Rzh Setia Jaya Sdn Bhd (in Liquidation) v Sime Darby Energy Solutions Sdn Bhd (BA-24C(ARB)-8-08/2023)

(i). OS No. BA-24C(ARB)-7-06/2023 (Setting Aside OS) was filed by SIME DARBY ENERGY SOLUTIONS SDN BHD (SDES) to set aside the Award pursuant to Section 37 of Arbitration Act 2005; and

(ii). OS No. BA-24C-8-08/2023 (Enforcement OS) was filed by RZH SETIA JAYA SDN BHD (IN LIQUIDATION) (RZH) against SDES for leave of court to enforce the Award pursuant to Section 38 Arbitration Act 2005. [2] As both these OSs are related to the Award, directions were given for both these suits to be heard together and the same was agreed by the parties. [3] Upon concluding all the filing of all related affidavits and submissions, this court had pronounced its decision for both the suits on 28.2.2024. Being dissatisfied with the decision of this court, SDES has filed a Notice of Appeal at the Court of Appeal, for which this Grounds of Judgment is written. B. BRIEF BACKGROUND [4] The dispute between the parties concerns a project known as “Menyiapkan Baki Kerja Projek Pembersihan Dan Pengindahan Sg. Melaka, Melaka Parcel 2 – Pakej 1 (Contract Reference No.: JPS/IP/SG/03/2015)” (“Project”) by the Government of Malaysia, under the Jabatan Pengairan dan Saliran (“Employer”). [5] In February 2012, the Employer awarded the Project to Sinnaiyah & Sons Sdn Bhd (“Sinnaiyah”) who had then appointed SDES as one of its Subcontractors to carry out parts of the works under the Project. The Employer had subsequently terminated the contract with Sinnaiyah on 10.9.2015 with some remaining work of the Project being incomplete. [6] The Employer accepted RZH’s tender to complete the Project by way of the “Employer’s Acceptance of Tender” dated 19.10.2016 (“Main Contract”). RZH then had appointed SDES by way of Letter of Award for Remaining Works for Stormwater Treatment Plant Only (Reference No.: RZH/MRB/LA/2016/02-SDOE) under the Project dated 27.10.2016 (“Subcontract”) as its Subcontractor to carry out works pursuant to the terms and conditions therein. Pursuant to clause 4.1 of the Subcontract, the works to be completed in accordance with the following timeline: Commencement Date: 16.11.2016 Completion Date: 15.5.2017 [7] There is no specific clause which provides for Extension of Time (“EOT”) but in accordance to Clause 5.1 of the Subcontract, the Liquidated Ascertained Damages (“LAD”) of 0.1% of the Subcontract Sum per calendar day or RM1,000.00 per calendar day whichever higher, shall be imposed. “ 5. LIQUIDATED, ASCERTAINED DAMAGES AND SPECIAL-CONDITION

5.1. If the Sub-Contractor failed to complete the Sub-Contract Works or any part thereof within the Completion Date stated in Clause 4.1 thereof, then the Liquidated and Ascertained Damages of 0.1% of Sub-Contract Sum per calendar day or Ringgit Malaysia: One Thousand Only (RM1,000.00) per calendar day whichever higher shall be imposed.” [8] On 2.8.2019 SDES terminated the Subcontract due to the breach of Clause 8 of the LOA and had commenced Adjudication Proceedings against RZH and had been awarded a sum of RM1,806,538.76 (Adjudication Sum) through the Adjudication Decision dated 31.10.2019 (AD). Due to failure to pay the Adjudicated Sum, SDES had wound up RZH on 7.12.2021. C. ARBITRATION PROCEEDINGS [9] In 2020, RZH had commenced an Arbitration Proceeding by serving a Notice of Arbitration dated 25.5.2020 to SDES. [10] The Award dated 22.5.2023 by the Arbitrator, Elaine Yap Chin Gaik awarded in favour of RZH against SDES as follows (RZH as the Claimant and SDES as the Respondent): Claim by the Defendant Prayer in Amended SOC Description Amount Outcome H.1 Liquidated Ascertained Damages 3,745,000.00 Allowed H.2 Alternative to [1]. Damages to be assessed 1,912,716.65 Dismissed H.3 Loss for engaging 3rd party Subcontractors 1,646,971.44 Dismissed H.4 General damages - Dismissed H.5 Exemplary and/or aggravated damages - Dismissed H.6 Declaration that the Plaintiff indemnifies the Defendant for any loses, claims or otherwise arising from any breach, non-performance by the Plaintiff, their servants or agents of any provision of the Subcontract which affects the performance of the Defendant under the Main Contract - Dismissed H.7 Setting aside of the Adjudication Decision dated 31.10.2019 - Not necessary H.8 Alternatively, dismissal of the Plaintiff’s claims under Adjudication No. ADJ-2546-2019 - Not necessary H.9 Interest - See below H.10 Costs See below Principal amounts recoverable by the Defendant from the Plaintiff 3,745,000.00 Counterclaim by the Plaintiff Prayer in Amended SOC Description Amount Outcome 70(1) Balance of Certificate Claim No. 1 to 16 1,255,794,.00 Allowed 70(2) Non-certified Progress Claim No. 17 and 18 1,181,083.78 Partially allowed for 260,222.00 70(3) Non-certified Progress Claim No. 19 (Revised) 363,591.00 70(4) Variation Order 420,192.24 Partially allowed 80,631.76 70(5)(a)-

Remeasurement works 60,150.21 Dismissed 70(6) Missing items at site 116,943.20 Dismissed 70(7) Security Guard at site 55,400.66 Dismissed 70(8) Retention Sum 266,853.09 Allowed 70A Loss of profit by the removal of the three job scopes - Dismissed 71-74 Interest on 70(1)-(2) as at 31.02.2019 - See below 75-76 Interest on registered Adjudication Decision (Judgement Sum) 142,367.41 See below 77 Continuing interest on A70(1)-70(8) - See below 78(1)-(3) Adjudication costs 122,020.62 Dismissed 79-81 Interest on 78(1) to (3) - Dismissed 82 Cost of arbitration - See below 83 Compound interest on costs - See below Principal amounts recoverable by the Plaintiff from the Defendant 1,863,501.48 Costs Description Amount Arbitrator’s Fees & Service Tax 196,706.35 AIAC’s Administrator Fees & Service Tax 43,710.62

150.00 Legal Fees 100,000.00 Transcribing Costs 7,591.40 AIAC Room Booking 18,934.25 Advance Preliminary Deposit paid by the Plaintiff (-) 94,473.10 TOTAL 272,619.52 As such, it is ordered that the net sum payable by the Plaintiff to the Defendant including costs is RM2,154,118.04. “Operative Final Award :

The Respondent shall be liable to indemnify the Claimant for any losses, claims or otherwise arising from any breach, non-performance by the Respondent, their servants or agents of any provision of the Sub-Contract evidenced by the Letter of Award (Ref. No. RZH/MRB/LA/2016/02-SDOE) dated 27-10-2016 between the parties which affects the performance of the Claimant under the corresponding Main Contract dated 19-10-2016 between Jabatan Pengairan dan Saliran and the Claimant, in respect of the project known as “Menyiapkan Baki Kerja Projek Pembersihan Dan Pengindahan Sg. Melaka, Melaka Parcel 2- Pakej 1 at Melaka (Kontrak No.: JPS/IP/SG/03/2015)”;

The Respondent shall pay to the Claimant the sum RM1,881,498.52 within 14 days from the date of this Award;

The Respondent shall pay to the Claimant costs of this arbitration in the sum RM272,619.52 within 14 days from the date of this Award;

Interest on all sums payable under this Award shall accrue at the rate of 5% per annum from the date of this Award until full payment is made.” D. GROUNDS OF APPLICATION TO SET ASIDE THE AWARD I. Section 37(1)(b)(ii) Arbitration Act 2005 [11] SDES had file the Setting Aside OS against RZH on the following grounds being in conflict of Public Policy of Malaysia pursuant to Section 37(1)(b)(ii) Arbitration Act 2005: i. The Arbitrator had decided that since there is no express extension of time (EOT) clause, no request for EOT can be made. This findings by the Arbitrator can be harmful to the subcontractors’ position in the construction industry and will give rise for unreasonable LAD claims to be made against them; ii. The Arbitrator had accepted the 1st EOT request conceded by RZH retrospectively on 10.7.2018 for the period from 15.5.2017 to 14.6.2017. Should retrospective approvals be a norm in the construction industry; iii. A retrospective approval given is against public policy as this would allow time at large as in this case when RZH failed to set a completion date after the expiry of the 1st EOT on 14.6.2017; iv. In view of RZH’s failure to set a completion date and by the Arbitrator’s findings that the completion date is 14.7.2017, has RZH left time at large? v. Can the Arbitrator rely on the 1st EOT date of 14.7.2017 as the completion date when she had decided that no EOT can be applied for without an express EOT clause in the contract? vi. The Arbitrator had failed to consider the 7 EOT (ending on 20.1.2020) which were given by the Employer to RZH; vii. The Arbitrator had ruled that it is the burden of SDES to prove the delay and also the acts of prevention by RZH in the delay occurred; viii. The Arbitrator had failed to consider that when the original contract sum is reduced, then the LAD calculation should be based on the lower sum and not the original sum; ix. Since the Arbitrator had rejected the claims for variation order (VO) and remeasurement on the basis that there were no written instructions, it is against public policy that RZH and the Employer had been unjustly enriched from SDES works; and x. The Arbitrator had decided that SDES has the responsibility to prepare the Delay Report Analysis. II. Section 37(2)(b)(i) & (ii) Arbitration Act 2005 [12] It is also SDES’s position that there has been a breach of Natural Justice in the Award pursuant to Section 37(2)(b)(i) & (ii) of Arbitration Act 2005 on the following grounds: i. The Arbitrator had decided that since there is no express EOT clause, no request for EOT can be made; ii. The Arbitrator had been inconsistent in accepting 14.6.2017 as the completion date when she had decided that no EOT can be applied for; iii. The Arbitrator had failed to explain and justify as to why the LAD claim was from 5.12.2017 to 24.5.2019; iv. The Arbitrator had failed to justify and explain which scope of works of SDES which were considered for the LAD calculation and whether the 3 scope of works which had been removed were still included in those dates; v. The Arbitrator had decided that SDES had not produced any authority to justify time at large despite 2 authorities were cited; vi. The Arbitrator had failed to consider that RZH had not claimed for LAD in the Interim Payment Certificates or had not issued a Certificate of Non-Completion but had allowed the LAD claim in total; vii. The Arbitrator had failed to consider that RZH had not suffered an estimated gross loss of RM3,745,000.00 as there were no documentary evidence or witnesses to justify these losses; viii. The Arbitrator had failed to consider that RZH had committed a serious breach of Clause 8 of the LOA when RZH had failed to pay SDES the sums owed for Interim Payment Certificate Nos. 5- 16; ix. The Arbitrator had failed to consider that the acts of prevention were intentionally done by RZH which had caused undue delay in obtaining approval from the Employer by RZH. This is in breach of Clause 22 of the LOA; x. Although SDES had cited Abbey Developments Limited v PP Brickwork Limited (2003) EWHC as authority to substantiate its claim as to why the 3 scope of works which had been removed from SDES and given to 3rd party contractors should not have been done so by RZH, the Arbitrator had decided that SDES had failed to produce any authority; xi. The Arbitrator had decided that SDES had failed to produce any expert evidence; xii. The Arbitrator had failed to consider that the claim for “Missing Items” had been proven by SDES by way of a police report and correspondences between parties; xiii. The Arbitrator had failed to consider that the condition for a Bumiputra Contractor participation is new; xiv. The Arbitrator had decided that SDES failed to handover the project site to RZH; and xv. The Arbitrator had failed to consider that the alter ego of the project is the Director of Hektar Juara Sdn. Bhd i.e the Superintendent Officer (SO) who was also RZH’s witness at the Arbitration Proceedings. E. SDES’S SUBMISSION Conflict with the Public Policy of Malaysia pursuant to Section 37(1)(b)(ii) Arbitration Act 2005: a. EOT – Based on paragraphs 9 (i), (ii), (iv), (v) and (vi) hereinabove [13] According to SDES, deciding that the parties cannot file for EOT would be against public policy because it would hurt the subcontractor's standing in the construction industry and will result in irrational LAD claims against them. In relation to this, it is SDES’s position that EOT is an implied term in the absence of an express provision in the Subcontract. In order to substantiate this argument, SDES had referred to the case of Era Kemuncak Jaya (M) Sdn Bhd V. Tenaga Switchgear Sdn Bhd (2021) 1 LNS 1570 (the Era Kemuncak case) wherein Wong Kian Kheong J (as he was then) held that: “[57] I opine that there is no requirement for the Plaintiff to apply for an EOT before the Defendant’s Implied Right can be exercised. This is because even if the Plaintiff has not applied for an EOT, the Defendant’s Implied Right can still be exercised as the Defendant sees fit.” [14] As such, it is SDES’s argument that although there is no express clause on EOT, by virtue of the Era Kemuncak case, SDES has the implied right to apply for the same from RZH. The Arbitrator’s decision that no EOT can be applied for is not in line with the Era Kemuncak case. [15] Although the Arbitrator had decided that no EOT can be applied for, yet she had taken the 1st EOT date of 14.7.2017 as the new completion date. By her accepting the 1st EOT date she had been inconsistent. [16] SDES also submits that since the 1st EOT dated 14.6.2017 was accepted as the new completion date and since no other EOT request was considered subsequently, time has become at large. [17] SDES submits that since RZH was granted 7 EOT by the Employer, it should also grant the same to SDES. By not doing so, it is a violation of public policy and it has caused ambiguity and oppression on the subcontractors. b. Delay and LAD - Based on paragraphs 9 (vii), (viii) & (x) hereinabove [18] Although SDES's expert witness confirmed that parties seeking for LAD must prove the delay, the Arbitrator determined that the burden of proof rested with SDES and not with RZH. [19] SDES refers to the Federal Court case of Cubics Electronics Sdn Bhd (in liquidation) v. Mars Telecommuncations Sdn Bhd

