Ideaworks Resources Sdn.Bhd. v Oakland Holdings Sdn. Bhd. (WA-24C(ARB)-1-01/2023)

This suit involves an application by the Plaintiff to set aside the Award Allowing Summary Determination In Part pursuant to Rules 19.9 and 19.5 of the of the Asian International Arbitration Centre Rules 2021 (‘AIAC Rules’) dated 3.10.2022 (‘Award’) by the learned Arbitrator, Mr. Rodney Leonard Martin (‘Arbitrator’) under subparagraphs 37(1)(a)(iv) and (v), 37(1)(b)(ii) and 37(2)(b)(i) and (ii) of the Arbitration Act 2005 [Act 646] (‘AA 2005’).

After having considered the cause papers and the oral and written submissions of the parties, I had dismissed the Plaintiff’s application. These are my full grounds for the decision.

The cause papers are as follows:

the Plaintiff’s Originating Summons (‘O.S.’) dated 11.1.2023 (encl. 1);

the Plaintiff’s Affidavit In Support (‘AIS’) affirmed by its Director, Ariyan Jay Chinniah on 17.1.2023 (encl. 2);

the Defendant’s Affidavit In Reply (‘AIR’) affirmed by its General Manager, Cho Kah Hing on 23.2.2023 (encl. 5); and

the Plaintiff’s AIR affirmed by the same deponent on 23.3.2023 (encl. 7). Salient Background Facts [4] The Plaintiff is a private limited company having its registered address at No. 31-3, Jalan Tasik Selatan 3, Metro Centre, Bandar Tasik Selatan, 57000 Kuala Lumpur. [5] The Defendant is also a private limited company with a registered address at Level 23, Menara Olympia, No. 8, Jalan Raja Chulan, 50200 Kuala Lumpur. [6] By the Letter of Acceptance dated 18.10.2018 (‘LoA’), the Plaintiff was appointed as the nominated sub-contractor for the project described as “Cadangan Menaik Taraf Fasad, Ubahsuai Dalaman Pada Tingkat 3 dan 4 Pada Bangunan Avenue “K” 52 Tingkat Yang Sedia Di Atas Lot PT44, Seksyen 43, Jalan Ampang, Daerah Kuala Lumpur, Wilayah Persekutuan” (‘Project’) for the sub-contract lump sum of RM11,677,762.13. [7] The scope of the Sub-Contract Works comprised of –

Hoarding & Staging Works;

Demolition and Removal Works;

New Extension and Upgrading Works (Architectural, Structural &

Landscape Works. [8] Clause 4.1 of the LoA provides that the Form of Sub-Contract between the parties will be the “Agreement and Conditions of PAM Sub-Contract 2006 (For Use where the Sub-Contractor is Nominated under the PAM Contract 2006)” (‘PAM Sub-Contract 2006’) with the exception of those clauses in the PAM Sub-Contract 2006 specifically over-ridden by the terms and conditions of the LoA. [9]

Amount (RM)

Original Contract Value 11,677,762.13

Variation Orders (‘VO’) Nos. 1 to 123 2,494,005.54 Less Amount Previously Certified (9,708,199.07) TOTAL 3,893,371.55 [13] Subsequently, vide a letter dated 11.8.2020, the Plaintiff submitted a revised FAS to include VO Nos. 123, 124 and 126 in the sums of RM120,974.70, RM12,124.00 and RM258,060.00 respectively (‘Revised FAS’) and a claim for loss of profit in the sum of RM120,974.70. The Revised FAS is as follows:

Amount (RM)

Original Contract Value 11,677,762.13

VO Nos. 1 to 126 2,885,159.24 Less Amount Previously Certified (9,708,199.07) TOTAL 4,854,722.30 [14] Disputes arose between the parties regarding, among others, the FAS and Revised FAS (which shall hereinafter be referred to as the ‘Final Account Claim’). [15] The Consultants completed the Final Account on 8.3.2021 and the Defendant forwarded the same to the Plaintiff vide the letter dated 26.3.2021, which was acknowledged receipt by the Defendant on 31.3.2021. [16] The Plaintiff had earlier commenced the arbitration proceedings against the Defendant by way of the Notice of Arbitration dated 18.12.2020 pursuant to Clause 29.1 of the Sub-Contract Conditions (‘CoC’). The Plaintiff sought a determination by the arbitral tribunal on its entitlement to, among others, the value of original and variation works, retention sums, loss of profit and loss and expense in the total sum of RM6,251,228.58. [17] The Defendant counterclaimed for the sum of RM1,173,167.50 as loss and damages as a result of the alleged refusal by the Plaintiff to make good the defective works as required under the Sub-Contract. [18] During the Preliminary Meeting No. 1 held virtually on 14.1.2022, the parties agreed that –

