3Q Resources (M) Sdn Bhd v 1. ) Magnum Consortium Sdn Bhd (PA-22NCvC-182-11/2018)

MAGNUM CONSORTIUM SDN BHD

SOLIDWIN PROPERTY SDN BHD

HONG YEAM WAH

TEOH HAI HIN

KHAW TIEW CHAI

CHEN MUN HENG (NO. K.P.:670123-07-5073) … DEFENDAN-DEFENDAN JUDGEMENT A. INTRODUCTION [1] There are two applications for security for costs before this Court. The first is Enclosure 174, filed by the 1st and 3rd Defendants, and the 01/07/2025 13:06:13 PA-22NCvC-182-11/2018 Kand. 208 second is Enclosure 176, filed by the 2nd and 4th Defendants. Under Enclosure 174, the 1st and 3rd Defendants pray that the Plaintiff be ordered to furnish security for costs in respect of both the Plaintiff’s original claim and their counterclaim, in the sum of RM150,000.00 or such other amount as this Court deems just and appropriate. Similarly, under Enclosure 176, the 2nd and 4th, relying on the same grounds, seek an order that the Plaintiff be directed to provide security for costs in respect of both the Plaintiff’s original claim and the Defendants’ counterclaim, in the sum of RM150,000.00. B. 1st AND 3rd DEFENDANTS SUBMISSION [ Enclosure 174] [2] The 1st and 3rd Defendants contend that the Plaintiff has no valid or sustainable claim against them, and that they possess a good and credible defence to the Plaintiff’s claim. In the event that the Plaintiff’s claim is dismissed with costs, and their Counterclaim is allowed with costs, the 1st and 3rd Defendants are legitimately concerned that they will face significant difficulties in recovering the legal costs incurred in defending the claim and pursuing their counterclaim, including any damages that may be awarded. According to the 1st and 3rd Defendants, there exists credible evidence, within the meaning and contemplation of Section 580A of the Companies Act 2016, to support the assertion that the Plaintiff will be unable to pay the costs of the 1st and 3rd Defendants in the event the latter succeed in their defence and counterclaim. The 1st and 3rd Defendants submit that there is a substantial risk and high probability that they will be unable to recover the legal costs and damages sought from the Plaintiff, thereby justifying the necessity for an order for security for costs under Section 580A. [3] The Plaintiff is an exempt private company, and the last known financial statement filed by the Plaintiff dates back to 2004. The 1st and 3rd Defendants submit that they do not have access to the Plaintiff’s current financial accounts. Based on publicly available information, including records obtained from the Suruhanjaya Syarikat Malaysia (SSM), the Plaintiff appears to possess no substantial assets and is, in fact, a dormant company. Critically, the Plaintiff has not produced any documentary evidence to rebut or meaningfully address the Defendants’ contention that it is both dormant and insolvent. There is a complete absence of bank statements, audited accounts, or other financial documentation evidencing the Plaintiff’s financial standing. No material has been tendered to show that the Plaintiff has been financially active or solvent at any point since 2004. In these circumstances, the Plaintiff has failed to provide any credible evidence or satisfactory explanation to demonstrate its capacity to satisfy any adverse costs order that may be made in favour of the Defendants, should the Defendants succeed in their defence. As such, the Plaintiff has not established any valid ground upon which the Court should refuse an order for security for costs. The application by the 1st and 3rd Defendants, therefore, cannot be regarded as oppressive or unjust, but rather constitutes a reasonable and justified protective measure against the real risk that they may not be able to recover costs if successful. [4] Furthermore, the Plaintiff has not demonstrated that it has the means to comply with any potential costs order in favour of the 1st and 3rd Defendants. It has not identified any unencumbered or undisputed assets in its possession. Absent any indication of income, active operations, or current financial means, the Plaintiff has failed to put forward any credible evidence that would allow the Court to reasonably conclude that it would be able to satisfy a costs award. In these circumstances, it is just, fair, and appropriate that an order be made directing the Plaintiff to furnish security for costs. [5] In contrast, the 1st and 3rd Defendants have adduced sufficient evidence to demonstrate that the Plaintiff’s financial position is precarious and uncertain. In light of this, it is appropriate and reasonable for the Plaintiff to be required to provide security for costs by paying a sum, as this Court deems just and proper, to be held by the solicitors for the 1st and 3rd Defendants pending the final determination of this suit. The estimated legal costs to be incurred by the Defendants in relation to the care and conduct of the matter, including trial preparation and hearing, are in the region of RM150,000.00. The amount sought is fair, reasonable, and proportionate in the circumstances, having regard to the complexity and value of the claim, and cannot be considered oppressive. [6] The 1st and 3rd Defendants also submit that there has been no undue delay in filing the present application for security for costs. The application was made as soon as reasonably practicable, considering the procedural history of this case — including the time taken for the hearing and disposal of the Defendants’ initial application to strike out the Plaintiff’s claim, the Plaintiff’s subsequent appeal to the Court of Appeal, the Defendants’ application for leave to appeal to the Federal Court, and further interlocutory applications involving amendments to pleadings. In the context of this procedural background, there is no inordinate or unjustified delay. Moreover, it is trite that delay alone is not decisive, particularly in a case where the litigation has been protracted due to multiple procedural steps and interlocutory appeals. In any event, the Plaintiff has not demonstrated any actual prejudice suffered as a result of the timing of the present application. [7] Finally, the 1st and 3rd Defendants state that they have already incurred substantial legal costs prior to the filing of this application. This includes the need to review and analyze voluminous records and documents, as the issues involved in this matter are complex and numerous. C. THE 2nd AND 4th DEFENDANTS SUBMISSION [ Enclosure 176] [8]

