1. ) Pestech Technology Sdn Bhd v Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd (WA-22C-84-12/2024)

PESTECH TECHNOLOGY SDN BHD (COMPANY NO: 201301045990 [1075814-X])

PESTECH INTERNATIONAL BERHAD (COMPANY NO: 201101019901 [948035-U]) …PLAINTIFFS DAN SYARIKAT PEMBENAAN YEOH TIONG LAY SDN BHD (COMPANY NO: 12479-V) …DEFENDANT GROUNDS OF JUDGMENT (Enclosure 3 & 8) Introduction [1] Today’s proceedings involve both Enclosures 3 and 8 which is firstly Pestech Technology Sdn. Bhd. (“PTSB”) together with its parent company, Pestech International Bhd (PIB) (Plaintiffs) application for S/N a/yr/6Af90a5AYB93yZ7pw stay of the arbitration proceedings commenced via the Notice of Commencement of Arbitration Proceedings dated 18.10.2023 until the current proceedings pending in this Court is completely and finally disposed in Enclosure 3 (Enclosure 3) whilst Enclosure 8 is conversely the Defendant’s application pursuant to amongst others section 10 of the Arbitration Act 2005 for all further proceedings in this action be stayed and/or such further or other order which the Court deems appropriate to address the patent abuse attached to the said action (Enclosure 8). Brief Background Facts [2] Pestech Technology Sdn. Bhd. (“PTSB / P1”) together with its parent company, Pestech International Bhd (PIB / P2), entered into a subcontract with Syarikat Pembenaan Yeoh Tiong Lay Sdn. Bhd. (“YTL”) for the electrification works of the Gemas-Johor Bahru Electrified Double Track Project. The Malaysian Government had engaged CRCC CREC CCCC Consortium Sdn. Bhd. as the Main Contractor, which in turn subcontracted the works to SIPP-YTL, a joint venture between YTL and SIPP Rail Sdn. Bhd. S/N a/yr/6Af90a5AYB93yZ7pw [3] On 24 August 2018, YTL awarded PTSB a Letter of Award (“LOA”) for a fixed-price, turnkey contract, which was later formalized through a Subcontract Agreement dated 18th December 2018. [4] Under the agreement, PTSB was responsible for the design, procurement, construction, and maintenance of the Overhead Catenary System (“OCS”) covering a 194.22-kilometer stretch of track, along with the construction of eight Traction Power Supply Buildings and the installation of various electrical distribution and auxiliary systems. The original contract price was RM400 million, and it was later revised through Supplementary Agreement No. 1 (“SA1”) dated 17th August 2019, which restructured the cost breakdown but maintained the overall contract value. [5] A dispute arose due to several alleged breaches by YTL, which severely affected PTSB’s ability to perform under the contract. YTL allegedly imposed a back-loaded payment structure, meaning that payments were concentrated towards the end of the project, which allegedly was a deviation from the industry norm and the terms of the Main Contract. [6] PTSB had allegedly agreed to this structure based on the assumption that the project would be completed within 31 months. However, they S/N a/yr/6Af90a5AYB93yZ7pw allege that there were delays caused by YTL, coupled with its failure to make timely payments, resulting in severe cash flow issues for PTSB. [7] It was also alleged by the Plaintiffs that YTL also failed to disclose a critical Approved Materials List issued by the Ministry of Transport (“MOT”) on 27th July 2018, which specified that only certain materials from pre-approved suppliers could be used. [8] This list was allegedly only furnished to PTSB on 29th October 2018, after the Subcontract had already been executed. PTSB claims that it had initially priced its tender based on different suppliers, and the sudden imposition of the MOT’s restrictions led to increased costs and project delays. [9] Another issue arose when allegedly YTL instructed PTSB on 28th September 2018 to relocate nine Traction Power Supply Substations (“TPSS”) into the Right of Way (“ROW”) due to the Government’s failure to acquire the original land designated for these substations. PTSB had conducted extensive site surveys, soil investigations, and other preparatory work for the originally planned locations. S/N a/yr/6Af90a5AYB93yZ7pw [10] The alleged forced relocation, which was allegedly not initially accounted for in the Subcontract, had caused further delays and additional costs. [11] PTSB submits that YTL had allegedly assured PTSB that these relocation works would be treated as variations, entitling PTSB to additional compensation and time extensions, which PTSB claims YTL failed to honor these commitments. [12] It was alleged that the breaches by YTL extended beyond project execution delays, and YTL failed to compensate PTSB for materials delivered on-site, under-certified completed works, and withheld payments unjustifiably. [13] PTSB thus claimed for variation works and loss and expense due to delays were also rejected, allegedly despite YTL securing extensions of time under its Main Contract. [14] It was further alleged that YTL further refused to reimburse PTSB for Sales and Service Tax (“SST”) amounting to RM4,237,298.43. These alleged failures cumulatively resulted in severe negative cash flow for PTSB, making it allegedly increasingly difficult for the company to meet its financial obligations and sustain operations. S/N a/yr/6Af90a5AYB93yZ7pw [15] On 10th May 2023, YTL served PTSB with a Notice of Termination, alleging that PTSB was insolvent and had failed to meet its obligations under the Subcontract toi which PTSB strongly denies this, asserting that it was never insolvent and that YTL’s claims were baseless. [16] The alleged insolvency was premised on PTSB’s requests for advance payments, which were allegedly necessitated by YTL’s own failure to make timely payments under the Subcontract. [17] PTSB argues that it had secured sufficient funds from overseas in April 2023 to improve its financial standing and was fully capable of completing the project had YTL not wrongfully terminated the contract. [18] Furthermore, PTSB contends that YTL’s claim that PTSB was unable to pay its debts was unfounded, as PTSB had, in fact, made payments to its subcontractors and project staff despite YTL’s financial withholding. [19] PTSB further contends that YTL’s termination of the contract was done in bad faith, given that YTL was aware, in early May 2023, that S/N a/yr/6Af90a5AYB93yZ7pw IJM Corporation Berhad, a competitor in the Malaysian and international rail sector, had become the new shareholder of PIB. [20] PTSB further claims that YTL’s termination came one day after PTSB issued a letter on 9 May 2023 demanding full payment for materials stored at the Taman Emas Warehouse, for which YTL would have faced a significant financial liability. [21] Additionally, the Plaintiffs claim that despite claiming insolvency as the reason for termination, YTL engaged in post-termination discussions with PTSB regarding the possibility of continuing the remaining works under new commercial terms, demonstrating that PTSB was still capable of performing. [22] PTSB also highlights that it had completed 70% of the works at the time of termination and was on track to complete the project by November 2023. [23] The Plaintiffs contend and will contend that the Notice of Termination dated 10.05.2023 was wrongfully issued and/or issued mala fide and/or in contravention to public policy based on the conduct of the Defendant as highlighted in paragraph 14 to 35 of the SOC, which in summary are as follows: - S/N a/yr/6Af90a5AYB93yZ7pw

