Macro Dimension Concrete Sdn Bhd v Jimah Energy Ventures Sdn Bhd (WA-24NCC(ARB)-18-05/2024)

The Plaintiff seeks to invoke the powers granted to this Court under sections 11(1)(a), 11(1)(b) and 19J of the Arbitration Act 2005 for the following orders: - a. An injunction against the Defendant, their servants and/or agents restraining them from acting upon or giving effect to the Notice of Termination dated 29.4.2024 purporting to terminate or putting an end to the Agreement dated 1-7-2020 entered between the Plaintiff and Defendant; b. An injunction against the Defendant from taking away any rights vested to the Plaintiff under the Agreement and assigning and/or allocating and/or giving away those rights to any third party; c. An injunction against the Defendant, their servants and/or agents restraining them from acting upon or giving effect to the suspension of rights of the Plaintiff under the Agreement dated 1-7-2020; d. It is contempt of Court for any persons notified of this order to knowingly assist or permit a breach of the Order granted in this action; e. A penal notice pursuant to Order 45, rule 7 of the Rules of Court 2012 be endorsed to the Order granted by this Honourable Court in this application; f. Costs to be paid by the Defendant; g. Any further or other relief that this Honourable Court deems fit to grant.

The Plaintiff and the Defendant entered into an agreement dated 1- 7-2020 (“the said Agreement”) under which the Defendant agreed to allow the Plaintiff to collect Fly Ash, a by-product of the Defendant’s power plant (“the said Plant”) for the period from 8-7-2020 to 31-12-2033.

3.

Material terms of the said Agreement are summarized as follows: - 1 clause 2.3(a)(i) - the Plaintiff commits to collect a minimum of 30,600mt of Fly Ash from the Defendant per month (“the Committed Tonnages”) subject to the method of calculating the portion to be collected of the Fly Ash produced under clause 2.3(b).

3.2 clause 2.3(a)(iii) – if the accumulated quantity of the total uncollected Fly Ash exceeds 50% of the Committed Tonnages, the Defendant shall be entitled to reduce the quantity of the committed tonnage.

3.3 clause 2.3(b) – the portion of the Fly Ash to be collected by the Plaintiff shall be calculated based on the formulae P= 30,600mt per month / 55,100mt per month = 56%. In other words, the minimum amount committed shall be at least 56% of the produced Fly Ash from the said Plant.

3.4 clause 3.1 - The said Agreement shall be effective from the commencement date to 31-12-2033.

3.5 clause 6.2(a) and (c) – The Plaintiff shall collect and remove all Fly Ash in accordance with clause 2.3(b)(iv) or (v) (whichever is applicable). Failure to collect may cause the Defendant the right to impose payment adjustment at the rate of RM 200.00 per Metric Ton for any quantity of Fly Ash not collected and stored in the Main Fly Ash Silo.

3.6 clause 5 – The Plaintiff shall issue to the Defendant a bill for the Fly Ash collected (“the said Bill”) and the said Bill shall be paid by the Plaintiff within 30 days from the date of the receipt of the said Bill.

3.6 clause 14.1(a)(ii) and (v) – It constitutes an event of default by the Plaintiff if the Plaintiff, inter alia, fails to collect the Fly Ash beyond the threshold for uncollected Fly Ash in excess of 3 times from the commencement date, or fails to perform any of its obligations under the terms of the said Agreement.

3.7 clause 20.1 – If any dispute or controversy or claim arises out of or in relation to this said Agreement, the dispute shall first be resolved through consultation or discussion. If that fails, the parties agree to refer the dispute to arbitration in accordance with the UNCITRAL rules.

The Defendant claimed that the Plaintiff committed a breach of the terms of the said Agreement following which a notice of event of default and termination of the said Agreement dated 29-4-2024 (“the said Notice”) was issued.

In the said Notice, the Defendant claimed: “Based on the owner’s records, the quantity of uncollected Fly Ash which the collector has failed to collect ..has reached the threshold for uncollected Fly Ash in excess of 3 times….. In this regard, the owner hereby notifies the collector that a collector’s event of default pursuant to clause 14(a)(v) of the agreement has occurred. … the owner hereby exercises its right to terminate the agreement… and the agreement shall be deemed to be terminated on 25 May 2024.”

The Plaintiff responded vide a letter dated 10-5-2024 denying that there was such a default and that the said Notice was issued prematurely without having resort to clause 20.1 of the said Agreement. This response was disputed by the Defendant vide a letter dated 14-5-2024.

The Plaintiff’s solicitors have since issued a notice to arbitrate vide a letter dated 21-5-2024, referring the above dispute to arbitration. B. Applicable Law 8. I produce section 11 of the Arbitration Act for ease of convenience:- “1) A party may, before or during arbitral proceedings, apply to a High Court for any interim measure and the High Court may make the following orders for the party to-

maintain or restore the status quo pending the determination of the dispute;

take action that would prevent or refrain from taking action that is likely to cause current or imminent harm or prejudice to the arbitral process;

provide a means of preserving assets out of which a subsequent award may be satisfied, whether by way of arrest of property or bail or other security pursuant to the admiralty jurisdiction of the High Court;

preserve evidence that may be relevant and material to the resolution of the dispute;

provide security for the costs of the dispute.”

Section 19J of the Arbitration Act is as follows: - “(1) The High Court has the power to issue an interim measure in relation to arbitration proceedings, irrespective of whether the seat of arbitration is in Malaysia.

The High Court shall exercise the power referred to in subsection (1) in accordance with its own procedures in consideration of the specific features of international arbitration.

Where a party applies to the High Court for any interim measure and an arbitral tribunal has already ruled on any matter which is relevant to the application, the High Court shall treat any findings of fact made in the course of such ruling by the arbitral tribunal as conclusive for the purposes of the application.”

The test that is applicable when dealing with an application under section 11 and section 19J of the Arbitration Act is also trite. It is similar to an application for an interim injunction as laid down in Keet Gerald Francis Noel John v Mohd Noor bin Abdullah & Ors [1995] 1 MLJ 193. I summarise the principles applicable as follows:-

The Plaintiff must show the existence of a bona fide serious issue that must be determined at trial or by way of arbitration;

(ii) The Plaintiff must show that damages would not be adequate; and

(iii) That the balance of convenience lies in favour of granting the order sought by the Plaintiff. See KNM Process Systems Sdn Bhd v Lukoil Uzbekistan Operating Company LLC [2020] 1 CLJU 479, Esso Petroleum Malaysia Inc v Kago Petroleum Sdn Bhd [1995] 1 CLJ 283, HSL Constructor Sdn Bhd v Hyundai Engineering Malaysia Sdn Bhd & Anor [2022] CLJU 947 and Pestech Sdn Bhd v Maybank Islamic Bhd & Anor [2024] 3 CLJ 107.

This Court however cautions itself that it should not consider the merits of the claim in detail and that should be left to be decided by way of arbitration. I refer to Tanjung Bin Energy Sdn Bhd v Tenaga Nasional Bhd [2021] MLJU 1691 and Padda Gurtaj Singh & Ors v Axiata Group Bhd & Ors [2022] 8 CLJ 671. I reproduce parts of the judgment of the Court in Tanjung Bin (supra):- “[40] As there exist an arbitration agreement here, this Court will be cautious and cannot attempt to determine the merits of the dispute as it eminently belongs for determination by the arbitral tribunal…”

I also refer to the recent decision of the Court of Appeal in Cypark Sdn Bhd v KNM Process Systems Sdn Bhd [2024] 7 CLJ 41 where Ahmad Zaidi Ibrahim JCA held: - “[29] The HCJ was of the view that the court's power to grant interim measures is confined to any one or more of s. 11(a) to (e) abovesaid and that the use of the word "may" shows that the court has a discretion to grant any "interim measure", "before or during arbitral proceedings" and parties may apply to court to vary or discharge the interim measure if there is a subsequent and material change of relevant circumstances. We agreed with the HCJ. [30] Based on the words "interim measure" aforesaid, the court may only grant interim measure and not permanent or final relief. As the arbitral tribunal is the sole arbiter of the dispute between the parties, in our view, it goes without saying that final relief should only be given by the arbitral tribunal in the form of a final award and not by the court.”

I also note that the power to grant such interlocutory orders should first be sought by the litigants before the arbitral tribunal. I refer to the decision of Ong Chee Kwan J in Malaysia Resources Corporation Bhd v Desaru Peace Holdings Club Sdn Bhd [2023] 4 CLJ 91:- “[43] In Malaysia, our s.19(1) of the AA 2005 provides the power for the arbitral tribunal to grant interim measures if requested for by a party to the arbitration "unless otherwise agreed by the parties". By this I take it to mean that parties to the arbitration can agree to exclude the jurisdiction of the arbitral tribunal to grant interim measures and instead leaving it exclusively to the courts to order such measures. For convenience, I would refer to such agreement as “exclusion agreement”. [44] This means that under our AA 2005, if there is no exclusion agreement, both the arbitral tribunal and the court will have concurrent jurisdiction to grant interim measures in respect of the arbitration proceedings. [45] Although it is not explicit in our AA 2005, particularly under ss. 11(1) and 19(1) thereto, that relegates the role of the court in granting interim measures to that of a subsidiary or supporting role, it is my judgment that in the exercise of the concurrent jurisdiction, it will be wholly inconsistent with the fundamental principles of party autonomy and minimal judicial intervention if the court were to adopt a “complete freedom of choice” approach as canvassed by learned counsel for the plaintiff. [46] Section 8 of the AA 2005 reads: No court shall intervene in matters governed by this Act, except where so provided in this Act. [47] The aforesaid section is our Parliament's adoption of the principle of minimum judicial intervention in arbitration following art. 5 of the UNCITRAL Model Law. It restricts the courts' role only to such matters as are expressly and specifically provided in the AA

Party autonomy is given precedence over court intervention in arbitration. [48] Based on the aforesaid principle, it is only natural that when parties agreed to have their disputes to be determined by an arbitral tribunal, all applications including application seeking interim measures relating to their disputes ought to be made before the said tribunal. This necessarily imposes limitations to the parties' choice of forum on matters pertaining to their disputes. It seems to me incongruous that a party, who on the one hand, has agreed to the arbitral tribunal's jurisdiction to determine the disputes including the granting of interim measures, to nevertheless, be at liberty on the other hand to prefer his application for interim measures to be determined by the courts. To my mind this is inconsistent with the principle of party autonomy that underlies the AA 2005. [49] Thus, even though the arbitral tribunal is not the only forum that is empowered to grant interim measures in connection with the arbitral proceedings because the AA 2005 confers on the court concurrent jurisdiction to entertain and grant interim measures as well, it does not mean that a party has a free choice to file the application for interim measures in either the courts or before the arbitral tribunal. Quite apart from the obvious potential conflicts that may arise with both the court and the arbitral tribunal having concurrent jurisdiction, there is also the need to coordinate the powers and competences of the court and the arbitral tribunal in the exercise of the jurisdiction in order to avoid any abuse of procedure. This is best avoided by requiring a party seeking interim measures to first resort to the arbitral tribunal and only subsidiarily to the court. [50] It is true that ss. 11(1) and 19(1) of the AA 2005 do not state that an application for interim measures has to be first made to the arbitral tribunal. Neither do these provisions state that a party is not permitted to file the application to both the court and the arbitral tribunal. A wide and liberal interpretation of these provisions would permit a party to first file an application before the court and thereafter, if the decision is not in his favour, to file a similar application before the arbitral tribunal. Quite clearly, this cannot be the intended purpose of Parliament giving concurrent jurisdiction to the court and the arbitral tribunal. [51] The sections must be approached in a manner that is consistent with the court's role in arbitration proceedings under the UNCITRAL Model Law which is to facilitate, support and aid the arbitral tribunal to ensure that the award of the arbitral tribunal will not be rendered impotent and or unenforceable. Following from the principles of party autonomy, the court should respect the parties' choice and assume a subsidiary role and refrain from entertaining and granting any application for interim measures which should first be made before the arbitral tribunal save for certain exceptional circumstances. [52] Accordingly, I echo the sentiment of Justice Mohamad Ariff Md Yusof (as he then was) in the case of Cobrain Holdings Sdn Bhd v. GDP Special Projects Sdn Bhd [2010] CLJU 1834; [2010] 1 LNS 1834; [2010] MLJU 2140 where His Lordship held that when the interim measure is the one that both the court and arbitral tribunal have jurisdiction to grant, a party should first apply before the arbitral tribunal. Further, the court will only entertain and grant interim measures in exceptional circumstances, to wit, where:

the interim measure is sought against a third party whom the arbitral tribunal has no jurisdiction.

(ii) the matters are very urgent; or

(iii) the High Court's coercive powers of enforcement are needed;

(iv) the arbitral tribunal has not been constituted.”

However, as with all general rules there are always exceptions. In this case, I find that as the arbitration tribunal has not been constituted, the Plaintiff is entitled to apply to this Court for the said orders sought and in view of the urgency of the application to ensure that the status quo is maintained pending the outcome of the arbitration. C. Applying the law to the Facts 15. I find that the Plaintiff has shown that the (i) existence of a bona fide serious dispute that should be determined by the arbitration tribunal, (ii) that damages would not be adequate in the circumstances of this case, and (iii) that the balance of convenience lies in its favour.

Serious Issue to be Tried 16. The claim lodged by the Plaintiff against the Defendant is clearly not a frivolous claim and will require deliberation by the arbitrator as to how the terms of the agreement are to be interpreted and applied. This Court agrees that at the very least the Plaintiff has shown that the following issues arises in this case for the arbitration panel to decide: -

Whether the termination of the said Agreement is valid?

(ii) Whether the Plaintiff did breach the clause by failing to collect the Fly Ash as alleged by the Defendant in contravention of clause 14 of the said Agreement?

