Ever Right Sdn Bhd vs Akitek Bandaran (Sabah) Sdn Bhd (MJLR 2009b7) David Wong,4/3/2009,SS
[OSK24-52-2600-2]
1
Jurisdiction: MALAYSIA
IN THE HIGH COURT IN SABAH & SARAWAK
AT KOTA KINABALU
Parties: For Plaintiff: Ever Right Sdn Bhd
(Company No 104024-X)
For Defendant : Akitek Bandaran (Sabah) Sdn Bhd
(Company No 36083-K)
File Number: K24-52-2006
Issues: Whether the court should allow an application for
security for costs pursuant to Section 351(1) Companies
Act 1965?
Principle of law on the application of section 351(1)
Companies Act 1965 discussed.
Hearing Date: 4th March 2009
Date of Decision: 4th March 2009.
Judge: HONOURABLE JUSTICE DAVID WONG DAK WAH
Representation: For Plaintiff: Victor Chong
Messrs Poh & Victor Chong Advocates
Kota Kinabalu
For Defendant: Kong Ming Yen
Messrs Lind Willie Wong & Chin
Advocates,
Kota Kinabalu
[OSK24-52-2600-2]
2
RULING
This was an appeal by the plaintiff against the Deputy Registrar’s decision in
allowing the defendant’s application for security for costs under section
351(1) of the Companies Act 1965. The learned Deputy Registrar 5 imposed a
sum of RM30,000.00 as security for costs to be paid into court.
Brief Facts
In this action, the plaintiff sought an order against the defendant to take
delivery of 12 strata title deeds and a declaration that the defendant be no
10 longer entitled to enforce the default provision of the consent order dated
30th September 2004 (consent order) which read as follows:
ORDER
UPON THE APPLICATION of the plaintiff by Summons in Chambers
pursuant to Order 19 r 7 dated 4th August 2004 coming up for hearing this
15 day for an order that judgment be entered against the Defendant on the
ground that the Defendant had failed to serve a defence on the plaintiff to
this action.
AND UPON READING the Affidavit in Support of Tsen Kian Fah @
Tsen Ken Fah affirmed on 29th July 2004.
20 AND UPON HEARING Datuk Douglas Lind of counsel for the Plaintiff
and Miss Soo Pui Wan of counsel for the Defendant.
AND BY CONSENT:-
IT IS HEREBY ORDERED that the Defendant shall within thirty (30)
days from the date of the making of this order deliver to the Plaintiff the
25 12 strata title deeds, namely ST010507767, ST010507801, ST010507847,
[OSK24-52-2600-2]
3
ST010507833, ST010507758, ST010507794, ST010507838,
ST010507874, ST010507749, ST010507755, ST010507829 and
ST010507865 for the warehouses described as Lots 7, 8 and 9 sold by the
Defendant to the Plaintiff by the agreement dated 19th May 1989, together
with all the duly executed prescribed memoranda of 5 transfer and other
relevant forms to facilitate the transfer of each of the aforesaid strata title
deeds by the Defendant to the Plaintiff.
AND IT IS FURTHER ORDERED that in default of the Defendant
delivering to the Plaintiff the aforesaid strata title deeds and the duly
10 executed memoranda of transfer within 30 days after the date of this
order, the Plaintiffs shall then be entitled to damages as provided in item
(d) of the prayer in the statement of claim namely the refund of the sum of
RM750,000.00 together with interest at the rate of 10.5% per annum from
19th May 1989 till date of payment.
15 AND IT IS ALSO ORDERED that the Defendant do pay to the Plaintiff
costs to be taxed if not agreed.
Dated the 30th day of September 2004
The plaintiff is alleged to have defaulted in complying with the consent order
20 resulting in the defendant here taking up a winding up proceedings against
the plaintiff in Suit K28-36-2005.
In view of the winding up proceedings against the plaintiff, the defendant
took out this application for security for costs.
The Law
25 Section 351 of the Companies Act 1965 states as follows:-
[OSK24-52-2600-2]
4
(1) “Where a company is plaintiff in any action or other legal
proceeding the Court having jurisdiction in the matter may, if it
appears by credible testimony that there is reason to believe
that the company will be unable to pay the costs of the
defendant if successful in his defence, require sufficient 5 security
to be given for those costs and stay all proceedings until the
security is given”.