The Defendant rear loaded payment milestones;

(ii) The dishonest concealment of the Approved Material List from the Government by the Defendant;

(iii) Relocation of the Traction Power Substation;

(iv) Negative Project Cashflow due to the Defendant’s own breach;

Wrongful termination by the Defendant;

(vi) Termination when PTSB was not insolvent;

(vii) Termination actuated in bad faith by the Defendant; and

(viii) Termination premeditated by the Defendant. [24] YTL proceeded to initiate arbitration proceedings against both PTSB and PIB on 11th September 2023. The Plaintiffs argue that certain disputes such as the validity of the termination, allegations of bad faith, and issues related to insolvency fall outside the scope of the arbitration clause and should be resolved by the courts. [25] PTSB and PIB claim that arbitration is unsuitable for determining issues of statutory obligations, fraud, and public policy matters, as these require judicial intervention. S/N a/yr/6Af90a5AYB93yZ7pw [26] As a result of YTL’s actions, PTSB claims that it has allegedly suffered substantial financial losses, including RM36.4 million in prolongation costs due to project delays, RM51 million in variation works, and RM87.4 million in lost profits from the remaining payment milestones. [27] PTSB also seeks damages for the confiscation of five shipping containers, additional materials seized from the Taman Emas Warehouse, and the wrongful withholding of certification payments. [28] PIB also alleges that it has also suffered reputational damage due to YTL’s actions, affecting its ability to secure financing and attract future business opportunities. [29] Both Plaintiffs seek declaratory relief confirming that the termination was wrongful, compensation for financial losses, and damages for bad faith conduct, along with costs and other reliefs as deemed fit by the court. Parties Respective Submissions [30] Pestech Technology Sdn. Bhd. (“P1”) and Pestech International Berhad (“P2”) had argued in support of their application under S/N a/yr/6Af90a5AYB93yZ7pw Enclosure 3 that the arbitration clause in the Sub Contract should be confined to matters concerning contractual performance and obligations and that broader legal principles and statutory obligations extend beyond such scope must be determined by the Courts; in particular P1 and P2 contend that the arbitration clause does not encompass the validity and propriety of the notice of Termination. [31] It is further submitted by P1 and P2 that issues of bad faith and statutory obligations are not suitable to be determined in an arbitration, especially on the issue of insolvency matters which are governed by the Insolvency Act 1967 which they argue as being non arbitrable. [32] To surmise, the Defendant in support of Enclosure 8 has submitted that: -

32.1 Section 18 of the Arbitration Act 2005 regulates the issue of jurisdiction of an arbitral tribunal.

32.2 The contractual relationship between the Defendant herein and P1 was via a sub contract dated 18.12.2018 (Sub Contract) whilst the relationship between P2 and the S/N a/yr/6Af90a5AYB93yZ7pw Defendant was by way of Parent Guarantee issued by P2 to the Defendant (Parent Guarantee).

