Tandex Chemicals Sdn. Bhd. v Tecnicas Reunidas Malaysia Sdn Bhd (WA-22NCvC-547-10/2023)

Upon being served with the Writ in this action, the Defendant had, after entering appearance, filed an application pursuant to Section 10 of the Arbitration Act 2005 for a stay order.

Though learned counsel for the Defendant put up impressive written and oral submissions, replete with pictorial presentation of the law applicable to arbitration agreements, I was constrained to dismiss the Defendant’s said application. This was because I found, based on the facts of this case, that there was no arbitration agreement in existence to justify a stay order under Section 10 of the Arbitration Act 2005. Background Facts [4] The Plaintiff is a private limited company incorporated in Malaysia. It pleaded that it carries out business activities related to cleaning of plant, piping and equipment, including but not limited to chemical cleaning, steam blowing, oil flushing, degreasing, passivation of cooling waters and flange management.

It was further pleaded by the Plaintiff that it has been in the aforesaid business since 1986, and has been continuously carrying out works for Petronas in the past years. I reckoned that the Plaintiff had mentioned its experience in carrying out works for Petronas because the Defendant was a contractor appointed by Petronas, and had allegedly agreed to appoint the Plaintiff as its subcontractor. I am using the word “allegedly” because the appointment of the Plaintiff as a subcontractor is a substantive issue in this civil suit, but not the subject matter of the Defendant’s stay application.

The Defendant is also a private limited company incorporated in Malaysia, and was the main contractor for Petronas in respect of its project at the Petronas Pengerang Integrated Complex located within the area known as RAPID Pengerang, Johor.

As mentioned above, on 12th April 2019, there was a fire, followed by an explosion at the Petronas Pengerang Integrated Complex, and the affected areas had to be cleaned in order to bring the affected areas in the plant back to operational standards. This clean-up project to the affected areas was classified as a “rework/revamp”. The Plaintiff’s Claim [8] The Plaintiff pleaded that it was engaged by the Defendant as its subcontractor to carry out works for the clean-up project mentioned above.

In its Statement of Claim, the Plaintiff’s prayers are divided into two parts; part A for several declarations and part B for judgment to order the Defendant to pay the Plaintiff. The main prayers are as follows:

“Part A A declaration that the Defendant in accepting the Plaintiffs proposal vide email dated 25.10.2022 and subsequently vide letters dated 24.12.2022 had accepted the Plaintiff's proposals for the Recovery Works.

A declaration that the Defendant, vide the Letter of Award dated 81.12.2022 had accepted the Plaintiff's proposals for the Recovery Works. …

A cancellation / termination fee of RM 2,800,000.00 pursuant to the terms of the Plaintiff’s proposal as accepted by the Defendant; and

Genaral Damages in the sum of RM 1,000,000.00;

Exemplary Damages; and …” [10] As could be seen from the Plaintiff’s prayers, this is obviously a civil suit in which it would be necessary to hear oral evidence and assessment of damages if this Court is to decide the issue of liability in favour of the Plaintiff. [11] I am not delving deeper into the Plaintiff’s claim at this stage because it is unnecessary to do so for the purpose of determining whether there was an arbitration agreement between the parties. The Defendant’s Application for a Stay [12] The Defendant had, after entering appearance, filed an application pursuant to Section 10 of the Arbitration Act 2005 for a stay order. The relevant part of the Notice of Application and prayers were as follows: [13] The Defendant’s supporting affidavit disclosed that the Defendant’s defence would be that there was no concluded contract with the Plaintiff and hence, no liability to pay the Plaintiff. Yet, the Defendant contended that since it had issued a Letter of Award dated 31st December 2021 and a Purchase Order dated 4th January 2022 to the Plaintiff, an arbitration agreement had allegedly been created. [14] Reliance was placed by the Defendant on Clause 11 of the Particular Commercial Terms section of the said Purchase Order. A screenshot of it is shown below: [15] Reliance was also placed by the Defendant on the General Terms and Conditions for Construction Subcontractors which allegedly formed an integral part of the said Purchase Order and contained an arbitration clause. I shall refer to its contents in my analysis below to show why I concluded that there was no arbitration agreement between the parties. Analysis of the Applicable Law and Documentary Evidence [16] In the Arbitration Act 2005, “arbitration agreement” is defined in Section 9(1) as “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 defined legal relationship, whether contractual or not”. Section 9(2) thereof further states that an arbitration agreement may be in the form of an arbitration clause in an agreement or in the form of a separate agreement. [17] In order to avoid the uncertainty of oral agreements, Section 9(3) of the said Act makes it mandatory for an arbitration agreement to be in writing. [18] Section 9(4) further expands the definition of an arbitration agreement that is “in writing”, with the following words: “(a) 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 one party and not denied by the other.” [19] Since electronic and digital communication is the norm these days, Section 9(4A) of the said Act states that data messages are to be construed as “in writing” if the information is accessible for subsequent reference, i.e. verifiable in the future. Its exact words are as follows: “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 reference.” [20] The following excerpts from the Defendant’s supporting affidavit confirmed that the Defendant disputes the Plaintiff’s claim of a concluded and valid contract that is enforceable. [21] And as averred in paragraph 16 of the Defendant’s supporting affidavit (as shown above), the Defendant’s stand was that the Defendant rejected the Plaintiff’s offer, i.e. no contract was formed. Bearing this contention of the Defendant in mind, I move on to examine Clause 11 of the Particular Commercial Terms section of the said Purchase Order. [22] As is evident from the screenshot of Clause 11, there was no mention whatsoever in the first clause, i.e. Clause 11.1, as to the event that would lead to arbitration. Clause 11.1 simply states that the law of England and Wales will govern the validity, interpretation, construction and performance of the SUBCONTRACT. The word “arbitration” was not mentioned at all. Then ‘out of the blue’, Clause 11.2 says that “the arbitration proceedings” shall take place in London, England, in English. [23] An ‘omission’ to state the event that will lead to arbitration might have been due to an oversight in ‘copy and paste’ of the terms in the said Purchase Order. However, it is trite that the Court will not rewrite the terms of any document written by a party. The document adduced as evidence ought to be read as it is, without the court attempting to add in ‘missing words’ for the parties. If any authority is required, I would rely on the Federal Court in Kumpulan Darul Ehsan Bhd v. Mastika Lagenda Sdn Bhd [2017] 4 MLJ 561, where it was held as follows: “[23] … In this case there were two crucial matters agreed upon, namely, the option right and the waiver provision. As such those terms must be considered in the light of the legal principles, to wit, that the sanctity of a contract must be preserved and that it is not the function of the court to rewrite the agreed terms in a contract”. [24] Those words of the Federal Court in Kumpulan Darul Ehsan Bhd (supra) are binding on this court, to prohibit me from reading into Clause 11.1 any non-existent word regarding the event that will justify a referral to arbitration. [25] As for the General Terms and Conditions for Construction Subcontracts (“the GTCC”) which allegedly formed part of the said Purchase Order, I agree with the Plaintiff’s submission that the evidence showed that the Plaintiff insisted that the GTCC was to be excluded. This was stated clearly in the Plaintiff’s email to the Defendant on 10th January 2022, which receipt was not denied by the Defendant. An excerpt of para

of the said email is self-explanatory. [26] Further, it is to be noted that the purpose of the GTCC is to govern the future performance of the contract by the Plaintiff. As pointed out above, the Defendant is vehemently denying that any contract was concluded and attempting to justify its issuance of a letter of rejection of the Plaintiff’s offer on 12th January 2022. In such circumstances, it would be plainly wrong and inequitable to allow the Defendant to ‘blow hot and cold’, to say that the Plaintiff’s offer had been rejected but the terms and conditions proposed by the Defendant, including the GTCC, are binding on the Plaintiff. There was a further and equally compelling reason for this court to hold that the GTCC does not bind the Plaintiff. This further reason is in Clause 31.1 of the GTCC – when compared with Clause 11.2 of the aforesaid Purchase Order. [27] To recapitulate, Clause 11 of the said Purchase Order states as follows: [28] According to Clause 11.1 (as shown in para [27] above), the law of England and Wales is to be the law to govern the validity, interpretation, construction and performance of the SUBCONTRACT. However, in Clause 31.1 of the GTCC, the law of Spain was stated to be the law applicable. A screenshot of the said Clause 31.1 is shown below. Conclusion [29] It is my judgment that the Plaintiff did not agree to be bound by the GTCC, and further, the contradiction of its Clause 31.1 with Clause 11.1 of the main document, i.e. the said Purchase Order, about the law applicable – whether the law of England and Wales or that of Spain is to be applicable – further confirmed that a mere reference to the GTCC could not have created any arbitration agreement for the Defendant to demand arbitration in lieu of a civil suit to resolve the Plaintiff’s claim. Counsel for the Plaintiff: Parkash Singh A/L Pramjit Singh SOLICITORS FOR THE PLAINTIFF: MESSRS HARNIZA & CO. Advocates & Solicitors Suite 902, Level 9, Menara Choy Fook On, No 1B, Jalan Yong Shook Lin, Section 17, 46050 PETALING JAYA, SELANGOR. Counsel for the Defendant: Terence Loh (Oliver Chin Wy Hong, Han Jean Lee (PDK) with him) SOLICITORS FOR THE DEFENDANT: MESSRS BELDEN Advocates & Solicitors A-27-01, The Met Corporates Towers, No. 20, Jalan Dutamas 2, 50480 KUALA LUMPUR CASE(S) REFERRED TO: 1) Federal Court in Kumpulan Darul Ehsan Bhd v. Mastika Lagenda Sdn Bhd [2017] 4 MLJ 561. LEGISLATIONS’ REFERRED TO: 1) Section 9(1) of the Arbitration Act 2005. 2) Section 9(2) of the Arbitration Act 2005. 3) Section 9(3) of the Arbitration Act 2005. 4) Section 9(4) of the Arbitration Act 2005. 5) Section 9(4A) of the Arbitration Act 2005. 6) Section 10 of the Arbitration Act 2005.