23.3. Whether the Award deals with a dispute not contemplated by or not falling within the terms of the submission to Arbitration when the Arbitrator decided that by conduct, the parties have accepted that the Respondent's claim for rectification works is the sum retained as the Retention Sum under the Contract.” Jurisprudence Related to Section 37(3)(6) UNCITRAL Model Law 1985 (Model Law) and New York Convention 1958 (Convention) – Setting Aside Award is The Last Option for Court. [8] Malaysia has adopted the Model Law (which has subsumed part of the Convention) for domestic as well as international arbitration. The Convention does not allow an arbitral award to be set aside for error of fact and/or law. The Convention only allows an award to be challenged for one of the grounds set out in Article I to V and in particular V. The Convention per se does not make any obligation for the seat court to supervise the arbitral proceedings to ensure that an award issued by the arbitral tribunal is enforceable in the Convention countries unless the relevant exception unique to the state applies. [9] In essence, the Convention allows an arbitration award made in one Convention country to be enforceable in another country. The Convention supports party autonomy. Parties to an arbitration agreement can even agree to appoint a tribal chief of a remote part of Malaysia as an arbitrator and agree to be bound by his award. That award can be enforceable in any Convention countries. Very crucially when it relates to the Convention and/or strictly the Model Law parties choosing arbitration as a mode of dispute settlement must take cognisance that they are prohibited from complaining to the court that arbitration award suffers from error of fact and/or law. Party autonomy 14 concept requires the parties to diligently accept the decision of the arbitral tribunal chosen by the parties. Courts as a general rule will be reluctant to interfere whether it is a question of fact or law as the arbitrator is deemed to be the sole and final judge of all questions, both of law and fact, as eloquently stated by Williams J in the 19th century case of Hodgkinson v Fermie [1857] 140 ER 712, where His Lordship also observed: "You have constituted your own tribunal; you are bound by its decision." [10] Only in rare circumstances, the courts even under the Malaysia Arbitration Act 1952 (old regime) had interfered in the award and the courts have acknowledged party autonomy concept warrants the court to be slow in interfering with award unless it is immoral, sinful, improper, unconscionable and worthy of condemnation. [See Crystal Reality Sdn Bhd v Tenaga Insurance (Malaysia) Sdn Bhd [2008] 3 CLJ 79 (CA); Las Vegas Hilton Corporation v Lo Yuk Leung [1998] HKCU 33]. [11] The greatest setback under the Convention was that it did not provide a commitment for courts in Convention countries to assist and supervise the arbitral tribunal to ensure that arbitral tribunal delivers an award which can be enforced in the Convention country and avoid a challenge under Article V of the Convention. This shortcoming was remedied by countries accepting the Model Law provisions recommended by United Nations Commission on International Trade Law. 15 [12] Malaysia has adopted the Model Law provisions with some improvements to cater for domestic as well as international arbitration when the seat is in Malaysia. Model Law allows a challenge to the award on similar terms as Article V of the Convention in the seat itself. In addition, it obliges the court in lieu of setting aside the award to refer the matter to the arbitral tribunal to correct the award so that the arbitral tribunal will be able to deliver an enforceable award. There are only certain circumstances where the award can be set aside as of right, for example, incapacity of parties, etc. In essence, article 34(4) of the Model Law does not give an option to set aside the award at the first instance unless the exception applies without remitting the matter to the arbitral tribunal. The said article 34(4) read as follows: “(4) The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside. [13] Malaysia has adopted article 34(4) and is reflected in article 37(6). In addition, Malaysia has included a sub-provision for the court to separate part of the award, thereby accepting the doctrine of separability and/or severability to set aside a part of the award only and is reflected in section 37(3). The doctrine of severability was already in place by development of case laws under the old regime. If the award can be severed to save the integrity of the decision making process, the courts have readily done so. However, if the award is inextricably interwoven with the jurisdictional issue and cannot be severed without violence to the jurisdictional principles and/ or quantum, the courts have refused to exercise its discretion. For example, the Privy Council in the case of 16 Pratap Chamaria v Durga Prasad Chamaria AIR 1925 P.C. 293 on the issue of severability had this to say: "The principle of severability in cases of awards is very well known. If an award is given in regard to the subject-matter of the suit itself, which is clearly separate and severable from the other matters decided in the award, then there is no reason why the award should not be upheld to the extent that it relates to the subject-matter of the suit...The court, of course, has no power to deal with matters which lay beyond the ambit of the suit and as such beyond its jurisdiction, but it has certainly power to accept the award in regard to matters in dispute between the parties, which are involved in the litigation itself. If, however, the pronouncement of the arbitrators is such that matters beyond the scope of the suit are inextricably bound up with matters falling within the purview of the litigation, in that case, the court would be unable to give effect to the award because of the difficulty that it cannot determine to what extent the decision of the subject-matter of the litigation has been affected and coloured by the decision of the arbitrators in regard to matters beyond the ambit of the suit. In the latter class of cases, the doctrine of severability cannot operate to save the award even for the purpose of disposing of the pending litigation. [See Malhotra 2006 pages 1131 and 1132]." [14] Severability will be applicable to a complaint, for example, under section 37(1)(a)(v) where the attack is only against part of the award. Section 37(6) closes the door to arguments related to functus officio. Very importantly, the AA 2005 permits the court to allow the arbitral tribunal to reconsider the award even though it may have become functus officio, and take such steps as in the arbitral tribunal's opinion will eliminate the grounds for setting aside. In Hartela Contractors Ltd v Hartecon JV Sdn Bhd & anor [1999] 2 MLJ 481, Gopal Sri Ram JCA (as he then was) asserted: 17 "the jurisdiction to set aside or remit an arbitrator's award whether at common law or under statute is one that should be exercised with great care and a proper sense of responsibility". [15] Even to remit the award to the arbitral tribunal, the court must be satisfied that award if allowed to be enforced will result in patent injustice, etc. [See Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd [2016] 3 CLJ 403]. To set aside an arbitration award, the section clearly requires proof. Mere allegation or surmise will not be sufficient. The burden is on the applicant. It is also well settled in dealing with an award, the High Court does not enjoy appellate jurisdiction. In Pembinaan LCL Sdn Bhd v SK Styrofoam (M) Sdn Bhd [2007] 3 CLJ 185, Gopal Sri Ram (JCA as he then was) had this to say: "A court when examining the objections taken to an award made by an arbitrator is not required to examine the correctness of the claim on merits. The court cannot sit in appeal over the views of the arbitrator by re-examining and reassessing the materials." [16] Even though Hartela as well as Pembinaan relate to pre AA 2005 award, it clearly states the court’s position that it will not interfere with the award. However, sections 37(3), 37(6) as well as 42(4)(c), etc. gives the court some options to consider to save the award being set aside. [17] The unique position of section 37(6) of AA 2005 is that when an applicant complains of breach of natural justice and/or dispute not contemplated by the parties as in the instant case, the courts have no option to make a finding on those issues and set aside the award without giving the arbitral tribunal an option to re-open the arbitral proceedings or the award unless the exception applies. Sections 37(6) and also 18 42(4)(c) to some extent allows the court to check the misconduct of the arbitrator. In essence, sections 37 and 42 permits some supervisory jurisdiction on the arbitrator after the award has been released and if the arbitrator fails to satisfactorily comply with the direction of the court it may lead to committal proceedings. [18] In Asean Bintulu Fertilizer Sdn Bhd v Wekajaya Sdn Bhd and another appeal [2017] MLJU 1530, it was stated: “22. … The test for intervention will relate to cases where the award suffers from patent injustice and/or where the award is manifestly unlawful and unconscionable. Usually the consideration which need to be taken into account at the initial stage itself will include whether (i) the point of law attempted to be raised will have substantial effect on the arbitration; (ii) the point have been raised before the arbitrator; (iii) arbitrator’s decision must be obviously wrong or the question must be of general public importance and open to serious doubt; (iv) it must be just and proper for the court to determine the question.” [19] In addition, the Court of Appeal asserted that: “19(d) Section 36 will fortify the argument that the award is final and binding on the parties. Section 36 provision is not found in the Model Law. Section 36 places a higher threshold on the court when it intends to set aside an award related to a section 37 application. In this respect, the decision from other jurisdiction which does not have a similar provision will not be helpful, save those cases which had dealt with the jurisprudence relating to ‘patent injustice’ or unconscionability, etc.” 19 Whether there was mutual consent. [20] Learned counsel for the respondent submits that there was no mutual consent. That part of the submission read as follows: “25. The Respondent denies that the Appellant's claim was allowed by mutual consent. Although the Respondent did not dispute the amount of RM36,688.39 payable to the Appellant under the Final Certificate, the Respondent did dispute the whole of the Appellant's claim and counterclaimed for LAD and rectification costs.” [21] Mutual consent may be in writing as well as conduct and it all depends on the facts and at times the law. In the instant case, the respondent has two applications at the first instant itself, i.e. under sections 37 and 42. If the respondent’s intention is to set aside the award, the referral on the issue of counterclaim should have been under section 37(6) and not under section 42(3) of AA 2005. Section 37(6) states: “(6) On an application under subsection (1) the High Court may, where appropriate and so requested by a party, adjourn the proceedings for such period of time as it may determine in order to allow the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.” [22] Under section 42(3), the scope of courts direction is very limited and is related to the reasons or sufficient reason for the award only. Under section 37(6), the scope of courts direction is very wide and it can encompass section 42(3) as an award without any reason or sufficient reasons may be set aside. That is to say, the court can direct the arbitral 20 tribunal to give grounds with a proviso to say if they fail to do so satisfactorily the award may be set aside. The arbitral tribunal on such occasion has two choices, (i) to resume the arbitral proceedings to deal with courts direction; or (ii) take any other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside. [23] Section 37(6) of AA 2005 is pari materia to article 34(4) of the UNCITRAL Model Law 1986. The Model Law regime does provide a procedure to save the award for breach of natural justice or allegation of related to issues such as “not within the contemplation of parties” or issues related to pre or post award interest, etc. That is to say, section 37(6) does not give