(ii) in connection with the making of the award”. 50 10 5 [9] In a recent case of Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd [2016] 2 MLJ 697, the Court of Appeal dismissed the appeal. The facts of the case have been summarised by the editors of MLJ at pp.697- 698 as follows: “The appellant had engaged the respondent to carry out a warehouse 10 extension project. After the respondent had completed 70% of the work, the appellant terminated the contract and appointed third-party contractors to complete the remaining 30%. When the parties arbitrated their dispute over the termination, the appellant counterclaimed for RM357,419.80 it had allegedly incurred in completing the balance of works left unfinished by the 15 respondent. The arbitral tribunal (‘the tribunal’) found the appellant had acted reasonably and fairly in terminating the contract and had the right to appoint third-party contractors to complete the remaining 30% of the project. However, since there was lack of evidence to prove the amount that was paid to the third-party contractors, and since it was 20 undisputed that the balance 30% of the contract price was RM260,470.20, the tribunal decided it was fair to award the appellant the said contract price plus 20% of that figure for ‘inflation’ making the total RM312,564.24. The respondent applied to the High Court pursuant to ss 37 and 42 of the Arbitration Act 2005 (‘the Act’) to challenge the tribunal’s award contending 25 that the issue of ‘inflation’ decided upon by the tribunal was never pleaded or claimed or raised by the parties at any time nor was it one the tribunal had called upon the parties to address. Accordingly, the respondent contended, the tribunal had acted beyond its jurisdiction and breached the rules of natural justice. The respondent contended that the award 30 contravened ss 37(1)(a)(iv) and 37(1)(b) of the Act and raised valid questions of law under s 42 of that Act. The High Court set aside the tribunal’s decision on the counterclaim holding that as there was no proof to support the counterclaim, the tribunal should have dismissed it and not proceeded on its own accord to determine what was a ‘fair amount’ to be 35 awarded. The High Court held that as the respondent sought to set aside only that part of the award relating to the counterclaim, it had wrongly invoked s 37(1)(a)(iv), instead of s 37(1)(a)(v) of the Act. As to the challenge under s 42 of the Act, the High Court held that only two out of the four questions of law raised were real, proper and valid. As the tribunal 40 failed to explain where it sourced the factor of ‘inflation’ or the value of that factor and also failed to invite the parties to address the tribunal on that issue, it had exceeded the limits of its jurisdiction and breached the rules of fair play and natural justice resulting in an unlawful and unconscionable decision that required the court’s intervention. The appellant’s instant 45 appeal was against the quantum of its counterclaim. There was no appeal by the respondent”. 50 11 5 [10] In an instructive judgment impinging on ss.37 and 42 of the AA 2005, His Lordship Hamid Sultan JCA in a supporting judgment at 713 [28] and [29], 715[30] and [31] and 716[33] and [34], held - “[28] In challenging an award related to domestic arbitration it has now become a common practice to file the application under ss 37 as well 10 as 42. There are case laws to support such an approach. However, for proper management of issues under ss 37 and 42, the application must be separately dealt with as the jurisprudence involved in dealing with the applications varies. I will explain this further in the judgment. 15 [29] An application to set aside an award under s 37 largely deals with issues relating to the award making process and has nothing to do with error of facts and/or law on the face of record unless the exception applies; such as public policy. An application under s 42 has nothing to do with the award making process but has everything to do with the 20 award per se and error of law on the face of record which error substantially affects the rights of one or more of the parties. The distinction between ss 37 and 42 is that like of an apple and an orange. Sections 37 and 42 read as follows: 25 … [30] For example, in this case the complaint by one of the parties was that the learned arbitrators when dealing with damages proceeded on the frolic of their own without inviting submission and awarded damages. 30 Such a breach will not fall under s 42 of the AA 2005 but will fall under s 37(1)(a)(iv) and/or (v), etc, as the complaint is that the affected party was unable to present the case and it may follow that the award contains decisions on matters beyond the scope of submission to the arbitration or breach of natural justice, etc. 35 [31] The threshold to satisfy under s 37 is very low (though the courts are slow in setting aside the award) and upon proof if successful, the court has an option to send back the matter to the arbitral tribunal to eliminate the grounds for setting aside, as set out in s 37(6). This was 40 not done in this case. To put it in another way when a party to the arbitration complains of breach related to s 37(1)(a)(iv) and/or (v) etc, he must invite the courts attention to s 37(6) and cannot rely on s 42 as it will be an abuse of process, as he is relying on omission or excess of jurisdiction which is covered under s 37 and not s 42 of the AA 2005. 45 [32] In addition, once the applicant had chosen to rely on s 37 grounds as stated earlier that will mitigate a no-case under s 42. I do not think it will be a proper exercise of judicial power to entertain an application under s 42 when the applicant is relying on the same facts as advocated for a s 37 50 12 application. In my considered view, a trial court ought not to entertain an 5 application under s 42 at all. I will explain this further. [33] The threshold to satisfy s 42 requirements is very high and I will say in consequence of case laws, it is extremely high. That is to say, if a party cannot succeed under s 37, on the same facts and complaint the 10 general jurisprudence will dictate an application under s 42 will be futile as s 37 relates to arbitral process and s 42 relates to arbitral award. [34] Before the trial court hears an application under s 42, it must take cognisance of some well established principles, which the court has 15 considered under ss 23 and 24 of the Arbitration Act 1952 under the old regime as well as the new regime which advocates