(2) “The costs of any proceeding before a court under this Act shall
be borne by such party to the proceeding as the Court may, in
10 its discretion, direct”.
In Skrine & Co v MBF Capital Bhd & Anor [1998] 3 CLJ 432 Dato’Gopal
Sri Ram JCA sets out the steps required by Section 351 of the Companies
Act 1965 as thus:-
15 “Section 351 of the Companies Act 1965 provides for a two-stage
inquiry into whether security for cost should be awarded where the
Plaintiff is a company. The first step is for the court to determine
whether there is credible evidence that the company will be unable to
pay the defendant’s cost, and the second is to ascertain whether that
20 evidence supports the belief that the company will be unable to do so”.
The plaintiff’s contention
The crux of the plaintiff’s counsel is that it has the ability to pay for any
costs awarded by virtue of the fact that the plaintiff owns a 4 storey building.
25 This can be seen from the affidavit in opposition by a director of the plaintiff
which states:
“…it is within the knowledge of the Defendant that the only assets of the
Plaintiff which are contained in the 10 units 4 storey buildings are
[OSK24-52-2600-2]
5
presently valued at more than RM6 million. Three of the 10 units belong
to the Defendant …..” (paragraph 10)
“I verily believe that it is within the Defendant’s knowledge that the
present value of the whole building is more than RM6 million…”
5 (paragraph 12)
With respect, the learned counsel for the plaintiff seemed to ignore the
following undisputed facts:
1. Save for financial year 1988, the Plaintiff has not submitted/filed their
audited accounts to the Registrar of Companies;
10 2. The Plaintiff failed or was unable to comply with the statutory demand
under S218 of the Companies Act and is deemed to be unable to pay
its debt.
3. The Plaintiff’s company is a “non-operating company whose only
assets are contained in the building”.
15 4. The building is presently unoccupied and dilapidated.
5. The plaintiff is having difficulty in selling the units in the building.
Apart from the above undisputed facts there is no evidence in court that the
plaintiff’s directors or its shareholders are financially able or willing to fund
the action. This is a relevant consideration which the court should take into
20 account in an application of such nature. This is what Ian Chin J did in the
case of Government of Sarawak v Sami Mousawi-Utama Sdn Bhd (1998) 4
[OSK24-52-2600-2]
6
CL J 175 and I have no reason to disagree with him. This is what he said at
page 186 of the report:-
“Therefore, I am of the view that the respondent had not produced
evidence to show that the contributors or shareholders of the
respondent, who stand to benefit if the action 5 is successful, are
financially not able to fund the action or are reluctant to provide the
fund for the security for costs. It must not be forgotten that they, the
contributors or shareholders, stand to benefit if the action is successful
while remaining unaffected by the consequence of a failed action. On
10 the other hand, the applicant would not be able to recover any cost if
the action should fail.”
For reasons as stated above I concur with the Deputy Registrar in ordering
an amount to be paid into court as security for costs.
15 Amount of security
As regards the amount of RM30,000.00 imposed by the Deputy Registrar,
there is no evidence or justification by the defendant’s counsel as to how the
sum of RM30,000.00 was arrived at. It is trite law that whenever an amount
is requested from the court be it in the form of damages or costs, parties must
20 justify or prove it. Here there is nothing. Counsel should follow what was
done by the counsel in the case of Bennes Engineering Sdn Bhd v Hong
Leong Assurance Berhad (reported in www.highcourt.sabah.sarawak.gov.my
(2006 cases - Sarawak) and that is, to particularize the amount claimed.
[OSK24-52-2600-2]
7
As I do not have the benefit of the counsel’s justification I shall rely on my
own analysis of the plaintiff’s action. From my reading of the pleadings in
this action, there can be only one issue and that is whether the defendant can
now rely on the full force of the default provision of the consent judgment in
view of its conduct subsequent to the date of the consent 5 order. The facts
involved are fairly straightforward and hence only required the court to make
a finding on whether the defendant’s conduct amounted to a waiver of the
default provision in the consent order. In short this case does not involve
complex law or facts.
10 Accordingly I reduce the amount from RM30,000.00 to RM20,000.00 to be
paid into court not later than 3rd April 2009. The amount shall be in cash or
in the form of a bank cheque.
