Ambico Offshore Sdn. Bhd. v Sapura Fabrication Sdn. Bhd. (BA-22NCvC-382-09/2021)

Content

1 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 DALAM MAHKAMAH TINGGI DI SHAH ALAM DALAM NEGERI SELANGOR DARUL EHSAN, MALAYSIA GUAMAN NO. BA-22NCvC-382-09/2021 ANTARA AMBICO OFFSHORE SDN BHD (No. Syarikat: 951843-V) …PLAINTIF DAN SAPURA FABRICATION SDN BHD (No Syarikat: 83307-K) ...DEFENDAN GROUNDS OF JUDGMENT (Enclosure 5) Introduction [1] This was an application by the Defendant by way of a Notice of Application dated 12.11.2021 for a stay of proceeding of a Writ of Summons dated 29.09.202 (Enclosure 5) pursuant to section 10 of the Arbitration Act 2005, Order 69 rule 10 and Order 92 rule 4 of the Rules of Court 2012 and the inherent power of this Court until the disposal of the arbitration proceedings between the Defendant and the Plaintiff (Stay Application). 27/10/2022 10:09:29 BA-22NCvC-382-09/2021 Kand. 28 2 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 [2] Based on the cause papers, written submissions, and after hearing oral submissions of both parties, I have dismissed this Stay Application and below are the reasons for my decision. Background Facts [3] The Plaintiff Ambico Offshore Sdn Bhd and Defendant Sapura Fabrication Sdn Bhd have entered into several contracts for the provision of services and associated products (Services). At the outset, Defendant engaged Plaintiff for their Services. [4] Clause 1 of the contracts inter alia, defines the word ‘contract’ to mean either the Purchase Order or the Services Order issued by Defendant to the Plaintiff. Clause 6 provides inter alia that Plaintiff is to submit its invoices to the Defendant for payment processing and in the event of any dispute or query on the Plaintiff’s invoices, the Defendant shall notify the Plaintiff of the said dispute or query. [5] Accordingly, in respect of the Services, Defendant issued purchase orders (Purchase Orders) to the Plaintiff. On the last page of each Purchase Order (PO), there is a proviso that states- “Upon acceptance of this PO, the Supplier agrees to Sapura Fabrication Sdn Bhd standard terms and conditions (as per page 5 3 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 of this document or per attached). The company shall be entitled to treat any other terms and conditions introduced by or on behalf of the Supplier as having no effect.” [6] The above ‘standard terms and conditions’ refer to the Standard Terms and Conditions for Supply of Goods (GC) whereby – Clause 26 (b) of the GC reads - “In the event that the Parties are unable to resolve such dispute or difference within twenty-eight (28) days set forth above, the matter shall be submitted to arbitration in accordance with and be subject to Rules of Asian International Arbitration Centre. The place of arbitration shall be Kuala Lumpur and all arbitration proceedings shall be conducted in the English Language. [7]

Preamble

Pursuant to the above contracts with the Defendant, it was agreed that Plaintiff was to provide Defendant with Services as particularised in the Purchase/Service Orders together with the pricing and total amounts to be paid. [8] Plaintiff issued Defendant with invoices which to date remain unpaid and outstanding. Together with one invoice AOSB/OSI/2018/010/INV94, Defendant issued Plaintiff with a Statement of Final Account confirming the value of the work done and the amount payable to Plaintiff which was 4 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 prepared, checked, verified, and approved by four different personnel/agents of the Defendant. [9] Upon receiving the invoices, Defendant issued a Payment Plan through an e-mail dated 17.12.2019 in which Defendant admitted the total amount outstanding and committed to making payment through a monthly installment. [10] Defendant has partly paid the amount demanded by Plaintiff, however, still owes Plaintiff the sum of USD 1,629,622.81 for Services rendered by Plaintiff. Subsequently Plaintiff, through its solicitors, sent a letter of demand dated 22.06.2020 to the Defendant which to date remains unanswered. [11] On 29.09.2021, Plaintiff filed a Writ of Summons (current High Court proceeding) seeking inter alia, payment of the sum RM 6,680,029.40 (USD 1,629,622.81) owed and outstanding from the Defendant. [12] On 12.11.2021, Defendant filed an application to stay this current High Court proceeding pursuant to section 10 of the Arbitration Act 2005 vide Enclosure 5 (Stay Application). 5 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 Defendant’s case [13] Defendant submits that there is a valid and operative clause binding between parties. Hence, Plaintiff’s action in filing this Writ of Summons against Defendant is premature and wrong as any action should be referred to arbitration. Defendant has a legitimate expectation to refer any disputes to arbitration in compliance with clause 26(b) of the GC. [14] Clause 26(b) of the GC is a clear and express arbitration clause pursuant to section 10 of the Arbitration Act 2005 and Plaintiff never challenged or invalidated the Purchase Orders and the application of clause 26(b) of the GC. Therefore, clause 26 (b) is a valid and operative arbitration clause for the purpose of this Stay Application. [15] Defendant did not take any steps in the proceeding as provided under subsection 10(1) of the Arbitration Act 2005. Plaintiff’s case [16] Defendant’s Stay Application should be dismissed as there is no specific arbitration agreement and even if there is, Defendant is statutorily barred from applying for a stay because it has filed its Defence i.e. taken a step in the proceedings. 