LITS Solutions Sdn Bhd v 1. ) Lai Thiam Sin 2. ) Leading Innovative Technologies & Systems Sdn Bhd

Case Significance

Illustrates the special-circumstances test for a stay of execution pending appeal, applied to an order made in a statutory derivative action, and the court's willingness to preserve the status quo where enforcement before the appeal could render a successful appeal nugatory.

This High Court decision at Penang, delivered by Rozana binti Ali Yusoff J, concerns an application by the defendants for a stay of execution of an order pending the disposal of their appeal to the Court of Appeal. The underlying suit was a derivative action brought in the name of the plaintiff company, LITS Solutions Sdn Bhd, pursuant to leave to bring a derivative action, seeking a declaration, damages and an injunction restraining the defendants from marketing, promoting or taking on projects using a "Flexi Parking" system. The plaintiff company's two directors held equal shareholding, and the litigation arose from the breakdown of that relationship, with the first defendant, an individual, and a second defendant company said to be exploiting the disputed system. On 23 December 2024 the Court had allowed part of the plaintiff's prayers, and the defendants, having appealed to the Court of Appeal, applied to stay execution of that order pending the appeal.

The governing principle is that execution of a judgment will not be stayed as a matter of course; a stay pending appeal is granted only where the applicant demonstrates "special circumstances" justifying it — the classic concern being that, without a stay, the appeal, if successful, would be rendered nugatory. The Court weighed the factors bearing on that question, including the nature of the relief granted and the practical consequences of enforcing it before the appeal was heard.

The Court found that the balance of factors favoured granting a stay and that special circumstances existed to justify it. It accordingly allowed the defendants' application for a stay of execution of the order dated 23 December 2024 pending the full and final disposal of their appeal to the Court of Appeal, with costs in the cause. The judgment is a useful illustration of the special-circumstances test for a stay of execution pending appeal, applied to an order made in a statutory derivative action, and of the court's willingness to preserve the status quo where enforcement before the appeal could render a successful appeal nugatory.