15 (Y.A. TUAN DAVID WONG DAK WAH)
Judge
20
25
Notice: This copy of the Court's Reasons for Judgment is subject to
formal revision.
1
Jurisdiction: MALAYSIA
IN THE HIGH COURT IN SABAH & SARAWAK
AT KOTA KINABALU
Parties: For Plaintiff: Ever Right Sdn Bhd
(Company No 104024-X)
For Defendant : Akitek Bandaran (Sabah) Sdn Bhd
(Company No 36083-K)
File Number: K24-52-2006
Issues: Whether the court should allow an application for
security for costs pursuant to Section 351(1) Companies
Act 1965?
Principle of law on the application of section 351(1)
Companies Act 1965 discussed.
Hearing Date: 4th March 2009
Date of Decision: 4th March 2009.
Judge: HONOURABLE JUSTICE DAVID WONG DAK WAH
Representation: For Plaintiff: Victor Chong
Messrs Poh & Victor Chong Advocates
Kota Kinabalu
For Defendant: Kong Ming Yen
Messrs Lind Willie Wong & Chin
Advocates,
Kota Kinabalu
[OSK24-52-2600-2]
2
RULING
This was an appeal by the plaintiff against the Deputy Registrar’s decision in
allowing the defendant’s application for security for costs under section
351(1) of the Companies Act 1965. The learned Deputy Registrar 5 imposed a
sum of RM30,000.00 as security for costs to be paid into court.
Brief Facts
In this action, the plaintiff sought an order against the defendant to take
delivery of 12 strata title deeds and a declaration that the defendant be no
10 longer entitled to enforce the default provision of the consent order dated
30th September 2004 (consent order) which read as follows:
ORDER
UPON THE APPLICATION of the plaintiff by Summons in Chambers
pursuant to Order 19 r 7 dated 4th August 2004 coming up for hearing this
15 day for an order that judgment be entered against the Defendant on the
ground that the Defendant had failed to serve a defence on the plaintiff to
this action.
AND UPON READING the Affidavit in Support of Tsen Kian Fah @
Tsen Ken Fah affirmed on 29th July 2004.
20 AND UPON HEARING Datuk Douglas Lind of counsel for the Plaintiff
and Miss Soo Pui Wan of counsel for the Defendant.
AND BY CONSENT:-
IT IS HEREBY ORDERED that the Defendant shall within thirty (30)
days from the date of the making of this order deliver to the Plaintiff the
25 12 strata title deeds, namely ST010507767, ST010507801, ST010507847,
[OSK24-52-2600-2]
3
ST010507833, ST010507758, ST010507794, ST010507838,
ST010507874, ST010507749, ST010507755, ST010507829 and
ST010507865 for the warehouses described as Lots 7, 8 and 9 sold by the
Defendant to the Plaintiff by the agreement dated 19th May 1989, together
with all the duly executed prescribed memoranda of 5 transfer and other
relevant forms to facilitate the transfer of each of the aforesaid strata title
deeds by the Defendant to the Plaintiff.
AND IT IS FURTHER ORDERED that in default of the Defendant
delivering to the Plaintiff the aforesaid strata title deeds and the duly
10 executed memoranda of transfer within 30 days after the date of this
order, the Plaintiffs shall then be entitled to damages as provided in item
(d) of the prayer in the statement of claim namely the refund of the sum of
RM750,000.00 together with interest at the rate of 10.5% per annum from
19th May 1989 till date of payment.
15 AND IT IS ALSO ORDERED that the Defendant do pay to the Plaintiff
costs to be taxed if not agreed.
Dated the 30th day of September 2004
The plaintiff is alleged to have defaulted in complying with the consent order
20 resulting in the defendant here taking up a winding up proceedings against
the plaintiff in Suit K28-36-2005.
In view of the winding up proceedings against the plaintiff, the defendant
took out this application for security for costs.
The Law
25 Section 351 of the Companies Act 1965 states as follows:-
[OSK24-52-2600-2]
4
(1) “Where a company is plaintiff in any action or other legal
proceeding the Court having jurisdiction in the matter may, if it
appears by credible testimony that there is reason to believe
that the company will be unable to pay the costs of the
defendant if successful in his defence, require sufficient 5 security
to be given for those costs and stay all proceedings until the
security is given”.
(2) “The costs of any proceeding before a court under this Act shall
be borne by such party to the proceeding as the Court may, in
10 its discretion, direct”.
