Nautilus Tug & Towage Sdn. Bhd. v 1. ) Dato Sri Suresh Emmanuel Abishegam 2. ) Dato Ahmad Johari Bin Abdul Razak 3. ) Ajaib Hari Dass 4. ) Dato Abd Latiff Bin Ahmad 5. ) Jaya Sudhir A/L Jayaram 6. ) Mak Lin Kum 7. ) Ahmad Lutfi Bin Abd Latiff 8. ) Dato Sri Abd Rahim Bin Jaafar 9. ) Azimuth Marine Sdn. Bhd.

Case Significance

Illustrates the court's reluctance to order security for costs against a shareholder who has obtained leave to pursue a statutory derivative action under the Companies Act, where the leave order already contains funding and control safeguards and no abuse of process is shown.

This decision of the High Court of Malaya at Kuala Lumpur (Commercial Division) concerns an application for security for costs made in the context of a statutory derivative action. The plaintiff company, Nautilus Tug & Towage Sdn Bhd, was the vehicle through which a shareholder had earlier obtained leave to bring derivative proceedings on the company's behalf against a group of individual defendants and a corporate ninth defendant, Azimuth Marine Sdn Bhd, for alleged breaches of duty owed to the company. Leave to institute the derivative action had been granted by another judge, together with orders authorising the company to control the conduct of the proceedings, reducing an interim management fee pending resolution, and requiring the applicant shareholder to fund the company's reasonable legal costs on an indemnity basis.

In the present application several of the defendants sought security for costs against the shareholder who had set the derivative action in motion. The court examined whether, having regard to the derivative nature of the proceedings and the safeguards already built into the leave order, an order for security for costs was warranted, and considered the authorities cited on the point together with the inherent jurisdiction preserved by Order 92 Rule 4 of the Rules of Court 2012. It concluded that the derivative action had been brought in accordance with the processes laid down under the Companies Act, that the defendants had shown no injustice and no abuse of process, and that there was no occasion to invoke the court's inherent jurisdiction to order security. Finding that no injustice would be caused by refusing the order, the court held that this was not a suitable case for security for costs and dismissed the application with costs in the cause. The judgment illustrates the court's reluctance to burden a properly authorised derivative claimant with security for costs.