32.3 There was a Notice of Termination for Default dated 10.5.2023 issued by the Defendant for termination of the Sub Contract upon reliance of the agreed contractual causes or events including that of the defined Insolvency Event therein.

32.4 A demand (“Demand”) was also made thereafter on the Performance Bond (“PB”) issued by Maybank which gave rise to Originating Summons No. WA-24C-92-06/2023 (OS 92) being commenced by P1 to restrain the said Demand.

32.5 OS 92 was dismissed by the High Court and subsequently affirmed by the Court of Appeal and leave by the Federal Court was dismissed.

32.6 In September 2023 and October 2023 respectively, separate notices of arbitration were issued by the Defendant to P1 (PTSB Arbitration) and P2 (PIB Arbitration). S/N a/yr/6Af90a5AYB93yZ7pw 12 32.7 There was subsequent consensual consolidation of the PTSB Arbitration and PIB Arbitration with the approval of AIAC which gave rise to the 2023 Agreed Consolidation Arbitrations.

32.8 In February 2024 there was a Procedural Order No.1 which regulated the 2023 Agreed Consolidation Arbitrations including inter alia the delivery of pleadings as well as the delivery of documents.

32.9 The Defendant then delivered its Statement of Claim dated 1.4.2024 against both P1 and P2 in the said Arbitration Proceedings.

32.10 Thereafter P1 and P2 delivered their separate Defence and Counter Claim dated 7.5.2024 against the Defendant in the said Arbitration Proceedings.

32.11 P1 and P2 had not before this ever gave any notice of any challenge to the jurisdiction or otherwise of the dispute before the said Arbitration Proceedings or to the 2023 Agreed Consolidation Arbitrations. S/N a/yr/6Af90a5AYB93yZ7pw 13 32.12 Between November 2024 and December 2024 P1 and P2 wanted an extension of time to make payment for the Agreed Advanced Preliminary Deposit as they were undertaking a corporate exercise and the Tribunal had, after an exchange of communications between the parties and the Tribunal, acceded to a suspension of the 2023 Agreed Consolidation Arbitrations till 15.1.2025.