In Skrine & Co v MBF Capital Bhd & Anor [1998] 3 CLJ 432 Dato’Gopal
Sri Ram JCA sets out the steps required by Section 351 of the Companies
Act 1965 as thus:-
15 “Section 351 of the Companies Act 1965 provides for a two-stage
inquiry into whether security for cost should be awarded where the
Plaintiff is a company. The first step is for the court to determine
whether there is credible evidence that the company will be unable to
pay the defendant’s cost, and the second is to ascertain whether that
20 evidence supports the belief that the company will be unable to do so”.
The plaintiff’s contention
The crux of the plaintiff’s counsel is that it has the ability to pay for any
costs awarded by virtue of the fact that the plaintiff owns a 4 storey building.
25 This can be seen from the affidavit in opposition by a director of the plaintiff
which states:
“…it is within the knowledge of the Defendant that the only assets of the
Plaintiff which are contained in the 10 units 4 storey buildings are
[OSK24-52-2600-2]
5
presently valued at more than RM6 million. Three of the 10 units belong
to the Defendant …..” (paragraph 10)
“I verily believe that it is within the Defendant’s knowledge that the
present value of the whole building is more than RM6 million…”
5 (paragraph 12)
With respect, the learned counsel for the plaintiff seemed to ignore the
following undisputed facts:
1. Save for financial year 1988, the Plaintiff has not submitted/filed their
audited accounts to the Registrar of Companies;
10 2. The Plaintiff failed or was unable to comply with the statutory demand
under S218 of the Companies Act and is deemed to be unable to pay
its debt.
3. The Plaintiff’s company is a “non-operating company whose only
assets are contained in the building”.
15 4. The building is presently unoccupied and dilapidated.
5. The plaintiff is having difficulty in selling the units in the building.
Apart from the above undisputed facts there is no evidence in court that the
plaintiff’s directors or its shareholders are financially able or willing to fund
the action. This is a relevant consideration which the court should take into
20 account in an application of such nature. This is what Ian Chin J did in the
case of Government of Sarawak v Sami Mousawi-Utama Sdn Bhd (1998) 4
[OSK24-52-2600-2]
6
CL J 175 and I have no reason to disagree with him. This is what he said at
page 186 of the report:-
“Therefore, I am of the view that the respondent had not produced
evidence to show that the contributors or shareholders of the
respondent, who stand to benefit if the action 5 is successful, are
financially not able to fund the action or are reluctant to provide the
fund for the security for costs. It must not be forgotten that they, the
contributors or shareholders, stand to benefit if the action is successful
while remaining unaffected by the consequence of a failed action. On
10 the other hand, the applicant would not be able to recover any cost if
the action should fail.”
For reasons as stated above I concur with the Deputy Registrar in ordering
an amount to be paid into court as security for costs.
15 Amount of security
As regards the amount of RM30,000.00 imposed by the Deputy Registrar,
there is no evidence or justification by the defendant’s counsel as to how the
sum of RM30,000.00 was arrived at. It is trite law that whenever an amount
is requested from the court be it in the form of damages or costs, parties must
20 justify or prove it. Here there is nothing. Counsel should follow what was
done by the counsel in the case of Bennes Engineering Sdn Bhd v Hong
Leong Assurance Berhad (reported in www.highcourt.sabah.sarawak.gov.my
(2006 cases - Sarawak) and that is, to particularize the amount claimed.
[OSK24-52-2600-2]
7
As I do not have the benefit of the counsel’s justification I shall rely on my
own analysis of the plaintiff’s action. From my reading of the pleadings in
this action, there can be only one issue and that is whether the defendant can
now rely on the full force of the default provision of the consent judgment in
view of its conduct subsequent to the date of the consent 5 order. The facts
involved are fairly straightforward and hence only required the court to make
a finding on whether the defendant’s conduct amounted to a waiver of the
default provision in the consent order. In short this case does not involve
complex law or facts.
10 Accordingly I reduce the amount from RM30,000.00 to RM20,000.00 to be
paid into court not later than 3rd April 2009. The amount shall be in cash or
in the form of a bank cheque.
15 (Y.A. TUAN DAVID WONG DAK WAH)
Judge
20
25
Notice: This copy of the Court's Reasons for Judgment is subject to
formal revision.
