388. Security for costs Flashcards
- Security for costs
Costs
General overview
[388.01] Section 388 allows a defendant who has been sued by a corporation in any action of other legal proceeding to apply to court for security for costs, if there is credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his defence.
Corporation
[388.02] As defined in s 4, a corporation includes a foreign company.
Foreign company’s bona fide claim
[388.03] The plaintiff, a Malaysian company, sued the respondent suppliers for damages for misrepresentation and breach of contract. The suppliers counterclaimed on a dishonoured cheque for RM17,720 issued by the company. They also applied for security for costs against the Malaysian company on the ground that it was ordinarily resident outside jurisdiction. It was held that under Order 23 r 1(1)(a) of the Rules of the Supreme Court 1996 , the condition which had to be satisfied before the court proceeded to exercise its discretion to order security for costs was whether it appeared to the court that the plaintiff was ordinarily resident out of the jurisdiction. Under s 388, the condition was whether it appeared by credible testimony that there was reason to believe that the plaintiff would be unable to pay the costs of the defendant if successful in his defence. Essentially, whether the discretion was one under Order 23 r 1(1)(a) or under s 388, the same principles are applicable. The relevant factors to consider are that firstly, the plaintiff has shown that it had a bona fide claim against the suppliers with reasonab le prospect of success on its claim. In view of the prevailing economic condition, it was unable to provide security for costs as ordered, and such an order if remained would undoubtedly stifle its claim. Moreover, the plaintiff was still carrying on business in Malaysia and it was open to the suppliers, if they succeeded in this action, to enforce the order for payment of costs the re. Hence, security for costs was not ordered against the plaintiff
Would order for security of costs be oppressive
[388.04] An order for security for costs would be oppressive against innocent sub-contractors whose claims wholly depend on the arbitration: Gateway Land Pte Ltd v Turner (East Asia) Pte Ltd [1987] SLR(R) 746; [1987] SGHC 54. In exercising the discretion granted by s 388 to order a company to provide security for costs in an action where there was credible testimony giving rise to reason to believe that the company would be unable to pay the defendant’s costs if the action failed, the court had to consider all relevant circumstances, including (a) whether the company’s claim was bona fide and not a sham; (b) whether the company had a reasonably good prospect of success; (c) whether there was any admission by the defendants that the money claimed was due; (d) whether the application for security was being used oppressively; (e) whether the company’s want of means had been brought about by the defendants; and (f) the lateness of the application which may show an attempt to thwart the plaintiff’s claim