6 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 [17] Defendant relies on subsection 10(1) of the Arbitration Act 2005 for its Stay Application. However, subsection 10(1) statutorily mandates that Defendant not take “…any other steps in the proceedings…”, failing which a stay will not be granted under Section 10(1). [18] Defendant has taken steps in the proceedings by, amongst other things, filing its Defence. The Federal Court was very clear in the case of Sanwell Corporation v Trans Resources Corporation Sdn. Bhd. [2002] CLJ 213 where it was held that “If the Appellant has served any pleadings, then he has clearly taken a step in the proceedings within the meaning of s 6 of the Act. He has thereby elected to proceed with the proceedings in the High Court and would be barred from applying for a stay of proceedings to refer the dispute to arbitration.” [19] Further, it is Plaintiff’s position that the subject matter and/or the causes of action in this suit are based on a breach of a payment plan i.e. a promise to pay and the tort of general economic loss, both of which are not the subject of or governed by any arbitration agreement. [20] Defendant’s sole ground for Enclosure 5 is the fact that there exists a contract between the parties which includes an arbitration clause. 7 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 However, Plaintiff’s suit herein is not filed pursuant to the said contract. Hence, the arbitration clause is of no effect. [21] Plaintiff submits that Defendant never challenged, objected, or raised any issues in respect of the invoices issued by Plaintiff. In fact, Defendant had made part payments in the amount of RM 540,924.80 to Plaintiff since the filing of this action which strengthens the fact that there is no dispute in respect of the said invoices. These payments show that Defendant is not disputing its indebtedness. Hence, there is no necessity to refer the matter to arbitration. [22] Plaintiff’s claim is for goods already sold and delivered but remaining unpaid. As such it is not premature. Defendant’s Stay Application is mala fide as Defendant has not shown any intention to be submitted to the jurisdiction of this Court. Analysis and Finding of this Court [23] Application for a Stay of High Court Proceeding Subsection 10(1) of the Arbitration Act provides that – “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 8 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 proceedings, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed”. [24] It is noted that section 10 has been amended in 2011 wherein the previous subsection 10(1)(b) has the proviso “there is in fact no dispute between the parties with regard to the matters to be referred” was removed. It has been repealed by virtue of section 4 of the Arbitration (Amendment) Act 2011. The effect of removal of the proviso means Courts are no longer required to inquire into the nature of the dispute as a prerequisite to granting a stay. [25] The Federal Court decision of Tindak Murni Sdn Bhd v Juang Setia Sdn Bhd and another appeal [2020] 3 MLJ 545 confirms the above position where it was held: “…under the amended s 10 (which came into force on 1 July 2011) of the AA, the court when considering an application for stay pending arbitration was not required to investigate whether a dispute existed between the parties warranting a referral to arbitration.” [26] This Court observes that in the present case, there was no dispute arising as the debt has been admitted by the Defendant and further 9 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 commitment to pay by monthly installment has been made as reflected in the Payment Plan that was drawn out by the Defendant itself. [27] In resisting the Stay Application, Plaintiff has relied on the fact that Defendant has made a partial payment and commitment to make payments by installment. This admission and commitment support the averment that Defendant has accepted the outstanding sums owed. Hence, there is no dispute arises between the parties with regard to the sums that should be paid for the Services rendered and delivered. As such, there is no necessity to refer the matter to arbitration as this Court has jurisdiction to hear and dispose of Plaintiff’s claim against Defendant to which this Court could fully agree. Valid and operative arbitration agreement [28] Defendant submits that it is mandatory for a stay to be granted when there is a valid and binding arbitration agreement between the parties. Defendant relies on the Federal Court case of Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 MLJ 417 and Tindak Murni (supra) where it was held that once the conditions under section 10 of the Arbitration Act are satisfied, it is mandatory for the Courts to refer the