My company is based overseas. Must it pay security for costs to sue in Malaysia?

Your company is incorporated in Singapore, Hong Kong or elsewhere, and a Malaysian customer owes it money. You file a claim in Malaysia, and the defendant's first move is an application asking the court to order you to put up security for its legal costs. This is a common step in cross-border cases, and it can be prepared for.

What is security for costs?

If a plaintiff loses a civil case, the court usually orders it to pay part of the defendant's legal costs. A defendant sued by someone with no assets in Malaysia worries that such a costs order could never be enforced. Security for costs deals with that worry: the plaintiff is ordered to deposit money in court, or give another form of security the court accepts, before the case goes further.

When can the court order it?

Under Order 23, rule 1 of the Rules of Court 2012, on the defendant's application, the court may order security if it appears that:

• the plaintiff is ordinarily resident out of the jurisdiction;
• the plaintiff is a nominal plaintiff suing for someone else's benefit and may be unable to pay costs;
• the plaintiff's address is not stated, or is wrongly stated, in the writ (unless this was innocent); or
• the plaintiff changed address during the case to evade the consequences of the litigation.

Even where a ground exists, the court orders security only if, having regard to all the circumstances, it thinks it just to do so.

For companies, section 580A of the Companies Act 2016 adds a separate ground: where a company is the plaintiff and credible testimony gives reason to believe it will be unable to pay the defendant's costs if the defendant succeeds, the court may order sufficient security and stay the proceedings until it is given. This applies to Malaysian companies too, not only foreign ones.

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What does the court consider?

The court looks at the whole picture. Matters commonly weighed include:

• whether the plaintiff has assets in Malaysia that a costs order could be enforced against;
• the apparent strength of the claim and of the defence, judged at a general level;
• whether the application is being used oppressively to stifle a genuine claim;
• whether the defendant's own conduct caused the plaintiff's difficulties;
• delay in making the application; and
• whether a costs order could be enforced where the plaintiff is based, for example under reciprocal arrangements.

The amount is a matter for the court. It is usually a proportion of the costs the defendant is likely to incur, and it may be ordered in stages as the case progresses.

How can a plaintiff respond?

1. Show assets in Malaysia: property, bank balances or other assets within reach of enforcement.
2. Offer an alternative: a bank guarantee or an undertaking from a Malaysian party, if acceptable to the court.
3. Challenge the amount: an inflated estimate of costs can be contested with a realistic breakdown.
4. Point to the strength of the claim and to any delay by the defendant.
5. Comply on time if security is ordered, or the action may be stayed or dismissed.

Example

A Singapore trading company sues a Johor distributor for unpaid invoices. The distributor applies for security because the company has no office or assets in Malaysia. The company files an affidavit showing its contracts, the distributor's signed delivery orders and the debt's age. The court orders a modest sum to be paid into court in stages, and the claim proceeds.

Common mistakes

• Ignoring the application, which can lead to an order for a large sum.
• Treating security as a penalty. It is protection for costs, not a finding against you.
• Missing the deadline to provide security after it is ordered.
• For defendants: applying late, after much of the case has been run.

When to speak to a lawyer

Speak to a lawyer before suing in Malaysia from overseas, so the risk of a security application is factored in, or as soon as you receive one. See our civil litigation page; you can also contact us.

Frequently asked questions

Does a Malaysian individual living overseas face the same risk?

Yes. The test under Order 23 is being ordinarily resident out of the jurisdiction, not nationality.

Do I get the security back?

If you win, or the case ends without a costs order against you, the security is normally released, subject to the court's directions.

Can a defendant also be ordered to give security?

Security for costs is generally sought from a plaintiff. A defendant who brings a counterclaim may be treated like a plaintiff for that claim.

Sources & fact check

Legal points in this article were checked against the primary sources below. The law can change; this is general information, not legal advice.

1. Rules of Court 2012 (P.U.(A) 205/2012), text published by the Malaysian Bar, including Orders 12, 13, 18, 19 and 93
2. Companies Act 2016 (Act 777), AGC Laws of Malaysia
3. Office of the Chief Registrar, Federal Court of Malaysia (Judiciary portal)

Fact-checked on 17 Oct 2026