JN SAF INDUSTRIES (M) SDN. BHD. v 1. ) YUKEN INDUSTRIAL SDN. BHD. (dahulunya dikenali sebagai YUKEN PREFAB STEEL SDN. BHD.) 2. ) Lu Huiming (Defendan Kedua Dalam Tuntutan Balasa)

Case Significance

Illustrates the discretionary grant of security for costs under Order 23 where a Malaysian company is controlled by a sole shareholder and director ordinarily resident abroad, balanced against the principle that security must not oppress a plaintiff.

This High Court decision at Shah Alam concerns an application for security for costs under Order 23 of the Rules of Court 2012 against a corporate plaintiff controlled from outside the jurisdiction. In the original action the plaintiff, JN SAF Industries (M) Sdn Bhd, sued the defendant, Yuken Industrial Sdn Bhd (formerly Yuken Prefab Steel Sdn Bhd), and the defendant, as plaintiff in a counterclaim, applied for security for costs against the plaintiff company and against an individual joined as the second defendant to the counterclaim. The central question was whether there was justification to order security for costs against the plaintiff. The court found that, although the plaintiff was a company incorporated in Malaysia, it had a sole director and sole shareholder who was a foreign national ordinarily resident outside the jurisdiction of the court, which was a clear and material factor supporting an order for security. It emphasised that security for costs is not an entitlement as of right but a matter for the court's discretion, to be exercised properly by balancing the relevant factors in the particular factual matrix, applying authorities including PT Karya Sumiden Indonesia v Oceanmasters Marine Services Sdn Bhd, and that the court must be careful, consistent with constitutional guarantees of a right to be heard, not to use security for costs as an instrument of oppression against a plaintiff, particularly the poor or needy. Weighing these considerations, the court held that there was justification to order security and that ordering it would not oppress the plaintiff. Exercising its discretion, it ordered the plaintiff to deposit RM100,000 as security for costs into the defendant's solicitors' account, held as stakeholders, by the stipulated date, allowed the related relief sought and made costs in the cause. The judgment is a useful illustration of security for costs being ordered where a Malaysian company is controlled by a sole foreign shareholder resident abroad.