Eng Han Engineering Sdn Bhd v Toshiba Elevator (Malaysia) Sdn Bhd (W-02(C)(A)-1082-07/2023)

Capital Avenue Development Sdn. Bhd. (Employer) had appointed the appellant company (Appellant) as the replacement main contractor (Replacement Main Contractor) for a project known as "Cadangan Pembinaan 2 Blok ... di atas Lot 37, ... Sembulan, Jalan Pantai Baru, Kota Kinabalu, Sabah (Sutera Avenue)” (Project).

Prior to the Employer's appointment of the Appellant as the Replacement Main Contractor, the respondent company (Respondent) had already been appointed as a nominated subcontractor for, among others, the supply, delivery, installation, testing, commissioning and maintenance of lift and escalator services in the Project (Sub-Contract Works).

The Sub-Contract Works were originally divided into two sections [2 Original Sections (Sub-Contract Works)] , namely, "OC1" (Block A of the Project) [Works (OC1)] and "OC2" (Block B and the Pedestrian Mall of the Project) [Works (OC2)].

By way of a "Letter of Acceptance" dated 13.7.2015 (LA), the Appellant formally appointed the Respondent for the Sub-Contract Works.

The 2 Original Sections (Sub-Contract Works) could not be completed within the agreed time periods [Delay (Works)].

There was a dispute between the Appellant and Respondent regarding the causes for the Delay (Works) [Causes (Delay)].

In view of the Delay (Works), the Project's architect (Architect) issued two "Certificates of Non-Completion" (CNCs) to the Appellant with regard to the 2 Original Sections (Sub-Contract Works) {Architect's 2 CNCs [2 Original Sections (Sub-Contract Works)]}. Consequently, the Appellant also issued two CNCs to the Respondent for the non-completion of the 2 Original Sections (Sub-Contract Works) {Appellant's 2 CNCs [2 Original Sections (Sub-Contract Works)]}.

The Appellant applied for an extension of time (EOT) from the Architect to complete the 2 Original Sections (Sub-Contract Works). By way of a letter dated 9.8.2017, the Architect granted an EOT for the Appellant to complete the 2 Original Sections (Sub-Contract Works) by 12.6.2017.

The Respondent did not apply for an EOT to complete the 2 Original Sections (Sub-Contract Works).

The Employer and Appellant entered into a "Supplementary Agreement" dated 28.6.2017 [Supplementary Agreement (Employer-Appellant)]. According to the Supplementary Agreement (Employer-Appellant), among others-

instead of the 2 Original Sections (Sub-Contract Works), the Sub-Contract Works were divided into five sections [5 New Sections (Sub-Contract Works)], namely OC1, OC2A, OC2B, OC3 and OC4 ["Works (OC1)”, "Works (OC2A)”, "Works (OC2B)”, "Works (OC3)” and "Works (OC4)”]; and

the new completion dates (New Completion Dates) and "liquidated damages" (LD) for the 5 New Sections (Sub-Contract Works) were as follows - SectionCompletion dateLD per dayWorks(OC1)12.6.2017RM40,000.00Works(OC2A)12.6.2017RM10,000.00Works(OC2B)12.6.2017RM10,000.00Works(OC3)31.10.2017RM5,000.00Works(OC4)31.10.2017RM5,000.00

On 21.10.2017, the Appellant sent a draft supplementary agreement to the Respondent regarding the New Completion Dates and LD sums for the 5 New Sections (Sub-Contract Works) [Draft Supplementary Agreement (Appellant-Respondent)].

The Respondent did not accept the Draft Supplementary Agreement (Appellant-Respondent) because according to the Respondent-

when the Respondent received the Draft Supplementary Agreement (Appellant-Respondent) on 21.10.2017-

the completion date for the Works (OC1), Works (OC2A) and Works (OC2A), ie., 12.6.2017, had lapsed; and

the New Completion Date for the Works (OC3) and Works (OC3), namely, 31.10.2017, would expire in 10 days [from the date of the Respondent's receipt of the Draft Supplementary Agreement (Appellant-Respondent)];

it was "impossible" for the Respondent to meet the New Completion Date for Works (OC1), Works (OC2A) and Works (OC2A) because -

permanent power supply to the development site (Site) was only made available on 29.5.2017; and

the Respondent required three weeks per lift-

to complete the testing and commissioning of the lifts; and

(ii) for the inspection of the lifts by "Jabatan Keselamatan dan Kesihatan Pekerjaan" (Department of Occupational Safety and Health) （JKKP's Inspection);

the Respondent was not aware of the New Completion Dates as stated in the Draft Supplementary Agreement (Appellant-Respondent); and

the Appellant did not provide the Respondent with the revised Sub-Contract Works programme and revised Master Works programme for the 5 New Sections (Sub-Contract Works).

The Architect issued five CNC's to the Appellant for the latter's failure to complete the 5 New Sections (Sub-Contract Works) within the time periods stipulated in the Supplementary Agreement (Employer-Appellant) {Architect's 5 CNCs [5 New Sections (Sub-Contract Works)]}.

The Appellant issued a CNC to the Respondent regarding the delay of the Respondent in completing the 2 Original Sections (Sub-Contract Works) within the time periods stated in the LA {Appellant's CNC [2 Original Sections (Sub-Contract Works)]}. B. Arbitral proceedings between the Appellant and Respondent (Arbitration)

There were disputes regarding the Sub-Contract Works which led to arbitral proceedings between the Appellant and Respondent before a sole arbitrator, Ar. Menaha Ramanath (Arbitrator).

In the Arbitration -

the Appellant's "Statement of Case" (SOC) alleged as follows, among others-

the existence of the Delay (Works);

the Respondent did not apply to the Appellant for an EOT for the Delay (Works);

the Architect's 2 CNCs [2 Original Sections (Sub-Contract Works)] had been issued to the Appellant;

the Supplementary Agreement (Employer-Appellant) had been executed but the Respondent refused to accept the Draft Supplementary Agreement (Appellant-Respondent);

the Respondent failed to complete the 2 Original Sections (Sub-Contract Works) within the time periods stipulated in the LA. Hence, the Appellant claimed LD in a sum of RM21,200,000.00 based on the completion dates of the 2 Original Sections (Sub-Contract Works) in the LA (Appellant's Arbitral Claim); and

as an alternative to the Appellant's Arbitral Claim, the Appellant claimed LD in an amount of RM6,760,000.00 premised on the completion dates of the 5 New Sections (Sub-Contract Works) as stipulated in the Supplementary Agreement (Employer-Appellant) (Appellant's Alternative Arbitral Claim);

in the Respondent's "Statement of Defence & Counterclaim" (DCC), among others-

the Respondent denied the Appellant's Arbitral Claim and Appellant's Alternative Arbitral Claim on the ground that the Delay (Works) were caused by-

the Appellant's delay in handing over the lift shafts to the Respondent;

(ii) there were obstructions to the Respondent's Sub-Contract Works on the Site (On-Site Obstructions) which were caused by the Appellant and/or the Appellant's sub-contractors (other than the Respondent); and

(iii) the Appellant failed to provide permanent power supply to the Site; and

the Respondent counterclaimed from the Appellant for, among others, a sum of RM914,538.04 on the following grounds-

an amount of RM556,788.04 was due from the Appellant to the Respondent for the Sub-Contract Works which had been performed by the Respondent and had been certified in Interim Certificates no.21 to 25,27 and 29; and

(ii) the Appellant shall pay to the Respondent a sum of RM357,750.00 as the first moiety of the Retention Sum (Respondent's Counterclaim); and

in the Appellant's "Statement of Reply and Defence to Counterclaim" (RDCC), among others-

the Appellant denied the Respondent's Counterclaim; and

the Appellant disputed the Respondent's allegations regarding the Causes (Delay). On the contrary, the Appellant averred that the Causes (Delay) were as follows-

the Respondent was not able to commence the Sub-Contract Works when possession of the lift shafts was delivered by the Appellant to the Respondent;

(ii) the Respondent was guilty of delay in submitting the Respondent's Performance Bond and Workmen Compensation Insurance Policy within the time periods stipulated in the LA; and

(iii) the Respondent did not have sufficient manpower to complete the Sub-Contract Works within the stipulated time periods.

At the conclusion of the Arbitration, the Arbitrator delivered a "Final Arbitration Award" which, among others-

dismissed the Appellant's Arbitral Claim and Appellant's Alternative Arbitral Claim; and

allowed the Respondent's Counterclaim (Award).