1 LNS 2017 wherein Richard Malanjum CJ held as follows: “(vii) The initial onus lies on the party seeking to enforce a damages clause under s. 75 of the Act to adduce evidence that firstly, there was a breach of contract and that secondly, the contract contains a clause specifying a sum to be paid upon breach. Once these two elements have been established, the innocent party is entitled to receive a sum not exceeding the amount stipulated in the contract irrespective of whether actual damage or loss is proven subject always to the defaulting party proving the unreasonableness of the damages clause including the sum stated therein, if any.” [20] Without justifying whether RZH had proved its LAD claim and despite both the evidence presented and the expert report, the Arbitrator had shifted the burden of proof to establish the delay in order to entitle RZH's LAD claim to SDES. It is SDES’s position that it does not need to demonstrate the delay in RZH's LAD claim but rather, SDES simply needs to demonstrate the acts of prevention and time at large. [21] The Arbitrator also acted in excess of her jurisdiction when she determined that the LAD rate should be based on the RM7,000,000 initial contract value, despite the fact that the Defendant had descoped and devalued SDES's contract to RM4,979,369-00. As a result, it was unfair of her to maintain the LAD claim at an unjustified earlier rate, thereby redefining the terms of the agreement. c. Variation Order (VO) – Based on paragraph 9 (ix) hereinabove [22] Because there were no written instructions, the learned Arbitrator had determined that SDES was not entitled to make claims for VO works. However, all VO works had undergone "Request for Work Inspections" that were attended by the Employer, RZH, and SDES where all pertinent parties had attended, provided reviews and comments, and were aware that the VO tasks were required. The Arbitrator had failed to consider this. [23] As a result of the Arbitrator’s decision in disallowing the claims for VO works, the Employer and RZH had been unjustly enriched. This enrichment is not only unjust but also a conflict of public policy. [24] The Arbitrator dismissed the Plaintiff's claim because the subcontract provided a guaranteed maximum price lump payment of RM7,000,000.00, even though the Defendant had admitted that JPS would pay for the remeasurement activities. It is the Arbitrator’s findings that SDES is not entitled for remeasurement. II, Breach of Natural Justice pursuant to Section 37(2)(b)(i) & (ii): Arbitration Act 2005 [25] SDES’s submission in relation to breach of Natural Justice by the Arbitrator in arriving to her decision is on the basis that the Arbitrator had failed to consider SDES’s claims, arguments and evidences. Areas of dispute under this ground had been listed in SDES’s submission as follows: “156. The Learned Arbitrator had significantly breached the rule of natural justice in making the Decision when she failed to consider amongst others, the following:

the Defendant’s glaring delay in obtaining approvals from JPS;

introduced new requirement after the contract was executed;

New requirement – FAT and Bumi sub-contractors not part of the subcontract;

Defendant’s breach of Clause 8 for non-payment;

No Master Work Program, Main Contract and M&E specifications given to Plaintiff;

Delay in approving EOT 1 and refusal of EOT 2 and EOT 3;

Non-completion of Grease Chamber caused Plaintiff’s M & E works delay;

Interceptor pipe works by Defendant caused Plaintiff’s pump sump to be flooded;

Time was not of essence to the Defendant and JPS;

Additional works such as VO and Remeasurement and Missing Items deliberately dismissed even though Defendant claimed and will be paid by JPS. “ [26] As an overall submission in relation to this ground, it is SDES’s position that the Arbitrator had heard SDES’s arguments on all the above listed issues (listed at paragraph 156 of its submission) but had failed to consider its arguments and that if she had considered SDES’s arguments then the Arbitrator would have reached a different conclusion. F. RZH’S SUBMISSION Allegation of Conflict with Public Policy [27] On the issue of SDES not having the right to apply for EOT where there is no express clause in the Subcontract allowing it to do so, the Arbitrator held that it was not open to her “to imply or incorporate new terms in a written contract without proper basis, the effect of which is to improve the contract which the parties have made for themselves”. [28] Suggesting otherwise, in the absence of any proof or submission from either party, would give the Arbitrator the authority to change the terms of the contract where the parties have decided for whatever reason not to include such conditions on how to request for extension of time. [29] On the issue of time to be at large, it was not pleaded by SDES but was only brought up in its submission. The Arbitrator nevertheless still considered and clarified the issue and held that time does not become large merely because no completion date was fixed after 14.06.2017. In this regard, the Arbitrator held: - “I do not agree with SDES’ submission that time had become at large because no new Completion Date had been fixed by RZH after 14-6- 2017. Since no new Completion Date is fixed, then it simply means that the existing date of completion remains and remained in this case, until SDES issued its notice to terminate the Sub-Contract on 2-8-2019.” (See paragraph 59, page 36 of the Award). [30] RZH submits that this issue of time at large is not within the public interest for it to be a ground for the setting aside of this Award. The assertions of breach of public policy cannot be vague and generalized. [31] SDES did not challenge during the arbitration proceeding the granting of EOT No. 1. SDES had in fact relied on this new date, therefore, SDES is estopped from raising this reason to contend that the Arbitrator was wrong to accept the new date 14.6.2017 as the new completion date. This issue is merely raised in this action as an attempt to reopen an agreed fact. As such, this allegation does not prejudicially affect the parties as being in conflict of public policy. [32] On the issue as to the 7 EOT granted to RZH be given to SDES, the Arbitrator decided as follows: “SDES also highlighted the fact that JPS had granted EOT to RZH, and consequently RZH was ultimately only exposed to 56 days of LAD. As proof of malice however, I find that this fact is not particularly helpful because the scope of the Main Contract was significantly different from the Sub-Contract. No clear parallels were shown as to how the 2 contracts were performed by the parties to mitigate their own loss”. [33] Therefore, on this issue being in conflict with public policy, SDES failed to show how this issue has contravened the fundamental notions and principles of justice by RZH not “sharing” the EOT granted to it by the Employer. [34] On the issue that the Arbitrator had failed to reduce the rate according to the reduced contract sum, Clause 5 of the Subcontract clearly provides that LAD to be imposed at a rate of 0.1% of the Subcontract Sum (RM7,000.00) per day if SDES fails to complete the works within the Completion Date. Since RZH had to descope the works due to the Plaintiff’s delay and is executed pursuant to Clause 6.2 of the Subcontract and clause 6.2 is silent on the value of subcontract given that the works had been taken over by other subcontractors, the learned arbitrator was careful in deciding on this matter in maintaining the value of the subcontract. [35] On the issue of VO and remeasurement claims were not allowed, it is not denied that there was no written instruction from RZH to SDES. Furthermore, evidence was led to show that the purported VO works were not variation works but rather works under the job scope of the Subcontract and as the subcontract is a lump sum contract, there is no need for remeasurement. Therefore, this reason is not in conflict with any public policy. II. Allegation of Breach of Natural Justice [36] RZH submits that the non-granting of EOT had not offended the rule of natural justice but by its contention, SDES has merely reopened the issues that have been decided, which the arguments as stated in its submission as follows: - “ (a) the subcontract has no express clause in allowing EOT;

the learned arbitrator disagreed with the parties that the EOT had been incorporated by way of conduct;

it is not open for the learned arbitrator to simply imply or incorporate new terms in the Subcontract without proper basis;

this is because the right for EOT must be based on the terms of the contract as to what circumstances justify the granting of EOT followed by procedures that must be complied with; and

without any express clause, the Plaintiff has no contractual right to apply for EOT.” [37] On SDES’s allegation that the Arbitrator did not make any clarification as to why the LAD claim is from 05.12.2017 to 24.05.2019, the period 05.12.2017 and 24.05.2019 derived from the Amended Statement of Claim which RZH had pleaded as the period SDES demobilized and abandoned the site work. On this issue, the Arbitrator, in her Award clearly stated as follows: - “In its Amended Statement of Claim, RZH claims that: a) SDES delayed in performing the Subcontract works and had failed to proceed with works regularly and diligently. Despite an extension of time of 205 days granted to SDES, SDES was in delay for 535 days between 5.12.2017 and 24.5.2019.” [38] SDES never pleaded in its case, nor did it adduced any evidence or submission to question the dates of the descoped works fall into. As such, RZH submits that SDES is “confusing the Court by basing such allegations on the breach of natural justice when in fact, such statement is entirely red herring.” [39] On SDES’s allegation that RZH’s claim for LAD was an afterthought as it had not been claimed in the Certificates of Payment, hence by allowing such claim the arbitrator had acted against the natural justice principle, RZH submits on this issue as follows: “(b) The Defendant by not including LAD claim in Certificates of Payment does not amount to waiving its contractual right to impose LAD;

