Tumpuan Megah Development Sdn. Bhd. v 1. ) Ing Bank N.V. (WA-24NCC(ARB)-30-08/2024)

1.

O.W. BUNKER FAR EAST (SINGAPORE) PTE LTD …DEFENDANTS GROUNDS OF JUDGMENT (DISMISSING ORIGINATING SUMMONS) (APPLICATION TO SET ASIDE ARBITRATION AWARD)

The Plaintiff seeks to set aside the award made by the arbitrators on 19-6-2024 concerning the costs of the arbitration commenced by the Plaintiff against the Defendants.

The Plaintiff claims that the award should be set aside pursuant to the powers reposed with this Court under section 37 (1) (b) (ii), section 27(2)(a)(i), section 37(2)(b)(i) and section 37(2)(b)(ii) of the Arbitration Act 2005.

The grounds relied on by the Plaintiff to set aside the Award are as follows: -

The Costs awarded by the Arbitrators conflicts with the public policy of Malaysia.

The Plaintiff was deprived of the opportunity to present its case and the arbitrators disregarded the Plaintiff’s submissions on the Defendants claims of the costs that should be awarded in their favor.

There was alleged bias and predetermination on the part of the tribunal as to occasion an alleged breach of natural justice.

The costs awarded was induced or affected by fraud. B. Decision by this Court – No Justification to set aside the award dated 19-6-2024 made by the arbitrators

The Originating Summons was dismissed with costs by this Court. I do not find that the issues and allegations put forth by the Plaintiff justifies setting aside the award dated 19-6-2024 made by the tribunal. I find that the complaints made by the Plaintiff are not substantiated and the award (i) is not against the public policy of Malaysia, (ii) was not made in breach of natural justice, (iii) is not tainted with bias or prejudice and (iv) is not induced or affected by fraud.

This case is related to the earlier Originating Summons No. WA- 24NCC(ARB)-24-07/2023 that was also filed by the Plaintiff. The previous Originating Summons was an application to set aside the Award made by the same panel of arbitrators dated 29-3-2023. The said Originating Summons was dismissed by this Court earlier on the grounds that the Plaintiff has failed to show that that the said award dated 29-3-2023 was (i) allegedly against public policy,

(ii) breaches natural justice, (iii) was illogical and not properly reasoned by the arbitrators, (iv) biased and the arbitrators had pre judged the merits of the case, (v) made on the issues that were not contemplated and do not fall within the scope of the agreement to arbitrate, (vi) made in contravention of the agreement to arbitrate and (vii) beyond the scope of the submissions to arbitrate.

The panel of arbitrators decided after allowing the preliminary issue of Res Judicata raised by the Defendants, heard parties concerning the costs of the arbitration and on 19-6-2024 made the following orders: -

that the Malaysian tribunal has jurisdiction to hear and determine the issue of costs.

(ii) that the Plaintiff is to pay the Defendants the sum of USD 220,986.26 as costs of the arbitration.

(iii) that the Plaintiff is to pay the Defendants the sum of EURO 1, 134, 507.77 as the Defendants’ legal and other costs.

(iv) post award interest at the rate of 5% per annum. D. Award by the Arbitrators dated 19-6-2024

For ease of reference I reproduce material parts of the Award made by the Arbitration tribunal: -

Jurisdiction of the Tribunal to determine and award costs – whether functus officio …. .

(ii) Determination of Costs to be awarded

I also note that the arbitration tribunal had painstakingly laid down and summarized the arguments raised by the Plaintiff and the Defendants before the tribunal. This can be seen at paragraphs 21 to 56 (on the issue of the jurisdiction of the tribunal) and paragraphs 66 to 109 (on the issue of costs to be awarded) of the award of the tribunal. E. Applicable Law on Setting Aside Arbitration Award under section 37 of the Arbitration Act

I reproduce section 37 of the Arbitration Act: -

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.

Where the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside.

An application for setting aside may not be made after the expiry of ninety days from the date on which the party making the application had received the award or, if a request has been made under section 35, from the date on which that request had been disposed of by the arbitral tribunal.

Subsection (4) does not apply to an application for setting aside on the ground that the award was induced or affected by fraud or corruption.

On an application under subsection (1) the High Court may, where appropriate and so requested by a party, adjourn the proceedings for such period of time as it may determine in order to allow the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal's opinion will eliminate the grounds for setting aside.

Where an application is made to set aside an award, the High Court may order that any money made payable by the award shall be brought into the High Court or otherwise secured pending the determination of the application.

The leading cases in this area are Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198 and Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd [2020] 9 CLJ 466.

I find that the principles of law applicable in an application to set aside an arbitration award premised on section 37 of the Arbitration Act has been succinctly explained by Aliza Sulaiman J in Ocned Water Technology Sdn Bhd v UEM Builders Berhad & Anor and another case [2023] CLJU 2727 as follows: - “[24] Based on the provisions in the AA 2005 and the case authorities to date, the legal principles in relation to an application to set aside an award under s. 37 AA 2005, and specifically, pursuant to the subparagraphs relied upon by UB-EP in the Setting Aside Application, may be summarised as follows:

an award made by an arbitral tribunal pursuant to an arbitration agreement is final and binding on the parties (see sub-s 36(1) AA 2005);

the court shall not intervene in matters governed by the AA 2005 except where so provided in the said Act (see s. 8 AA 2005);

the grounds enumerated in s. 37 are exhaustive and the court cannot set aside an award for reasons other than those that are listed. Further, the said grounds need to be construed narrowly as they represent exceptions to the finality of arbitration awards as stipulated in s. 36 AA 2005. 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 [see Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 1 CLJ 1; [2019] 2 MLJ 413 (FC) and Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd & Another Appeal [2020] 9 CLJ 466; [2020] 6 MLRA 124 (FC)];

when considering the exercise of discretionary power under subparagraphs 37(1)(a)(iv), 37(1)(a)(v) and 37(1)(b)(ii) AA 2005, the court does not sit as an appellate court and hence, the merits of the parties' respective case before the arbitral tribunal are not open to scrutiny [see The Government of India v Cairn Energy India Pty Ltd & Ors [2013] CLJU 1323; [2014] 9 MLJ 149 (HC)];

In respect of subparagraphs 37(1)(a)(iv) and (v) AA 2005, the disputes which the parties choose to submit for arbitration will demarcate the jurisdiction of the arbitral tribunal in the arbitral proceedings between them. An arbitral tribunal has no jurisdiction to resolve disputes that have not been referred to it in the submission to arbitration. In deciding whether an award deals with a dispute not contemplated by or not falling within the terms or scope of submissions to arbitration and whether an award contains decision on matters beyond the scope of the submission to arbitration, the dispute that was referred to the arbitrator must be determined by reference to the pleadings which were submitted by the parties during the arbitration. Pleadings in arbitral proceedings provide a convenient way for the parties to define the jurisdiction of the arbitrator by setting out the precise nature and scope of the disputes in respect of which they seek the arbitrator's adjudication. The burden lies on the party applying to set aside an award to prove, on a balance of probabilities, that there is a "new difference" which was not relevant to the determination of the dispute, and it was not an issue in dispute between the parties. In this regard, the parties' pleadings and submissions during the course of the arbitration are relevant considerations [see PT Prima International Development v Kempinski Hotels SA and other appeals [2012] 4 SLR 98, Perwira Bintang Holdings Sdn Bhd v Kerajaan Malaysia [2013] CLJU 1336; [2014] 11 MLJ 561 (HC) and Kerajaan Malaysia v Perwira Bintang

with regards to subparagraphs 37(1)(b)(ii) and 37(2)(b)(i) and (ii) AA 2005 -

in applying the concept of public policy for the purpose of setting aside an award under s. 37 of the AA 2005, it must be read narrowly and more restrictively. 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. The injustice must have real effect and had prejudiced the basic rights of the applicant;

