Tumpuan Megah Development Sdn Bhd v 1. ) Ing Bank N.V (WA-24NCC(ARB)-24-07/2023)

7.4.2014 And In the matter of Section 37(1)(a)(iii),

(iv),

(v),

(vi), Section 37(1)(b)(ii) and Section 37(2) of the Arbitration Act 2005 And In the matter of Order 69 Rule 2 and Rule 5 and Order 92 Rule 4 of the Rules of Court 2012 BETWEEN TUMPUAN MEGAH DEVELOPMENT SDN BHD PLAINTIFF AND

1.

O.W. BUNKER FAR EAST (SINGAPORE) PTE LTD DEFENDANTS JUDGMENT A. Introduction [1] Two arbitration tribunals had given awards in favour of the defendants and against the plaintiff. This prompted the plaintiff to take the steps described below: a. On 4 February 2020, an arbitration tribunal in the United Kingdo allowed the defendants claim for payment due from the plaintiff Award was registered as an order of the English High . The defendants then filed Kuala Lumpur High Court Originating Summons No. WA-24-4- the Reciprocal Enforcement of Judgment Act 1958 . The registration was allowed by the High Court on 22 March 2021. The plaintiff thus filed an application in OS 24/2021 to set aside the order of the High Court to register the UK Judgment . b. On 29 March 2023, an arbitration tribunal in Malaysia found in favour of the defendants, and allowed a preliminary objection by the defendants that the Malaysian Tribunal had no jurisdiction over the dispute between the parties . The Malaysian Tribunal found that the issues in the Malaysian Arbitration are res judicata and/or an abuse of process, as they have been determined in the UK Award. The plaintiff thus commenced this action to set aside the Malaysian Award. [2] The plaintiff has now filed an application to stay this action pending the disposal of the REJA Setting Aside Application. [3] After considering the Stay Application, the court found there to be no rare and compelling circumstance that would necessitate a stay of this action. As such, the Stay Application was dismissed. The reasons for the decision are set out below. B. Background Facts The Disputed Transactions [4] The dispute between the parties arose from the following transactions involving the sale of marine bunker fuels by the 2nd defendant to the plaintiff: a. The sale and delivery to the vessel Straits 1 at the port of Pasir Gudang, which was evidenced by a sales order confirmation dated 17 October 2014; and b. The sale and delivery to the vessel Dolphin 1 at the port of Kuantan, which was evidenced by a sales order confirmation dated 1 November 2014 (collectively, the ). [5] The 2nd defendant sought payment for the Disputed Transactions from the plaintiff. The plaintiff challenged the 2nd denying that the Disputed Transactions had occurred. [6] Arising from the dispute between the parties is the question of the documents governing the Disputed T position is that the Disputed Transactions fall within the purview of a set off agreement dated 7 April 2014 which was entered into between the plaintiff and the 2nd Agreement provides that any dispute arising out of or in connection with the Set Off Agreement and any separate transaction agreement entered into between the parties shall be referred to and resolved by arbitration in accordance with the Rules of the Kuala Lumpur Regional Centre for Arbitration, . [7] the Terms and Conditions of Sale(s) for would govern the Disputed Transactions, as the sales order confirmations for the Disputed Transactions incorporated the OWB T&Cs. The OWB T&Cs provide that disputes are governed by English law and shall be referred to arbitration in London, in accordance with the UK Arbitration Act 1996 and the terms of the London Maritime Arbitrators Association [8] The plaintiff claimed that the Disputed Transactions did not exist and the sales order confirmations issued for the Disputed Transactions are false documents. Consequently, there can be no incorporation of the OWB T&Cs between the parties, and the UK Arbitration Agreement does not exist. It is therefore the only valid arbitration agreement is the Malaysian Arbitration Agreement contained in the Set Off Agreement. Thus, any dispute regarding the existence of the Disputed Transactions ought to have been referred to arbitration in Malaysia pursuant to the Malaysian Arbitration Agreement. The UK Arbitration [9] Having taken the stand that the Disputed Transactions are governed by the OWB T&Cs and the UK Arbitration Agreement, the defendants commenced arbitration proceedings against the plaintiff in London pursuant to the UK Arbitration Agreement ( . [10] The plaintiff participated in the UK Arbitration under protest. Throughout the UK Arbitration, the plaintiff maintained that the arbitration tribunal in the UK dispute, as there was no valid and binding agreement for arbitration in the UK. Further, the plaintiff argued that the Disputed Transactions did not exist. [11] The UK Arbitration culminated in the UK Award dated 4 February 2020, where the UK Tribunal accepted jurisdiction over the dispute and allowed the d ,245 against the plaintiff. The UK Tribunal found that the plaintiff and the 2nd defendant had entered into the Disputed Transactions. The tribunal also found that the documents governing the Disputed Transactions incorporated the OWB T&Cs, which contain the UK Arbitration Agreement. Registration of the UK Award [12] The UK Award was registered as the UK Judgment, by an order of the English High Court dated 13 November 2020. [13] On 26 January 2021, the defendants filed OS 24/2021, to register the UK Judgment in Malaysia pursuant to REJA. The registration was allowed on 22 March 2021. The REJA Setting Aside Application [14] On 27 April 2021, the plaintiff filed the REJA Setting Aside Application in OS 24/2021, to set aside the registration of the UK Judgment in Malaysia, pursuant to section 5 of REJA. [15] In the course of proceedings, the plaintiff applied for four issues to be tried under order 67 rule 9(2) of the Rules of Court 2012 , which include whether there was a contract between parties which incorporated the OWB T&Cs and the UK Arbitration Agreement. [16] The Application for Trial was dismissed by the High Court, but allowed by the Court of Appeal on 17 November 2023. The defendants have appealed to the Federal Court. The Malaysian Arbitration [17] Approximately four months after the UK Award was given and prior to the commencement of registration proceedings in the UK, the plaintiff commenced arbitration proceedings in Malaysia on 11 June 2020

