(c) bahawa Defendan Ke-2 diberi kebebasan untuk memfailkan Pembelaannya dalam tempoh masa empat belas (14) hari selepas pendengaran dan pelupusan permohonan ini sekiranya permohonan ini tidak dibenarkan; [4] The learned Sessions Court Judge allowed prayers (b) and (c) above. [5] At this juncture I must emphasise that the Respondent did not file an appeal (or cross-appeal) against the decision of the Sessions Court which did not allow prayer (a) of the Application, that is to strike out the suit (see Douglas Ding Jangan & Ors v Kerajaan Negeri Sarawak & Ors [2021] 4 MLJ 946). For this reason, I did not take into consideration the arguments of the learned counsel for the Respondent regarding the Sessions Court’s decision not to strike out the suit against the Respondent and have confined the arguments only on the issue of the stay which the Sessions Court granted, being the subject matter of this Appeal. [6] I must also add that prayer (b) of the Application was a relief that the Respondent had specifically prayed for in the alternative and having been granted the said prayer cannot now complaint that the Sessions Court and now this Court ought to strike out the suit against the Respondent under prayer (a) of the Application Page 3 of 17 (paragraphs 16 and 76 of the Respondent’s Written Submissions (Enclosure 10). A] BACKGROUND [7] The Appellant filed a claim against the Respondent (2nd Defendants) and the 1st Defendant (Lineclear Motion Pictures Sdn Bhd) (“Lineclear”) at the Sessions Court. [8] The Appellant and Lineclear entered into an agreement called “Film Co-Investment Agreement” dated 28.3.2014 (“Film Agreement”) to, inter alia, the produce films. [9] At the material time, the Respondent was a director and majority shareholder of Lineclear. The Respondent had executed a “Deed of Guarantee” dated 28.3.2014 (“Guarantee”). The Guarantee, inter alia, guarantees the performance of Lineclear under the Film Agreement and indemnifies the Plaintiff against all losses, liabilities, damages, costs and expenses arising out of Lineclear’s failure to perform, inter alia, its obligations under the Film Agreement. [10] The Appellant’s claim against Lineclear and the Respondent as pleaded in its Amended Statement of Claim (“Statement of Claim”) is summarised as follows: i) Against Lineclear - for breach of the Film Agreement where the Appellant has not been presented with any films for its consideration to be produced with Lineclear, leading to a failure on part of the Lineclear to perform its obligations under the Film Agreement. The Appellant has paid RM937,500.00 to Lineclear and is claiming this sum including general damages and costs; ii) Against the Respondent – the Appellant is seeking to recover the RM937,500.00 from the Respondent based on the Guarantee. The failure of Lineclear to perform its obligations under the Film Agreement represents a breach of the terms of Page 4 of 17 the Guarantee on the part of the Respondent, in his failure to ensure such performance by Lineclear. [11] The Film Agreement contains an arbitration agreement and after the present case was filed at the Sessions Court, Lineclear applied to stay proceedings against Lineclear pending reference of the dispute to arbitration pursuant to Section 10 of the Arbitration Act and the stay was granted by the High Court on appeal (“Stay Order”). [12] However, Lineclear is not satisfied with the condition imposed by the High Court in the Stay Order pursuant to Section 10(2) of the Arbitration Act in which Lineclear is restrained from raising the issue of limitation under Section 6 of the Limitation Act 1953 at the arbitral proceedings. Lineclear has since filed an appeal to the Court of Appeal against the Stay Order. [13] Following the Stay Order, arbitral proceedings (“Arbitral Proceedings”) were initiated but have not proceeded to date as Lineclear has not made the payment for the Provisional Advance Deposit. [14] Further, Lineclear was wound up on 8.3.2022. [15] The Appellant’s action against the Respondent would have proceeded at the Sessions Court had it not been for the stay which was granted by the learned Sessions Court Judge being the subject matter of this appeal. B] GROUNDS RELIED ON BY THE RESPONDENT IN THE APPLICATION AND IN THIS APPEAL [16] In the Application and this Appeal the Respondent sought to strike out or alternatively stay the proceedings against him on essentially the following grounds: i) The Appellant’s claim against the Respondent is premature; Page 5 of 17 ii) There would be a multiplicity of proceedings if the Arbitral Proceedings proceeds at the same time with the Court proceedings against the Respondent; and iii) that there is a risk of conflicting decisions in the Arbitral Proceedings and the Court proceedings. C] SESSIONS