Ibn Highland Sdn. Bhd. v Zhongji Construction Sdn. Bhd. (WA-12ANCC-20-03/2023)

This is an appeal against the Kuala Lumpur Sessions Court’s decision dated 21.3.2023 dismissing the Appellant’s application dated 10.1.2023 for the stay of the action pending arbitration under section 10 of the Arbitration Act 2005 (“Stay Application”). The Session Court Judge found that the Respondent’s claim is based on a settlement agreement which had superceded an earlier agreement containing an arbitration clause. Since the latest settlement agreement contains no arbitration clause, there is no basis for the Stay Application. In any case, the Session Court Judge also found that the arbitration clause in the earlier agreement is invalid, null and void and or inoperative for uncertainty.

After perusal of the relevant cause papers, written submissions and hearing oral arguments from counsel, I dismissed the appeal. I do not see any grounds to disturb the decision of the learned Session Court Judge.

The Respondent, the Appellant and one Pin Zheng Construction (International) Sdn. Bhd. (“Pin Zheng”) entered into an agreement where the Appellant agreed to settle the outstanding sum owed by Pin Zheng to the Respondent as at 8.11.2020 (“the 1st Agreement”).

Subsequently, on or around 4.4.2021, the Respondent, the Appellant and Pin Zheng entered into another agreement which provides for the Appellant to settle the outstanding sum owed by Pin Zheng to the Respondent as at 31.3.2021 (“the 2nd Agreement”). The 2nd Agreement makes no mention of the 1st Agreement at all.

The material terms of the 2nd Agreement are, inter alia, as follows: 1) The outstanding sum of RM 1,100,000.00 shall be paid and or settled by way of set-off through transfer of the property known as Unit 2-1706 (“Property”) with the purchase price of RM 1,100,000.00 from the Appellant to the Respondent; and 2) The remaining outstanding sum amounting to RM 945,353.75 shall be paid and or settled by the Appellant to the Respondent in two (2) monthly instalments, namely RM 472,676.88 on 15.6.2021 (“1st Instalment”) and RM 473,676.87 on 15.7.2021 (“2nd Instalment”).

Whilst the Appellant had transferred the Property to the Respondent and paid the 1st Instalment, the Appellant had breached the 2nd Agreement when the Appellant failed, refused and or neglected to: 1) pay and settle the 1st Instalment within the stipulated time, i.e. on 15.6.2021 pursuant to Clause B (1.2) of the 2nd Agreement. The Appellant had only made payment of RM 100,000.00 on 14.7.2021 and RM 372,676.88 on 27.8.2021 respectively for the 1st Instalment; and 2) pay and settle the 2nd Instalment within the stipulated time, i.e. on 15.7.2021 pursuant to Clause B (1.2) of the 2nd Agreement. In this regard, despite numerous demands by the Respondent against the Appellant for the payment and or settlement of the 2nd Instalment, the Respondent has only made a partial payment of RM 50,000.00 on 29.10.2021 and RM 50,000.00 on 18.10.2022 (in total of RM 100,000.00).

Given that the Appellant failed, refused and or neglected to comply and fulfil its obligations as stated in the 2nd Agreement, the outstanding sum due and owed by the Appellant to the Respondent as at 31.10.2022 was RM 503,373.71 (“Outstanding Sum”).

As a result, the Respondent filed the present action to claim the Outstanding Sum against the Appellant based on the 2nd Agreement.

On 10.1.2023, the Appellant filed an application to refer the present action to arbitration based on the terms of the 1st Agreement. It was contended that both the 1st Agreement and the 2nd Agreement must be read together and clause III of the 1st Agreement contains an arbitration clause which is binding on the parties to the 2nd Agreement.

On 21.3.2023, the Learned Sessions Court Judge dismissed the Appellant’s application to refer the present action to arbitration with costs of RM 3,500.00 (“Sessions Court’s Decision”).

Dissatisfied with the Sessions Court’s Decision, the Appellant filed the present appeal premised primarily on the ground that both the 1st Agreement and the 2nd Agreement ought to be read together because the 1st Agreement expressly stated that it shall form “an integral part of the basis for determining the credit-debt relationship among the Parties”.

The Appellant’s Application is premised on Section 10, Arbitration Act 2005 (“AA 2005”) which provides as follows: “(1) A court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.”

