Casa Armada Sdn Bhd v Shapadu Energy & Engineering Sdn Bhd (BA-22NCC-42-04/2021)

The Plaintiff filed this action against the Defendant for RM2,563,965.69 for goods and services allegedly supplied by the Plaintiff under a written contract. 2

By Enclosure 9 the Defendant applied for a stay of this action pending arbitration under section 10 of the Arbitration Act 2005.

The Plaintiff vide Enclosure 21 applied to expunge the Defendant’s Affidavit-in-Reply.

On 5 January 2022, this Court dismissed the Plaintiff’s expungement application in Enclosure 21 and allowed the Defendant’s stay application in Enclosure 9 and therefore granted an order of stay pending arbitration under section 10 of the Arbitration Act 2005

Dissatisfied with the said decisions on stay and expungement, the Plaintiff has appealed to the Court of Appeal.

In Enclosure 21, the Plaintiff’s grounds for applying to expunge the Defendant’s Affidavit-in-Reply affirmed on 27.8.2021 (Enclosure 12) were that (1) it was not signed by the deponent; and (2) it was not signed by the deponent before a Commissioner for oaths.

In the Defendant’s Affidavit-in-Reply affirmed on 21.10.2021 (Enclosure 24) the Defendant’s deponent explained that the Enclosure 12 affidavit was in fact signed by her, and in view of Movement Control Order (“MCO”) in force at that time she could not affirm it physically 3 before a Commissioner for Oath, and hence a scanned copy was sent to the Commissioner for Oaths who called the deponent on telephone to confirm and verify her identity and signature before affirming it.

There is a difference between these three courses of action :(a) expunging an affidavit (in which event the expunged affidavit would be erased from the Court’s records); (b) striking out an affidavit in which event the struck-out affidavit is not erased from the Court’s records but cannot be used or relied upon as part of the evidence in the arguments or submissions in the court case); and (c) ruling that an affidavit is irregular or inadmissible (in which event the Court will disregard the contents of the affidavit without expunging it or striking it out).

Under the law, an affidavit should only be expunged from the Court’s records where the affidavit in both irrelevant and scandalous. It is not the practice of the Court to expunge an affidavit or document filed in the Court merely on ground that the affidavit or document is irregular or defective.

As the Plaintiff’s Enclosure 21 specifically prays for only expungement of the affidavit but the Plaintiff has not alleged or adduced any evidence that the contents of the affidavit is in any way scandalous, the Plaintiff’s Enclosure 21 cannot be sustained in law and therefore should be dismissed.

Further or alternatively, this Court notes that there is also an alternative ground for dismissing the Plaintiff’s expungement application in 4 Enclosure 21. Consequent upon Covid MCOs, the Courts of Judicature Act 1964 has been amended and pursuant to the amended sections of the 1964 Act the Chief Justice has issued practice directions including Practice Direction No. 9 of 2021. Item 7 of the Chief Justice’s Practice Direction No. 9 of 2021 allows unaffirmed copies of affidavits in urgent applications to be filed before the affirmation by a Commissioner for Oaths, to be followed by the filing of the affirmed copies within 14 days after the expiry of the MCO. Item 9 of the Chief Justice’s Practice Direction No. 9 of 2021 provides that no objection should be raised against the filing of affidavits on ground of irregularity. Reference should also be made to O.1A and O.41 r.4 of the Rules of Court 2012 which provide as follows: “Regard shall be to justice (O. 1A) In administering these Rules, the Court or a Judge shall have regard to the overriding interest of justice and not only to the technical non-compliance with these Rules.

Use of defective affidavit (O. 41, r. 4) An affidavit may, with the leave of the Court, be filed or used in evidence notwithstanding any irregularity in the form thereof.” In light of the above provisions of the ROC 2012 this Court finds no sufficient basis for expunging or striking out the Defendant’s Affidavit-in-Reply in Enclosure 12. 5

In the premises, this Court held that the Plaintiff’s expungement application in Enclosure 21 was dismissed with costs of RM3,000, subject to allocatur. Enclosure 9: Defendant’s stay application under section 10 of

Section 10(1) of the Arbitration Act 2002 provides as follows: “(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 arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.”

In our present case, there is an arbitration agreement contained in clause 23 of the parties’ written contract which stipulated as follows: “23. Governing Law, Claims and Dispute Resolution. b. This Agreement shall be governed by the laws of Malaysia. Seller agrees that any claims and disputes arising out of or relating to this Agreement, or the breach, termination or invalidity thereof which cannot be resolved through direct negotiation between Shapadu and Seller shall be submitted to binding 6 arbitration in accordance with the rules for Arbitration of the Kuala Lumpur Regional Centre for Arbitration. The appointing authority shall be the Kuala Lumpur Regional Centre for Arbitration and the language to be used in the arbitration proceedings shall be English. The arbitration award shall be final and binding on the parties.”

