An appeal does not automatically operate as a stay of proceedings; parties must demonstrate special circumstances to justify such orders.

JUDGMENT

Ahmad Fairuz Zainol Abidin J:

Introduction

[1]Vide enclosure 7, the 1st and 2nd Defendants prayed for all proceedings in the present suit be stayed pursuant to O 3 r 5 and O 92 r 4 of the Rules of 2012 pending the disposal of their appeal to the Court of Appeal against an order dated 9 February 2021 ("Leave Order") obtained in Kuala Lumpur Originating Summons No.: WA-24NCC-359-08/2020.

[2] After hearing parties, this Court dismissed the application. The reasons for this Court's decision are outlined below.

Background facts

[3] The 1st and 2nd Defendants are the shareholders and directors of the Plaintiff company ("the Company"). They collectively own a 65% stake in the Company. The other shareholders are Goh Swee Boh @ Goh Cheng Kin ("GCK") and Goh Tze Chien ("GTC")

[4] This present action is a derivative action. It was filed in the name of the Company pursuant to the Leave Order obtained by GCK and GTC in Originating Summons No. WA-24NCC-359-08-2020 ("Leave Application") under s 347 and s 348 of the Companies Act 2016 ("the Act").

[5] The Learned Judicial Commissioner allowed the Leave Application on 9 February 2021 which resulted in the Leave Order. In granting the Leave Order, the Court also made among others the following orders:

[5.1] GCK and GTC were allowed to inspect and thereafter take copies of, records and documents of the Company in relation to the Company's accounts;

[5.2] The Company, via the Defendants, shall allow GCK and GTC to inspect the original copies of the aforesaid documents;

[5.3] The Company shall pay legal fees of RM50,000.00 as the initial fees for the commencement of the derivative action; and

[5.4] The Company shall pay a sum of RM25,000.00 into GCK and GTC's solicitors' disbursement account for the purpose of paying the accountant's charges and fees to inspect the aforesaid documents.

[6] Dissatisfied with the Leave Order, the Company (the Defendant in the Leave Application) filed an appeal to the Court of Appeal.

[7] Pursuant to the Leave Order, the Company commenced the present Suit on 10 March 2021. The 1st and 2nd Defendants subsequently filed enclosure 5 to have the proceedings stayed pending the disposal of their appeal.

Parties' contention

[8] The 1st and 2nd Defendants submitted that they are special circumstances which warrant a stay of proceedings. In resisting enclosure 7, the Company submitted that the 1st and 2nd Defendants failed to show any exceptional reason to stay the proceedings.

Analysis and findings of the Court

[9] An appeal in itself does not automatically operate as a stay. This is provided for in O 55 r 16 of the Rules of 2012:

16. Stay of execution

(1) An appeal shall not operate as a stay of execution under the decision appealed against except in so far as the Court appealed from or the High Court may order, and any application for stay shall be made in the first instance to the Court appealed from.

[10] This is trite law and is also reiterated in the landmark case of Kosma Palm Oil Mill Sdn Bhd & Ors v. Koperasi Serbausaha Makmur Bhd, 2003 MarsdenLR 1713 ; by Augustine Paul FCJ:

"An appeal shall not operate as a stay of execution unless the Court so orders."

[11] The only exception to entitle a party to a stay is if he has demonstrated that there exist special circumstances.

[12] It is for this reason that Counsel for the Defendants argued that the special circumstances that existed were:

i. The authority of GCK and GTC to bring the present Suit in the name of the Company hinges upon the Leave

Order. The Leave Order is the subject matter of the appeal;

ii. The appeal against the Leave Order would be rendered nugatory and meaningless if a stay of proceedings is not ordered because the proceedings would have proceeded to a much-advanced stage and much time and resources would have been wasted by the Court and the parties;

iii. There are other deserving litigants which the Court may better spend its precious judicial time on rather on this Suit which may ultimately become a nullity if t