Ian HC Chin J:

Introduction

On 17 January 1998 the Government of Sarawak ("the applicant") took out this application for security for costs under s. 13(6)(a) of the Arbitration Act 1952 , and under s. 351(1) of the Companies Act 1965 , to be furnished by Sami Mousawi-Utama Sdn Bhd ("the respondent"), which is under liquidation, in relation to a pending arbitration ("arbitration").

Facts Of Case

The respondent is in the arbitration proceeding claiming against the applicant a sum of RM17 million under a consultancy service agreement made on 26 October 1984 ("the agreement"). The claim asserted by the respondent is for "outstanding professional fees for the design of Phase II, Phase III and Islamic details and decoration for Phases II and III of Mesjid Negeri Sarawak and Islamic Cultural Centre at Petra Jaya Kuching". The services that were provided upon which the respondent based its claim were elaborated by the respondent through an affidavit of its liquidator Ng Pyak Yeow, affirmed on 25 March 1998, in these terms: "the consultancy services to be provided by the [respondent] outstanding for the whole project and not just for the phases that are carried out. Appendix A and F to the said agreement specifies that the scope of the Consultancy Services begins with the preparation of the architectural schematic and outline design drawings and continues right through to the completion of construction." Datuk JC Fong, the Honourable Sarawak State Attorney-General, who appeared as counsel for the applicant, contended that those terms and other provisions in the agreement properly described the services to be rendered by an architect, engineer and surveyor as spelt out in the respective Architects Act 1967 , Registration of Engineers Act 1967 and the Quantity Surveyors Act 1967 . However, Mr. Chong Siew Chiang, learned counsel for the respondent, contended that the services rendered were for consultancy services and not services rendered by architects or engineers or surveyors. The differing view is relevant to the question of whether the respondent has a good arguable case. The applicant contended that the claim is not bona fide or that it is not a good arguable case because the respondent had not been registered as architects or engineers or surveyors under the relevant legislation relating to the three professions and therefore cannot claim the fees such being prohibited by the legislations.

It was a result of the claim by the respondent for "consultancy fees", a term used by learned counsel for the respondent, that it was referred to arbitration and which resulted in the appointment of three arbitrators who had since commenced preliminary hearings. The retainer fee for the arbitrators was fixed at RM150,000 with a refresher fee of RM12,000 per day. I turn now to the issues.

The Contentions

The matters that the court should take into account when deciding whether to order security for costs are set out in Keary Developments Ltd v. Tarmac Construction Ltd & Anor. [1995] 3 All ER 534, 539-540, viz.:

1. As was established by this court in Sir Lindsay Parkinson & Co Ltd v. Triplan Ltd [1973] 2 All ER 273, [1973] QB 609, the court has a complete discretion whether to order security, and accordingly it will act in the light of all the relevant circumstances.

2. The possibility or probability that the plaintiff company will be deterred from pursuing its claim by an order for security is not without more a sufficient reason for not ordering security (see Okotcha v. Voest Alpine Intertrading GmbH [1993] BCLC 474 at 479 per Bingham LJ, with whom Steyn LJ agreed). By making the exercise of discretion under s. 726(1) conditional on it being shown that the company is one likely to be unable to pay costs awarded against it, Parliament must have envisaged that the order might be made in respect of a plaintiff company that would find difficulty in providing security (see Pearson v. Naydler [1977] 3 All ER 531 at 536-537, [1977] 1 WLR 89