Where a company is the Plaintiff in any action or other proceedings and if it appears by a credible testimony that there is a reason to believe that the company will be unable to pay costs of the defendant if the defendant is successful in his defence, the Court may order the plaintiff to give sufficient security for 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] The Defendants have applied for security for costs pursuant to both Section 580A (1) of the Companies Act 2016 and Order 23 Rule 1 of the Rules of Court 2012. However, in the present case, the Defendants’ application is primarily grounded on the contention that the Plaintiff is impecunious. It must be emphasised that a Plaintiff’s impecuniosity, by itself, is not a valid ground for an application under Order 23 Rule 1 of the Rules of Court 2012. Instead, such a ground falls squarely within the ambit of Section 580A(1) of the Companies Act 2016, which specifically provides for security for costs where it appears from credible evidence that the company-Plaintiff is unlikely to be able to pay the costs of the Defendants if the Defendants are successful. Accordingly, the Defendants' reliance on Section 580A(1) is appropriate in the circumstances of this case, and the application for security should be considered under that statutory provision, not under Order 23. [19] In Haidakota (M) Sdn Bhd V Tan Tiam Chai & Anor Appeal

1 CLJ 699 [2008] MLJU 654 had explained the application of Section 580A of the Court of Appeal as follows: - The starting point is s. 351 of the Companies Act 1965 which confers a very wide discretion on the High Court to order a company to provide security for costs in an action brought by it or indeed against it. But the discretion is not untrammeled. Nor is it unprincipled. For there are settled guidelines upon which the discretion falls to be exercised. First, the application for security for costs must be made with reasonable promptitude after the issue of the writ. Delay is a good reason for the court to exercise discretion against the parties applying for security. See Kejuruteraan Taipan (M) Sdn Bhd v. Loh & Loh Contruction San Bhd (2007) 1 OLJ 210. Second, an order under s. 351 of the Act should generally not be made where the making of it would be oppressive. This is particularly so in a case where the company has an arguable case. Thirdly, security for costs would not be ordered where there is absence of any mala fide on the part of the plaintiff company in bringing its claim. Special attention should be paid to the balance that should be drawn between exposing an innocent defendant to the expense of defending a claim against the risk of shutting out a plaintiff from ventilating a genuine grievance. [20] In Skrine & Co v. MBf Capital Bhd & Anor & Other Appeals [1998] 3 CLJ 432, the Court of Appeal when dealing with the equivalent predecessor provision in s. 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. [21] In the premises, the burden lies squarely on the Defendants, as the applicants for security for costs, to produce credible and cogent evidence demonstrating that the Plaintiff will be unable to satisfy a costs order in the event that the Defendants succeed in their defence. While the Defendants have asserted that the Plaintiff is in a precarious financial position, I am mindful that such a submission, standing alone, is insufficient to ground an application under Section 580A of the Companies Act 2016. It is well established that mere impecuniosity is not, by itself, a sufficient basis for granting an order for security for costs—particularly in circumstances where the Defendants have failed to adduce credible, independent, and persuasive evidence establishing that the Plaintiff is truly incapable of meeting an adverse costs order. [22] In the present case, the question is simply whether or not it is just to order security for costs? In my opinion, four major considerations clearly merit my attention. [a] Firstly, the decision of the Court of Appeal in allowing the Plaintiff’s appeal against the High Court’s order striking out the Writ and Statement of Claim further reinforces the view that the Plaintiff’s case raises triable issues warranting adjudication at a full trial. This appellate decision reflects judicial recognition of the substantive merits of the Plaintiff’s claim. In the circumstances, the Defendants have not discharged the burden of demonstrating that the Plaintiff’s claim is so lacking in merit, or that the Plaintiff is so financially deficient, as to justify an order for security for costs. The evidence before this Court falls short of establishing a compelling case that the Plaintiff would be unable to satisfy a costs order in the event the Defendants succeed in their defence. Accordingly, I find that the Defendants have not made out a meritorious or reasonable application under Section 580A of the Companies Act 2016 to warrant the imposition of security for costs against the Plaintiff. [b] Secondly, it is