furthermore, the Defendant by way of correspondence to the Plaintiff had given notice claim for LAD, holding the Plaintiff accountable for any delays;

though the LAD claim was not incorporated in Certificates of Payment No. 1 to 16, it had been included in the letters exchanged dated between 01.03.2017 to 09.05.2017; and

by not including LAD claim in Certificates of Payment does not negate the Defendant’s right to claim” [40] On SDES’s allegation that RZH is not entitled for the LAD claim as no documentary evidence or witness statements to substantiate the LAD claim had been produced, RZH submits that Clause 5 of the Subcontract clearly provides for LAD at the rate of 0.1% of the subcontract sum being RM7,000,000.00 per calendar day or RM1,000.00 per calendar day, whichever is higher. Therefore, LAD was calculated at 535 days X RM7,000,000.00 amounting to RM3,745,000.00. [41] On the allegation that RZH had breached Clause 8 of the Subcontract due to non-payment of Certificate of Interim Payment Nos. 5 to 16, this is a non-issue as the Arbitrator had allowed SDES’s counterclaim and awarded RM1,255,794.63 for the balance of Certificate of Interim Payment Nos. 1 to 16 as per the Adjudicator’s decision. [42] On SDES’s allegation that the Arbitrator had concluded that SDES had failed to produce expert evidence to substantiate its allegation that there were acts of prevention by RZH that had caused the delays for which LAD was being claimed by RZH, RZH submits as follows at paragraph 82 of its written submission: “(c) in Paragraph 70 of the Award, the learned arbitrator established that there was no expert evidence provided to prove a critical path analysis leading to sufficient evidence that the delays were attributable to the Defendant;

it was Plaintiff that pleads the delays were attributable to the

this is aligned with the Plaintiff’s expert witness verified in its delay analysis report that the party alleging the delay should bear the burden;

without any evidence, the arbitrator cannot assess the Plaintiff’s claim that the delays were attributable to the Defendant; and

it is in fact the Plaintiff that did not provide accurate evidence to be considered by the arbitrator.” [43] In relation to the ‘missing items’ issue, RZH submits that the Arbitrator had dismissed SDES’s claim due to lack of evidence and the inadequacy in the pleading of facts as to the timeframe during which the said items had disappeared from site. [44] Finally, the issue of the requirement for Bumiputra contractor participation being a new term, RZH submits that it is not so as this requirement is not new. This requirement had no effect on SDES’s cabling and electrical works. G. ISSUES [45] The issues which this court has to determine are clearly as follows: i. whether the Award is in conflict with Public Policy of Malaysia; and or ii. whether the Award is in breach of natural justice. H. THE LAW ON SETTING ASIDE AN ARBITRATION AWARD [46] Section 36 of the Arbitration Act provide as follows: - “An award made by an arbitral tribunal pursuant to an arbitration agreement shall be final and binding on the parties and may be relied upon by any party by way of defence, set-off or otherwise in any proceedings in any court.” [47] The Award is immune from any interference by a court, and it can only be set aside by SDES if it is tainted by defects as outlined in Section 37(1)(a)(i) to (vi) and 37(1)(b) of the Arbitration Act. Section 37(1) and (2) provide as follows: “(1) An award may be set aside by the High Court only if —

the party making the application provides proof that —

a party to the arbitration agreement was under any incapacity;

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereon, under the laws of Malaysia;

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that party's case;

(iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration;

subject to subsection (3), the award contains decisions on matters beyond the scope of the submission to arbitration; or

(vi) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or

the High Court finds that —

the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Malaysia; or

(ii) the award is in conflict with the public policy of Malaysia.

Without limiting the generality of subparagraph (1)(b)(ii), an award is in conflict with the public policy of Malaysia where —