Invoked in and compelling

There ought to be very strong reasons for granting such a stay;

The benefits likely to result from granting such a stay of proceedings must clearly outweigh any disadvantage to the non-party. (emphasis added) [23] The Court of Appeal went on to cite with approval, the case of Jacob and Toralf Consulting Sdn Bhd v Siemens Industry Software GmbH [2013] CLJU 914 where the High Court reasoned that the test of rare and compelling circumstances is consistent with the fundamental rule that a plaintiff is required to prosecute his claim in court expeditiously. [24] Although Protasco (supra) and Jacob and Toralf Consulting (supra) involve applications for a stay of High Court proceedings pending arbitration where the party who applied for the stay is not a party to the arbitration, I find that the test would equally apply where the party seeking the stay is also a party to the arbitration. Certainly in this case, the reasoning in Jacob and Toralf Consulting (supra) would apply, as it was the plaintiff who initiated the Malaysian Arbitration, and proceeded to apply to set aside the Malaysian Award. The plaintiff should therefore be compelled to prosecute its claim in court in an expeditious manner. [25] In assessing whether there are rare and compelling circumstances that would necessitate a stay of this action, the court considered the following: a. Whether the outcome of the REJA Setting Aside Application would affect the present action; and b. Whether the balance of justice lies in favour of allowing the Stay Application. Would the outcome of the REJA Setting Aside Application affect the present action? [26] I considered the following facts that are beyond dispute: a. The REJA Setting Aside Application is an application to set aside an order of the Kuala Lumpur High Court dated 22 March 2021 which registered the UK Judgment. By the UK Judgment, the English High Court had registered the UK Award, which allowed the defendants claim against the plaintiff. b. The present proceedings before this court is an application by the plaintiff to set aside the Malaysian Award, which upheld the preliminary jurisdictional objection raised by the defendants, and found that the Malaysian Tribunal lacked jurisdiction over the disputes between the parties, by reason of res judicata and/or abuse of process. The Malaysian Tribunal reached this finding on the basis that the UK Tribunal had decided that it had jurisdiction over the dispute and the same jurisdictional issues in the Malaysian Arbitration had already been determined by the UK Award. [27] Based on these facts, I am of the view that the outcome of the REJA Setting Aside Application would not affect the current proceedings to set aside the Malaysian Award. My view is premised on section 37 of the Malaysian AA, which sets out the circumstances pursuant to which an award can be set aside by the court. [28] Section 37 of the Malaysian AA provides as follows:

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. (emphasis added) [29] It is clear from the provisions of section 37 of the Malaysian AA that the Malaysian Award may only be set aside in the specific limited circumstances set out therein, including the incapacity of a party to the arbitration agreement, the invalidity of the arbitration agreement, the award dealing with a dispute not falling within the terms of submission to arbitration or containing matters beyond the scope of the submission to arbitration, or the award being in conflict with public policy. [30] Thus, a consideration of the merits of the Malaysian Award is not relevant to an application to set aside the Malaysian Award. This is made clear in Hindustan Oil Exploration Co Ltd v Hardy Exploration & Production (India) Inc [2023] 4 MLJ 113, where the Court of Appeal held as follows: [47] This court takes cognisance that s 37 of the AA 2005 is based on article 34 of the Model Law. In adopting the Model the Malaysian courts do not have the right to decision. [48] decision is final and binding on the parties. On this score, any errors of law and fact made by the arbitral tribunal is not appealable. In such instance, the Malaysians courts do not and must not (emphasis added) [31] As such, in considering whether to set aside the Malaysian Award, this court will not be concerned with the merits of the decision of the Malaysian Tribunal, including whether the Malaysian Tribunal was correct in its finding that the issue of res judicata and/or abuse of process arises in the Malaysian Arbitration. Following this, even if the plaintiff was successful in the REJA Setting Aside Application, resulting in the setting aside of the registration of the UK Judgment in Malaysia, the finality of the Malaysian Award would not be affected. [32] I have considered that the Application for Trial in the REJA Setting Aside Application was allowed by the Court of Appeal, and that the Court of Appeal had ordered the following issues to be tried between the parties: a. Whether there was in fact a contract between parties which incorporates the OWB T&Cs and the UK Arbitration Agreement; b. Whether the 2nd defendant was engaging in a money lending transaction with a third party, Straits Energy Ltd, that was being disguised as a purchase of marine bunker fuels by the 2nd defendant from Straits Energy Ltd for delivery to the plaintiff; c. Whether there was an actual sale and delivery of marine bunker fuel from the 2nd defendant to the plaintiff; and d. Whether the UK Judgment was obtained by fraud, in the circumstances of this case. [33] The defendants have appealed against the decision of the Court of Appeal, and the appeal to the Federal Court is pending. As such, issues in the REJA Setting Aside Application remain live issues in dispute between the parties. It is however important not to be distracted by the core issue in the REJA Setting Aside Application, which is whether the courts in Malaysia are allowed to re-open and re-examine the jurisdiction of the UK Tribunal, in the process of registration of the UK Judgment in Malaysia (per Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763). . [34] I am of the view that this issue has no bearing on the application to set aside the Malaysian Award in this action, considering the exhaustive circumstances listed under section 37 of the Malaysian AA, pursuant to which the award may be set aside. Does the balance of justice lie in favour of allowing the Stay Application? [35] After giving due consideration to the facts of this case, I find that the balance of justice lies in favour of not allowing the Stay Application. In my view, a stay of this action would lead to a delay of proceedings involving the Malaysian Award, resulting in prejudice to the defendants. [36] It is important to highlight that it was the plaintiff who commenced the Malaysian Arbitration a fresh arbitral proceeding, based on the same dispute between the same parties that had been decided by the UK Tribunal in parallel with the REJA Setting Aside Application. In commencing the Malaysian Arbitration, the plaintiff took the risk of the Malaysian Tribunal deciding against it. Having chosen to take that risk, it is in my view inherently unjust to allow the plaintiff to take the position that the REJA Setting Aside Application would impact the present action, and to use that position as a justification to stay the present action involving the Malaysian Arbitration, which the plaintiff itself initiated. D. Decision [37] The court is of the firm view that allowing a stay of proceedings must necessarily remain the exception rather than the rule. In this case, with the considerations as set out, the plaintiff has not shown any rare and compelling circumstance for this exception to apply, and that would justify a stay of these proceedings. [38] It is on this basis that the Stay Application is dismissed, with costs. Dated 18 October 2024 ADLIN ABDUL MAJID Judge High Court of Malaya Kuala Lumpur Counsel: Plaintiff : N. Navaratnam (together with Wong Wye Wah and Derrick Chan) of Messrs. CK Chan Law Practice Defendants : Sharon Chong Tze Ying (together with Muhammad Suhaib Ibrahim) of Messrs. Skrine