parties to the arbitration. The Courts have no discretion but to grant a stay of proceeding, save for the exceptions set out in subsection 10(1). The 10 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 word “shall” in subsection 10(1) connotes mandatory compliance to refer to arbitration when there exists a valid and operative arbitration agreement. As such, Order 69 rule 10 of the Rules of Court empowers this Court with the jurisdiction to grant the stay. [29] By virtue of Press Metal Sarawak (supra), consideration for this Court is whether there is a valid and binding arbitration agreement between Defendant and Plaintiff and whether Defendant has taken any other steps in the proceedings before the Stay Application is made. [30] This Court reckons that the Federal Court restated the Malaysian Courts’ position in respect of their intervention in arbitration whereby the case of Press Metal Sarawak Sdn Bhd (supra) provides that the principle of party autonomy in arbitration will be upheld by giving effect to the arbitration agreement as long as it is not null and void, inoperative or incapable of being performed. If a binding arbitration exists between the parties, the Court must grant an order to stay the Court proceedings pending reference to arbitration on application by any party to an agreement for a stay order. [31] Based on the factual matrix, this Court noted that Defendant relies on the general terms and clauses that the parties, by virtue of clause 26(b) 11 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 of the GC, have agreed to submit to arbitration in the event of disputes. The clause puts into effect references to arbitration in the event of disputes. However, Plaintiff argues that it is only a general and standard term and not a specific arbitration agreement that has been in place between the parties. [32] This Court also noted that the legal relationship between Plaintiff and Defendant is for Plaintiff to supply the Services requested for and for Defendant to pay Plaintiff for the Services rendered. It is a simple arrangement for Services (products) sold and delivered. Based on the Statement of Claim and the Affidavit in Support for the Stay Application, Plaintiff has clearly shown that Defendant has never raised any issues with the invoices issued. Defendant has admitted and committed to making the full payment, albeit by installment. Further, it is a fact not disputed that Defendant has indeed made some payments for a sum of RM 540,924.80 to the Plaintiff. Based on these considerations, this Court agrees with the submission of the learned Plaintiff’s counsel that even if there is an agreement for parties to arbitrate, there is no necessity to refer the matter to the arbitration as the matter involves a clear-cut claim of outstanding debt unpaid to Plaintiff. The Defendant is now prevented from denying the existence of some facts essential to establish Plaintiff’s cause of action ie the default payment, in breach of the Payment Plan. 12 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 [33] Therefore, Plaintiff’s contention that it relies on the doctrine of promissory estoppel is acceptable to this Court, and Defendant now could not challenge the invoices or claim that there is a dispute under the concluded contracts. Court of Appeal case of Tan Sri Datuk Paduka Ting Pek Khiing v Dato’Hamzah Abdul Majid & Anor [2004] 2 CLJ 5034 which affirmed the position elucidated by Gopal Sri Ram JCA that the doctrine of promissory estoppel is available to Plaintiffs and that “It may (if established) assist a plaintiff in enforcing a cause of action by preventing a defendant from denying the existence of some fact essential to establish the cause of action, or (to put it in another way) by preventing a defendant from asserting the existence of some fact the existence of which would destroy the cause of action.” [34] Further, there is also a pleaded cause of action of a general tort of causing economic loss. This cause of action in tort is not subjected to or caught by any arbitration clause. Taking any other step in the proceedings [35] Another requirement of subsection 10(1) of the 2005 Act is that the party seeking a stay shall apply "before taking any other steps in the proceedings". In Press Metal (supra), the Federal Court held that section 13 | B A - 2 2 N C v C - 3 8 2 - 0 9 / 2 0 2 1 10(1) of the 2005 Act is only applicable to proceedings that have already been filed in court. An application for a stay of proceedings can only be filed by Defendant after Plaintiff has commenced proceedings in Court, but before Defendant takes any other steps in the proceedings. A stay of proceedings means a stay of proceedings that has already been filed in Court. Plaintiff contends that Defendant has taken steps in the proceeding by filing a Defence. Hence subsection 10(1) has not been fulfilled and a stay of the Court proceeding should not be granted. [36] Guidelines on what amounts to ‘any other step in the proceedings’ can be found in the often-quoted Federal Court case of Sanwell Corporation (supra). In this case, the guidelines follows: [34] … ‘Therefore, the legal position in Malaysia may be neatly summarized as follows: