Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 MarsdenLR 1934

HIGH COURT MALAYA KUALA LUMPUR
NAUTILUS TUG & TOWAGE SDN BHD – Appellant
Versus
DATO SRI SURESH EMMANUEL ABISHEGAM & ORS – Respondent
[Writ Summons No: WA-22NCC-403-06/2024]

Petitioner Advocates:Lim Chee Wee,Wee Hee,Kuljeet Kaur Sidhu Brar Kulwindar Singh,Emily Ho Mei Li ,Respondent Advocate: Kanarasan Ghandinesan

Security for costs can only be ordered against named plaintiffs in derivative actions, not non-parties, without demonstrated exceptional circumstances.

Headnote:(A) Companies Act 2016 - Section 348 - Rules of Court 2012 - Order 23 - Security for costs in derivative actions - Applicant's request for security for costs against a non-party dismissed - Court held that non-party does not fall under provisions allowing security for costs against plaintiffs; discretion to order costs against third parties requires exceptional circumstances. (Paras 6, 12, 20, 24, 52)

(B) Derivative action - Nature of claims arising from damages against the company - Court must carefully assess bona fides and merits of derivative actions before imposing security for costs - Prior order allowing derivative action indicates claim is valid and in good faith. (Paras 24, 54, 55)

(C) Judicial discretion - The court's discretion to order security for costs is restricted to named plaintiffs, and not extended to those controlling actions in a derivative capacity - Arguments for imposing security must demonstrate exceptional circumstances to be valid. (Paras 12, 28, 32)

Facts of the case:
The defendants applied for security for costs against the second defendant in a derivative action initiated by a plaintiff authorized to control proceedings on behalf of a company. Grounds included absence of defendant's assets in jurisdiction and financial incapacity to pay costs.

Findings of Court:
The application was dismissed as the court found insufficient grounds established by defendants to justify granting security for costs against the non-party.

Issues: The major legal questions centered around authority for seeking security for costs against a non-party and the appropriateness of the circumstances leading to such a request.

Ratio Decidendi: The court emphasized that security for costs can only be ordered against named plaintiffs and that exceptional cases must be evidenced for security against third parties.

Result: Application dismissed with no order as to costs.

Judgement Key Points

Key Points: - The court held that security for costs can only be ordered against the named plaintiff (the company) in derivative actions; non-parties (e.g., Timor) are not covered by O 23 r 1 and require exceptional circumstances for any costs order against them (!) (!) (!) . - The court emphasized that leave to institute a derivative action is a final order and that security for costs against non-named parties should not be granted absent exceptional circumstances; the Defendants’ application to secure Timor’s costs was dismissed (!) (!) (!) (!) . - The decision reiterates the factors for security for costs: bona fides, prospects of success, residency/assets, and the potential to stifle genuine claims; these are balanced case-by-case and do not automatically justify costs against a non-party in derivative actions (!) (!) (!) (!) . - The court cites that the proper party to be subjected to security for costs in derivative actions is the named plaintiff (the company), not the derivative applicant who obtained leave, in contrast to some foreign jurisdictions (!) (!) . - The judgment states that the British/English approach allows third-party security only under special/exceptional circumstances, and Malaysian rules have not extended security for costs to third parties like Timor (!) (!) . - The court left open the possibility to revisit security for costs after the derivative action is heard, but at present none were made against Timor (!) . - The judgment references that Atan J’s leave decision was not to be lightly treated; the derivative claim is bona fide and in the company’s best interests (!) (!) . - The decision notes that security orders for third parties are exceptional and not automatic, citing international authorities and comparative law (!) (!) .

How to determine when security for costs can be ordered against non-parties in derivative actions?

What is the court's stance on applicability of Order 23 of the Rules of Court 2012 to derivative actions and third parties?

What are the exceptional circumstances required to order security for costs against a non-party in derivative actions?

