs despite that the Appellants have yet to pay the past costs awarded to the Respondent in the High Court. [22] As the result, the Respondent sought for security for costs in the total sum of RM125,000.00 comprising of RM35,000 unpaid High Court costs and RM30,000.00 for each of the three appeals. [23] The Appellants in opposing contended the security for costs application were made by the Respondent without prior notification as well as not made at the earliest opportunity; hence irregular following Menon v. Abdullah Kutty [1974] 1 MLJ 130 (FC). [24] Moreover, the Appellants contended that other than the impecuniosity of the First and Fourth Appellants, the Respondent failed to demonstrate other cogent circumstances to justify the provision of security of costs. In respect of the unpaid cost orders awarded to the Respondent in the High Court, the Appellants replied that they were not established to be due. [25] Finally, the Appellants contended that the amount of security for costs sought by the Respondent is manifestly excessive. [26] We will firstly deal with the First to Third Appellants. On the evidence before us, we find that they are all not foreign parties residing out of jurisdiction or nominal parties acting on behalf for the benefit of others or parties who are constantly changing address to evade the consequences of the appeal. In this respect, they do not meet the threshold requirements envisaged in the Order 23 Rule 1 RC. Furthermore, albeit we find that their appeal may prima facie seem weak, but they are not hopeless. [27] As to the First Appellant who is a bankrupt and therefore impecunious, we however find that, unlike in respect of a body corporate incorporated under the CA, impecuniosity is not per se a cogent factor with regard to ordering security for costs. In this regard, Arifin Zakaria J (Later CJ) held as follows in Faridah Begum binti Abdullah v. Dato’ Michael Chong [1995] 2 MLJ 404: “Apart from the said property, the plaintiff also claims to be a director of two local companies. But the defendant in his affidavit (encl 18A) claims that these two companies do not have any substantial assets and both of them are inactive. The plaintiff did not rebut these allegations either. It is also not disputed that the plaintiff is now a bankrupt. In the above circumstances, I am of the view that the defendant's apprehension over the plaintiff's ability to meet any order as to costs that may be made by the court is not without basis. However, the plaintiff's impecuniosity by itself is not a sufficient ground for me to make the order for security for costs. As said by the Bingham LJ in Thune & Anor v London Properties Ltd & Ors [1990] 1 All ER 972 at p 979; [1990] 1 WLR 562 at pp 571–572: In approaching that question it cannot be too emphatically stated that impecuniosity of a personal plaintiff is never of itself enough to confer on the court a discretion to order security. It is not a ground in O 23 r 1(1) … But I am for my part firmly of the opinion that it is a matter which the court may, and in a proper case should, consider in exercising a discretion where power to make an order is established.” See also Ooi Meng Khin v. Amanah Scotts Properties (KL) Sdn Bhd & Ors and Another Appeal (supra). [28] We are aware that the First to Third Appellants have failed to pay the Respondent the past costs ordered by the High Court. It is an indicia of impecuniosity of the Second and Third Appellants too. However, we are of the view that these past costs which are due and payable should be recovered through enforcement proceedings instead of being ordered as security for costs. [29] Moving on to the Fourth and Fifth Appellants, it is plain that the Fourth Appellant which has been placed under JMO is impecunious and unable to pay its costs. Consequently, we find that the security for costs ought to be accordingly ordered pursuant to Section 580A CA. As for the Fifth Appellant which is dormant, it is reasonable for us to infer that there is no income stream as far as the Fifth Appellant is concerned. The sole asset of the Fifth Appellant which is the land that houses the factory operating that produces the edible oil cannot in our view be considered for security for costs because it formed part and parcel of the subject matter of the Agreement that is now under appeal which may form part of the asset which ultimately belong to the Respondent. It follows therefore that the Fifth Appellant is also impecunious and unable to pay its costs [30] In the premises, we find that the Respondent has justifiably made out its case that security for costs ought to be ordered against the Fourth and Fifth Appellants. [31] We are lastly mindful that the Appellants have also implored us in reliance on the case of Menon v. Abdullah Kutty (supra) that security for costs ought not to be ordered because there was no prior notice to seek security for costs served by the Respondent on the Appellants as well as that the application here has not been made with promptitude. Although we acknowledge it is good practice but it is however our view that there is no mandatory of service of a prior notice to seek security for costs expressly required in Section 44(1) CJA and Rule 17(1) RCA. Additionally, we do not find that the Respondent was lackadaisical which resulted in inordinate delay in the making of its application for security for costs in the circumstances herein. The Appellant has also not demonstrated that it has suffered prejudice in any way as the result of the alleged delay. [32] As to the amount of the security for costs, we assess a fair and reasonable total cost of RM50,000.00 for all the three forthcoming interlocutory matter (IM) appeals which will be heard together. CONCLUSION [33] It is for the foregoing reasons that we ordered security for costs as so ordered. Dated this 19th April 2024 Sgd. LIM CHONG FONG JUDGE COURT OF APPEAL LIST OF COUNSELS:

Counsels for Appellants

Mahmud Hasshahari Bin Johari Mawi;

Muhamad Hafizan Shafuan Bin

Mahzal Nazrin Bin Mahat. Solicitors for Appellants HASSHAHARI & PARTNERS Advocates & Solicitors, Space U8, 2-11-1, Persiaran Pasak Bumi, Bukit Jelutong, Seksyen U8, 40150 Shah Alam, Selangor Daruk Ehsan.

Counsels for Respondent

Siew Ka Yan. Solicitors Respondent MESSRS. SKRINE Level 8, Wisma UOA Damansara, 50 Jalan Dungun, Damansara Heights, 50490 Kuala Lumpur. LEGISLATIONS/STATUTES REFERRED TO: Section 44(1) of the Courts of Judicature Act 1964; Rules 17(1) and/or Rule 105 of the Rules of the Court of Appeal 1994; Order 23 of the Rules of Court 2012; and Section 580A of the Companies Act 2016. CASES REFERRED TO: Ling Khee Ming v. Ling Shew Kue @ Ling Chai Yuen & Anor [2018] 1 LNS 1139 Sir Lindsay Parkinson Co Ltd v. Triplan Ltd [1973] 2 All ER 273; Luminous Crossroads Sdn Bhd v. Lim Kong Huat Construction [2002] 5 CLJ 100; Skrine & Co v. MBF Capital Bhd & Anor & Other Appeals [1998] 3 CLJ 432; and Menon v. Abdullah Kutty [1974] 1 MLJ 130.