Kebabangan Petroleum Operating Company Sdn. Bhd. v Malaysia Marine and Heavy Engineering Sdn. Bhd. (WA-24C(ARB)-51-09/2021)

the application by Kebabangan Petroleum Operating Company Sdn Bhd (‘KPOC’) in Originating Summons (‘O.S.’) No. WA- 24C(ARB)-51-09/2021 for the Final Award dated 23.7.2021 by the Tribunal comprising of the learned Arbitrators, Dato’ Anantham Kasinather, Mr. Alan J Thambiayah and Mr. Chelva R Rajah SC (‘Award’) in an arbitration between KPOC and Malaysia Marine And Heavy Engineering Sdn Bhd (‘MMHE’) be recognised as binding and be enforced by entry as a judgment S/N re8ByzNMg0K3ije8u6KoAA against MMHE pursuant to s 38 of the Arbitration Act 2005 [Act 646] (‘AA 2005’) (‘Enforcement Application’); and

the application by MMHE in O.S. No. WA-24C(ARB)-52-09/2021 to set aside the Award in part or in full pursuant to subparas 37(1)(a)(iv), 37(1)(a)(v) and/ or 37(1)(a)(vi); subparas 37(1)(b)(ii), 37(2)(b)(i) and/ or 37(2)(b)(ii); and/ or sub-s 37(3) AA 2005 and/ or under the inherent jurisdiction of the Court (‘Setting Aside Application’). [2] The Court, after having given utmost consideration to the cause papers and the oral and written submissions by the parties, and upon the withdrawal of prayer 3 in the Setting Aside Application on the date of decision (with MMHE reserving its right to pursue the relief for a consequential order that KPOC reimburses MMHE forthwith all costs and expenses in respect of the arbitration in the sum of RM6,829,097.12 or in a sum to be assessed by the Court, by way of another action), had allowed prayers 1 and 2 in the Setting Aside Application pursuant to subparas 37(1)(b)(ii), 37(2)(b)(ii) and S/N re8ByzNMg0K3ije8u6KoAA 37(1)(a)(vi) AA 2005 with costs of RM30,000.00, and dismissed the Enforcement Application with costs of RM10,000.00. [3] These are my full grounds of judgment in respect of the said decision. The Cause Papers [4] The cause papers in relation to the applications are as follows:

KPOC’s O.S. dated 29.9.2021 (encl. 1);

KPOC’s Affidavit in Support (‘AIS’) affirmed by its Legal Manager, Sim Pek Ling on 28.9.2021 (encls. 2 - 7);

MMHE’s Affidavit in Reply (‘AIR’) affirmed by its Senior General Manager, Legal and Corporate Secretarial Affairs, Shahrin Albakri Bin Mustafa Albakri on 8.11.2021 (encls. 9 - 39); and S/N re8ByzNMg0K3ije8u6KoAA

KPOC’s AIR affirmed by the same deponent on 14.12.2021 (encls. 40 - 75).

MMHE’s O.S. dated 30.9.2021 (encl. 1);

MMHE’s AIS affirmed by the same deponent on 30.9.2021 (encls. 2 - 32);

KPOC’s AIR affirmed by the same deponent on 17.11.2021 (encls. 34 - 67);

MMHE’s AIR affirmed by the same deponent on 21.12.2021 (encl. 68); and

MMHE’s Additional Affidavit affirmed by its advocate and solicitor, Kalashini Sandrasegaran on 18.4.2022 (encl. 130). S/N re8ByzNMg0K3ije8u6KoAA Salient Background Facts [5] KPOC is a joint operating company comprised of PETRONAS Carigali Sdn. Bhd ('PCSB'), ConocoPhilips Sabah Gas Ltd. ('COP'), and Shell Energy Asia Ltd ('SEAL'). KPOC is incorporated in Malaysia with a registered address at Suite 13.03, 13th Floor, Menara Tan & Tan, 207 Jalan Tun Razak, 50400 Kuala Lumpur and a business address at Level 67, Tower 2, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur (PCSB, COP and SEAL will hereinafter be collectively referred to as the 'PSC Contractors'). [6] MMHE is also a company incorporated in Malaysia. Its registered address is at Level 31, Menara Dayabumi, Jalan Sultan Hishamuddin, 50050 Kuala Lumpur and its business address is at Plo 3, Pasir Gudang Industrial Estate, Jalan Pekeliling, Pasir Gudang, 81700 Johor. [7] By way of Contract No. KPOC/COC/2009/015: Fabrication of KBB Topsides dated 20.9.2011 ('Contract') between KPOC and Sime Darby Engineering Sdn Bhd ('SDE'), KPOC appointed SDE as the S/N re8ByzNMg0K3ije8u6KoAA contractor to carry out and complete construction, engineering, procurement, fabrication, inspection, testing & pre-commissioning, loadout and sea fastening of the KBB Topside and associated appurtenances ('Works'). [8] The effective date of the Contract is 22.4.2011 ('Effective Date'). [9] By a Novation Agreement in relation to the Contract dated 30.3.2012 between KPOC, SDE and MMHE ('Novation Agreement'), MMHE agreed, among others, to accept, observe, perform and discharge all liabilities and obligations of SDE under the Contract in all respects as if MMHE was a party to the Contract in place of SDE from the Effective Date. In other words, MMHE assumed SDE’s rights and responsibilities under the Contract by stepping into the shoes of the appointed contractor. [10] Under the Contract, MMHE was required to, amongst others, supply materials required for the performance and completion of the work except the items as specified in Part 6 of the Contract which are to be supplied by KPOC. These materials included amongst others, 2” & S/N re8ByzNMg0K3ije8u6KoAA Below and 3” & Above manual ball valves (collectively referred to as the 'Valves'). [11] MMHE completed the Works in June 2014, marked by the sail away of the KBB Topsides to the Kebabangan Field. The Field is located approximately 135 km North-West of Kimanis, off the coast of Sabah. The Field is intended to be a hub for development of deepwater oil and gas assets in the North Sabah area. [12] KPOC issued the Certificate of Completion dated 21.7.2014 ('CoC') with the Completion Date stated as 16.6.2014. According to the Contract, this marks the start of the guarantee period which, pursuant to Clause 15, Part 2 of the Contract lapsed on or about 16.12.2015. [13] KPOC’s allegations in the arbitration proceedings were limited to only matters arising from the supply of the Valves on a cost-plus basis through a sub-contractor, Mikuni (M) Sdn Bhd ('Mikuni') for purposes of the Works. S/N re8ByzNMg0K3ije8u6KoAA [14] Mikuni is a longtime player with an established presence in the industry and it has been engaged over the years by various entities, including PETRONAS (dealings since 31.10.1986), Talisman, Nippon Oil, Murphy Sarawak Oil, ExxonMobil and Shell. Mikuni’s principal in the PETRONAS e-LLRC database was one OMB SpA Italy ('OMB'). [15] Two procurement packages were awarded by MMHE to Mikuni pursuant to the terms of the Contract, namely Ball Valves (NPS 2 and Below) ('NPS 2 Valves'); and Ball Valves (NPS 3 and Above for UA) ('NPS 3 Valves') (collectively, the NPS 2 Valves and NPS 3 Valves shall hereinafter be referred to as the 'Cost-Plus Valves'). [16] According to MMHE, the value of the Contract at the time of award was approximately RM1.15 billion. For each of the award, MMHE entered into formal contracts with Mikuni. MMHE also issued five separate Purchase Orders ('PO') for the Cost-Plus Valves detailed as follows: S/N re8ByzNMg0K3ije8u6KoAA Item PO Value (RM) Quantity Total PO Value 12,387,076.69 Total Units Purchased 2501 Total Units Installed 1669 [17] An excess of 832 units were sold/ returned to MMHE as part of the final account settlement between KPOC and MMHE at the conclusion of the Contract. [18] The subject matter in dispute in the arbitration was the 1,669 units of Cost-Plus Valves installed as part of the Works. Payment to MMHE, from the portion of the Contract in issue, was approximately RM619,353.83 i.e. 5% of the total PO Value. [19] Separately, KPOC had its own contractual arrangement with Mikuni for the KBB Project whereby it had procured 129 units of actuated valves directly from Mikuni ('KPOC-Mikuni Valves') under the “Umbrella Agreement of Manual and Actuated Carbon, Austenitic Stainless and Duplex Stainless Steel Ball Valves for KPOC Projects and Operations S/N re8ByzNMg0K3ije8u6KoAA & Maintenance Contract Number: KPOC/COC/10/003” executed on 22.12.2010 ('Umbrella Agreement'). [20] According to KPOC, in April 2016 which is after the expiry of the guarantee period under the Contract, KPOC had contacted OMB to source a spare part for a 16” valve which is part of the KPOC-Mikuni Valves. KPOC claims that OMB had informed that it has no record of the valve. This led to the “discovery” that the Cost-Plus Valves were “in fact not manufactured by OMB”. Therefore, according to KPOC, Mikuni did not supply the Cost-Plus Valves as required under its sub-contract with MMHE. [21] The dispute was eventually referred to arbitration in accordance with Clause 40, Part 2 of the Conditions of Contract. - The Arbitration [22] KPOC served the Notice of Arbitration dated 13.3.2019 ('NoA') on MMHE on 14.3.2019. S/N re8ByzNMg0K3ije8u6KoAA [23] KPOC nominated Mr. Alan J Thambiayah as the First Arbitrator while MMHE selected Mr. Chelva R Rajah SC as the Second Arbitrator. Both parties jointly nominated Dato’ Anantham Kasinather as the Presiding Arbitrator. These nominations were eventually accepted and confirmed. [24] KPOC claimed that MMHE was in breach of the express and/ or implied terms of the Contract in respect of the supply of the Cost-Plus Valves and that it “has suffered substantial loss and damages, and such damage is continuing”. KPOC particularised its loss and damages at approximately RM125.1 million. [25] MMHE denied KPOC’s claims in its entirety in its Response to the NOA dated 11.4.2019. [26] By the Statement of Claim dated 11.10.2019 ('SoC') and later amended on 30.12.2020, KPOC's case against MMHE is essentially that – S/N re8ByzNMg0K3ije8u6KoAA

MMHE is in breach of the express terms of the Contract, inter alia, failure to provide the valves in accordance with the Contract; the valves were not free from errors, defects, shrinkages and failures; and failure to be responsible for the failure of its subcontractor, Mikuni;

MMHE is in breach of the implied terms of the Contract in that, among others, the valves supplied did not correspond with its description and were not of merchantable quality and not reasonably fit for the particular purpose for which they were supplied; and

as a result of the aforesaid, KPOC suffered and would suffer substantial loss and damage in respect of the valves which have been replaced and which will need to be replaced as tabulated below (inclusive of revisions that were made through the evidence of KPOC's witness): S/N re8ByzNMg0K3ije8u6KoAA CLAIM ALLOCATION PERCENTAGE(S) BASED ON NOTE TO FILE AMOUNT (RM) CLAIM 1: VALVE REPLACEMENT COSTS CLAIM

1a.

Costs for assessment on MMHE supplied valves (Oct 2016 - May 2017) 35%, 100% 549,300.12 1b. Procurement of 187 valves and replacement of 187 valves during shutdown/ turn around (TAR) in 2017 19.35%, 100% 10,188,325.22 1c. Claimant’s employees’ pay for employees involved in 2017 valve replacement 3%, 19.35%, 20%, 25%, 30%, 50%, 100% 5,433,680.25 1d. Travel expense reimbursements (TER) for Claimant’s employees for valve assessment (Oct 2016 - May 2017) and for valves replacement in 2017 19.35%, 46.52%, 100% 203,074.02 1e. Procurement of 117 valves in 2018 and replacement of 8 and 20 valves in 2018 and 2019 respectively 100% 866,798.41 Subtotal 17,241,178.02 CLAIM 2: FUTURE VALVE REPLACEMENT CLAIM S/N re8ByzNMg0K3ije8u6KoAA

Costs for remaining valves to be replaced (1,365 valves to be procured and 1,454 valves to be installed) 100% 13,683,586.48

Loss of revenue for planned facilities shutdown to replace the valves in TAR 2017 - 28,030,905.80 Total 58,955,670.31 [27] In its Statement of Defence dated 6.12.2019 ('SoD'), MMHE’s pleaded position, amongst others, is as follows:

The Contract provided that procurement shall be based on competitive bidding amongst those registered in the appropriate category as per the latest PETRONAS e-LLRC database and that all tenders shall be conducted in accordance with PETRONAS' Purchasing & Contracting Procedures and Governance. S/N re8ByzNMg0K3ije8u6KoAA

KPOC did not allege that SDE, prior to the novation, in respect of the NPS 2 Valves, and later, MMHE, had failed or neglected to comply with the provisions of the Contract in carrying out the bid process.

MMHE had complied with all instructions issued by KPOC and had performed its obligations in accordance with the requirements of the Contract and as set out in the Project Specifications section of the contract agreements between MMHE and Mikuni, which was approved by KPOC, or as instructed by KPOC. Even if it was determined that the Cost-Plus Valves were indeed counterfeit valves, there was no causal link between any such finding and MMHE’s obligations to KPOC under the Contract.

KPOC was fully engaged in the procurement process of the Cost-Plus Valves during the course of the Contract, as well as in the ensuing inspection and installation process. S/N re8ByzNMg0K3ije8u6KoAA

KPOC accepted the Cost-Plus Valves, released the corresponding payments, and issued the CoC. The Cost-Plus Valves were used for many years since and KPOC appears to continue to benefit commercially from the same. In the event there was any shortcoming at all, the same was waived or accepted by KPOC. KPOC’s claims are time-barred.

The 18-months guarantee period following completion of the Contract on 16.6.2014 pursuant to Clause 15.4, Part 4: Scope of Work had long lapsed.

KPOC did not take any mitigation measures to reduce or minimise any losses that had allegedly been incurred from the above alleged breaches. [28] In the Statement of Reply dated 17.1.2020 ('SoR'), KPOC responded, inter alia, that – S/N re8ByzNMg0K3ije8u6KoAA

its participation, if any, in the procurement and award process did not relieve MMHE of its liabilities, duties and obligations under the Contract;

acceptance, payment and the issuance of the CoC, and acceptance, use and benefit from the Cost-Plus Valves did not relieve MMHE of its liability and obligations;

MMHE is put to strict proof on its allegations of waiver, acceptance and estoppel;

its claims were not time barred as time would run from the discoveries made in respect of the valves in April 2016 and at the earliest, from completion in June 2014; and

it had satisfied its duty to mitigate by prioritising the replacement of valves based on the criteria of safety and criticality. S/N re8ByzNMg0K3ije8u6KoAA [29] KPOC led evidence from eight factual witnesses, including two individuals from OMB, and it also relied on three expert witnesses, namely, Jonathan Lloyd, Chng Eng Hui ('CEH') and Emily Choo Soke Yee ('CSY'). [30] MMHE called three factual witnesses and two expert witnesses, Peter Badala ('PB') and Ronald Merrick. [31] The experts subsequently filed a "Quantum Joint Statement of Peter Vincent Badala and Chng Eng Hui' dated 20.11.2020 ('JS-1') and a Joint Statement between CSY and PB ('JS-2'), respectively in respect of issues in relation to the quantum of the KPOC's claims. No Joint Statement was agreed between the experts in respect of liability. [32] KPOC’s List of Issues for the arbitration is re-produced below for ease of reference: "LIABILITY a. Whether the Respondent was and is in breach of the express and/or implied terms of the Contract in respect of the supply of the valves? S/N re8ByzNMg0K3ije8u6KoAA

Whether the Respondent has breached the Contract in respect of the failure to provide the valves required under the Contract?

Whether the Respondent has breached the Contract in respect of the necessary documents required under the Contract?

Whether the Respondent has breached the Contract in respect of the technical requirements under the Contract?

Whether the Respondent has breached the Contract in respect of inspection & testing requirements under the Contract? b. Whether the Respondent is relieved of any liability or obligation under the Contract by reason of the matter raised in the Defence? c. Whether the Respondent is relieved of any liability or obligation under the Contract by reason of the procurement of the valves on a cost-plus basis? S/N re8ByzNMg0K3ije8u6KoAA d. Whether the Respondent is no longer be liable after the guarantee period? e. Whether the action is barred by limitation? QUANTUM a. Whether by reason of the breach, the Claimant has suffered damages and the quantum of such damages?

Whether the Claimant is entitled to the costs for assessment on the valves and for valves replacement (2016 – 2019) and the quantum i. Whether the Claimant is entitled to the costs for assessment on the MMHE supplied valves (October 2016 – May 2017) and the quantum ii. Whether the Claimant is entitled to the procurement of 187 valves and replacement of 187 valves during shutdown/ turn-around (TAR) 2017 and the quantum iii. Whether the Claimant is entitled to the Claimant’s employees pay for employees S/N re8ByzNMg0K3ije8u6KoAA involved in 2017 valve replacement and the quantum iv. Whether the Claimant is entitled to the travel expense reimbursements (TER) for Claimant’s employees for valves assessment (October 2016 – May 2017) and for valves replacement in 2017 and the quantum v. Whether the Claimant is entitled to the procurement of 117 valves in 2018 and replacement of 8 and 20 valves in 2018 and 2019 respectively and the quantum

Whether the Claimant is entitled to the costs for remaining valves to be replaced (1365 valves to be procured and 1454 valves to be installed) and the quantum

Whether the Claimant is entitled to the loss of revenue for planned facilities shutdown to replace the valves in TAR 2017 and the quantum". [33] MMHE’s List of Principal Issues is similarly shown below: S/N re8ByzNMg0K3ije8u6KoAA "Liability 1) The true construction of MMHE’s obligations under the KKB Contract in respect of the supply of the Cost-Plus Valves. 2) Are there terms to be implied into the KKB Contract, and if so, what are those terms? 3) Is MMHE in breach? 4) Limitations, if any, to KPOC’s claim in respect of liability. Quantum 5) If (3) is answered in the affirmative (and the claim is not limited per (4)), whether the breach caused KPOC to suffer loss? 6) If yes, what damages is KPOC entitled to seek from MMHE? 7) Has KPOC proven its case in respect of its loss? 8) Did KPOC mitigate its loss?". S/N re8ByzNMg0K3ije8u6KoAA [34] The issues as identified by the Tribunal and the conclusions may be summarised as follows: ISSUE CONCLUSION 1st Was there a contractual obligation on the part of the Respondent to ensure that the below 2” and 3” above valves supplied to the Claimant were manufactured and purchased from OMB? (see p 25 of the Award) The supply of 2” and below and 3” and above manual ball valves under Contract No. KPOC/COC/2009/015 by the Respondent had to be manufactured by OMB. (see para 78, p 34 of the Award) 2nd Whether the valves supplied by the Respondent were manufactured by OMB? The Respondent, in breach of the Contract, delivered valves to the Claimant which were not in accordance with the Contract, in that, they were not manufactured by OMB, and is consequently liable in damages to the Claimant, S/N re8ByzNMg0K3ije8u6KoAA (see p 34 of the Award) unless the claim is defeated by the defences of De Minimis and/ or the terms of the guarantee or barred by limitation. (see para 101, p 75 of the Award) 3rd

Loss arising from valve replacement in 2017, 2018 and 2019 The claim for RM17,241,178.02 million is upheld in full as the Tribunal is satisfied that the methodology employed by the Claimant to determine the quantum of its losses is reasonable, applying the principles of law to determine damages for claims of this nature pronounced in the more recent authorities in Malaysia, and New Zealand. S/N re8ByzNMg0K3ije8u6KoAA (see para 115, p 86 of the

(ii) Loss that will arise from future valve replacement efforts (see para 115, p 86 of the Award)

(iii) Loss of revenue due to stoppage in production in 2017 (see para 115, p 86 of the Award) (see para 142, p 134 of the Award) Damages in the sum of RM9,820,771.00 is awarded to the Claimant (RM4,360,847.00 + RM2,601,351.00 + RM2,384,667.00 + RM473,906.00). (see para 150, p 147 of the Award) The claim for the sum of RM28,030,905.80 by way of loss of revenue is disallowed. (see para 132, p 108 of the Award) 4th Interest The damages awarded to the Claimant should be paid by the Respondent with interest at 5% per annum commencing 11th October S/N re8ByzNMg0K3ije8u6KoAA 2019, being the date of the statement of claim till the date of realization. (see para 152, p 149 of the Award) [35] Ultimately, the Tribunal in para 168, p 160 of the Award made the following award: "A) AWARDS the Claimant the sum RM 17,241,178.02 as Damages for the costs expenses incurred by the Claimant for assessment, procurement and replacement of valves in the period 2016 to 2019; B) AWARDS the Claimant interest calculated at the rate of 5% per annum from 11.10.2019 to the date of payment on the sum of RM 17,241,178.02; C) AWARDS the Claimant the sum of RM 9,820,770.00 as Damages suffered by the Claimant in having to procure 1365 valves and install 1454 valves in the future; S/N re8ByzNMg0K3ije8u6KoAA D) AWARDS the Claimant interest on the sum of RM 9,820,770.00 at the rate of 5% per annum from 11.10.2019 till the date of payment; AND E) AWARDS the Claimant the sum of RM 1,029,167.25 for its legal fees and expenses.". I. The Setting Aside Application [36] As earlier stated, MMHE’s Setting Aside Application was made pursuant to subparas 37(1)(a)(iv), 37(1)(a)(v) and/ or 37(1)(a)(vi); subparas 37(1)(b)(ii), 37(2)(b)(i) and/ or 37(2)(b)(ii); and/ or sub-s 37(3) AA 2005. [37] The relevant part of s 37 AA 2005 for present purposes is quoted below: “Application for setting aside S/N re8ByzNMg0K3ije8u6KoAA

(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

(vi) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or S/N re8ByzNMg0K3ije8u6KoAA

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 S/N re8ByzNMg0K3ije8u6KoAA contains decisions on matters not submitted to arbitration may be set aside. ...”. [38] In the O.S., MMHE stated that the grounds for the application are as averred in the AIS, which were summarised as follows:

the Award is in conflict with the public policy of Malaysia in that a breach of the rules of natural justice occurred during the arbitration and/ or in connection with making the Award pursuant to subparas 37(1)(b)(ii), 37(2)(b)(i) and/ or 37(2)(b)(ii) AA 2005;

the arbitral procedure was not in accordance with the agreement of the parties pursuant to subpara 37(1)(a)(vi) AA 2005;

the Award deals with a dispute not contemplated by or not falling within the terms of the submissions to Arbitration and/ or contain decisions on matters beyond the scope of submission to Arbitration and/or made in excess of powers and/ or jurisdiction pursuant to subparas 37(1)(b)(ii), 37(2)(b)(i) and/ or 37(2)(b)(ii) S/N re8ByzNMg0K3ije8u6KoAA AA 2005 or alternatively, subparas 37(1)(a)(iv) and/ or 37(1)(a)(v) AA 2005 in that the Tribunal based its decision/ findings on arguments that the parties have not submitted on and/ or evidence or argument extraneous to the Arbitration without giving the parties further notice and the opportunity to respond; and

the Award is in conflict with the public policy of Malaysia pursuant to subpara 37(1)(b)(ii) AA 2005 in that it contains findings and/ or application of legal principles that are in conflict with judicial precedents/ high authorities in Malaysia. [39] Following the hearing of the Setting Aside Application and during the clarification session, MMHE had chosen to narrow down its grounds of challenge. Before these grounds are explained, the claims by KPOC against MMHE in the arbitration must first be appreciated. This is best illustrated by referring to p 8 of MMHE's presentation slides for the hearing (encl. 126) which is re-produced below: S/N re8ByzNMg0K3ije8u6KoAA Claim Amount [in RM] Claim 1: Valve Replacement Costs Claim 1a Costs for assessment on MMHE supplied valves (Oct 2016-May 2017) 549,300.12 1b Procurement of 187 valves and replacement of 187 valves during shutdown/turn around (TAR) in 2017 10,188,325.22 1c Claimant’s employees’ pay for employees involved in 2017 valve replacement 5,433,680.25 1d Travel expense reimbursements (TER) for Claimant’s employees for valve assessment (Oct 2016-May 2017) and for valves replacement in 2017 203,074.02 1e Procurement of 117 valves in 2018 and replacement of 8 and 20 valves in 2018 and 2019 respectively 866,798.41 17,241,178.02 Claim 2: Future Valve Replacement Claim 2 Costs for remaining valves to be replaced (1365 valves to be procured and 1454 valves to be installed) 13,683,586.48 Claim 3: Loss of Revenue Claim 3 Loss of revenue for planned facilities shutdown to replace the valves in TAR 2017 62,266,539.78 Total 93,191,304.29 S/N re8ByzNMg0K3ije8u6KoAA [40] As alluded to in para 35 above, the Arbitral Tribunal awarded KPOC's Valve Replacement Costs Claim ('Claim 1') in its entirety and with regards to KPOC's Future Valve Replacement Claim ('Claim 2'), a sum of RM9,820,770.00 was awarded. [41] KPOC's Loss of Revenue Claim ('Claim 3') was rejected by the Arbitral Tribunal and is therefore not relevant in the Setting Aside Application except to note that Claim 3 was subsequently reduced to RM28,030,905.00 in the course of oral evidence. Hence, KPOC's overall claim was reduced to RM58,955,669.00. KPOC's attempts to introduce a new claim in the sum of RM23,098,721.13 by way of amendments to the SoC four days before the hearing was rejected by the Arbitral Tribunal. [42] MMHE's grounds for the Setting Aside Application were focused to the following:

whether a breach of the rules of natural justice occurred during the arbitration and/ or in connection with making the Award S/N re8ByzNMg0K3ije8u6KoAA

failed to consider and determine certain defences and arguments put forth by MMHE in the arbitration pertaining to the issues of –

(A) burden of proof as to MMHE’s true obligations under the Contract; waiver; acquiescence; and estoppel;

(B) whether KPOC had mitigated its loss;

(C) KPOC’s status as a no-profit, no-loss entity;

(D) the quantification of Claim 1; and

(E) the award of interest;

(ii) arrived at findings on the issues of invocation of the doctrine of adverse inference; discharge of the burden of proof; S/N re8ByzNMg0K3ije8u6KoAA guarantee; limitation; and interest based on arguments that were not advanced by either party, without affording the parties an opportunity to address the Arbitral Tribunal on the same;

whether the arbitral procedure was not in accordance with the agreement of the parties pursuant to subpara 37(1)(a)(vi) AA 2005 as the Arbitral Tribunal failed to make a finding or a reasoned award –

in respect of Claim 1 by finding in favour of KPOC’s quantification of Claim 1 in arriving at the award of RM17,241,178.02, the reasonableness of the award, assessment of each sub-claim and issues unique to Claim 1 and why KPOC’s quantification was accepted over that of the opinion of KPOC’s own expert witness or the joint position of the expert witnesses; S/N re8ByzNMg0K3ije8u6KoAA

(ii) in respect of the claim for Claim 2 in determining the quantification, including over that of KPOC’s own quantification;

as per subpara 38(c) above; and

whether the Award contains findings and/ or application of legal principles that are in conflict with judicial precedents on the requirement to prove loss; the characterisation of the Contract as an “entire contract”; and pre-award interest on a sum that has not been incurred. - The Legal Principles [43] In Schedule 1 to KPOC’s Written Submissions (encl. 83), the “General Principles on Setting Aside” gleaned from the case authorities to date ('General Principles') were set out as follows: S/N re8ByzNMg0K3ije8u6KoAA "1. For the purpose of setting aside an award under s. of AA 2005, the concept of public policy ought to be read narrowly and more restrictively. 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, it does not necessarily mean that the award must be set aside as a matter of course. The court must also consider the background policy of encouraging arbitral finality and minimalist intervention approach to be adopted in line with the spirit of the Model Law. The scope of public policy ground for setting aside an arbitral award could only be invoked in deserving cases ie, in instances where it appears a violation of the most basic notions of morality and justice (see Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 at paras [55] to [58]).

The court must consider (i)(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; (ii) 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; (iii) if the breach is relatively immaterial or was not likely to have affected the outcome, discretion will be refused; S/N re8ByzNMg0K3ije8u6KoAA

(iv) 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; (v) where the breach is significant and might have affected the outcome, the award may be set aside; (vi) 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; (vii) the discretion given to 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; (viii) 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. However prejudice is a relevant consideration (see Master Mulia Sdn Bhd v. Sigur Rus Sdn Bhd [2020] 9 CLJ 213 at paras [53] and [62]).

The overriding concern is fairness. Fairness is a multidimensional concept and it would be also unfair to the successful party if it is deprived of the fruits of its labour as a result of a dissatisfied party raising a S/N re8ByzNMg0K3ije8u6KoAA multitude of arid technical challenges after an arbitral award has been made. The courts are not a stage where a dissatisfied party can have a second bite of the cherry (see Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86 at para [65] and TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 at paras [2] and [125]).

It must always be borne in mind that it is not the function of the court to assiduously comb an arbitral award microscopically in attempting to determine if there was any blame or fault in the arbitral process; rather, an award should be read generously such that only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied. The court should not nit-pick at the award. As a matter of general approach, the courts strive to uphold arbitration awards. They do not approach them with meticulous legal eye, endeavouring to pick holes, inconsistencies and faults in awards and with the objective of upsetting or frustrating the process of arbitration award in a reasonable and commercial way, expecting as is usually the case, that there will be no substantial fault can be found with it. The breach of natural justice must be demonstrably clear on the face of the record without the need to pore over thousands S/N re8ByzNMg0K3ije8u6KoAA of pages of facts and submissions (see Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86 at para 65 and TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 at paras [45] and [125]).

The courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award but which may be disguised and presented as a challenge to process failures during the arbitration. A prime example of this would be a challenge based on an alleged breach of natural justice. Among the arguments commonly raised in support of breach of natural justice (a) that the arbitral tribunal misunderstood the case presented and so did not apply its mind to the actual case of the aggrieved party; (b) that the arbitral tribunal did not mention the arguments raised by the aggrieved party and so must have failed to consider the latter's actual case; and (c) that the arbitral tribunal must have overlooked a part of the aggrieved party's case because it did not engage with the merits of that part of the latter's case. Although such arguments may be commonly raised, more often than not, they do not, in fact, amount to breaches of natural justice (see AKN and another v ALC and others and other appeals [2015] 3 SLR 488 at para [39]). S/N re8ByzNMg0K3ije8u6KoAA

It will usually be a matter of inference rather than of explicit indication that the arbitrator wholly missed one or more important pleaded issues. However, the inference - that the arbitrator indeed failed to consider an important pleaded issue - if it is to be drawn at all, must be shown to be clear and virtually inescapable. If the facts are also consistent with the arbitrator simply having misunderstood the aggrieved party's case, or having been mistaken as to the law, or having chosen not to deal with a point pleaded by the aggrieved party because he thought it unnecessary (notwithstanding that this view may have been formed based on a misunderstanding of the aggrieved party's case), then the inference that the arbitrator did not apply his mind at all to the dispute before him (or to an important aspect of that dispute) and so acted in breach of natural justice should not be drawn. An arbitral tribunal's decision to reject an argument (whether implicitly or otherwise, whether rightly or wrongly, and whether or not as a result of its failure to comprehend the argument and so to appreciate its merits) is not a breach of natural justice (see AKN and another v ALC and others and other appeals [2015] 3 SLR 488 at paras [46] and [47]). S/N re8ByzNMg0K3ije8u6KoAA

An arbitral tribunal is not obliged to deal with every argument. All that is required of the arbitral tribunal is to ensure that the essential issues are dealt with. The arbitral tribunal need not deal with each point made by a party in an arbitration. In determining the essential issues, the arbitral tribunal also should not have to deal with every argument canvassed under each of the essential issues. Arbitral tribunals must be given fair latitude in determining what is essential and what is not. An arbitral tribunal has the prerogative and must be entitled to take the view that the dispute before it may be disposed of without further consideration of certain issues. A court may take a contrary view ex post facto, but it should not be too ready to intervene. An argument is a proposition that inclines towards a specific conclusion. It typically contains reasons or premises, either factual or legal or both, which are presented as driving one towards a particular conclusion. An issue, on the other hand, is a topic. It is non-prescriptive, and usually expressed as a question. In proposing that the issue should be determined in its favour, a party may submit different arguments that could operate cumulatively or independently. As long as one argument resolves the issue, there is no justification for insisting that the arbitral tribunal go on to consider the other arguments which have been rendered academic. It is S/N re8ByzNMg0K3ije8u6KoAA the right to be heard and not a right to receive responses to all the submissions or arguments presented that is protected. An issue need not be addressed expressly in an award; it may be implicitly resolved. Resolving an issue does not have to entail navigating through all the arguments and evidence. If the outcome of certain issues flows from the conclusion of a specific logically prior issue, the arbitral tribunal may dispense with delving into the merits of the arguments and evidence for the former (see TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 at paras [72] to [77]).

An arbitral tribunal must demonstrably have at least attempted to comprehend the parties' arguments on the essential issues. However, it is also clear that the inquiry should not be side-tracked by the explicability of a decision alone. The inexplicability of the decision is only one factor which goes towards proving that the arbitral tribunal did not in fact properly attempt to consider or comprehend the parties' arguments. The central inquiry in all such cases is whether the award reflects the fact that the arbitral tribunal had applied its mind to the critical issues and arguments. The general principle that errors of law do not found a basis for challenging an award would also be denuded of any significant S/N re8ByzNMg0K3ije8u6KoAA meaning if the court is too fixated with the explicability of a decision. An assessment of whether the arbitral tribunal had attempted to understand the parties' submissions is effectively an investigation into the inner workings of the respective arbitrator's minds. Ostensibly, the arbitral tribunal may, after applying its mind, fail to comprehend the submissions or comprehended them erroneously, and thereby come to a decision which may fall to be characterised as inexplicable. Such a situation falls short of a breach of the rules of natural justice (see TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 at paras [88] to [91]).

Even if the arbitrator was wrong in not giving the parties the opportunity to submit, the breach must be such gravity and materiality that the party can be said to have been denied due process (see Pancaran Prima Sdn Bhd v. Iswarabena Sdn Bhd & Another Appeal [2020] 9 CLJ 466 at para [109]).

An allegation of inadequate reasons is generally not capable of sustaining a challenge against an award. While recognising that there is a duty to give reasons arbitrators are under no duty to deal with every possible argument. Even if some of an arbitral tribunal's S/N re8ByzNMg0K3ije8u6KoAA conclusions are bereft of reasons that is not necessarily fatal. There are a variety reasons why an arbitral tribunal may elect not to say something. The crux is whether the contents of the arbitral award taken as a whole inform the parties of the bases on which the arbitral tribunal reached its decision on the material or essential issues. The fact that the arbitrator did not feel it necessary to discuss his reasoning and explicitly state his conclusions cannot mean that he did not have regard to those submissions at all. It may have been an accidental omission on his part to indicate expressly why he was rejecting the submissions since the arbitrator took care to explain the reasons for his other determinations. Alternatively, he may have found the points so unconvincing that he thought it was not necessary to explicitly state his findings. Whatever may be the reason, it is not considered that the party was not afforded natural justice (see TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 at paras [97] to [105] and Tanjung Langsat Port Sdn Bhd v. Trafigura Pte Ltd & Another Case [2016] 4 CLJ 927 at paras [83] – [87]).

In so far as the right to be heard is concerned, the failure of an arbitrator to refer every point for decision to the parties for submissions is not invariably a valid ground S/N re8ByzNMg0K3ije8u6KoAA for challenge. It is almost invariably the case that parties propose diametrically opposite solutions to resolve a dispute. The tribunal is perfectly entitled to take a middle path between the parties' opposing all or nothing positions. Further, a tribunal has no duty to consult the parties on its thinking process before finalising its award so long as the final outcome does not involve a dramatic departure from what has been presented to it [see Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86 at para [65](d) & (e)].

Once a fair hearing has been given to the rival cases presented by the parties the rules of natural justice do not require the arbitrator to disclose what he is minded to decide so that the parties may have a further opportunity of criticising his mental process before he reaches a final decision. An arbitrator is not bound to slavishly adopt the position advocated by one party or the other. It will usually be no cause for surprise that arbitrators make their own assessment of evidentiary weight and credibility, pick and choose between different aspect of an expert's evidence, reshuffle the way in which different concepts have been combined, make their own value judgments between the extremes presented, and exercise reasonable latitude in drawing their own conclusions from the material presented (see S/N re8ByzNMg0K3ije8u6KoAA Intraline Resources Sdn Bhd v. Exxonmobil Exploration And Production Malaysia Inc [2017] 1 LNS 1022 at paras [86] and [87]).

To succeed in a case for excess of power or mandate. The applicant must show (i) the matters which are within the scope of the submission to arbitration; (ii) it then must prove that the award deals with a ‘new difference’ which is not within the scope of reference; (iii) if shown, whether such ‘new difference’ was irrelevant to the actual issues for determination; (iv) if so, whether the ‘new difference’ would have had a material impact on the final outcome as announced in the award; (v) whether that part of the award inflicted by the ‘new difference’ may be separated from the other parts of the award to warrant only the part affected to be set aside. The correctness of the decision is not relevant. Even if the tribunal had erred in its decision, if this was an error in the exercise of the power vested in the tribunal to decide on an issue that was referred to it and was within its scope of submission and not in respect of a ‘new difference’ outside the scope of submission; such an error does not and cannot amount to excess of jurisdiction [see Intraline Resources Sdn Bhd v. Exxonmobil Exploration And Production Malaysia Inc [2017] 1 LNS 1022 at para [26](m) and Tanjung Langsat S/N re8ByzNMg0K3ije8u6KoAA Port Sdn Bhd v. Trafigura Pte Ltd & Another Case [2016] 4 CLJ 927 at paras [14] and [25](c)].

The law does not allow an arbitral award to be set aside for error of fact and/ or law (see Garden Bay Sdn Bhd v Sime Darby Property Bhd [2018] 2 MLJ 636 at para [8])". [44] KPOC’s submissions at the hearing were based on these over-arching General Principles. To avoid repetition, in reading these grounds of judgment, it can be presumed that the General Principles formed the backbone of KPOC’s defence against MMHE’s application in the Setting Aside Application. [45] In its response to the General Principles, MMHE contended that it has not shied away from the General Principles and two observations were made, namely that KPOC –

merely regurgitated the General Principles without reference to any finding or reasoning in the Award; and S/N re8ByzNMg0K3ije8u6KoAA

was selective in setting out the General Principles, for example, in TMM Division, it was additionally held that "(10) The arbitral tribunal was generally bound to give reasons for its decision. However, arbitrators were not in general required to set out in their reasons an explanation for each step taken by them in arriving at their evaluation of the evidence and in particular for their attaching more weight to some evidence than to other evidence or for attaching no weight at all to such other evidence. All that was necessary was that the arbitrators ought to set out what, on their view of the evidence, did or did not happen and ought to explain succinctly why, in the light of what happened, they had reached their decision and what that decision was. Even if some of an arbitral tribunal’s conclusions were bereft of reasons, that was not necessarily fatal. There were a variety of reasons why an arbitral tribunal might elect not to say something. The standards relating to the level of detail to be given for judgments which were applicable to judges were assistive indicia to arbitrators: at [100] to [103].". MMHE's counsel further cited the decisions in Ngati Hurungaterangi & Ors v Ngati Wahiao [2017] NZCA 429 at paras 61 to 63 and Z v Y [2018] HKCFI 2342 S/N re8ByzNMg0K3ije8u6KoAA at paras 10 to 14 to support the proposition that key and material issues raised for determination by the arbitral tribunal should be considered and dealt with fairly and the award should be reasoned, to the extent of being reasonably sufficient and understandable by the parties. MMHE urged the Court to be mindful of KPOC's selective approach and to consider the cases cited in Schedule 1 to encl. 83 in full. [46] The specific arguments put forth by MMHE in respect of each ground to set aside the Award are addressed in the subsequent part of these grounds of judgment. 1st Ground: Whether the Tribunal failed to consider and to make a finding in the Award on the defence and arguments raised by MMHE with regards to –

the quantification of Claim 1;

the issue of burden and specifically – S/N re8ByzNMg0K3ije8u6KoAA

waiver;

(ii) acquiescence; and

(iii) estoppel; and

whether KPOC had mitigated its loss

The Quantification of Claim 1 - The Parties’ Submissions [47] As can be seen in the table in para 39 above, there are five different sub-claims making up Claim 1, amounting to RM17,241,178.02. [48] According to MMHE, each sub-claim was presented to the Arbitral Tribunal with its own set of evidence, supporting documents and unique issues to be addressed. In the Award, the Tribunal had summarised the position of the parties and reproduced parts of the submissions at paras 133 to 137, pp 108 - 132 of the Award. In particular, three grounds were set out in para 134, p 123 of the Award S/N re8ByzNMg0K3ije8u6KoAA which was described as MMHE’s objections to Claim 1. The three grounds are as follows:

that there is a real possibility of there being 341 genuine valves on the Topsides and hence, a discount should be applied as there is a very real likelihood of overlap between the replaced valves and the 341 valves. Alternatively, the number of units of valves to be replaced and installed ought to be reduced by 341 units. In the submission before this Court, MMHE referred to this ground simply as "the effect of 341 valves to the quantum computation";

KPOC's computation of its losses is faulty as it is premised on the allocation method i.e. percentages derived from man-hours without any supporting documents; and

adoption of the Note to File as a mode to determine the hours of work involved is defective as it is not based on actual hours but planned hours. S/N re8ByzNMg0K3ije8u6KoAA [49] The Tribunal dealt with these grounds in paras 138 to 141, pp 132 - 134 of the Award under the heading "FINDINGS OF THE TRIBUNAL ON THE FIRST HEAD OF DAMAGE FOR RM17,241,178.02" and concluded in para 142, p 134 as follows: "142. The Tribunal upholds the Claimant’s Claim for RM17,241,178.02 million in full as the Tribunal is satisfied that the methodology employed by the Claimant to determine the quantum of its losses is reasonable, applying the principles of law to determine damages for claims of this nature pronounced in the more recent authorities in Malaysia, and New Zealand.". [50] MMHE's grievance is that –

whilst the methodology was deemed reasonable, the Tribunal, however, did not apply the same as against KPOC’s actual claim i.e. to assess each of the five different sub-claims which makes up Claim 1; and S/N re8ByzNMg0K3ije8u6KoAA

in the submission of the parties and JS-1, other issues apart from the applicable methodology were raised for the determination of the Tribunal. However, the Tribunal did not consider any of these other issues in upholding KPOC’s claim in full. [51] KPOC's counter arguments to MMHE's complaints are that –

the assessment of quantum for Claim 1 was not listed as MMHE's principal issue; this was simply one of the arguments canvassed by MMHE on the loss and damage suffered by KPOC;

in any event, the Tribunal has dealt with the essential issues surrounding the quantification of Claim 1, notably, the five sub-claims, the evidence in respect of these sub-claims, the respective experts' assessments of the quantum and the state of documents and reasonableness of the quantum before coming to its decision; S/N re8ByzNMg0K3ije8u6KoAA

the Tribunal is not obliged to deal with every argument and each point made by MMHE. JS-1 was prepared before the hearings and so would not have taken into account all the evidence led;

there was no reliance or concession made by KPOC's counsel during the oral clarification. KPOC has never claimed anything lesser than the claim of RM17 million. KPOC only made reference to the experts' assessment so that, in the event the Tribunal was not with KPOC on its claim, it should at least award the sum assessed by KPOC's expert;

the Tribunal was entitled to accept KPOC's quantification of the actual costs incurred for Claim 1. This can be contrasted with Claim 2, which are for costs which have yet to be incurred where the Tribunal accepted the experts' assessment. The Tribunal was perfectly entitled to favor the experts' assessment in Claim 2 as the experts were almost ad idem in their assessment; and

the inference that the Tribunal failed to consider an important issue must be shown to be clear and virtually inescapable. Even S/N re8ByzNMg0K3ije8u6KoAA if the Tribunal misunderstood MMHE's case or having been mistaken as to the law or having chosen not to deal with a point pleaded by the aggrieved party because the Tribunal thought it unnecessary, the inference should not be drawn. The Tribunal's decision to reject an argument, whether implicitly or otherwise, whether rightly or wrongly, and whether or not as a result of its failure to comprehend the argument and so to appreciate its merits, is not a breach of natural justice. - Findings of the Court [52] Basically, MMHE attempted to persuade the Court to set aside the Award on the ground that it is in conflict with the public policy of Malaysia where a breach of the rules of natural justice occurred in connection with the making of the Award as the Arbitral Tribunal failed to consider and make any findings on the evidence of the expert witnesses as recorded in JS-1 and as submitted by the parties in the arbitration proceedings. S/N re8ByzNMg0K3ije8u6KoAA [53] In so far as the legal principles governing an assessment as to whether a case under subpara 37(1)(b)(ii) read with subpara 37(2)(b)(ii) AA 2005 is established, Mr. K. Mohanadass drew the attention of the Court to the following passage from Redfern and Hunter on International Arbitration, Sixth Edition, Oxford University Press, 2015 by the learned authors Nigel Blackaby and Constantine Partasides with Alan Redfern and Martin Hunter at pp 598 and 599: “10.40 … where an arbitral tribunal fails to deal with all of the issues referred to it for determination, it is usually said that the award should at least be held valid in respect of the issues with which it does deal. However, this is perhaps too simplistic. The significance of the issues that were not dealt with must be considered in relation to the award as a whole. For example, it is not difficult to envisage a situation in which the issues that were overlooked were of such importance that, had they been dealt with, the whole balance of the award would have been altered and its effected would have been different. In such circumstances, it seems fair that the aggrieved party should have a right of recourse against the entire award.…” S/N re8ByzNMg0K3ije8u6KoAA (emphasis added). [54] Closer to home, the Federal Court has expounded on the application of subparas 37(1)(b)(ii) and 37(2)(b)(ii) AA 2005 in the seminal decision in Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 at pp 427 - 430 as quoted below: "[49] The term ‘public policy’ is not defined in the AA 2005. However, the term appears in three different sections, namely of ss 4, 37 and 39 of the AA 2005. As commonly used, the term ‘public policy’ signifies some matter which concerns public good and public interest. It is a fundamental principle of justice in substantive and procedural aspects. … [52] The term ‘public policy’ as appears in s 37(1)(b)(ii) of the AA 2005 covers a scope of ‘public policy’ elements as used generally. However, in s 37(2)(b)(ii) the scope is more specific. It specifically categorises a breach of the rules of natural justice which occurred in connection with the making of an award as being in conflict with the public policy of Malaysia. S/N re8ByzNMg0K3ije8u6KoAA [53] The decision of the Singapore Court of Appeal in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR 597, provides a good guidance on the interpretation of the term ‘public policy’ in an application to set aside an arbitral award made by a tribunal, on the ground of a breach of the rule of natural justice for being in conflict with the public policy. In that case Chan Sek Keong CJ (delivering the judgment of the court) ruled: Although the concept of public policy of the State is not defined in the Act or the Model Law, the general consensus of judicial and expert opinion is that public policy under the Act encompasses a narrow scope. In our view, it should only operate in instances where the upholding of an arbitral award would ‘shock the conscience’ (see Downer Connect (58) at (136), or is ‘clearly injurious to the public good or … wholly offensive to the ordinary reasonable and fully informed member of the public’ (see Deutsche Schachbau v Shell International Petroleum Co Ltd [1987] 2 Lloyds Rep 246 at 254, per Sir John Donaldson MR), or where it violates the forum’s most basic notion of morality and justice: see Parsons &Whittemore Overseas Co Inc v. Societe Generalede L’Industrie du Papier (RAKTA) 508 F 2d 969 (second Cir, 1974) at 974. S/N re8ByzNMg0K3ije8u6KoAA [54] In a recent case of Sigur Ros Sdn Bhd v Master Mulia Sdn Bhd [2018] 3 MLJ 608; [2018] 3 MLRA 219, the Court of Appeal held, inter alia, that a breach of the rules of natural justice that occurred in an arbitral proceedings which has a real and substantial impact on the outcome of the arbitration and the eventual award rendered, is plainly said to be in conflict with the public policy of Malaysia. [55] Section 37(2)(b)(ii) of the AA 2005 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) of the AA 2005. 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 of the AA 2005, 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 S/N re8ByzNMg0K3ije8u6KoAA 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’. [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 of the AA 2005, 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). [57] The court must evaluate the nature and impact of the particular breach in deciding whether the award should be set aside under s 37. The court must also consider the background policy of encouraging arbitral finality and minimalist intervention approach to be adopted in line with the spirit of UNCITRAL Model Law. The effect of ss 8, 9, 37 and 42 of the AA 2005 is that the court should be slow in interfering with or setting aside an S/N re8ByzNMg0K3ije8u6KoAA arbitral award. The court must always be reminded that constant interference of arbitral award will defeat the spirit of the AA 2005 which for all intent and purposes, is to promote one-stop adjudication in line with the international practice (see: Ajwa For Food Industries Co (MIGOP), Egypt v Pacific Inter-Link Sdn Bhd & another appeal [2011] MLJU 1537; [2013] 2 CLJ 395; Taman Bandar Baru Masai Sdn Bhd v Dindings Corporations Sdn Bhd [2009] MLJU 793; [2010] 5 CLJ 83; and Lesotho Highlands Development Authority v Impregilo SpA and others [2005] UKHL 43). In this regard, the court needs to recognise the autonomy of the arbitral process by encouraging finality; and its advantage as an efficient alternative dispute resolution process should not be undermined. [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 S/N re8ByzNMg0K3ije8u6KoAA 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: 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)." S/N re8ByzNMg0K3ije8u6KoAA (emphasis added; see too, para 43 of the judgment in Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198 at pp 232 and 233 where the Federal Court shed light on the guiding principles on the exercise of residual discretion when an application for setting aside an award is grounded on breach of natural justice). [55] The aforesaid guiding principles were applied by this Court in M101 Entity Sdn Bhd v Geopancar Sdn Bhd and another case [2022] MLJU 1354; Propel Synergy Sdn Bhd v Vistasik Sdn Bhd and another case [2022] MLJU 824 (affirmed by the Court of Appeal on 7.11.2022 and motion for leave to appeal to the Federal Court was dismissed on 15.5.2023); and East Coast Economic Region Development Council v. Multi-Spex Architects Sdn Bhd & Another Case [2022] 8 CLJ 103. [56] Further, in Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd [2010] SGHC 80, the Singapore High Court referred to s 48(1)(a)(vii) of the Arbitration Act (Cap 10, 2002 Rev Ed), which is similar to subpara 37(2)(b)(ii) AA 2005, and to a decision by the Singapore Court of Appeal as follows: S/N re8ByzNMg0K3ije8u6KoAA "31 In Pacific Recreation Pte Ltd v SY Technology Inc [2008] 2 SLR(R) 491, the Court of Appeal held that a court or tribunal would be in breach of natural justice if it decided a case on a basis not raised or contemplated by the parties, since the affected party would have been deprived of its opportunity to be heard or to address the issues upon which the case was decided: at [30]. The corollary is plainly also true – that a court or tribunal will be in breach of natural justice if in the course of reaching its decision, it disregarded the submissions and arguments made by the parties on the issues (without considering the merits thereof). Otherwise, the requirement to comply with the maxim audi alteram partem would be hollow and futile, satisfied by the mere formality of allowing a party to say whatever it wanted without the tribunal having to address or even understand and consider whatever had been said." (emphasis added). [57] Proceeding next to an analysis of the issues raised in the instant case, firstly, the question as to whether the assessment of quantum for Claim 1 was listed as MMHE's principal issue or otherwise can be swiftly dealt with. In my view, the answer is in the affirmative because the assessment of quantum for Claim 1 would fall within the umbrella S/N re8ByzNMg0K3ije8u6KoAA of Issues 6 and 7 under "Quantum" in MMHE’s List of Principal Issues (see para 33 above) i.e. "6) If yes, what damages is KPOC entitled to seek from MMHE?" and "7) Has KPOC proven its case in respect of its loss?". [58] In any event, in Part G on "Alleged Loss and Damage" in the SoD, MMHE had clearly put KPOC to strict proof of the alleged loss and damage and stated that KPOC has no entitlement to its claims and that the value of the alleged loss and damage is exorbitant, disproportionate and without any basis. KPOC’s alleged loss and damage was said to be almost 7.5 times the combined value of the Purchase Orders. [59] Furthermore, both parties have addressed the issue in the arbitration proceedings (see item 4, p 7 in the Scott Schedule prepared by the learned counsels for the hearing in this Court (encl. 124) where references are made to the parties' respective Opening Statements in paras 140 - 174 and 396 - 430, encl. 106; Main Submissions in paras 173 - 225 and 586 - 733, encl. 81; and Reply Submissions in paras 34 - 71 and 7(19), (20), 144 - 149, 170 - 177, encl. 75). S/N re8ByzNMg0K3ije8u6KoAA [60] Secondly, on the issue as to whether the Tribunal has dealt with the essential issues surrounding the quantification of Claim 1 and provided its findings and reasonings, a scrutiny of the Award reveals that para 133, pp 108 - 122 consists of lengthy quotations from KPOC's Opening Statement and Reply Submissions while para 134, p 123 refers to MMHE’s objections to Claim 1 (see para 48 above). [61] In para 135, p 123 of the Award, the Tribunal said: "As the Tribunal is satisfied that the first objection is devoid of merit for reasons to be set out under its findings, the Tribunal proposes to only set out below, Counsel’s submissions on the second and third objections. Counsel’s principal submissions on the second and third objections as set out in the Respondent’s Counsel’s Closing and Reply Submissions and in the same numbered paragraphs as therein, are as follows: …". [62] The reasons given by the Tribunal in rejecting MMHE's first objection can be found in para 138, p 132 of the Award as re-produced below: S/N re8ByzNMg0K3ije8u6KoAA "138. Following the Tribunal's earlier ruling that the Claimant has discharged the burden of proving that the manual valves were not manufactured by OMB, it must follow that unless the Respondent tendered positive evidence of the delivery of the 341 valves to the Claimant, the Tribunal is obliged to reject the claim of the Respondent, that it did in fact deliver 341 valves to the Claimant. The fact that the Mikuni did purchase 341 valves from OMB and represented to OMB that these valves were intended for the Kebabangan Project, does not mean that these valves were indeed delivered to the Claimant, in the face of the discrepancies in the contents of the DO dated 23.11.2012 and the PO No.17222- Revised. The Respondent having opted to not lead any positive evidence to explain these discrepancies, the Tribunal rejects the objection based on the first ground.". [63] It is observed that there is a numbering error in the Award as there is no para 136. Instead, after para 135, the Award continues with para 137 where the Tribunal quoted excerpts from MMHE's Closing Submission relating to the deficiency in the computation arising from it being based on Note to File. S/N re8ByzNMg0K3ije8u6KoAA [64] The Tribunal addressed MMHE's second and third objections in the following paras at pp 132 - 134 of the Award: "139. The basis for the Respondent’s second and third objections in law are primarily based on the pronouncements of the Federal Court in the case of Popular Industries Limited v Eastern Garment Manufacturing Sdn. Bhd, where the court said: "It is axiomatic that a plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages upon proof of the contravention of a right." [Emphasis added]."