the arbitration agreement as per Clause 29.1 of the CoC and pursuant to Clause 4.1 of the LoA is amended by the agreement of the parties to incorporate the AIAC Rules 2021; and

the AA 2005 as at 1.11.2018 applies. [19] On 10.7.2022, the Defendant served its Summary Determination Request dated 10.7.2022 (‘Request’) pursuant to Rule 19.1(a) and/ or

of the AIAC Rules, which read as follows: “19.1. Any Party to an arbitration may submit a request for a summary determination (“Summary Determination Request”) to dismiss, in whole or in part, a claim, counterclaim or defence where:

the claim or counterclaim or defence is manifestly without merit; or

the claim or counterclaim or defence manifestly falls outside the Arbitral Tribunal’s jurisdiction.”. [20] The Defendant sought to dismiss part of the Plaintiff’s claims in the arbitration on the basis that the Final Account Claim –

falls outside of the Arbitral Tribunal’s jurisdiction because the contractually agreed pre-condition in Clause 26.7(b) of the CoC which entitles the Plaintiff to refer claims related to the Final Account to arbitration has not been met; and/ or

is without merit because the Plaintiff failed to dispute the Final Account in writing within three months of its receipt of the same, or at all. Therefore, pursuant to Clauses 26.7(a) and 26.11 of the CoC, the Final Account is now conclusive and deemed agreed between the parties (see paragraph 4 of the Request). [21] The Plaintiff filed its Response to the Request on 25.7.2022 and the Defendant, its Reply, on 29.7.2022. The Plaintiff also filed its Further Response dated 3.8.2022. Eventually, a virtual hearing was held on 29.8.2022. [22] The Arbitrator’s Summary Determination is as follows: “172. Having considered the parties’ submissions, the authorities cited and the evidence adduced in respect of the Respondent's Summary Determination Request, the Tribunal hereby finds that: a. Clause 26.7(b) applies in view that the Claimant's FA submissions were issued pursuant to Clause 26.7 of the CoC and the procedure thereunder should be followed to resolve the disputes between the parties in view of the fact that it is mandatory for the parties to comply with the FA procedure; b. the Respondent's Notice of Arbitration dated 18 December 2020 was premature in view of the fact that the Claimant had invoked Clause 26.7 by issuing the FA Submissions pursuant to Clause 26.7 of the CoC and did not follow the procedure thereunder, particularly, the issuance of a written notice of disagreement with particulars to dispute the FA pursuant to Clause 26.7(b) of the CoC. c. the Tribunal does not have jurisdiction to determine any dispute arising from the FA on the basis that the Claimant's non-compliance with Clause 26.7(b) of the CoC renders the Tribunal without jurisdiction to determine any dispute relating to the Claimant's Final Account claim. d. No dispute had arisen or crystallised as of 9 September 2020 when the Architect issued its replies to the Claimant's VO claims. Also, the FA is deemed agreed by the parties in accordance with Clause 26.7(b) of the CoC in the absence of a written notice of disagreement with particulars pursuant to Clause 26.7(b) of the CoC. e. the Claimant's FA Claim is without merit on the basis that the FA is deemed agreed by the parties in accordance with Clause 26.7(b) of the COC due to the Claimant having not issued a written notice of disagreement with particulars pursuant to Clause 26.7(b) of the CoC. a. Accordingly, the Tribunal finds and holds that the Respondent’s Summary Determination Request is allowed and the Claimant’s FA Claim in these arbitration proceedings is dismissed.”. Analysis and Findings of the Court - Preliminary Objection (‘PO’) [23] The Defendant raised a PO that the AIS was not filed within the prescribed time limit as provided under sub-s 37(4) of the AA 2005 which stipulates that: “Application for setting aside

…

An application for setting aside may not be made after the expiry of ninety days from the date on which the party making the application had received the award or, if a request has been made under section 35, from the date on which that request had been disposed of by the arbitral tribunal.”. [24] On the hearing date, Mr. CL Tan appeared for the Plaintiff and when Mr. S. Rajan, the Defendant’s counsel mentioned the PO in the course of oral submissions, Mr. CL Tan admitted that he had overlooked the PO. The Plaintiff’s counsel said that he can file an application for extension of time and requested to file a reply submission. I did not allow the request as it was made too late in the day i.e. in the midst of oral submissions on the date of hearing. [25] I allowed the PO for the following reasons:

O. 69, r. 4(2) of the Rules of Court 2012 provides that: “Starting the claim (O. 69, r. 4)

…

The applicant shall file by affidavit, written evidence on which he intends to rely when he files his originating summons, including a copy of the arbitration agreement and the award, where relevant.”. Hence, the AIS must be filed at the same time as the O.S. (see Jet Gombak Sdn Bhd & Anor v Provista Ventures Sdn Bhd [2018] MLJU 1075);

the parties received the Award on 13.10.2022. The last date for filing of the O.S. and AIS is therefore 11.1.2023. Although the O.S. was filed on 11.1.2023, the AIS was filed only on 17.1.2023; and

the Plaintiff did not file any application for time to be extended and nor was any reason offered for the late filing of the AIS. [26] In the absence of any affirmations by the Plaintiff to support its application in encl. 1, the suit must be dismissed. Nevertheless, I had considered the two grounds relied upon by the Plaintiff to set aside the Award, namely that the Award –

deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration and contains decisions on matters beyond the scope of the submission of arbitration (see paragraphs 37(1)(a)(iv) and (v) of the AA 2005); and

is in conflict with the public policy of Malaysia in that a breach of the rules of natural justice occurred during the arbitral proceedings and/ or in connection with the making of the Award (see paragraphs 37(1)(b)(ii) and 37(2)(b)(i) and (ii) of the AA 2005). [27] The provisions in the AA 2005 which were relied upon by the Plaintiff are shown below: “37. (1) An award may be set aside by the High Court only if –

the party making the application provides proof that –

… …

(iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration;

subject to subsection (3), the award contains decisions on matters beyond the scope of the submission to arbitration; or …

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.

Where the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside. …”. 1st Ground: Whether the Award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration and contains decisions on matters beyond the scope of the submission to arbitration [28] In M101 Entity Sdn Bhd v Geopancar Sdn Bhd and another case [2022] MLJU 1354, this Court had set out the legal principles in these words: “[25] Sub-s 36(1) AA 2005 provides that “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, set-off or otherwise in any proceedings in any court.”. [26] The principle of minimum intervention by the court is reflected in s 8 AA 2005 which states that “No court shall intervene in matters governed by this Act, except where so provided in this Act.”. M101, in seeking the intervention of this Court, has filed the Setting Aside Application pursuant to s 37, which is one of several provisions under the AA 2005 permitting the involvement of the Court such that if M101 has successfully proven its case on the balance of probabilities under subpara 37(1)(a) and/ or (b), the Court may make an order to set aside the Award (see Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 MLJ 417). [27] In Propel Synergy Sdn Bhd v Vistasik Sdn Bhd and another case [2022] MLJU 824, this Court had stated the following with regards to subpara 37(1)(a)(iv) of the AA 2005: “[34] The arbitral tribunal draws its authority from the submission to arbitration by which it has been appointed. The Arbitrator must therefore decide the dispute according to the scope of the arbitration. He cannot decide the dispute on issues which have not been raised or addressed by the parties or are not relevant to the determination of the dispute; often referred to as a “new difference” (see PT Prima International Development v Kempinski Hotels SA and other appeals [2012] 4 SLR 98 and Kerajaan Malaysia v. Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617).”” (see to paragraphs 70 - 73 of the decision in Johawaki Development Sdn Bhd v. Majlis Agama Islam Wilayah Persekutuan & Another Case [2020] MLRHU 483 and paragraph 80 in UCSI Group Holdings Sdn Bhd v Pembinaan Ikhasas-Merak Sdn Bhd [2018] MLJU 2128). [29] The Plaintiff submitted that –

the Request was beyond the terms of the submission to arbitration because the Notice of Arbitration has set out the disputes between the parties and the Defendant has submitted to the jurisdiction of the arbitral tribunal in respect of the said disputes. As such, the Defendant should not have been allowed to raise any issue in relation to the jurisdiction of the arbitral tribunal in determining the dispute between the parties; and

by delivering the Award, the Arbitrator went beyond the agreed terms of submission to arbitration as the Arbitrator –

has erred in his findings by holding that he has no jurisdiction over the matter and that the Plaintiff’s Notice of Arbitration is premature which resulted in the Plaintiff not having recourse against the Defendant; and

(ii) has failed to appreciate that –

(A) a dispute had arisen between the parties when the Consultant, SOMA Architect Sdn Bhd (‘SOMA’) had determined and rejected most of the VOs claimed by the Plaintiff in the Plaintiff’s Final Account submission even before the Defendant’s Final Account was issued. Thus, the Plaintiff is entitled to commence the arbitration proceedings prior to the issuance of the

(B) the mere issuance of the Defendant’s Final Account after the Plaintiff’s Notice of Arbitration is immaterial and does not undermine the jurisdiction of the Arbitrator as by the time the Defendant’s Final Account was issued, it was already known between the parties that a dispute had arisen, and such dispute was the subject matter of the arbitration proceedings;

(C) the disputes raised by the Plaintiff and the Defendant’s Final Account arose from the same contract. Since the Plaintiff’s Final Account submissions is pending arbitration, the Arbitrator is fully empowered to make a ruling in respect of matters relating to the Defendant’s Final Account; and

(D) the Plaintiff did not invoke Clause 26.7(b) of the CoC to commence arbitration, but rather Clause 29.1. Hence, the Defendant’s contention that the issuance of the Final Account is a condition precedent under Clause 26.7(b) to the Plaintiff’s entitlement to commence arbitration is baseless. [30] In so far as the argument in paragraph 29(a) above is concerned, it is clearly flawed for the following reasons:

sub-s 18(1) AA 2005 expressly provides that the arbitral tribunal may rule on its own jurisdiction. This provision provides for the doctrine of “Kompetenz-Kompetence” whereby arbitrators may decide on their jurisdiction without the need for support from the court and the courts are discouraged from determining the issue before the arbitral tribunal has decided it. A challenge to the arbitrator’s jurisdiction may be partial or total; in the present case it is the former (see The Arbitration Act 2005: UNCITRAL Model Law as applied in Malaysia, Sweet & Maxwell Asia, 2007 by Sundra Rajoo and WSW Davidson at pp 85 - 87);

there is a plethora of cases where an arbitrator has found that he does not have the jurisdiction to determine a dispute which was referred to him in a notice of arbitration, see the example as submitted by the Defendant i.e. Tokio Marine Insurans (M) Bhd v WCT Construction Sdn Bhd [2021] MLJU 381;

the parties had agreed to incorporate the AIAC Rules. This means that a Summary Determination Request may be submitted by any party (see Rule 19.1 as quoted in paragraph 19 above) and the Arbitral Tribunal has the power to rule on its own jurisdiction (see Rule 20). The purpose of Rule 19 of the AIAC Rules 2021 is “… to provide the parties with an avenue for early dismissal, in whole or in part, of a claim, counterclaim, or defence in instances where such is either “manifestly without merit” or “falls outside the arbitral tribunal’s jurisdiction”. By allowing parties this avenue, it allows them to save time and costs in the proceedings by permitting the early dismissal of a claim, counterclaim, or defence.” (see The Commentary to the AIAC Arbitration Rules 2021 at paragraph 19.2, p 170); and

in reply to paragraph 7 of the Notice of Arbitration, where the Plaintiff asserted its entitlement to be paid for works done claimed in its Final Account Submission in the total sum of RM4,284,530.25, the Defendant had, at the earliest time possible, namely in its Response to Notice of Arbitration dated 25.10.2021, put across its position that the Plaintiff “… has not complied with the necessary conditions precedent under the Sub-Contract in making its claims herein thereby disentitling the Claimant from pursuing the same. Equally, the Claimant is not entitled to benefit from its own breach. …”. This argument was further amplified in the Defendant’s Amended Statement of Defence And Counterclaim dated 10.6.2022 (‘Amended SDC’, see paragraph 9). [31] Proceeding next to the Plaintiff’s contentions in paragraph 29(b) above, the terms of submission to arbitration are to be found in the Statement of Claim (‘SoC’) and Amended SDC as the Request was submitted 10 days after the filing of the Amended SDC. The disputes between the parties and the extent of jurisdiction and submission to the jurisdiction of the Arbitrator are to be determined by way of reference to the SoC and Amended SDC. [32] Upon scrutiny of the SoC and Amended SDC, there is no doubt at all that the Plaintiff’s Final Account Claim and the issue as to whether such Claim is premature for non-compliance with Clause 26.7(b) of the CoC were submitted for the determination of the Arbitrator. [33] In the SoC, the Plaintiff alleged, among others, that the Defendant had breached the contract by refusing to honour the payments for original and variation works done, losses incurred and the retention sum. Express reference was made to the Final Account in the SoC, for instance in respect of the original work: “12. The Claimant had on or about 9.3.2020 and 11.6.2020 submitted its Final Account Submission and Final Account Submission (Revised), respectively.