(iii) Whether the interpretation of clause 2(b), clause 6.2 and clause 14 adopted by the Defendant as to how the said Fly Ash is to be calculated is correct?

These issues are also clearly related to the said Agreement and are the subject matter of the pending arbitration. Guided by the earlier authorities, this Court finds that there are bona fide serious issues that have to be resolved before the arbitration tribunal.

(ii) Whether Damages is adequate?

The Defendant contended that damages would be adequate to compensate the Plaintiff for any losses that it may suffer as a result of the decision to terminate the said Agreement and therefore the Defendant should not be forced to sell its Fly Ash to the Plaintiff. The Defendant suggested that the Plaintiff should be able to purchase the required Fly Ash from a third party. The difference between the purchase price and what was paid to the Plaintiff would be the damages claimable at the end of the arbitration.

The said argument is attractive but unfortunately I have to disagree. At this juncture, I find that the Plaintiff has shown to this Court that the said supply of Fly Ash at the quantity required as agreed cannot be obtained from the open market.

The Plaintiff’s Counsel has meticulously explained to this Court that the Fly Ash is a waste product that is regulated under the Environmental Quality (Scheduled Wastes) Regulations 2005 and cannot be imported into Malaysia. Fly Ash could only be purchased from energy producers in Malaysia, and it would be nearly impossible for the Plaintiff to obtain supply at such quantity required from the existing suppliers in Malaysia.

The Plaintiff has also demonstrated that its business of manufacturing cement products, bricks and ready-made concrete requires a constant large supply of Fly Ash, which was planned to be obtained substantially from the Plaintiff’s premises.

This is to be compared to the Defendant, who, even if successful in the said arbitration, would not be put into any real difficulties. It is not in the business of producing Fly Ash; it is merely a waste product. The Defendant’s primary concern is ensuring that the Fly Ash is collected regularly to comply with environmental laws and regulations. Its power-producing plant will continue to produce Fly Ash. Even if the Plaintiff is unsuccessful in arbitration, the Defendant could then claim damages for the supply of the Fly Ash to the Plaintiff, based on what the Defendant could have received on the open market.

Moreover, I also find that the Plaintiff did agree to provide an undertaking as to damages in this case. Thus, if the arbitration is not in its favour, the Defendant may be able to claim its losses that arises from the supply of Fly Ash to the Plaintiff.

The Plaintiff therefore has shown that damages may not be adequate in the circumstances of this case. The Plaintiff requires a constant supply of Fly Ash for its manufacturing, and an abrupt cessation of this supply may cause irreparable harm to it. The continuation of its manufacturing business at this stage depends on the supply of the Fly Ash from the Defendant.

(iii) Balance of Convenience 25. For the above reasons, I also find that the balance of convenience lies in favor of granting some of the orders sought by the Plaintiff.

I do not see any harm or prejudice caused to the Defendant if the Plaintiff is be allowed to collect the required Fly Ash as this will not interrupt the Defendant’s core business of generating power.

I further note that as Fly Ash is a by-product of the Defendant's power plant and will be produced regardless of who purchases it, the balance of convenience lies in favour of the Defendant. The Defendant may suffer irreparable harm if it cannot obtain a constant supply of Fly Ash as agreed between the parties. At this juncture, the Plaintiff has shown that it could not obtain the required supply from the available market in Malaysia. The harm that will befall the Plaintiff is far greater than the discontent that the Defendant may face having to entertain the supply of the Fly Ash to the Plaintiff. D. Orders 28. Nonetheless, I find that as the parties are in dispute, this Court should only allow the minimum amount of Fly Ash to be supplied to the Plaintiff, which would be 56% of the Fly Ash produced by the Defendant from the said Plant per month. This is to ensure that the rights of the Plaintiff and the Defendant are preserved pending the outcome of the arbitration.

If the Plaintiff fails to collect the said Fly Ash at the said amount, then the right to collect will automatically cease, as the failure to collect will show that the Plaintiff is not sincere in its attempt to secure the said supply. I opine this is more than fair in the circumstances of this case.

I also award no order as to costs as the parties are in arbitration and the main issue in dispute should be left determined by the arbitration panel. Dated 7th August 2024 Dato’ Indera Mohd Arief Emran bin Arifin Judge High Court of Malaya at Kuala Lumpur NCC 5 Counsel Daniel Bock Jr Wei together with Datuk Jagjit Singh, Dato’ Dr. Abd Shukor Ahmad and Aaron Aiman Thangarajoo for the Plaintiff Messrs. Shukor Baljit & Partners Advocates & Solicitors Crystal Wong together with Soh Zhen Ning and Ang Yi Shan for the