The Tribunal is not persuaded to dismiss the Claimant’s claim for the first head of damage based on the pronouncements of the Federal Court in Popular Industries simply because the law of damages has developed since that decision in 1989. The fact of the matter is that, courts of law, are now confronted with instances where the gathering of precise evidence may be either difficult to come by or obtaining precise S/N re8ByzNMg0K3ije8u6KoAA evidence may only serve to increase the damages suffered by the victim of the breach, without the certainty of the victim being able to recover the additional costs of securing the more precise evidence. For instance, on the facts of this case, the Respondent has not led any evidence to suggest that the replacement of the allocation methodology and the File to Note by another methodology, would have resulted in a substantial reduction of the damages. The thrust of the submission of the Respondent is essentially, that, the absence of records of the hours actually spent and basing the quantum of loss on a pre-prepared Note to File and not the hours actually spent, renders the evidence of the losses suffered, to lack the necessary precision to meet the burden of proof pronounced in Popular Industries. The Tribunal is satisfied that the test is no longer one that demands certainty but more, whether the methodology adopted by the Claimant is a reasonable one as pronounced by the Malaysian Federal Court in the case of Pancaran Prima Sdn. Bhd v Iswarabena Sdn. Bhd (2020)9 CLJ 123. The Court in that case adopted the pronouncement of Bowen L.J in the decision of the House of Lords in Radcliffe v Evans where His Lordship said and I quote: S/N re8ByzNMg0K3ije8u6KoAA "In all actions accordingly on the case where the damage actually done is the gist of the action, the character of the acts themselves which produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularly with which damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry."

In concluding that the Claimant has satisfied the “reasonable test” in proving the losses suffered by it, the Tribunal is also satisfied that in cases involving the replacement of valves, some of which are underwater, as is the case here, more innovative methodology may be adopted by the victim of breach to prove its losses, so long as the methodology adopted is a reasonable one. For the record, the Tribunal sets out below paragraph 319 of the Claimant’s Closing submission in S/N re8ByzNMg0K3ije8u6KoAA Reply, which, in the Tribunal’s view accords with the current law in Malaysia for proving damages in cases of this nature. "319. The New Zealand Court of Appeal case of Newbrook v.Marshall [2002] 2 NZLR 606 [See: CBA 3, Tab 7] would also be relevant to the present case. The Court held that in cases where variables are involved, if precise figures had to be proved few plaintiffs would succeed. Where it is established that a particular factor was causative but its precise contribution to the loss could not be correctly calculated in precise dollar terms, a more robust approach is required of the Courts which in many cases demands a rough and ready approach to the facts. In support of this, the Court referred to the case of Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 where the Court held that "the assessment of damages often involves so many unquantifiable contingencies and unverifiable assumptions that in many cases realism demands a rough and ready approach to the facts". The Privy Council judgment in Tai Hing Cotton Mill v. Kamsing Knitting Factory [1979] AC 91 was also cited which concluded that S/N re8ByzNMg0K3ije8u6KoAA "the ends of justice would be best served if they [Their Lordships] were to fix a new figure of damages as best they can upon the available evidence, such as it is."." [65] Following from the above-mentioned reasonings, the Tribunal was satisfied that the methodology employed by KPOC to determine the quantum of its losses is reasonable and proceeded to award KPOC's claim for RM17,241,178,02 in full. [66] Mr. T. Kuhendran vehemently submitted for KPOC that the Tribunal has dealt with the essential issues surrounding the quantification of Claim 1. However, the Court, upon scrutinising the affidavit evidence and lengthy and detailed submissions by the parties, is of the view that MMHE's attempt to set aside the Award on the ground that the Tribunal has failed to consider and to make a finding in the Award on the arguments raised by MMHE with regards to the quantification of Claim 1 is well-founded. My reasons for this determination are elaborated below. S/N re8ByzNMg0K3ije8u6KoAA [67] In MMHE's Additional Affidavit (encl. 130), the letter dated 3.7.2020 from KPOC's solicitors to the Tribunal attaching the "Agreed List of Issues Requiring Expert's Opinions" was exhibited. This "Agreed List of Issues" consists of KPOC's and MMHE's liability issues and quantum issues. The parties' quantum issues are as follows: "3. Claimant's Quantum Issues a) Whether the costs claimed by the Claimant in connection with the valves replaced and to be replaced are fair and reasonable; b) Whether the loss of revenue claimed is fair and reasonable;

Respondent's Quantum Issues a) An assessment of the costs that KPOC claims to have incurred and/or will incur relating to the replacement of the Cost-Plus Valves, including in respect of the reasonableness of the quantum. b) An assessment of KPOC's loss of revenue relating to "planned facilities shutdown to replace the Valves during shutdown / turn-around in 2017.". S/N re8ByzNMg0K3ije8u6KoAA Reasonableness of the quantum of KPOC's Claim 1 was clearly agreed as one of the issues on which the views of the experts were to be obtained. Further, in the cover letter, the parties communicated to the Tribunal, among others, that: "3. …

However, parties agree that they will instruct their respective expert witnesses to consider and opine on matters listed in both parties' list requiring expert evidence submitted to the Tribunal on 6.3.2020, whether as part of the main report, joint statement, or the rebuttal report, as the case may be.

The aforesaid agreement does not, however, amount to acceptance that the issues identified by the other party as relevant or material to the outcome of these arbitration proceedings.". S/N re8ByzNMg0K3ije8u6KoAA [68] In conformity with the statement in subpara 3(b) of the cover letter, JS- 1 was prepared. In the part on "INTRODUCTION" in JS-1, it was explained that: "…

The Joint Statement is issued pursuant to paragraphs 11.3 and 11.4 of Procedural Timetable and Procedural Order No. 2 pursuant to Article No. 17 of the AIAC Arbitration Rules 2018.

This Joint Statement sets out the agreements and/or disagreements between the Experts on matters of quantum from the following reports:

PB's Report dated 25 October 2020 ("PB 1");

CEH's WS ("CEH WS") together with Report on Quantum Assessment ("CEH-1”) and Report on Observations ("CEH-2") dated 26 October 2020; …

The objective of this Joint Statement is to narrow down differences between the Experts to assist the Tribunal S/N re8ByzNMg0K3ije8u6KoAA in dealing with only the issues of disagreement during cross examination.

In the time available for this Joint Report after exchange of expert reports and tele-communication discussion held between the Experts and their assistants, the Experts have been unable to complete their review on narrowing the differences on the figures for all the claims. Therefore, this Joint Report is partially complete. The Experts will however continue to discuss matters with a view to narrowing any differences up to the hearing. …". [69] In para 244(a) of KPOC’s Closing Submissions in the arbitration proceedings, KPOC sought an award for at least the sum assessed by its quantum expert, CEH. The different assessments put forth by KPOC and the parties' experts were presented in a table ('Said Table') which is re-produced below: S/N re8ByzNMg0K3ije8u6KoAA KPOC PB CEH 1a - Costs for assessment on the MMHE supplied valves (Oct 2016 - May 2017) 549,300 133,052 226,761 1b - Procurement / replacement of 187 valves during TAR 2017 10,188,325 7,596,511 8,291,910 Procurement 2,161,896 1,531,140 1,531,140 3rd party services 8,026,429 6,065,371 6,760,770

Claimant’s employees’ pay for employees involved in 2017 valve replacement 5,433,680 1,048,777 4,693,232 1d. Travel expense reimbursements (TER) for Claimant’s employees for valve assessment (Oct 2016 - May 2017) and for valves replacement in 2017 203,074 30,298 64,508 1e. Procurement of 117 866,798 394,637 886,244 S/N re8ByzNMg0K3ije8u6KoAA valves in 2018 and replacement of 8 and 20 valves in 2018 and 2019 Total 17,241,178 9,203,275 14,162,655 (see too, Mr. T. Kuhendran's presentation slides for the Tribunal at pp 7715 - 7792, particularly at pp 7764 - 7784, encl. 67 where references are made to the opinion of the respective parties' expert). [70] Based on the Said Table, it is apparent that KPOC’s own expert witness assessed KPOC's claim, at the highest, at the sum of RM14,162,655.00. Nevertheless, the Tribunal saw it fit to award the entire sum as claimed by KPOC i.e. RM17,241,178.00. [71] Had the Tribunal considered the different evaluations by KPOC and the parties' experts, there would have been a discussion on these matters, including the assessments by each expert, JS-1 and the submissions by the parties, in the Award. However, this is noticeably absent in the Award. S/N re8ByzNMg0K3ije8u6KoAA [72] As submitted by Mr. K. Mohanadass in this Court, KPOC’s own expert witness was of the view that some elements of Claim 1 cannot be attributed to MMHE, not because of methodology, but based on evaluation of the evidence on the assessment and quantification of Claim 1 and KPOC’s ability to prove the same. Some examples were mentioned in the learned counsel's Written Submissions (see para 122(1) - (5), pp 45 - 47, encl. 69) whereby with reference to Claim 1b - Procurement/ replacement of 187 valves during TAR in 2017, it was contended, –

for valve procurement costs, that "… KPOC claims RM2,161,896.00 as its costs. However, both expert witnesses in the Joint Statement agree that the cost of procurement for manual valves ought to be at the amount of RM1,713,552.00. There is no need to apply any methodology to compute this claim as KPOC seeks 100% of the costs. … KPOC, during the oral clarification, was at pains to emphasise to the Tribunal that some of its claims forming part of Claim 1 "is not affected by the allocation percentages" i.e., that it should be awarded even if the S/N re8ByzNMg0K3ije8u6KoAA Tribunal is not in favour of the methodology advanced by KPOC. This is because these claims are "procurement" costs. …”; and

for other third-party services, that "… KPOC claims 19.35% from approximately RM41,480,253.23 i.e., the amount that KPOC says it had incurred in engaging third party services. However, both expert witnesses in the Joint Statement, upon reviewing the supporting documentation, agreed that out of the total 19 vendors, the invoiced amount (prior to allocation based on methodology) for 17 of those vendors shall be assessed at the amount of RM37,074,750.00. There was no agreement reached in respect of the other 2 vendors but the disagreed amount (at the highest) was only RM486,489.58; thus, the total invoiced amount as assessed by the expert witnesses (prior to allocation based on methodology) remained well below KPOC's computation of RM41,480,253.23.". [73] With regards to subpara 122(5) of the Written Submissions in the arbitration as quoted above, MMHE's counsel further explained the S/N re8ByzNMg0K3ije8u6KoAA term "shared costs" in his presentation slides at the hearing of the Setting Aside Application in these words: “ • KPOC replaced certain units of KPOC-Mikuni Valves as well as the Cost-Plus Valves at the same time. i.e., during the same period. KPOC also carried out maintenance activities. • Certain costs incurred during the period were shared costs and thus, must be properly allocated. • KPOC derived the allocation % based on manhours projections • KPOC says 19.35% of the shared costs ought to be allotted to Cost-Plus Valves = MMHE. • KPOC's expert witnesses assessed the allocation at 18.32%. • MMHE's expert witnesses assessed the allocation at 16.04%. • Not all costs were shared costs. For example, the costs to procure replacement valves were claimed in full by KPOC. • Thus, to assess Claim 1: (1) there is a need to assess KPOC's methodology i.e., the allocation approach; (2) if acceptable, determine the applicable %; (3) apply the % to shared costs; and (4) assess costs that were not S/N re8ByzNMg0K3ije8u6KoAA subject to allocation. i.e., standalone costs (not shared costs).". [74] Further, as can be seen in the Said Table, both parties' experts arrived at the same assessment for procurement in the amount of RM1,531,140.00. Mr. T. Kuhendran, in submitting for KPOC, adverted to this fact during the oral clarification before the Tribunal and said that "This item, the procurement, is not affected by the allocation percentages. It is only this item, the 8 million, 6 million and 6.7, which is affected by the allocation percentage." [see The Notes of Proceedings for Day 10 of the arbitration on 14.4.2021 at p 892 of the same (encl. 75)]. However, no explanation or justification was forthcoming from the Tribunal as to why they rejected this amount in favor of RM2,161,896.00 as claimed by KPOC. [75] In the arbitration, the parties were at pains to appoint their experts, who thereafter produced JS-1, and to also make submissions on the experts' opinions. It is fair to say that there is a legitimate expectation that the Tribunal would consider the contents of the experts' reports S/N re8ByzNMg0K3ije8u6KoAA and JS-1, and the parties' submissions on these documents in arriving at a decision on the quantum for Claim 1. [76] In its submissions before this Court, MMHE acknowledged that the Tribunal is not required to accept the position advanced by either expert. However, and with great respect to the Tribunal, having found that the methodology was acceptable, the Tribunal needed to go further to apply the methodology or to consider other relevant issues to properly assess and determine Claim 1. It is fair to expect that the Tribunal would discuss each sub-claim under Claim 1, which is based on its own set of evidence, supporting documents and computation, and provide a reasoned decision as to why KPOC’s approach was favoured over that of the expert witnesses. The Tribunal's conclusion at para 142 of the Award is, regrettably, not sufficient in assessing and quantifying Claim 1. [77] In this respect, MMHE is not wrong in relying on the decision of this Court in Johawaki Development Sdn Bhd v. Majlis Agama Islam Wilayah Persekutuan & Another Case [2020] 1 LNS 528 (the decision was affirmed by the Court of Appeal on 17.3.2023) in drawing a parallel S/N re8ByzNMg0K3ije8u6KoAA scenario of the arbitral tribunal making an award for actual loss at a sum much higher than that as stated in the counterclaim without providing any reasons. [78] In addition, the Tribunal's approach in respect of Claim 1 may be compared to the methodology it adopted with regards to Claim 2. In respect of Claim 2, the Tribunal did not consider KPOC's quantification at all and instead, had relied on the views and assessments by the expert witnesses. The divergent approach adopted by the Tribunal lends credence to MMHE's challenge against the Award on the issue of assessment of quantum for Claim 1. [79] Applying the legal principles in the cases of high authority as alluded to previously, it is my considered view that the Tribunal is in breach of the rules of natural justice in connection with the making of the Award as the Tribunal had, regretfully, in the course of reaching its decision, disregarded the opinion of the parties' experts and the submissions made by the parties on the issues in respect of each of the sub-claim under Claim 1. S/N re8ByzNMg0K3ije8u6KoAA [80] This breach is indeed serious because, had the Tribunal considered and made known its findings on each of the sub-claim, it may well be that the Tribunal would not have awarded the full amount as claimed by KPOC, despite accepting the methodology advanced by KPOC. There is no doubt in my mind that the breach of the rules of natural justice in this case is significant and has a real impact on the outcome of the arbitral proceedings. [81] Further, as per the test laid down in Jan De Nul (supra), MMHE has established that this is a deserving case for the Award to be set aside on the ground of it being in conflict with the public policy of Malaysia as the most basic notions of morality and justice was violated. Upholding the Award in the circumstances of this case would be injurious to the public good or wholly offensive to the ordinary reasonable and fully informed member of the public in the light of the failure of the Tribunal to fully address the submissions of the parties in relation to each of the sub-claim under Claim 1 and to justify the quantum awarded in the sum as claimed by KPOC and the rejection of the assessment made by PB and CEH. S/N re8ByzNMg0K3ije8u6KoAA

The Issue of Burden – waiver, acquiescence and estoppel - The Parties’ Submissions [82] At the arbitration, MMHE argued that KPOC's case is hoisted by its reliance on evidence sourced from OMB and even if the Tribunal takes the view that there is sufficient basis to shift the evidential burden to MMHE, on balance, MMHE has not acted in breach of its contractual obligations because of –

de minimis;

MMHE’s true obligations under the Contract;

reliance on Clause 15, Part 2 of the Contract on the provision of guarantees;

waiver;

acquiescence; and S/N re8ByzNMg0K3ije8u6KoAA

estoppel (see paras 423 - 478 of MMHE's Closing Submissions. KPOC's response can be seen in paras 279 - 309 of its Closing Submissions In Reply). [83] In relation to the 2nd Issue on "Whether the valves supplied by the respondent were manufactured by OMB", the Tribunal concluded that: “101. … the Respondent, in breach of the Contract, delivered valves to the Claimant which were not in accordance with the Contract, in that, they were not manufactured by OMB, and is consequently liable in damages to the Claimant, unless the claim is defeated by the defences of De Minimis and/or terms of the guarantee or barred by limitation.” (emphasis added). [84] MMHE averred that the Tribunal had obviously considered only two, instead of six of MMHE's pleaded defences to defeat KPOC’s claim. Therefore, no findings and conclusions were made by the Tribunal in S/N re8ByzNMg0K3ije8u6KoAA the Award in respect of the remaining four pleaded defences and this, again, renders the Award to be in conflict with the public policy of Malaysia where a breach of the rules of natural justice occurred in connection with the making of the Award. [85] To counter MMHE's contentions, KPOC basically raised the same arguments as it did for 1st Ground: (a), namely, that waiver, acquiescence and estoppel ('Three Issues') were not MMHE’s principal issues, and the Tribunal had considered the Three Issues. In amplification of the latter, –

KPOC relied heavily on para 74 of the Award where the Tribunal is said to have addressed the Three Issues when it considered MMHE’s contention that, having accepted the valves, it was now too late in the day for KPOC to allege a breach of contract. Further the findings that MMHE was in breach, despite MMHE raising the Three Issues, shows that the Tribunal rejected those arguments. S/N re8ByzNMg0K3ije8u6KoAA For ease of reference, para 74 of the Award is re-produced below: "74. On the first issue, the thrust of the Respondent’s defence is essentially two-fold. First, in the absence of any mention of OMB in the Contract and any representation by the Respondent that the valves were manufactured by OMB, there is no basis to impute an obligation in contract upon the Respondent to deliver valves from OMB. Secondly, the supply and delivery of both sets of valves were preceded by a lengthy procurement process and the Claimant has never alleged that it was prevented from ascertaining the true origins of the valves during this process. Indeed, in the words of Counsel for the Respondent, since “all parties proceeded on the basis that the Cost-Plus Valves were OMB branded”, it is now too late in the day for the Claimant to allege breach of contract, particularly since no defects have been detected in the valves apart from the claim that they are not from OMB." (emphasis added). S/N re8ByzNMg0K3ije8u6KoAA

KPOC submitted that MMHE's criticism of where the Tribunal addressed the Three Issues in the Award, i.e. under the 1st Issue in para 74 of the Award instead of para 101 is flawed as the Tribunal is entitled to reshuffle the way in which different concepts have been combined and should have reasonable latitude in drawing its own conclusions from the material presented;

it is a matter of inference rather than of explicit indication that an arbitrator has wholly missed one or more important pleaded issues. In this regard, MMHE failed to establish that it is clear and virtually inescapable that the Tribunal failed to consider the Three

KPOC asserted that MMHE has not shown materiality of the breach and how it would have resulted in a different outcome. Prejudice is still a relevant consideration. S/N re8ByzNMg0K3ije8u6KoAA - Findings of the Court [86] In a nutshell, MMHE in paras 312 - 314 of its Opening Statement in the arbitration posited –

on "Waiver" that, KPOC had waived shortcomings, if any, in terms of the performance of the works by way of accepting the Valves and the issuance of the CoC, save in respect of any continuing obligations. The continuing obligations in respect of, amongst others, fit for intended purpose, are no longer alive beyond the guarantee period;

on "Acquiescence" that, KPOC had accepted any shortcomings and/ or deviations from the Contract during the course of the Contract. Aside from acceptance of the Valves and issuance of the CoC, KPOC did not raise any Non-Conformance Report, and had full knowledge of the process and activities. KPOC can no longer seek to assert its strict contractual rights, if any; and S/N re8ByzNMg0K3ije8u6KoAA

on "Estoppel" that, KPOC, having led MMHE to believe that it had waived and/ or accepted these matters, cannot blow hot and cold. It would be unconscionable for KPOC to do so. KPOC had accepted the Valves, put the Cost-Plus Valves to use for many years and in KPOC’s own case, continues to benefit commercially from the Cost-Plus Valves. The case authorities cited in support of this proposition were Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331 and Q2 Engineering Sdn Bhd v PJI-LFGC (Vietnam) Ltd & Ors [2013] 8 MLJ 157. [87] The analysis on whether the Three Issues formed MMHE’s principal issues in the arbitration proceedings was conducted in the same manner as for 1st Ground: (a), and with the same outcome. [88] The Three Issues fall to be considered under Issue 3 on "Liability" in MMHE’s List of Principal Issues i.e. "Is MMHE in breach?". [89] Furthermore, the Three Issues were raised in the pleadings and submissions at the arbitration (see item 1, p 4 in the Scott Schedule S/N re8ByzNMg0K3ije8u6KoAA (encl. 124) where references are made to paras 35, 36(6)(f) and (g), 36(11), 36(12), 41, 42, 44, 45, 46 and 48 -54 of the SoD, encl. 105; paras 23, 24, 27, 32, 33, 34 - 40 of the SoR, encl. 105; the parties' Opening Statements in paras 310 - 315 and 90 - 104, encl. 106; Main Submissions in paras 99 - 122 and 423 - 478, encl. 81; and Reply Submissions in paras 279 - 309 and 106 - 111, encl. 75). [90] Notably, in its Opening Statement, MMHE has made it clear that to its understanding, KPOC's cause of action is essentially premised on allegations of breach of contract and that the burden of proof, on balance, lies on KPOC. If KPOC satisfactorily discharges this burden, the evidential burden then shifts to MMHE. The Three Issues are MMHE's response in the event the Tribunal finds that the burden has shifted to MMHE. The Three Issues were not pleaded as defences to be considered as part of the issue on whether KPOC has discharged the burden of proof. [91] All paras in the Award which were cited by KPOC as showing that the Tribunal had considered the Three Issues precedes para 101 of the Award, i.e., the para where the Tribunal recognised that KPOC has S/N re8ByzNMg0K3ije8u6KoAA established its burden and acknowledged only two of the six defences raised by MMHE as defences that may defeat the burden. [92] Whilst it is accepted that the Tribunal is at liberty to arrange its analysis of the issues and the parties' submissions as it sees fit, however, MMHE's complaint is not on the "re-shuffling" of the matters placed before the Tribunal for determination, but rather the absence of any findings and conclusions on the Three Issues which would include consideration of, inter alia, the following questions as posed by MMHE:

"The true effect of the issuance of COC, including whether the COC amounts to a representation by KPOC that they are satisfied with the completion of the Works and they are now estopped in law from contending otherwise, including in placing reliance on Clause 2.6, Part 2 of the Contract?";

"Whether KPOC had waived shortcomings, if any, in terms of the performance of the Works by way of accepting the Valves and the issuance of the COC, save in respect of any continuing obligations."; and S/N re8ByzNMg0K3ije8u6KoAA

"Whether KPOC had accepted any shortcomings and/or deviations from the KBB Contract during the course of the Contract by, amongst others, making payment and accepting the Valves? Whether KPOC is estopped from asserting otherwise.". [93] The failure by the Tribunal to deal with the Three Issues constitutes a serious breach of the rules of natural justice in connection with the making of the Award and is material to the outcome of the arbitration because, had the Tribunal considered the Three Issues, the Tribunal may have found that KPOC, by virtue of its conduct, had waived any shortcomings in the performance of the works by accepting the Valves and by issuing the CoC and thus, is estopped from contending otherwise. It is possible that the Tribunal would not have awarded the claims in KPOC’s favor. S/N re8ByzNMg0K3ije8u6KoAA

Whether KPOC had mitigated its loss - The Parties’ Submissions [94] MMHE's counsel cited the judgments of the apex court in Guan Soon Tin Mining Co v Wong Fook Kum [1969] 1 MLJ 99, Kabatasan Timber Extraction Co v Chong Fah Shing [1969] 2 MLJ 6 and Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd [1994] 3 MLJ 569 to support the proposition that a party who fails to mitigate his loss disentitles himself to any damages. In this regard, the issue as to whether a party had acted reasonably and what is reasonable in every case is a question of fact. [95] MMHE averred that the issue on whether KPOC had mitigated its loss was pleaded and addressed by both parties in the arbitration. However, the Tribunal did not consider KPOC's duty to mitigate at all and failed to make any findings in respect of the same as part of the award for Claim 1 and Claim 2. S/N re8ByzNMg0K3ije8u6KoAA [96] KPOC retaliated that the Tribunal had dealt with the issue of mitigation in the Award. Specifically, the Tribunal is said to have considered mitigation in para 133 of the Award when discussing Claim 1 and in para 143 of the Award when discussing Claim 2. The Tribunal additionally recognised that mitigation was raised in para 38 of the Award when discussing Claim 3. - The Findings of the Court [97] A scrutiny of the pleadings clearly shows that mitigation was pleaded and submitted upon at the arbitration. [98] In responding to the particulars of the loss and damage allegedly suffered by KPOC, MMHE pleaded in the SoD, among others, that: "68. Further, there is no contention, or information, in the Claim that would indicate that KPOC did take any mitigation measures to reduce or minimise any losses that it allegedly incurred from the above alleged S/N re8ByzNMg0K3ije8u6KoAA breaches. KPOC is accordingly put to strict proof of any mitigation measures that it undertook.". [99] KPOC retorted in its SoR that: "49. … the Claimant will contend that it has satisfied its duty to mitigate. This included prioritizing the replacement of valves based on safety and criticality of the valves.". (see too, item 2, p 5 in the Scott Schedule (encl. 124) where references are also made to the parties' Opening Statements in paras 128 - 139 and 445 - 454, encl. 106; Main Submissions in paras 142 - 145 and 822 - 825, encl. 81; and Reply Submissions in paras 530 - 533 and 134 - 138, encl. 75). [100] Mr. T. Kuhendran submitted for KPOC that the following paras in the Award is proof that the Tribunal had considered the matter on mitigation of damages:

Para 38 of the Award at pp 11 - 12: S/N re8ByzNMg0K3ije8u6KoAA "The Tribunal delivered the following oral decision on the Application to Introduce Additional Documents on 15.12.2020: … "The Tribunal understands that the application to introduce new documents involves some 37 documents. According to Counsel for the Claimant 33 of the documents are confined to mitigation issues. The Tribunal grants leave to the Claimant to introduce these 33 documents in evidence conditional to their use being confined to mitigation issues only. The Tribunal grants the consequential order permitting the Respondent to introduce any new documents in its possession deemed necessary to rebut these 33 documents provided such use is limited to mitigation only. …".". The above quoted para of the Award appears under the section on "Procedural History" of the arbitration. In my opinion, this para S/N re8ByzNMg0K3ije8u6KoAA serves as a record that the Tribunal had made an oral order on 15.12.202 on KPOC's application to introduce additional documents and it shows that the Tribunal was cognizant of the fact that the parties had submitted on the mitigation related issues.

Paras 117 and 132 of the Award at pp 87 and 108: "117. The claim for loss of revenue relates to the loss of gas revenue suffered during TAR 2017 when all production ceased from the KBB facilities. As the Claimant needs to satisfy the Tribunal of its entitlement to this head of damage, as a matter of law, before recourse can be had to the facts, the Tribunal proposes to deal with the third category of the Claimant’s claim for damages, i.e, for loss of revenue, first. In other words, the Tribunal will not deal with the factual and expert evidence of the respective parties on this issue, unless the Tribunal concludes that the Claimant is entitled to this head of damage, in the first instance. … S/N re8ByzNMg0K3ije8u6KoAA

The Claimant’s claim for the sum of RM28,030,905.80 under item (iii) by way of loss of revenue is disallowed.". Basically, this part of the Award sets out the Tribunal's approach to KPOC's claim for loss of revenue, namely to consider KPOC's entitlement to the same as a matter of law, and the conclusion in not allowing the claim on the ground that KPOC cannot in law recover damages for the loss of revenue suffered by the PSC Contractors on their behalf (see the discussion in paras 123 - 131, pp 103 - 108 of the Award). In the light of this approach and the ultimate findings, the Tribunal did not need to consider any issue on mitigation of damages at all.

Para 133 of the Award at pp 108 - 122: "133. The submission of Counsel for the Claimant for this head of damages, as they appear in Counsel’s Opening Statement and Reply submissions and in the same numbered paragraphs therein are as follows: S/N re8ByzNMg0K3ije8u6KoAA …". This para of the Award is obviously a reproduction of selected paras from KPOC's Opening Statement and Reply Submissions, which do not deal with mitigation. No reference was made by the Tribunal to the parts in the parties' pleadings, Opening Statements and submissions which did touch on the issue of mitigation of damages.

Para 144 of the Award at pp 139 - 145: "144. The submission of Counsel for the Respondent refuting the Claimant’s entitlement for the future valve Replacement claim, as set out in the same numbered paragraphs in the Respondent’s Counsel’s Closing and Reply submissions are as follows: …". This para is again a reproduction of the submissions before the Tribunal, this time it is MMHE's Closing Submissions and Reply S/N re8ByzNMg0K3ije8u6KoAA Submissions. The parts cited from these submissions also do not deal with mitigation whereas MMHE had a specific sub-heading on the issue of mitigation in both of its submissions as quoted below: Closing Submissions: "O. Did KPOC mitigate its loss?

Although KPOC accepts that it does have a duty to mitigate, KPOC also says, at the same time, the burden of proof lies with MMHE, both to plead and to prove facts demonstrating that KPOC has failed to take reasonable steps to mitigate its loss.

That MMHE has been able to do so, on balance, cannot be seriously disputed. The position is straight forward.

MMHE's case in this regard has been articulated in section 445-455 of MMHE's Opening Statement. KPOC has not responded to the same, and no evidence elicited at the Hearing may improve KPOC's position. S/N re8ByzNMg0K3ije8u6KoAA

In short, KPOC has failed to mitigate its loss.". Reply Submissions: "I. Specific points raised by KPOC I (a) Mitigation (p.39, KPOC's Submissions)

See paragraphs 445-455 of MMHE's Opening Statement as well as Section O of MMHE's Submissions.

All the evidence available in this Arbitration points to the following: (1) KPOC appears to have accepted OMB's position at face value and did not bother to ascertain or interrogate the position; (2) despite both experts having agreed that risk based approach is most suitable in assessing and carrying out the replacement exercise, KPOC has only produced (and appears to have relied on) an initial assessment in the form of the Risk Assessment Document produced in 2016; (3) no subsequent risk assessment was carried out in 2017, 2018, 2019, or 2020; (4) KPOC appears to S/N re8ByzNMg0K3ije8u6KoAA have rushed to replaced certain Valves in 2017 - despite there being no evidence that there is a need to replace the Valves within a specific time frame; and (5) the evidence demonstrates that KPOC's decision to rush to replace the Valves have caused it to incur additional costs.

Pertinently, there is nothing in the Risk Assessment Document that suggests the Valves must be replaced. The Document stipulates a number of mitigation strategies. In particular, KPOC's own Document provides as follows in the Conclusion section: "Based on the risk assessment on the manual valves with unknown manufacturing quality, it was concluded that operations and gas export can continue safely offshore as long as the mitigation strategy defined in the risk assessment is followed. This mitigation strategy consists of the following elements: 1) Prevention: limit operating pressures in gas export system, limitation on pressurization after certain blowdown S/N re8ByzNMg0K3ije8u6KoAA scenarios and a lower limit on operating temperature during well start-up as per Platform Instruction 36. 2) Detection and barrication: a monitoring program has been set up to check for leaks on valves and barricade and monitor existing leaks to make sure the leak has not exceeded the safe threshold. 3) Isolation: valve isolation plan has been identified for each valve in the risk assessment to isolate the valve from the process and where applicable a plan to continue production with the valve isolated." (emphasis added)

KPOC has not shown that these mitigation strategies could not have been in place long term and that it was necessary to proceed to replace the Valves as KPOC had done.

It follows that there is no evidence in this Arbitration that KPOV had mitigated its loss, at all.". S/N re8ByzNMg0K3ije8u6KoAA

Paras 145 and 146 of the Award at pp 145 and 146: "145. The first and second objections to the Claimant’s claim for the second head of damages are that, in law, the Claimant is not entitled to purchase and install new valves since losses computed on the basis of reinstatement are unreasonable. Secondly, that there is no evidence of any intention on the part of the Claimant to reinstate, in any event. The Tribunal rejects the first objection since what constitutes the aggrieved party’s loss is in every case a question of fact depending on the extent of the damage. The Tribunal adopts, as applicable to the facts of this case, the pronouncements of L J. Jauncey, in the case of Ruxley that “where the contract breaker has entirely failed to achieve the contractual objective it may not be difficult to conclude that the loss is the necessary cost of achieving that objective. Thus, if a building is constructed so defectively that it is of no use for its designed purpose the owner may have little difficulty in establishing that his loss is the necessary cost of reconstructing” (see page 275, para d-e). The fact of the matter is that, the Respondent has failed to S/N re8ByzNMg0K3ije8u6KoAA perform the contract entirely and this is not just a case of the valves not meeting specifications but a case, where the valves were from an altogether unknown source.

As regards the absence of any evidence proffered of the Claimant’s intention to install the valves in the future, the Tribunal adopts the pronouncements of LJ Jauncey, in the case of Ruxley “However, I should emphasize that in the normal case the court has no concern with the use to which the Plaintiff puts an award of damages for a loss which has been established. Thus, irreparable damage to an article as a result of a breach of contract will entitle the owner to recover the value of the article irrespective of whether he intends to replace it with a similar one or to spend the money on something else” as the basis to dismiss this objection. For the same reasons, the Tribunal’s view is that the Respondent is not entitled to any reduction in the damages by reason of the valves having been put to use for a period of 6 years. Accordingly, in the view of the Tribunal the future purchase and installation of the remaining valves is reasonable on the facts of this case.". S/N re8ByzNMg0K3ije8u6KoAA The above cited paras contain the Tribunal’s decision in respect of Claim 2, under the heading “FINDINGS OF THE TRIBUNAL ON THE SECOND HEAD OF DAMAGES”. They do not address the issue of mitigation. Evidently, there is no consideration and determination on, among others, whether KPOC had prioritised the replacement of valves based on safety and criticality of the valves as pleaded in para 49 of the SoR. [101] Based on the foregoing, it can be concluded that the Tribunal's discussion, analysis, findings and conclusions on the issue of mitigation as submitted by the parties can nowhere be found in the Award. [102] Although this Court is in agreement with MMHE's contention that the parts of the Opening Statements and submissions which were expressly referred to by the Tribunal in the Award are not related to the issue of mitigation, nevertheless even assuming that any of the quoted parts do make such reference, MMHE has aptly drawn the attention of the Court to cases such as Som Datt Builders Ltd v. State S/N re8ByzNMg0K3ije8u6KoAA of Kerala [2009] INSC 1600, Indian Oil Corporation vs Indian Carbon Ltd 1988 AIR 1340 and Tanjung Langsat Port Sdn Bhd v. Trafigura Pte Ltd & another case [2016] 4 CLJ 927 for the proposition that reproduction of certain paras from the parties’ submissions is not sufficient and cannot in any way be elevated as a finding or determination on the part of the arbitral tribunal. Reasons must be given, and these must deal with the substantial points that have been raised. As was held by the Supreme Court of India in Som Datt Builders (supra): “25. The requirement of reasons in support of the award under Section 31(3) is not an empty formality. It guarantees fair and legitimate consideration of the controversy by the arbitral tribunal. It is true that arbitral tribunal is not expected to write judgment like a court nor it is expected to give elaborate and detailed reasons in support of its finding/s but mere noticing the submissions of the parties or reference to documents is no substitute for reasons which the arbitral tribunal is obliged to give. Howsoever brief these may be, reasons must be indicated in the award as that would reflect thought process leading to a particular conclusion. To satisfy the requirement S/N re8ByzNMg0K3ije8u6KoAA of Section 31(3), the reasons must be stated by the arbitral tribunal upon which the award is based; want of reasons would make such award legally flawed.” (emphasis added). [103] KPOC's counsel argued that even if the Award is bereft of reasons, that is not necessarily fatal. What is important is to consider whether the contents of the Award, taken as a whole, inform the parties of the basis on which the Tribunal reached its decision on the essential issues. [104] With respect, the present situation is akin to the earlier grounds on quantification of Claim 1 and the issue of burden, where try as one may and even taking the Award in its entirety or at its highest, the stark reality is that the Tribunal's assessment of the parties' pleaded positions and submissions is non-existent. [105] With regards to the issue as to whether the burden lies on KPOC or MMHE to demonstrate mitigation, it is for the Tribunal to pronounce its decision as to which party bears the burden of proof and whether that S/N re8ByzNMg0K3ije8u6KoAA party has successfully discharged the burden or otherwise. This determination is, once again, notably lacking. [106] Finally, and in closing on this matter, this Court agrees with MMHE's submission that the breach of the rules of natural justice by not addressing the issue of mitigation is serious and material to the outcome of the arbitration. This is because, the acceptance of MMHE's arguments on mitigation may well have resulted in a reduction of the quantum of the Award or a finding that, by virtue of its conduct, KPOC had disentitled itself to any substantial damages. 2nd Ground: Whether the arbitral procedure was not in accordance with the agreement of the parties pursuant to subpara 37(1)(a)(vi) AA 2005 in that the Tribunal failed or neglected to make a finding, provide reasons and/ or make a reasoned award in respect of Claim 1 [107] According to MMHE, the agreed arbitral procedure includes Article 34(3) of the UNCITRAL Arbitration Rules adopted as part of the AIAC S/N re8ByzNMg0K3ije8u6KoAA Arbitration Rules 2018 and sub-s 33(3) of the AA 2005 whereby the Tribunal is under a duty to give a reasoned award. [108] Article 34(3) of the UNCITRAL Arbitration Rules on “Form and effect of the award" provides that "The arbitral tribunal shall state the reasons upon which the award is based, unless the parties have agreed that no reasons are to be given.”. [109] Sub-s 33(3) of the AA 2005 reads as follows: “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/N re8ByzNMg0K3ije8u6KoAA (see too, the rationale for reasons in an award and the cases which have discussed on the meaning of "reasons for award" in UNCITRAL Model Law & Arbitration Rules: The Arbitration Act 2005 (Amended 2011 & 2018) and the AIAC Arbitration Rules 2018, Sweet & Maxwell, 2019 by Datuk Professor Sundra Rajoo & Special Contributor Dr. Thomas R. Klötzel at pp 485 - 489). [110] MMHE contended that the Tribunal breached is duty to give a reasoned award in respect of Claim 1 for the reasons as put forth in relation to the 1st Ground: (a). KPOC similarly reiterated its submissions on the 1st Ground: (a). [111] The Court was persuaded by MMHE's submissions that the Tribunal failed or neglected to make a finding and to make a reasoned award in respect of Claim 1 for the same reasons as explained for the 1st Ground: (a). S/N re8ByzNMg0K3ije8u6KoAA II. The Enforcement Application [112] The Enforcement Application was filed by KPOC pursuant to s 38 of the AA 2005. For present purposes, the relevant provisions are sub-ss

and (2) which read as follows: “Recognition and Enforcement

(1) 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 recognized as binding and be enforced by entry as a judgment in terms of the award or by action.

In an application under subsection (1) the applicant shall produce –

the duly authenticated original award or a duly certified copy of the award; and

the original arbitration agreement or a duly certified copy of the agreement.”. S/N re8ByzNMg0K3ije8u6KoAA [113] Under subpara 39(1)(a)(vii) AA 2005, one of the grounds for refusing recognition or enforcement of the award is that the award has been set aside by a court of the country in which, or under the law of which, that award was made. [114] In the light of the decision of this Court that there is merit in the Setting Aside Application, it necessarily follows that KPOC’s Enforcement Application must be dismissed. Pronouncement [115] In conclusion, MMHE has successfully established that –

the Award is in conflict with the public policy of Malaysia in that a breach of the rules of natural justice occurred in connection with the making of the Award pursuant to subparas 37(1)(b)(ii) and 37(2)(b)(ii) AA 2005 when the Tribunal failed to consider and make a finding on MMHE’s arguments on the quantification of Claim 1; burden, namely, as to the submissions regarding S/N re8ByzNMg0K3ije8u6KoAA waiver, acquiescence and estoppel; and whether KPOC had mitigated its loss; and

the arbitral procedure was not in accordance with the agreement of the parties pursuant to subpara 37(1)(a)(vi) AA 2005 as the Tribunal failed to make a reasoned award in respect of Claim 1. These findings justify the setting aside of the Award in its entirety and are sufficient to dispose of the Setting Aside Application without the need for the Court to make a determination on the other grounds relied upon by MMHE in the Setting Aside Application. [116] Based on all the aforesaid reasons, MMHE’s Setting Aside Application in O.S. No. WA-24C(ARB)-52-09/2021 was allowed with costs. The Award was set aside in full and KPOC’s Enforcement Application in O.S. No. WA-24C(ARB)-51-09/2021 was dismissed with costs. [117] On the issue of costs, Mr. K. Mohanadass prayed for RM50,000.00 for the Setting Aside Application and RM10,000.00 for the Enforcement Application. This was countered by Mr. T. Kuhendran who submitted S/N re8ByzNMg0K3ije8u6KoAA that costs of RM25,000 for the Setting Aside Application and RM5,000 for the Enforcement Application are appropriate. [118] After giving due consideration to the amount of costs as submitted by the parties and to all relevant circumstances (see O. 59, r. 16 Rules of Court 2012), the Court awarded costs of RM30,000.00 and RM10,000.00 for the Setting Aside Application and Enforcement Application, respectively, subject to allocatur. Dated: 28 August 2023 (ALIZA SULAIMAN) Judge Construction Court 2 High Court Kuala Lumpur S/N re8ByzNMg0K3ije8u6KoAA Counsels/ Solicitors: For the Plaintiff in O.S No. WA-24C(ARB)-51-09/2021 and the Defendant in O.S. No. WA-24C(ARB)-52-09/2021: Kuhendran Thanapalasingam (Michael Koh and J. Agesh with him) Messrs. Zul Rafique & Partners Advocates & Solicitors D3-3-8, Solaris Dutamas No. 1 Jalan Dutamas 1 50480 Kuala Lumpur For the Plaintiff in O.S. No. WA-24C(ARB)-52-09/2021 and the Defendant in O.S. No. WA-24C(ARB)-51-09/2021: Mohanadass Kanagasabai (Kalashini Sandrasegaran and Thomas Shaun Mathews with him) Messrs. Mohanadass Partnership Advocates & Solicitors B-21-8, The Vertical, Avenue 3 Bangsar South City No. 8, Jalan Kerinchi 59200 Kuala Lumpur S/N re8ByzNMg0K3ije8u6KoAA Cases and legislation referred to in the submissions by learned counsels and in the Grounds of Judgment: Cases: Ahmani Sdn Bhd v Petronas Penapisan (Melaka) Sdn Bhd [2015] 11 MLJ 32 AKN and another v ALC and others and other appeals [2015] 3 SLR 488 Allianz General Insurance Company (Malaysia) Bhd v. Virginia Surety Company Labuan Branch [2020] 5 CLJ 345 AUF v AUG and other matters [2015] SGHC 305; [2016] 1 SLR 859 BZV v BZW and another [2021] SGHC 60; [2022] 3 SLR 447 BZW and another v BZV [2022] SGCA 1 Calibre M&E Sdn Bhd v. PT Cooline Hvac Engineering & Another Case [2019] 1 LNS 1012 CBX and another v CBZ and others [2021] SGCA(I) 3 CDM and another v CDP [2021] SGCA 45 S/N re8ByzNMg0K3ije8u6KoAA CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305 Datuk Haji Zainal Abidin Ahmad & Ors v. Sarawak Plantation Agriculture Development Sdn Bhd [2015] 1 LNS 1495 Dr Koay Cheng Boon v Majlis Perubatan Malaysia [2012] 3 MLJ 173 Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd [2010] SGHC 80 Garden Bay Sdn Bhd v Sime Darby Property Bhd [2018] 2 MLJ 636 Garden Bay Sdn Bhd v. Sime Darby Property Bhd [2021] 3 CLJ 751 General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 2 All ER 173 Genisys Intergrated Engineers Pte Ltd v UEM Genisys Sdn Bhd & Ors [2008] 6 MLJ 237 The Government of India v Cairn Energy India Pty Ltd & Ors [2014] 9 MLJ 149 Government of Malaysia v. Syarikat Ismail Ibrahim Sdn Bhd & Ors [2020] 1 LNS 40 S/N re8ByzNMg0K3ije8u6KoAA Green Prospect Sdn Bhd v King Ong Development Sdn Bhd [2018] 6 MLJ 739 Guan Soon Tin Mining Co v Wong Fook Kum [1969] 1 MLJ 99 Hindustan Oil Exploration Company Limited v. Hardy Exploration & Production (India) Inc [2022] 1 LNS 637 Hitachi Zosen Robin Dockyard (Pte) Ltd v Lee Pui Keng & Anor [1988] 2 MLJ 473 Hodgson v Creation Consumer Finance Ltd [2021] EWHC 2167 (Comm) Indian Oil Corporation vs Indian Carbon Ltd 1988 AIR 1340 Intraline Resources Sdn Bhd v. Exxonmobil Exploration and Production Malaysia Inc [2017] 1 LNS 1022 Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 Jan De Nul (Malaysia) Sdn Bhd & Anor v. Vincent Tan Chee Yioun & Anor & Other Cases [2016] 1 LNS 1234 Jitweer Singh a/l Ojagar Singh v Public Prosecutor [2016] 4 MLJ 525 S/N re8ByzNMg0K3ije8u6KoAA Johara Bi Binte Abdul Kadir Marican v Lawrence Lam Kwok Fou & Anor [1981] 1 MLJ 139 Johawaki Development Sdn Bhd v. Majlis Agama Islam Wilayah Persekutuan & Another Case [2020] 1 LNS 528 JY Creative Sdn Bhd v MEACS Construction Sdn Bhd and another case [2022] MLJU 941 Kabatasan Timber Extraction Co v Chong Fah Shing [1969] 2 MLJ 6 Kelana Erat Sdn Bhd v Niche Properties Sdn Bhd and another application [2012] 5 MLJ 809 Kerajaan Malaysia v. Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617; [2015] 6 MLJ 126 Letchumanan Chettiar Alagappan @ L Allagappan (as executor to SL Alameloo Achi alias Sona Lena Alamelo Acho, deceased) & Anor v Secure Plantation Sdn Bhd [2017] 4 MLJ 697 Majuikan Sdn Bhd v Barclays Bank Plc [2015] 1 MLJ 171 Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd [1994] 3 MLJ 569 S/N re8ByzNMg0K3ije8u6KoAA Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198; [2020] 9 CLJ 213 MMC Engineering Group Bhd & Anor v. Wayss & Freytag (Malaysia) Sdn Bhd & Anor [2015] 1 LNS 705 Newbrook v Marshall [2002] 2 NZLR 606 Ngati Hurungaterangi v Ngati Wahiao [2017] NZCA 429 Ngati Wahiao v Ngati Hurungaterangi & Ors [2017] NZSC 200 OAO Northern Shipping Company v Remolcadores De Marin Sl, “Remmar” [2007] 2 Lloyd’s Rep 302 Pancaran Prima Sdn Bhd v. Iswarabena Sdn Bhd & Another Appeal [2020] 9 CLJ 466 Pancaran Prima Sdn Bhd v lswarabena Sdn Bhd and another appeal [2021] 1 MLJ 1 Perwira Bintang Holdings Sdn Bhd v Keraiaan Malaysia [2014] 11 MLJ 561 Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd [2016] 2 MLJ 697 S/N re8ByzNMg0K3ije8u6KoAA Popular Industries Limited v Eastern Garment Manufacturing Sdn Bhd [1989] 3 MLJ 360 Propel Synergy Sdn Bhd v Vistasik Sdn Bhd and another case [2022] MLJU 824 Satin Straits Sdn Bhd v Seng San Bing [2020] 8 MLJ 553 Segi Astana Sdn Bhd & Anor v Malaysia Airports Holdings Bhd and another case [2022] 7 MLJ 91 Sigur Ros Sdn Bhd v. Master Mulia Sdn Bhd [2018] 8 CLJ 291 SJIC Bina Sdn Bhd v. Iskandar Regional Development Authority [2020] 1 LNS 2213 Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86 Som Datt Builders Ltd v. State of Kerala [2009] INSC 1600 Sunway Creative Stones Sdn Bhd v. Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd & another case [2020] 1 LNS 529 Syarikat Kemajuan Timbermine Sdn Bhd v Kerajaan Negeri Kelantan Darul Naim [2015] 3 MLJ 609 S/N re8ByzNMg0K3ije8u6KoAA Syarikat Pembinaan Binaken v. Perbadanan Pembangunan Bandar [2001] 3 CLJ 601 Tanjung Langsat Port Sdn Bhd v. Trafigura Pte Ltd & Another case [2016] 4 CLJ 927 Tekun Nasional v Plenitude Drive (M) Sdn Bhd and another appeal [2021] 6 MLJ 619 Thai-Lao Lignite Co Ltd & Anor v Government of The Lao People’s Democratic Republic [2017] MLJU 1196 The Government Of India v. Cairn Energy India Pty Ltd & Anor [2012] 3 CLJ 423 TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 Tokio Marine Insurans (M) Berhad v. WCT Construction Sdn Bhd [2021] 1 LNS 483 Tong Aik (Far East) Ltd v Eastern Minerals & Trading (1959) Ltd [1963] 1 MLJ 322 UDA Land Sdn Bhd v. Puncak Sepakat Sdn Bhd [2020] 1 LNS 877 S/N re8ByzNMg0K3ije8u6KoAA Wong Chong Chow v Pan-Malaysian Cement Works Bhd [1980] 2 MLJ 75 Z v Y [2018] HKCFI 2342 Legislation: Arbitration Act 2005, ss 8, 20, 33, 35, 37, 38 & 39 AIAC Arbitration Rules 2018 Civil Law Act 1956, s 11 Rules of Court 2012, O. 59 r. 16 & O. Other sources: Datuk Professor Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second Edition), Lexis Nexis, 2017 Datuk Professor Sundra Rajoo & Special Contributor Dr. Thomas R. Klötzel, UNCITRAL Model Law & Arbitration Rules: The Arbitration Act 2005 (Amended 2011 & 2018) and the AIAC Arbitration Rules 2018, Sweet & Maxwell, 2019 S/N re8ByzNMg0K3ije8u6KoAA Halsbury’s Laws of Malaysia – Civil Procedure (Volume 7(1) and 7(2)) Nigel Blackaby & Constantine Partasides with Alan Redfern & Martin Hunter, Redfern and Hunter on International Arbitration, Sixth Edition, Oxford University Press, 2015 S/N re8ByzNMg0K3ije8u6KoAA