1. ) Perfect Channel Sdn Bhd v Xin Shi Resources Sdn Bhd (CA-24NCC(ARB)-2-04/2022)

PERFECT CHANNEL SDN BHD

TAN SRI PHENG YIN HUAH (NRIC NO : 480702-06-5091) ...PLAINTIFF AND XIN SHI RESOURCES SDN.BHD (COMPANY NO : 201501024306 (1149635-T)) ...DEFENDANT GROUNDS OF JUDGMENT

The Plaintiffs’ filed Originating Summon to set aside an Arbitral Award dated 17.12.2020 (“the Award”) that was granted to the Defendant. The Arbitration award was issued by the panel of Arbitrators (“the tribunal”) in Beijing China under the Arbitration Proceedings Case No: X20191868.

The Plaintiffs’ seek this court order to set aside the Award pursuant to Section 37(1)(b)(ii) and 37(2)(b) of the Arbitration Act 2005.

This court has dismissed the Originating Summons on 19.9.2022 with cost of RM5,000.00 to be paid to the Defendant.

The Defendant in this suit has commenced Arbitration Proceedings against the Plaintiff to resolve a dispute of an outstanding payment that is due and to by the Plaintiff to the Defendant under the Toll Rolling Agreements.

The Arbitration Proceedings have commenced on 29.8.2019 and halfway through the arbitration proceeding, the Plaintiffs have proposed to end the dispute through a settlement agreement.

Thus, a Settlement Agreement dated 16.1.2020 (“the Settlement Agreement”) was signed between the parties. Parties have agreed that the Defendant would only withdraw the arbitration proceedings against the Plaintiffs upon receiving the full settlement sum amounting to RM1.65 million.

The pre-trial conference was held on 18.6.2020 where both parties have informed the tribunal regarding their intention to reach a resolution via the settlement Agreement.

During the hearing on 21.9.2020, the tribunal was informed regarding the repayment of RM400,000.00 made by the 1st Plaintiff. Thus, the tribunal is aware of the repayment made.

Both the Plaintiffs have failed to comply with the Settlement Agreement they have failed to pay off the remaining sum before

2.11.2020. Thus, the tribunal has proceeded to grant the Award to the Defendant on 17.12.2020.

Dissatisfied with the said Award, the Plaintiffs then filed in this Originating Summon to set aside the said Award.

The Plaintiffs’ mainly filed this suit to set aside the Award pursuant to Section 37(1)(b)(ii) and Section 37(2)(b) of the Arbitration Act 2005 state as follows; Section 37(1)(b):

An award may be set aside by the High Court only if;

the High Court finds that :-

the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Malaysia; or;

(ii) the award is in conflict with the public policy of Malaysia. Section 37(2)(b)

Without limiting the generality of subparagraph (1)(b)(ii), an award is in conflict with the public policy of Malaysia where-

a breach of the rules of natural justice occurred-

during the arbitral proceedings; or

(ii) in connection with the making of the award.

Thus, through this application it implies that the Award granted by the Tribunal is in conflict with the public policy in Malaysia due to the breach of natural justice during the arbitration proceeding or in connection with the making of the award.

The Plaintiffs, in this suit had merely alleged the presence of conflict in public policy and breach of natural justice without being specific on which actions or instances that caused such breach in the first place.

This court is guided by the Federal Court case of Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198 on the exercise of the court’s residual discretion when confronted with an application to set aside an award grounded on breach of natural justice. The Federal Court has laid down the principle as below: “[53]……

first, the court had to consider:

which rule of natural justice was breached; (b) how it was breached; and (c) in what way the breach was connected to the making of the award;

second, the court must consider the seriousness of the breach in the sense of whether the breach was material to the outcome of the arbitral proceeding;”

The Plaintiffs had not sufficiently particularized the complaint recognizable under the Arbitration Act 2005. There is nowhere written in any of the Affidavits on which rule of natural justice was breached and how it was breached.

The entirety of the Plaintiffs’ averments is that the Tribunal has failed to consider a few payments made by the Plaintiffs in accordance to the Settlement Agreement and has proceeded to grant the Award to the Defendant.

It is clear that during the arbitration hearing on 21.9.2020, the Tribunal was informed regarding the repayment of RM400,000.00 made by the 1st Plaintiff. The Plaintiffs also has agreed to this statement in their Affidavit. Thus, it is undisputed fact that the Tribunal was aware of the payments made and there was a full disclosure with regards to the transactions that has occurred.

With the attendance of all parties during the arbitration process and with the knowledge of the Settlement Agreement, it is absurd to later on come and say that there was injustice in the process of granting the Award to the Defendant.

There has been no suggestion or any sort of statement in the Plaintiffs’ affidavits that the Plaintiff was prohibited by the Tribunal from giving any evidence. Neither does the Plaintiffs say that they were estopped from making representations on any issue that arose during the hearing before the Tribunal.

This court is guided by the locus classicus case of Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 where the Federal Court in this case has laid down the principles of setting aside an arbitration award based on conflict of public policy and breach of natural justice. “[52] The term ‘public policy’ as appears in s 37(1)(b)(ii) of the AA 2005 covers a scope of ‘public policy’ elements as used generally. However, in s 37(2)(b)(ii) the scope is more specific. It specifically categorises a breach of the rules of natural justice which occurred in connection with the making of an award as being in conflict with the public policy of Malaysia. [55]..the concept of public policy generally is itself a broad concept. But in applying the concept for the purpose of setting aside an award under s 37 of the AA 2005, the concept of public policy ought to be read narrowly and more restrictively. The court’s intervention should be sparingly used. The court must be compelled that a strong case has been made out that the arbitral award conflicts with the public policy of Malaysia. As clearly stated by the Court of Appeal in Sigur Ros (with which we agree): ‘The concept of public policy must be one taken in the higher sense where some fundamental principle of law or justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the integrity of the court’s process or powers will be abused’.”

