Chapter 36 - Security for Costs

Question 1

SECURITY FOR COSTS

Overview

Answer 1

1) general principles
2) exercise of discretion
3) procedures to apply for security for costs

Question 2

GENERAL PRINCIPLES ON SECURITY FOR COSTS

Overview

Answer 2

1) The law & scope
3) Example - foreign P
4) Example - P residing out of jurisdiction

Question 3

GENERAL PRINCIPLES ON SECURITY FOR COSTS

The law & scope

Answer 3

1) The law - O.23, r.1:

threshold that D must cross: 
(a)
(b)
(c)
(d)

2) Scope - Aeronave Spa & Anor v Westland Charters Ltd:

• the rule under O.23, r.1 does give a discretion to the court.
• Once D crosses the threshold in O.23, r.1, the Court is vested with the discretion to order security for costs against P.

Question 4

GENERAL PRINCIPLES ON SECURITY FOR COSTS

Example - foreign P

Answer 4

Ref. Crozat v Brogden:

• there was an inflexible rule that if a foreigner is suing, he should give security for costs.
• It is the usual practice of the courts to make a foreign plaintiff give security for costs & it does so, as a matter of discretion, because it is just to do so.
• The ordinary rule still remains, that it is a matter of discretion for court to order security for costs against P when he is suing D.

Question 5

GENERAL PRINCIPLES ON SECURITY FOR COSTS

Example - P residing out of jurisdiction

Answer 5

Raju Rajaram Pillai v MMC Power Sdn Bhd:

• As the plaintiff was ordinarily resident out of the jurisdiction, with no postal address and no property at all in Malaysia and had not even established goodwill, reputation or made his presence felt in Malaysia, the scales of justice titled in favour of the defendants for security for costs.
• The order for security for costs should be approximately 1/4 out of the sum claimed by the plaintiff in his statement of claim.
• In view of the circumstances of the case and the fact that the plaintiff’s claim was quite substantial, the Malaysian defendants must be protected as a matter of public policy.

Question 6

EXERCISE OF DISCRETION

Overview

Answer 6

1) general
2) bankruptcy or impecuniosity
3) merits of the case

Question 7

EXERCISE OF DISCRETION

general - 1

Answer 7

Sir Lindsay Parkinson & Co Ltd v Triplan Ltd:

• The court will consider all the circumstances of the particular case;
• Some of the matters which the court might take into account:
• whether the company’s claim is bona fide and not a sham;
• whether the company has a reasonably good prospect of success;
• whether there is an admission by the defendants on the pleadings or elsewhere that money is due;
• whether the application for security was being used oppressively — so as to try to stifle a genuine claim;
• whether the company’s want of means has been brought about by any conduct of the defendants, such as delay in payment or delay in doing their part of the work.

Question 8

EXERCISE OF DISCRETION

general - 2

Answer 8

Menon v Abdullah Kutty:

• Order for security for costs is a discretionary remedy to be exercised in accordance with well known principles.
• The court is not bound by any hard and fast rules, but has to look at all the circumstances of the case.

Factors:

1) POVERTY:
- Poverty of the defendant is a ground to increase the security for costs but where it exists, the court must consider other circumstances, whether in a particular case it will order further security to be given
2) DOUBTFUL SOLVENCY:

• It may well be that the defendant is in a state of doubtful solvency, but the matter must be resolved at the earliest opportunity, i.e. when the notice of appeal was given.
• In ordinary circumstances the respondent ought to confront the defendant by letter to give security.
  If there is no adequate response, then the respondent may apply to court.

3) MAKING THE APPLICATION:

• Whether there was a prior demand for security;
  Whether the motion is made at the earliest opportunity.

Question 9

EXERCISE OF DISCRETION

Bankruptcy or impecuniosity

Answer 9

1) Faridah Begum v Dato’ Miachel Chong:

• O.23 applies to a bankrupt in the same way as it applies to other litigants.
• However, bankruptcy should not be a factor that should prompt the court in making such an order.
• Bankruptcy is just a matter which the court may, and in a proper case should, consider in exercising a discretion where power to make an order is established

2) Ooi Meng Khin v Amanah Scotts Properties (KL) Sdn Bhd:
- FC held that although impecuniosity can be a ground to order an appellant to furnish security for costs, still, the court must also consider other circumstances in exercising its discretion.

Question 10

EXERCISE OF DISCRETION

Merits of the case

Answer 10

Porzelack KG v Porzelack (UK) Ltd:

• In evaluating the merits of the application for security for costs, the court is always careful to avoid any attempt at a detailed investigation into the merits of the case.
• It is not a right course to adopt on an application for security for costs since the decision whether or not to order security for costs is necessarily made at an interlocutory stage on inadequate material and without any hearing of the evidence.
• However, if it can clearly be demonstrated that the plaintiff is likely to succeed, in the sense that there is a very high probability of success, then that is a matter that can properly be weighed in the balance.
• Similarly, if it can be shown that there is a very high probability that the defendant will succeed, that is a matter that can be weighed.

Question 11

SECURITY FOR COSTS

Procedures to apply for security for costs

Answer 11

O.23, r.1(2B) & (2C):

• Mode:
• Service:
• Affidavit:
• Service of affidavit: