The arbitral tribunal shall, in all cases, decide in accordance with the terms of the agreement and shall take into account the usages of the trade applicable to the transaction." (emphasis added) [17] It cannot be gainsaid that our Courts have consistently held under the repealed Arbitration Act 1952 that section 11 of the Civil Law Act 1956 empowers an arbitral tribunal to grant pre-award interest, being the governing substantive law where Arbitration is concerned. The Court of Appeal in Leong Kum Whay v QBE Insurance (M) Sdn Bhd [2006] 1 CLJ 1 confirmed that an Arbitrator has the power to award pre-award interest: “[32] In the first place it is well settled that an arbitrator, in the absence of a specific clause in the agreement, has power to award interest (see Lian Hup Manufacturing Co Sdn Bhd v Unitata Bhd [1994] 2 MLJ 51; Executive Engineer v DN Senapati AIR 1980 Orissa 74)..." 14 [18] It may also be argued that just as under the repealed Arbitration Act 1952, the present Arbitration Act 2005 does not prohibit the award of pre-award interest. Hence in the absence of any specific prohibition under the Act and the contract, an arbitral tribunal, deriving its powers from the contractual submission to it, must necessarily have the implied power to award interest. The arbitral tribunal derives its power to adjudicate a dispute not from the Arbitration Act 2005 but from the arbitration agreement of the parties. [19] Such is the position in England in the English Court of Appeal in Chandris v Isbrandtsen-Moller Co Inc [1950] 2 All ER 618 where one of the questions before the Court of Appeal was whether or not interest could be awarded by an Arbitrator on the amount awarded for demurrage. The English Court of Appeal underscored the fact that an Arbitrator's power to award interest was derived from the submission to him which clothed him with the power to decide "all matters in difference" according to the existing law of contract, exercising every right and discretionary remedy given to a court of law: i.e. s 3 of the Law Reform (Miscellaneous Provisions) Act 1934 (our s 11 of the Civil Law Act 1956). Indeed there is a sense of déjà vu as one considers the arguments raised by learned counsel there. His 15 Lordship Tucker LJ in the English Court of Appeal case held at pp 621- 623 as follows: "The argument for the claimant is that just as in 1851 the arbitrator derived his power to give interest directly, not from the Act of 1833, but from a submission to him of all matters in dispute, so, now, in 1950, the arbitrator does not derive his jurisdiction to give interest from the Act of 1934, but from the submission to him of the disputes, which involves that he has to deal with those disputes according to the law of the land and that he is clothed with authority to give to the claimant such rights and remedies as would have been available to him in a court of law having jurisdiction to deal with the same subject-matter. Counsel submits that, applying the reasoning of Sir John Jervis CJ in Edwards v Great Western Ry Co to the statute of 1934, in which we find a court of record substituted for a jury, the same result should follow, viz that, by reason of the submission, the arbitrator has been clothed with authority to deal with this matter in the same way as that in which it could have been dealt with by a court of record. The argument for the charterers is that one must now look only at s 3(1) of the Act of 1934 to determine what the powers of the arbitrator are, and that that sub-section in terms merely gives a 16 discretionary power to courts of record with regard to any proceedings tried in such a court. The Act of 1934, it is urged, is silent regarding arbitrations, and, therefore, it must be taken to have been intended that its provisions should not apply to arbitrations. Counsel drew our attention to the fact that in the Arbitration Act, 1934, which had been passed two months earlier, there was a special provision under s 11 providing for interest to be allowed on awards. That section provides: “A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt.” Counsel further points out that the Arbitration Act, 1934, makes no provision for the awarding of interest by the arbitrator as distinct from the interest given under s 11, which only runs from the date of the award. Furthermore, says counsel, the policy of the legislature in this matter can be ascertained by seeing what has been done in subsequent Acts, and he quotes the Evidence Act, 1938, the Limitation Act, 1939, the Law Reform (Frustrated Contracts) Act, 1943, and the Law Reform (Contributory Negligence) Act, 1945, in all 17 of which special provision has been made in terms, including the case of arbitrations, and, says counsel, that shows that the legislature, when it intends to give powers to an arbitrator, does so in terms. With regard to that argument, I do not think it is strictly permissible to interpret a statute by reference to what has been done in subsequent statutes, but, however that may be, I think the history of this matter shows that up till 1938, or thereabouts, there had been a considerable difference of judicial opinion as to the power of an arbitrator in the absence of express provision to deal with certain defences which are expressly available as answers to actions, and the position with regard to those matters was dealt with by the House of Lords in Naamlooze Vennootschap Handels-en-Transport Maatschappij “Vulcaan” v A/S J Ludwig Mowinckels Rederi. There, Lord Maugham LC said ([1938] 2 All ER 155): “The matter does not rest there, because we have to consider how far the suggested elimination of defences available at law or in equity must logically be held to extend in other arbitrations. If the party defending may not rely on the Statute of Limitations, 18 can he rely on the Statute of Frauds, or the Act partially replacing it? Could he rely in a commercial arbitration on the Gaming Act? A number of like questions might be asked. It is true, and this is the main point on which the appellants rely, that the Limitation Act, 1623, s. 3, was in terms limited to actions. It may be noted that no such statute passed before the Real Property Limitation Act, 1833, expressly bound courts of equity. There is, however, no doubt that long before the Judicature Act, 1873, where a court of equity had to adjudicate on the validity of a debt in a suit to administer an estate, or in any like suit, it held itself bound to apply the statutes of limitations in precisely the same way as if there were an action at law to recover the debt … It is indisputable that, in modern arbitration, the principles of equity must be applied just as they would now be applied in a court of law, since upon a Special Case for the opinion of the court under s. 7 of the Arbitration Act or the Judicature Act, 1925, s. 94 (replacing s. 19 of the Arbitration Act), the court is, and has long been, bound to apply equitable rules and relief. It is difficult to see how the equitable view of the applicability of the Limitation Act, 1623, to a case of debt can be 19 excluded in a legal arbitration … The authorities on the question as to whether the statutes of limitation are available in an arbitration have been carefully considered by my noble and learned friend LORD WRIGHT, presiding in the Court of Appeal, and it is not necessary to repeat them. The hesitation or the doubts expressed by SCRUTTON, L.J., in Board of Trade v. Cayzer, Irvine & Co. appear to be mainly directed against the laying down of an absolute and general rule applicable in all kinds of arbitration. At least, that is how I understand them, and, if I may say so with all respect, to that extent I agree with them. The remarks of VISCOUNT CAVE, L.C., in the same case, when the matter came before this House, certainly tend to show that, in his view, in commercial arbitrations an arbitrator is bound to give effect to all legal defences, including a defence under any statute of limitation. On a careful consideration of all the cases, I am content to say that I agree with what was said by LORD SALVESEN, delivering the judgment of the Board in Ramdutt Ramkissendass v. E. D. Sassoon & Co... In that case the Indian Limitation Act 1908 (the relevant period being three years), was 20 taken for practical purposes to be the same as the Limitation Act, 1623, and LORD SALVESEN observed: 'Although the Limitation Act does not in terms apply to arbitrations, they [their Lordships of the Judicial Committee] think that in mercantile references of the kind in question it is an implied term of the contract that the arbitrator must decide the dispute according to the existing law of contract, and that every defence which would have been open in a court of law can be equally proponed for the arbitrator's decision unless the parties have agreed - which is not suggested here - to exclude that defence. Were it otherwise, a claim for breach of a contract containing a reference clause could be brought at any time, it might be twenty or thirty years after the cause of action had arisen … '” Counsel for the charterers says that a distinction is to be drawn between statutes which bar a remedy, such as the statutes of limitation, the Statute of Frauds, 1977, the Sale of Goods Act, 1893, and so forth, to all of which statutes an arbitrator is bound to give effect notwithstanding they afford defences to actions, and statutes which confer rights, and that in the latter cases the right so conferred is not to be extended beyond the plain words of the enacting statute. 21 I cannot see why any distinction should be drawn between the duty of an arbitrator to give effect to such statutes as the Statute of Limitations and his jurisdiction in his discretion to award of interest is only a part of the damages recoverable, and, adapting to the facts of this case the language of Lord Salvesen in the case to which I have just referred—language which was approved by Lord Maugham—it would read as follows: “Although the Law Reform (Miscellaneous Provisions) Act, 1934, does not in terms apply to arbitrations, I think that in mercantile references of the kind in question it is an implied term of the contract that the arbitrator must decide the dispute according to the existing law of contract, and that every right and discretionary remedy given to a court of law can be exercised by him.” To that there are certain well-known exceptions, such as the right to grant an injunction, which stand on a different footing. One of the reasons why an arbitrator cannot give an injunction is that he has no power to enforce it, but such an objection does not apply to an award of interest. This matter was dealt with fully by Lord Goddard CJ in delivering judgment of the court in the Podar case. He dealt with the power to 22 give interest at common law and under the Civil Procedure Act, 1833, and he then proceeded to say ([1949] 2 All ER 67): “The case which would seem to be directly in point is Edwards v. Great Western Ry. Co... In that case the court approved of the allowance of interest by an arbitrator because it was allowable in the circumstances of that case by the provisions of the Civil Procedure Act, 1833. Accordingly, we think we must take it to be the law that before the Law Reform (Miscellaneous Provisions) Act, 1934, an arbitrator had the same powers as the court with regard to the award of interest, but no greater power.” The Lord Chief Justice then goes on to deal with the Law Reform (Miscellaneous Provisions) Act, 1934, and he says (ibid): “Moreover, as s. 28 and s. 29 of the Civil Procedure Act are repealed, we feel driven to hold that not only have arbitrators no power to give interest on damages, but they have been deprived of the powers which they had so long as the sections of the Civil Procedure Act were in force and can now only give it in circumstances in which it was recoverable at common law.” 23 Counsel for the charterers argued that that judgment was based on the assumption that it was the Civil Procedure Act, 1833, which gave the arbitrator his power to award interest, and that, once that Act was repealed, all such powers had gone, and, unless the arbitrator had been given fresh powers, he had none. I think, however, that the real basis of Edwards v Great Western Ry Co was that the arbitrator derived his powers, not from the Act of 1833, but from the submission to him which necessarily gave him the “implied powers” referred to in the language of Lord Salvesen which I have just quoted, and I see no reason why, since the Act of 1934, an arbitrator should not be deemed impliedly to have the same powers. Therefore, with diffidence, having regard to the view expressed by the Divisional Court on this matter, I have come to the conclusion that in such a case as the present the arbitrator has power to award interest, and, accordingly, to that extent, I think this appeal should succeed and the Podar case (Podar Trading Co Ltd, Bombay v Fracois Tagher, Barcelona [1942] 2 All ER 62) be overruled." (emphasis added) 24 [20] The Chandris reasoning was applied in the Malaysian context in Lian Hup Manufacturing Co Sdn Bhd v Unitata Bhd [1994] 2 MLJ 51, at page 54, where it was held: “According to Chandris case, the power of an arbitrator to award interest was derived from the submission to him which impliedly gave him power to decide all matters of difference according to existing law of contract, exercising every right and discretionary remedy given to a court of law. The court decided that the arbitrator had the power to award interest. In the present case, the parties have agreed in the arbitration clause in the contract … that the construction, validity and performance be governed by Malaysian law. Under s. 11 of the Civil Law Act 1956, the court has the discretionary power to award interest for the recovery of any debt or damages. See Evergrip Prestressing Sdn Bd v Ken Construction & Trading Sdn Bhd. In my view, the arbitrator in the present case has the same power as that of the court to award interest at such rate as he thinks fit. Since it was within the discretionary power of the arbitrator to award interest in this 25 case, the court would not interfere with the exercise of his discretionary power.” (emphasis added) [21] The same conclusion on the power of an Arbitrator to grant pre-award interest was reached by Faiza Tamby Chik J in Raja Lope & Tan Co v Malayan Flour Mills Bhd [2000] 6 MLJ 228, p. 238-239 and Raus Sharif J (as the PCA then was) in Shamelin Holdings Sdn Bhd v Mohd Anhar bin Ahmad (trading as ABA Architect) [2006] 6 MLJ 135, p 140-141 and as stated in the Court of Appeal In Leong Kum Whay v QBE Insurance (M) Sdn Bhd & Ors [2006] 1 MLJ 710. [22] The position in Singapore is exemplified by the case of Ahong Construction (S) Pte Ltd v United Boulevard Pte Ltd [1995] 1 SLR 548 (p. 556 to 557), where Lai Kew Chai J. held as follows: “With regard to the specific exercise of awarding interest in arbitration, it is the law that generally interest should be awarded on a successful claim. An arbitrator who awards a sum of money but fails to award interest to compensate the successful claimant accordingly has prima facie misconducted himself in the technical sense of the word: Panchaud Freres SA v Pagnan and 26 Fratelli [1974] 1 Lloyd’ at p 394. Lord Denning MR (as he then was) said: “[i]n a commercial transaction if the plaintiff has been out of his money for a period, the usual order is that the defendant should pay interest for the time for which the sum has been outstanding. No exception should be made except for a good reason. An arbitrator may decline to award any interest or award interest at a lower rate or for a shorter period but he must have reasonable grounds for doing so and he should set out these reasonable grounds in his award.” (emphasis added) [23] In the event that an Arbitration under the Arbitration Act 2005 is such that the arbitral tribunal does not have the power to award pre-award interest, Malaysia would be out of sync with other countries that apply the UNCITRAL Model Law, and more so with respect to International Arbitration. As stated in the Explanatory Note to the Arbitration Bill 2005, one of the avowed aims of the legislation is to encourage international uniformity in the Arbitration regime under the UNCITRAL Model Law dated 21 June 1985. [24] Jurisdictions in England, Australia, India and Singapore allow an arbitral tribunal to award pre-award interest as they have understood that 27 the arbitral tribunal derives its powers not from the Arbitration legislation but from the submission to the tribunal which clothed the tribunal with the implied powers to award interest. It follows that if the particular Arbitration statute is not the source of the Arbitral tribunal's power to award interest, then it does not quite matter if the Arbitration statute is silent on pre-award interest for so long as it does not prohibit the award of pre-award interest. The award of pre-award interest would also fall within "usages of the trade applicable to the transaction" as envisages under section 30(5) of the Arbitration Act 2005. The attractiveness of having Malaysia as the seat of Arbitration would also be adversely affected if there can be no award of pre-award interest in a dispute that comes before it for Arbitration. [25] It may also be argued that Parliament is presumed to know the law at any time it exercises its legislative authority upon a subject as was highlighted by the Court of Appeal in Luggage Distributors (M) Sdn Bhd v Tan Hor Teng [1995] 1 MLJ 719 at 754. It is a very persuasive argument that Parliament is presumed to have known the law relating to an arbitral tribunal's power and its jurisdiction to grant pre-award interest when enacting the Arbitration Act 2005. As a corollary, a statute is not to be taken as effecting a fundamental alteration in the general law unless it uses words that point unmistakably to that conclusion. Such was the principle 28 laid down by the Federal Court in Malayan Banking Bhd v Chairman of Sarawak Hisuing Developers' Association [2014] 5 MLJ 169 at p 178: "[23] If the Act wishes to take away that right, words must be used that point unmistakably to that conclusion (National Assistance Board v Wilkinson [1952] 2 QB 648). Devlin J in clear terms said: It is a well-established principle of construction that a statute is not to be taken to effecting a fundamental alteration in the general law unless it uses words that point unmistakably to that conclusion...it is another principle of statutory interpretation that the court leans against an interpretation which produces unjust and arbitrary consequences." (emphasis added) [26] S. 33(6) of the Arbitration Act 2005 merely spells out the arbitral tribunal's power to grant post-award interest and its discretion in determining the rate. It says nothing on pre-award interest and it must have intended not to effect any fundamental alteration of that general law that an Arbitrator has power and jurisdiction to award pre-award interest. Indeed it can be said that s. 33(6) merely seeks to make it clear that an award may include post-award interest unless the Arbitration agreement otherwise 29 provides, unlike the previous position under s. 21 of the Arbitration Act 1952 where it is a case where unless the award otherwise directs, interest shall run from the date of the award at the same rate as a judgment debt. It appears that there is then no justification for concluding that the converse is true in that pre-award interest is prohibited merely because section 33(6) of the Arbitration Act 2005 is silent on it when it speaks clearly of when post award interest may be made. [27] However for the time being, the position of the law on pre-award interest is as declared by the Court of Appeal in the Far East Holdings' (supra) case. Irrespective of my personal predilection and preference, the position of the law on pre-award interest as may be awarded by an Arbitrator is as propounded authoritatively by the Court of Appeal in the Far East Holdings' case (supra). To put it pointedly and plainly, an Arbitrator has no jurisdiction to award pre-award interest but only post-award interest if provided for in the arbitration agreement. [28] The law will have the opportunity to develop as the cases from which the principle is derived, go through to the apex Court. In the meanwhile, the doctrine of stare decisis or binding precedent, applies to the High Court. 30 [29] Both judicial deference and discipline would demand of a High Court to follow the decision of a Court of Appeal on a point of law already decided. Whilst one may be at liberty to state the persuasive arguments to the contrary, one is not at liberty to disregard an authoritative pronouncement of the law of a court higher up in hierarchy. The following reminder of the Federal Court in Metramac Corp Sdn Bhd (formerly known as Syarikat Teratai KG Sdn Bhd) v Fawziah Holdings Sdn Bhd [2006] 4 MLJ 113 would resonate with all who respect the rules of binding precedent: "[45] ... In order to appreciate the importance of adhering to the doctrine of stare decisis useful references may be made to Cassell & Co Ltd v Broome & Anor [1972] 1 All ER 801 where Lord Hailsham said at p 809: The fact is, and I hope it will never be necessary to say so again, that, in the hierarchical system of courts which exists in this country, it is necessary for each lower tier, including the Court of Appeal, to accept loyally the decisions of the higher tiers. Where decisions manifestly conflict, the decision in Young v Bristol Aeroplane Co Ltd [1944] 2 All ER 293 offers guidance 31 to each tier in matters affecting its own decisions. It does not entitle it to question considered decisions in the upper tiers with the same freedom. Even this House, since it has taken freedom to review its own decisions, will do so cautiously. That this is so is apparent from the terms of the declaration of 1966 itself where Lord Gardiner LC said: Their Lordships regard the use of precedent as an indispensable foundation upon which to decide what is the law and its application to individual cases. It provides at least some degree of certainty upon which individuals can rely in the conduct of their affairs, as well as a basis for orderly development of legal rules." [30] Ever so often, an admonishment along the lines spelt out in Periasamy s/o Sinnappen v Public Prosecutor [1996] 2 MLJ 557 at p 582 has been repeated to rein in respect for the authority of a higher court: "Lastly, the learned appellate judge did not sufficiently address his mind to the decision in Khoo Hi Chiang. We find the cavalier fashion in which he approached the judgment of a five-member bench of the 32 Supreme Court in a case which was an authority binding upon him to be quite appalling. We are convinced that the learned appellate judge ought not to have brushed it aside as he did. We may add that it does not augur well for judicial discipline when a High Court judge treats the decision of the Supreme Court with little or no respect in disobedience to the well-entrenched doctrine of stare decisis. We trust that the occasion will never arise again when we have to remind High Court judges that they are bound by all judgments of this court and of the Federal Court and they must, despite any misgivings a judge may entertain as to the correctness of a particular judgment of either court, apply the law as stated therein." (emphasis added) Pronouncement [31] For the reasons given above, this Court was constrained to vary the Award by setting aside the pre-award interest only pursuant to an application under section 42 of the Arbitration Act 2005 such that interest awarded should run at the rate of 8% per annum from the date of Award 33 i.e. 28 October 2015 to date of realization instead of from 16 May 2012. The rest of the Award is upheld and remains intact. Each party shall bear its own costs. Dated: 9 May 2016. - signed - Y.A. TUAN LEE SWEE SENG Judge Construction Court Kuala Lumpur For the Plaintiff : Neorazlim binti Saidil (Senior Federal Counsel – AG’s Chambers) For the Defendant : Felix Dorairaj (Messrs Dorairaj, Low & Teh) Date of Decision : 14 Mac 2016