On or about 2.4.2021, the Claimant received a draft Final Account from the Respondent’s consultant. The Claimant disputes the content of the Final Account, especially the variation woks as valued by the Respondent’s consultant and the purported set off on account of alleged defective works. …

Based on the Final Account Submission and Final Account Submission (Revised), the value of the original work claimed by the Claimant is RM11,107,570.08.

The Respondent had through its draft Final Account appeared to have accepted that the value of such original work completed by the Claimant is

For the purpose of this arbitration and in the interest of time, the Claimant is willing to accept the assessment and valuation carried out by the Respondent’s consultant in respect of the value of the Claimant’s original work.”. [34] Among the relevant terms of the CoC which were quoted by the Defendant in the Amended SDC is Clause 26.7 which reads: “26.7 Within three (3) Months after Practical Completion of the Sub-Contract Works, the Sub-Contractor shall send to the Contractor with copies to the Architect and Consultant, all documents necessary for preparing the Final Account. Such document shall contain all the latest construction drawings and details (bound together), details of all quantities, rates and prices and any adjustment of the Sub-Contractor Sum and additional payment or compensation claimed by the Sub-Contractor under the Sub-Contract together with any explanation and supporting vouchers, documents and calculations which may be necessary to enable the Final Account to be prepared by the Architect or Consultant. The Final Account shall be completed within six (6) Months from receipt of all the documents from the Sub-Contractor. The period for completion of the Final Account shall be adjusted if there is any delay by the Sub-Contractor in sending the necessary documents. In the event the Sub-Contractor fails to submit all documents necessary for preparing the Final Account, the Architect or Consultant shall nevertheless complete and issue the same based on the information available within the Period to complete the Final Account stated in Appendix ‘A’. On completion of the Final Account, the Architect or Consultant shall then send a copy of the document to the Contractor and Sub-Contractor.

26.7(a) If nothing in the said Final Account is disputed by the Contractor or Sub-Contractor within three (3) Months from the date of receipt of the Final Account from the Architect or Consultant, the Final Account shall be conclusive and deemed agreed by the parties.

26.7(b) If either party disputes the Final Account, the party disputing the Final Account shall by written notice to the other party (with copies to the Architect and Consultant) set out any disagreement complete with particulars within three (3) Months of the date of receipt of the Final Account from the Architect or Consultant. The Architect or Consultant within three (3) Months from the date of receipt of the grounds of dispute shall either amend or not amend the Final Account. Any party disagreeing with the amended Final Account or decision not to amend the Final Account shall refer the dispute to arbitration under Clause 29.0 within three (3) Months from the date of receipt of the amended Final Account or decision not to amend the Final Account. Failure to refer the dispute to arbitration within the stipulated time, the Final Account or amended Final Account shall deem to be conclusive and deemed agreed by the parties.”. [35] The Defendant submitted that the Plaintiff had contravened Clause 26.7(b) of the CoC as detailed in these excerpts of the Amended SDC: “9. … The Respondent states as follows: aa.

SOMA had determined and mostly rejected the Plaintiff’s claim for variation works even before the Defendant’s Final Account was issued wherein the substantial difference is in respect of the amount certified by the Plaintiff (RM2,885,159.24) and SOMA (-RM108,533.44) for VO Nos. 1 to 127. Hence disputes had arisen over the FAS and Revised FAS; and