(ii) the court's intervention should be sparingly used, and the court must be compelled that a strong case has been made out that the arbitral award conflicts with the public policy of Malaysia. 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 AA 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 this power must be exercised judiciously and only when it is just to do so. In considering whether the discretion should be exercised, the court must undertake an evaluation of relevant factors such as the seriousness, magnitude or materiality of the breach; its nature and its impact; whether the breach would have any effect on the outcome of the arbitration and leaving room for casual breach or occasional error; costs of rehearing and delay in raising the complaint. The policy of encouraging arbitral finality will dissuade the court from exercising discretion when the breach is relatively immaterial or was not likely to have affected the outcome [see Kyburn Investments Ltd v Beca Corporate Holdings Ltd [2015] 3 NZLR 644; Sigur Ros Sdn Bhd v. Master Mulia Sdn Bhd [2018] 8 CLJ 291(CA), Jan De Nul (supra) and Pancaran Prima (supra)]; and

(iii) the guiding principles on the exercise of residual discretion when an application for setting aside an award is grounded on breach of natural justice are as follows: “First, the court must consider: (a) which rule of natural justice was breached; (b) how it was breached; and (c) in what way the breach was connected to the making of the award; Second, the court must consider the seriousness of the breach in the sense of whether the breach was material to the outcome of the arbitral proceeding; Third, if the breach is relatively immaterial or was not likely to have affected the outcome, discretion will be refused. Fourth, even if the court finds that there is a serious breach, if the fact of the breach would not have any real impact on the result and that the arbitral tribunal would not have reached a different conclusion the court may refuse to set aside the award; Fifth, where the breach is significant and might have affected the outcome, the award may be set aside; Sixth, in some instances, the significance of the breach may be so great that the setting aside of the award is practically automatic, regardless of the effect on the outcome of the award; Seventh, the discretion given the court was intended to confer a wide discretion dependent on the nature of the breach and its impact...." [see paragraph 53 in Master Mulia Sdn Bhd v. Sigur Ros Sdn Bhd [2020] 9 CLJ 213; [2020] 6 MLRA 51 at pp 80 - 81 (FC)].”

I also refer to the judgment of Liza Chan J in Tune Group Sdn Bhd & Ors v Padda Gurtaj Singh [2022] CLJU 2228:- "[23] As such, the Court must be wary if the applicants in applying to set aside the award are seeking to widen the strictly narrow grounds for challenge in s. 37 and s. 39 AA, and not be carried away by the applicants' resort to convoluted or fanciful arguments and interpretation of the facts, evidence and law which at any rate are not within the province of the court but is to be as found and determined by the tribunal as arbiter of fact and evidence. [24] The Court is to take note of trite principles as follows:

24.1 The court is not an appellate court, and does not sit in appeal of a final arbitral award - Garden Bay Sdn Bhd v. Sime Darby Property Bhd [2018] 6 CLJ 199; [2018] 2 MLJ 636 CA at [15]; Pembinaan LCL Sdn Bhd v. SK Styrofoam (M) Sdn Bhd [2007] 3 CLJ 185; [2007] 4 MLJ 113 CA at Held (1) and [14] - [16]; Infineon Technologies (M) Sdn Bhd v. Orisoft Technology Sdn Bhd (previously known as Orisoft Technology Bhd) and another application [2010]

24.2 An applicant cannot challenge the merits of, reopen and/or re-argue the findings and decision of the Tribunal on the substantive issues of the dispute decided by Tribunal - Master Mulia (supra) FC at [54]; Brunsfield Project Management Sdn Bhd v. Ingeniur Bersekutu Consulting Engineers [2015] CLJU 1546 CA at [33], [41] and [44]; MRCB Engineering Sdn Bhd v. Lee Hon Min & Others [2018] CLJU 835 HC at [22] - [27]; The Government of India v. Vedanta Ltd (legal successor to Cairn India Ltd) & Anor [2018] CLJU 617; [2018] MLJU 630 HC at [64];

24.3 The Award cannot be challenged on alleged points of law or interpretation of law. This would have been permissible only specifically under s. which was appealed and dealt with at a later part of this judgment - Huawei Technologies (Malaysia) Sdn Bhd v. Maxbury Communications Sdn Bhd & Another Appeal [2019] 6 CLJ 588; [2019] MLJU 1755 CA at [38], [41] to [43] which held that error of law could only be appealed under s. 42 and not s. 37 of the AA 2005. All errors of fact and/or law are errors committed within the scope of jurisdiction or mandate of the arbitrator. To hold otherwise would result in every award being subject to review, and in effect, appeal by the courts; Ketua Setiausaha Dalam Negeri & Anor v. Salconmas Sdn Bhd [2020] CLJU 422; [2020] MLJU 476 HC at [60] on the effect of the deletion s. 42 and that all arbitral awards can no longer be challenged on the ground that the arbitrator had fallen into an error of law;