For reasons which we will explain later in this judgment, we reproduce below the relevant part of the Award under the heading "Arbitrator's Considerations and Reasons": "4.14 Issue of Delay in Hand-over of lift shafts to Respondent Considering all the facts and circumstances available to the Arbitrator for this arbitration and in accordance with Clause 29.2(e) of the Conditions of Sub-Contract, I find and hold the following:

In spite of the urgency of the completion of the works, in the case of Section OC1, the Respondents 6 lift equipment had arrived on site on 7 April 2016, Para 2.17, but there was no handover of the lift shaft;

Claimant reported that 15 lift shafts had been handed-over to Respondent on 2 June 2016, Paras 2.26. 3 months before the Contract Date of Completion, however, casting of structure for Level 11 Block A was pending and would be a source of water ingress at the top of the block causing a damp lift shaft and water ponding in the lift shaft.

An experienced Main Contractor should be aware that installation of the large components of lift equipment brought to the top of the Block by tower crane then suspended in the lift shaft from a hoisting beam above the shaft can only take place when the lift motor room is nearly complete (for access of the lift equipment). After the large lift equipment are placed in the Lift Motor Room, the walls are completed, the room is made watertight and the completed with door and door lock for security. Lift components and installation require dry environment to avoid rust and surface damage, and short circuit to the wiring and cables.

It would be imprudent for the Respondent to have on standby skilled lift installers and testers at a cost at the site waiting to install the lift equipment at the 11th hour to meet the completion date set by the Employer. Skilled manpower is a cost for the Respondent and it would be injudicious to have the skilled resource of installer and tester on standby to be expected in several gangs to complete the lift installation for 20nos [sic] on lifts in OC1 within 2 months.

The only possible work to be done whilst waiting for the precise site environment is to inspect the verticality of the shaft and setting out for the door frames and landing level in the lift lobby on each floor, Para 2.24 Respondent Memo dated 11 May and 18 May 2016 to Claimant and Para 2.14, Respondent Memo dated 1 June 2016 to Claimant, Para 2.25 refer.

The Claimant could not cater access opening at Ground Floor lift lobby opening so that the lift landing doors and lift control components could be brought up to each lobby manually, Para 2.13.

4.15 Issue of Delay in the Claimant's Progress of Works Considering all the facts and circumstances available to the Arbitrator for this arbitration and in accordance with Clause 29.2(e) of the Conditions of Sub-Contract, I find and hold that the Claimant's progress of works was already in substantial delay long before the appointment of the Respondent as the Nominated Sub-Contractor to supply and install lifts and escalators for the Works, which has inadvertently caused subsequent delay in in the planned schedule of handover of the lift shafts to the Respondent to commence its works.

4.16 Issue of the Applicable Contact Dates for the Respondent Considering all the facts and circumstances available to the Arbitrator for this arbitration and in accordance with Clause 29.2 (e) of the Conditions of Sub-Contract, I find and hold that the Supplementary Agreement between the Employer and the Claimant has extended the completion period by one year and changed the Sections of the development to suit the Employer as the Developer of the Works and to is to revise the [LD] to be imposed on the Claimant in view of the substantial delay in the Claimant's progress of works. The Respondent is compelled to tag along with Claimant's progress of works in the absence of a Master Work Programme for the Main Contract.

4.17 Issue of Site Obstruction Considering all the facts and circumstances available to the Arbitrator for this arbitration ad in accordance with Clause 34.8 (e) of the Conditions of Sub-Contract, I find and hold that the Respondent's scope of work as the Lift and Escalator Subcontractor has had to endure "acts of prevention which have impeded the Respondents installation, testing and commissioning of the lifts and escalators, disturbed the necessary sequence of work required for lift and escalator installations and the Claimant's slow progress of main building works, reported hindrances at site, areas that were left with debris when the site is required to be clean, other documented incidences have made it more difficult for the Respondent to complete the works by the dates stipulated in the Sub-Contract and revised dates by the Employer which has caused the Respondent's construction period to be 'set at large'.

4.18 Issue of Non-Completion Certificates Considering all the facts and circumstances available to the Arbitrator for this arbitration, Para 4.17 and the above, and in accordance with Clause 34.8(e) of the Conditions of Sub-Contract, I find and hold that the Claimant's issuance of Certificates of Non-Completion to the Respondent are not valid.

4.19 Issue of Clearing of Debris Considering all the facts and circumstances available to the Arbitrator for this arbitration, the photographs recorded in the Bundle of Documents, and in accordance with Clause 34.8(e) of the Conditions of Sub-Contract, I find and hold that the Claimant is responsible to provide a clean and dry site for the respondent to install the lift, escalator and components to avoid rectification and replacement caused by building debris and water leakage.

4.20 Issue of Protection to Completed Scope of Work With reference to Clause 11.5 of LOA, protection to the completed scope of work is at the Respondent's own cost. The lift and escalator equipment usually arrives [sic] at the site with a plastic sheet covering to avoid scratches etc. The Claimant's Safety and Health team are responsible to ensure that there is no physical damage or vandalism on M&E installation.

4.21 Issue of Power Supply for Testing and Commissioning of the Lift and Escalator Works Considering all the facts and circumstances available to the Arbitrator for this arbitration and in accordance with Clause 34.8(e) of the Conditions of Sub-Contract, I find and hold that the permanent electricity supply is required for final testing and commissioning for all the lifts and escalators so that the control panels and power supply to the lift and escalator equipment is stable and calibrated to manufacturer's specifications for optimum performance before handover to the Employer for operation and public use." (emphasis added). C. Proceedings in the High Court

There were three applications filed in the High Court [3 Applications (High Court)] , namely:

Originating Summons No.: WA-24C(ARB)-44-10/2022 was filed by the Appellant for an order of the High Court to set aside the Award (Appellant's Setting Aside OS);

the Respondent filed Originating Summons No.: WA- 24C(ARB)-51-12/2022 for the High Court to recognise the Award as binding and to enforce it (Respondent's Enforcement OS); and

in the Respondent's Enforcement OS, the Appellant filed a Notice of Application for the High Court to refuse the enforcement of the Award [Appellant's Application (Respondent's Enforcement OS)].

The 3 Applications (High Court) were heard together and the learned High Court Judge decided as follows:

the Appellant's Setting Aside OS was dismissed with costs [High Court's Decision (Appellant's Setting Aside OS)];

the High Court allowed the Respondent's Enforcement OS with costs [High Court's Decision (Respondent's Enforcement OS)]; and

the Appellant's Application (Respondent's Enforcement OS) was dismissed without costs {High Court's Decision [Appellant's Application (Respondent's Enforcement OS)]}.

The learned High Court Judge gave one written judgment (High Court's Judgment) for -

the High Court's Decision (Appellant's Setting Aside OS);

the High Court's Decision (Respondent's Enforcement OS); and

the High Court's Decision [Appellant's Application (Respondent's Enforcement OS)].

The following grounds, among others, were provided in the High Court's Judgment:

according to paragraphs 7 to 10 and 18 of the High Court's Judgment, the learned High Court Judge was guided by-

s 8 of the Arbitration Act 2005 (AA);

the following two Federal Court judgments-

Vernon Ong Lam Kiat FCJ's decision in Master Mulia Sdn Bhd v Sigur Ros Sdn Bhd [2020] 12 MLJ 198; and

(ii) the judgment of Abdul Rahman Sebli FCJ (as he then was) in Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd [2021] 1 MLJ 1; and

the Court of Appeal's judgment delivered by Nallini Pathmanathan JCA (as she then was) in Huawei Technologies (M) Sdn Bhd v Maxbury Communications Sdn Bhd [2019] MLJU 1755;

the Arbitrator did not breach natural justice because she had applied her mind to the following "essential issues" which arose in the Arbitration-

the issue of delay in the handing-over of the lift shafts paragraph 13 of the High Court's Judgment;

in paragraph 14 of the High Court's Judgment, the Arbitrator had dealt with the issue regarding the applicable contract dates for the Respondent to complete the Sub-Contract Works;

the issue of On-Site Obstructions was discussed in paragraphs 15 and 16.2 of the High Court's Judgment;

in sub-paragraph 16.1 of the High Court's Judgment, the Arbitrator dealt with the invalid CNCs;

according to sub-paragraph 16.3 of the High Court's Judgment, the Employer had the obligation to ensure that there was no physical damage or vandalism on the Mechanical and Electrical installations on the Site; and

the issue of permanent power supply for the testing and commissioning of the Respondent's lifts and escalators was discussed in sub-paragraph 16.5 of the High Court's Judgment;

the Arbitrator had dealt with all the issues submitted to the Arbitration in the SOC, DCC and RDCC - paragraphs 17 and 22 of the High Court's Judgment;

in paragraphs 19,20 and 30 of the High Court's Judgment, the learned High Court Judge decided that any failure by the Arbitrator to consider, among others, the following facts would not have affected the outcome of the Arbitration-

with regard to the lift installation process, the fact that the Appellant could not cater for access opening to the ground floor of the Site;

the progress of the Appellant's works had been substantially delayed before the appointment of the Respondent because dates of the late handing-over of the lift shafts had already been agreed upon by the parties; and

the Arbitrator's failure to find whether any physical damage or vandalism caused to the Respondent's lift installations, had prevented the Respondent's Sub-Contract Works;

the failure of the Respondent to adduce the Master Works programme as evidence in the Arbitration, did not constitute a breach of natural justice because the Appellant was "free" to adduce such evidence in the Arbitration - paragraph 21 of the High Court's Judgment;

according to paragraph 22 of the High Court's Judgment, the Arbitrator had not failed to appreciate the material facts and legal principles in making the Award;

the High Court could not set aside the Award even if the Arbitrator had made factual and/or legal errors - paragraphs 23 to 26 of the High Court's Judgment;

in paragraphs 27 and 28 of the High Court's Judgment, premised on the Federal Court's judgment delivered by Abdul Rahman Sebli FCJ in Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd [2021] 1 MLJ 1, the learned High Court Judge held that the Arbitrator could draw on her own experience;

the High Court followed the judgment of VK Rajah JA in Singapore's Court of Appeal case of Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86 to decide that the court "does not comb the Award microscopically" - paragraph 29 of the High Court's Judgment; and

the Arbitrator did not breach natural justice and the Award was not therefore contrary to public policy - paragraph 31 of the High Court's Judgment. D. Proceedings in the Court of Appeal

The Appellant filed the following three appeals to the Court of Appeal (3 Appeals):

Civil Appeal no. W-02(C)(A)-1082-07/2023 was filed against the High Court's Decision (Appellant's Setting Aside OS) $ (1^{st}$ Appeal);

the Appellant lodged Civil Appeal no. W-02(C)(A)-1083- 07/2023 against the High Court's Decision (Respondent's Enforcement OS) $ (2^{nd}$ Appeal); and

Civil Appeal no. W-02(C)(A)-1084-07/2023 was filed against the High Court's Decision [Appellant's Application (Respondent's Enforcement OS)] （ $ 3^{rd} $ Appeal).

We heard together the 3 Appeals. E. Submission of the parties

In support of the 3 Appeals, the Appellant's learned counsel contended that there was a breach of natural justice by the Arbitrator which brought the Award to be in conflict with the public policy of Malaysia. According to the Appellant's learned counsel, among others-

notwithstanding the Appellant's delay in the handing-over of the Site to the Respondent (Appellant's Delay), the Arbitrator did not consider the following evidence and submission by the Appellant's learned counsel at the Arbitration that there was a delay in the Respondent's performance of the Sub-Contract Works (Respondent's Delay) -

the Respondent was not in a position to commence the Sub-Contract Works even if there was no Appellant's Delay;

when the Respondent actually performed the Sub-Contract Works (Respondent's Works), there was a delay in the Respondent's Performance [Delay (Respondent's Works)];

the On-Site Obstructions were "localised" and did not delay the Respondent's Works; and

there was a delay on the part of the Respondent to arrange for an early JKKP's Inspection [Respondent's Delay (JKPP's Inspection)];

the Respondent did not object to the New Completion Dates. Instead, the Respondent incorporated the New Completion Dates in the Respondent's revised Sub-Contract Works programme (Respondent's Revised Works Programme). The Respondent was estopped from denying the New Completion Dates stated in the Respondent's Revised Works Programme;

the Respondent did not apply for an EOT regarding the Respondent's Delay. Nor was there an EOT from the Architect for the Respondent's Delay;

even if the Arbitrator had considered the above contentions, she did not give any reason for dismissing those contentions. Reliance was placed on a judgment of the Hong Kong Court of First Instance in A v B & Ors [2024] 4 HKC 36;

the Appellant's learned counsel relied on the judgment of Singapore's Court of Appeal in CAI v CAJ & Anor [2021] SGHC 21, to submit that the "chain of reasoning" in the Award-

was not one which the parties had reasonable notice that the Arbitrator could adopt; and

had no sufficient nexus to the parties' arguments in the Arbitration; and

the Award was not "reasoned" one and had breached s 33(3) AA. For this submission, the Appellant's learned counsel relied on the judgment of the Court of Appeal of Singapore in BZW & Anor v BZV [2022] SGCA 1.

The Respondent's learned counsel made the following submission, among others, to persuade us to dismiss the 3 Appeals:

in view of the fact that the Award was final under s 36(1) AA and the court's "minimalist" role under s 8 AA, the Award can only be set aside in exceptional circumstances in s 37 AA;

as far as possible, the court should take a "holistic" approach and sustain the Award;

even if a ground to set aside the Award is established under s 37 AA, the court may nonetheless exercise its discretion not to set aside the Award and enforce it;

the Appellant had the legal burden to persuade the court on a balance of probabilities to set aside the Award on the ground that there was a breach of natural justice by the Arbitrator which brought the Award to be in conflict with the public policy of Malaysia. In this regard, the Appellant had failed to discharge such legal onus;

s 37 AA deals with the Award-making process and not the errors of fact and/or law allegedly made by the Arbitrator;

by virtue of s 21(3)(b) AA, the Arbitrator was empowered to draw on her own knowledge and expertise in making the Award; and

there was no error of fact and/or law in the High Court's Judgment (3 Applications). F. Issues

These 3 Appeals raise the following questions:

whether the Appellant had proven on a balance of probabilities that there was a breach of the second rule of natural justice in connection with the making of the Award as understood in s 37(1)(b)(ii) read with (2)(b)(ii) AA. In this regard -

did the Arbitrator consider two matters in paragraphs 4.14.3 (what an "experienced Main Contractor" should be aware of in this case) and 4.19 (the Appellant was responsible to provide a clean and dry Site) of the Award (2 New Matters) which-

were not adduced as evidence in the Arbitration; and

(ii) were not submitted by the Appellant and Respondent before the Arbitrator?;

if the answer to the issue in sub-paragraph (1)(a) is "yes", whether prior to the making of the Award, the Arbitrator should have given to the parties-

reasonable notice regarding the 2 New Matters; and

(ii) a reasonable opportunity to submit on the 2 New Matters;

with regard to the 2 New Matters, did the Arbitrator draw on her own knowledge and expertise within the meaning of s 21(3)(b) AA? With regard to this question-

s 21(1) to (3) AA only concern the procedure (not substantive matters) to be adopted in arbitral proceedings. Should s 21(3)(b) AA empower an arbitral tribunal to draw on the arbitral tribunal's own knowledge and expertise regarding substantive and non-procedural issues in an arbitration?; and

(ii) if an arbitral tribunal intends to draw on a particular aspect of the arbitral tribunal's knowledge and expertise with regard to a substantive matter, should the arbitral tribunal, prior to the making of the arbitral award, inform all the parties that the arbitral tribunal would rely on the particular aspect and give the parties a reasonable opportunity to be heard regarding the particular aspect?;

did the Award provide reasons for the Award as required under s 33(3) AA. If the answer to this issue is "no", does a breach of s 33(3) AA, in itself, constitute proof on a balance of probabilities that-

the Arbitrator had breached the second rule of natural justice in s 37(2)(b)(ii); and/or

(ii) the Award is in conflict with the public policy of Malaysia in s 37(1)(b)(ii)?; and

whether the Arbitrator was required to set out in the Award expressly and in detail all the issues and evidence adduced in the Arbitration even though the issues and evidence did not support the Award, failing which the Award could be set aside on that ground that there was a breach of the second rule of natural justice under ss 37(1)(b)(ii) and 37(2(b)(ii) of the AA;

if there is a breach of the second rule of natural justice in this case, should the court refuse to exercise its discretion to set aside the Award pursuant to s 37(1)(b)(ii) read with (2)(b)(ii) AA on the ground that all the parties had been afforded a right tos 9. Definition and Form of Arbitration Agreement

adduce all documentary evidence in the Arbitration;

examine all the witnesses called to testify in the Arbitration; and

present submissions, both oral and prior to the making of the Award, to the Arbitrator? OUR DECISION G. The court's approach in deciding applications to set aside arbitral awards

We reproduce below the relevant parts of ss 8, 9(1), 21(1), (2), (3)(b), 33(3), 36(1), 37(1)(b)(ii) and 37(2)(b)(ii) AA: "s 8. Extent of Court Intervention No court shall intervene in matters governed by [AA], except where so provided in [AA].

In [AA], "arbitration agreement" means 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.

Subject to the provisions of this Act, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.

Where the parties fail to agree under subsection (1), the arbitral tribunal may, subject to the provisions of this Act, conduct the arbitration in such manner as it considers appropriate.

The power conferred upon the arbitral tribunal under subsection (2) shall include the power to-

determine the admissibility, relevance, materiality and weight of any evidence;

draw on its own knowledge and expertise;

order the provision of further particulars in a statement of claim or statement of defence;

order the giving of security for costs;

fix and amend time limits within which various steps in the arbitral proceedings must be completed;

order the discovery and production of documents or materials within the possession or power of a party;

order the interrogatories to be answered;

order that any evidence be given on oath or affirmation; and

make such other orders as the arbitral tribunal considers appropriate. s 33. Form and Contents of Award

An award shall state the reasons upon which it is based, unless -

the parties have agreed that no reasons are to be given; or

the award is an award on agreed terms under section 32. s 36. An Award is Final and Binding

An award made by an arbitral tribunal pursuant to an arbitration agreement shall be final and binding on the parties and may be relied upon by any party by way of defence, setoff or otherwise in any proceedings in any court. s 37. Application for Setting Aside

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

the High Court finds that -

(ii) the award is in conflict with the public policy of Malaysia.

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." (emphasis added).

We adopt the following approach with regard to the court's power to set aside an arbitral award under s 37(1) and (2) AA:

it is clear from the permissive term "may" in s 37(1) AA that the court has a discretion to set aside an arbitral award [Court's Discretion (To Set Aside Arbitral Awards)] under any one or more of the grounds stated in s 37(1)(a)(i) to (vi), (b)(i), (ii), (2)(a), (b)(i) and (ii) AA [Grounds (Section 37 AA)]. We rely on the two Federal Court judgments, namely-

in Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413, at [56], Ramly Ali FCJ decided as follows- [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 [AA], 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 Ltd [2015] 3 NZLR 644; Sigur Ros Sdn Bhd).” (emphasis added); and

Vernon Ong Lam Kiat FCJ gave the following judgment in Master Mulia Sdn Bhd v Sigur Ros Sdn Bhd [2020] 12 MLJ 198, at [46] - [46] In our considered view, the opening words of sub-s 37(1) [AA] which employs the terms 'may be set aside' is plain and unambiguous. Subsection 37(1) clearly provides that the High Court retains a residual discretion not to set aside an award even though a ground for setting aside may be made out. ..." (emphasis added);

the Court's Discretion (To Set Aside Arbitral Awards) should only be exercised exceptionally due to the following four considerations [4 Considerations (Arbitration)]-

parties have the freedom to enter into an "arbitration agreement" as understood in s 9(1) AA. Such freedom has been described as "Party Autonomy";

by virtue of s 36(1) AA, an arbitral award "shall be final and binding on the parties", namely the "Finality of Awards";

s 8 AA provides for a "minimalist judicial intervention" approach. Unless an arbitral award can be set aside under any one of Grounds (Section 37 AA), the court has no discretion and/or power to set aside an arbitral award under-

any written law (other than AA);

(ii) case law; and/or

(iii) the court's inherent jurisdiction and/or the court's inherent power; and

the AA, including its s 37, does not provide for an appeal to the High Court against an arbitral award. Nor is an application to set aside an arbitral award pursuant to s 37 AA an application for a Judicial Review of the arbitral award. According to the Federal Court in Master Mulia, at [54] - [54] Underlying these guiding principles is the policies and objectives of the New York Convention and the Model Law. As a matter of principle and policy, the courts will seek to support rather than frustrate or subvert the arbitration process. The role of courts in the arbitral regime in general is one of assistance supportive of the arbitral process and not one of interference with it. Bearing in mind the two primary objectives of the Model Law (respect for and preservation of party autonomy and ensuring procedural fairness), the courts do not review the merits of the arbitral tribunal's decision." (emphasis added); and

the party who applies to court to set aside an arbitral award (Applicant) -

has the legal and evidential burden to satisfy the court on a balance of probabilities of the existence of any one of the Grounds (Section 37 AA); and

has the onus to persuade an exercise of the Court's Discretion (To Set Aside Arbitral Awards) in the Applicant's favour. H. The court's discretion to set aside an arbitral award on the ground that the award is in conflict with the public policy of Malaysia and/or there is a breach of the rules of natural justice by the arbitral tribunal

Firstly, even if an "arbitral tribunal" [defined in s 2(1) AA] has not breached the rules of natural justice as understood in s 37(2)(b)(i) and/or (ii) AA, the Court's Discretion (To Set Aside Arbitral Awards) may still be exercised if an arbitral award is in conflict with the public policy of Malaysia within the meaning of s 37(1)(b)(ii) AA. Having said that, for an Applicant to prove on a balance of probabilities that an arbitral award conflicts with our public policy, the Applicant has to fulfil a high threshold as laid down by the following judgment of the Federal Court in Jan De Nul, at [55] and [58] (Jan De Nul Test): [55] Section 37(2)(b)(ii) [AA] provides that an award made by an arbitral tribunal would be in conflict with the public policy of Malaysia if a breach of the rules of natural justice occurred in connection with the making of the award. The circumstances stated in s 37(2) are by no means exhaustive. Other appropriate circumstances may also fall under the category of 'public policy' in view of the opening phrase 'without limiting the generality of sub-para (1)(b)(ii)' as appears in s 37(2) [AA]. However, it must be appreciated that 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 [AA], 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'. [58] The scope of public policy ground for setting aside an arbitral award could only be invoked in deserving case ie in instances where it appears a violation of the most basic notions of morality and justice. It covers fundamental principles of law and justice in substantive as well as procedural respect. Instances where the upholding of an arbitral award would shock the conscience, or clearly injurious to the public good, or wholly offensive to the ordinary reasonable and fully informed member of the public, had been held by courts in various jurisdiction to fall within the category of public policy ground for setting aside an arbitral award. Thus, instances such as 'patent injustice', 'manifestly unlawful and unconscionable', substantial injustice', 'serious irregularity' and other similar serious flaws in the arbitral process and award, would also fall within the applicable concept of public policy and therefore by virtue of s 37(1)(b)(ii) [AA] when proven, can be a ground for the court to exercise its discretion to set aside the award (see: Ajwa for Food Industries). Such instances fall within 'the basic and fundamental notions or principles of justice'. The court must adopt the principle as laid down by Howard M Holtzmann and Joseph E Neuhans as found in their commentary in A guide to the UNCITRAL Model on International Commercial Arbitration: Legislative History and Commentary 'that the term 'public policy' which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects'. The terms 'patent injustice' or 'substantial injustice' or 'manifestly unlawful and unconscionable' as often used by the court in setting aside arbitral awards, do not mean injustice which is more than de minimis; what is required is that the injustice had real effect and had prejudiced the basic right of the applicant (see: Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86).” (emphasis added).

In this case, the Appellant did not rely on Jan De Nul Test to contend that the Award was in conflict with the public policy of this country. In any event, applying Jan De Nul Test, we are not satisfied that the Award was in conflict with the public policy of Malaysia.

It is not disputed that here are two rules of natural justice, namely-

the first rule of natural justice $ [1^{\mathrm{st}} $ Rule (Natural Justice)] requires an arbitral tribunal -

to be free from actual bias; and

if there is no actual bias on the part of an arbitral tribunal, the arbitral tribunal should be perceived by "a fair-minded and informed observer" that there is no real danger of bias on the part of the arbitral tribunal please refer to the Court of Appeal's judgment in Wawasan Raya (M) Sdn Bhd & Anor v MARC Service Residence Management Corporation [2025] 4 MLRA 1, at [22(1)]; and

according to the second rule of natural justice $ [ 2^{n d} $ Rule (Natural Justice)]-

before an arbitral tribunal makes a final award, all parties in an arbitration shall have a right to-

adduce all relevant documentary evidence in the arbitral proceedings;

(ii) examine all witnesses who testify in the arbitration; and

(iii) to make submission, written and oral, to the arbitral tribunal; and

in Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd [2018] 2 SLR 1311, at [55] to [65], a case decided by Singapore's Court of Appeal, Steven Chong Horng Siong JA explained that there are three scenarios [3 Scenarios (Glaziers Engineering)] as follows- "(1) An omission to invite submissions on the applicable standard of persuasion or proof is not a breach of the fair hearing rule [55] ... The courts should be mindful that a surprising outcome may be the product of several distinct types of situations, some of which may not involve any breach of natural justice at all (see [56]-[63] below). The true question is whether the parties have been deprived of a fair opportunity to be heard (see Soh Beng Tee at [43] and The Royal Bank of Scotland NV v TT International Ltd [2015] 5 SLR 1104 at [73] and [77]). Here we speak of fairness not in terms of equal treatment between the parties, but in terms of reasonableness. At the risk of stating the obvious, a fair and reasonable opportunity of being heard may or may not require a decision-maker to take the overt step of inviting submissions from the parties on a given issue. We shall illustrate the above propositions by discussing three distinct types of proceedings which may result in surprising outcomes. First, the outcome of a dispute may be surprising to the parties because although they each have addressed the particular question which the decision-maker has posed as a decisive issue, the decision-maker has ultimately answered that question in a way that is so far removed from any position which the parties have adopted that neither of them could have contemplated the result. An example of this was seen in Pacific Recreation, where the point in issue was the governing law of a deed. Both parties had addressed this issue - the respondents had submitted that the deed was governed by Singapore law while the appellants had submitted that the deed was governed by Chinese law - but neither party had suggested or contemplated what the judge eventually decided - which was that the governing law was US law. [57] On appeal, this court found that the appellants had been deprived of their right to be heard on a decisive issue because they had no opportunity to raise arguments as to why US law was inapplicable, or alternatively, why US law also supported their interpretation of the deed (Pacific Recreation at [33]-[34]). In such a situation, the parties were rightly said to have had no fair opportunity to be heard because although they knew the question which was of decisive importance (ie, the governing law of the deed), they (a) did not know; and (b) could not reasonably have expected that the judge may have answered the question in the way that she did. Natural justice required that if the judge took the view that neither Chinese law nor Singapore law were satisfactory alternatives, she ought to have invited the parties to make submissions on whether US law was the governing law, and if so, what the applicable principles were (at [34]). This must be so because the content of each party's submissions would in turn depend on the applicable governing law. [58] Alternatively, the outcome of a dispute may be surprising to the parties by reason of the fact that they have not even addressed the very question which the decision-maker has posed as being a decisive issue, because they (a) did not know; and (b) could not reasonably have expected that it would be in issue at all. An example of this may be seen in the case of The Vimeira [1984] 2 Lloyd's Rep 66, where the issue in dispute was whether a particular port where a ship had docked to discharge was unsafe for the vessel. The parties argued the case on the basis that the decisive issue was whether there was sufficient water in the port for the ship to dock safely. The arbitrators, however, decided that the port was unsafe because the turning area was unduly restrictive for the vessel, notwithstanding that this issue had not been raised in the pleadings. [59] The English Court of Appeal held that this amounted to a breach of natural justice, Robert Goff LJ stating that it was unfair for the arbitrators "to decide a case against a party on an issue which has never been raised in the case without drawing the point to his attention so that he may have an opportunity of dealing with it" (at 75). In our view, the court rightly found that the parties did not have a fair opportunity to be heard on the issue of the adequacy of the turning area for the vessel. Such a finding is necessarily fact-sensitive and would be a function of the evidence before the arbitrator. The parties did not have an opportunity to adduce evidence or address the arbitrator because they were subjectively unaware that the adequacy of the turning area was an issue at all. They did not have a fair opportunity because they objectively could not have reasonably foreseen that it was a live issue. In such situations, the arbitrator would be in breach of natural justice unless he has taken the step of inviting submissions on that issue. The final type of situation is where the outcome of a dispute is surprising to the parties because they have omitted to address a particular issue even though they could reasonably have foreseen that the issue would form part of the court's decision. The parties may have chosen not to address the issue because they failed to apply their minds to it, or failed to appreciate its significance, or because they each assumed that the decision-maker would adopt their position on that issue. Whatever the case may be, this type of decision cannot be set aside on the basis of any breach of natural justice because if the parties could reasonably have foreseen that the issue would arise, and if they choose not to address that issue, they cannot complain that they have been deprived of a fair hearing. [61] One type of case which comes within this category are those where the decision-maker has decided the dispute on a premise which, though not directly raised by the parties, is reasonably connected to an argument which the parties have raised (see TMM ([46] supra) at [63]). In TMM, the key issue in dispute between a ship purchaser and a ship seller was whether the ship purchaser was entitled to terminate the contract on the basis of an alleged repudiatory breach on the ship seller's part. Central to this question was whether the term which the ship seller had breached ("clause 11") was a condition of the contract. The ship purchaser alleged that clause 11 was a condition, whereas the ship seller alleged that it was an innominate term. The dispute was referred to arbitration and the arbitrator found that clause 11 was not a condition, but a collateral warranty. The ship purchaser sought to have the arbitrator's decision set aside, alleging that he had breached the rules of natural justice by deciding the case on the basis that the term was a collateral warranty, when neither party had advanced that case. [62] On the facts, Chan J held that it was in fact the ship seller's case before the arbitrator that clause 11 was a warranty (at [68]). He thus dismissed the application to have the decision set aside. Going further, however, he held that even if the only issue put before the arbitrator was whether clause 11 was a condition or an innominate term, the arbitrator could not be said to have deprived the ship purchaser of its right to be heard. This was because the finding that clause 11 was a collateral warranty was not only reasonably connected to the arguments raised by the parties, but was a reasonable follow-through from the arbitrator's finding that clause 11 was not a condition (at [70]). In our judgment, the present case comes within this category of cases where the parties are precluded from complaining of a breach of the fair hearing rule because they ought reasonably to have foreseen that the issue in question (here, the applicable standard of persuasion) would arise, but failed to make submissions on the point. Indeed, it is a gross understatement to say that the parties could "reasonably foresee" that the issue of the standard of persuasion would arise, or that the issue was "reasonably connected" to arguments raised by the parties. Rather, the standard of persuasion was so integral and crucial to the adjudicator's very task of determining the dispute that there was no way he could have decided the dispute without coming to a position on the standard to be applied. In an adversarial decision-making process, it is inherently the remit of the decision-maker to assess the evidence against some standard of proof or persuasion. Therefore, the parties may well have been surprised by the view that the adjudicator formed as to the applicable standard, but they could not have been surprised that he had to form a view on this very point. [64] Seen in this light, it could not have been a breach for the adjudicator to have omitted to invite submissions from the parties as to the applicable standard of persuasion. The applicable standard was a question so obviously crucial to his determination that he was not obliged to highlight to the parties that it would be a live issue. If the parties decided not to address it, knowingly or otherwise, they cannot complain that they had no fair or reasonable opportunity to be heard. We would thus qualify the Judge's observation that an adjudicator must comply with the principles of natural justice not only with regard to the ultimate issue before him but also with regard to the "subsidiary issues on the path to his decision on the ultimate issue" (GD ([3] supra) at [60]). While it is undoubtedly true that a decision-maker must adhere to the principles of natural justice even in dealing with subsidiary issues, this does not necessarily mean that the decision-maker must specifically invite submissions or hear from the parties on all subsidiary issues if the subsidiary issues ought reasonably to have been foreseen by the parties. [65] In summary, it is not a breach of the fair hearing rule for a decision-maker to fail to invite submissions on an issue as fundamental and inherent in every legal dispute as that of the standard of persuasion or proof to be applied." (emphasis added);

the 3 Scenarios (Glaziers Engineering) are -

where an arbitral tribunal has answered a particular issue "in a way that is so far removed from any position which the parties have adopted that neither of them could have contemplated the result" $ [1^{\mathrm{st}} $ Scenario (Glaziers Engineering)];

(ii) the outcome of an arbitration may be surprising to the parties by reason of the fact that they have not addressed the question which the arbitral tribunal has posed as being a decisive issue because they did not know and could not reasonably have expected that it would be in issue at all” $ [2^{\mathrm{nd}} $ Scenario (Glaziers Engineering)]; and

(iii) the arbitral tribunal has decided the dispute on a premise which, though not directly raised by the parties, the parties could "reasonably have foreseen that the issue would arise" or the issue is "reasonably connected to an argument which the parties have raised" [3 $ ^{rd} $ Scenario (Glaziers Engineering)];

in the $ 1^{\mathrm{st}} $ Scenario (Glaziers Engineering) and $ 2^{\mathrm{nd}} $ Scenario (Glaziers Engineering), prior to the making of the award, the arbitral tribunal should have given the parties-

reasonable notice regarding the new matter(s) which was/were not raised by the parties; and

(ii) a reasonable opportunity to submit on the new matter(s). If the arbitral tribunal fails to fulfil the above subparagraphs (d)(i) and (ii), the $ 2^{\mathrm{nd}} $ Rule (Natural Justice) has been breached;

there is no breach of the $ 2^{\mathrm{nd}} $ Rule (Natural Justice) in the $ 3^{\mathrm{rd}} $ Scenario (Glaziers Engineering); and

the 3 Scenarios (Glaziers Engineering) have been adopted by our High Court in Mudajaya Corporation Bhd v KWSL Builders Sdn Bhd & another case [2024] 7 MLJ 849, at [1(1)], [10] and [12(4)].

When an Applicant relies on a breach of the rules of natural justice to set aside an award, we are bound by the following judgment of the Federal Court case of Master Mulia, at [53] and [58]: [53] In the light of the above, we think that the guiding principles on the exercise of residual discretion when an application for setting aside an award is grounded on breach of natural justice may be stated as follows: First, the Court must consider (a) 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; Third, if the breach is relatively immaterial or was not likely to have affected the outcome, discretion will be refused; Fourth, even if the court finds that there is a serious breach, if the fact of the breach would not have any real impact on the result and that the arbitral tribunal would not have reached a different conclusion the court may refuse to set aside the award; Fifth, where the breach is significant and might have affected the outcome, the award may be set aside; Sixth, in some instances, the significance of the breach may be so great that the setting aside of the award is practically automatic, regardless of the effect on the outcome of the award; Seventh, the discretion given the Court was intended to confer a wide discretion dependent on the nature of the breach and its impact. Therefore, the materiality of the breach and the possible effect on the outcome are relevant factors for consideration by the Court; and Eighth, whilst materiality and causative factors are necessary to be established, prejudice is not a pre-requisite or requirement to set aside an award for breach of the rules of natural justice. [58] This reading is supported by the case law in New Zealand where the setting aside provision on the NZ Act mirrors s 37 [AA]. Like s 37(2)(b) [AA], Article 34(6)(b), Schedule 1 of the NZ Act does not stipulate the requirement of prejudice (Kyburn (supra); Trustees of Rotoaira Forest Trust v Attorney General [1999] 2 NZLR 452). To reiterate, these decisions make the following points. First, the imposition of a requirement of prejudice narrows down what is intended to be a wide discretion (Kyburn (supra) at p 564); Second, provisions allowing for the setting aside of arbitral awards can be said to vest in the court a wide discretion to set aside awards. The question of whether an award ought to be set aside for breach of natural justice therefore does not turn on prejudice. It turns, instead, on amongst other things, the significance of the breach and the extent to which it might or may have affected the outcome of the arbitration. It is not necessary to show that the breach did in fact affect the outcome (Kyburn (supra) at p 653). Procedural prejudice would be sufficient to ground an application to set aside (Rotaoira (supra) at p 462). Fourth, there is no basis on which it can be said that the onus is on the applicant to show that the consequences of the breach are sufficiently material to warrant setting aside an award. The ordinary burden on an applicant cannot be elevated to a legal requirement to show that the outcome would be different had the breach not occurred (Kyburn (supra) at p 654). Fifthly, materiality of the breach and the possible effect on the outcome are treated as relevant factors going to the exercise of the discretion, such as the likely costs of holding a re-hearing (Kyburn (supra) at p 654). Lastly, prejudice, if it can be shown, would be material. However, no single factor is decisive or necessary for an award to be set aside (Kyburn (supra) at p 654). Kyburn (supra) was cited with approval by this Court in Jan De Nul (M) Sdn Bhd (supra)). We are in agreement with the view expressed by the Court of Appeal that the threshold under s 37 is very low as compared to that under s 42 [AA] (see para. [38] of the Court of Appeal's written judgment).” (emphasis added). I. Had the Arbitrator breached the $ 2^{\mathrm{nd}} $ Rule (Natural Justice) in making the Award with regard to the 2 New Matters?

It was clear from the SOC, DCC and RDCC that the question of what were the Causes (Delay) was a live issue in the Arbitration. The Causes (Delay) would decide whether the Appellant could claim LD from the Respondent for the Delay (Works) and if so-

what would be the quantum of LD payable by the Respondent to the Appellant [Quantum (LD)]?; and

if the Respondent's Counterclaim was allowed, the Arbitrator was duty bound to take into account the Quantum (LD) in making the Award.

The 2 New Matters in paragraphs 4.14.3 and 4.19 of the Award -

were not adduced as evidence in the Arbitration; and

were not submitted by the Appellant and Respondent before the Arbitrator. We are of the view that in respect of the 2 New Matters, this case falls within the 2 $ ^{nd} $ Scenario (Glaziers Engineering) because -

both the Appellant and Respondent did not know about the 2 New Matters; and

the parties could not reasonably have expected the 2 New Matters to be in issue at all. In view of the above reasons, the $ 2^{\mathrm{nd}} $ Rule (Natural Justice) required the Arbitrator, before the Award was made, to give to the Appellant and Respondent -

reasonable notice regarding the 2 New Matters; and

(ii) a reasonable opportunity to submit on the 2 New Matters. As the Arbitrator had failed to perform the two requirements in the above sub-paragraphs (i) and (ii), there was proof on a balance of probabilities that the Arbitrator had breached the $ 2^{\mathrm{nd}} $ Rule (Natural Justice) in this case under s 37(1)(b)(ii) read with (2)(b)(ii) AA {Arbitrator's Breach [ $ 2^{\mathrm{nd}} $ Rule (Natural Justice)]}. In this regard, the High Court had committed an error of law in failing to find the existence of the Arbitrator's Breach [ $ 2^{\mathrm{nd}} $ Rule (Natural Justice)] (High Court's Legal Error).

Premised on Master Mulia, we decide as follows:

as explained in the above paragraphs 34 and 35, the Arbitrator's Breach $ [ 2^{\mathrm{nd}} $ Rule (Natural Justice)] had occurred;

the Arbitrator's Breach $ [2^{\mathrm{nd}} $ Rule (Natural Justice)] was made "in connection with the making of the [Award] as understood in s 37(2)(b)(ii) AA; and

the Arbitrator's Breach $ [ 2^{\mathrm{n d}} $ Rule (Natural Justice)] was serious and material to the outcome of the Arbitration because-

the 2 New Matters were material to the issue regarding the Causes (Delay) - please refer to the above paragraph 34;

the Arbitrator relied on the 2 New Matters to decide the Causes (Delay) in favour of the Respondent against the Appellant;

the Arbitrator's Breach $ [ 2^{\mathrm{nd}} $ Rule (Natural Justice)] had a "real impact" on the outcome of the Arbitration because the Arbitrator could (not would) have reached a different conclusion if, before the Award was made, she had given to the Appellant and Respondent-

reasonable notice regarding the 2 New Matters; and

(ii) a reasonable opportunity to submit on the 2 New Matters; and

the Appellant's Arbitral Claim for LD totalled RM21,200,000.00. The amount of the Appellant's Alternative Arbitral Claim for LD was RM6,760,000.00. The sum of the Respondent's Counterclaim (allowed by the Arbitrator) was only RM914,538.04. It is clear from the amounts of the Appellant's Arbitral Claim, Appellant's Alternative Arbitral Claim and Respondent's Counterclaim that the Arbitrator's Breach $ [2^{nd} $ Rule (Natural Justice)] was so great that we have to exercise our "residual discretion" pursuant to s 37(1) AA to set aside the Award in its entirety. We exercise our discretion as such notwithstanding the fact that both the Appellant and Respondent had been afforded a right by the Arbitrator to -

adduce all documentary evidence in the Arbitration;

(ii) examine all the witnesses called to testify in the Arbitration; and

(iii) present submissions, both oral and prior to the making of the Award, to the Arbitrator. The considerations stated in the above sub-paragraphs (i) to (iii) will generally be present in all arbitrations. Hence, if these considerations can justify the court's refusal to exercise its discretion to set aside an arbitral award based on a breach of the $ 1^{\mathrm{st}} $ Rule (Natural Justice) or the $ 2^{\mathrm{nd}} $ Rule (Natural Justice), then the court's residual discretion to set aside an arbitral award under s 37(1)(b)(ii) and (2)(b)(ii) AA will be rendered redundant.

In view of the High Court's Legal Error and the reasons explained in the above sub-paragraph 36(3)(d), the learned High Court Judge had erroneously exercised his discretion under s 37(1) AA by dismissing the Appellant's Setting Aside OS. Hence, appellate intervention is warranted in this case. J. Did the Arbitrator rely on her knowledge and expertise regarding the 2 New Matters?

The Federal Court had decided in Pancaran Prima, at [3], [34], [54], [62] to [64], [78], [82], [90], [91] and [99] to [102], as follows: [3] The appellant had been granted leave to appeal on the following five questions of law, namely:

Whether the arbitrator who is an engineer who relies on his own knowledge of the construction industry in arriving at a decision on the quantum of 'loss of profit' pursuant to a provision recognised by section 21(3)(b) [AA] for an arbitrator to be able to draw on its own knowledge and expertise, can then be said to be in breach of the rules of natural justice within the meaning of section 37(1)(b)(ii) read together with subsection 2(b) [AA]? [34] We shall first deal with the arbitrator's loss of profit ruling, which comes within leave questions 2, 3 and 4, and which concerns a breach of the rules of natural justice. The basis for the respondent's challenge in the High Court was para 147 of the award, which the learned arbitrator expressed in the following terms: Similarly, I am not convinced that the Claimant's 25% margin or RM2,635,936.26 is fair and reasonable without taking into consideration the risks associated with that of a construction project, especially a civil engineering project is subjected to the vagaries of many unaccounted extraneous factors. But in the Malaysia construction industry, it is almost a norm when asked to indicate a 'profit and attendance' for having to manage a nominated subcontractor, most contractors would include a margin between 10-15%. In my view, it would not be unreasonable to presume these margins represent what an industry perceived as a safe 'no risk profit margin'. Further as lump sum contract assume higher risk than provisional quantities work, I am minded in this instant to award a margin for loss of profit for the remaining drainage (lump sum) work at 10% and the remaining vehicular box culvert (provisional quantities) work at 7.5%. [54] Having asked himself the right question, ie 'has the Claimant proved his loss of profit in the legal sense of on the balance of probability?', the learned arbitrator went on, based on the material before him, to make a firm finding of fact that the appellant had proved its loss of profit except that the sum claimed was neither fair nor reasonable, hence his decision to award a lower figure but without acceding to the respondent's contention that the appellant was only entitled to nominal damages. [62] In awarding a loss of profit of 10% for the remaining drainage works and 7.5% for the remaining vehicular box culvert, the arbitrator was in fact moderating the appellant's claim of 25% by reducing it for contingencies, albeit taking the 10-15% margin for P&A which he described as 'almost the norm' in the Malaysian construction industry. [63] Obviously, what the learned arbitrator did was to strike a balance between the high and the low of the quantum for loss of profit. He did not slavishly apply the 10-15% 'norm' but only allowed for a lower range. We agree with learned counsel for the appellant that this is what arbitrators are expected to do. [64] What is also clear from the award is that in determining the quantum of loss of profit, the learned arbitrator found the respondent's evidence to be of little value but at the same time he considered the quantum claimed by the appellant to be excessive. That was the reason why, as we just mentioned, he brought the appellant's claim down from 25% to 10% for loss of profit for the remaining drainage works and 7.5% for the remaining vehicular box culvert (provisional quantities) works. [78] It is important to appreciate that a determination under s 21(3)(b) is one of fact and not of law. In form and spirit, the provision clearly allows the arbitral tribunal to draw on its own knowledge and expertise on any fact in issue which it is acquainted with. What the respondent was suggesting in effect was that there must be actual 'evidence' before the arbitral tribunal before it could draw on its own expertise and knowledge in arriving at such finding of fact. [82] In cases where an arbitrator is appointed for his or her special knowledge and skill or expertise, such arbitrator is entitled to draw those sources for the purpose of determining the dispute and need not advise the parties that he or she is doing so: see Mediterranean and Eastern Export Co and Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84. [90] There is no dispute that the arbitrator in the present case was not a lay arbitrator. He was a professional engineer by profession, a chartered arbitrator and a Fellow of the Chartered Institute of Arbitrators (FCIArb). There was no argument raised at any stage of the proceedings, including before us, that he did not have the requisite special knowledge and expertise to entitle him to make the pronouncement that 'in the Malaysian construction industry, it is almost a norm when asked to indicate a 'profit and attendance' for having to manage a nominated subcontractor, most contractors would include a margin of 10-15%'. [91] Clearly, the norm that the learned arbitrator was speaking of related to general facts, 'that is to say facts which form part of the general body of knowledge within their area of expertise as distinct from facts that are specific to the particular dispute' (Methanex Motunui Ltd). The learned arbitrator was therefore competent to draw on his own knowledge and expertise on the existence of the 10-15% no profit risk norm in the Malaysian construction industry without giving the parties the opportunity of answering it and showing that his view was wrong (Jordeson & Co). [99] In the context of the present case, we do not think that the drawing by the arbitrator on his own knowledge and expertise of the 10-15% no risk profit margin for P&A as being 'almost a norm' in the Malaysian construction industry was something that was not reasonably foreseeable or was a significant surprise to the respondent, so much so that the failure by the learned arbitrator to give it the opportunity to submit on the issue had resulted in a serious breach of the rules of natural justice. While it is true that the arbitrator was not expected to know everything about the norms in the Malaysian construction industry, neither is he expected to know nothing at all. [100] To the argument that actual evidence (in this case evidence of the 10-15% no risk profit margin for P&A) must be produced before the arbitral tribunal before it could draw on its own knowledge and expertise under s 21(3)(b), we can only say that such argument has a tendency to defeat the object behind the provision rather than to put its object into effect and must be rejected. [101] The construction if accepted will render the provision completely otiose and denuded of all meaning, contrary to the trite principle that Parliament does not legislate in vain. Heed must be taken of s 17A of the Interpretation Acts 1948 and 1967 which provides for a purposive approach in the interpretation of statutes. [102] Effect must therefore be given to s 21(3)(b) of the Act in order to follow through with Parliament's intention to allow the arbitral tribunal to draw on its 'own knowledge and expertise'. Actual evidence is the very antithesis of a person's own knowledge and expertise. Unless it can be shown that the arbitrator's own knowledge and expertise on any fact in issue is plainly and unarguably wrong, the court must be very slow to interfere with his findings." (emphasis added).

Firstly, the Arbitrator did not state in paragraphs 4.14(3) and 4.19 of the Award that she had relied on her own expertise, knowledge and experience (Expertise/Knowledge/Experience) with regard to the 2 New Matters. Nor did the Arbitrator state in any part of the Award that she had relied on her Expertise/Knowledge/Experience in respect of the 2 New Matters. It cannot be implied in the Award that the Arbitrator had relied on her Expertise/Knowledge/Experience regarding the 2 New Matters. Accordingly, the Respondent cannot now invoke s 21(3)(b) AA to contend that the Arbitrator had relied on her Expertise/Knowledge/Experience with regard to the 2 New Matters.

Secondly, even if it is assumed that the Arbitrator intended to rely on her Expertise/Knowledge/Experience in respect of the 2 New Matters [Arbitrator's Expertise/Knowledge/Experience (2 New Matters)], prior to the making of the Award, the Arbitrator should have -

informed both the Appellant and Respondent that the Arbitrator intended to rely on the Arbitrator's Expertise/Knowledge/Experience (2 New Matters); and

given the parties a reasonable opportunity to be heard regarding the Arbitrator's Expertise/Knowledge/Experience (2 New Matters). Both the Appellant and Respondent should be afforded a reasonable opportunity to adduce their own expert evidence to confirm, vary or rebut the Arbitrator's Expertise/Knowledge/Experience (2 New Matters). In support of the above decision, we rely on the following judgment of Steven Chong JCA in Singapore's Court of Appeal case of CAJ & Anor v CAI and another appeal [2022] 1 SLR 505, at [55] to [57]: [55] As regards the Secondary NJ [Natural Justice] Breach, we saw no reason to disturb the Judge's finding that the Tribunal had not actually relied on any of the evidence adduced by the appellants in the Arbitration when it granted the 25-day extension of time (see the Judgment at [167]). In any event, even if the Tribunal had purported to rely on some of the evidence already adduced in the Arbitration (ie, the Tribunal only partially and not solely relied on its experience), there was no doubt that the Tribunal did rely on its "experience" to some extent in arriving at its decision to grant a 25-day extension of time. So long as the Tribunal's decision on the EOT Defence was based in part on its "unarticulated experience" (see the Judgment at [162]), in relation to which the respondent had not been afforded any opportunity to address, that in itself constituted a breach of natural justice. As we have emphasised, any claim for an extension of time in a construction project is often fact-sensitive and subject to a variety of moving parts. The Tribunal's prior experience dealing with extension of time claims for other construction projects would be immaterial in deciding on the appropriate extension of time in this case without the benefit of pleadings, specific evidence (both factual and expert) and arguments to determine the proper extension of time to be granted. Once this glaring fact is placed in the correct perspective, it would be immediately apparent that the failure of the Tribunal to inform the parties as to how its "experience" would bear on the extension of time issue was another classic case of breach of natural justice. [56] This point may also be illustrated by reference to paras 334-335 of the Award, where the Tribunal granted a 25-day extension of time on the basis that this represented the appellants' culpability of around 25% for the delay. With respect, this was a somewhat puzzling finding for the following reasons: [57] Of course, it is trite that mere errors of fact or law are not sufficient to warrant setting aside an award (see CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305 at [33]). By highlighting the apparent flaws in the Tribunal's reasoning, we are in no way seeking to substitute the Tribunal's decision for our own on the merits. Our point is simply this: the fact that the Tribunal's reason for granting a 25 day extension of time to the appellants made no sense at all only served to highlight: (a) the importance of the parties' pleadings, evidence and submissions in supplementing the Tribunal's purported "experience"; and (b) the prejudice suffered by the respondent when the Tribunal failed to invite the parties, especially the respondent, to address the Tribunal on its purported "experience"." (emphasis added). Based on CAJ, if the Arbitrator had relied on her Expertise/Knowledge/Experience in respect of the 2 New Matters, she would have breached the $ 2^{\mathrm{nd}} $ Rule (Natural Justice) because, before the Award was made, the Arbitrator should have -

informed both parties that the Arbitrator intended to rely on the Arbitrator's Expertise/Knowledge/Experience (2 New Matters); and

given the Appellant and Respondent a reasonable opportunity to be heard regarding the Arbitrator's Expertise/Knowledge/Experience (2 New Matters), including a reasonable opportunity to call their own expert(s) to support, vary or rebut the Arbitrator's Expertise/Knowledge/Experience (2 New Matters). K. Whether the court can set aside an arbitral award on the ground that the arbitral award did not contain reasons as required by s 33(3) AA

Section 33(3) AA provides that an arbitral award "shall state the reasons upon which it is based" save for the two exceptions as provided in s 33(3)(a) and (b) AA.

In the absence of the circumstances stated in s 33(3)(a) and (b) AA and notwithstanding the employment of the mandatory term "shall in s 33(3) AA, we are of the following view:

if an arbitral award does not contain any reason, namely, there is a breach of s 33(3) AA {Breach [Section 33(3) AA]}, a Breach [Section 33(3) AA], in itself, does not constitute proof that the award is in conflict with the public policy of Malaysia within the meaning of s 37(1)(b)(ii). This is because a Breach [Section 33(3) AA] per se may not satisfy the Jan De Nul Test; and

a Breach [Section 33(3) AA] does not necessarily mean that the arbitral tribunal in question has breached the $ 1^{\mathrm{st}} $ Rule (Natural Justice) and/or $ 2^{\mathrm{nd}} $ Rule (Natural Justice) under s 37(2)(b)(ii) AA (in connection with the making of the arbitral award). The above view is supported by the 4 Considerations (Arbitration) - please refer to the above paragraph 29(2).

In this case, the Arbitrator had given reasons for the Award. There was therefore no breach of s 33(3) AA in this instance. L. Whether an arbitral tribunal was required by AA to set out all the issues and evidence in the arbitral award

The AA does not require, either expressly or by necessary implication, an arbitral tribunal to set out in the arbitral award expressly and in detail all the issues and evidence adduced in the arbitration proceedings (Issues/Evidence). Having said that, it will be helpful to all parties, their learned counsel and the court (if legal proceedings are subsequently instituted to set aside or enforce the arbitral award) if the arbitral tribunal sets out in detail the Issues/Evidence in the arbitral award. Needless to say, if an arbitral tribunal does not set out in detail the Issues/Evidence in the arbitral award, such an omission, in itself-

does not prove that the award is in conflict with the public policy of Malaysia as understood s 37(1)(b)(ii). In such case, the Jan De Nul Test is clearly not satisfied; and

is not tantamount to a breach of the $ 2^{\mathrm{nd}} $ Rule (Natural Justice) pursuant to s 37(2)(b)(ii) AA (in connection with the making of the arbitral award). M. Should the court recognise and enforce the Award?

We reproduce below the relevant parts of ss 38(1) and 39(1)(b)(ii) AA: "s 38. Recognition and Enforcement

On an application in writing to the High Court, an award made in respect of an arbitration where the seat of arbitration is in Malaysia or an award from a foreign State shall, subject to this section and section 39 be recognised as binding and be enforced by entry as a judgment in terms of the award or by action. s 39. Grounds for Refusing Recognition or Enforcement

Recognition or enforcement of an award, irrespective of the State in which it was made, may be refused only at the request of the party against whom it is invoked-

if the High Court finds that-

(ii) the award is in conflict with the public policy of Malaysia." (emphasis added).

Once the Respondent had complied with all the procedural requirements regarding the Respondent's Enforcement OS, the burden would shift to the Appellant to satisfy the court of the existence of any one of the circumstances provided in s 39(1)(a)(i) to (vii), (b)(i) and (ii) AA for the court to refuse the Respondent's Enforcement OS - please refer to the High Court's decision in Murray & Roberts Australia Pty Ltd v Earth Support Company (SEA) Sdn Bhd [2015] 3 AMR 152, at [63] to [65].

As explained in the above Part I and paragraph 40, we are satisfied that the Appellant had discharged the legal burden to prove on a balance of probabilities that there was a breach of the $ 2^{n d} $ Rule (Natural Justice) in connection with the making of the Award as understood in s 37(1)(b)(ii) read with (2)(b)(ii) AA. Consequently, the learned High Court Judge should have dismissed the Respondent's Enforcement OS under ss 38(1) and 39(1)(b)(ii) AA.

Premised on the above evidence and reasons -

the $ 1^{\mathrm{st}} $ Appeal is allowed with the following order-

the High Court's Decision (Appellant's Setting Aside OS) is set aside;

the Award is set aside in its entirety; and

the Respondent shall pay costs of RM30,000.00 to the Appellant for the proceedings with regard to the Appellant's Setting Aside OS in the Court of Appeal and High Court (subject to allocatur fee);

the $ 2^{\mathrm{nd}} $ Appeal is allowed as follows-

the High Court's Decision (Respondent's Enforcement OS) is set aside; and

there shall be no order as to costs in respect of the proceedings regarding the Respondent's Enforcement OS in the Court of Appeal and High Court; and

the $ 3^{\mathrm{rd}} $ Appeal is struck out with no order as to costs.

A draft copy of this judgment (Draft) had been previously forwarded to Mariana binti Yahya and Wan Ahmad Farid bin Wan Salleh JJCA. Both my learned sister and brother had expressed their concurrence with the Draft. DATE: 16 MAY 2025 WONG KIAN KHEONG Judge Court of Appeal For the Appellant: Mr. Foo Joon Liang & Ms. Tasha Lim Yi Chien (Messrs Gan Partnership) For the Respondent: Mr. Simrenjeet Singh a/l Baldev Singh, Mr. Tay Por Hai, Ms. Sareniya Thanaseharan & Mr. Sam Wei Yan (Messrs Simrenjeet, Tay & Co.)