COURT’S GROUNDS FOR GRANTING THE STAY OF PROCEEDINGS [17] In her grounds of judgment the learned Sessions Court Judge granted the stay of proceedings for the following reasons: i) It was unsafe for the proceedings to proceed. This is stated in paragraph 2.4 of her grounds as follows: “Mahkamah berpendapat bahawa adalah tidak selamat bagi untuk meneruskan tindakan ini terhadap Defendant Kedua sehingga presiding timbang tara antara Plaintif dan Defendan Pertama selesai dan diputuskan.” (own emphasis added) ii) The Appellant’s claim against Lineclear and the Respondent involve the same debt owed by Lineclear and is the main issue. Therefore it is appropriate for the proceedings to be stayed pending the disposal of the Arbitral Proceedings. This can be seen in paragraph 3.3 of the learned Sessions Court’s Judge’s grounds which states: “Mahkamah mendapati bahawa tuntutan Plaintif terhadap Defendan Kedua adalah sama dengan tuntutan Plaintif terhadap Defendan Pertama iaitu jumlah hutang yang tidak dibayar oleh Defendan Pertama kepada Plaintif dan berpendapat bahawa ia merupakan isu utama dan maka dengan itu adalah sesuai keseluruhan presiding di Mahkamah ini ditangguhkan dahulu sementara presiding di Tribunal Timbang Tara selesai dan diputuskan.” (own emphasis added) Page 6 of 17 iii) the Sessions Court has the discretion to grant the stay to avoid the following: “… ketidakkemasan prosiding seperti untuk memanggil saksi-saksi yang sama untuk memberi keterangan, penandaan eksibit yang mungkin akan lari sususan dan masa serta kos semua pihak” (own emphasis added) iv) The learned Sessions Court Judge then concluded as follows: “Adalah jelas bahawa Defendan Pertama adalah Penghutang Prinsipal dan Defendan Kedua merupakan Penghutang Sekunder iaitu penjamin kepada Defendan Pertama dan bertanggungjawab ke atas kegagalan obligasi Defendan Pertama hanya apabila kegagalan obligasi Defendan telah disahkan.” (own emphasis added) [18] It would appear that the issue of the Appellant’s claim against the Respondent being premature and the risk of conflicting decisions in the Arbitral Proceedings and the Sessions Court proceedings were not part of grounds that were relied on by the learned Sessions Court Judge. D] THE LAW AND PRINCIPLES APPLICABLE TO AN APPLICATION FOR STAY OF PROCEEDINGS PENDING REFERENCE TO ARBITRATION [19] It must first be emphasised that unlike in the case of Lineclear, there is no arbitration clause/agreement in the Guarantee. [20] This then gives rise to the issue of what test is to be applied for the granting of a stay against non-parties to an arbitration agreement. [21] In Apex Marble Sdn Bhd & Anor v. Leong Tat Yan [2021] LNS 137 where the Court of Appeal applied the “rare and compelling circumstances” test where it was held as follows: Page 7 of 17 “[28] The threshold that has to be reached to warrant of a stay of proceedings against non-parties pending arbitration, was considered and rightly applied in the case of Jacob and Toralf Consulting Sdn Bhd v. Siemens Industry Sofatware GMbH & Co & Ors [2013] 1 LNS 914 where it was held that the test to be utilized was not that of “special circumstances” but rather the “rare and compelling circumstances” test as enaunciated in Reichhold Norway ASA and another v. Golman Sachs International [2000] 2 All ER 679. [29] In Reichhold (supra), the standard was stated to be: a) invoked in “rare and compelling circumstances”; b) there ought to be very strong reasons for granting such a stay; c) the benefits likely to result from granting such a stay of proceedings must be clearly outweigh and disadvantage to the non-party.” (own emphasis added) [22] However, the Court of Appeal in Protasco Bhd v. Tey Por Yee & Another Appeal [2018] 5 CLJ 299 referred to and analysed the test as applied by the Singapore Court of Appeal in the case of Tomolugen Holdings Ltd A and Another v. Silica Investors L td and Others Appeals [2015] SGCA 57 and held as follows: [47] In allowing the appeals and granting a stay of the court proceedings against non-parties pending arbitration, the Singapore Court of Appeal inter alia, opined that the grant of a stay of court proceedings to non-parties to the arbitration under the inherent jurisdiction of the court ought not, to be relegated to such a high threshold as the “rare and compelling circumstances” test articulated in Reichhold Norway. [48] The decision of the Singapore Court of Appeal in Tomolugen is instructive as it studies the approaches adopted in several Commonwealth jurisdictions prior to arriving at the proper approach to be adopted in Singapore. This therefore affords us a bird’s-eye view of the approach adopted in several other jurisdictions enabling this court to consider the reasoning in these jurisdictions prior to determining the best approach to be taken in these appeals. (own emphasis added) Page 8 of 17 [23] It is not entirely clear whether the Court of Appeal in Protasco (supra) applied the “rare and compelling circumstances” test. However, what is clear is that in the more recent case of Apex Marble (supra) the Court of Appeal had specifically held that the test to be applied for the granting of a stay against non-parties to an arbitration agreement is the “rare and compelling circumstances” test. I, therefore, accept this to be the correct test to be applied in the present case. [24] I will now revert to the grounds relied upon by the Respondent in support of the Application and for opposing this Appeal. E] PREMATURE CLAIM [25] Learned counsel for the Respondent’s submissions (both written and oral) on this issue are lengthy and are tied to the issue of why the suit ought to be struck out. [26] The crux of learned counsel for the Respondent’s argument is that the Appellant’s pleaded case is that the Respondent’s liability under the Guarantee is a secondary obligation which means that the Respondent’s liability is contingent upon the liability of Lineclear being established by the Appellant at the Arbitral Proceedings. [27] Firstly, as I have stated earlier, learned counsel for the Respondent cannot be allowed to submit on this issue as there was no appeal (or cross-appeal) by the Respondent in respect of the Sessions Court’s decision which disallowed prayer (a) of the Application, that is to strike out the suit. [28] Secondly, the net effect of learned counsel for the Respondent’s above argument is to invite this Court to consider the merits of the Appellant’s claim when the suit was not struck out but stayed. Page 9 of 17 [29] To entertain learned counsel for the Respondent’s submissions is to delve into the merits of the Appellant’s claim. This, I cannot do as it will tantamount to the Court prejudging the Appellant’s claim. [30] It must be borne in mind that this Appeal before me is in respect of the decision of the Sessions Court granting the stay only. [31] If I were to accept learned counsel for the Respondent’s above submissions then I would have to make a finding or determination that the Appellant’s claim against the Respondent is predicated on liability being first established against Lineclear, the subject matter of the Arbitral Proceedings. [32] The Respondent has not even filed his Defence and as such has not stated his defence(s) against the Appellant’s claim. [33] Without going into the merits of the Appellant’s claim, it is important to set out the position taken by the Appellant on this issue, i.e. whether the Appellant’s claim against the Respondent is dependent upon liability being first establish against Lineclear in the Arbitral Proceedings. The Appellant’s position can be summarised as follows: i) The Appellant’s has a standalone right to seek recourse against the Respondent and is not based on liability being first established against Lineclear. ii) In this regard, the terms of the Guarantee include an indemnity which entitles the Appellant to take action against the Respondent independent of its claim against Lineclear. It is for the Court to determine if the Respondent is liable to the Appellant. iii) The outcome of the Arbitral Proceedings is irrelevant because it will not bind the Respondent. [34] In his submissions, learned counsel for the Respondent went into great lengths to examine and analyse almost every minute detail of the Appellant’s claim to essentially show that the Respondent’s liability is secondary and subject to the Appellant proving its claim against Lineclear. Page 10 of 17 [35] This then elicited a response by learned counsel for the Appellant to defend its position as stated above. [36] Again, I reiterate and emphasise that if I were to entertain learned counsel for the Respondent’s arguments on this issue it would tantamount to determining the merits of the Appellant’s case against the Respondent when the Respondent has not even filed its Defence. [37] I therefore agree with learned counsel for the Appellant’s submission that if the position, after trial of the matter, is that the Respondent’s liability is secondary and he cannot be liable to the Appellant without Lineclear’s liability being established, then this is a decision for the Court to make after considering the documents and witnesses. [38] In other words, since the Appellant’s position is that it’s claim against the Respondent can proceed independently of the Arbitral Proceedings against Lineclear, then it is up to the Appellant to prove its case. [39] Taking this issue further, in the event the Respondent is successful in proving at the trial that the Appellant’s claim is secondary and subject to liability being established against