court should not readily intervene in arbitration award unless there is a patent injustice”. (Emphasis added) 20 [11] In the same case, His Lordship Prasad Abraham JCA (delivering the judgment of the Court), on the exercise of power under s.37 AA 2005, opined at 701-702 [2], [3] and [4] as follows: “[2] In dealing with the defendant’s counterclaim, the arbitral tribunal in this 25 case found the defendant was not entitled to recover any loss or damages arising from the termination of the contract. The arbitral tribunal found absence of evidence to support its counterclaim. The arbitral tribunal then went on to say that it would proceed to use the factor of inflation set at 20% being a reasonable sum and the arbitral tribunal proceeded 30 to find on the following basis. The balance of 30% of the contract price RM260,470.20 add 20% inflation RM52,094.04 = RM312,564.24. [3] This issue was not brought up by the parties nor were the parties alerted to it nor invited to address that point and therefore the award in 35 our view contains decisions on matters beyond the scope of the submission to arbitration in breach of ss 37(1)(a)(v) and 37(1)(b) of the Arbitration Act 2005 (‘the Act’) and raises question of law under s 42 of the said Act. 40 [4] The learned judge dealt fairly exhaustively and methodically the challenge mounted by the plaintiff in particular relation to ss 37 and 42 of the said Act. Section 34 (art 34(1) of the Model Law) which allows recourse to court against an arbitral award may only be made by an application to set aside the same. We agree with the learned judge that s 37(1)(a)(v) 45 would constitute the relevant provision to apply in the light of the challenge being mounted by plaintiff. It is our view that s 37 only allows the court to set aside the award save for the limited exception under s 37(3) of the said Act. As the learned judge exercised her powers to vary the arbitral award, the court could only proceed under s 42 of the said Act (see 50 13 the decision of this court in Kerajaan Malaysia v Perwira Bintang Holdings 5 Sdn Bhd [2015] 6 MLJ 126; [2015] 1 CLJ 617)”. (Emphasis added) [12] For purposes of my decision, I shall only focus on s.37(1)(a)(iv) and s.37(2)(b) AA 2005 as I find it is sufficient to dispose off the 10 Plaintiff’s appeals without the need to deliberate on s.42 AA 2005. With regard to the s.37(1)(a)(iv) AA 2005 argument, it is necessary to reproduce the relevant portion of the Award of the Arbitrator (exh.LCS- 2 at pp.99-101 Plaintiff’s Affidavit in Support) which reads as follows: “Examining the Pleadings to determining the Issues 15 The role of pleadings in an arbitral proceeding is synonymous with the role it plays in the court. In order to determine if an arbitral tribunal has the jurisdiction to make an award in respect of a particular dispute it is necessary to refer to the pleaded case of each party to the arbitration and 20 the issues of law and fact raised in the pleadings to see whether they encompass that dispute. (See PT Prime International Development v Kempinski Hotels SA [2012] 4 SLR 98 as summarized by Gerald Chien-Yi Kuppusamy in his paper The Role of Pleadings in determining an Arbitrator’s Mandate (2013) 25 SAcLJ at 331). 25 It is clear from paragraphs 5 and 6 of the Claimant’s Statement of Claim that the Claimant’s cause of action is based entirely on the existence of the Collateral Agreement as pleaded in paragraph 5. 30 Essentially the Claimant’s pleaded case is to “recoup and recover the balance sum of RM2,140,000.00 through subsequent award of contract for planning and design works pursuant to the Settlement Agreement”. The issue that this Arbitral Tribunal has to decide first and foremost is therefore whether the Collateral Agreement has been proved on a balance of 35 probability. Whether the Pleadings disclosed a cause of action on Clause 4 per se A cursory reading of paragraph 6.2 of the pleadings by its use of the 40 conjunction “and/or” tends to suggest that an alternative claim under Clause 4 per se may be intended. It may therefore be necessary for completeness to examine whether an alternative cause of action is also intended and if so, whether it is sufficient to sustain an action under Clause 4 per se – for an arbitral tribunal must confine its jurisdiction to the 45 questions raised in the pleadings and is liable to have its award set aside if it exceeds its jurisdiction by deciding on questions not pleaded. (See Court 14 of Appeal Singapore in Malayan Insurance Co Inc v Chek Brothers 5 Construction Co. [1971-1973] SLR (R) 550.). A careful examination of the letter dated 18/07/2013, as stated in Paragraph 6.2 which led the Claimant to file this claim indicates clearly that its intention was to “recoup the amount of RM2,140,000.00” irrefutably 10 pointing to a cause of action under the Collateral Agreement as pleaded and not under Clause 4 per se. Had it been the intention of the Claimant to plead an alternative cause of action based on Clause 4 per se, it has to plead the particulars of the 15 breach under Clause 4 in clear terms independent of facts it relied on to support its claim under the Collateral Agreement. No such particulars of such a breach is pleaded, nor was there a submission on this point. Having scrutinized Paragraphs 6.2 and 6.3 of the Claimant’s Statement of 20 Claim, it is clear that they do not raise an alternative cause of action based on the terms in Clause 4 of the Settlement Agreement. The Issues 25 The issues that this Arbitral Tribunal has to decide will have to be confined to whether the Collateral Agreement as pleaded exists; and if it does, whether there is a breach of the Collateral Agreement as pleaded to enable an order of specific performance and/or damages to be granted to the Claimant”. 30 [12.1] The learned Arbitrator made the following finding (exh.LCS-2 at p.108 Plaintiff’s Affidavit in Support) which reads as follows: “Finding 35 It is clear that the Settlement Agreement settles all the disputes encountered by the Parties pertaining to the Purchase Agreement but left in its wake an entirely new one under Clause 4. However, the Claimant’s claim is not based on the Settlement Agreement under Clause 4 but on the Collateral Agreement which emanates from the Settlement Agreement and 40 which this Arbitral Tribunal has found not to have existed. It follows therefore the Claimant’s claim for specific performance and or compensation in lieu as pleaded has to be disallowed with costs”. 45 [13] In submission the Defendant argued -