based on the Chronology of Events (in encl. 22) and the conduct of the parties at the material time, Clause 26.7 of the CoC was not strictly followed by the parties and there is a waiver. This matter should have been decided after the hearing rather than by way of summary determination by the Arbitrator, these are in essence a challenge on the substantive merits of the findings by the Arbitrator. It is trite that when hearing an application under s 37 of the AA 2005, this Court does not sit in an appellate capacity. Mr. CL Tan’s submissions for the Plaintiff that the Arbitrator had erred in his findings and conclusions, including on the contractual interpretation of Clause 26.7 of the CoC, obviously relate to the merits of the Award; they are not valid grounds for the Award to be set aside. [39] The learned counsel for the Plaintiff placed heavy reliance on the decision by the High Court at Kota Kinabalu, Sabah in Masenang Sdn Bhd v Sabanilam Enterprise Sdn Bhd [2014] 1 LNS 1893, which was subsequently affirmed by the Court of Appeal and Federal Court. There were two interlocutory applications before the court in Masenang viz. the plaintiff’s application for summary judgment for damages and the defendant’s application for stay of proceedings under s 10 AA 2005. The salient fact is that the plaintiff had issued Progress Claim No. 12 (‘PC 12’) as its final claim after it issued a notice of termination to the defendant in accordance with Clause 26.6 of the PAM Building Contract 2006 (With Quantities). The defendant then issued written notice to dispute PC 12 on the eve of the expiry of the three months period as stipulated under Clause 26.6(b). This was followed with a notice of arbitration. Around 3½ months later, the plaintiff amended its final claim and submitted Progress Claim No. 12 (Amended) (‘PC 12 - Amended’) to the defendant. [40] The defendant in Masenang argued that the claim in PC 12 and PC 12 - Amended are in principle the same dispute as the plaintiff had omitted some claims in the latter and the dispute is in respect of the final state of accounts between the parties for works done. As the defendant had issued a notice of arbitration in relation to PC 12, it was submitted that by virtue of s 23 AA 2005, arbitral proceedings are deemed to have commenced and PC 12 - Amended falls within the jurisdiction of the arbitrator to determine. [41] On the other hand, the plaintiff in Masenang contended that PC 12 - Amended is conclusive because the defendant did not dispute the same within the stipulated three months period under Clause 26.6(b). It was also contended that PC 12 - Amended does not fall under the notice of arbitration as the notice was issued earlier and it cannot vest an arbitrator with jurisdiction over disputes that arise after the date of issuance. The plaintiff urged the court to dismiss the stay application on the ground that there is no dispute to be arbitrated under PC 12 – Amended. [42] Ravinthran Paramaguru J (now JCA) accepted the defendant’s submission that PC 12 and PC 12 - Amended arose from one and the same contract between the parties and therefore, the notice of arbitration covers PC 12 - Amended as well. [43] The Plaintiff in the instant case urged this Court to similarly find that there is only one contract between the parties and as the Final Account Claim is pending arbitration, the Arbitral Tribunal has jurisdiction to hear and decide on matters relating to the Defendant’s Final Account. [44] However, in my considered view, Masenang’s case is distinguishable for the following reasons:

Masenang involved an application for stay pending arbitration under s 10 of the AA 2005 and not an application to set aside an award pursuant to s 37. The issue in Masenang was whether there was a dispute arising from the contract which should be referred to arbitration whereas the enquiry here is whether the Plaintiff has established its case as set out in the 1st Ground;

the Final Account Claim clearly fell within the terms of the submission to arbitration as outlined earlier. In the light of the Request, the Arbitrator proceeded to consider the parties’ submissions and decided that, based on his contractual interpretation of Clause 26.7 of the CoC, the Plaintiff had not met the pre-conditions as laid down in that provision and the Final Account Claim fell outside his jurisdiction; and

in Masenang, the court observed that, “… assuming the jurisdictional point of the plaintiff that the arbitrator has no jurisdiction to hear any dispute pertaining to Progress Claim No. 12 (amended) is relevant, under section 18 of the Arbitration Act 2005, the arbitrator is fully empowered to rule on his own competence.”. Here, the Arbitrator has already exercised his power to rule on the jurisdictional point raised by the Defendant from the earliest possible stage of the arbitration proceedings. [45] Finally, the Plaintiff’s contention that the Arbitrator has committed errors because the finding that the Plaintiff’s claim has no merits is inconsistent with the Arbitrator’s decision as regards jurisdiction, a perusal of the parties’ submissions on the Request shows that the Arbitrator was merely dealing with the Defendant’s additional submission that the Final Account Claim is “… manifestly without merit as the Final Account is conclusive and deemed agreed by the parties. …” (see paragraphs 48 - 56 of the Request) and the Plaintiff’s responses to the same (see paragraphs 33 - 43 of the Plaintiff’s Response to the Request). The Arbitrator had addressed the parties’ respective positions and made his findings under “Issue No. 2:

first, the Court must consider (a) which rules 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 outcomes, 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.”. [105] The test of breach of public policy and/ or natural justice was expounded by the Federal Court in Jan De Nul (supra) in the following passage: “[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) of the AA 2005 when proven, can be a ground for the court to exercise its discretion to set aside the award....”.” [see too, the case authorities which have laid down useful guidelines on the meaning of “natural justice” in the context of paragraph 37(2)(b) and the legal principles surrounding the application of subparagraph 37(1)(b)(ii) read with paragraph 37(2)(b) of the AA 2005 as a ground to challenge an award, namely, Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86, Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452, Kyburn Investments Ltd v Beca Corporate Holdings Ltd [2015] 3 NZLR 644 and Sigur Ros Sdn Bhd v Master Mulia Sdn Bhd [2018] 3 MLJ 608 (CA); the legal principles in these cases were applied by this Court in, among others, Kris Heavy Engineering & Construction Sdn Bhd v. EP Engineering Sdn Bhd [2019] MLRHU 1536, Johawaki Development (supra), Sunway Creative Stones Sdn Bhd v Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd and another summons [2020] MLJU 658, Propel Synergy Sdn Bhd v Vistasik Sdn Bhd and another case [2022] MLJU 824 and M101 Entity (supra)]. [49] The Plaintiff claimed that the Award is in conflict with the public policy of Malaysia as a breach of the rules of natural justice occured during the arbitral proceedings and/ or in connection with the making of the Award and the test as laid down in Jan De Nul’s case is satisfied because the Arbitrator –

had considered and interpreted Clause 26.7 of the CoC in isolation to the fact that it was Clause 29.1 of the CoC that the Plaintiff invoked to refer the disputes between the parties to arbitration;

failed to consider that the approach used by him has deprived the Plaintiff of its right to have proper access to justice, whether under the Constitution or otherwise;

in determining the Request, had failed to consider the impact of the decision on the Plaintiff and that the Plaintiff would be without a recourse against the Defendant, and is severely prejudiced by the Award;

having determined that he has no jurisdiction over the dispute, he then proceeded to hold that the Plaintiff’s claim has no merits. The Arbitrator has committed errors because the finding as regards the merits is inconsistent with the decision as regards jurisdiction; and

failed to give due regard to the fact that at the stage of the arbitration proceedings then, no evidence on the issues had been produced before him and it would be arbitrary for the Plaintiff’s claim to be dismissed summarily. In view of the matters raised by the Plaintiff, the Arbitrator should have appreciated that this is not a proper and fit case for summary determination. [50] The Plaintiff firmly believed that the Arbitrator should not continue to act as an arbitrator as there are justifiable doubts with regards to the propriety of the Arbitrator continuing as an arbitrator. [51] In my considered view, the Plaintiff has not established the requirements for the Award to be set aside pursuant to subparagraph 37(1)(b)(ii) read with subparagraphs 37(2)(b)(i) and (ii) of the AA 2005 for the following reasons:

the justifications put forth by the Plaintiff in respect of the 2nd Ground are essentially a repetition of the justifications for the 1st Ground, this time put across as constituting a breach of the rules of natural justice. However, the Plaintiff’s averments do not raise any issues of public policy or natural justice, but rather are complaints that the Arbitrator has made incorrect findings on the merits;

the Defendant was well within its rights to submit the Request to the Arbitrator as allowed under the AIAC Rules, which both parties had agreed would apply to govern the arbitration proceedings, and the Arbitrator had accordingly considered the parties’ submissions and delivered his decision regarding the Request;

the Defendant was given full opportunity to ventilate the Request by way of its written Response and Further Response and a virtual hearing which included the submission of evidence to support its position; and