apparent that this application was not filed with reasonable promptitude following the issuance of the Writ. The Defendants only brought this application more than six (6) years after the commencement of proceedings. In considering the fact that the Defendants' application is primarily grounded on the alleged impecuniosity of the Plaintiff, it would have been reasonable and expected for the Defendants to file the application at the earliest opportunity, and not to delay the application until the issuance of bankruptcy orders against the Plaintiff’s shareholders or directors. The belated timing of this application, particularly in light of the fact that the Plaintiff’s status as an exempt company and its non-filing of financial statements had long been a matter of public record, undermines the credibility and urgency of the Defendants' claim for security for costs. The Defendants have not provided any satisfactory explanation for the inordinate delay, nor have they demonstrated why the alleged impecuniosity only became material upon the recent bankruptcy orders. If this application had been made bona fide, it would not have been brought only now—at a stage where the matter is already ready for trial. In these circumstances, to allow the application at this late juncture would, in my view, be oppressive. In the circumstances, I find that the application lacks the element of reasonable promptness required under the law. [c] Thirdly, the Plaintiff has effectively rebutted the allegation of impecuniosity through its affidavit evidence. The Plaintiff has shown that the Defendants are presently withholding a substantial sum of RM56,160.00, being the costs and allocator awarded to the Plaintiff by the High Court, Court of Appeal, and Federal Court in related proceedings. Furthermore, the Plaintiff has previously made a payment of RM9,360.00 in legal costs to the Defendants, pursuant to the earlier High Court order striking out the Plaintiff’s claim. These facts collectively undermine the Defendants’ assertion that the Plaintiff is financially incapable of satisfying an adverse costs order. On the contrary, the evidence demonstrates that the Plaintiff has previously complied with cost orders and possesses the financial means—at least to some extent—to meet its obligations. The Defendants have not adequately rebutted this aspect of the Plaintiff’s evidence. In particular, the sum of RM56,160.00 currently withheld by the Defendants, being costs awarded to the Plaintiff in earlier proceedings, may reasonably be regarded as available for set-off against any future costs that may be awarded in favour of the Defendants, should they succeed in their defence. This further undermines the Defendants’ contention that the Plaintiff will be wholly unable to satisfy an adverse costs order. [d] Finally, the documentary evidence produced by the Defendants, particularly the SSM search results and the Plaintiff's status as an exempt private company, in my view, is not sufficient to establish that the Plaintiff is impecunious or that it is currently subject to any winding-up proceedings. While the Plaintiff’s exempt status and the absence of filed financial statements may raise questions regarding its financial transparency, these factors alone do not amount to credible evidence that would give rise to a “reason to believe” — as required under Section 580A(1) of the Companies Act 2016 — that the Plaintiff would be unable to pay the Defendants’ costs should the Defendants succeed in their defence. Accordingly, the Defendants have not discharged the requisite burden of proof, and the application for security for costs cannot be sustained on the basis of speculative or unsubstantiated assertions regarding the Plaintiff’s financial position. [23] Upon hearing the submissions of both parties, I find that the Defendants have not fulfilled the requirements laid down in the applicable principles governing an application for security for costs. There is also no cogent evidence before this Court to show that the Plaintiff’s assets are insufficient to satisfy any potential costs order in favour of the Defendants. Mere assertions or inferences drawn from the Plaintiff’s corporate filings, without more, are inadequate to discharge the evidential burden imposed on the Defendants under Section 580A(1). Having considered the totality of the evidence and submissions, I find that the Defendants have not discharged the burden of justifying their entitlement to an order for security for costs. Accordingly, the application at Enclosure 174 and 176 are dismissed with costs of RM3000 for each Enclosure. SGD (ROZANA BINTI ALI YUSOFF) Judge High Court of Penang Dated on 1st July 2025. Counsel M.S Rajen & Y. Yogeswaran (Messrs Yoges & Co.) for the Plaintiff. A. Suppiah (Messrs Presgrave & Matthews) for the 1st Defendant and 3rd Defendant. Karin Lim & Nicholas Lim (Messrs Lim Leng Han & SF Tho) for the 2nd Defendant and 4th Defendant. V. Amareson (Messrs Amareson & Meera) for 6th Defendant.