the making of the award was induced or affected by fraud or corruption; or

a breach of the rules of natural justice occurred —

during the arbitral proceedings; or

(ii) in connection with the making of the award.” [48] The Federal Court case of Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd & Another Appeal (supra) [2021] 1 MLJ 1, provides the proper way for court to decide as to whether an award should be set aside on the ground that it is alleged to be conflicting with public policy: “[142] The grounds enumerated in s 37 need to be construed narrowly as they represent exceptions to the finality of arbitration awards (s 36). This is to avoid devaluing the arbitration agreement that arbitral awards are final and binding and also to preserve the autonomy of the forum selected by the parties by minimising judicial interference in arbitral awards: Jan De Nul. [143] This narrow and restrictive definition is important in Jan De Nul interpreted as only encompassing violations of the ‘most basic notions of morality and justice or such violations that offend the fundamental principle of law and justice, some element of illegality, where enforcement of the award involves clear injury to public good or the integrity of the court’s process and powers will thereby be abused’. What is required is that the injustice had real effect and had prejudiced the basic rights of the applicant. We do not find this to be the case in the present appeals.” [49] The case of Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198, held as follows in relation to what constitutes as a breach of natural justice: “Learned counsel argued that the upshot of a natural justice complaint is that it must not be inconsequential. In the context of this case, the vital question is whether the breach made a difference to the outcome of the arbitrator’s decision on this issue. The High Court was clear on this point that although there was a natural justice breach in respect of the third principal issue only there were other reasons that justified the arbitrator’s conclusion on this point. The third principal issue would have been decided in the same way notwithstanding the breach of natural justice as there were other grounds relied on by the arbitrator which justified his conclusion. As such, where there are several supporting grounds for a decision, the inadequacy of one ground will not invalidate the decision of the arbitrator” FINDINGS OF THE COURT Whether the Award is in conflict with public policy of Malaysia. [50] Since SDES’s application to set aside the Award is squarely on its allegation that the Award is in conflict of public policy of Malaysia and breach of natural justice based on the grounds as stated hereinabove i.e. pursuant to Sections 37(1)(b)(ii) and 37(2)(b)(i) & (ii) Arbitration Act 2005, this court refers to the Federal Court case of Jan De Nul (M) Sdn Bhd & Anor v. Vincent Tan Chee Yioun & Anor [2019] 1 MLRA 91; [2019] 2 MLJ 413; [2019] 1 CLJ 1 at pp 427 – 430 where the application of sub-paragraphs 37(1)(b)(ii) and 37(2)(b)(ii) Arbitration Act 2005 has been proffered by Ramly Ali FCJ as follows: "[49] The term 'public policy' is not defined in the Arbitration Act 2005. However, the term appears in three different sections, namely of ss 4, 37 and 39 of the Arbitration Act 2005. As commonly used, the term 'public policy' signifies some matter which concerns public good and public interest. It is a fundamental principle of justice in substantive and procedural aspects. … [52] The term 'public policy' as appears in s 37(1)(b)(ii) of the Arbitration Act 2005 covers a scope of 'public policy' elements as used generally. However, in s 37(2)(b)(ii) the scope is more specific. It specifically categorises a breach of the rules of natural justice which occurred in connection with the making of an award as being in conflict with the public policy of Malaysia. [53] The decision of the Singapore Court of Appeal in PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA [2007] 1 SLR 597, provides a good guidance on the interpretation of the term 'public policy' in an application to set aside an arbitral award made by a tribunal, on the ground of a breach of the rule of natural justice for being in conflict with the public policy. In that case Chan Sek Keong CJ (delivering the judgment of the court) ruled: Although the concept of public policy of the State is not defined in the Act or the Model Law, the general consensus of judicial and expert opinion is that public policy under the Act encompasses a narrow scope. In our view, it should only operate in instances where the upholding of an arbitral award would 'shock the conscience' (see Downer Connect (58) at (136), or is 'clearly injurious to the public good or... wholly offensive to the ordinary reasonable and fully informed member of the public' (see Deutsche Schachbau v. Shell International Petroleum Co Ltd [1987] 2 Lloyds Rep 246 at 254, per Sir John Donaldson MR), or where it violates the forum's most basic notion of morality and justice: see Parsons & Whittemore Overseas Co Inc v. Societe Generalede L'Industrie du Papier (RAKTA) 58 F 2d 969 (second Cir, 1974) at 974. [54] In a recent case of Sigur Ros Sdn Bhd v. Master Mulia Sdn Bhd [2018] 3 MLRA 219; [2018] 3 MLJ 608; [2018] 8 CLJ 291, the Court of Appeal held, inter alia, that a breach of the rules of natural justice that occurred in an arbitral proceedings which has a real and substantial impact on the outcome of the arbitration and the eventual award rendered, is plainly said to be in conflict with the public policy of Malaysia. [55] Section 37(2)(b)(ii) of the Arbitration Act 2005 provides that an award made by an arbitral tribunal would be in conflict with the public policy of Malaysia if a breach of the rules of natural justice occurred in connection with the making of the award. The circumstances stated in s 37(2) are by no means exhaustive. Other appropriate circumstances may also fall under the category of 'public policy' in view of the opening phrase 'without limiting the generality of sub-para (1)(b)(ii)' as appears in s 37(2) of the Arbitration Act

However, it must be appreciated that the concept of public policy generally is itself a broad concept. But in applying the concept for the purpose of setting aside an award under s 37 of the Arbitration Act 2005, the concept of public policy ought to be read narrowly and more restrictively. The court's intervention should be sparingly used. The court must be compelled that a strong case has been made out that the arbitral award conflicts with the public policy of Malaysia. As clearly stated by the Court of Appeal in Sigur Ros (with which we agree): 'The concept of public policy must be one taken in the higher sense where some fundamental principle of law or justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the integrity of the court's process or powers will be abused'. [56] Even though the court finds that a breach of the rules of natural justice has been established or that an arbitral award is in conflict with the public policy under s 37 of the Arbitration Act 2005, it does not necessarily mean that the award must be set aside as a matter of course. The power of the court to set aside an award under s 37 is discretionary and will not be exercised automatically in every case where the complaints are established (see: Kyburn Investments Ltd v. Beca Corporate Holdings Ltd [2015] 3 NZLR 644; Sigur Ros Sdn Bhd). [57] The court must evaluate the nature and impact of the particular breach in deciding whether the award should be set aside under s 37. The court must also consider the background policy of encouraging arbitral finality and minimalist intervention approach to be adopted in line with the spirit of UNCITRAL Model Law. The effect of ss 8, 9, 37 and 42 of the Arbitration Act 2005 is that the court should be slow in interfering with or setting aside an arbitral award. The court must always be reminded that constant interference of arbitral award will defeat the spirit of the Arbitration Act 2005 which for all intent and purposes, is to promote one-stop adjudication in line with the international practice (see: Ajwa For Food Industries Co (MIGOP), Egypt v. Pacific Inter-Link Sdn Bhd & another appeal [2012] 3 MLRA 383; [2013] 2 CLJ 395; Taman Bandar Baru Masai Sdn Bhd v. Dindings Corporations Sdn Bhd [2009] 4 MLRH 171; [2010] 5 CLJ 83; and Lesotho Highlands Development Authority v. Impregilo SpA and others [2005] UKHL 43). In this regard, the court needs to recognise the autonomy of the arbitral process by encouraging finality; and its advantage as an efficient alternative dispute resolution process should not be undermined. [58] The scope of public policy ground for setting aside an arbitral award could only be invoked in deserving case ie in instances where it appears a violation of the most basic notions of morality and justice. It covers fundamental principles of law and justice in substantive as well as procedural respect. Instances where the upholding of an arbitral award would shock the conscience, or clearly injurious to the public good, or wholly offensive to the ordinary reasonable and fully informed member of the public, had been held by courts in various jurisdiction to fall within the category of public policy ground for setting aside an arbitral award.” (Emphasis added) [51] Based on the case of Sigur Ros Sdn Bhd v. Master Mulia Sdn Bhd (supra), ‘public policy’ had been defined as ‘some fundamental principle of law or justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the integrity of the court's process or powers will be abused'. [52] Following that, in the case of Jan De Nul (M) Sdn Bhd & Anor v. Vincent Tan Chee Yioun & Anor (supra) ‘public policy’ is defined as ‘some matter which concerns public good and public interest’. Based on these definitions, the reasons given by SDES on its allegation against the Award as being in conflict with public policy have no elements of which raise concerns over public good and or interest. [53] In fact, as argued by RZH, SDES’s allegation is much to do about its dissatisfaction towards the decision derived by the Arbitrator. The issue pertaining to EOT, delay, LAD and VO had all been incorporated in the subcontract agreement entered into by the parties. These are all contractual terms which either party had the chance to negotiate and amend accordingly. Having executed the subcontract agreement, parties are bound by the terms and conditions stated therein. [54] Both SDES and RZH had made reference to the Era Kemuncak case to support their own position at the Arbitration Proceeding, the Arbitrator too had relied on this case to come to a decision regarding the issue on EOT. According to the Learned Arbitrator, whilst the Era Kemuncak case allows an implied right to grant an extension in the absence of an express clause on EOT in an agreement, it does not give the right to apply for an EOT. Therefore, the Arbitrator had denied SDES the right to apply for EOT in the absence of an express EOT clause. [55] The undeniable facts of this case are that in the subcontract agreement, there was a completion date i.e on 15.5.2017, there were delays to the completion date, there was extension of time granted to SDES and that as a consequence to the delay due to failure to complete within the stipulated given time LAD becomes claimable by RZH against SDES as per Clause 5 of the LOA. It is also not denied by SDES that there are no written instructions given for the works claimed by SDES as VO. Relevant parts of the Award are as follows: “ 44. Both parties cited Era Kemuncak Jaya (M) Sdn Bhd v Tenaga Switchgear Sdn bhd [2022] 1 MLRH 208 in their respective written submission. In that case, the High Court held that there was an implied contractual right of an employer to grant an EOT to the contractor. That case did not consider if there wa a corresponding implied contractual right of a contractor to apply for EOT. This distinction may be logical subject to the facts because in the case of a delay, the rights and interests of the employer and contractor are not necessarily aligned and there is no party in the seeking and granting of an indulgence.

As a matter of fact and law in the present case, I find that it is not open for me to imply or incorporate new terms in a written contract without proper basis, the effect of which is to improve the contract which the parties have made for themselves. In this regard: a. An unexpressed tem can be implied and if and only if the parties must have intended that term of form part of their contract based on the test in Sababumi (Sandakan) Sdb bhd v Datuk Yap Pak Leong [1983] 2 MLJ 151 (referred to in the Era Kemuncak case) ; and b. In respect of a contract wholly reduced into writing by the parties, extrinsic evidence including the subsequent conduct of parties cannot be used to interpret the terms of a contract, much less to incorporate additional terms.

I therefore hold that SDES does not have an implied right to apply for EOT in the absence of a contractual provision that explicitly provides for it in the Sub-Contract. This is because the right to an EOT must be based on the terms of the contract as to what circumstances justify an EOT and what procedure should apply.” [56] As much as SDES claims that decisions pertaining to the EOT, delays, LAD and VO are in conflict with public policy, the Arbitration had made her decision on these issues purely based on the facts and evidences produced at the Arbitration and had referred to the terms and conditions of the LOA and the subcontract agreement. [57] As such, it is this court’s considered view that SDES has failed to establish its allegation that the Award is in conflict with public policy of Malaysia on its generality pursuant to Section 37(1)(b)(ii) Arbitration Act 2005. II. Whether there is a breach of natural justice [58] SDES’s allegation under this heading is pursuant to Section 37(2)(b)(i) & (ii) Arbitration Act 2005. In general, the rules of natural justice has 2 rules to it: i. 1st rule – rule against biasness; and ii. 2nd rule – right to be heard. [59] These rules are coded in Section 20 Arbitration Act 2005: “Section 20 – Equal treatment of parties The parties shall be treated with equality and each party shall be given a fair and reasonable opportunity of presenting that party's case.” [60] SDES allegations against the Award under this ground is not related to the 1st rule i.e against biasness but on the 2nd rule. Even so, SDES allegation is not that the Arbitrator had failed to provide procedural fairness or that there were issues raised by SDES that were not heard or addressed by the Arbitrator but more that these issues were heard but failed to be considered by her. [61] As submitted by RZH, all the issues raised by SDES was heard, addressed and deliberated by the Arbitrator before arriving to her conclusion. This court confirms RZH’s submission and is of the view that the Arbitrator had provided her justifications to all her findings in the Award. [62] The merits of the issues had been considered and justified by the Arbitrator. None of the issues raised by SDES in its Affidavit in Support had been left unheard or considered by the Arbitrator as alleged by SDES. [63] According to Section 36(1) Arbitration Act 2005, an arbitration award is final and Section 8 Arbitration Act 2005 is clear that the court “shall” not intervene in any matter governed by Arbitration Act 2005 unless provided in the Arbitration Act 2005. Therefore, SDES’s application to set aside the Award on the given grounds is more to applying to this court to review or revisit the merits of the Award using Section 37(1) of Arbitration Act 2005. [64] Whether there is a conflict of public policy or there is a breach of natural justice as alleged by SDES through this application, none of its grounds had been substantiated for this court to intervene. There is no procedural unfairness and there is no evidence of lack of impartiality. [65] SDES had however raised a 3rd ground only through its submission. The additional issue which was raised by SDES against the Arbitrator is pursuant to Section 37(1)(a)(iv) Arbitration Act 2005, which was not raised in its Affidavit in Support. The allegation under this ground is as follows: “Section 37