The authority above has clearly explained the threshold in setting aside an Award based on the concept of public policy whereby it must be read more narrowly and restrictively.

This means that the Plaintiffs must be able to proof to this honorable with a strong proof an evidence that there was real breach of natural justice that has occurred which in turn causes the conflict with public policy in Malaysia. Mere assertions are not sufficient to set aside an Award.

In this case, when the Settlement Agreement was reached, the Plaintiffs were granted two grace periods to make payments to the Defendant. The Plaintiffs also had ample time to provide evidence on why the Award should not ne granted by the Tribunal. After considering all the documents and evidence adduced, the Tribunal has proceeded to grant the Award. Thus, there were no breach of natural justice as per asserted by the Plaintiffs.

In accordance to the Jan De Nul’s case, the Plaintiff must be able to proof to this court that there is some element of illegality, where enforcement of the award involves clear injury to public good or the integrity of the court’s process or powers will be abused.

This court is of the view that there is no such illegality in this case which in conflict with the public policy. There is no evidence lead to this element. The Plaintiffs have failed to satisfy the prerequisite requirements in setting aside for conflict of public policy under Section 37 of the Arbitration Act 2005.

On the other hand, if the Plaintiffs were dissatisfied with the award granted by the Tribunal, the Plaintiff will take necessary action soonest as the Tribunal granted the Award. In this case, there was a gap of two years’ time from the date the Award was granted to the date this application was made.

This application was also made only after the Defendant has filed in an application for the Award to be recognize and enforced. Thus, this application is an afterthought action by the Plaintiffs.

This court is also of the considered stand with the Defendant whereby when an Award is granted via an arbitration proceeding, the Court’s intervention shall be minimal. In the presence of a any breach of natural justice, setting aside an arbitral award is not autonomous.

This honorable court refers to judgement in Jan De Nul’s case whereby it was decided that; “[56] Even though the court finds that a breach of the rules of natural justice has been established or that an arbitral award is in conflict with the public policy under s 37 of the AA 2005, it does not necessarily mean that the award must be set aside as a matter of course. The power of the court to set aside an award under s 37 is discretionary and will not be exercised automatically in every case where the complaints are established (see: Kyburn Investments Ltd v Beca Corporate Holdings

The abovementioned authority has clearly stated that even if there is a breach of natural justice of public policy, setting aside the arbitral award is still discretionary and will not be set aside automatically.

Thus, it could be easily understood that in order to set aside an arbitral Award, the Plaintiffs must be able to proof to this court there is a strong case with solid evidence.

In this case, the Plaintiffs have merely stated the presence of breach of natural justice and public policy without any proof presented before this court. The Plaintiffs have also failed to satisfy the threshold in setting aside an arbitration award based on conflict of public policy and breach of natural justice.

This court is also guided by the common practice whereby minimal intervention of the court in the Arbitration process and on the award granted. There are definitely solid reasons as to why parties chose an arbitration proceeding rather than a trial in court to settle the dispute between them. The intervention of the court in setting aside the Award granted would defeat the purpose of the whole arbitration process.

Referring to the court of Appeal case of Tridant Engineering (M) Sdn Bhd v Ssangyong Engineering and Construction Co Ltd [2016] MLJU 599 “[24] In the New Zealand jurisdiction, a similar philosophy of minimal Court intervention also prevails. Bingham J (as he then was) in Zermalt Holdings v Nu-Life Upholstery Repairs [1985] 2 EGLR 14 said: ..As a matter of general approach, the Courts strive to uphold arbitration awards. They do not approach them with meticulous legal eye, endeavouring to pick holes, inconsistencies and faults in awards and with the objective of upsetting or frustrating the process of arbitration award in a reasonable and commercial way, expecting as is usually the case, that there will be no substantial fault can be found with it.

This decision was nothing but an affirmation of the modern approach by the Courts towards the arbitral regime that is being practised widely. When parties have seen it fit to agreed that their disputes to be resolved by an arbitral process rather than the judicial process, the Courts must first and foremost respect and enforce such choice for the simple reason that they had exercised their right of freedom of choice.

Therefore, on these grounds alone, this court has dismissed the Originating Summons on 19.9.2022 with cost amounting to RM5,000.00 to be paid by the Plaintiffs to the Defendant. ZAINAL AZMAN BIN AB AZIZ JUDGE HIGH COURT MALAYA OF KUANTAN PAHANG DARUL MAKMUR DATED : 10 MARCH 2023 Plaintiffs Solicitor : Ms Jean Leong Tetuan Peter Ling & Co B-3A-01, Gateway Corporate Suites Gateway Kiaramas, No.1 Jalan Desa Kiara 50480 Kuala Lumpur. Email : klplc@plc.net.my Ref. : pdl.kl.2151 Defendant Solicitors : Mr Michael Anthony with Ms Denise Chin and Ms Chan Wai Ling Messrs Michael Chai & Co Level 5, Wisma Hong Leong 18 Jalan Perak 50450, Kuala Lumpur Email : mchai@mchai.com.my