24.4 The limited grounds of challenge are as set out in ss. 37 and 39 AA - Garden Bay Sdn Bhd v. Sime Darby Property Bhd [2018] 6 CLJ 199; [2018] 2 MLJ 636 CA at [12];

24.5 Breaches of natural justice and public policy ought to be manifestly obvious and/or against the conscience or morality and entail a very high threshold. For breach of public policy - Pancaran Prima Sdn Bhd v. Iswarabena Sdn Bhd & Another Appeal (supra) FC at [143]; Jan De Nul supra at [55] and [58] Sigur Ros Sdn Bhd v. Master Mulia Sdn Bhd [2018] CLJU 2125; [2018] 3 MLJ 608 CA at [31] - [33] PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA [2007] 1 SLR 597 (Singapore Court of Appeal) at [59]. On breach of natural justice - Pancaran Prima Sdn Bhd v. Iswarabena Sdn Bhd & Another Appeal (supra) at [139] & [140]; Master Mulia at para [53] & [62]; AKN and another v. ALC and others and other appeals (supra) at [39]; Kyburn Investments Ltd v. Beca Corporate Holdings Ltd [2015] 3 NZLR 644 (New Zealand Court of Appeal) at [41] - [44];

24.6 Matters solely reserved to the Tribunal:

24.6.1 finding and assessment of the facts and evidence - Pancaran Prima Sdn Bhd v. Iswarabena Sdn Bhd & Another Appeal (supra) at [132]; Garden Bay at [53]; Chain Cycle Sdn Bhd v. Kerajaan Malaysia [2016] 1 CLJ 218; [2016] 1 MLJ 681 CA at [61], Ketua Setiausaha Dalam Negeri & Anor v. Salconmas Sdn Bhd [2020] CLJU 422; [2020] MLJU 476 HC at [60];

24.6.2 interpretation of law - Huawei Technologies at [38], [41], [42] & [43] [Tab 22 of SSPC's BOA (Vol II) Encl. 110 p. 158]; Ketua Setiausaha Dalam Negeri & Anor v. Salconmas Sdn Bhd (supra) at [60], Cairn Energy India Pty Ltd & Anor v. The Government of India [2010] 2 CLJ 420; [2009] 6 MLJ 795 CA at [2], [10], [11], [21] to [24], Kluang Health Care Sdn Bhd v. Lee Yong Beng [2016] 1 CLJ 281; [2015] MLJU 77 3 HC at [36], [37] & [40];

24.7 In the context of a final arbitral award and the AA, the term in "excess of jurisdiction" is a reference to whether a dispute, matter or issue as determined by the Tribunal is within the terms or scope of a submission to arbitration, and therefore within the jurisdiction of the Tribunal. It is not a reference to whether the Tribunal made a wrong decision or an error of law in its interpretation, construction or application of a contract, a term thereof or the law in its determination and decision on the dispute or matter that was without question submitted to arbitration and within its jurisdiction to determine - Huawei Technologies (supra) at [38], [41] to [43], [45] and [46]; The Government of India v. Cairn Energy Pty Ltd & Ors [2012] 3 CLJ 423; [2014] 9 MLJ 149 HC at [130] to [137], PT Asuransi (supra) at [37] to [39] Otherwise, every challenge as to the correctness of an arbitration award would be said to be made without jurisdiction and amenable to appeal in circumvention of the AA - Huawei Technologies (supra) at [42]." F. Decision on the merits of the Plaintiff’s application to set aside the Award

(I) Allegation that the Award of Costs is against public policy

The Plaintiff claims that the Award of Costs is against public policy as the arbitrators had failed to identify the basis of the said award i.e. whether the award of costs is made on a standard or indemnity basis. The Plaintiff also suggests that this allegedly is an omission that is against Malaysian public policy on costs and is contrary to allegedly an established Malaysian public policy regime.

I find that this issue goes to the merits of the costs directed to be paid by the panel of arbitrators and is not against public policy.

It must be remembered that this Arbitration was commenced by the Plaintiff in accordance with the Asian International Arbitration Centre Rules effective as of 9-3-2018. The arbitrators have the requisite powers under the AIAC rules to fix the costs of the arbitration and who should be responsible for the appropriate costs. This is provided under Article 40 of the said AIAC rules.

The complaint by the Plaintiff is based on the allegation that the arbitrators did not follow the costs regime that has been applied in Court proceedings. This can be seen in the Plaintiff’s reliance established case law on this issue: -

Kian Joo Can Factory Berhad v See Teow Koon & Another appeal [2017] 8 CLJ 667

(ii) Allan lee Mason v Jeremy Keith Smeeton [2016] MLJU 1250

(iii) Singh and another v Observer Ltd [1989] 2 All ER 751

(iv) In Strike Sdn Bhd v Foong Sau Har [2021] MLJU 413

M Cheng Construction Sdn Bhd v Hasman Jalil & Anor [2003] 6 CLJ 251

(vi) Lin Jian Wei v Lim Eng Hock Peter [2011] SGCA 29

(vii) Lownds v Home Office [2002] 4 All ER 775

(ix) Sivarasa rasiah v Badan Peguam Malaysia [2012] 2 MLJ 333

Singham Sulaiman Sdn Bhd v Appraisal Property

(xi) Merck Sharp & Dohme Corporation v Hovid Bhd [2022] MLJU 16

The Plaintiff suggests that as the decision on costs was so extravagant and contrary to the Malaysian Court standards as well as it is not reasonable, this tantamount to an award that is against public policy.

This Court disagrees with this position. An award of costs of the arbitration proceedings lies solely in the hands of the arbitrators chosen and appointed in accordance with the terms of the arbitration agreement.

It is not for this Court to interfere and find that such an award is against public policy. The issue of costs to be awarded should be left solely in the hands of the tribunal and is actually part of the merits of the claim. Therefore, this does not fall within the ambit of section 37 of the Arbitration Act.

There is a plethora of cases that covers this area and the Commonwealth Courts have found that as a general rule, unless it is provided in the agreement to arbitrate, that the rules of costs and the scale of costs applicable in Court proceedings are not binding on the arbitrators. I find this illustrated in the following cases: -

As referred to in the Law Commission Report, in H W Broe Ltd v Jones, Greig J made the following observation that scale costs could be disregarded in arbitrations: The amount awarded exceeds, to a considerable extent, what might be allowed normally in Court proceedings by way of party and party costs but an arbitrator is not limited in any way by the rules of procedure or the conventions which are applicable to costs based on a party and party scale. I can see no error of law.

In Ronke v Meyer, Doogue J accepted that an arbitrator has an entitlement to award full costs, and said the result was “clearly within his discretion even if it was exercised in a manner which this Court was unlikely to have adopted”.

In Ruapehu District Council v Asphaltic Construction Ltd, Neazor J rejected an argument that an award of double the scale amounts was an error. One of the reasons was that “the arbitrator was in no way bound to adhere to the costs allowed by the High Court Rules”.

In The Marble & Granite Centre Ltd v Emery, Robertson J considered the impact of the 1996 Act and maintained that, under those new provisions, arbitrators need not replicate the same approach as the Courts: Our Court system has been predicated on the basis of reasonable contributions towards the costs of a party which is successful. There are other approaches to costs awards and in an arbitral setting the exact approach of the Courts need not be replicated.

In Rosser v Global Construction Services, the arbitrator found that the High Court scale had no application. Randerson J dismissed the costs appeal, agreeing that the arbitrator was entitled, in her discretion, to disregard scale costs under the District Court and High Court Rules.

Such distinctions are implicit in the Act, which requires the tribunal to fix the costs before they are allocated. In contrast, actual costs are generally irrelevant for determining costs in the High Court.

A survey of New Zealand arbitrators in 2006 indicated that costs awards of 75–85 per cent of actual costs were not unusual in domestic arbitrations. Consistent with those observations, the authors in Williams and Kawharu on Arbitration suggest that the trend in both New Zealand domestic arbitrations, and in international commercial arbitrations, is to award a successful party a substantial portion or all of their arbitration costs and (reasonable) legal costs.

