Kerajaan Malaysia v 1. ) Syarikat Ismail Ibrahim Sdn Bhd (WA-24C(ARB)-33-11/2016)

SYARIKAT ISMAIL IBRAHIM SDN BHD

GEMA DESA SDN BHD

AMAN SELAMA SDN BHD 2 (COMPANY NO. 93260-D) (Trading under joint venture in the name of “SIGMA CONSORTIUM”) ... PLAINTIFFS AND KERAJAAN MALAYSIA ... DEFENDANT (heard together with) IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR IN THE STATE OF WILAYAH PERSEKUTUAN, MALAYSIA (CIVIL DIVISION) ORIGINATING SUMMONS NO: WA-24C(ARB)-33-11/2016 In the Matter of an arbitration between Sigma Consortium Sdn Bhd and Kerajaan Malaysia And In the Matter of an arbitration infront of Miss Tan Swee Im And 3 In the Matter of award made on 18.8.2016 (referred to as the “Final Award”) And In the Matter of Section 42 of the Arbitration Act 2005 And In the Matter of Order 69 Rules 6 of the Rules of Court 2012 BETWEEN KERAJAAN MALAYSIA ... PLAINTIFF

SYARIKAT ISMAIL IBRAHIM SDN BHD

GEMA DESA SDN BHD

AMAN SELAMA SDN BHD (COMPANY NO. 93260-D) 4 (Trading under joint venture in the Name of “SIGMA CONSORTIUM”) ... DEFENDANTS THE JUDGMENT OF YA LEE SWEE SENG [1] There are 2 Originating Summons that are being heard together. The first in WA-24C(ARB)-32-11/2016 is one where the First Plaintiff is Syarikat Ismail Ibrahim Sdn Bhd. The Second Plaintiff is Gema Desa Sdn Bhd and the Third Plaintiff is Aman Selama Sdn Bhd. The Plaintiffs were trading under an unincorporated joint venture called Sigma Consortium. The Government of Malaysia is the Defendant. [2] In the second Originating Summons WA-24C(ARB)-33-11/2016 the Government of Malaysia is the Plaintiff and the three companies constituting Sigma Consortium are the Defendants. [3] For consistency and to avoid confusion on identities of the parties, the Plaintiffs shall be collectively referred to as the “Claimant” for they were the Claimants in the Arbitration. The Defendant is the Government of Malaysia and shall be referred to as the “Government”. [4] The Claimant had referred 3 questions of law for the Court to decide under a reference under section 42 of the Arbitration Act 2005 (“AA 2005” or “The Act”). The Government, on the other hand, had referred one 5 question of law on the jurisdiction of the Arbitrator to grant pre-Award interest. Project [5] The Project is with respect to a Building Contract under the Conditions of Contract (“COC”) for the Design, Build and Turnkey Project (PWD Form DB/T), collectively called the “Contract” for the Design, Build and Completion of Works for the upgrading of Federal Roadway 76 from Kuala Kangsar to Grik, Perak Darul Ridzuan - Package 2, Lenggong to Sauk. [6] The Claimant entered into the Contract with the Government on 10.12.2001. The Contract was for a fixed Lump Sum Contract for RM235,081,519.72. [7] A dispute arose between the parties and central to the dispute was the variation of the 5 bridges to be designed and built under the Contract to box culvert for 4 of the bridges and rock fill for one of them. [8] The learned Arbitrator, while holding that there was an invalid omission or alteration of the Contract Sum in her Interim Award as to Liability, nevertheless proceeded to dismiss the Claimant’s Claim for the balance Contract Sum not paid of RM8,708,438.24. The learned Arbitrator had also awarded the following to the Claimant in her Final Award dated 18.8.2016 i.e. the sum of RM722,290.43 for the loss and expense in 6 relation to Extension of Time No. 3, the sum of RM3,411,433.47 being the balance sum claimed for the loss and expense in relation to Extension of Time No, 1 and 2, the sum of RM4,279,718.48 being Additional Haulage costs to approved dump site; making a total sum awarded of RM8,413,442.38. [9] The learned Arbitrator also awarded interest in the said sum of RM8,413,442.38 at the rate of 5% per annum from 19.3.2006 to date of realization. The Claimant was also awarded costs of RM768,268.50. Prayers [10] Both parties had filed a separate application each to refer questions of law for the Court to decide under a reference under section 42 AA 2005 with a view to vary the Final Award of the Arbitrator. The Claimant in their Amended Originating Summons had referred 3 questions to this Court for its decision as follows:

Whether the learned Arbitrator had erred by referring to Clause 28 of the Contract and in particular Clause 28.8 when the said Clause 28.8 was not pleaded and was not an issue raised by the Government in their Defence;

Whether the learned Arbitrator had erred when deciding that Clause 28.8 of the Contract is applicable eventhough the Arbitrator had decided that the Variation works to the 5 bridges 7 under Clauses 27.2 and 27.3 are invalid and that Clause 28.8 is not applicable when there is no valid variation effected on the 5 bridges under Clause 27 of the Contract;

Whether the learned Arbitrator erred when she decided in a manner contradicting her Interim Award as to Liability where she had decided that the Variation to the 5 bridges under Clause 27.2 and 27.3 of the Contract is invalid and as such the Contract Sum shall not be adjusted or altered as held in paragraph 112 of the Interim Award and that the Government ought to pay the Claimant for the Works done in the 5 bridges in accordance with the Contract Sum. [11] The question of law referred to Court by the Government was whether the learned Arbitrator has the jurisdiction to grant pre-Award interest. Principles [12] A reference on a question of law is not an appeal against an arbitral award. The High Court in a Section 42 Arbitration Act 2005 Application is not exercising an appellate jurisdiction. Understandably there will be minimal intervention by the Court as has been underscored in several latest appellate decisions in the case of Kerajaan Malaysia v Perwira Bintang 8 Holdings Sdn Bhd [2015] 1 CLJ 617 and in the case of Chain Sycle Sdn Bhd v Kerajaan Malaysia [2016] 1 CLJ 218. [13] The rationale is not difficult to find. Parties incorporated an arbitration agreement into their contracts knowing full well that any matter or dispute arising out of contract shall be referred to the arbitral tribunal agreed upon and the decision of that arbitral tribunal shall be final and binding. They deliberately decided to exclude the Courts from hearing the matter or dispute knowing full well the merits and demerits of Arbitration. The parties get to choose their arbitrator that they can agree and if they cannot, there is the procedure for a third arbitrator to be chosen by the two arbitrators chosen by each one of them. There are of course variations to this procedure and the permutations are there to provide for maximum independence and impartiality, whether perceived or real, to be afforded by the system that places a premium on party autonomy. [14] It is generally accepted that such a system is to be preferred to that of having a court of law decide on the matter or dispute as in the latter the parties have no control, much less say, in who would be hearing their case and whether the Judge hearing the dispute is a specialist knowledgeable in the field of their dispute. There is also the attendant problem of delay in the system of administration of justice in the Courts with the result that parties may have to wait for years to have their cases heard and thereafter to 9 weather through another delay across the various tiers of appeal that might be available. [15] Parties, especially a foreign party to a contract might be more confident of having a choice as to the arbitrator who has the requisite experience and expertise involving the area of the dispute and are more certain of the hearing being concluded much earlier with the element of finality built in. [16] There is also the element of familiarity with the procedure depending on the rules for arbitration that parties may agree and the advantage of confidentiality. [17] Be that as it may, many jurisdictions have allowed very limited grounds for setting aside or varying an arbitral award such as on ground of excess of jurisdiction and also in limited instance, like ours, in the case of domestic arbitration, to allow questions of law to be referred which decision on what is said to be an error of law would substantially affect the rights of the parties. [18] As the High Court does not sit as an Appellate Court, it cannot examine or assess the evidence afresh. In a section 42 AA 2005 application the High Court may only answer a genuine question of law arising from facts as already found by the arbitrator. 10 [19] This minimal intervention approach is consistent with our adoption of the Model Law on International Commercial Arbitration (“Model Law”) by the AA 2005, which can be seen from the provision provided in the Act as follows: a. Section 8 of the AA 2005 (amended in July 2011) reiterates the philosophy behind the said Act of minimal intervention with the proviso “except so provided by this Act” and b. Section 42 (1A) of the AA 2005 (introduced in July 2011) which qualifies intervention on errors of law with reference to the expression “shall dismiss” unless the question of law “substantially affects the rights”. [20] In answering a question of law referred to the Court for its determination under section 42 AA 2005, the Court shall not alter the finding of facts as found by the arbitrator. The High Court in the case of Exceljade Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2013] MLJU 1202 (“The Exceljade”) has adopted the approach in The Baleares [1993] 1 Lloyd’s Rep 215, as follows at pages 227 - 228: “….The arbitrators are the masters of the facts. On an appeal the court must decide any question of law arising from an award on the basis of a full and unqualified acceptance of the findings of facts of the arbitrators. It is irrelevant whether the Court considers those 11 findings of fact to be right or wrong. It also does not matter how obvious a mistake by the arbitrators on issues of fact might be, or what the scale of the financial consequences of the mistake of fact might be. This is, of course, an unsurprising position. After all, the very reason why parties conclude an arbitration agreement is because they do not wish to litigate in the Courts. Parties who submit their disputes to arbitration bind themselves by agreement to honour the arbitrator’s award on the facts. The principle of party autonomy decrees that a Court ought never to question the arbitrators’ findings of fact...” [21] The Court in the case of The Exceljade (supra) has adopted the statement in The Baleares above in considering the application under section 42 of the Act as can be seen below: “38. The caution sounded in The Baleares (above) is pertinent in relation to the approach to be adopted in the consideration of awards by way of a reference of law to the High Court under section 42 of the Arbitration Act 2005. It articulates the non-interventionist approach adopted by the Courts in relation to findings of facts by arbitrators.” [22] Reliance on disputed facts is an unacceptable manner of pursuing an application under Section 42 AA 2005. In the case of Awangku Dewa bin Pgn Momin & Ors v Superintendent of Lands and Surveys, Limbang 12 Division [2015] 3 MLJ 161 at page 174, para 25, the Court of Appeal (Mohd Hishamudin, JCA) said: “There should not be any suggestion in the affidavits of parties ……… of facts being disputed or any disagreement on the part of the applicants/appellants with the evaluation of the evidence by the arbitrator”. [23] The AA 2005 allows for an award, said to be tainted with a true error of law, to come under challenge through questions of law posed under section 42. However, the following requirements to the said Section 42 must be met: a. There must be a question of law; b. The question of law must arise out of an arbitral award; and c. The issue must have a substantial effect on the rights of the parties. [24] In the case of the Exceljade (supra) Justice Nallini Pathmanathan J (now JCA) had discussed in length as regards to the position of law under section 42 AA 2005. Upon perusal of section 42 of the Act, Nallini J stated that the key to its interpretation turns on how the words ‘question of law arising out of an award’ are to be construed. Any issue which falls within the purview of those words allow for a party to an award to refer the same 13 to the High Court. However the issue must have substantial effect on the rights of the parties in order for the court to intervene. It is also discussed in the case of the Exceljade (supra) on the approach to be adopted by the Court in a section 42 application. In this regards, the decision of Mustill J in the Chrysalis [1983] 1 WLR 1469 was referred by the High Court Judge. The High Court Judge has quoted Mustill J. proper test or approach to be adopted by a court determining substantive reference which turns on a question of law arising out of the arbitration. This test or approach is being adopted because section 1(2) of the United Kingdom Arbitration Act and our section 42 of the Act are similar in that both sections deal with questions of law arising out of the arbitration award. For the ease of reference, the passage is reproduced in full as follows: “[17] Mustill J. then goes on to consider the proper test or approach to be adopted by a court determining the substantive appeal which turns on a question of law arising out of the arbitration: “...Starting therefore with the proposition that the court is concerned to decide on the hearing of the appeal whether the award can be shown to be wrong in as, how is this question to be tackled? In a case such as present, the answer is to be found by dividing the arbitrator’s process of reasoning into three stages: (1) The arbitrator ascertain the facts. This process 14 includes the making of findings on any facts which are in dispute. (2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached. (3) In the light of the facts and the law so ascertained, the arbitrator reaches his decision. In some cases stage (3) will be purely mechanical. Once the law is correctly ascertained, the decision follows inevitably from the application of it to the facts found. In other instances, however, stage (3) involves an element of judgment on the part of the arbitrator. There is no uniquely “right” answer to be derived from marrying the facts and the law, merely a choice of answers, none of which can be described as wrong. Stage (2) of the process is the proper subject matter of an appeal under the Act of 1979. In some cases an error of law can be demonstrated by studying the way in which the arbitrator has stated the law in his reasons. It is, however, also possible to infer an error of law in those cases where 15 a correct application of the law to the facts would lead inevitably to one answer, whereas the arbitrator has arrived at another; and this can be so even if the arbitrator has stated the law in his reasons in a manner which appears to be correct, for the court is then driven to assume that he did not properly understand the principles which he had stated. Whether stage (3) can be ever be the proper subject of an appeal, in those cases where the making of decision does not follow automatically from the ascertainment of the facts and the law, is not a matter upon which it is necessary to express a view in the present case. Pioneer Shipping Ltd. V B.T.P. Tioxide Ltd. [1982] AC 736, show that where the issue is one of commercial frustration, the court will not intervene, save only to the extent that it will have to form its own view, in order to see whether the arbitrator’s decision is out of conformity with the only correct answer or (as the case may be) lies outside the range of correct answer. This part of the process investigating whether the arbitrator has gone wrong at the second stage. But once the court has concluded that a tribunal which correctly understood the law could have arrived at the same answer as 16 the one reached by the arbitrator, the fact that the individual judge himself would have come to a different conclusion is no ground for disturbing the award.” (emphasis added) [25] The Federal Court in its recent case of Far East Holdings Bhd & Anor v Majlis Ugama Islam dan Adat Resam Melayu Pahang and other appeals [2018] 1 MLJ 1 has distilled and declared authoritatively on the position of the law with respect to a reference under section 42 AA 2005. It is a watershed case from the apex court and thus there is no more need to cite the various cases before the Far East Holdings (FC) case (supra). [26] What is substantially and strictly the test is now clearly expressed below: “Question of fact [153] Where it is a question of fact, ‘The arbitrators (remain) the masters of the facts. On an appeal the court must decide any questions of law arising from the award on the basis of full and unqualified acceptance of the findings of fact of the arbitrators. It is irrelevant whether the court considers these findings to be right or wrong. It also does not matter how obvious a mistake by the arbitrators on issues of fact might be or what the scale of the financial correspondences of the mistake of fact might be. That is, of course, an unsurprising position. After all, the very reason 17 why parties conclude an arbitration agreement is because they do not wish to litigate in the courts. Parties who submit their disputes to arbitration bind themselves by agreement to honour the arbitrators’ award on the facts. The principle of party autonomy decrees that a court ought never to question the arbitrators’ findings of fact’ (The ‘Baleares’ at p 228). ‘... on findings of facts an arbitrator is the sole judge. Further, whether he drew the wrong inferences of facts from the evidence itself is not sufficient as a ground to warrant setting aside his award (see GKN Centrax Gears Ltd v Matbro Ltd [1976] 2 Lloyd’s Rep 555)’ (Future Heritage Sdn Bhd v Intelek Timur Sdn Bhd [2003] 1 MLJ 49 per Richard G Malunjum JCA, as he then was). ‘... if an arbitrator had erred by drawing wrong inferences of fact from the evidence before him, be it oral or documentary, that in itself is not sufficient to warrant setting aside of his award. It would be contrary to all the established legal principles relating to arbitration if an award based upon the evidence presented were liable to be reopened on the suggestion that some of the evidence had been ‘misapprehended and misunderstood’ per Raja Azlan Shah J (as he then was) in Sharikat Pemborong Pertanian & Perumahan v Federal Land Development Authority [1971] 2 MLJ 210’ (Intelek Timur Sdn 18 Bhd v Future Heritage Sdn Bhd [2004]1 MLJ 401 per Siti Norma Yaakob FCJ, as she then was, delivering the judgment of the court). [154] ‘It is essential therefore to understand the basic difference between appeals in the court system from subordinate courts, where issues of ‘weight of evidence’ are routinely addressed, and references under s 42 of the Act, where the court has no jurisdiction to entertain arguments based on weight of tribunal’s findings of fact are conclusive by alleging that they are inconsistent or they constitute a serious irregularity or an excess of jurisdiction, or on the basis that there was insufficient evidence to support the findings in question. The argument that it is a question of law whether there is material to support a finding of fact is no longer available’ (Russell on Arbitration (1997) at pp 8–057)’ (The Arbitration Act 2005 at pp 198–199). [155] At any rate, s 42 only permits a reference on a discrete question of law. Under s 42, there is no jurisdiction to deal with questions of fact. As Steyn LJ put it in The Baleares, ‘on an appeal the court must decide any question of law arising from the award based on a full and unqualified acceptance of the findings of fact of the arbitrators’. The question of law must accept the findings of facts. Hence, all argument or debate on the findings of fact of the arbitrator, on the inferences 19 drawn by the arbitrator from his findings of fact and or from the evidence could not and would not be entertained. ....... [185] In our summary of the law, we indicated that our answers to leave questions 1 and 2 in Civil Appeals 02–19–04 of 2016 and 02– 20–04 of 2016 would be, now are, the following:

both the distinction between a general reference and a specific reference, and the ‘rule’ that there could not be a reference to court over an error of law under a specific reference to the arbitrator, are no longer relevant or applicable under the AA

We must however add that leave questions 1 and 2 were not questions of law arising out of the award. ‘General reference’ and ‘specific reference’ were raised by the Court of Appeal below; and

under s 42, the only test is whether there is a question of law arising from the award that substantially affects one or more of the parties; ‘illegality’, ‘manifestly unlawful and unconscionable’, ‘perverse’, ‘patent injustice’ are not applicable tests.” (emphasis added) 20 [27] The Federal Court in the Far East Holdings (FC) case (supra) speaking through Jeffrey Tan FCJ had also given some examples of a “question of law” as follows: “[150] ‘The question of law must be one of law and not fact’ (The Arbitration Act 2005 at p 198). ‘An error of fact alone is insufficient’ (Department of Education v Azmitia [2015] WASCA 246 per Mazza JA). But there is no universal definition of ‘question of law’. Nonetheless, from our survey of the authorities, we would conclude that one of the following, which is not an exhaustive list, would meet the paradigm of ‘any question of law’ in s 42:

a question of law in relation to matters falling within (2) of Mustill J’s three-stage test;

a question as to whether the decision of the tribunal was wrong (The Chrysalis);

a question as to whether there was an error of law, and not an error of fact (Micoperi): error of law in the sense of an erroneous application of law;

a question as to whether the correct application of the law inevitably leads to one answer and the tribunal has given another (MRI Trading);

a question as to the correctness of the law applied; 21

a question as to the correctness of the tests applied (Canada v

a question concerning the legal effect to be given to an undisputed set of facts (Carrier Lumber);

a question as to whether the tribunal has jurisdiction to determine a particular matter (Premiums Brands): this may also come under s 37 of the AA 2005; and

a question of construction of a document (Intelek).” Whether the Arbitrator has the jurisdiction and power to grant pre-Award interest at 5% per annum when there is no agreed term in the Arbitration Agreement conferring jurisdiction on the Arbitrator to grant pre-Award interest [28] The issue as to whether an Adjudicator has the jurisdiction and power to award pre-Award interest has already been answered authoritatively in Far East Holdings (FC) case (supra). [29] The questions posed that are relevant to our consideration are as follows:

whether under or in proceedings under the Arbitration Act 2005, the arbitrator has the jurisdiction to award pre-Award interest? 22

whether the arbitrator has the jurisdiction to award pre-Award and post-Award interests when it is not specifically pleaded? (emphasis added) [30] The Federal Court answered as follows: “[186] In relation to the leave questions in Civil Appeal 02–21–04 of 2016, we observe that s 21 of the AA 1952, which provided that ‘A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award at the same rate as a judgment debt’, gave latitude to an arbitrator to award interest. Under the AA 1952, an arbitrator was not constrained to award interest only from the date of the award. But under the AA 2005, an arbitrator has not that room to maneuver. Section 33(6) of the AA 2005 provides:

Unless otherwise provided in the arbitration agreement, the arbitral tribunal may —

award interest on any sum of money ordered to be paid by the award from the date of the award to the date of realisation; and

determine the rate of interest. [187] Unless otherwise provided in the arbitration agreement, an arbitrator could only award post-award interest. The AA 2005 23 does not contemplate the award of pre-Award interest, unless so provided in the arbitration agreement. There was no indication that pre-Award interest was provided in the arbitration agreement. Pre-Award interest could not be awarded. Post-award interest may be granted. But since post-award interest was not pleaded, it would not seem fair that the discretion to award interest should be exercised in favour of post-award interest.” (emphasis added) [31] Learned counsel for the Claimant had taken umbrage that the learned SFC had sworn an affidavit in support on the Government’s application for a reference under section 42 AA 2005 on the award of pre-Award interest. He cited the case of Datin Melati Abdullah & Ors v Syed Hassan Syed Salem [1999] 5 [CLJ] 582 at page 584 - 585, where the Court held that: “… Counsel having conduct of this case should not affirm an affidavit deposing to facts and matters not within his own knowledge. One must take note of the salutary warning given by Edgar Joseph Jr J (now FCJ) in Seng Huat Hang Sdn Bhd v Chee Seng & Co Sdn Bhd [1986] 1 MLJ 348 where his Lordship rightly pointed out that in matters where disputed questions of facts are involved, it would be best that the parties and not their solicitors to affirm affidavits thereto. Kamalanathan Ratnam JC (now J) in Perwira Affin Bank Bhd (dahulunya dikenali sebagai Perwira Habib 24 Bank Malaysia Bhd) v Lorrain Esme Osman [1996] 4 MLJ 656 aptly said at p. 662 of the report: An advocate and solicitor should be a percussionist of his client’s case; not a protagonist in its cause. If he descends into the arena of the trial by affirming an affidavit relating to disputed facts, he could be subjected to the usual process of cross-examination. How far then can he extend the right of privilege? Issues such as these ought to be in the forefront of the mind of a solicitor before he rushes in to affirm an affidavit upon his client’s cause. ... In my judgment, in affirming encl. 10, Mr. Joseph Mathews has run counter to O. 41 r. 5(2) of the RHC – an irregularity that was incurable” (emphasis added) [32] I had overruled the objection raised by learned counsel for the Claimant in that here there is no dispute where factual matters are concerned that the SFC had deposed to. I agree with the learned SFC that the case of Datin Melati is an application to extend time to file an affidavit in reply under O.32 r.1 (2) of the Rules of High Court 1980, where it is important to explain the reasons of the delay in filing the affidavit in reply as required under the Rules. When the Court there held that the counsel having conduct of the instant case should not affirm an affidavit deposing to 25 facts and matters not within his own knowledge, the Court had further held that there was a delay of three months and three days when the application for enlargement of time was filed but the reasons for the delay was not explained at all. [33] The fact of the Agreement to Arbitrate and the documents filed in the Arbitration and the Interim and Final Award are not in dispute save for the questions of law that both parties have sought to refer to this Court under section 42 AA 2005. More importantly the facts of what happened at the Arbitration are within the personal knowledge of the learned SFC who had conduct of Arbitration and who has affirmed the Affidavits setting out the facts of what happened. [34] Learned counsel for the Claimant said that the Government had raised the issue of pre-Award interest which had already been dealt with in paragraphs 279 to 285 of page 42 of the Final Award. The observation of the Arbitrator is as follows: “279. There is no dispute that the Tribunal is entitled to award pre-Award interest, and both parties rely on the court rate of interest.

The parties differ on the applicable rate with the Claimant submitting that it should be 8% per sum being the applicable rate when they [were] kept out of funds, and the Respondent submitting that the current applicable rate of 5% per annum should be used. 26

As for the commencement of interest calculation, the Claimant submits that it should be calculated from “after 45 days from 07.02.2006” which Is about when the debt was incurred. The Respondent did not challenge when the interest should be calculated from. ......

Taking the respective positions of the parties and the facts of the matter into account, I consider that it is reasonable to award interest on the sum of RM 8,413,442.38 at the rate of 5% per annum from 19 th March 2006 (being 45 days from 07.02.2006) until date of receipt by the Claimant of full payment.” [35] The learned SFC argued that the Arbitrator has no jurisdiction to decide on pre-Award interest based on section 33(6) AA 2005. At the time when the arguments were heard the learned SFC had relied on the Court of Appeal’s decision in Far East Holdings Bhd & Anor v Majlis Ugama Islam dan Adat Resam Melayu Pahang & Another Appeal [2015] 4 MLJ 766 at p 798: “[98] On the issue of interests, we agree with the learned judge that the Arbitrator has erred in law in awarding pre and post award interests. Having considered the Act, we find that under s. 33(6), the Act has made specific provision for post award interest, but does not 27 provide for pre award interest. Clearly the Act does not contemplate the awarding of pre award interest. We agree with the submissions by the learned counsel for FEH and KAOP that when the Act specifically provides for post award interest but is silent on pre award interest, then implicitly the Legislature did not intend to confer on an arbitrator the power to award pre award interest. Therefore we agree with the learned judge that the award of pre award interest ought to be set aside.” (emphasis added) [36] The Claimant however contended that the Government had all the rights and opportunity to raise the same during the submission stage at the Arbitration but had failed, refused and/or neglected to deliberate on this matter despite having the chance to do so, thereby the Plaintiff is estopped from raising in this application now. [37] Learned counsel for the Claimant referred to the case of Lembaga Pelabuhan Kelang v Kuala Dimensi Sdn Bhd & Another Appeal [2010] 9 CLJ 532 at page 560: “[31] As the parties’ original intention to proceed by way of arbitration had been subsequently abandoned, as expressed in cl 2.4 and 4.4 in DA 2 and DA 3 respectively, neither of them should be allowed to go back on their words. Hence, it would be unfair or unjust for KDSB to do so. In other words, the doctrine of estoppel may be 28 invoked. This doctrine of estoppel has been succinctly stated by Lord Denning in the Amalgamated Investment v Texas Commerce [1981] 3 All ER 577 at 584 in the following words: “When the parties to a transaction proceed on the basis of an underlying assumption (either in fact or of law, and whether due to misrepresentation or mistake, makes no difference), on which they have conducted the dealings between them, neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands” (emphasis added) [38] The Claimant had submitted all matters including the issues of interests to the Arbitrator and the pre-Award interests were raised in the Statement of Case and subsequently in pleadings and submission. [39] Learned counsel for the Claimant submitted with considerable persuasion that the Government cannot now after losing the case, seek to evade the Arbitration Award by alleging that the Arbitrator has no jurisdiction. [40] To be clear the Arbitration Agreement between the Claimant and the Government, it is agreed in Clause 56.5 of the Arbitration Agreement that: 29 “56.5 The Arbitrator shall have power to review and revise any certificate, opinion, decision, requisition or notice and to determine all matters in dispute which shall be submitted to him, and of which notice shall have been given in accordance with sub-clause 56.3 aforesaid, in the same manner as if no such certificate, opinion, decision, requisition or notice had been given.” (emphasis added) [41] The Claimant had raised the claim for pre-Award interest in the pleadings and submission and the Government failed, refused and/or neglected to deal with the same. The Claimant submitted, therefore, that the Government is estopped from raising this issue now. [42] It was further emphasized that by learned counsel for the Claimant that both parties had previously pleaded and submitted on the issue of interests whereby the issue raised by the Government herein was never raised previously during the submission. [43] Learned counsel for the Claimant further referred to the case of Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd & Anor [2008] 1 MLJ 233 at page 246, which held that: [16] I think it essential to remember that the question whether or not any given dispute comes within the provisions of an arbitration clause would primarily depend upon the terms of the 30 clause. The answer to this question must depend on (a) what is the dispute, and (b) what disputes the arbitration clause covers. [17] In Haymen and Anor v Darwins Ltd [1942] 1 All ER p 337 the House of Lords had held that an arbitration clause which contained the words ‘any dispute shall arise between the parties hereto in respect of this agreement or any of the provisions herein contained or anything arising hereout the same shall be referred for arbitration …’ is wide enough and still remains effective to cover a situation even where the injured party has accepted repudiation, such as the claim that ‘the contract has come to an end’ — as for example, by frustration — since in such cases it is the performance of the contract that has come to an end. [18] The question has to be judged by an interpretation of the arbitration cl 34. Surely, the particular manner of expression, ‘any matter or thing of whatsoever nature arising thereunder or in connection therewith,’ and ‘any dispute or difference arise ... either during the progress or after completion or abandonment of the works’ in cl 34, rather than the restrictive words ‘under this agreement’ denotes a clear intention of both parties to have a very much wider ambit for arbitral method of dispute resolution. For these reasons, I find and hold that cl 34 is wide enough to bring this issue of the 31 retention bond within the ambit of the ongoing arbitral proceedings. Indeed, upon the determination by the arbitrator of the dispute, pursuant to cl 34, an accounting between the first and the second defendant could and should include the question of the retention bond. To hold otherwise would be to allow the first defendant to steal a march on the realization of the retention bond in the teeth of what they have agreed to in cl 34. [19] A similar situation occurred in Government of Gibraltar v Kenney and Another [1956] 3 All ER 22. In that case the first defendant had been employed by the plaintiffs as a quantity surveyor under an agreement which specified the remuneration which he was to receive and provided by cl 9, that if any dispute or difference should occur between the parties in relation to anything or matter arising out of or under the agreement it should be referred to arbitration. Disputes having arisen concerning the first defendant’s remuneration, the second defendant was appointed sole arbitrator and the first defendant delivered points of claim. The plaintiffs contended before the arbitrator that some of the matters referred to in the points of claim were outside the scope of the submission to arbitration in cl 9. The arbitrator, before coming to any determination on the matters raised, ruled that he had jurisdiction to hear the 32 reference and the plaintiffs now sought a declaration to the contrary effect. The disputed matters in the points of claim included a claim by the first defendant for a sum of money on a quantum meruit for services rendered, it being alleged that the agreement had ceased to have any application to these services, and an alternative claim for a similar sum alleged to be payable, if the contract was adjudged to have been frustrated, partly under the Law Reform (Frustrated Contracts) Act, 1943, and partly on a quantum merit. [20] Therein it was held that the claim for a quantum meruit, and the alternative claim in the event of the agreement being adjudged to have been frustrated, were both claims arising out of the agreement within the ambit of the arbitration clause and were matters which ought to be determined by the arbitrator and which could conveniently be determined by him, as there was no such clear separation of issues as would put one or more outside the arbitration agreement” (emphasis added) [44] As the Arbitration Agreement between the parties provided that the Arbitrator has jurisdiction to hear all matters, the Claimant submitted that there is no such issue of the Arbitrator not having jurisdiction as the same is provided under the Agreement between both parties. 33 [45] Additionally and/or in the alternative, learned counsel for the Claimant submitted that sections 4,7,18(3) AA 2005 would apply as the Government did not at any material time, challenge that the Arbitrator had no jurisdiction to award pre-Award interest as raised in this application now:

Section 4 provides for the arbitrability of subject matter: “4. (1) Any dispute which the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless the arbitration agreement is contrary to public policy.

The fact that any written law confers jurisdiction in respect of any matter on any court of law but does not refer to the determination of that matter by arbitration shall not, by itself, indicate that a dispute about that matter is not capable of determination by arbitration.”

(ii) Section 7 provides for the waiver of right to object 7. A party who knows—

of any provision of this Act from which the parties may derogate; or

that any requirement under the arbitration agreement has not been complied with, and yet proceeds with the arbitration without stating its objection to such non- 34 compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived its right to object.”

(iii) Section 18(3) on failure to raise objection on jurisdiction “18. (3) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence.” (emphasis added) [46] As no objection was raised on the jurisdiction of the Arbitrator and that it was only raised after the Final Award has been issued, learned counsel for the Claimant submitted that the Government cannot now raise this issue. [47] It was further submitted that, even if the Government’s argument is true that the Arbitrator has no jurisdiction to award pre-Award interest, this Court nevertheless has the jurisdiction to award under sections 42(4) and

AA 2005 as well as under section 69(4) of the Courts of Judicature Act 1964, Order 94 rule 4 of the Rules of Court 2012 and under section 11 of the Civil Law Act 1956. [48] From the point of view of fairness and justice of the case, learned counsel for the Claimant impressed upon this Court that it should uphold the award of pre-Award interest as the Project in dispute had been 35 completed on or about year 2006, but the Plaintiff had taken time until 2010 but still failed, refused and/or neglected to complete the reference to Court process thereby resulting in substantial delay. [49] In the light of the Federal Court’s decision in Far East Holdings (FC) case (supra) such arguments, no matter how appealing, must have been deemed to have been rejected by the apex Court which decision is of course binding on this Court. Such arguments cannot prevail over the lack of jurisdiction and power of the Arbitrator to grant pre-Award interest unless there is a provision conferring such a jurisdiction and power on the Arbitrator in the Arbitration Agreement. [50] The Claimant further raised the point that under the KLRCA Arbitration Rules (Revised in 2013), the Arbitrator has been granted the power to award for pre-Award interest. According to Rule 11(8)(a) of the KLRCA Arbitration Rules (Revised in 2013), it stated as follows:- “8. Unless the parties have agreed otherwise, the arbitral tribunal may: a) award interest on any sum of money ordered to be paid by the award on the whole or any part of the period between the date on which the cause of action arose and to the date of realization of the award; and b) determine the rate of interest.” 36 [51] Be that as it may, the Arbitration here is an ad-hoc Arbitration and not one where the parties have agreed to adopt the KLRCA Arbitration Rules. It was only because the parties could not agree on the sole appointment of an arbitrator that both parties had requested the Director of KLRCA to appoint an arbitrator pursuant to Clause 56.3 of the Contract. [52] It was also argued by the Claimant that the Arbitration Act 1952 would apply where the Arbitrator would have the jurisdiction and power to grant pre-Award interest. It is no doubt true that the Contract was entered into on 10.12.2001 before the AA 2005 came into force on 15.3.2006. However parties had agreed to arbitration based on the AA 2005 with the appointment of the Arbitrator by the KLRCA on 14.4.2011. The repeal and savings provision of the AA 2005 in section 51 is clear as set out below:

“Repeal and savings

The Arbitration Act 1952 [Act 93] and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 1985 [Act 320] are repealed.

Where the arbitral proceedings were commenced before the coming into operation of this Act, the law governing the arbitration agreement and the arbitral proceedings shall be the law which would have applied as if this Act had not been enacted. 37

Nothing in this Act shall affect any proceedings relating to arbitration which have been commenced in any court before the coming into operation of this Act.

Any court proceedings relating to arbitration commenced after the commencement of this Act shall be governed by this Act notwithstanding that such proceeding arose out of arbitral proceedings commenced before the commencement of this Act.” (emphasis added) [53] Whilst a reference to Arbitration in Clause 56.9 of the Contract is a reference to Arbitration within the meaning of the Arbitration Act 1952 (“AA 1952”), that AA 1952 has already been repealed by the time the Arbitration commenced in 2011. The then applicable statue governing Arbitration is the AA 2005. Parties cannot refer to Arbitration under the AA 2005 and then where jurisdiction and powers of the Arbitrator is concerned, fall back on the AA 1952 which had been repealed and replaced by the AA 2005. That would be not only anomalous but anachronous as well. [54] Where estoppel is concerned, it has no application against the provision of a statute or a clear statutory provision of the law. In the Federal Court case of Silver Corridor Sdn Bhd v Gallant Acres Sdn Bhd & Anor [2016] 5 MLJ 1 it was observed as follows: 38 “[58] Our view is that the plaintiffs’ claim is based on statutory provisions of s 293 of the CA read together with s 52 of the BA. These statutory provisions, as we have discussed earlier, are clear and unambiguous. Estoppel, being an equitable principle cannot operate to defeat clear statutory provisions of law. This settled principle of law was adopted by Edgar Joseph Jr in United Malayan Banking Corporation Bhd v Syarikat Perumahan Luas Sdn Bhd (No 2) [1988] 3 MLJ 352b when His Lordship ruled that: ‘The defence of estoppel accordingly fails since there cannot be an estoppel to evade the plain provisions of a statute.... particularly when the non-compliance goes to the root of the thing’.”(emphasis added) [55] The Arbitration Agreement must be specific enough where the matter of pre-Award interest is concerned since it is a matter expressly referred to in section 33(6) AA 2005 and interpreted by the Court of Appeal and the Federal Court in Far East case (supra) as going to jurisdiction. It can only be said to be a case falling within the meaning of “Unless otherwise provided for in the Arbitration Agreement...” if there is an express provision in the Arbitration Agreement providing something opposite to the matter of post-Award interest or at least different as in pre-Award interest is specifically provided for. 39 [56] The fact that the claim for pre-Award interest is claimed and denied or objected to does not mean that the parties have agreed to confer jurisdiction on the Arbitrator to award pre-Award interest in the Arbitration unlike a case of post-Award interest which is to be granted as a matter of course, as the Arbitrator already has jurisdiction under the AA 2005 to award post-Award interest, and the post-Award interest claim only need to be pleaded, unless otherwise provided for. To come within the matter for the Arbitrator to decide in an Arbitration Agreement, the matter must be specifically referred to, for otherwise the default position is that under section 33(6) AA 2005, the Arbitrator has no jurisdiction to award pre-Award interest unlike post-Award interest where all that is required is that it be pleaded unless the parties provided expressly that the Arbitrator shall not decide on post-Award interest. [57] I agree with the learned SFC that Clause 56.5 of the Agreement referred to by the Claimant to support its argument that it is within the Arbitration Agreement of parties to award pre-Award interest, did not provide anything with regards to interest. This Clause only deals with Arbitrator’s power to determine matters in dispute within the parameters of the construction contract itself. [58] The learned Arbitrator had stated under paragraph 281 of the Final Award that the Government did not challenge when the interest should be 40 calculated from. However such a conduct is not sufficient to confer jurisdiction on the Arbitrator to award pre-Award interest. In fact the Court of Appeal in the Far East case (supra) did not decide on the point of pleading for the ‘pre-Award interest’ as when the law is clear that the Arbitrator has no jurisdiction to grant ‘pre-Award interest’, the issue as to whether it was pleaded or not becomes irrelevant. Likewise the absence of the Government’s submission on the interest because the issue is that of far greater matter of the lack of jurisdiction on the part of the Arbitrator to award ‘pre-Award interest’. [59] Pleading a claim for pre-Award interest does not amount to an Arbitration Agreement to confer jurisdiction on the Arbitrator and so the power to award pre-Award interest when ordinarily under section 33(6) AA 2005 the Arbitrator has no jurisdiction or power to so award. Otherwise there would have been no necessity to require the element of a provision in the Arbitration Agreement to that effect. Pronouncement [60] I would thus exercise my power under section 42(4)(b) AA 2005 to vary the award of pre-Award interest such that all interests awarded on the various heads of claims at 5% per annum shall run from the date of the Final Award 18.8.2016 to date of realization. 41 [61] I exercised my discretion and made no order as to costs as at that time the matter on this issue was awaiting decision of the Federal Court in Far East (supra). Whether the Arbitrator can, having found as a matter of fact that the variation in reducing the works of the Claimant was invalid and without the Claimant’s consent, dismiss the Claimant’s Claim for the balance Contract Sum under the Lump Sum Contract [62] The Claimant’s assertion is that the questions of law posed arose from paragraphs 67 (a), 88 till 89, 92 till 96, 273, 274, 278, 285, 286 (1), 287 and 279-285 of the Final Award at page 44 of the Final Award namely whether the Arbitrator erred in law when she decided that the Claimant is not entitled to its claim for balance outstanding payment from the Contract Sum for wrongful omission and alteration of the Contract Sum of the Lump Sum Contract without the consent of the Claimant. [63] At the outset the relevant clauses in the Conditions of Contract of the PWD Form Design and Build and Turnkey Projects shall first be set out for ease of reference: CONDITIONS OF CONTRACT FOR DESIGN & BUILD AND TURNKEY PROJECTS (PWD FORM DB/T) 42

Contractor’s obligations 2.2 The Contractor shall be fully responsible for the design, execution and maintenance of the Works/portion of the works for which his design/alternative design have been accepted by the Government, and shall absolutely guarantee the Government independent of fault that the design, materials and workmanship for the Works or portion of the works is suitable for the known requirements of the Government. Design Guarantee 27 Variations 27.1 The term ‘Variation’ means:

a change in the Contract Documents which makes necessary the alteration or modification of the design, quality or quantity of the Works as described by or referred to in the Contract Documents, otherwise than such as may be reasonably necessary for the purposes of rectification pursuant to Clause 8.5 including:

the addition, omission or substitution of any work; Definition 43

(ii) the alteration of the kind or standard of any of the materials, goods to be used in the Works;

(iii) the removal from the Site of any work executed or materials or goods brought thereon by the Contractor for the purposes of the Works other than work, materials or goods which are not in accordance with this Contract; and/or

the addition, alteration or omission of any obligations or restrictions imposed by the P.D. in the Contract Documents with regard to:

access to the Site or use of any specific parts of the Site;

(ii) limitations of working space;

(iii) limitations of working hours;

(iv) the execution or completion of the Work in any specific order. 44

27.2 The P.D. may issue instructions effecting a Variation in the Government’s Requirements or the Contractor’s Proposal. No Variation instructed by the P.D. under this Clause shall in any way vitiate or invalidate the Contract but the fair and reasonable value (if any) of all such Variations shall be taken into account in ascertaining the amount of the Contract Sum except to the extent that such Variation is necessitated by the Contractor’s default. Provided that the Government may not effect a change which is, or which makes necessary, an alteration or modification in the design of the Works without the consent of the Contractor which consent shall not be unreasonably delayed or withheld. Instructed Variation 27.3 The Contractor shall effect Variations to the Works or design if in the opinion of the P.D. the same is necessary for the purpose of suitability, functionality and safety of the Works. Variations for the Purpose of suitability, functionality and safety 45

27.4 Where a Variation under Clause 27.3 by the Contractor results in extra cost, the said extra cost, shall be borne by the Contractor unless the Contractor can prove to the satisfaction of the P.D. that such Variation is necessary in a consequence of any physical condition (other than weather conditions or condition due to weather, the nature, character and extent of local conditions, accessibility of the Site, the supply of electricity and water, the nature and geology of the ground, subsoil and sub-marine, the hydrological and climatic conditions, the form, nature and sustainability of the Site, the supply of and conditions affecting labour and materials) or artificial obstruction which could not reasonably have been foreseen by an experienced Contractor. However, if a Variation under Clause 27.3 results in a reduction in cost the Contract Sum shall be accordingly reduced. Cost to be borne by Contractor 46

27.5 No changes to the Government’s Requirements or Contractor’s Proposal made under this Clause shall relieve the Contractor of his obligations under Clause 2.2 hereof. Contractor’s obligations unchanged 28.

VALUATION OF VARIATIONS 1 The valuation of additional or substituted work shall be consistent with the values of work of similar character set out in the Contract Sum Analysis or Contract Schedule of Rates making due allowance for any change in the conditions under which the work is carried out and/or any significant change in the quantity of the work so set out. Where there is no work of a similar character set out in the Contract Sum Analysis or Contract Schedule of Rates a fair valuation shall be made. Valuation of instructed variation 30 Contract Sum 30.1 The Contract Sum shall not be adjusted or altered in any way whatsoever otherwise than in accordance with the express provisions of the Conditions. Adjustment of Contract Sum to be in accordance with the Conditions 47 [64] To appreciate the issue and import of the questions of law raised the relevant observations of the Arbitrator in the Final Award must be set out as follows: “79. It is not in dispute that Bridges No. 6, 7, 9, 10 and 11 were not constructed in the manner originally intended. Instead: a. Bridges 6, 7, 10 and 11 were converted into construction of box culvert; and b. Bridges 9 was converted into rockfill. It is not disputed that the Claimant had been paid for the box culvert and rockfill works actually carried out.

The parties agree that the change of Bridges 6, 7, 10 and 11 to box culvert and the change of Bridge 9 to rockfill is a ‘change of design’. It is also not in dispute that this was a change under Clause 27 of the COC. …

In view that the parties agree that the change to the 5 bridges is a “change of design” which is a change under Clause 27 of the COC, I find it necessary to consider Clause 28 of the COC “Valuation of Variations”. 48

The contents of Clause 28 are such that it is an express condition of the COC which goes to alter the Contract Sum in case of Variations, especially by Clause 28.8 which states: “Effect shall be given to Clause 28 by addition to or deduction from the Contract Sum.”

I am not persuaded by the Claimant’s argument that the full Contract Sum should be payable regardless that the work done was altered, and regardless that the work done as altered had been paid for.

Neither am I persuaded by the Claimant’s submission at the Claimant’s Written Submission in Reply dated 4 th September 2015/paragraph 3 – that in the Interim Award the Tribunal had ruled that the Respondent’s variation of price in respect of the 5 bridges were made without complying with the contract requirement and therefore the Respondent remain liable to pay for the 5 bridges as per contract. A plain reading of the Interim Award on Liability at paragraphs 114 and 115 will show such submissions to be incorrect. The Interim Award on Liability merely concluded that there had been invalid alteration by the Respondent of the Contract Sum in reliance of 49 Clause 27.3 of the COC. The Interim Award did not decide that the Respondent remained liable to pay for the 5 bridges as per contract. On the contrary, the Interim Award concluded that the quantum of the Claimant’s entitlement is left to be considered in the hearing on quantum. ......

It is unfortunate that the only evidence of adjustment that is available in these proceedings are those of the Respondent with no competing valuation by the Claimant. In the premises, the only valuation of the adjustment is that of the Respondent vide their PHK.

The Respondent further argued that by virtue of the valuations carried out pursuant to Clauses 50 and 51 of the COC, the Respondent had properly valued the works carried out which in turn represents the adjustment or alteration to the Contract Sum, which in this case is a reduction.

Considering the Respondents’ stand, together with the provisions of the Contract as a whole including Clauses 27, 28 and 30 of the COC, together with the lack of alternative valuation by the Claimant of any adjustment or alteration to the Contract Sum despite agreeing that the 5 bridges were the subject of change 50 under Clause 27, I am compelled to decide in favour of the Respondent.” (emphasis added) [65] Learned counsel for the Claimant submitted firmly that having made the finding on liability in the Interim Award where the unilateral variation as in the omission works were concerned with respect to the bridges, the Arbitrator must then logically follow through with the award of the balance contract sum not paid in a Lump Sum Contract. [66] It is important to appreciate and affirm the thought process en-route to the learned Arbitrator’s finding on liability in her Interim Award. I had used the word “affirm” circumspectly as there had been no application by the Government of Malaysia to set aside the Interim Award on the finding of liability. [67] The Interim Award As To Liability dated 16.12.2013 at pages 927-929 of Exhibit “SIB-2“ of the Affidavit in Support dated 01.11.2016, at paragraphs 98-115 set out the learned Arbitrator’s reasons and reasoning in arriving at her finding on the Government’s liability as follows: “98. Therefore interference by the Respondent in the Claimant’s choice of design would attract consequences to the Respondent unless such interference was allowed by the Contract. 51

Clause 27.3 does allow for interference by the PD but on the terms set out in the Clause, namely that the variation must be “necessary for the purpose of sustainability, functionality and safety of the Works”.

I have examined the evidence before this tribunal to consider whether the considerations of “keadaan tapak” and the attendant “keperluan hidraulik” falls within the phrase “suitability, functionality and the safety of the Works” as used in Clause 27.3. Having done so, I find that those considerations do not fall within the phrase, as the considerations pertain to design and not the Works.

I am fortified in my finding by the undisputed fact that the bridges in question were never constructed. That being the case, the considerations can only be in respect of the design, and not the Works.

Accordingly I find that this change instructed by the PD does not fall within the ambit of Clause 27.3. Sub-Issue 1(e) – Even if a change under Clause 27.3, does the requirement of consent under Clause 27.2 still apply? 52

The Claimant went on to submit that even if the change fell under the provisions of Clause 27.3, it had to be read together with Clause 27.2 as they were all part of Clause 27, therefore consent of the Claimant remained a pre-requisite.

Since I have made a finding that the change did not fall under the provisions of Clause 27.3, I find no need to further consider this point made by the Claimant.

Sub-Issue(f) – Alteration of Contract Sum The parties are agreed that that the Contract as a lump sum fixed price contract and the contract sum shall not be adjusted or altered in anyway whatsoever otherwise than in accordance with the express provision of the Contract (Clause 30.1 of the COC AB(A)1 – 128. Clause 30.1 of the COC states: “The Contract Sum shall not be adjusted or altered in anyway whatsoever otherwise than in accordance with the express provision of the Conditions.” 53

In this respect parties are also agreed that Clause 27, in particular, Clauses 27.2 and 27.3 expressly provide for the Contract Sum to be adjusted or altered.

The Claimant contends that that the alteration of the Contract Sum arising from the change of the bridges to box culvert and rockfill fall to be determined under Clause 27.3.

As abovesaid, I have found that on the facts, the change of the bridges to box culvert and rockfill are a “variation in the Government’s Requirements or the Contractor’s Proposal” and fall to be determined under Clause 27.2. It is further an undisputed fact that no consent was sought from the Claimant.

That being the case, the variation was not properly affected by the Respondent under Clause 27.2, and the valuation provisions of Clause 27.2 do not apply.

And as I have made a finding that the changes do not fall to be determined under Clause 27.3, therefore the valuation provisions of Clause 27.3 also do not apply. 54

Parties have not led evidence of nor canvassed any other “express provision of the Conditions” for the adjustment or the alteration of the Contract Sum. That being the case, there is no evidence before this tribunal as to an applicable express provision for adjustment or alteration of the Contract Sum.

Therefore applying the provisions of the Contract as agreed between the parties, in particular Clause 30.1 that: “The Contract Sum shall not be adjusted or altered in anyway whatsoever otherwise than in accordance with the express provision of the Conditions.” I therefore find that the Contract Sum has not been adjusted or altered in accordance with the express provision of the COC.

I have also fully considered the other arguments canvassed by the parties in respect of how the Contract Sum and alterations thereto should be treated. This includes the arguments as to the Claimant’s entitlement under the Lump Sum Contract and the principle of law for Lump Sum Contract, for the culvert works undertaken. However I consider that they are not directly relevant in view of the specific COC provisions, in particular Clause 30.1, which the parties agree they are bound by. 55

Conclusion of Issue 1 I therefore find on the issue of liability, that there has been an invalid alteration by the Respondent of the Contract Sum in reliance of Clause 27.3 of the COC.

However the quantum of the Claimant’s entitlement following on from this finding on liability is left to be considered in the hearing on quantum.” (emphasis added) [68] In contrast, learned counsel for the Claimant submitted that during the Final Award stage the Arbitrator made an error of law (refer affidavit dated 18.11.2016, Exhibit “SIB-4“, pages 13-15), as follows: “78. The Respondent’s case on the other hand is that since the said 5 bridges were not constructed by the Claimant, therefore the Claimant is not entitled to be paid.

The parties are agreed that the Contractor was a lump sum fixed contract and the contract sum shall not be adjusted or altered in anyway whatsoever otherwise than in accordance with the express provision of the Contract (Clause 30.1 of the COC AB(A) 1-128). .... 56

I am not persuaded by the Claimant’s argument that the full Contract Sum should be payable regardless that the work done was altered, and regardless that the work done as altered had been paid for.

