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CIVIL PROCEDURE – HIGH COURT ORDERS SECURITY FOR COSTS AGAINST HIDDEN FUNDER – CHAMPERTOUS FEATURES TRIGGER O 23 R 1(2A) ROC

1. Summary and Facts:
In Syed Sazlee bin Syed Hamzah (as executor of the estate of Syed Hamzah bin Syed Abu Bakar, deceased) v Puncak Kenangan (M) Sdn Bhd & Ors [2025] 12 MLJ 937, the plaintiff, Syed Sazlee, sued the defendants as executor of his late father’s estate to recover more than RM21 million in alleged unpaid dividends from Puncak Kenangan Sdn Bhd. The defendants applied for security for costs on the basis that the litigation was funded and controlled by a non-party, Khoo Kiam Chong (KKC). They relied on documents showing the deceased had given KKC a power of attorney, declared 47.5% of his interest was held for KKC, and agreed to transfer 47.5% of his shares to KKC in return for financial help. The defendants argued these documents proved KKC would benefit from the suit and was directing it, while the plaintiff maintained KKC was merely providing a loan.

2. Legal Issues:
• Whether the defendants’ applications for security for costs were filed with undue delay.
• Whether the plaintiff, suing as executor, is a nominal plaintiff.
• Whether the plaintiff can satisfy potential costs.
• Whether KKC is a non-party of the suit.
• Whether an undertaking as to damages is required.

3. Court’s Findings:
• The High Court allowed the application with costs.
• No specific time for filing security for costs as the defendants reasonably waited for disposal of other interlocutory applications and not prejudiced plaintiff due to the timing application.
• The court held that security for costs could be ordered against KKC, the non-party funder controlling the litigation, despite the plaintiff suing as an executor.
• KKC financed and controlled litigation through a share-in-recovery arrangement of 47.5%, not a loan.
• The resembled champerty due to KKC’s control and share of proceeds, supporting the security order.
• The plaintiff failed to prove his ability to pay the cost which led to reduce the amount to avoid stifling litigation, and no undertaking as to damages was required.
• The plaintiff’s address was valid, and the estate held only a RM5,000 car.
• The past unpaid costs indicated a high risk that defendants would not recover.

4. Practical Implications:
This judgment affirms the several principle of laws including;
• The third-party funders are not immune from security for costs.
• The Court will carefully consider control, funding arrangements, and the ability of the plaintiff to pay.
• Proper address and legal representation can protect procedural compliance, as O 6 r 2(e) requirements may not apply if the plaintiff is represented by lawyers.

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