Delta Corp Shipping Pte Ltd v 1. ) Michael Lwee Wan Thoo (JA-22NCC-74-08/2021)

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Page 1 of 13 MALAYSIA IN THE HIGH COURT IN MALAYA AT JOHOR BAHRU IN THE STATE OF JOHOR DARUL TAKZIM CIVIL SUIT NO. JA-22NCC-74-08/2021 BETWEEN DELTA CORP SHIPPING PTE LTD (Singapore Company No: 201821635E) …PLAINTIFF

Preamble

Pursuant to the newly enacted s 41B of the Arbitration Act 2005, all court proceedings should be heard in chambers unless otherwise ordered. The court may make an order to have the proceedings heard in open court upon the application by a party, or on its own motion if satisfied that the proceedings ought to be heard in open court. Stay of proceedings—Unlike the 1952 Act, the 2005 Act provides in s 10 for a mandatory stay of court proceedings where there is an arbitration agreement unless the arbitration agreement is null and void, inoperative or incapable of being performed: Duta Wajar Sdn Bhd v Pasukhas Construction Sdn Bhd [2012] 5 MLJ 27, CA; Renault SA v Inokom Corp Sdn Bhd [2010] 5 MLJ 394, CA. A stay will be ordered even when the validity of the arbitration agreement is challenged, or where one party alleges that the dispute does not fall within the ambit of the arbitration agreement, as this is a matter which should be determined by the arbitral tribunal at first instance: TNB Fuel Services Sdn Bhd v China National Coal Group Corp [2013] 4 MLJ 857, CA; Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 AMR 635; [2015] 5 AMR 30; [2016] 5 MLJ 417. Arbitration clauses will be interpreted broadly, taking into consideration the commercial reality and purpose for which the contract was entered into: Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 AMR 635; [2016] 5 MLJ 417, FC; Press Metal Sarawak Sdn Bhd v Etiqa Takaful Berhad [2015] 5 AMR 30, CA. Section 10 of the 2005 Act also provides that a stay of the proceedings shall be ordered and the parties required to refer the matter to arbitration when the defendant had not taken “any other steps in the proceedings”: Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd[2010] 3 AMR 721; [2010] 3 MLJ 656, CA. In Borneo Samudera Sdn Bhd v Siti Rahfizah Mihaldin & Ors [2008] 6 MLJ 817; [2008] 5 CLJ 43, CA, it was held that an Page 7 of 13 alternative prayer for security for costs which was made in the event that the High Court did not grant the applicant’s primary relief for a stay does not constitute submission to jurisdiction or a step in the proceeding. “An application, which is made in the event that the specific application for a stay is unsuccessful, is not a step in the proceedings”: Comos Industry Solution GmbH v Jacob and Toralf Consulting Letrikon Sdn Bhd [2012] 4 MLJ 573; [2012] 4 AMR 493, CA. However, a request for an extension of time to file a defence has been held to be a step in the proceedings and a waiver of the arbitration clause: Winsin Enterprise Sdn Bhd v Oxford Talent (M) Sdn Bhd [2009] 4 AMR 562; [2010] 3 CLJ 634, HC. In Chut Nyak Isham bin Nyak Ariff v Malaysian Technology Development Corp Sdn Bhd [2009] 6 MLJ 729, HC, it was held that arbitral proceedings take precedence over any court proceeding. A stay pending arbitration may be granted of proceedings upon an application by a non-party to the court proceedings: Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd & Anor [2007] AMEJ 0194; [2008] 1 MLJ 233, HC. A party to an arbitration agreement may be able to stay proceedings brought against a non-party: Renault SA v Inokom Corp Sdn Bhd [2010] 5 MLJ 394, CA; Srivenkateswara Constructions v Union of India AIR 1974 AP 278 (DB). The inclusion of third parties in an action who are not subject to an arbitration agreement will not be a ground to refuse a stay of proceedings: AV Asia Sdn Bhd v MEASAT Broadcast Network Systems Sdn Bhd [2011] 2 AMR 193; [2011] 8 MLJ 792, HC; Pembinaan San Yu Sdn Bhd v Pembinaan Legenda Unggul Sdn Bhd & 5 Ors [2016] 2 AMCR 579. Once an order for stay under s 10(1) has been made and sealed, the court will be functus officio and cannot revisit the order: Uba Urus Bina Asia Sdn Bhd v Quirk & Associates Sdn Bhd & Anor [2016] AMEJ 0151; [2016] 4 CLJ 468, HC. Page 8 of 13 Malaysian courts can grant a stay of proceedings pending arbitration even when the seat of arbitration is outside Malaysia.” [6] In the book Law and Practice of Arbitration in Malaysia Second Edition 2019 by Grace Xavier and Joanne Long the learned authors state: “A court may be justified in refusing a stay only in plain and obvious cases, where a reasonable tribunal, without undertaking a meticulous examination of the merits, is bound to hold that the issues raised by a defendant are frivolous or vexatious. Where there was in existence an agreement to arbitrate, and the conditions set out in section 6 of the Act were satisfied, then a court should favour the grant of a stay. The court’s residual discretion to refuse a stay was limited to cases involving fraud, or where there was no dispute that fell to be determined within the arbitration clause. Where the court is satisfied that a question of fraud had been successfully invoked by the defendant, then a stay would be refused. An arbitrator’s powers did not extend to decide on questions of fraud. However, a mere allegation of fraud would not of itself amount to a ground for refusing a stay. A stay would be refused if the arbitration clause relied on was an attempt to oust the court’s jurisdiction. A party opposing an application for a stay of proceedings must show proof that there was a clear agreement to arbitrate. By submitting to have the dispute resolved by arbitration, the parties had agreed to confer upon the arbitrator the power to resolve the dispute. As such the parties ought to be held to their bargain. In the case of Thamesa Designs Sdn Bhd & 3 Ors v Kuching Hotels Sdn Bhd the court held that the parties to the proceedings before the learned judge had never questioned its jurisdiction and had, by their conduct, waived their rights to go to arbitration. It was, therefore, too late for the respondents to raise an issue in the face of the arbitration clause in the said contract that Page 9 of 13 the court had no jurisdiction to hear the matter. As further observed by Mohamed Dzaiddin SCJ at pp 2093–2094 (AMR): “On the question of the jurisdiction of the court, it seems clear to us that the parties to the proceedings before the learned judge had never questioned its jurisdiction. On November 10, 1987, the Kuching High Court made an order that the issue whether there was any debt due or accruing due, if any, and what amount, to the judgment debtor from the garnishee be tried. The parties then went ahead with the hearing. It would, therefore, be too late for the respondents/garnishee to raise an issue in the face of the arbitration clause in the said contract that the court has no jurisdiction to hear the matter. If an authority is required on this point, we need only refer to the decision of this court in Newacres Sdn Bhd v Sri Alam Sdn Bhd. In that case, the appellant raised a preliminary objection on clause 23 of the joint-venture agreement which provided for reference to arbitration in the case of any dispute or difference with regard to any clause, matter or thing whatsoever or the operation or consideration thereof or any matter connected with the agreement, or the rights, duties or liabilities of any of the parties. Jemuri Serjan CJ (Borneo), in delivering the judgment of the court and after considering the full citation of authority, addressed the issue in the following manner (at p 481): The real question for our determination is whether in the face of the provision of clause 23 the respondent is entitled in law to go to court instead of referring the dispute to arbitration, considering that it does not contain the “ Scott v Avery clause”. Dobb’s case (1935) 53 CLR 643 itself would provide an answer to this case, Page 10 of 13 particularly the part of the judgment which reads as follows: “What no contract can do is to take from a party to whom a right actually accrues, whether ex contractu or otherwise, his power of invoking the jurisdiction of the courts to enforce it. ( Kill v Hollister (1746) 1 Wils 129;. Thompson v Charnock 101 ER 1310; Czarnikow v Roth, Schmidt & Co [1922] 2 KB 478 .) Accordingly, a contract providing for arbitration did not, apart from statute, prevent the institution of an action or suit, even although an actionable breach of contract was committed by the refusal to refer. (In re Smith & Service and Nelson & Sons (1890) 25 QBD 545 at p 544, per Bowen LJ). But if, before the institution of an action, an award was made, it governed the rights of the parties and precluded them from asserting in the courts the claims which the award determined. By submitting the claims to arbitration, the parties confer upon the arbitrator an authority conclusively to determine them. That authority enables him to extinguish an original cause of action.” This observation clearly supports the proposition that the respondent can still go to court, provided before the institution of an action, no award had been made by an arbitrator. In any case, clause 23 is never intended to oust the jurisdiction of the court under any circumstances, and we agree that in this case it is not the appellant’s case that the court’s jurisdiction was thus ousted. From what we have said earlier on in the judgment it is indisputable that the appellant did not object to the recourse to court by the Page 11 of 13 respondent but went along throughout, not only filing affidavits in reply to the affidavits of the respondent when they filed the issues as ordered by Razak J but also filing the statement of defence and counterclaim. Such a conduct must, by its very nature, amount to a waiver of the rights of the parties to go to arbitration. Neither did the appellant have recourse to s 6 of the Arbitration Act 1952 (Act 93) to apply for a stay of the proceedings thereby reinforcing the argument that it had abandoned its rights to go to arbitration, but submitted itself to the jurisdiction of the court. In any event, even if the appellant were to apply for stay of the proceedings in the High Court under s 6 of the Arbitration Act 1952, his application would fail for the reason that he had taken various steps in the proceedings, and even had agreed for the case to be set down for trial 30 days from the date of the High Court order dated June 19,