....The Interim Award did not decide that the Respondent remained liable to pay for the 5 bridges as per contract...

Considering the Respondents‘ stand, together with the provisions of the Contract as a whole including Clauses 27, 28 and 30 of the COC, together with the lack of alternative valuation by the Claimant of any adjustment or alteration to the Contract Sum despite agreeing that the 5 bridges were the subject of change under Clause 27, I am compelled to decide in favour of the Respondent.” (emphasis added) [69] Learned counsel for the Claimant highlighted that during the hearing and submission stage at the Arbitration, clause 28 of COC was never raised or addressed by both parties. The Arbitrator relied on Clause 28, in particular clause 28.8 as the basis to reject the Claimant’s claims for the reason that: “Effect shall be given to Clause 28 by addition to or deduction from the Contract Sum“. 57 [70] Learned counsel for the Claimant cited the case of B. Surinder Singh Kanda v The Government of the Federation of Malaya [1962] MLJ 169 the Privy Council decided that: “If the right to be heard is to be a real right which is worth anything, it must carry with it a right in the accused man to know the case which is made against him. He must know what evidence has been given and what statements have been made affecting him; and then he must be given a fair opportunity to correct or contradict them.“ (emphasis added) [71] Learned counsel for the Claimant was adamant that the Claimant was deprived of the right to be heard with respect to clause 28 of COC as both parties neither argued nor submitted on this issue and he reiterated the principle as quoted in the case WRP Asia Pacific Sdn Bhd v NS Bluescope Lysaght Malaysia Sdn Bhd & Other Case [2015] 1 LNS 1236 at page 67: ‘... this at least is clear: no tribunal, however informal, can be entitled to reach a decision against any person without giving to him some proper opportunity to put forward his case‘. (emphasis added) [72] I agree with learned counsel for the Claimant that there had been a breach of natural justice here in that Clause 28 COC was not pleaded and 58 in play before the learned Arbitrator. In Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd [2016] 3 CLJ 403, the Court of Appeal at page 427 held that a point that was not raised in the counterclaim and thereby depriving the plaintiff of an opportunity to address the tribunal is a complaint under section 42 AA 2005: “[39] In our present case we agree with the finding of the learned judge that the point of inflation being a gauge for work done in the counterclaim and summarily fixing the rate at 20% was not a point raised during the proceedings depriving the plaintiff of an opportunity to address the Arbitral Tribunal on that point which formed the basis of the award on the counterclaim, the learned judge in our view was correct to find a complaint under s. 42 had been made out.” (emphasis added) [73] I can appreciate the Claimant’s position when it was argued on its behalf that if Clause 28 was raised during the Arbitration (which was not), the Claimant would have had the chance to be heard and would, amongst others, state that Clause 28 “Valuation of Variation“ (page 127 Exhibit „SIB- 1“ Affidavit In Support dated 01.11.2016) must be read together with Clause 27 which is on “Variations“ (page 126 Exhibit “SIB-1“ Affidavit In Support dated 01.11.2016) and as the Arbitrator had decided that Clause 59 27 relied on by the Defendant is invalid, therefore Clause 28 cannot be relied upon. [74] In the Interim Award As To Liability at page 929 the learned Arbitrator had unequivocally decided as follows: “114. I therefore find on the issue of liability, that there has been an invalid alteration by the Respondent of the Contract Sum in reliance of Clause 27.3 of the COC.“ (emphasis added) [75] It goes without saying that the learned Arbitrator must not detract from her findings of fact made during the Interim Award in arriving at the sum to be paid by the Government of Malaysia to the Claimant. The Final Arbitral Award must be consistent with and not in conflict with the Interim Award and that the Final Award must have an internal coherence. [76] The learned Arbitrator cannot afford to contradict herself in her Final Award. Having held that the change of the 5 bridges to box culverts and rockfill did not fall under Clause 27.2 and 27.3 of the COC, she is not at liberty to conclude that there is change under Clause 27 of the COC in the Final Award. [77] The fact that the learned Arbitrator did not single out under which sub-clause of Clause 27 that the change was made which entitled the Government to vary the contract sum is disquieting. It cannot be Clause 27.1 for that is a definition clause on the meaning of “Variation” and it is not 60 disputed that the change in the design is “Variation” within the meaning of Clause 27.1 COC. It cannot be Clause 27.2 or 27.3 because the learned Arbitrator had held that these sub-clauses are not applicable. [78] Logically and reasonably then Clause 28 cannot apply to value the work done and to make adjustment to the Contract Sum accordingly. [79] The Variation is not under Clause 27.2 because the consent of the Claimant was not obtained at all as held by the learned Arbitrator and there has not been any challenge on this finding of fact by the learned Arbitrator. I would go so far as saying that such a finding of fact cannot be challenged and in any event the Government did not challenge the Interim Award as to Liability handed down. The Variation is not under Clause 27.3 because the change is not because of suitability, functionality and safety as found as a matter of fact by the learned Arbitrator. Again the Government had not challenged this finding of fact. [80] In the present case, it is not disputed that the Claimant had performed its obligation under the COC, to build the box culvert to replace the 5 bridges. When the box culverts had been completed by the Claimant, the Claimant is entitled to claim from the Government the lump sum price which was not validly altered by either party under the provision of the COC. As such, I agree that when the Claimant has performed the Works as 61 directed by the P.D., it is entitled to receive the full Lump Sum in accordance with Clause 30.1 of the COC. [81] As a corollary, the Government’s allegation that the 5 bridges had been altered to box culverts and rockfill and hence the Claimant is not entitled to the Lump Sum amount is devoid of merit. So long as the Lump Sum has not been validly varied by the Government in accordance to the provision of the Contract and so long as the Claimant had completed the works for the 5 bridges albeit in the form of box culverts and rockfill as directed by the Government, the Claimant should be entitled to the Lump Sum contract payment without alteration. [82] It is only too obvious that the Arbitrator’s Final Award on this issue substantially affected the Claimant’s rights as it involves substantial amount of approximately RM8.7 million. [83] I agree with learned counsel for the Claimant that the issues raised herein are not dispute on facts but are questions of law (a) one that goes against the basis principle of the right to be heard; and (b) one where the learned Arbitrator had gone beyond the scope of reference by both parties when the dispute had always been on Clauses 27.2, and 27.3 (which the Arbitrator expressly in the Interim Award held as invalid) and on Clause 30.1 COC only. 62 [84] Very specifically the question of law raised is with respect to the proper construction of Clauses 27, 28 and 30 of the COC. [85] The Federal Court in Far East Holdings (FC) case (supra) has made it abundantly clear that a question of construction of documents is a question of law as follows: “Is the construction of a document a question of law? [156] It must be more than settled that the construction of a document is a question of law. In Munusamy v Public Services Commission [1964]1 MLJ 239, where on the construction of an article of the Constitution which forbids the dismissal or reduction in rank of certain persons unless a certain condition is complied with, that is that the person concerned be given a reasonable opportunity of being heard, Thomson LJ said ‘That question of construction is a question of law ...’. In Citicorp Investment Bank (Singapore) Ltd v Wee Ah Kee [1997] 2 SLR 759, Yong Pung How CJ said ‘we must approach the construction of the document, which is a question of law, untrammelled by any concession as to the meaning of the agreement that might have been given by the court below’. ‘It is trite that a question of construction is a question of law and not fact (see Bahamas International Trust Co Ltd and another v Threadgold [1974] 1 WLR 1514 (HL)’ (Bintulu Development Authority v Pilecon 63 Engineering Bhd [2007] 2 MLJ 610 per Nik Hashim JCA, as he then was, delivering the judgment of the court).... .....In Intelek Timur Sdn Bhd v Future Heritage [2004] 1 MLJ 401, the Federal Court followed Ganda Edible Oils Sdn Bhd v Transgrain BV [1988]1 MLJ 428,where the Supreme Court adopted the following passage in Halsbury’s Laws of England (4th Ed) Vol 2 p 334 para 623, which stated that a question of construction is a question of law: ... and where the question referred for arbitration is a question of construction, which is, generally speaking, a question of law ...” (emphasis added) [86] I agree with the Claimant that the learned Arbitrator had misconstrued that Clause 28 was applicable when it was not after holding that the Government’s change of the 5 bridges to be invalid when they wrongly altered the design of 5 bridges to become rockfill and box culvert. However, instead of awarding the Claimant for the Government’s non-performance of the original contractual term, the Arbitrator held that the works not performed should be adjusted according to Clause 28 and thus had wrongly applied Clause 28 when it has no application at all following the finding of an invalid alteration as in a reduction of the Works. [87] The decision of the learned Arbitrator that erred on this issue goes against the sanctity of contract that required the JKR contract formulated by 64 the Government to be upheld instead of relying on Clause 28 when there has been no valid variation under Clause 27. [88] I agreed with the Claimant that the 3 tests under section 42 AA 2005 had been fulfilled:

There must be question of law:

whether the Arbitrator erred in considering issue not disputed by both parties and without first inviting both parties to submit on issue of clause 28 COC;

(ii) Contrary to the Interim Award decision.

