Nautilus Tug & Towage Sdn. Bhd. v 1. ) Dato Sri Suresh Emmanuel Abishegam (WA-22NCC-403-06/2024)

AZIMUTH MARINE SDN BHD DEFENDANTS GROUNDS OF JUDGMENT (ENCLOSURE 22) S/N Zk/4oIdeU2cfbr5GVuXDw A. Introduction 1. This is the application of the 6th and 8th Defendants for security for costs against Dato’ Seri Timor Shah Rafiq (“Timor”).

Timor had initiated an application for leave to institute a derivative action on behalf of the Plaintiff against the Defendants, inter alia, for alleged breaches of the Defendants’ duties to the Plaintiff. This application was heard by Justice Atan and on 23-5-2024 was given leave to institute these proceedings in the civil suit no: WA-24NCC-629-11/2023. Justice Atan had made the following, inter alia, orders: - “(3) The Plaintiff be authorised to control the conduct of the derivative proceedings;

The management fee payable by the Defendant to Azimuth Marine Sdn. Bhd. be reduced to USD 8,000 per month pending final resolution of the derivative proceedings initiated by the Def endant against Dato’ Sri Suresh Emmanuel Abishegam, Dato’ Ahmad Johari Bin Abdul Razak, Ajaib Hari Dass, Dato’ Abd Latiff Bin Ahmad, Jaya Sudhir A/L Jayaram, Mak Lin Kum, Ahmad Lutfi Bin Abd Latiff, Dato’ Sri Abd Rahim Bin Jaafar and Azimuth Marine Sdn. Bhd.; S/N Zk/4oIdeU2cfbr5GVuXDw

The Defendant pays all reasonable legal fees and disbursements incurred by the Plaintiff in connection with this application or pending the grant of leave or any other interim relief on a full indemnity basis;

The Defendant pays the costs incurred by the Plaintiff for the derivative proceedings to be initiated on behalf of the Defendant against Dato’ Sri Suresh Emmanuel Abishegam, Dato’ Ahmad Johari Bin Abdul Razak, Ajaib Hari Dass, Dato’ Abd Latiff Bin Ahmad, Jaya Sudhir A/L Jayaram, Mak Lin Kum, Ahmad Lutfi Bin Abd Latiff, Dato’ Sri Abd Rahim Bin Jaafar and Azimuth Marine Sdn. Bhd. on a full indemnity basis;”

The grounds relied on by the said Defendants in seeking this application are summarised as follows: -

That Timor is ordinarily out of jurisdiction of this Court. He is a resident of California, United States.

(ii) That Timor does not have assets within the jurisdiction of this Court.

(iii) That Timor is not within a jurisdiction where the First Schedule of the Reciprocal Enforcement of Judgments Act.

(iv) That Timor is financially impecunious and is unable to pay the award of costs, if any, is granted against him. S/N Zk/4oIdeU2cfbr5GVuXDw

That the High Court in the Civil Suit No: WA-22NCC-151-03/2023 had granted security for costs against him to the sum of RM 120,000 for each application filed by the Defendants in those proceedings.

(vi) That this suit is malicious and is an abuse of process.

(vii) That Timor is usually resident in Malaysia in a Hotel.

(viii) Timor does not hold any executive positions in other Malaysian companies and has no interest in any companies in Malaysia or any business entity.

(ix) That the claim against the Defendants could not be sustained as they are not liable for actions of co-directors.

Indemnity orders entered by Atan J does not preclude the application for security for costs against Timor.

The Defendants seeks the sum of RM 500,000.00 as security for costs. B. Decision of this Court 5. After hearing the parties, this Court decided to dismiss the application with no order as to costs. This Court finds that the Defendants have failed to show that the facts of this case, as disclosed in the affidavits S/N Zk/4oIdeU2cfbr5GVuXDw before this Court, fall within the circumstances laid down under Order 23 of the Rules of Court 2012. My reasons for this decision are as stated in the following paragraphs. C. Applicable Law – Order 23 of the Rules of Court 2012 6. The law concerning security for costs is trite. Order 23 of the Rules of Court 2012 is reproduced below: - “1. Security for costs of action (O. 23 r. 1)

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 fact that Timor is an ordinary resident out of the jurisdiction of this Court, and he does not have assets within jurisdiction of this Court, does not automatically mean that this Court should grant an order for security for costs in favor of the Defendants.

I refer to the decision of Mohamed Dzaiddin J (as he then was) in Kasturi Palm Products v. Palmex Industries Sdn Bhd [1985] 1 LNS 149, where he is reported to have stated: - “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 S/N Zk/4oIdeU2cfbr5GVuXDw 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. 1 p.384). In exercising its discretion, it is clear that the Court will 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. "

I also refer to the decision of Arifin Zakaria J (as he then was) in Faridah Begum Bte Abdullah v. Dato’ Michael Chong [1995] 2 CLJ 951, and the decision of Nalini Pathmanathan J (as she then was) in P T Karya Sumiden Indonesia v. Oceanmasters Marine Services Sdn Bhd & anor [2014] 6 CLJ 251.

