Spnb Aspirasi Sdn Bhd v Setia Awan Management Sdn Bhd (AA-22C-1-01/2024)

In this Act, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a 110 defined legal relationship, whether contractual or not.

An arbitration agreement may be in the form of an arbitration clause in an agreement or in the form of a separate agreement.

An arbitration agreement shall be in writing.

An arbitration agreement is in writing- 115

if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means; or

if it is contained in an exchange of statement of claim and defence in which the existence of an agreement is alleged by 120 one party and not denied by the other.

The requirement that an arbitration agreement be in writing is met by any electronic communication that the parties make by means of data message if the information contained therein is accessible so as to be useable for subsequent 125 reference.

A reference in an agreement to a document containing an arbitration clause shall constitute an arbitration agreement, provided that the agreement is in writing and the reference is such as to make that clause part of the agreement.

For the purpose of this section, "data message" means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange, electronic mail, telegram, telex or telecopy. 135 [10]. The Arbitration Act 2005, specifically Section 9, mandates that an arbitration agreement must reflect a clear and unequivocal intention by the parties to refer disputes exclusively to arbitration. In its current form, Clause 18 does not meet this standard. Its permissive 140 language, coupled with the lack of critical procedural details, makes it ambiguous and non-binding. Instead of compelling arbitration, the clause leaves the decision to the discretion of the parties, thereby failing to qualify as a binding arbitration agreement under the Arbitration Act. 145 [11]. In Hitti Aluminium Sdn Bhd v. TKH Construction Sdn Bhd [2020] CLJU 205; [2020] MLRHU 221 the court referring to Lembaga Pelabuhan Kelang v. Kuala Dimensi Sdn Bhd and Another Appeal [2010] 9 CLJ 532; [2011] 2 MLJ 606 ; [2010] 2 MLRA 580 [2010] 2 MLRA 580, states when there is conflicting 150 provisions within a contract, one directing disputes to arbitration and another submitting disputes to the jurisdiction of the courts. Such clause renders the arbitration agreement null and void, inoperative, or incapable of being performed under Section 10(1) of the Arbitration Act 2005, which provides: 155 Arbitration agreement and substantive claim before court

A court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the 160 parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed [12]. In Lembaga Pelabuhan Kelang (supra), the Court of Appeal 165 addressed whether disputes should be resolved through arbitration or litigation. The case centred on conflicting clauses in agreements between the parties: a) The Principal Development Agreement (DA1) included an arbitration clause stating disputes be referred to 170 arbitration, making arbitration optional. b) The supplemental agreements (DA2 and DA3) contained jurisdiction clauses explicitly submitting disputes to civil courts, suggesting a preference for litigation. 175 The Court determined that the jurisdiction clauses in the supplemental agreements override the arbitration clause in DA1. The conflict between the clauses suggested the parties had abandoned arbitration in favour of litigation. Consequently, the arbitration clause was deemed null, void, and inoperative under 180 Section 10(1)(a) of the Arbitration Act 2005. The High Court's decision to stay proceedings for arbitration was overturned, allowing the litigation to proceed in court. [13]. I am of the view, Clause 18 provides an option for dispute resolution through either arbitration or litigation but does not mandate 185 arbitration as the sole method. Its permissive nature, coupled with the absence of arbitration-specific details, demonstrates that it does not meet the requirements of a binding arbitration agreement under the Arbitration Act 2005. Consequently, Clause 18 allows for either arbitration or litigation based on the choice exercised by the parties. 190 b) How should it be determined whether the dispute resolution is through arbitration or courts? [14]. There are two elements that determine the manner in which the dispute ought to be resolved: a) the language and intent of the dispute resolution clause; and 195 b) the actions of the parties in invoking the mechanisms stipulated within the agreement. Both elements must be examined to ascertain whether arbitration is binding or if litigation remains a valid option for dispute resolution. 200 [15]. The language of the dispute resolution clause is the first point for determining the parties' intent. In this case, Clause 18 of the DACT refer disputes either to arbitration or to the courts. This wording does not create a binding obligation for disputes to be resolved 205 exclusively through arbitration. Such language is markedly different arbitration. The permissive nature of Clause 18 is consistent with the ruling in Lembaga Pelabuhan Kelang (supra), where the court 210 held that conflicting provisions allowing for both arbitration and litigation rendered the arbitration clause null and void. In such cases, the clause fails to meet the requirements of the Arbitration Act 2005 for enforceability as a mandatory arbitration agreement. [16]. Secondly, the actions of the parties are equally critical in 215 determining whether the dispute resolution process has been properly invoked. In the present case, the plaintiff has exercised its option under Clause 18 to pursue litigation by filing a writ and statement of claim in the High Court of Ipoh. This action signifies a clear choice of the court proceeding as the forum for resolving 220 disputes. On the other hand, the defendant, while arguing in favour of arbitration, has not taken the necessary procedural steps to initiate the arbitration process. Specifically, the defendant failed to issue a notice of arbitration, which is the formal mechanism under the Arbitration Act 2005 to trigger arbitration proceedings. Without 225 such a notice, the d resolved through arbitration lacks procedural legitimacy. [17]. Moreover, in the present case, Exhibit A-2 in the Affidavit of Ng Teck Hua, affirmed on behalf of the defendant, contains a letter of demand from the defendant to the plaintiff. In this letter, the 230 defendant demanded payment of RM311,897,723.00 for alleged losses arising from the p legal proceedings if payment was not made. If the defendant had intended to refer the matter to arbitration, it would have been required to issue a notice of arbitration, formally initiating the 235 arbitration process and proposing an arbitrator. This procedural step would have triggered arbitration under the Arbitration Act 2005 and the DACT. The absence of this step indicates that the defendant also opted for the "court clause" to resolve the dispute, further undermining its argument that the dispute should be resolved 240 through arbitration. [18]. Finally, I sought support from an Indian case M/S Zhejiang Bonly Elevator Guide Rail v. M/S Jade Elevator Components AIR 2018 Supreme Court 4271, where the Supreme Court of India referred to a prior decision in INDTEL Technical Services Private Limited 245 v. W.S. Atkins Rail Limited (2008) 10 SCC 308 to interpret a similar dispute resolution clause as in the present case. In INDTEL (supra), the court examined clauses that required disputes to be referred to adjudication if an amicable settlement failed. The clause in INDTEL reads as: 250 Subject to Clause 13.3 all disputes or differences arising out of, or in connectionwith, this agreement which cannot be settled amicably by the parties shall be referred to adjudication;