32.13 After a change of solicitors, P1 took a conflicting position for the 2023 Agreed Consolidation Arbitrations to be discontinued and for the matter to be placed before the Court. Analysis & Findings [33] It is trite that if there is a prima facie arbitration agreement between the parties, the Court is mandated to grant a stay of the action in Court as per section 10 of the Arbitration Act 2005 which provides: “(1) A court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to S/N a/yr/6Af90a5AYB93yZ7pw arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.” [34] I have from the facts before me observed that the challenge to the 2023 Agreed Consolidation Arbitrations only came about on 7.12.2024. This in my view is a belated delayed challenge on jurisdiction which is more than a year after the PTSB Arbitration and PIB Arbitration respectively were initiated via separate notices of arbitration were issued by the Defendant to P1 (PTSB Arbitration) and P2 (PIB Arbitration) September 2023 and October 2023 respectively. [35] After a careful analysis of the entire chronology of the matter before this Court, it is also my decision that the conduct of both P1 and P2 and its active participation in the same, at least till sometime in November 2024, in the 2023 Agreed Consolidation Arbitrations would preclude it from proceeding in the matter before this Court herein on the ground of estoppel as both P1 and P2 had previously unconditionally submitted to and recognized the 2023 Agreed Consolidation Arbitrations. S/N a/yr/6Af90a5AYB93yZ7pw [36] I am in consonant with legal authorities such as amongst others Cockett Marine Oil (Asia) Pte Ltd v MISC Bhd and Anor appeal [2022] 6 MLJ 786, Abd Rahman bin Sultan & Ors v Federal Land Development Authority & Anor and other appeals [2023] 4 MLJ 318 and Macsteel International Far East Ltd v Lysaght Corruguated Pipe Sdn Bhd and other appeals [2023] 4 MLJ 551 which recognize anti-arbitration injunction as being only given in exceptional circumstances so as to prevent unscrupulous parties to evade or delay the arbitration. [37] Thus upon a thorough consideration of the respective issues and submissions raised by all sides, I am rejecting any arguments on the merits of the alleged contractual disputes between them as I find this Court is not the proper avenue to decide on the same as it is meant to be determined in arbitration as per the respective arbitration agreements in the Sub Contract and Parent Guarantee to which the parties are bound. See Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 MLJ 417 where our Apex Court held: “[33] What the court needs to consider in determining whether to grant a stay order under the present s 10(1) (after the 2011 Amendment) is whether there is in existence a binding arbitration S/N a/yr/6Af90a5AYB93yZ7pw agreement or clause between the parties, which agreement is not null and void, inoperative or incapable of being performed. The court is no longer required to delve into the details of the dispute or difference (see TNB Fuel Services Sdn Bhd). In fact the question as to whether there is a dispute in existence or not is no longer a requirement to be considered in granting a stay under s 10(1). It is an issue to be decided by the arbitral tribunal.” [38] As to the remedy of the alleged ‘winding up’ issues, I find after perusing the issue and dispute in the Statement of Claim filed herein, that the same does not involve insolvency matters per se and thus the contention that this issue is governed by the Insolvency Act 1967 and thus being non arbitrable is, with respect, misconceived and untenable. [39] I further note that the term “Insolvency Event” has been defined in the said Sub Contract but the parties herein are not seeking for the Arbitral Tribunal to decide on whether the issue of a ‘winding up’ arises and thus comes within the Companies Act 1965, but that the thrust of the issue is in fact for the said Tribunal to determine whether one of the limbs in Clause 39 with regards the “Termination” clause exists. S/N a/yr/6Af90a5AYB93yZ7pw [40] Thus, I hold that the decision or the principle enunciated in the said case of Peninsula Education (Setia Alam) Sdn Bhd v BIaxis (M) Sdn Bhd (In Liquidation) [2024] 10 CLJ 216, which was referred to by learned counsel for P1 and P2, is with respect in my decision not applicable before me based on the facts of the case in this Court as in the aforesaid case where it was held inter alia that even though a winding-up of a company has the effect of terminating agreements which the liquidator may not want to affirm and continue with, the arbitration agreement would survive such a termination is rather different from the facts of the matter before me where the Plaintiffs have not been wound up. [41] To surmise, this Court will not allow the proceedings here to stifle the Arbitration proceedings between the parties, with particular regards to the 2023 Agreed Consolidation Arbitrations as I am of the strong opinion the process herein i.e. the OS filed by P1 and P2 is an abuse of the Court’s process. Any speedy and effective resolution of the alleged contractual disputes between the parties should be determined in Arbitration and not here as such actions would tantamount to breaching the respective arbitration agreements. S/N a/yr/6Af90a5AYB93yZ7pw [42] I would refer to and quote the Federal Court in Tindak Murni Sdn Bhd v Juang Setia Sdn Bhd and another appeal [2020] 3 MLJ 545 where the Court held: “For the contractor it was submitted that when cl 34 is read with and in the light of cll 30.2 and 30.3(i), the effect is that disputes on the interim certificates are ‘carved out’ and not subject to arbitration. It was further submitted that the court must consider the contract in its entirety, give effect to every clause and harmonise each clause with the other clauses. However, in making this submission, counsel for the contractor failed and neglected to bring the attention of the court to the clause immediately following upon 30.3(i) namely cl 30.3 (ii) which reads as follows: Disputes of Difference in Respect of Right to Set-Off, to Arbitration In the event of any disputes or differences as to any rights of the Employer to set off or to any counterclaim or any allegations of defective works, materials or goods or for any other reasons then such disputes or differences shall be referred to an arbitrator for judgment under Clause 34.0. It is clear from this clause that the employer enjoys and is entitled to refer any disputes or differences in relation to set offs or S/N a/yr/6Af90a5AYB93yZ7pw counterclaims or any allegations of defective works or for any other reason whatsoever to an arbitrator under cl 34.”

[43] At the end of the day to surmise, I disagree that the arbitration between the parties hereto would be oppressive, vexatious or an abuse of process as claimed by P1 and P2 for the reasons I have mentioned above in my grounds herein and I hereby allow and grant an Order In Terms for prayers 1 and 4 in Enclosure 8. Consequently, I dismiss Enclosure 3 with costs. Dated: 11th day of April 2025 sgd. NADZARIN WOK NORDIN HIGH COURT JUDGE CONSTRUCTION COURT 1 COUNSEL FOR PLAINTIFFS: Dhanaraj Vsudean, Ahmad Nazri Ibrahim & Arun Ganesh Boopalan (Messrs Kamil Hashim Raj & Lim] S/N a/yr/6Af90a5AYB93yZ7pw COUNSEL FOR DEFENDANT: Felix Dorairaj, Logan Sabapathy, Chong Samuel-Man & Vivian Oh (Messrs Dorairaj, Low & Teh] S/N a/yr/6Af90a5AYB93yZ7pw