In the above-cited case, Nalini Pathmanathan J stated: - “[48] It is evident that in each case the court will balance the factors stipulated above in the context of each particular factual matrix and determine whether it would be just in the particular facts of that case to order security for costs. It is not an entitlement as of right. (See also North Plaza Sdn Bhd v. United Securities Sdn Bhd [2010] 1 CLJ 470; [2010] 1 MLJ 631 and Eastacres Development Sdn Bhd v. Fatimah Mutallip &

Essentially, the decision whether to grant security for costs is at the discretion of this Court. This discretion, as with all other powers, must be exercised based on the circumstances of each case and consider relevant factors. The factors that must be considered include, inter alia, as follows: -

Whether the Plaintiff is resident out of jurisdiction.

(ii) Whether the Plaintiff has any assets within jurisdiction.

(iii) Whether the claim is bona fide and not a sham.

(iv) Whether the Plaintiff has a reasonably good prospect of success.

Whether the application for security was being used oppressively to stifle a genuine claim. D. Decision of this Court – Reasons for Dismissing this application

Order 23 of the Rules of Court 2012 only allows security for costs against a Plaintiff – Timor is not the named Plaintiff 12. Firstly, I note that the Defendants here seek security for costs according to Order 23 of the Rules of Court 2012.

Timor is not the named Plaintiff in this suit. I am aware that he had obtained leave to bring a derivative action in the name of the company against the Defendants. This does not mean that he is the Plaintiff in these proceedings. The named Plaintiff remains the company and if any security for costs is sought, it should be obtained against the named Plaintiff even in a derivative action. Timor remains to be anon party to these proceedings.

I refer to the decisions of the Commonwealth Courts relied on by the Defendants. They are Forest Carbon Methodology Pty Ltd v. Schultz [2023] FCA 943, Birnie Capital Property Partnership v William Norman Birnie (Civ-2010-404-00300) and International Connex Holdings Pte Ltd v. Wealth Resources Enterprises Ltd [2006] HKC

601.

In all these cases, the claims filed by the named Plaintiffs were derivative and were instituted by the shareholders of the said company. The Courts, after considering the factual matrix of each case, did grant security for costs but were only ordered against the named Plaintiff, i.e. the company and not against the party that had obtained the right to institute a derivative action in the name of the said company.

I opine that the Defendants have failed to appreciate that Timor is not a party to this suit. The fact that he has control over the suit does not mean that he should be directed to pay security for costs on behalf of the Plaintiff to cover the potential costs, if any, that may be ordered in favour of the Defendants. Any security for costs, under Order 23 of the Rules of Court 2012, may be sought against the Plaintiff in the proceedings, but not against the persons who have control over the suit or have obtained S/N Zk/4oIdeU2cfbr5GVuXDw leave to institute those proceedings under section 355 of the Companies Act 2016.

It must be borne in mind that our Rules of Court 2012 have not extended the right to obtain security for costs beyond the Plaintiff named in the suit. Order 23 of the Rules of Court 2012 has not been amended to add third parties as those who should provide security for costs. This is compared to the current rules applicable in England and Wales, which states: - “Conditions to be satisfied 25.27. The court may make an order for security for costs if—

it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and

either an enactment permits the court to require security for costs, or one or more of the following conditions apply—

the claimant is resident out of the jurisdiction;

(ii) the claimant is a company or other body (whether incorporated inside or outside England and Wales) and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so; S/N Zk/4oIdeU2cfbr5GVuXDw

(iii) the claimant has changed their address since the claim was commenced with a view to evading the consequences of the litigation;

(iv) the claimant failed to give their address in the claim form, or gave an incorrect address;

the claimant is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe that they will be unable to pay the defendant’s costs if ordered to do so;

(vi) the claimant has taken steps in relation to their assets that would make it difficult to enforce an order for costs against them. Security for costs other than from the claimant 25.28. The defendant may seek a security for costs order against a person other than the claimant, and the court may make such an order, if—

the court is satisfied, having regard to all the circumstances of the case, that it is just to make such an order;

the person has assigned the right to the claim to the claimant with a view to avoiding the possibility of a costs order being made against them, or has contributed or agreed to contribute to the S/N Zk/4oIdeU2cfbr5GVuXDw claimant’s costs in return for a share of any recovery in the proceedings; and

the person is someone against whom a costs order may be made.”

This power to direct security for costs against a third party, which is inherently missing from our rules, exist under the foreign rules of Court which can be seen in the decision of Hildyard J in The RBS Rights Issue Litigation [2017] EWHC 1217 as follows: - “CPR25.14 plugs what was previously a gap in the rules (which are intended to be comprehensive) to enable a defendant to obtain an order for security for costs against someone other than the claimant if the court is satisfied, "having regard to all the circumstances of the case, that it is just to make such an order" and that other person has either (a) assigned the right to the claim to the claimant with a view to avoiding the possibility of a costs order being made against him (see CPR25.14(2)(a)) or (b) contributed or agreed to contribute to the claimant's costs in return for a share of any money or property which the claimant may recover in the proceedings (see CPR25.14(2)(b)), and "is a person against whom a costs order may be made" (see CPR25.14(2)): and see also paragraphs 21 to 23 of my March 2017 judgment.”

I also note that the Rules of Court 2012 do not even provide for the power to order security for costs against a third party, even when Order 23 rule 1(b) is applicable. Even when it is shown that the Plaintiff was only a nominal party and is suing for the benefit of a third party, the security for costs is ordered against not the said beneficiary but against the Plaintiff. This shows that the power to provide security for costs is limited only against the party named in the proceedings and not against a non-party, even if he or she obtains any benefit out of the said suit.

