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2023 MarsdenLR 1909
COURT OF APPEAL PUTRAJAYA
PERBADANAN PENGURUSAN CITY PLAZA – Appellant
Versus
SIGMA ELEVATOR (M) SDN BHD – Respondent
[Civil Appeal No: J-02(C)(A)-2437-12/2021]
The court emphasized that in applications for security for costs, the merits of the underlying claims must be considered alongside financial capability, ensuring a balanced approach to justice.
Headnote:(A) Arbitration Act 2005 - Section 11 - Application for Security for Costs - Plaintiff sought RM400,000.00 security for costs against Defendant due to insolvency concerns - High Court ruled in favor of Plaintiff, citing Defendant's inability to pay costs from prior orders - Defendant appealed, arguing the merits of its arbitration claim were not considered. (Paras 2, 4, 14, 38)
(B) Security for Costs - The Court found the High Court erred in not considering the merits of the Defendant's arbitration claim and financial capability, which are relevant factors in security for costs applications - The appellate court emphasized that the exercise of discretion in such matters should not be disturbed unless legally wrong. (Paras 11, 27, 30, 36)
(C)
Findings of Court:
The learned JC's ruling was set aside, allowing the Defendant's appeal and highlighting the necessity of considering all relevant factors, including the legitimacy of the Defendant's claims. (Paras 6, 37)
(D)
Issues: Whether the learned JC properly considered the Defendant's financial capability and the merits of its arbitration claim in ordering security for costs. (Paras 14, 38) (E)
Ratio Decidendi: The appellate court concluded that the learned JC failed to consider relevant factors, including the Defendant's arbitration claim, thereby rendering the order for security for costs legally incorrect. (Paras 36, 42) (F)
Result: The Defendant's appeal was allowed, and the High Court's order was set aside.
Based on the provided legal document, this case is primarily centered around the application for security for costs under Section 11 of the Arbitration Act 2005, rather than under Order 23. The case involves a dispute over whether the court should order a party to provide security for costs during arbitration proceedings, considering factors such as the financial capability of the defendant and the merits of the arbitration claim (!) (!) (!) .
The court's analysis and decision focus on the exercise of discretion in granting security for costs under the relevant statutory provisions, and the case discusses the considerations that should be taken into account when making such an order, rather than the procedural rules under Order 23. Therefore, the case is about security for costs under the applicable section of the Arbitration Act 2005, not specifically under Order 23.
| Table of Content |
|---|
| 1. introduction to the case and application. (Para 1 , 2 , 3) |
| 2. high court's findings on defendant's financial status. (Para 4 , 5) |
| 3. defendant's appeal against high court decision. (Para 6 , 7) |
| 4. chronology of events leading to the case. (Para 8 , 9 , 10) |
| 5. law regarding security for costs. (Para 11 , 12) |
| 6. defendant's challenges to the high court's ruling. (Para 14 , 15) |
| 7. pivotal ground for appeal regarding discretion. (Para 16 , 17) |
| 8. consideration of relevant factors in security for costs. (Para 18 , 19 , 20) |
| 9. counterarguments from plaintiff's counsel. (Para 21 , 22) |
| 10. plaintiff's claims about the learned jc's considerations. (Para 23 , 24) |
| 11. relevance of defendant's arbitration claims. (Para 25 , 26) |
| 12. merits of defendant's arbitration claim and its relevance. (Para 27 , 28) |
| 13. court's view on merits and relevance in security for costs. (Para 29 , 30) |
| 14. determination of the learned jc's errors. (Para 31 , 32) |
| 15. considerations in the learned jc's decision. (Para 33 , 34) |
| 16. conclusion on the jc's exercise of discretion. (Para 35 , 36) |
| 17. final conclusion on the appeal. (Para 37) |
Introduction
[1] The parties hereinafter shall be referred to as they were before the Johor Bahru High Court in Saman Pemula No: JA-24C(ARB)-1-07-2021.
[2]Vide Saman Pemula No: JA-24C(ARB)-1-07-2021 abovesaid, the Plaintiff (Sigma Elevator (M) Sdn Bhd) had applied for Security for Costs in the sum of RM400,000.00 against the Defendant (Perbadanan Pengurusan City Plaza) pursuant to s 11 of the Arbitration Act 2005 ( AA 2005).
[3] On 28 November 2021, the learned High Court Judicial Commissioner (JC) allowed the Plaintiff's said application with Costs and ordered the said security sum be paid to the Plaintiff's solicitor as a stakeholder.
The Findings And Rulings Of The High Court Dated 28 November 2021
[4] Based on the Grounds of Judgment (GOJ), the learned JC ruled that there is reasonable doubt about the Defendant's ability to pay costs if the Defendant is unsuccessful at the arbitration. His Lordship's ruling/order is founded on the following findings:
(i) that the Defendant is insolvent, as admitted by the Defendant, and that its account has been frozen. Its audited account for 2019 showed a deficit (paras 14-16 of the GOJ referred to). The learned JC referred to, amongst others, the cases of Ling Khee Ming v. Ling Shew Kue @ Ling Chai Yuen & Anor [2018] 5 MLRA 529; [2018] 6 AMR 550 and Skrine & Co v. MBF Capital Bhd & Anor And Other Appeals ; ;
(ii) that it is undisputed that the Defendant failed to pay costs ordered/ awarded earlier to the Plaintiff, amounting to RM80,000.00, and no cogent reason was given by the Defendant for such failure (paras 18-21 of the GOJ referred). The learned JC referred to, amongst others, the case of Sagajuta (Sabah) Sdn Bhd v. Trane Malaysia Sales & Service Sdn Bhd and
(iii) as to the amount for security, based on the fact that the arbitration claim is for RM5 million, the Adjudication Decision (AD) sum is RM1 million plus, and previous costs of RM80,000.00, the learned JC was of the view that it was fair and reasonable (para 23 of the GOJ referred to).
[5] Dissatisfied with the aforementioned decision/order, the Defendant appeals to the Court of Appeal. Hence, this Appeal before us.
Our Decision/Order
[6] After having appraised the Appeal Records and considering the submissions by the learned Counsels for both sides, we unanimously found merits in the Defendant's appeal. Hence, we accordingly allowed the Defendant's Appeal herein with Costs of RM5,000.00, subject to the allocator. Accordingly, the order of the learned JC is, thus, set aside.
[7] We allowed the Defendant's appeal on the following grounds.
Chronology Of Events
[8] The relevant chronology of events leading to the Plaintiff filing the application (Saman Pemula No. JA-24C(ARB)-1-07-2021) is as follows:
(i) vide an Offer Letter dated 22 December 2014, the Defendant offered a contract titled "Proposed Lift Moderni