Question of law arose from the arbitral award:

In this case, it was the consideration of Clause 28 which was never raised by the parties.

Issue has substantial effect on the rights of the parties.

This is a RM8,708,438.24 dispute which substantially affected the rights of the Claimant under the Contract. [89] The question of law materially affected the Claimant that had tendered for the Project to construct the bridges but instead the design was altered invalidly by the Government and thereby depriving the Claimant of the works tendered for. In the case of Kejutaan Holdings Sdn bhd v Magnum 4D (Perak) Sdn Bhd & Ors [2009] 6 CLJ 570 at page 582 paragraph C – D, the Court held that: 65 “.... It is well-established principle sanctioned by the doctrine of sanctity of contract that parties who make agreements must adhere to their terms. The law does not permit excuse from performance save in very rare instances. There is no power in any court to interfere with the contractual obligations lawfully established or to cancel obligations voluntarily assumed.....“ (emphasis added) [90] Learned SFC submitted that the learned Arbitrator having found that there had been an invalid alteration of the Contract Sum under Clause 27.2 and 27.3 was nevertheless obliged to determine on the issue of quantum which is the amount that the Claimant is entitled to be paid as a result of the change which had been held by the learned Arbitrator to be an invalid alteration of the Contract Sum. Whilst I have no quarrel with that, I have a problem with how the learned Arbitrator went about determining the quantum without reference to the balance Contract Sum for which the Claimant had been deprived but instead requiring the Claimant to prove the value of work done. [91] With the greatest of respect, the learned Arbitrator fell into error here. Having held that there was an invalid alteration of the Contract Sum the only logical and inexorable consequence is to restore the Contract Sum and to make an award for the payment of the balance Contract Sum. 66 [92] Very pertinently, the Claimant had not claimed for damages to be assessed but rather as reproduced in paragraph 67(a) of the Final Award for “Claims for balance Outstanding Payment from the Contract Sum for Wrongful Omission and Alteration of the Contract Sum of the Lump Sum” amounting to RM8,708,438.24. [93] The quantum is thus the balance Contract Sum unaltered since the alteration was invalid. The learned Arbitrator cannot backtrack from her findings of mixed fact and law that the alteration was invalid under the contract and yet refuse to award the balance Contract Sum not paid and instead launch into an assessment of actual work done. That would be inconsistent and illogical in the light of the findings in the Interim Award. [94] To then hook on to Clause 28.8 to assess damages for wrongful omission and alteration of the Contract Sum would be to launch out on a tangent not permitted by her earlier findings in her Interim Award. [95] This is a matter where even by applying Lord Mustill’s 3-stage test, in applying the law to the facts as found by the learned Arbitrator, there is only one result which is that the Claimant is entitled to the balance Contract Sum not paid for the invalid alteration to the Contract Sum. It is a natural consequence; as natural as day would follow night and as surely as the sun would rise in the morning! 67 [96] The learned SFC referred to the case of Datuk Mohd Ali bin Hj Abdul Majid & Anor (both practising as Messrs Mohd Ali & Co) v Public Bank Berhad [2014] MLJU 473 where the Federal Court stated as follows: “[32] It is a trite law that a claimant claiming damages must prove that he has suffered the damage. The claimant has the burden of proving both liability and quantum of damages, before he can recover the sum claimed. This follows from the general rule that the burden of proving a fact is upon him who alleges it and not upon him who denies it, so that where a particular allegation forms an essential part of a person’s case, the proof of such allegation falls on him. (See s 103 of the Evidence Act 1950). If he fails to prove both the liability and the quantum of damages, he losses the action.”(emphasis added) [97] Whilst I have no quibble with the above principle on the need to prove damages for breach of contract that one is said to have suffered, the said principle does not apply to the instant case which is a claim for the balance Contract Sum not paid. [98] Perhaps the error of law could have been avoided had the learned Arbitrator kept in the forefront of her mind the jurisprudence underpinning a 68 Lump Sum Contract as explained in Airsquare Sdn Bhd v Eng Keat Seng and Another Appeal [2013] 5 MLJ 526: “[7] Applying the above definition to the findings of the learned trial judge, with respect, we are unable to follow the reasoning of Her Ladyship. In our judgment, upon Her Ladyship ruling the contract to be a lump sum contract for RM620,000, it must necessarily follow that Airsquare Sdn. Bhd. is entitled to recover this amount, so long as it has completed the works undertaken by it pursuant to the subcontract. This is because the difference between RM620,000 and the value of the works completed amounting to RM420,000 represent profit element in the subcontract. In our judgment, it is inconsistent for Her Ladyship to have on the one hand ruled the subcontract to be lump sum contract and simultaneously rule Airsquare Sdn. Bhd. to be only entitled to RM420,000 representing the purported value of the work completed by Airsquare Sdn. Bhd. Accordingly, in our judgment, following Her Ladyship’s ruling that the subcontract between the parties was a lump sum contract, Her Ladyship should have ordered judgment in favour of Airsquare Sdn. Bhd. for the sum of RM620,000 less the aggregate of the payments made by Eng Keat Seng.’ (emphasis added) 69 [99] The very essence of a Lump Sum Contract has been explained in Construction Law (Vol 1) by Julian Bailey at page 557 as follows: “Normally without some term allowing for variations under a fixed price contract to perform works, the paying party is not entitled to vary the contract by reducing the work to be done; the builder would have a right to say that he had quoted a fixed price to do certain work and he was prepared to carry out all that work in order to receive his payment.” (emphasis added) [100] Unpleasant as the consequences may be, the parties have freely negotiated for a Lump Sum Contract, with both sides appreciating the risks involved. For the Claimant they would have to manage the inflation risk and that of the increase in price of materials. [101] I would agree with the approach of the Court of Appeal in Perbadanan Kemajuan Negeri Selangor v Selangor Country Club Sdn Bhd [2016] 8 CLJ 211 that effect must be given to the plain words as employed by the parties as follows: “[33] As a general rule, the words of an instrument must be construed according to their natural meaning. Where the language of a document is plain and unambiguous and applies accurately to existing facts then the intention of the parties to the document should be gathered from the language of the document 70 itself. No amount of acting by the parties can alter or qualify words which are plain and unambiguous: see s. 94 of the Evidence Act 1950; North Eastern Railway Company v. Hastings [1900] AC 260 (PC). [34] Accordingly, when a court is called upon to interpret a document, it looks at the language. If the language is clear and unambiguous and applies accurately to existing facts, it shall accept the ordinary meaning, for the duty of the court is not to delve into the intricacies of the human mind to disclose one's undisclosed intention, but only to take the meaning of the words used by him, that is to say his expressed intentions: see Kamla Devi v. Takhatmal AIR 1964 vol. 51 a Supreme Court of India decision at p. 386.” (emphasis added) [102] Whilst in the present case, there are provisions for variations under Clause 27.2 and Clause 27.3, the learned Arbitrator had held that the variations effected by the P.D. was not in compliance with Clause 27.2 and Clause 27.3 with the consequence that Clause 28 does not apply and that Clause 30 would hold sway. 71 Pronouncement [103] I would thus agree with the Claimant that the variation of the works was unilateral by the Government and without the consent of the Claimant under Clause 27.2 and that such a change is nor necessitated by suitability, functionality nor safety under Clause 27.3; both findings being made by the learned Arbitrator in the Interim Award against which there had been no application to set aside. [104] Therefore I am constrained and indeed compelled to allow the Claimant’s Claim for the balance of the Contract Sum of RM8,798,438.24 and that interest shall run at the rate of 5% per annum from 18.8.2016 (being Date of Final Award) to date of realization and so the Final Award is varied to that extent. [105] I also awarded costs of RM20,000.00 to the Claimant. - signed - Y.A. LEE SWEE SENG Judge Construction Court Kuala Lumpur 72 For the Plaintiffs in : Joseph Ting and Alan Tan OS WA-24C(ARB)-32-11/2016 : (Messrs Joseph Ting & Co.) For the Defendants in : OS WA-24C(ARB)-33-11/2016 : For the Defendant in : Noerazlim Saidil OS WA-24C(ARB)-32-11/2016 : (Senior Federal Counsel) For the Plaintiff in : OS-WA-24C(ARB)-33-11/2016 : Date of Decision : 11 October 2017 [This Judgment is subject to editorial and grammatical corrections]