As the Defendants are relying solely on Order 23 of the Rules of Court 2012, this Court cannot grant an order for costs against Timor. This is a derivative action instituted by Timor after obtaining leave from Atan J, and as a result, he is not the Plaintiff in this suit. It is trite law that a member or a director of a company who obtains leave to institute a derivative action is not a party to the suit and is only attempting to enforce a cause of action that resides with the company.

If the suit is successful, then the benefits received from the said suit will reside with the company. Timor will not personally benefit from this suit. This can be seen in the decision of the Federal Court in Low Cheng S/N Zk/4oIdeU2cfbr5GVuXDw Teik & Ors v. Low Ean Nee [2024] 6 MLRA 220, where Nallini Pathmanathan FCJ held: - “[79] In summary, the central distinction between the oppression action and the derivative action lies in the nature of the claim. An oppression claim premised on the circumstances set out in s 346(1) is a personal claim made by the minority shareholder who suffers a distinct and personal loss, while a derivative action is brought on behalf of the company by the shareholder in a representative capacity. Therefore, the question to be asked when deciding on which action to pursue is this: against whom has the alleged harm been caused? If the harm has caused injury to one or more shareholders, then the oppression action is proper. If the harm is to the company alone, a derivative action is the appropriate cause of action. …. [84] In enacting separate provisions to govern the oppression action and the derivative action respectively, the Legislature has signalled the need for a distinction between both actions. Accordingly, it is not open for the Courts to ignore the statutory distinction between an oppression action, where the conduct of the majority shareholders or the persons in control of the company causes direct and immediate harm to a minority shareholder, versus a derivative action where claims arise solely S/N Zk/4oIdeU2cfbr5GVuXDw because the company itself has suffered damage and there is only incidental loss to the minority shareholder. [85] The existence of the two distinct statutory provisions warrants the conclusion that each section creates a different cause of action. It is selfevident that only the person in whom a cause of action is vested may enforce the relevant claim. If the cause of action is vested in the company, then it is the company itself that should take action. If, on the other hand, it is vested in the shareholder, then he must take action (see: Paul Davies, Sarah Worthington and Chris Hare, Gower's Principles of Modern Company Law (11th Edn, Sweet & Maxwell, 2021) at para 14- 001). … [112] In other words, the rule is inextricably tied up to the issue of who suffers the loss and thereby, in whom the cause of action is vested, and ultimately reverts to the proper plaintiff rule.”

Therefore, as this is a derivative action, the alleged wrong would have been a wrong done against the company, and Atan J would have found that the appropriate Plaintiff would have been the company. Under S/N Zk/4oIdeU2cfbr5GVuXDw those circumstances, any attempt to seek security for costs in this suit, the Defendants should seek the same against the named Plaintiff and not against Timor.

I believe that this approach could be seen in the dicta of Lord Denning MR in Wallersteiner v. Moir (No.2) [1975] 1 All ER 849: - “But what if the action fails? Assuming that the minority shareholder had reasonable ground for bringing the action—that it was a reasonable and prudent course to take in the interests of the company—he should not himself be liable to pay the costs of the other side, but the company itself should be liable, because he was acting for it and not for himself. In addition, he should himself be indemnified by the company in respect of his own costs even if the action fails. It is a well-known maxim of the law that he who would take the benefit of a venture if it succeeds ought also to bear the burden if it fails. Qui sentit commodum sentire debet et onus. This indemnity should extend to his own costs taxed on a common fund basis.”

This can also be seen in the decision of Buckley LJ in the same case: - “So I come to the third possible approach mentioned earlier. Counsel for Mr Moir, pointing to the Supreme Court of Judicature (Consolidation) Act 1925, s 50 and to RSC Ord 62, r 4(1), suggests that we should now make an order protecting Mr Moir against being ordered to pay the costs of any other party in this matter in any event. I have never known a court to make any order as to costs fettering a later exercise of the court's discretion in respect of costs to be incurred after the date of the order. I cannot think of any circumstances in which such an order would be justified. It seems to me to be undesirable to fetter judicial discretion in respect of future costs. If Dr Wallersteiner were to succeed on some or all of the issues which are now awaiting trial, the trial judge appears to me to be the proper person to decide whether justice requires that Dr Wallersteiner should recover any of his costs from Mr Moir or any other party. We should not, in my opinion, attempt to prejudge that question. But there are circumstances in which a party can embark on litigation with a confident expectation that he will be indemnified in some measure against costs. A trustee who properly and reasonably prosecutes or defends an action relating to his trust property or the execution of the trusts is entitled to be indemnified out of the trust property. An agent is S/N Zk/4oIdeU2cfbr5GVuXDw entitled to be indemnified by his principal against costs incurred in consequence of carrying out the principal's instructions (Broom (Brown) v Hall; Pettman v Kebel; Williams v Lister & Co) …”

