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MALAYSIA: FOREIGN ENTITY MUST PAY SECURITY COSTS IN ORDER TO INITIATE LITIGATION

29th May, 2019

This case was in relation to two foreign companies whereby Merck KGaA (hereinafter referred to as “the Plaintiff”) which is involved in the business of pharmaceutical, chemical and life sciences and Xtalic Corporation (hereinafter referred to as “the Defendant”) which is involved in the business relating to nanostructured materials with regards to a dispute about the security for costs application in relation to an appeal against the decision of the Malaysian Registrar of Trade Marks.

Background

The Plaintiff had opposed Defendant’s Malaysian Trade Mark Application No. 090111990 for the mark “Xtalic” in Class 2 at the Intellectual Property Corporation of Malaysia (MyIPO). After rounds of written submission, the opposition was dismissed by MyIPO.

The Plaintiff appealed against the decision of MyIPO in dismissing the Plaintiff’s opposition to the Defendant’s trademark application.

The Defendant via its solicitors issued a letter to the Plaintiff’s solicitors requesting payment of security for costs for the Defendant to defend Plaintiff’s appeal. The Plaintiff however, rejected the Defendant’s request. Therefore, the Defendant filed an application in the High Court for an order requiring the Plaintiff to provide security for costs.

Defendant’s arguments

The Defendant relied on the cases of Luminous Crossroads Sdn Bhd v Lim Kong Huat Construction [2002] 5 CLJ 100 and S & S Power Switchgear Ltd v Toprank Corp Sdn Bhd [2005] 2 MLJ 69 whereby the Defendant has a meritorious application because the Plaintiff is ordinarily resident out of the jurisdiction of this Court. Moreover, the Defendant has already succeeded in the originating forum before the Registrar of Trade Marks which gives the Defendant a better prospects of success over the Plaintiff in regards to obtaining security of costs.

Plaintiff’s argument

The Plaintiff contended based on the case of Goldquest International Ltd v Teh Leong Kiat [2003] 2 CLJ 402 whereby the order for security costs is not obtainable as a matter of right against a foreign plaintiff. Besides that, the Plaintiff had also relied on the case of Kasturi Palm Products v Palmex Industries Sdn Bhd [1986] 2 MLJ 10 where Mohamed Dzaiddin J (Later CJ) held that:

“Admittedly under Rule 1(i), security for costs cannot be ordered as of right from a foreign plaintiff but only if the Court thinks it just to order depending on the circumstances of the case.”

Judgement

Based on the arguments from both parties, the court ruled that the Defendant has satisfied the requirement under Order 23 Rule 1(a) of the Rule of Court 2012. With regards to no application made by the Defendant pursuant to regulation 48(1) of the Trade Mark Regulations 1997, the court is of the view that it is irrelevant in this case because that is applicable to and concerned a different forum and has nothing to do with any consequential appeal to the High Court. The court further stressed that the timing of the application with the time lapse of slightly over one month is undoubtedly been done with promptitude.

Furthermore, with the court’s ruling where the High Court followed the English Court of Appeal case of Aeronave SPA and another v Westland Charters Ltd and others [1971] 3 All ER 531 wherein Lord Denning MR held as follows:

“It is usual practice of the courts to make a foreign plaintiff give security for costs. But it does so, as a matter of discretion, because it is just to do so. After all, if the defendant succeeds and gets an order for his costs, it is not right that he should have to go to a foreign country to enforce the order. It is to be noted that Italy is not within the provision of the Foreign Judgements (Reciprocal Enforcement) Act 1933. But even if it were, Kohn v Rinson & Stafford (Brod) Ltd shows that it is not a ground for refusing security. The ordinary rule still remains, that is a matter of discretion.”

The Court had then allowed Defendant’s application and ordered the Plaintiff to pay the security for costs.