Historically, security for costs was a procedure to prevent an abuse of process whereby a losing plaintiff fails to pay costs to the defendant. It was therefore primarily a defensive move to avoid being out-of-pocket by the defendant. However, this measure has evolved with time and some defendants have tactically utilized it as a sword to defeat genuine claims.

An application for security for costs can be made pursuant to O 23 Rules of Court 2012 or s 580A Companies Act 2016. In any event, the Court has the inherent jurisdiction to make any order for security for costs. One classic example of the exercise of inherent jurisdiction can be seen in the High Court case of Customer Loyalty Solutions Sdn Bhd (in liquidation) v Advance Information Marketing Bhd & Anor [2017] MLJU 1919 which took place prior to the enactment of s 580A of the Companies Act 2016. In Customer’s case, despite the fact that the unamended Companies Act 2016 removed the provision for security for costs against impecunious companies, the Court held that there was no abrogation of the powers of the Courts to order security for costs.   

Two recent security for costs applications  may be of interest – the first one by the English High Court pertains to arguments involving the Covid-19 pandemic; the second case involves security for costs being ordered against a foreign rape victim suing a Malaysian inspector.  

International Pipeline Products Ltd v IK UK Ltd and others [2020] EWHC 1602 (Ch) 

This is a case where the impact of the Covid-19 epidemic (“Covid-19”) was raised in support of the application for security for costs.  

Brief background 

The Claimant sued the Defendants who left their employment to establish a new competing company. The Claimant alleged that the 2nd to 8th Defendants being ex employees had stolen equipment, misappropriated confidential information and acted to conceal their actions. It was further alleged that the Defendants conspired to procure customers and employees of the Claimant whilst utilizing the Claimant’s confidential information.

Several Defendants filed for security for costs on the basis that the Claimant was impecunious. In arguing for such security, the Defendants requested the Court to take into account the looming economic downturn caused by the Covid-19 pandemic. To substantiate this point, the Defendants submitted various reports on the impact of the Covid-19. 

The Court rejected the Covid-19 argument. According to the deputy judge, he was unable to conclude that the impact of Covid-19 including any economic downturn or the current state of the oil and gas industry would detract the Claimant from paying costs to the Defendants. In doing so, the deputy judge took into account that although there was an oversupply of oil, there ought not be any impact to the Claimant’s business of pipe maintenance and repair which would still be needed for moving oil and gas for storage purposes. 

Nandine-Erdene Khoskhulug lwn Hazrul Hisham bin Ghazali & Anor [2021] MLJU 529 

This is a case where the Plaintiff was ordered to pay RM70,000.00 as security to sustain her civil suit against a police inspector who had allegedly raped her.  

Brief background 

The Plaintiff was a foreigner (Mongolian) who was allegedly abducted and raped by a police inspector during the first Movement Control Order implemented in Malaysia. The Plaintiff proceeded to file suit against the police inspector for trespass to person and false imprisonment, seeking special, general, punitive and exemplary compensation against the police inspector. 

The police inspector applied for security for costs seeking RM70,000.00 from the Plaintiff on the basis that the Plaintiff is a Mongolian citizen without assets in Malaysia and that he has a reasonable chance to succeed in his defence, thus creating a risk that he may not be able to claim costs should he succeed in defending the claim.  

The Court allowed the application and ordered the Plaintiff to pay security for costs.

Commentary 

As may be expected, the case of Nandine made international headlines. Eventually, the Plaintiff resorted to crowdfunding to comply with the security for costs ordered. This case has been widely criticised for the usage of security for costs as a tactical sword to stifle a rape victim’s pursuit of justice. 

Conclusion

The Courts possess an unfettered discretion to order security for costs. Whilst an application for security of costs may be important to protect a defendant against frivolous and unmeritorious claims, at the same time the Courts ought to avoid injustice and prevent the stifling of genuine claims by use of this tactical procedure. It is ultimately the Court’s duty as the protector of justice to ensure that security for costs is not wielded as a tactical sword instead of being used merely as a shield, as intended. After all, ultimately justice needs to be served.  

Author : Jaslyn Saw 
Email : [email protected]