I also refer to Lord Scarman’s dicta on this issue, which is reproduced below: - “An indemnity I agree that it is open to the court in a stockholder's derivative action to order that the company indemnify the plaintiff against the costs incurred in the action. I think that the principle is the same as that which the court applied in Re Beddoe which concerned the costs incurred by a trustee in an action respecting the trust estate. The indemnity is a right distinct from the right of a successful litigant to his costs at the discretion of the trial judge; it is a right which springs from a combination of factors: the interest of the company and its shareholders, the relationship between the shareholder and the company, and the court's sanction (a better word would be 'permission') for the action to be brought at the company's expense. It is a full indemnity such as an agent has who incurs expense in the authorised business of his principal. As a general rule, I would expect an application for leave to bring proceedings at the expense of S/N Zk/4oIdeU2cfbr5GVuXDw the company to be made at the commencement of the action: but, as Lindley LJ in Beddoe's case ([1893] 1 Ch at 557) recognised in relation to a trustee's action on behalf of the trust estate, if at the end of the case the judge should come to the conclusion that he would have authorised the action had he been applied to, he can even then allow the plaintiff his costs on a full indemnity basis against the company. In my opinion, Mr Moir should have his indemnity not only against costs already incurred by him on behalf of the two companies but also against costs to be incurred up to and including discovery, after which he should obtain the further directions of the court. I agree that the procedure proposed by Buckley LJ would be suitable and should be adopted until such time as a rule of court is made which covers the situation.”

For the above reasons, I find that the Defendants’ application in Enclosure 22 should be dismissed. The powers provided to this Court under Order 23 of the Rules of Court 2012 do not extend to Timor. The right to seek security for costs under the said rule is limited to the named Plaintiff. Therefore, this Court cannot exercise such powers and extend the said rule to third parties such as Timor as sought by the Defendants.

(ii) It is wrong for this Court to make a finding that Timor should bear the costs at this stage and provide security – No evidence that this is an Exceptional Case justifying costs against Timor 27. One of the arguments put forth by the Defendants here is based on the argument that this Court has discretionary powers to order costs to be borne by a third party even if he or she is not a named litigant.

The Defendants’ counsel refers to Takako Sakao v. Ng Pek Yuen & Anor (No. 3) [2010] 1 CLJ 429, where Gopal Sri Ram FCJ delivering the judgment of the Federal Court held: - “[15] Dealing with the first question, it is now settled that a court has power to direct a non-party - and for present purposes Dato' Chong is a non-party - to pay the costs of any suit, appeal or other proceeding. This was established by the decision of the House of Lords in Aiden Shipping Ltd v. Interbulk Ltd [1986] AC 965. In Symphony Group plc v. Hodgson [1994] QB 179, the English Court of Appeal in the judgment of Balcombe LJ laid down the following guidelines for the making of a costs order against a non-party:

An order for the payment of costs by a non-party will always be exceptional: see per Lord Goff in Aiden Shipping Co. Ltd. v. Interbulk Ltd. [1986] AC 965, 980F. The judge should treat any application for such an order with considerable caution.

It will be even more exceptional for an order for the payment of costs to be made against a non-party, where the applicant has a cause of action against the non-party and could have joined him as a party to the original proceedings. Joinder as a party to the proceedings gives the person concerned all the protection conferred by the rules, as to eg, the framing of the issues by pleadings; discovery of documents and the opportunity to pay into court or to make a Calderbank offer (Calderbank v. Calderbank [1976] Fam. 93); and the knowledge of what the issues are before giving evidence.

Even if the applicant can provide a good reason for not joining the non-party against whom he has a valid cause of action, he should warn the non-party at the earliest opportunity of the possibility that he may seek to apply for costs against him. At the very least this will give the non-party an opportunity to apply to be joined as a party to the action under Ord. 15, r. 6(2)(b)(i) or (ii). S/N Zk/4oIdeU2cfbr5GVuXDw Principles (2) and (3) require no further justification on my part; they are an obvious application of the basic principles of natural justice.

An application for payment of costs by a non-party should normally be determined by the trial judge: see Bahai v. Rashidian [1985] 1 WLR 1337.

The fact that the trial judge may in the course of his judgment in the action have expressed views on the conduct of the non-party constitutes neither bias nor the appearance of bias. Bias is the antithesis of the proper exercise of a judicial function: see Bahai v. Rashidian [1985] 1 WLR 1337, 1342H, 1346F.

The procedure for the determination of costs is a summary procedure, not necessarily subject to all the rules that would apply in an action. Thus, subject to any relevant statutory exceptions, judicial findings are inadmissible as evidence of the facts upon which they were based in proceedings between one of the parties to the original proceedings and a stranger: see Hollington v. F. Hewthorn & Co. Ltd.[1943] KB 587; Cross on Evidence, 7th ed.

(1990), pp. 100-101. Yet in the summary procedure for the determination of the liability of a solicitor to pay the costs of an action to which he was not a party, the judge's findings of fact may be admissible: see Brendon v. Spiro [1938] 1 KB 176, 192, cited with approval by this court in Bahai v. Rashidian [1985] 1 WLR S/N Zk/4oIdeU2cfbr5GVuXDw 24 1337 1343D, 1345H. This departure from basic principles can only be justified if the connection of the non-party with the original proceedings was so close that he will not suffer any injustice by allowing this exception to the general rule.

Again, the normal rule is that witnesses in either civil or criminal proceedings enjoy immunity from any form of civil action in respect of evidence given during those proceedings. One reason for this immunity is so that witnesses may give their evidence fearlessly: see Palmer v. Durnford Ford [1992] QB 483, 487. In so far as the evidence of a witness in proceedings may lead to an application for the costs of those proceedings against him or his company, it introduces yet another exception to a valuable general principle.