The Appellant must therefore show that:

there is an agreement to arbitrate the present disputes between the parties; and

the arbitration agreement is not invalid and or null and void and or inoperative. [See: Tindak Murni Sdn Bhd v Juang Setia Sdn Bhd and another appeal [2020] 3 MLJ 545] [14] To my mind, the Learned Sessions Court Judge had rightly decided that the Respondent’s claim in the action herein is based on the 2nd Agreement which does not contain any arbitration clause. [15] The Appellant’s only basis for contending that the arbitration clause in the 1st Agreement applies to the 2nd Agreement is that the 1st Agreement contains a clause which states (in original words): “The credit-debt relationship between Party A and Party B shall be subject to final settlement, refund of any overpayment or a supplemental payment for any deficiency. This Agreement shall be an integral part of the basis for determining the credit-debt relationship among the Parties.” Based on the aforesaid, it was contended that the 1st Agreement and the 2nd Agreement ought to be read together. [16] With respect, the Appellant’s contention is wrong and contrary to the terms of the 2nd Agreement. The recital of the 2nd Agreement clearly provided that the settlement of the outstanding sum as at 31.3.2021 is subject to the terms and conditions on the 2nd Agreement only, i.e. “subject to and upon the terms and conditions hereinafter contained”, without mentioning or referencing the 1st Agreement. [17] There is no basis for Appellant’s contention that both agreements ought to be read together. The 2nd Agreement contains all the final settlement terms agreed upon by the parties. It is a separate and independent agreement from the 1st Agreement without any cross-reference or mention of the 1st Agreement at all. The “credit-debt relationship” clause referred to by the Appellant is confined only to the 1st Agreement. It does not extend to the 2nd Agreement. [18] The mode of settling the outstanding sum due to the Respondent in the 1st Agreement was purely based on the transfer of property without any cash payment. On the other hand, under the 2nd Agreement, the settlement of the outstanding is in the form of a transfer of property and payment by cash in 2 separate instalments. [19] The inconsistent and conflicting mode of settlement of the outstanding sums suggests that the 2nd Agreement is intended to supercede or replace the 1st Agreement. I do not find any error in the learned Session Court Judge’s finding rejecting the contention that the 2nd Agreement is a continuation of the 1st Agreement. [20] Accordingly, I agree that the 1st Agreement is irrelevant to the Respondent’s claim herein and since the 2nd Agreement does not contain any arbitration clause, the Appellant’s application for a stay pending a reference of the dispute to arbitration was rightly dismissed. [21] In any case, I also find that the 1st Agreement relied upon by the Appellant does not contain a valid, enforceable and/or operative arbitration clause. [22] The purported arbitration clause relied upon by the Appellant as set out in Clause III of the 1st Agreement states thus: “All the disputes from the performance of this Agreement shall be settled by the Parties through amicable negotiation. Should such negotiation fail, the dispute shall be submitted to the Malaysian court at the seat of commodity housing described in the second paragraph of “WHEREAS” and the arbitration shall be conducted in accordance with the laws of Malaysia. [emphasis added] [23] As can be immediately appreciated, the Clause III aforesaid makes a reference to ‘dispute’ being submitted to the Malaysian Court and at the same time refers to arbitration. The said clause is uncertain, conflicting and illogical. Such a clause is void and or inoperative and or invalid. In Malaysian Newsprint Industries Sdn Bhd v Bechtel International, Inc & Anor [2008] 5 MLJ 254, the High Court held that: “[23] The parties are at liberty to decide on how to word the arbitration agreement provided it is clear and certain (Tan Kok Cheng & Sons Realty Co Sdn Bhd v Lim Ah Pat (t/a Juta Bena)). The agreement to arbitrate is just like a contract and it must be clear and certain. It will be construed to be void for uncertainty if its meaning is so ambiguous that it is incapable of being construed to give the agreement a certain degree of certainty. ...” [emphasis added] [24] Accordingly, it is my judgment that the Learned Sessions Court Judge had correctly dismissed the Appellant’s contention that there is an existence of an arbitration clause. Conclusion [25] In light of the above, the Appellant’s appeal herein is dismissed with costs. Dated the 11th day of October 2023 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 Counsel:

Ms. Khew Jo-Von, Jovien for Appellant

Mr. Lum Kok Kiong with Ms. Tan Ming Chu for Respondent

Tindak Murni Sdn Bhd v Juang Setia Sdn Bhd and another appeal [2020] 3 MLJ 545 2. Malaysian Newsprint Industries Sdn Bhd v Bechtel International, Inc & Anor [2008] 5 MLJ 254

Section 10 of the Arbitration Act 2005