Lineclear then: i) if the Arbitral Proceedings have not concluded and liability against the Lineclear has not (or has not yet) been established then the Appellant’s claim would fail as it has failed to prove its case against the Respondent; or ii) if the Arbitral Proceedings have concluded and liability is established against Lineclear at the Arbitral Proceedings then the Appellant would have proven its case against the Respondent. [40] In either scenario, there is no reason why the Appellant’s claim against the Respondent cannot proceed simultaneously with the Arbitral Proceedings. It is also interesting to note that the Respondent has not taken the position that it would concede to the Appellant’s claim against him should the Appellant succeed in its claim against Lineclear in the Arbitral Proceedings. Page 11 of 17 [41] Unfortunately, though the learned Sessions Court Judge did not strike out the suit and her decision to grant the stay was not based on the argument that the Appellant’s claim is premature, however, she proceeded to make a determination on the merits of the Appellant’s case by finding that the Appellant’s case against the Respondent is dependant upon liability being first established against Lineclear. [42] With respect, the learned Sessions Court Judge had erred in making this finding as she has prejudged the Appellant’s claim. [43] Her decision prevents the Appellant from proceeding to trial to prove its claim against the Respondent. This also raises the question as to whether the Appellant can still proceed with its case against the Respondent if liability is not established against Lineclear in the Arbitral Proceedings. [44] Whether the Guarantee includes an indemnity, separate and distinct and enforceable against the Respondent with or without Lineclear is a triable issue. [45] In the circumstances, it is unnecessary for me to analyse the cases cited by both learned counsel for the Respondent and Appellant on whether the Guarantee includes and indemnity or whether it would not make a difference if the Guarantee includes an indemnity as the Appellant’s claim would still depend on liability being proven against Lineclear. These are issues for trial and ought not be determined at this stage. [46] As such, I conclude that the Appellant’s claim against the Respondent is not premature. F] MULTIPLICITY [47] The issue of multiplicity of proceedings is connected to the above issue on whether the Appellant’s claim against the Respondent is premature. Page 12 of 17 [48] Multiplicity of proceedings does not arise in this case and I agree with learned counsel for the Appellant submissions on this issue in that: i) It is the Appellant’s position that it’s claim against the Respondent can proceed and be proven with or without Lineclear. The Appellant should be allowed to prove its case against the Respondent at the trial of this matter. I reiterate paragraphs 36 to 44 above that at this stage the Court should not decide the merits of the Appellant’s claim against the Respondent. ii) The Appellant’s case against the Respondent (before the Sessions Court) is whether the Respondent has breached the terms of the Guarantee whereas in the Arbitral Proceedings the issue is whether there has been a breach of the Film Agreement by Lineclear and/or whether there is a total failure of consideration. iii) The Appellant’s claim against the Respondent can proceed independently of the Appellant’s claim against Lineclear in the Arbitral Proceedings. iv) The arbitral decision involving Lineclear will not bind the Court or the Respondent who is not a party to the Arbitral Proceedings. Again, it bears repeating that there is no arbitration agreement/clause in the Guarantee. Being a non-party to the Arbitral Proceedings, any award the arbitral tribunal makes will not bind the Respondent (LNH Landscaping Sdn Bhd v. TKH Construction Sdn Bhd and other appeals [2021] MLJU 761; Vertex Superieur Sdn Bhd & Anor v. Shell Malaysia Trading Sdn Bhd [2021] MLJU 1531; Protasco (supra)). v) The fact that the claimed sum against Lineclear and the Respondent is the same does not render the action against the Respondent not capable of being determined by the court. The Sessions Court has misconstrued a cause of action with a remedy. The Appellant is entitled to seek the same remedy from different causes of action. Page 13 of 17 vi) There is no evidence put forward before the Court to show that the Court proceedings and the Arbitral Proceedings would involve the same cause papers, documents, witnesses and facts. G] CONFLICTING DECISIONS [49] The learned Sessions Court Judge, in her grounds of judgment, held that the decision of the Arbitral Proceedings will impact the court proceedings against the Respondent, however, her grounds are silent