Kilang Sawit Bell Sdn Bhd v Kwantas Oil Sdn Bhd (24ARB-3-09/2014)

Award Timbangtara di bawah Rujukan No. A363 bertarikh 23.12.13 (Award Timbangtara Tingkat Pertama tersebut”) oleh Tribunal Timbangtara dan sebahagian dari Award Timbangtara di bawah Rujukan No. AA363 bertarikh 25.08.14 (“Award Rayuan tersebut”) oleh Lembaga Rayuan PORAM (“Lembaga Rayuan tersebut”) The Palm Oil Refiners Association of Malaysia di bawah PORAM Rules of Arbitration and Appeal (“Award-award tersebut”) diketepikan di bawah Seksyen 37(1)(b)(ii) Akta Timbangtara 2005. 3 [3] In addition to making an application to set aside both the Awards under section 37(1)(b)(ii) of the Arbitration Act 2005 ( the Act), the Applicant also seeks this Court’s determination on several questions of law pursuant to section 42 of the Act. The questions are as follows: i) Interpretasi dan penggunaan klausa force majeure di dalam kontrak di antara Perayu dan Responden terhadap insiden kebakaran yang menyebabkan kerosakkan yang teruk ke atas kilang minyak kelapa sawit Perayu; ii) Sama ada dari tingkah laku di antara Perayu dan Responden, terma-terma kontrak tersirat boleh diimplikasikan dan terpakai di dalam kontrak mereka; iii) Sama ada Perayu telah dibebaskan daripada kesemua tanggungjawab kemudiannya di bawah kontrak oleh kerana peristiwa force majeure; iv) Sama ada kebakaran yang berlaku di kilang minyak kelapa sawit Perayu yang menyebabkan kerosakkan yang teruk itu adalah salah satu peristiwa force majeure yang membebaskan Perayu dari menunaikan tanggungjawab di bawah kontrak tersebut; dan 4 v) Sama ada, dalam keadaan di mana tiadanya persetujuan sebaliknya, faedah pada kadar 8% setahun boleh dikenakan di dalam award timbangtara manakala Arahan Amalan 1 tahun 2012 seperti yang diisukan oleh Ketua Hakim Negara menetapkan faedah ke atas amaun penghakiman pada kadar 5% setahun sahaja. [4] The background facts which give rise to this appeal are these. Both the Applicant and the Respondent (Kwantas Oil Sdn Bhd) are involved in the palm oil industry. The Applicant and the Respondent have entered into two contracts of selling and purchase of Crude Palm Oil (‘CPO’) namely: (i) KBPO/1212-0065 dated 26.11.2012 and (ii) KBPO/1212-0066 dated 27.11.2012. In these two contracts, the Respondent has contracted to buy from the Applicant, 3000 metric tonnes of CPO at a price stated as “MPOB Peninsular Malaysia of CPO average price for December 2012-RM80.00 PMT. The supplies of CPO under the two Contracts are due for full delivery until December 2012. [5] Up until 24.12.2012, the Appellant had only delivered 632.08MT of CPO to the Respondent out of the 3000MT contracted in the two contracts. The Applicant claimed that the full delivery of the CPO to the Respondent could not be met due to numerous frustrations or 5 constraints caused by the Respondent themselves. The frustrations/ constraints caused by the Respondent according to the Applicant are among others; i. delivery restriction; ii. exorbitant imposition of penalties and unwillingness to negotiate; iii. high amount of CPO drawn for samples; and iv. refusal to pay for the said CPO samples. [6] The Applicant also claimed that with all these constraints that it was facing, the Applicant knew that it would not be able to fulfil its’ contractual obligation under the two contracts and therefore the Applicant had offered or suggested to the Respondent a Wash Out. The Respondent did not agree to the Wash Out and instead extended the delivery period from December 2012 to January

However, on 2.1.2013, a fire broke out at the Applicant’s mill resulting in a shutdown of the mill. [7] On 4.1.2013, the Respondent was informed of the fire by the Applicant. Later, vide a letter dated 10.01.2013, the Applicant had requested for a cancellation of the contract (Wash Out) to which 6 the Respondent disagreed. The Respondent, on the other hand gave the Applicant an extended time until February 2013 to complete the delivery of the CPO. [8] The Applicant subsequently made two more deliveries namely, on the 25th and 28th January 2013. After these two deliveries, the Applicant did not make any more delivery of the CPO to the Respondent. [9] In February 2013, the Respondent sent two reminders (dated 20.2.2013 and 26.02.13) to the Applicant to expedite the delivery of the remaining CPO. The Applicant, however did not respond to both the requests. [10] Instead of delivering the remaining CPO due under the two contracts to the Respondent, the Applicant had issued a letter dated 8.03.13 terminating the contracts. The terminations of the two contracts were made pursuant to Clause 12 PORAM/MPOA Domestic Sales Contract (“the Contract”) citing force majeure as the reason for termination. In the same letter, the Applicant also stated that in view of both these contracts had been terminated, the 7 remaining balance of 1,599,90 MT of CPO under the contracts are deemed to be null and void. [11] By a letter dated 12.3.2013, the Respondent responded to the Applicant’s letter rejecting such termination. The Respondent, on the contrary had put the Applicant on notice that it is in default on the non-delivery of the remaining CPO and thus demanded payment of the sum of RM466,691.56 being the difference between the contract price and market price at the date of the default within fourteen(14) days from the date of the letter. The Applicant was also put on notice that in the event that it failed to pay the said sum, the Respondent will then opt for legal recourse/arbitration. [12] Subsequently, the Respondent had referred the dispute to the Palm Oil Refiners Association of Malaysia (PORAM) for arbitration. [13] On 23.12.2013, the Arbitration Tribunal (Tribunal) allowed the Respondent’s claim (First-tier award). Dissatisfied with the award, the Applicant then appealed to the Appeal Board. The Applicant’s appeal was rejected by the PORAM’ Appeal Board on 20.01.2014. 8 [14] The Applicant’s case before the Arbitral Tribunal is plainly this. The two contracts were validly terminated by the Applicant by virtue of Clause 12 to Clause 12 PORAM/MPOA Domestic Sales Contract namely, when fire broke out at the Applicant’s mill, it would not be possible for the Applicant to deliver the remaining CPO to the Respondent. In view of this, the contracts are validly terminated under by invoking the Force Majeure Clause under Clause 12. [15] The Arbitral Tribunal however, is of the opinion that Clause 12 which was relied onto by the Applicant has no application in the dispute between the Applicant and the Respondent on the following grounds:

That the Applicant did not sell and the Respondent did not buy on “Seller’s Own Production”. If it was so, then there would be justification for the Applicant to invoke Clause 12 PORAM/MPOA

(ii) That quantity of the Applicant ought to have bought in the balance CPO of similar specifications to meet their contractual obligations. 9 [16] The Appeal Board agreed with decision and concurred with the First-Tier Award on the non-application of Clause 12. [17] The Applicant had raised three grounds in support of its application. The three grounds are as follows: i) Bahawa keputusan Lembaga Rayuan tersebut mengenai isu Force Majeure di bawah Klausa 12 PORAM/MPOA Domestic Sales Contract di “Point 1, Findings of the Appeal Board” adalah bertentangan dengan undang-undang substantif Malaysia dan berlawanan dengan polisi awam Malaysia; ii) Bahawa kegagalan Lembaga Rayuan tersebut dalam mengiktiraf, dalam konteks undang-undang substantive Malaysia, terma-terma dan syarat-syarat tersirat dalam kontrak dan juga amalan komersil di antara Perayu dan Responden di bahagian “Point 1, Findings of the Appeal Board” di dalam Award Rayuan tersebut adalah bertentangan dengan undang-undang substantif Malaysia dan berlawanan dengan polisi awam Malaysia; iii) Bahawa Lembaga Rayuan tersebut dengan salahnya meratifikasikan Award Timbangtara Tingkat Pertama tersebut yang dengan salahnya mengenakan faedah ke atas Perayu terhadap amaun yang tidak ditentukan pada kadar 8% setahun dan yang 10 dinyatakan sebagai dari tarikh 08.03.14 sehingga “payable by the Respondents (Appellants)” di perenggan (d) Award Timbangtara Tingkat Pertama tersebut yang mana adalah bertentangan dengan undang-undang substantive Malaysia dan berlawanan dengan polisi awam Malaysia; [18] The Applicant contends that at the arbitration proceedings both before the Tribunal and the Appeal Board, the Respondent had disputed the termination only on the sole ground that the Applicant is not willing to fulfil its obligation because the Applicant is selling the CPO to another buyer as there was an increase in the price of the CPO (sole ground). However, according to the Applicant, the Tribunal and the Appeal Board have held that Clause 12 of frustration of the contracts on the grounds of force majeure due to fire of the Applicant’s mill has no application before them because the two contracts do not provide that the CPO to be delivered to the Respondent must exclusively be produced by the Applicant and thus, the Applicant must fulfil its obligation under the two contracts to deliver the remaining CPO by obtaining the CPO from other millers or from the open market. The Applicant also contends that in arriving to their decisions, the arbitral bodies had not consider or failed to consider the implied terms of the two contracts and the conducts of the Respondent (objection on the sole ground and 11 extending time to deliver the remaining CPO). On this basis, the Applicant had contended that when the arbitral bodies did not take into consideration of the substantive law relating to implied terms and estoppel by conduct in arriving to their decisions, both of these awards are therefore in conflict with the public policy of Malaysia. [19] Before this Court determines whether the decisions of the arbitral bodies in the present case are in contrary with the public policy of Malaysia or whether there are questions of law to be determined in the present case, this Court would first briefly allude to the general principles with regards to the role of the Court when faced with an application challenging or setting aside an arbitral award. [20] There is a myriad of authorities on this. Suffice for this Court to mention a few. In the case of Pembinaan LCL Sdn Bhd v SK Styrofoam (M) Sdn Bhd [2007] 4 MLJ 113 Gopal Sri Ram JCA (as he then was) in delivering the judgment of the Court of Appeal had set out the principles governing an application to set aside or remit an arbitral award. At pages 122,123 and 124, his lordship has stated this: 12 “Now before I state my views on the approach adopted by the learned judge to the application before him I consider it essential to advert to the principles that govern an application of the kind that the learned judge dealt with in this case. For that purpose, I need go no further than three authorities. First, judgment of Raja Azlan Shah J (as His Highness then was) in Sharikat Pemborong Pertanian & Perumahan v Federal Land Development Authority [1971] 2 MLJ 210 which is an authority that has been repeatedly quoted from and applied. Here are the relevant passages at pp 210–211: ‘It is essential to keep the distinction between a case where a dispute is referred to an arbitrator in the decision of which a question of law becomes material from the case in which a specific question of law has been referred to him. The wealth of authorities make a clear distinction between these two classes of cases and they decide that in the former case the court can interfere if and when any error appears on the face of the award but in the latter case no such interference is possible upon the ground that the decision upon the question of law is an erroneous one. Instances of the former are afforded by Absalom Ltd v Great Western (London) Garden Village Society Ltd [1933] AC 592; British Westinghouse Electric & Manufacturing Co Ltd v Underground Railways Co of London Ltd [1912] AC 673; 13 Hodgkinson v Fernie 3 CB (NS) 189; 140 ER 712, and Attorney-General for Manitoba v Kelly and others [1922] 1 AC 268, 281 PC; Government of Kelantan v Duff Development Co Ltd [1923] AC 395, 411 and In re King and Duveen [1913] 2 KB 32 are instances of the latter. In the present case I have on consideration come to the conclusion that no question of law was referred. What was submitted to the arbitrator was a question of law which incidentally, and indeed necessarily, arose in applying ascertained facts. The reference involved both composite questions of law and fact. The court can therefore review the award if and when there is error apparent on the face of the award. ... Let me state here that this is not a re-hearing. My sole purpose is to determine whether there is error of law on the face of the award. With regard to the first point, I am not satisfied that the arbitrator had drawn wrong inferences of fact from the evidence. Even if he did, that by itself is not sufficient as a ground to warrant setting aside the 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 14 misunderstood (see In re Great Western Railway Co And HM’s PostmasterGeneral [1903] 19 TLR 636).’ … The second authority is Union of India v Rallia Ram AIR 1963 SC 1685 where Shah J, when delivering the judgment of the Indian Supreme Court said: ‘An award being a decision of an arbitrator whether a lawyer or a layman chosen by the parties, and entrusted with power to decide a dispute submitted to him is ordinarily not liable to be challenged on the ground that it is erroneous. In order to make arbitration effective and the awards enforceable, machinery is devised for lending the assistance of the ordinary courts. The court is also entrusted with power to modify or correct the award on the ground of imperfect form or clerical errors, or decision on questions not referred, which are severable from those referred. The court has also power to remit the award when it has left some matters, referred undetermined, or when the award is indefinite, or where the objection to the legality of the award is apparent on the face of the award. The court may also set aside an award on the ground of corruption or misconduct of the arbitrator, or that a party has been guilty of fraudulent concealment or wilful deception. But the Court cannot interfere with the award of otherwise proper on the ground 15 that the decision appears to it to be erroneous. The award of the arbitrator is ordinarily final and conclusive, unless a contrary intention is disclosed by the agreement. The award is the decision of a domestic tribunal chosen by the parties, and the civil courts which are entrusted with the power to facilitate arbitration and to effectuate the awards, cannot exercise appellate powers over the decision. Wrong or right the decision is binding if it be reached fairly after giving adequate opportunity to the parties to place their grievance in the manner provided by the arbitration agreement.’ Third, and last, in Intelek Timur Sdn Bhd v Future Heritage Sdn Bhd [2004] 1 MLJ 401, Siti Norma FCJ said at p 407: ‘The law regarding the effect of an arbitrator’s award is well settled in that the award is final, binding and conclusive and can only be challenged in exceptional circumstances. As such, 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 the setting aside of his award.’ It is the unanimous view of all the authorities that the High Court in exercising its statutory jurisdiction under the Arbitration Act 1952 does not enjoy appellate jurisdiction. See, for example, Puri 16 Construction Pvt Ltd v Union of India AIR 1989 SC 777, where it was held that: ‘ ... a court while examining the objections taken to an award filed by an arbitrator is not required to examine the correctness of the claim on merits. The court cannot sit in appeal over the views of the arbitrator by re-examining and reassessing the materials.’ ” [21] In another decision of the Court of Appeal in the case of Future Heritage Sdn Bhd v Intelek Timur Sdn Bhd [2003] 1 MLJ 49, Richard Malanjum JCA (as his lordship then was) has summarised the general principles as to Court’s intervention on arbitral awards as follows: “Before dealing with the grounds in this appeal, perhaps it is opportune here to have a quick overview of some of the legal principles relating to power of the courts to set aside an award of an arbitrator. And to begin with, I think the statement of law and the discourse therein in the case of Hartela Contractors Ltd v Hartecon JV Sdn Bhd & Anor [1999] 2 MLJ 481 require no further clarification. This is what Gopal Sri Ram JCA said at pp 487-488: 17 ‘The general rule at common law is that, absent a contrary intention in the agreement to arbitrate entered into between the parties to a controversy, the award of an arbitrator is final, binding and conclusive. It may not be challenged merely on the ground that it is erroneous. As Shah J, said in Union of India v Rallia Ram AIR 1963 SC 1685 at p 1691: ... So jealously did the common law guard against curial interference with private arbitrations that it was most reluctant to create exceptions to the general rule. The policy of the common law is reflected in the judgment of Williams J, in Hodgkinson v Fernie (1857) 3 CBNS 189 where he said: ‘The law has for many years been settled, and remains so at this day that, where a cause or matters in difference referred to an arbitrator a lawyer or a layman, he is constituted the sole and final judge of all questions both of law and of fact … The only exceptions to that rule are cases where the award is the result of corruption or fraud, and one other, which though it is to be regretted is now, I think firmly established, viz where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. Though 18 the propriety of this latter may very well be doubted I think it may be considered as established.’ Thus, the common law as a very limited exception grudgingly allowed a court to intervene and set aside an award on the face of which it appeared an error of law. That is an important exception that prevails until today. In Champsey Bhara v The Jivraj Balloo Spinning & Weaving Co. Ltd 1923 AIR PC 66, Lord Dunedin, when delivering the advice of the Board, explained the breath of this limited common law jurisdiction over arbitration awards. He said (at p 69) ‘An error of law on the face of the award means, in their Lordships’ view, that you can find in the award or document actually incorporated thereto, as for instance, a note appended by he arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties’ rights depend to see if that contention is sound.’ 19 Quite apart from the common law, the jurisdiction of the ordinary courts in the environment of private arbitration stems also from statute. ... In my judgment, the jurisdiction to set aside or to remit an arbitrator’s award whether at common law or under statute is one that should be exercised with great care and with a proper sense of responsibility. One may do well to keep in mind the words of Sharma J in Puri Construction Pvt Ltd v Union of India 1989 AIR SC 777 at p 780: ‘When a court is called upon to decide the objections raised by a party against an arbitration award, the jurisdiction of the court is limited, as expressly indicated in the Arbitration Act and it has no jurisdiction to sit in appeal and examine the correctness of the award on merits.’ (See also Cairn Energy India Pty Ltd & Anor v The Government of India [2009] 6 MLJ 795). [22] Coming back to the present case, it is to be noted that the first ground on which the Applicant sought to have both the awards set aside is that both of the awards granted by the Tribunal and the 20 Appeal Board are in conflict with the public policy of Malaysia under Section 37(1)(b)(ii) of the Act. [23] Section 37(1)(b)(ii) of the Act reads:

An award may be set aside by the High Court only if-

.......

the High Court finds that –

…….

(ii) the award is in conflict with the public policy of Malaysia. [24] The scope of section 37 of the Act has been illustrated by the Court of Appeal in the case of Ajwa For Food Industries Co (MIGOP), Eqypt v. Pacific Inter-Link Sdn Bhd & Another Appeal [2013] 2 CLJ 395, where it was held inter alia: “Section 37(1) of the Arbitration Act 2005 provides for the various grounds on which an arbitral award may be set aside. The onus is on the party making the application to provide proof. The court’s discretion in setting aside the arbitral award is now limited to the narrowly defined circumstances in line with modern international practice. The effect of the present ss. 8, 9, 37 and 42 of the Arbitration Act is that the court should be slow in interfering with an arbitration award ... (at p. 405)” 21 [25] In the case of The Government of India v Cairn Energy India [2014] 9 MLJ 149, the Court of Appeal held inter-alia: “Although there appears to be no requirement of ‘proof in subpara 37(1)(b)(ii) and whilst the question of what amounts to ‘public policy’ may be a difficult one, i would also venture to say that the court nevertheless requires sufficient basis for such allegation or ground in order that it may ‘find’ that ‘the award is in conflict with the public policy of Malaysia.’ This requirement extends to not only identifying the particular public policy of Malaysia which said to be conflicted but also to providing basis of the alleged conflict; that is how it is conflicted or breached; and how the breach has prejudiced the rights of the plaintiff.” (emphasis added) [26] In the case of Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617 at paragraph 39, Mohamad Ariff Yusof, JCA in delivering the judgment of the Court of Appeal had stated: “In as much as the courts must embrace the principles of finality of awards, party autonomy and minimal court intervention in the context of the UNCITRAL Model Law legal regime, the courts cannot allow an award to stand in the face of a clear excess of jurisdiction and a breach of the 22 equally important principle that arbitration proceeding is consensual and the mandate of the chosen arbitrator has to be limited to the terms of the submissions and the agreed issues.” [27] The Applicant’s application was strongly opposed and objected by the Respondent. The Respondent submits a three-folds objection. Firstly, the Applicant had failed to explain how both the awards are against the public policy of Malaysia; secondly the threshold of section 42 of the Act is not fulfilled by the Applicant as the Applicant had not posed any question of law for determination by this Court; and thirdly the Tribunal and the Appeal Board have been statutorily authorised to award the 8% interest. Has the Applicant explain how both the awards are against the public policy of Malaysia? [28] It is the contention of the Respondent that the Applicant had failed to explain how both the awards are against the public policy of Malaysia. The Respondent submitted that in ascertaining whether the arbitral award is in conflict with Malaysian public policy, section 37(2) of the Act provides a useful guidance. Section 37(2) of the Act has given illustrations of 2 situations in which an arbitral award 23 can be in conflict with the public policy of Malaysia. The situations are namely; (i) the award was influenced by fraud or corruption; or

(ii) there was a breach of natural justice rules during the arbitration or in connection with making the award. [29] It is the submission of the Respondent that none of the situations illustrated in Section 37(2) of the Act are applicable in the present case. [30] The Applicant on the other hand submitted that in the two contracts entered between the parties, a contractual term can be implied that the CPO delivered by the Applicant must necessary be from the Applicant’s own production. Here, the Applicant had relied on Clause 5 of the Contract. The Applicant contends that the reading of Clause 5 does not envisage that a miller must buy from the open market in case of delay since delivery can be extended subject to the payment of penalties. [31] Against this contention, it is pertinent for this Court to reproduce the entire provision of Clause 5 of the Contract. Clause 5 reads: “Extension of Collection/Delivery 24 Collection/delivery must be completed within the contract period, failing which it shall constitute a default. However, subject to mutual agreement in writing at least 5 working days prior to expiry of contract period, the time for collection/delivery could be extended to a period (hereinafter referred to as the extended period) not exceeding 10 days. The following charges for the quantity carried forward each day are to be borne by the party requesting the extended period:- First 5 days without any charges 6th. day at RM1.00 PMT 7th. day at RM2.00 PMT 8th. day at RM3.00 PMT 9th. day at RM4.00 PMT 10th. day at RM5.00 PMT Non-collection/delivery of the oil by the end of the extended period shall constitute a default. However, subject to mutual agreement in writing, the time for collection/delivery could be delayed for a further period and in which event, completion of the contract may be delayed to the extent of the period of delay requested. In this instance, non-collection/delivery in the contract month shall not constitute default.” [32] In summary, the Applicant is contending that the term of the contracts do not provide that a miller is required to get the CPO from the other millers to fulfil the contracts. However by reading Clause 5 and the Respondent’s conduct in extending the time of 25 delivery to enable the Applicant to fulfil its obligation under the contracts and its sole ground of objection with regards to the termination, the implied terms must be that the CPO must come from the Applicant’s own production only and not from some other miller or from the open market. [33] It is this Court’s considered view that the Applicant’s contention is clearly without basis and devoid of merits. Firstly, Clause 5 merely stipulates the terms for the time for delivery, extension of time in case of delays and charges imposed when time for delivery is extended. Clause 5 could not be possibly be read with the conducts of the Respondent to imply a contractual term in the manner contended by the Applicant. Basically, the arbitral tribunal and the Appeal Board in their decisions merely found that the force majeure clause under Clause 12 has no application in the dispute in the absence of specific terms in the contracts that the CPO must exclusively be produced by the Applicant. Hence, to fulfil its obligation under the contracts the Applicant must obtain CPO of similar specifications from other millers or from the open market. There is no such issue of substantive law in relation to the implied terms or estoppel by conducts that the tribunal or the Appeal Board had not consider. 26 [34] To read and to colour a different reading of Clause 5 is thoroughly a misconception. It would be infinitely unjust and too outreaching to read a clause (Clause 5 in the present case), simply stating the allowance of extension and penalties for extension, to mean that a buyer should only receive CPO of the Applicant’s own production. There is an utter absence of nexus here. The allowance of extension has no relations at all to the supplier or the identity of a supplier in the contracts. The allowance of an extension merely states that if there should be a delay, the Respondent can give an extension while being paid penalties. It does not at all dictate, in fact could not possibly dictate that the supply must come from the Applicant’s own production. The Respondent is empowered to give and to refuse extension as it pleases. Where, how, and from whom the CPO supply should be obtained for delivery is irrelevant to Clause 5. It is simply that, when an extension is given, in absence of any specific term for Seller’s own Production, the Applicant must perform its obligation to deliver the remaining CPO notwithstanding the CPO being its own production or from other millers or from the open market. Regardless of the CPO’s origins, the Applicant must ensure to supply the CPO to the Respondent. Failing to do so is a clear indication of a breach of the Applicant’s own fault. There is 27 absolutely nothing to be derived from the Respondent’s conduct in allowing the extension to draw any grounds for estoppel. [35] Here, the issues before the Arbitral bodies were primarily on the issue of force majeure which obviously is not against substantive Malaysian law. Hence, this Court opines that there is no question of both the awards being against public policy of Malaysia. [36] This Court is therefore in full agreement with the Respondent that the Applicant had failed to explain the manner in which the awards are in conflict with public policy of Malaysia. The Applicant must therefore fail under section 37(1)(b)(ii) of the Act. Reference on question of law under section 42 of the Act [37] It is submitted on behalf of the Respondent that in order for the Applicant to invoke section 42 of the Act, there must be a proper and valid question of law arising out of an award for the matter to be referred to the High Court. The existence of valid question of law is a fundamental requirement of the provision. 28 [38] It is further submitted by the Respondent that the Applicant’s case here does not pose any question of law but merely alludes to an issue with regards to the applicability of Clause 12 of the Contract, namely the force majeure clause. The Respondent further contends that essentially the Applicant is not satisfied with the Tribunal’s and Appeals Board’s decision on the non-application of Clause 12 of the Contract which relates to force majeure. [39] Thus, the Respondent contends that the Applicant fails in its invocation of section of 42 of the Act on the following reasons: i. failure to pose a question of law; and ii. the Applicant is challenging the Tribunal and Appeals Board’s finding of facts in reaching their decision on the applicability of Clause 12 of the Contract. Section 42 of the Act cannot be used to challenge factual findings of an arbitration tribunal. [40] On this contention, the Respondent relied on these following cases:

(i)

SDA Architects v Metro Millenium Sdn Bhd [2014] 3 CLJ In this case, Hishamudin Mohd Yunus delivering the judgment of the Court of Appeal have stated: 29 “But how does one determine whether a particular question raised is a proper and valid question of law or not? One does so by considering the propriety of the question that is proposed is the context of the facts of the case as a whole, including the issue that have to be dealt with by the arbitrator.”

(ii) Majlis Amanah Rakyat v Kausar Corporation Sdn Bhd [2011] 3 AMR 315, Ariff Yusoff J (as he then was) at page 325, paragraphs 19 and 20 had stated: [19] Section 42 of the Arbitration Act 2005 is headed "Reference on questions of law". Under subsection (1) of the section, any party "may refer" to the High Court any "question of law arising out of an award." This reference must be filed within 42 days of the publication and receipt of the award, and must identify the question of law to be determined and additionally identify the grounds on which the reference is sought. (Subsection (2)). Under subsection

(4), the High Court may, on the determination of the reference, order the following:

confirm the award;

vary the award:

remit the award in whole or in part, together with the High Court's determination on the 30 question of law to the Arbitral Tribunal for reconsideration; or

set aside the award, in whole or in part. [20] Unlike similar provisions in other Commonwealth jurisdictions, Malaysia law refers to a “reference’’ as opposed to an "appeal". However, like the other jurisdictions, the question of law is required to be a question which "arises out of an award."

(iii) Intelek Timur Sdn Bhd v. Future Heritage Sdn Bhd [2004] 1 CLJ 743. The Federal Court inter alia held the following: “An arbitration award is final, binding and conclusive; and can only be challenge in exceptional circumstances. As such 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 for the setting aside of his award.” [41] The Applicant argued that it has posed valid questions of law. The questions is listed out in the Originating Summons are as follows:

Interpretation and the usage of force majeure clause in the contract between Applicant and the Respondent in respect of the fire incident; 31

Whether there is an implied terms based on the parties’ conduct;

Whether Applicant’s liability is discharged due to the force majeure clause;

Whether the fire which destroyed the Applicant’s mill is considered as an incident under force majeure which exempted the Applicant from any liability

Whether the Arbitrators’ award on interest of 8% is justiciable when there is no specific provision for the same while Practice Direction 1 of 2012 by Chief Judge of Malaysia has fixed the interest rate at 5% per annum [42] Closer examination on the questions (a) to (d), one could not help to come to an overwhelming conclusion that these questions are questions of fact related to application of Clause 12. At this juncture, it may useful for this Court to reproduce Clause 12. Clause 12 reads: “12. Force Majeure Should delivery/collection by Sellers be prevented by reason of fires, strikes, lockouts, riots, civil commotion, floods and/or any cause comprehended in the term force majeure, the contract period shall be extended for a period equal to the duration of the disabling 32 circumstances but not exceeding a period of 60 calendar days. If the force majeure event ends with 21 days preceding the end of the extended period, then a further 21 days shall be allowed after the termination of the force majeure event. Should the fulfilment of the contract not be possible within the extended period, the contract or any unfulfilled part thereof shall be deemed to be null and void at the end of such extended period.” [43] Basically, when the Arbitral bodies rejected the application of Clause 12 in the dispute between the Applicant and the Respondent, the question whether this force majeure clause applicable or otherwise is entirely dependent on the factual matrix of the case and it is therefore involving question of facts. Ultimately, the decisions made are findings of facts. [44] Further, Clause 12 does not operate automatically. Just because the Applicant’s mill caught fire, it does not mean that the Applicant is automatically relieved from its obligation or liability under the contracts under this force majeure clause. The Applicant must demonstrate that due to the fire they were unable to deliver the CPO to the Respondent or to any other dealer or customer. However to this Court’s amazement, from Exhibit “WKL-2” at page 47 in the Applicant’s own Affidavit In Support, the Applicant 33 miraculously managed to engage in a sales of 500 metric tons CPO to another Dealer (Tegap Bumijaya Sdn Bhd) on 9th March 2013 for March 2013 delivery. It is to be noted that on 8th March 2013, which is the date of the termination letter, the CPO price was at RM2352.50 compared to the contractual price of RM2060.00 which was about RM292.50 per metric tonnes higher than the contract price. [45] How could the Applicant submit that it was unable to deliver the CPO to the Respondent when the Applicant was able to supply to another dealer 500 tonnes of CPO when it claimed that its mill is not in operation and the remaining CPO could not be delivered to the Respondent. Now, it is the Applicant’s duty to proof that they are unable to fulfil the contracts even with the extension of time granted by the Respondent. In this case, the Applicant has failed to do so. Inevitably, the inference here is that the Applicant had terminated the contracts not in good faith of not being able to supply. Instead, the Applicant is using the fire incident as an excuse to terminate the Contracts while having a better deal with another dealer. 34 [46] The law is trite and settled that the High Court will not disturb the finding of fact by Arbitrators. Sundra Rajoo & WSW Davidson, the authors of “The Arbitration Act 2005, UNCITRAL Model Law as applied in Malaysia “ at page 198 had said this: “It has long been accepted that in arbitration, the tribunal’s findings of fact are conclusive. See the following passage from Georgas SA v Trammo Gas Ltd (the ‘Baleares’) [1993] 1 Lloyd’s Rep 215 at 228, an English Court of Appeal decision quoted in Russell on Arbitration (1997), paragraph 8-057: The arbitrators are the masters of facts. On an appeal the court must decide any questions of law arising from the award on the basis of a full and unqualified acceptance of the findings of fact of the arbitrators. It is irrelevant whether the court considers these findings of facts 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. We take this opportunity to state our view that this basic principle still holds good for the future and that there is nothing in the terms of the Act that suggests the court has any wider jurisdiction to deal with issues of fact than has existed in the past.” 35 [47] With regards to invocation of section 42 of the Act in relation to reference on question of law arising from arbitral award, in the case of Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617, the Court of Appeal has held inter alia:

With the insertion of s. 42(1A) of the Act, the court is cautioned against setting aside or varying an award unless the error of law substantially affects the rights of parties. It would thus appear this particular jurisdiction is not to be lightly exercised by the courts. (para 51)