the Request predominantly concerned a point of law regarding the contractual interpretation of Clause 26.7 of the COC. The dismissal of a claim due to the failure of a party to satisfy a contractual condition precedent is not unusual in the construction industry. In this regard, the Plaintiff has not established that it has met the test as laid down in Jan De Nul’s case. [52] In sum, the Plaintiff’s 2nd Ground is baseless as there has been no breach of public policy or natural justice in the making of the Award. The Plaintiff’s prayer for an order to stay the arbitration proceedings pending disposal of the O.S. [53] In prayer (3) in the O.S., the Plaintiff sought an order for the arbitration proceedings under AIAC Reference No.: AIAC/D/ADM-991-2021 to be stayed pending disposal of the O.S. [54] However, as rightfully submitted by the Defendant, the Plaintiff had requested for the arbitration proceedings to be stayed vide an e-mail to the Arbitral Tribunal on 11.1.2023. [55] The Arbitrator extensively dealt with the Plaintiff’s request in the Order for Directions No. 2 dated 31.1.2023 whereby he ordered a stay of the arbitration proceedings for the sole reason of avoiding any unnecessary costs being incurred in the event the Plaintiff’s application in this Court is successful. [56] In the light of the said Order for Directions, there is no necessity for me to deal with prayer (3) in the O.S. Conclusion [57] Premised on the aforesaid considerations, the Plaintiff’s application in encl. 1 was dismissed. [58] The Defendant prayed for costs of RM30,000.00 because there was no attempt by the Plaintiff to fit the grounds of application under s 37 of the AA 2005 in a blatant disregard of the rules. Mr. S. Rajan submitted that this goes against the provision which allows for summary determination and the removal of s 42 AA, and the Defendant was put to unnecessary expense. [59] At the other end of the scale, Mr. CL Tan proposed that costs should be between RM10,000.00 and RM15,000.00 as the Plaintiff has the right to pursue the application which involved a novel award pursuant to the provision on summary determination. [60] I decided to award costs of RM15,000.00 to the Defendant, subject to allocatur. Dated: 9 August 2024 (ALIZA SULAIMAN) Judge Construction Court 2 High Court Kuala Lumpur Counsels/ Solicitors: For the Plaintiff: Tan Chong Lii (Tuan Earn Yee with him) Messrs. Tan Chong Lii & Co Advocates & Solicitors Unit 720, Level 7 Block A, Lobby 4, Damansara Intan No. 1, Jalan SS 20/27 47400 Petaling Jaya Selangor For the Defendant: Shannon Rajan (Tatvaruban Subramaniam and Eric Gabriel Gomez with him) Messrs. Skrine Advocates & Solicitors Level 8, Wisma UOA Damansara 50 Jalan Dungun Damansara Heights 50490 Kuala Lumpur Cases, legislation and other sources referred to in the submissions by learned counsels and in the Grounds of Judgment: Cases: Chan Heng Si & Ors v Pacific & Orient Insurance Co Bhd and another case [2023] MLJU 101 Dato' Dr Muhammad Ridzuan bin Mohd Salleh & Anor v Syarikat Air Terengganu Sdn Bhd [2012] 3 MLJ 737 Datuk Bandar Kuala Lumpur v Seman bin Amat & other cases [1996] 3 CLJ 263 Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 Jet Gombak Sdn Bhd & Anor v Provista Ventures Sdn Bhd [2018] MLJU 1075 Johawaki Development Sdn Bhd v. Majlis Agama Islam Wilayah Persekutuan & Another Case [2020] MLRHU 483 Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617 Kris Heavy Engineering & Construction Sdn Bhd v. EP Engineering Sdn Bhd [2019] MLRHU 1536 Kyburn Investments Ltd v Beca Corporate Holdings Ltd [2015] 3 NZLR 644 M101 Entity Sdn Bhd v Geopancar Sdn Bhd and another case [2022] MLJU 1354 Masenang Sdn Bhd v Sabanilam Enterprise Sdn Bhd [2014] 1 LNS 1893 Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198 Ong Guan Teck v Hijjas [1982] 1 MLJ 105 Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd and another appeal [2021] 1 MLJ 1 Pembinaan LCL Sdn Bhd v SK Styrofoam (M) Sdn Bhd [2007] 4 MLJ 113 Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd [2016] 2 MLJ 697 Sigur Ros Sdn Bhd v Master Mulia Sdn Bhd [2018] 3 MLJ 608 Propel Synergy Sdn Bhd v Vistasik Sdn Bhd and another case [2022] MLJU 824 Sii Toh Siong v Hung Ming Chung [2000] 2 MLJ 204 Sigur Ros Sdn Bhd v Master Mulia Sdn Bhd [2018] 3 MLJ 608 (CA) SJIC Bina Sdn Bhd v Iskandar Regional Development Authority & Anor [2020] MLJU 2366 Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86 Sunway Creative Stones Sdn Bhd v Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd and another summons [2020] MLJU 658 Tokio Marine Insurans (M) Bhd v WCT Construction Sdn Bhd [2021] MLJU 381 Transgrid Ventures Sdn Bhd v Colas Rail System Engineering Sdn Bhd (now known as CRSE Sdn Bhd) and other cases [2022] MLJU 3049 Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 UCSI Group Holdings Sdn Bhd v Pembinaan Ikhasas-Merak Sdn Bhd [2018] MLJU 2128 Legislation: Arbitration Act 2005, ss 14, 15, 18, 34 & 37 AIAC Arbitration Rules 2021, rr. 19 & 20 Rules of Court 2012, O. Other source(s) referred to: Sundra Rajoo and WSW Davidson, The Arbitration Act 2005: UNCITRAL Model Law as applied in Malaysia, Sweet & Maxwell Asia, 2007 The Commentary to the AIAC Arbitration Rules 2021, Asian International Arbitration Centre, 2022