on whether there will or could be conflicting decisions between the Arbitral Proceedings and the Sessions Court. [50] As stated earlier, the issues that the Arbitral Proceedings will deal with and the issues that that the Sessions Court is to determine are different. The Arbitral Proceedings can proceed concurrently with the Court proceedings. [51] The decision of the arbitral tribunal involving Lineclear will not bind the Court or the Respondent who is not a party to the Arbitral Proceedings and neither has the Respondent, in applying for a stay, agreed to be bound by the decision of the Arbitral Proceedings in the case before the Sessions Court. [52] I had also dealt with these issues earlier and reiterate paragraphs 39 and 48 above. In any event, there would not be any conflicting decisions. [53] The Respondent is not precluded from raising, at trial, that the liability of the Respondent is secondary under the Guarantee and is subject to liability being first established against Lineclear. H] DELAY AND INDEFINITE STAY [54] I have also taken into account that if a stay is granted it will be for an indefinite period of time. Page 14 of 17 [55] This is an important factor and was considered in Tomolugen Holdings (supra) and Protasco (supra). In both cases, the Singapore as well as our Court of Appeal had considered the delay issue and the period of the stay applied for seriously which were weighed in their decisions. [56] On this issue, the winding up of Linear was brought to my attention through fresh evidence which was admitted via Court Order dated 20.6.2022. This coupled with Lineclear’s appeal against the High Court’s Stay Order will inevitably delay the Arbitral Proceedings. [57] In this regard the following passage by Justice Mohd Zawawi Salleh (as he then was) speaking for the Court of Appeal in the case of Jagdis Singh a/l Banta Singh v. Outlet Rank (M) Sdn Bhd [2013] 4 MLJ 213 on some of the principles to be considered in applications for stay to be instructive: “(e) it is important to stress that initiation of a suit in a court of law demands the suit will be heard expeditiously and completed without any inhibition midway. Therefore, where an application for stay of proceedings is intended to merely stop or suspend the proceedings, it will be refused. Some applicants, on seeing the weakness of their client’s case, would resort to application for stay and thereby waste the time of the other party and the court. …..” [58] Adding this to the other considerations stated earlier would go against the granting of a stay. I] CONCLUSION [59] Whether it is based on the “rare and compelling circumstances” test or the traditional special circumstances test, weighing all the relevant factors, I did not find that either test has been satisfied to warrant the grant of a stay as prayed for by the Respondent. With respect, the learned Sessions Court Judge had erred in granting the stay and this justifies me to intervene in that decision. Page 15 of 17 [60] I also note that the Sessions Court’s Order dated 8.11.2021 granting the stay (“Order”) allowed prayer (b) of the Application which states, “digantungkan sementara menunggu rujukan pertikaian ke timbang tara” which is very unusual as this is not a stay under Section 10 of the Arbitration Act but made pursuant to the inherent jurisdiction of the Court. The Order appears have granted a stay pending reference of the dispute (between the Appellant and the Respondent) to arbitration. The dispute between the Appellant and the Respondent cannot be referred to arbitration as there is no arbitration agreement in the Guarantee between the Appellant and the Respondent. Thus, such an order cannot be granted under the circumstances even if the Respondent satisfies the “rare and compelling circumstances” test or the special circumstances test. [61] For the reasons stated above, I allowed this Appeal and set aside the Sessions Court’s Order dated 8.11.2021 with costs of RM15,000/- in favour of the Appellant. Dated this 19th day of December, 2022 -SGD- (WAN MUHAMMAD AMIN BIN WAN YAHYA) Judicial Commissioner High Court of Malaya, Kuala Lumpur (Commercial Division (NCC 3)) Page 16 of 17 COUNSEL FOR THE APPELLANT K. Shanti Mogan (Denise Choo together with her) Messrs Shearn Delamore & Co Tingkat 7, Wisma Hamzah-Kwong Hing No.1, Leboh Ampang 50100 Kuala Lumpur. Tel: 03-2027 2921 / 2751/2744 Email: shanti@shearndelamore.com COUNSEL FOR THE RESPONDENT Faisal Moideen (Julian Ch’ng together with him) Messrs Moideen & Max Suite B-05-12, Gateway Kiaramas No.1, Jalan Desa Kiara, Mont Kiara 50480 Kuala Lumpur Tel: 03-62059288 / 9388 Email: general@moideenmax.com LEGISLATION / RULES CITED Arbitration Act 2005 ▪ Section 10 ▪ Section 10(2) Limitation Act 1953 ▪ Section 6 Page 17 of 17 CASES CITED