In our present case the Plaintiff has alleged or not adduced evidence to show that the arbitration agreement in clause 23 is null and void, inoperative or incapable of being performed.

In Tindak Murni Sdn Bhd v. Juang Setia Sdn Bhd [2020] 4 CLJ 301 the Federal Court, in deciding how an application under s. 10 (1) is to be dealt, held as follows: “[37] The starting point for an analysis of the issues in these appeals requires firstly a consideration of the arbitration clause in the governing contract so as to ascertain whether it comprises a valid agreement to arbitrate. [38] The question arises why this should be an initial or primary consideration. The reason is s. 10 of the Arbitration Act 2005, which sets out the role of the court when confronted with an application for a stay pending arbitration. It reads as follows: 7 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 arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. (emphasis added). [39] The emphasised portions make it clear that the first step is to ascertain whether there is in fact an agreement to arbitrate in respect of the dispute in question. (See inter aliaTNB Fuel Services Sdn Bhd v. China National Coal Group Corp [2013] 1 LNS 288). [40] Section 9 of the Arbitration Act 2005 is relevant here. It is entitled "Definition and form of arbitration agreement". Subsection 9(1) defines an "arbitration agreement" to mean "an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. [41] The same section goes on to state in sub-s. 9(2) that an arbitration agreement may be in the form of an arbitration clause in an agreement, or in the form of a separate agreement. The former situation is applicable to the present facts. 8 [49] In all these circumstances, it therefore remained incumbent upon the court, notwithstanding the initiation of the civil suit by the contractor, to carry out its function as set out in s. 10, namely to refer the dispute to arbitration unless the arbitration agreement is null, void or inoperative. The court carries out its prescribed statutory duty by ascertaining: i. whether there is an agreement to arbitrate the dispute; ii. whether the arbitration agreement is valid or null, void or inoperative; Having done so, the following consequences ensue from s. 10: i. If there is a valid agreement to arbitrate, then the court must refer the dispute to arbitration; ii. If the agreement to arbitrate is null, void or inoperative then the matter/suit need not be referred to arbitration.” (emphasis added)

When the AA 2005 was first enacted, s. 10 (1) allowed the Court to refuse stay of proceedings subject to an arbitration agreement where the court was satisfied that there was no dispute between the parties. This was subsequently abolished by the Arbitration (Amendment) Act 9 2011 and the alleged absence of a dispute is no longer a ground for refusing a stay

The law on this point clarified by the Federal Court in Press Metal Sarawak Sdn Bhd v. Etiqa Takaful Bhd [2016] 9 CLJ 1 at paras [32] to [38] where the apex court explained the evolution of the dispute in the repealed Act to the Amendment Act 2011 where dispute is no longer condition precedent. The position in Press Metal Sarawak was reiterated again by the Federal Court in Far East Holdings Bhd v. Majlis Agama Islam Dan Adat Resam Melayu Pahang [2018] 1 CLJ 693 where at paras [108] and [109] the Court repeated the position as Amendment Act 2011 is to render a stay mandatory when action is filed in court in breach of the arbitration agreement.

The mandatory referral to arbitration is consistently upheld without regard to dispute and this again repeated in the Federal Court case of Arch Reinsurance Ltd v. Akay Holdings Sdn Bhd [2019] 1 CLJ 305 at para [54].

In Tindak Murni case (supra) the Federal Court reiterated and held that the existence of a dispute is no longer a requirement for grant of stay pending arbitration under section 10 of the Arbitration Act 2005, as clearly and beyond doubt clarified in the following passages of the Federal Court’s judgment: “The Contractor's Submission That There Was No Dispute That Warranted Referral to Arbitration 10 [52] It was also emphasized by counsel for the contractor in the course of the oral hearing before us that the relevant clauses of the governing contract and case-law relating to interim certification was such that its claim was beyond dispute. In other words, the existence of a debt due and owing to the contractor was undisputed. As such, the contention was that there was simply no dispute that warranted referral to arbitration. [53] With respect, this contention is flawed and affords no answer to the employer's application to have the dispute referred to arbitration for the following reasons:

Under s. 10 of the Arbitration Act 2005 as it presently stands, there is no question of the court entering into the arena of whether or not a "dispute" subsists between the parties. The role of the court is simply as set out in s. 10, which we have explained in extenso above. This is borne out inter alia by the decision of the Court of Appeal, as comprehensively explained by Anantham Kasinather JCA in TNB Fuel Services Sdn Bhd v. China National Coal Group Corp [2013] 1 LNS 288. His Lordship compared the present version of s. 10(1) of the Arbitration Act 2005 with the earlier version of the section and stated: 11