Based on case authorities, a number of propositions can be stated as guidelines: (i) the question of law must be identified with sufficient precision; (ii) the grounds in support must also be stated on the same basis; (iii) the question of law must arise from the award, not the arbitration proceeding generally; (iv) the party referring the question of law must satisfy the court that a determination of the question of law will substantially affect his rights; (v) the question of law must be a legitimate question of law, and not a question of fact 'dressed up' as a question of law; (vi) the court must dismiss the reference if a determination of the question of law will not have a substantial effect on the rights of parties; (vii) this jurisdiction under s. 42 is not to be lightly exercised, and should be exercised only in clear and 36 exceptional cases; (viii) nevertheless, the court should intervene if the award is manifestly unlawful and unconscionable; (ix) the arbitral tribunal remains the sole determiners of questions of fact and evidence; and (x) while the findings of facts and the application of legal principles by the arbitral tribunal may be wrong (in instances of findings of mixed fact and law), the court should not intervene unless the decision is perverse. (para 57)

The determination of what constitutes ‘a question of law’ under s. 42 will involve a mixed consideration of relevant statutory rules, case laws and legal principles, and an identification of the relevant facts on which to apply the ‘law’. (para 58) [48] In ascertaining what constitutes a question of law under section 42 of the Act, Mohamad Ariff Yusof JCA, in delivering the judgment of the Court of Appeal in Perwira Bintang had referred to the analysis done by Nallini J (as she then was) in the case Exceljade Sdn Bhd v Baure [2014] 1 AMR 253. Nallini J’s observations of Mustil J in Finelvet AG v. Vinava Shipping Co Ltd, The Chrysalis [1983] 1 Lloyd’s Rep 503; [1983] 1 WLR 1469 is reproduced below: 37 “ Mustil 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 law, how is this question to be tackled? In a case such as the present, the answer is to be found by dividing the arbitrator's process of reasoning into three stages.

The arbitrator ascertains the facts. This process 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 light of the facts and the law so ascertained, the arbitrator reaches his decision. In some case, 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 some 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. 38 Stage (2) of the process is the proper subject matter of an appeal under the Act of 1979 ... (emphasis added)” [49] With reference to Nallini J’s analysis, the Court of Appeal in paragraph 60 of Perwira Bintang’s case said this: “[60] In practical terms, we are persuaded that we should be looking at stage (2) of the process of reasoning as the proper focus of the inquiry under s. 42, which will mean ascertaining not so much a clear position of the "law" without regard to underlying facts, but, as analysed, the arbitrator will be ascertaining the “law” as a process comprising “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.” Typically, this process will involve a mixed consideration of relevant statutory rules, case laws and legal principles, and an identification of the relevant facts on which to apply the “law”.” [50] Based on the aforementioned reasons, it is this Court’s judgment that the Arbitrators had carefully evaluated the evidence and 39 applied the correct principles of law in their findings, and thus there is no question of law arising out of both the Awards that requires determination of this Court under section 42 of the Act which warrants the setting aside of the Tribunal’s Award and the Appeal Board’s decision. The question in respect of interest awarded [51] The next complaint raised by the Applicant is on the issue of interest awarded by the Arbitrators. The Applicant submitted that the Arbitrators had awarded interest at the rate of 8% per annum from the date of default (08.03.13) until the date of Award. The Applicant submitted that section 33(6) of the Act states that (a) the arbitral tribunal may award interest on any sum of money to be paid by the award from the date of the Award to the date of realization; and (b) determine the rate of interest. Further, it was submitted by the Applicant that the Part VI of Section 4 of the PORAM Rules of Arbitration and Appeal has stated that an Award shall become final and conclusive and shall be enforceable in the same manner as a judgment or order of the same effect. Here, the Arbitrators had awarded interest of 8% per annum from the date of default (08.03.13) until the date of Award. The arbitrators had also awarded an additional interest of 8% per annum from the date of 40 award until full payment of the award to the Respondent. Hence, it is the submission of the Applicant that the interest should be 5% per annum and not 8% per annum as per Practice Direction 1 of 2012 which took effect from 01.08.12 as the Chief Justice Malaysia had directed that interest on judgment debts are to be fixed at 5% per annum. [52] On this issue, this Court is in full agreement with the Respondent’s contention that the Appeal Board and Tribunal are statutorily authorized to grant interests on the arbitration award pursuant to section 33(6) of the Act and section 11 of the Civil Law Act 1956. It is patently clearly that the arbitrators are empowered under the Act to determine the rate of interest. Hence, when the Arbitrators awarded the Respondent interests at the rate of 8% per annum on the Award, the Arbitrators are well within the parameter of their statutory boundary. [53] In these circumstances, the Applicant’s Originating Summons in Enclosure 1 is therefore dismissed with costs of RM8000.00 to the Respondent. 41 ...................................................... (DATUK AZIMAH BINTI OMAR) Judicial Commissioner High Court Shah Alam Selangor Darul Ehsan Dated the 13th day of April 2015 For the Applicant : Tetuan Sukanthan Mizuraini Encik Sukanthan M.Pasupathy For the Respondent : Tetuan Azzat & Izzat Encik Fahri Azzat