13.3. If any dispute or difference under this agreement touches 255 or concerns anydispute or difference under either of the sub-contract agreements, then the parties agree that such dispute or difference hereunder will be referred to the adjudicator or the courts as the case may be appointed to decide the dispute or difference under the relevant sub-contract agreement and the 260 parties hereto agree to abide by such decision as if it were a decision under this (underline is emphasised) [19]. However, the disputes related to sub-contract agreements could be 265 referred to either an adjudicator or the courts. The judge in INDTEL, considering the entire clause, concluded that the parties clearly intended to resolve disputes through arbitration. This case supported the view of the judge in Zhejiang Bonly Elevator (supra), affirming that the parties in this case also intended 270 arbitration to be the preferred method of dispute resolution. The judge stated: In the case at hand, as we find, Clause 15 refers to arbitration or court. Thus, there is an option, and the petitioner has invoked the arbitration clause. Therefore, we have no 275 hesitation, in the factual context of the case, in appointing an arbitrator. Accordingly, Justice Prakash Prabhakar Naolekar, a former Judge of this Court, is appointed as the sole Arbitrator to arbitrate the disputes between the (underline emphasis added) 280 [20]. Consequently, the court in Zhejiang Bonly Elevator held that when parties refer to arbitration as an option, invoking the arbitration clause triggers the process and, therefore, ordered the appointment of a sole arbitrator to complete the arbitration process. 285 [21]. Similarly, in the present case, the plaintiff invoked the "court clause" by filing a writ and statement of claim in the High Court of Ipoh. Following the decisions in Zhejiang Bonly Elevator and INDTEL Technical Services Private Limited, the DACT offers an option for dispute resolution, and the Plaintiff has exercised its right to choose 290 litigation. [22]. The determination of whether disputes should be resolved through arbitration or litigation involves interpreting the permissive language of the clause and examining the actions of the parties. In this case, Clause 18 does not mandate arbitration, and the plaintiff has validly 295 opted for litigation. The d of demand for damages and threatening legal proceedings further reinforces that litigation was the intended method of dispute resolution between the parties. Moreover, since the plaintiff has already initiated court proceedings, it has effectively exercised the 300 option for litigation under the agreement, thereby excluding the possibility of arbitration for this dispute. Accordingly, the final issue must be answered in the negative, and a stay of proceedings is not warranted. Conclusion 305 [23]. Clause 18 of the DACT does not constitute a valid arbitration clause, as it offers the parties an option to either proceed with arbitration or litigation. Since the plaintiff has filed a lawsuit, it has exercised its option to invoke the court process. Moreover, the defendant, by issuing a letter of demand threatening court action, also 310 demonstrated its reliance on the court clause rather than arbitration. Accordingly, the defendant's application to stay the proceedings and refer the matter to arbitration is dismissed with costs of RM2,000. 315 320 Date : 12 December 2024 325 Moses Susayan MOSES SUSAYAN Judicial Commissioner 330 High Court in Malaya at Ipoh, Perak Counsel: 335 For the plaintiff : Masturina Rodzi Advocates and Solicitors [Messrs Edwin Lim & Suren] Kuala Lumpur 340 For the defendant : Dinesh Nandrajog Advocates and Solicitors [Messrs Nandrajog] Shah Alam, Selangor 345 [Notice: This Grounds of Decision is subject to official editorial revision] Headnotes 350 ARBITRATION: Arbitration clause - Construction of - Arbitration clause in principal agreement drafted in a permissive manner - Whether Clause 18 of the DACT provides an option for dispute resolution through either arbitration or litigation - Whether the permissive term "may" and lack of essential arbitration-specific details, such as the seat 355 of arbitration and arbitrator appointment procedure, rendered the clause non-binding under Section 9 of the Arbitration Act 2005 - Factors determining whether an arbitration clause evinces a clear and unequivocal intention to arbitrate - Whether parties had effectively abandoned arbitration by their conduct, including reliance on litigation 360 - Whether arbitration clause was rendered null, void, inoperative, or incapable of being performed under Section 10(1) of the Arbitration Act 2005. 365