The fact that an employee, or even a director or the managing director, of a company gives evidence in an action does not normally mean that the company is taking part in that action, in so far as that is an allegation relied upon by the party who applies for an order for costs against a non-party company: see Gleeson v. J. Wippell & Co. Ltd.[1977] 1 WLR 510, 513.

The judge should be alert to the possibility that an application against a non-party is motivated by resentment of an inability to obtain an effective order for costs against a legally aided litigant. The courts are well aware of the financial difficulties faced by S/N Zk/4oIdeU2cfbr5GVuXDw parties who are facing legally aided litigants at first instance, where the opportunity of a claim against the Legal Aid Board under section 18 of the Legal Aid Act 1988 is very limited. Nevertheless the Civil Legal Aid (General) Regulations 1989 (S.I. 1989 No. 339/89), and in particular regulations 67, 69, and 70, lay down conditions designed to ensure that there is no abuse of legal aid by a legally assisted person and these are designed to protect the other party to the litigation as well as the Legal Aid Fund. The court will be very reluctant to infer that solicitors to a legally aided party have failed to discharge their duties under the regulations - see Orchard v. South Eastern Electricity Board [1987] QB 565 - and in my judgment this principle extends to a reluctance to infer that any maintenance by a non-party has occurred. [16] On the issue whether a non-party would suffer prejudice if we ordered him or her to pay costs personally, we find two further authorities of assistance. The first is H. Leverton Ltd v. Crawford Off-Shore (Exploration) Service Ltd (in liquidation) (1996), The Times, 22 November. That was a case in which Garland J made an order of costs against Mr Christopher Richard Crawford, a non-party who was the sole directing mind and will of the defendant company and for all practical purposes the S/N Zk/4oIdeU2cfbr5GVuXDw company itself. It was held that the making of such an order against Mr Crawford did no injustice to him because of his closeness to the proceedings. It is to be noted that in Leverton the order was sought after giving notice to the defendant. [17] The other case is Tolhurst v. Smith [1995] EMLR 176 where Chadwick J (later LJ) after dismissing an action brought by an individual plaintiff ordered costs against a company called Lawrence Tolhurst Music Company Limited on the ground that the company was Mr Tolhurst's alter ego. But we notice from the report of that case that there an application by inter partes motion was made to Chadwick J seeking the special order as to costs.”

Counsel for the Defendants also reinforces this argument by referring to, inter alia, Aiden Shipping Co Ltd v. Interbulk Ltd (The Vimeira) [1986] 2 All ER 409, Symphony Group PLC v. Hodgson [1993] 4 All ER 143, Dolphin Quays Developments Ltd v. Mills and others [2007] EWHC 1180 and Dymocks Franchise Systems (NSW) Pty Ltd v. Todd [2004] 1 WLR 2807.

I agree with the general law as suggested by counsel for the Defendants. This Court retains the right or power to impose costs against a non-party. However, this power is exercised only under “special or exceptional circumstances” and not as of right. I find that the summary of the legal position as explained by Sir Andrew Morrit C in Dolphin Quays v. Mills (supra) to be insightful: - “[33] I shall not make the order sought for a number of, largely cumulative, reasons. First it has been recognised from the beginning that the making of a third-party costs order requires some ‘exceptional’ circumstance. What is ‘exceptional’ has to be ascertained by reference to the ordinary range of litigation which comes before the courts: see Globe Equities Ltd v Globe Legal Services Ltd [1999] BLR 232 at 239 (para 21) and the Dymocks Franchise case [2005] 4 All ER 195 at [25](1). This case was an entirely normal case of receivers seeking to enforce a contractual right forming part of the security. There was nothing speculative about it in that they obtained the advice of counsel no fewer than three times. The fact that the claim failed may be unusual but can hardly be classified as ‘exceptional’. If an order is made in this case then it should be made in all such cases. S/N Zk/4oIdeU2cfbr5GVuXDw [34] Second, it is not alleged that there was any element of impropriety or unreasonableness in the initiation and prosecution of the claim. Not only does such absence confirm that the claim was in no sense ‘exceptional’ but it underlines the fact that that is not an alternative justification for making the order sought. [35] Thus, third, the only available justification, and that relied on by counsel for Mr Mills, is the broad principle enunciated in the Dymocks Franchise case [2005] 4 All ER 195 at [25](3) quoted in [19], above. But that principle did not embrace the wider proposition in relation to receivers expressed in Knight v FP Special Assets further facilities for that purpose. It did not initiate or control them. It was not guilty of any impropriety or unreasonableness in their conduct. [36] Fourth, in the absence of any winding up of the company, s 109(2) of the 1925 Act and cl 5.3 of the charge both provided that the receivers were the agents of the company and that the company was solely responsible for their acts or defaults. In those circumstances I do not consider that it is possible to identify either the receivers or the bank as the ‘real’ party. The party was the company. The S/N Zk/4oIdeU2cfbr5GVuXDw proceedings were commenced and prosecuted by its agents on its behalf for the benefit and at the expense of those claiming under it by virtue of the charge or the equity of redemption. [37] Fifth, the hardship caused to Mr Mills by his inability to recover his costs from the company could have been avoided if he had pursued his remedy of security for costs from the company promptly or at all. Given the absence of any exceptional features or of any impropriety or unreasonableness on the part of the receivers or the bank I do not consider that justice requires that an order in his favour should now be made against the receivers. Who knows how differently events might have turned out if Mr Mills had taken the steps commonly taken by a normally prudent litigant? The fact that the receivers were unwilling to consider a ‘without prejudice’ offer from Mr Mills is no indication of the answer to that question. [38] Whilst I share the views of Longmore and Laws LJJ in Petromec Inc v Petroleo Brasileiro SA Petrobras [2006] All ER (D) 260 (Jul), that these cases are commonly over-complicated by reference to authority when in truth they are exercises of a very wide discretion on the facts of the S/N Zk/4oIdeU2cfbr5GVuXDw instant case, I should make some further reference to the three cases cited to me in which orders have been made against receivers. In the first, Bacal Contracting Ltd v Modern Engineering (Bristol) Ltd [1980] 2 All ER 655 at 659, Judge Fay QC considered that the receiver was the ‘real’ party and the company plaintiff a nominee plaintiff because the receiver could not be the agent of either the company or the secured creditor after the winding up had commenced. That reasoning cannot apply to this case because in the absence of any winding up of the company the receivers continue to be agents for the company.”

It seems to me that one of the factors that the Courts consider when dealing with the power to impose costs against a third party is whether there is any evidence of impropriety or wrongdoing involved by the third party in pursuing the claim or the case against the Defendants. The Courts in England and Wales, New Zealand and Australia have taken into account factors such as (i) whether the litigant and the third party had obtained legal opinion on the merits of the case, (ii) whether the third party personally benefited from the claim, (iii) the conduct of parties throughout the suit, (iv) whether there was any public benefit or public good will in the initiation of the suit e.g. aiding a poor litigant, (v) evidence of bad faith, fraud or impropriety against the third party and (vi) solvency of the named S/N Zk/4oIdeU2cfbr5GVuXDw Plaintiff. In other words, evidence must be produced that the case is exceptional and far from the ordinary suit that the Court should grant an order against a third party who is responsible for the said suit.

In cases cited by counsel, imposition of such liability is usually done at the end of the trial after findings of fact are made and after the Court can ascertain that the liability for the costs should be imposed against the third party. The third party must be made personally liable for the costs with reasons to do so.

As it stands, this Court is not able to make such a finding against Timor. At this stage, leave to institute derivative proceedings has been granted by Atan J. The test as to whether leave ought to be granted can be seen in Dato Seri Timor Shah Rafiq v. Nautilus Tug & Towage Sdn Bhd [2024] 4 CLJ 499 and section 348 of the Companies Act 2016. The applicant must show (i) good faith and that (ii) the proposed claim appears prima facie to be in the best interest of the company. In other words, the Court found that the complaints are with sufficient merit that they should be pursued and that, at this juncture, there is sufficient evidence to support the alleged wrongdoing.

As such, this Court cannot automatically make a finding that Timor should be made liable for the costs of the proceedings at this stage. That would be the direct implication of the order for security for costs. He must first be made liable, and that can only be done if the Defendants are successful in the suit and show that the suit should not have been initiated, and Timor should personally bear the said costs.

It must also be borne in mind that the application for leave under section 348 of the Companies Act 2016 is not an interlocutory order but is a final order. See Loh Teck Wah v. Lim Pang Kiam & Ors [2022] CLJU 374, where Ahmad Fairuz Zainol Abidin J held: - “Threshold for leave [27] There is a burden imposed on an applicant in a leave application under s. 348 of the Act. In Celcom (Malaysia) Bhd, the Court of Appeal held that the leave application is not to be dealt with lightly and be considered with a low threshold similar to leave applications for judicial review. Citing the case of Swansson v. RA Pratt Properties Pty Ltd & Anor [2002] NSWSC 58 328 the Court held that: "[24] It is clearly the intent of the act that leave to bring a derivative action must not be given lightly. An application under s. 237(2) is not S/N Zk/4oIdeU2cfbr5GVuXDw interlocutory in character; the relief sought is final and the applicant bears the onus of establishing the requirements of the subsection to the Court's satisfaction.". (emphasis added) [28] The standard in making out a case for leave is on a balance of probabilities (see Celcom (M) Berhad). There is therefore, a duty for the court to consider strictly the adherence with the statutory requirements. [29] It is based on the above parameters that that this Court must examine if the Applicant has initiated the application in good faith.”

Harmindar Singh FCJ in the above cited case held as follows: - “[23] Although at first blush the leave application seems interlocutory in nature, it is quite different from the requirement of leave in judicial review applications. The relief sought in s. 348 is in essence final in nature and cannot be revisited. Indeed, once leave is granted, the proceedings are brought in the name of the company (s. 347(2) ). With the grant of leave, it vests extraordinary power in the applicant to represent and advance the company's interest. The court's role S/N Zk/4oIdeU2cfbr5GVuXDw is therefore pivotal in ensuring that there is strict compliance with the statutory requirements. [24] It cannot be gainsaid that the intention was to provide the right balance between on the one hand, protecting the company from wrongdoings committed against it and ensuring that only a proper complainant be allowed to bring and sustain a derivative action and, on the other hand, protecting a company from unmeritorious or unwarranted interference in the company's affairs by disgruntled complainants who were likely to abuse the statutory remedies. It is therefore unfortunate that some courts have adopted the approach that the grant of leave has to be assessed on a low threshold. … [28] The Court of Appeal in Celcom (Malaysia) Bhd v. Mohd Shuaib Ishak [2010] 7 CLJ 808; [2011] 3 MLJ 636 ("Celcom") in following the Australian case of Swansson v. RA Pratt Properties PTY Ltd & Anor [2002] NSWSC 583; [2002] 42 ACSR 313 ("Swansson"), and correctly in our view, held that the onus of proof is on the applicant on a balance of probabilities. The court further held that the test of good faith is two-fold. One is an honest belief on the part of the applicant that a good cause of action S/N Zk/4oIdeU2cfbr5GVuXDw exists and has a reasonable prospect of success and two, that the application is not brought up for a collateral purpose.”

Therefore, Atan J would have found that the proposed suit to be filed in the name of the company is undertaken in good faith and that the proposed claim appears to be in the best interest of the company.

In the circumstances, it cannot be said that the facts of this case, at this stage, fall within the type of cases that have been categorized to be “exceptional” as identified in the above-quoted cases. Unless it is shown that the claim is frivolous, without merit or was instituted maliciously, this Court cannot make any finding that Timor should be made responsible for these future costs and, as such, provide security at this stage. This is to put the Cart before the Horse.

I nonetheless state that the Defendants are given liberty to revisit this issue in the future after the derivative action is heard and disposed of. If this Court finds that the case is merely an abuse of process of the Court or is a waste of resources, then the said Timor may be made personally liable for the costs incurred by the Defendants. This determination can S/N Zk/4oIdeU2cfbr5GVuXDw only be made after considering the merits of the claim brought forth by the Plaintiff against the Defendants.

(iii) Application for security for costs should have been made in the section 348 Companies Act 2016 - (Derivative Leave Application)

In addition to the above, I also find that the Defendants should have sought security for costs against Timor in the suit before Justice Atan.

The Court, in hearing an application for leave to institute a derivative claim, have wide powers as provided under Section 350 of the Companies Act 2016. The said proviso is produced herein:-

“Powers of the Court In granting leave under this section and sections 347 and 348, the Court may make such other orders as the Court thinks appropriate including an order-

authorizing the complainant or any other person to control the conduct of the proceedings;

giving directions for the conduct of the proceedings;

for any person to provide assistance and information to the complainant, including to allow inspection of the company's books;

requiring the company to pay reasonable legal fees and disbursements incurred by the complainant in connection with the application or action, or pending the grant of the leave or pending the grant of any injunction by the Court hearing the application for leave under this section; or

the costs of the complainant, the company or any other person for proceedings taken under this section, including an order as to indemnity for costs.”

Similarly, such wide powers have also been provided to the Courts in Singapore under Section 216A (5) of their Companies Act 1967. The same powers could also be seen under Section 233(1) of the British Columbia Business Corporation Act 2002 and in Section 242 of the Corporations Act 2001 in Australia.

The Courts in those jurisdictions have exercised such powers to direct the applicant to provide security for costs for the derivative action as seen in CIP Group Pty Ltd (CAN 610 483 577) and others v SO and others [2022] FCA 1490, Cleanfin Pty Ltd v Forest Carbon S/N Zk/4oIdeU2cfbr5GVuXDw Methodology Pty Ltd [2024] FCA 489, Hougen Co v Su [2023] BCJ No. 1922 and Ma Wai Fong Kathryn v Trillion Investment Pte Ltd [2020] SGHC 79.

Therefore, the Defendants should apply for security for costs before Justice Atan. This would have been the appropriate method of securing costs against Timor as he is a litigant in those proceedings and the Court is empowered to make such orders deems fit concerning the derivative action, including Timor’s costs, the company and any other persons. This would include future costs of the Defendants.

I am aware that the Defendants in this suit were not named personally in the derivative claim. However, because of their concerns, I believe that the Defendants are still entitled to apply to intervene in those proceedings and seek to vary the orders made. I opine that even at this stage, they could still apply to seek security for the costs against Timor to ensure that their interests are protected. See Dr Lourdes Dava Raja Curuz Durai Raj v. Dr Milton Lum Siew Wah & Anor [2020] 9 CLJ 192. That is the most appropriate jurisdiction to hear this application.

I have also considered the proposition put forth by the Defendants’ Counsel that seeks to distinguish the costs of the suit that may be incurred in pursuing the claim by the Plaintiff / Company and the potential costs that may be incurred by the Defendants in defending the claim. They suggest that the orders made by Atan J only deal with the costs incurred by Timor in pursuing the claim and that any orders of the costs of the Defendants are not covered by the said orders.

Counsel for the Plaintiff on the other hand suggests that the issue of costs has been extensively dealt with by Atan J and as such this Court should not reopen this issue again. He points out to parts of the judgment of Atan J and the orders made by him.

I believe that this issue is best dealt with by the Court that granted leave to file these claims. The issues raised by the Plaintiff and the Defendants show that these are facts that should have been raised before Atan J. The Court could then consider all these factors and make the orders that it deems fit and proper in accordance with section 350 of the Companies Act 2016. I opine that the Defendants are not barred from raising the issue of security of costs before Atan J as they are persons S/N Zk/4oIdeU2cfbr5GVuXDw that are affected by the said orders and should be allowed to raise this issue before the said Court.

(iv) Security for Costs should not be granted – The facts show that this is not a suitable case 49. Even if I am wrong on the above, I find that the facts of this case do not justify the order for security for costs against Timor. Security for costs against a foreign Plaintiff, such as Timor, is not as of right. See Kasturi Palm Products v. Palmex Industries Sdn Bhd [1986] 2 MLJ 310 and Sakhi SPA v Leu Cheng Chye (No.2) [2000] 1 MLJ 556.

I have considered that Timor is an individual ordinary resident out of jurisdiction, and he has no assets in Malaysia. This Court is duty-bound to have regard to all the circumstances of each case. See Stone Master Corporation Bhd v. Ong Kow Ee @ Ong Chiow Chuen [2023] MLJU

3212.

However, as referred to earlier, the claim filed in this suit is a derivative claim filed on behalf of the company for the alleged wrongs committed against the company. The claim alleges that the Defendants S/N Zk/4oIdeU2cfbr5GVuXDw had breached their duties to the company. As stated earlier, the application for leave to institute the derivative action was approved by Atan J. Accordingly, the Court found that it was (i) bona fide and (ii) that there is a prima facie case and (iii) that to allow the claim to be pursued is in the best interest of the company.

The bona fides of the suit is one of the factors that must be considered when making such orders for security for costs. See Tan See Meng & Ors v. Able Oils & Fats Sdn Bhd [2024] 4 MLJ 1 and Rudy Petroleum Sdn Bhd v. HSAP Sdn Bhd [2022] 7 MLJ 354.

As indicated by the Federal Court in the cited case earlier, the threshold that must be passed by Timor is not low, and the Court hearing the said application cannot take this task lightly. It is a final decision and is binding on the parties.

The High Court had also deemed it fit that the costs of this proceeding be borne by the Plaintiff. All costs incurred by Timor in pursuing this claim must be indemnified by the Plaintiff. This order is only made as and when it is appropriate, and as seen in the cases cited earlier, S/N Zk/4oIdeU2cfbr5GVuXDw such as Wallersteiner v Moir (No.2) [1975], requires careful consideration by the Courts before such orders are made. The right to be indemnified for costs of a derivative claim is not automatic and will depend on the facts of each case.

In the circumstances, I find that the fact that the High Court had granted leave to Timor to pursue the claim in the name of the company indicates that this is a bona fide claim and that the wishes or the decision of the majority of the board of directors should be overridden. To suggest that Timor now should provide security for costs would mean that this Court now varies the previous orders made by Atan J.

Despite having received an order that he be indemnified for the costs incurred for the derivative action, he is on the other hand, must fork out the prospective costs of the Defendants. This factor overwhelms the other issues raised by the Defendants and as a result I find that the discretion to direct security for costs should not be allowed.

Finally, I find that the sums sought by the Defendants show that the said application is intended only to stifle the suit filed. The Defendants S/N Zk/4oIdeU2cfbr5GVuXDw have not shown that the said security sought is bona fides and not made based on a genuine estimation of the potential order of costs that this Court may find against Timor.

The security sought shows that the Defendants have only intended to stifle the derivative claim. This tactical step should not be entertained by this Court. See Luminous Crossroads Sdn Bhd v. Lim Kong Huat Construction [2002] 5 CLJ 100, Measat Broadcast Network Systems Sdn Bhd v. AV Asia Sdn Bhd [2014] 3 CLJ 915, Ashin Sdn Bhd v. Datuk Bandar Kuala Lumpur & Ors [1999] 5 MLJ 663, Goldquest International Ltd v. Teh Leong Kiat [2003] 2 CLJ 402 and Doree Industries (M) Sdn Bhd & Ors v. Sri Ram & Co & Ors [2007] 1 MLJ

722.

For completeness, I have also considered the inherent powers granted to this Court as provided for under Order 92 Rule 4 of the Rules of Court 2012. I do not find that it is necessary to invoke the inherent jurisdiction of this Court to make such orders for security for costs sought by the Defendants. I find that no injustice would be caused, and there is no abuse of process. The derivative action had followed the required processes as laid down under the Companies Act 2016, and as a result, S/N Zk/4oIdeU2cfbr5GVuXDw the Defendants have not shown any form of injustice or any abuse of process to justify the said prayers sought.

Therefore, given the above, I find that this is not a suitable case for security for costs that should be made against Timor. I dismiss the said application with costs in the cause. Dated 5th May 2025 Dato’ Indera Mohd Arief Emran bin Arifin Judge High Court of Malaya at Kuala Lumpur NCC5 S/N Zk/4oIdeU2cfbr5GVuXDw Counsel: Lim Chee Wee, together with Wee Hee, Kuljeet Kaur Sidhu Brar a/p Kulwindar Singh & Emily Ho Mei Li For the Plaintiff Jasper Hee Partnership Advocates & Solicitors Kanarasan Ghandinesan For the 1st & 9th Defendant Ghandi Advocates & Solicitors Chetan Jethwani together with Ivy Shu For the 2nd, 3rd, 4th & 7th Defendant Chetan Jethwani & Company Advocates & Solicitors Stephanie Chong For the 5th Defendant Rosli Dahlan Saravana Partnership Advocates & Solicitors Himahlini Ramalingam together with Aiman Haqeem Gopi Seshadari & Kuhan Pillai For the 6th & 8th Defendant Himahlini & Co.