The present form of s. 10 of the Arbitration Act 2005 is the result of the amendment to that section which came into force on 1 July 2011 (Act A1395). It is generally accepted that the effect of the amendment is to render a stay mandatory unless the agreement is null and void or impossible of performance. The Court is no longer required to delve into the facts of the dispute when considering an application for stay.... (emphasis added). The position stated above is therefore trite, namely that the court is not to enquire or investigate whether there subsists a dispute warranting referral to arbitration. That is a matter for the consideration and determination of the arbitral tribunal. Prior to the amendment to s. 10, the courts expended considerable time and effort in determining whether a 'dispute' subsisted by virtue of the earlier wording of s. 10:

The court before which proceedings brought in respect of a matter which is the subject matter of an Arbitration Agreement shall, where party makes an application before taking any other step in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds: 12

that the agreement is null and void, inoperative or incapable of being performed; or

that there is in fact no dispute between the parties with regard to the matters to be referred. (emphasis added). (See for example Tjong Very Sumito and others v. Antig Investments Ptd Ltd [2009] SGCA 41 which stated that "if it was at least arguable that the matter is the subject of the arbitration agreement, then a stay of proceedings should be ordered... it is only in the clearest of cases that the court ought to make a ruling on the inapplicability of an arbitration agreement". This resulted in the courts undertaking an exercise of determining whether a dispute existed between the contracting parties.) With the removal of limb (b) however, the issue of the subsistence or otherwise of a dispute between the parties is rendered obsolete and irrelevant. In the textbook entitled 'UNCITRAL Model Law & Arbitration Rules - The Arbitration Act 2005 (Amended 2011 & 2018) and the AIAC Arbitration Rules 2018 ' by Datuk Professor Sundra Rajoo (special contributor Dr Thomas R Klotzel), the author discussed the effect of amending s. 10 of the Arbitration Act 2005 (at pp. 30-31):

1.161 The amendment to section 10 removes the courts' power to stay arbitration proceedings where the court is satisfied 13 that there is no dispute between the parties with regard to the matters to be referred to arbitration. The old provision placed an undue restriction on the arbitration process which was not contained in the UNCITRAL Model Law or the New York Convention.

1.162 In line with Article 8A of the UNCITRAL Model Law, under the current section 10 of the AA 2005 the High Court is under the obligation to refer the parties to arbitration unless the High Court is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed...” In the premises, this Court has held that under the amended section 10 of the Arbitration Act 2005, a court matter which falls within the ambit of a valid and enforceable arbitration clause shall be stayed pending arbitration, and it is irrelevant to consider whether or not there is in fact a dispute between the parties. The only defence which the party opposing the section 10 stay application can avail of is that the arbitration agreement is null and void, inoperative or incapable of being performed. It is trite that the onus of proving such defence is upon the party who opposes the section 10 stay application.

The Federal Court in Tindak Murni Sdn Bhd v. Juang Setia Sdn Bhd [2020] 4 CLJ 301 paragraphs [52] and [53] has made it clear beyond doubt that the allegation or argument that there is no dispute between 14 the parties is not a valid ground to oppose a section 10 application for stay pending arbitration.

The case authorities cited by the Plaintiff here were decided before the Federal Court’s decision in Tindak Murni Sdn Bhd v. Juang Setia Sdn Bhd and are not applicable to a s. 10 application anymore. Any case authority prior to the Federal Court’s decision in Tindak Murni Sdn Bhd v. Juang Setia Sdn Bhd and which contradicts the principle decided by the Federal Court’s decision in Tindak Murni Sdn Bhd v. Juang Setia Sdn Bhd has been overruled by the Federal Court.

As there is no allegation or basis for saying that the arbitration clause [clause 23(b)] is in any way invalid or unenforceable, this Court held that the section 10 stay should be granted in view of the arbitration agreement in clause 23 of the written contract between the Plaintiff and the Defendant.

In further clarification, it is to be noted that the facts and evidence necessary for sustaining the section 10 stay application in the present case are established in the Defendant’s Affidavit-in-Support (Enclosure 10) of the stay application, it is not necessary for this Court to refer to or rely upon any of the contents of the Defendant’s Affidavit-in-Reply (Enclosure 12) in arriving at the conclusion and decision on s.10 stay application. Irrespective of whether or not the Defendant’s Affidavit-in-Reply (Enclosure 12) was disregarded by this Court, the decision and outcome of Enclosure 9 stay application would not be different. 15

In conclusion, this Court held on 5 January 2022 that the Plaintiff’s expungement application in Enclosure 21 be dismissed with costs of RM3,000 and that the Defendant’s section 10 stay application in Enclosure 9 be allowed with costs of RM5,000, subject to allocatur. Dated : 21th February 2022. Signed ...………........................................................... TEE GEOK HOCK JUDICIAL COMMISIONER HIGH COURT OF MALAYA AT SHAH ALAM (NCvC 10) To the parties’ solicitors:

For the Plaintiff : Nur Azreen Mohd Arshad Messrs R.Y. Nanthan & Partners (Petaling Jaya)

For the Defendants : Siti Nurazwani Zulkeflee Messrs Shahabudin & Rozima (Kuala Lumpur)