KENSINGTON GROUP MANAGEMENT LIMITED v DATO CHEW HUN SENG PENCELAH 1. ) TAN SRI LEE KIM TIONG @ LEE KIM YEW 2. ) CHUA HEE BOON

Case Significance

Illustrates that a plaintiff's foreign incorporation does not by itself justify an order for security for costs under Order 23 of the Rules of Court 2012; the court retains an overriding discretion to be exercised on all the circumstances, and here declined to order security against a British Virgin Islands plaintiff.

This High Court decision at Shah Alam, delivered by Judicial Commissioner Choong Yeow Choy, concerns an application for security for costs under Order 23 of the Rules of Court 2012. The dispute in the main action arose from an alleged breach of agreements concerning a substantial block of some 20.8 million shares in Country Heights Holdings Berhad, with the plaintiff, Kensington Group Management Limited, a company incorporated in the British Virgin Islands, claiming losses in excess of RM24 million. By way of counterclaim the defendant sought, among other relief, a declaration that the agreements were void and unenforceable. The defendant's separate application asked the court to order the plaintiff to deposit RM250,000 as security, to stay the proceedings pending payment, and to dismiss them on default, on the footing that the plaintiff was a foreign entity with no shown assets in Malaysia and a "nominal plaintiff" that might be unable to meet an adverse costs order.

The court treated the governing question as whether this was a proper case to exercise its discretion under the rule. It explained that an order for security involves a two-stage process: the applicant must first bring the case within one of the requirements of Order 23 rule 1, and even if that threshold is crossed, an order does not follow as of right, because the court retains a discretion to be exercised "if, having regard to all the circumstances of the case, the Court thinks it just to do so." Drawing on Kasturi Palm Products and Taimoku Corporation, the court held that a plaintiff being a foreign company does not by itself entail an order for security, distinguishing Menon v Abdullah Kutty as concerned with security for the costs of an appeal. The defendant also conceded and withdrew an argument that the plaintiff fell outside the court's jurisdiction. Having weighed all the circumstances, the court dismissed the application and ordered the defendant to pay costs of RM10,000, subject to allocatur. The judgment is a useful illustration of how the Malaysian courts treat foreign incorporation as a relevant but non-decisive factor in the discretionary grant of security for costs.