an option to set aside the award as of right at the trial stage or even at the apex stage. The courts must be vigilant of the jurisprudence related to section 37(6) and should not set aside the award in the first instance and create miscarriage of justice. [24] Cases in this area of law have not highlighted in detail the significance of section 37(6); a saving provision for all injustice and/or maladies complained of in relation to an award. In fact with the presence of section 37(6) regime, it will be an abuse of process of court for any applicant having submitted to an arbitration agreement and in the face of section 36 of AA 2005, to move the court to set aside the arbitration award. In saying so, there may be instances where section 37(6) may not be applicable. For example, where the grounds relate to incapacity of parties, etc. or public policy. In Jan De Nul (Malaysia) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2017] MLJU 1542, the Court of Appeal observed: 21 “[6] It is important to note that section 37 is not in pari materia to any of the sections in English Arbitration Act 1996 (EAA 1996). In addition, England is not strictly a Model Law country. England allows the court to intervene on the arbitral award on a number of grounds. There is no provision in England as that of the opening of section 37(1) i.e. “An award may be set aside by the Court if…” in relation to setting aside a domestic award. The provisions of sections 67 and 68 of EAA 1996 give a positive and/or substantive right to the party to challenge the award. At the most the right under section 37, if at all is negative in nature as it is dependent on the courts discretion. Section 37 of AA 2005 does not give a positive right for the parties to challenge the award. Section 37 AA 2005 vests the discretion to the court. The distinction between the English and the Malaysia Act is not one related to an apple and orange but a marble and pumpkin. Counsel, in decided cases often have been instrumental in citing the English cases to seek intervention of the court to interfere in the award. However, most of the Malaysian decisions have not allowed intervention readily and where intervention has been allowed or the jurisprudence advocated has been in favour of intervention the reasoning appears to be convoluted in the light of our section 37 AA 2005 and the difference in sections 67 and 68 of EAA 1996. For ease of reference, we produce sections 67 and 68 of EAA 1996.” [25] Even our section 42 is not in pari materia to section 69 EAA 1996, when it relates to appeal in respect of point of law. The jurisprudence in England is to accommodate intervention and the jurisprudence in Malaysia for section 42 is to be extremely restrictive in intervention. England also does not have a similar or equivalent provision like section 36 which attempts to bar court intervention per se. [26] Appreciating the distinction in our sections 37 and 42 of AA 2005 in relation to EAA 1996, the Court of Appeal in Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd [2016] 3 CLJ 403, had in simple terms advocated that the test for intervention will be related to one 22 where the award suffer from patent injustice and/or where the award is manifestly unlawful and unconscionable. Parading English judgments in submissions or cases relating to sections 37 or 42 in actual fact have no jurisprudential utility. The test in England can be said to be one related to low threshold to intervene and in Malaysia the legislation has placed a high threshold for intervention, though the threshold to satisfy the grounds stated in section 37 may be low. [27] In Jan De Nul (Malaysia) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2017] MLJU 1542, the Court of Appeal made the following observations: [9] Section 37 largely subsumes Article V of the New York Convention. In addition, it has additional features to ensure the award is not set aside. Section 37 grounds relates to arbitral process. The threshold to satisfy the grounds may appear to be low. However, the court is given discretion not to set aside the award notwithstanding the applicant can establish one or more of the grounds set out in section 37. Some of the grounds stated under section 37, if established, may require the court to set aside the award as of right. For example, incapacity of a party to the arbitration agreement or no notice of the arbitration proceedings was given at all. The weaker grounds will relate to such as “unable to present the party’s case” where due opportunity has been given to the parties and award is within the four corners of the principal contract which carries arbitration clause or agreement. [See Lesotho Highland Development Authority v. Impregilo Spa [2005] UKHL 43]. [10] In considering whether or not to set aside the award, the court is obliged to look at other provisions of the Act and take a holistic approach as far as practical to sustain the award. Very importantly the court must consider sending the award back to the arbitral tribunal to eliminate the grounds for setting aside. There may be instances where the award cannot be 23 sent back to the tribunal. For example, incapacity of one of the party’s to the arbitration agreement or where no notice of arbitration was given, etc. [11] Unlike the New York Convention regime, the Model Law advocates the jurisprudence to ensure the arbitral tribunal delivers an award which is enforceable. The court’s role is to ensure substantive integrity of the arbitral process is maintained at all stages. Trivial complaints framed as excess of jurisdiction related to the manner the arbitral tribunal had handled the issues which arose from the substantive contract having the arbitration clause should not be much of a concern for the court in the regime of party autonomy concept. Only violent breaches on the face of record which compromises the integrity of the decision making process should be the cause of concern for the courts. [12] It is now well settled that in Malaysia, the arbitrators’ award is final, binding and conclusive and can only be challenged in exceptional circumstances. This jurisprudence is unique to Malaysia and is well articulated in section 36 of AA 2005 which reads as follows: “An award is final and binding