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

the party making the application provides proof that-

(iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration;” [66] It is SDES’s allegation that the Arbitrator’s decision that SDES has no contractual right to apply for EOT was not contemplated by both parties and as such, the Award should be set aside. SDES submits that the learned Arbitrator had decided on a “new difference” when she had decided that no EOT can be applied for in the absence of an express clause on EOT as the application for EOT was not disputed by either party. In its argument, SDES relies on the Court of Appeal case of Kerajaan Malaysia v. Perwira Bintang Holdings Sdn Bhd (2015) 1 CLJ 617 wherein Mohd Ariff Yusof JCA held as follows: [22] Finding Of “New Difference” By The High Court [22] The learned High Court Judge considered the background facts in some detail. Her Ladyship also evaluated the issues formulated by the arbitrator, as agreed and modified by both parties. Her Ladyship considered the detailed finding of the arbitrator, which was quoted in extenso, but concluded that the arbitrator had decided on a dispute which was not contemplated by, or not falling within the terms of the submission to arbitration. This is an area of arbitration law which allows the court to set aside an award on the ground that an arbitrator had decided on a “new difference” which is irrelevant to the claim, the “new difference” being understood as a new dispute not contemplated by or not falling within the terms of the arbitration submission. The underlying rationale for this rule rests on the consensual nature of arbitration. Parties are not compelled to resort to arbitration contractually, but if they provide for it and refer their dispute to arbitration, the mandate of the arbitrator must be limited to the terms defined by the parties for him to exercise his jurisdiction. If the arbitrator strays from the confines of this mandate, he will be acting in excess of his jurisdiction, even though he may have the initial and primary jurisdiction to arbitrate between the parties. This rationale is stated succinctly by the Court of Appeal, Singapore in PT Prima International Development v. Kempinski Hotel SA & Other Appeals.” [67] Even though this issue was raised only in SDES’s submission which does not amount to evidence as it was not given under a sworn statement but upon perusing through the Award, this court is of the view that this issue is not one that was not contemplated by the parties. The decision made by the Learned Arbitrator is well within the issue raised by the parties i.e on EOT. [68] Undisputedly, there is no express clause on EOT in the contract, however, since there is a completion date given in the contract, any uncompleted work beyond the date given is at the discretion of RZH to grant an extension. The Arbitrator had referred to the case of Era Kemuncak Jaya case which was referred to by both parties and concluded that the Era Kemuncak case did not consider if there was a corresponding implied contractual right of the a contractor to apply for EOT and since it is not open for the Arbitrator to imply or incorporate new terms in a written contract, she had gone on to explain and justify further as to why she had arrived to her decision. [69] By reason of Section 21(3)(b) Arbitration Act 2005, an arbitrator may draw on his or her “own knowledge and expertise” - also see the FC judgment by Abdul Rahman Sebli FCJ in the case of Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd [2021] 1 MLJ 1. [70] The learned Arbitrator had not just decided that SDES does have not have an implied right to apply for EOT in this case but had also given her reasons for deciding so: “46. I therefore hold that SDES does not have an implied right to apply for EOT in the absence of a contractual provision that explicitly provides for it in the Sub-Contract. This is because the right to an EOT must be based on the terms of the contract as to what circumstances justify an EOT and what procedures should apply.” [71] Based on the foregoing, this court fails to see any breach of public policy as alleged by SDES in this case. The relationship between SDES and RZH is one which is contractual and the contract which they have entered into is open for review by both parties. Terms and conditions of the contract are subject to the parties’ agreement. Hence, the fact that there is no clause in the contract which allows SDES to apply for an extension of time is a matter which is known to SDES at the time it entered into the contract. Had it not been agreeable to SDES, its dissatisfaction should have been addressed at the time the contract was entered into. Therefore, as I see it, the Arbitrator had merely addressed the issues based on the terms and conditions of the Subcontract and as such I do not see any breach of Public Policy to warrant the Award to be set aside. [72] In the upshot, it is this court’s considered view that SDES had failed to establish its grounds to set aside the Award on its given grounds. As such, SDES’s application to set aside the Award is hereby dismissed with costs of RM5,000.00 subject to allocatur fees. Suit 8 – Enforcement of The Arbitration Award [73] Since SDE’s sole reason to oppose the enforcement of the Award is on its application to set aside the same and as the setting aside application has been dismissed, the enforcement of the Award is allowed with no order as to costs. SUMATHI A/P MURUGIAH Judicial Commissioner High Court of Malaya Shah Alam, Selangor Darul Ehsan DATE : 20 MAY 2024 Counsel for Sime Darby : Ms. Vijayalatha a/p P. Velupillai (Messrs. Velupillai & Associates) Counsel for RZH : Ms. Tan Wei Li (Messrs. Vin Cheng & Co)