Table of Content
1. application for security for costs against timor. (Para 1 , 2 , 3 , 4)
2. court's discretion on security for costs. (Para 5 , 11 , 12 , 27)
3. bona fide nature of the derivative claim. (Para 6 , 7 , 20 , 56)
4. security for costs not automatic for foreign plaintiffs. (Para 8 , 10 , 25 , 57)
5. final dismissal of the application for security for costs. (Para 46)

Mohd Arief Emran Arifin J:

(Enclosure 23)

A. Introduction

[1] This is the application of the 2nd, 3rd, 4th and 7th Defendants for security for costs against Dato' Seri Timor Shah Rafiq ("Timor").

[2] Timor had initiated an application for leave to institute a derivative action on behalf of the Plaintiff against the Defendants, inter alia, for alleged breaches of the Defendants' duties to the Plaintiff. This application was heard by Justice Atan and on 23 May 2024 was given leave to institute these proceedings in the Civil Suit No: WA-24NCC-629-11/2023 [Dato' Seri Timor Shah Rafiq v. Nautilus Tug & Towage Sdn Bhd [2024] MLRHU 1794; [2024] 3 MLJ 433; [2024] 10 CLJ 757]. Justice Atan had made the following, inter alia, orders:

"(3) The Plaintiff be authorised to control the conduct of the derivative proceedings;

(4) The management fee payable by the Defendant to Azimuth Marine Sdn Bhd be reduced to USD 8,000.00 per month pending final resolution of the derivative proceedings initiated by the Def endant against Dato' Sri Suresh Emmanuel Abishegam, Dato' Ahmad Johari Bin Abdul Razak, Ajaib Hari Dass, Dato' Abd Latiff Bin Ahmad, Jaya Sudhir A/L Jayaram, Mak Lin Kum, Ahmad Lutfi Bin Abd Latiff, Dato' Sri Abd Rahim Bin Jaafar and Azimuth Marine Sdn Bhd.;

(5) The Defendant pays all reasonable legal fees and disbursements incurred by the Plaintiff in connection with this application or pending the grant of leave or any other interim relief on a full indemnity basis;

(6) The Defendant pays the costs incurred by the Plaintiff for the derivative proceedings to be initiated on behalf of the Defendant against Dato' Sri Suresh Emmanuel Abishegam, Dato' Ahmad Johari Bin Abdul Razak, Ajaib Hari Dass, Dato' Abd Latiff Bin Ahmad, Jaya Sudhir A/L Jayaram, Mak Lin Kum, Ahmad Lutfi Bin Abd Latiff, Dato' Sri Abd Rahim Bin Jaafar and Azimuth Marine Sdn Bhd on a full indemnity basis;"

[3] The grounds relied on by the said Defendants in seeking this application are summarized as follows:-

(i) That Timor is ordinarily out of the jurisdiction of this Court. He is a resident of California, United States.

(ii) That Timor does not have assets within the jurisdiction of this Court.

(iii) That Timor is not within a jurisdiction where the First Schedule of the Reciprocal Enforcement of Judgments Act .

(iv) That Timor is financially impecunious and is unable to pay the award of costs, if any, is granted against him.

(v) That the High Court in the Civil Suit No: WA-22NCC-151-03/2023 [Nautilus Tug & Towage Sdn Bhd v. Dato' Seri Suresh Emmanuel Abishegam & Ors; Dato' Wan Mohamed Yaccob Dato' Wan Sailadin (Third Party) [2025] MLRHU 360; [2025] 6 CLJ 623] had granted security for costs against him to the sum of RM120,000.00 for each application filed by the Defendants in those proceedings.

(vi) Indemnity orders entered by Atan J do not preclude the application for security for costs against Timor.

[4] The Defendants seek the sum of RM1,000,000.00 as security for costs.

B. Decision Of This Court

[5] After hearing parties, this Court decided to dismiss the application with no order as to costs. This Court finds that the Defendants have failed to show that the facts of this case, as disclosed in the affidavits before this Court, fall within the circumstances laid down under O 23 of the Rules of Court 2012. I also do not find that this Court should exercise its inherent powers under O 92 r 4 of the Rules of Court 2012 to provide security for costs as suggested by the said Defendants. My reasons for this decision are as stated in the following paragraphs.

C. Applicable Law — Order 23 Of The Rules Of Court 2012

[6] The l

Click Here to Read the rest of this document