In Bradbury v Westpac Banking Corporation, the Court of Appeal described access to justice as a significant factor supporting the High Court position of limiting the losing party’s liability for costs. However, access to justice objectives for the public court system do not apply in the same way for private arbitrations. [22] Accordingly, the authorities universally support the position that the arbitrator has a wide discretion, and need not assess or consider what High Court scale costs would be (these would be a non-mandatory consideration). As was the case before the daily recovery rates and time allocations in schs 2 and 3 of the High Court Rules were introduced, there is nothing unprincipled about the approach of assessing the actual costs incurred, then discounting downward to arrive at a reasonable allocation. Indeed, that is consistent with the fixing and allocating costs as required under cl 6(1)(a) of sch 2 of the Act. (New Zealand Act)”

In McCracken v Boyer [20025] NZHC 546 where O’ Gorman J after perusing the established law in New Zealand held:- [21] Both before and after the 1996 Act and General Distributors Ltd v Casata Ltd, the principles for awarding costs in arbitrations have been well-established. While some core principles are consistent with those expressed in r 14.2, there are also clear differences:

(ii) The English High Court’s decision in BPY v MXV [2023] EWHC 82, where on the issue of costs awarded and the challenge made under section 68 of the UK Arbitration Act 1996, Justice Butcher held: - As to the second matter, BPY relies upon the fact that in the Costs Award, MXV was awarded 50% of its legal costs and 75% of the arbitration costs for the Preliminary Issue Award, and upon the Arbitrator's decision not to order MXV to pay BPY's costs, as well as the arbitration costs of the Preliminary Issue Award. BPY contended that, as it had won the Preliminary Issue, these costs awards gave rise to an appearance of bias. I do not consider that there is anything in this complaint. Under Rule 28.4 of the LCIA Rules, the Arbitrator had a discretion in relation to the award of costs. The rule provides that the tribunal should make costs decisions 'on the general principle that costs should reflect the parties' relative success and failure in the award or arbitration or under different issues, except where it appears to the Arbitral Tribunal that in the circumstances the application of such a general principle would be inappropriate under the Arbitration Agreement or otherwise.' In the Costs Award, the Arbitrator considered the parties' respective submissions in considerable detail. She rejected MXV's case that costs should be awarded on an indemnity basis. Her decision not to award costs to BPY was a rational one, based on the fact that 'the Preliminary Issue stemmed from [BPY's] claim, which was ultimately dismissed entirely on the merits'. But she also held that MXV could not recover all its costs of the Preliminary Issue bearing in mind that it had raised and then lost the Preliminary Issue, and also taking into account various conduct issues. Her decision was well within her discretion; was reasoned; and does not give any appearance of bias.”

One could also see that it is common to find that in arbitration costs to be awarded beyond the standards laid down by Courts. Awards that have allowed for full indemnity costs have been found not to be excessive and have been confirmed by the Courts in other jurisdiction such as that in Canada as seen in Allard v University of British Columbia [2021] BCSC 60, K-Rite Construction Ltd and 1856050 Alberta Ltd v Enigma Venture Inc [2020] ABQB 566 and Schickedanz v Wagema Holdings Limited [2023] ON

Therefore, I do not find that the challenge to the arbitration award lodged by the Plaintiff is tenable. There is no issue of public policy that has been breached by the award of costs as claimed by the Plaintiff. It must be remembered that this is an award of an arbitration that was initiated by the Plaintiff based on the terms of the agreement to arbitrate. There is no issue concerning access to justice as the parties did agree on their own volition to submit to the jurisdiction of the arbitrators. Therefore, the scale and proportionality of costs awarded by the arbitrators is not an issue of concern to the administration of justice to this Court. Having agreed to the submit to arbitration the Plaintiff must be aware and accept the possibility of such large costs being imposed against them. More so when that seems to be the common practice in arbitration as seen in the earlier cited cases.

This approach can be seen in the decision of Judith Prakash J in VV and Another v VW [2008] SGHC 11. In that case, the Plaintiff complained that the award of costs made by the arbitrators to the sum of $2,805,498.52 is excessive and contrary to public policy. Substantial arguments were put before the Court on similar issues. Judith Prakash J dismissed such arguments and held as follows: - “29 The courts will however, move to provide redress whenever it is clear that excessive costs have been claimed. If this application arose out of a dispute heard in court and appeared before me as a review of taxation proceedings, it is likely that I would have opened it up to determine whether it was reasonable for one party to have to pay such a high quantum in costs. While the courts recognise that senior counsel with particular expertise are able to command certain fee levels, there is within any common law system an inherent bench marking process which would be able to assess what the reasonable and appropriate figure would be in the circumstances within the general prevailing legal market. This does not necessarily relate to what a particular counsel might charge his client (and what the client might be content to pay for the expertise). Indeed every counsel of standing should be able to ask his client to pay his market price. In the court system, however, a client would pay this price knowing that, even if successful, he may not thereafter be able to recover all amounts so paid from his opponent. 30 The situation in arbitration proceedings is, however, somewhat different. From the authorities cited to me it is clear that in international arbitrations the entitlement of the successful party to costs and the way in which such costs should be assessed are hotly debated issues. For example, concerns have been expressed about the differing levels of costs incurred depending on which jurisdiction the counsel employed come from as rates, naturally, vary substantially from country to country. Despite the concerns, except in very limited circumstances, the merit of the arbitral process as opposed to civil litigation is that the parties have many liberties in the process of adjudication of their dispute, the principal one being the choice of who determines the dispute for them. Essentially this means that the parties choose a person they trust to adjudicate their dispute fairly and must then stand or fall by that choice. Where institutional arbitration has been chosen by the parties the appointment is sometimes made not by the parties themselves but by a named institution; and such institution conducts various phases of the arbitration and may even become involved in some instances (the SIAC is an example) in the taxation of costs. Where an institution administers an arbitration, it must scrupulously supervise and keep track of how an arbitrator performs. Reputable institutions do perform this function well. There are situations, however, where the institution serves only as a default appointing authority. In these cases, the institution has no control over the conduct of the arbitration (and is not intended by the parties to have such control). I sometimes wonder whether or not in cases like this where the parties have no other recourse, not even the publication of an award or a discussion of how the arbitration was handled due to confidentiality, the courts should in very restricted and specific circumstances exercise a supervisory role to prevent or curb excesses. That, however, is not something I can do under the present regime. Legislative intervention would be required to change it. 31 I have said what I said in the proceeding paragraphs because I have concluded that it is not part of the public policy of Singapore to ensure that the costs incurred by parties to private litigation outside the court system eg arbitration whether the same is domestic or international, are assessed on the basis of any particular principle including the proportionality principle. That is not to say that arbitrators should not follow established legal principles when assessing costs payable by one party to another but simply that there are no public policy implications connected with that procedure. There is no public interest involved in the legal costs of parties to one-off and private litigation. Such litigation sets no precedents and binds no one apart from the immediate parties. The immediate parties are parties to the arbitration because they had a pre-existing contractual relationship by which they had decided (probably, though not always, with the benefit of legal advice) that disputes arising under the contract were to be settled in this way outside the judicial system. There is no issue of such parties having been fortuitously involved in litigation as is often the case in court where claims arise not only out of contract but also out of tort and non-commercial relationships. The concern that has been expressed by judges and others as to keeping the costs of litigation in proportion to the circumstances of the case has been a concern that related to court litigation and the general rubric of “access to justice”. From a policy perspective, this concern does not extend to private arbitrators despite personal misgivings at the quantum of any costs award in such litigation. I do not think that the amount of costs awarded by an arbitrator to a successful party in an arbitration proceeding could ever be considered to be injurious to the public good or shocking to the conscience no matter how unreasonable such an award may prove to be upon examination. The courts adhere to the policy of party autonomy embodied in the Act and reflected by the limited grounds on which they may interfere in the arbitral process. The prevailing public policy being that substantive arbitral awards are inviolable notwithstanding mistakes of fact or law, it would be odd for the courts to be able to justify interfering with the quantum of costs awarded by an arbitrator by invoking public policy. 32 It follows from what I have said above that in my judgment the plaintiffs have no basis to challenge the Costs Award on public policy grounds. This decision is not dependent on whether the principle of proportionality is a part of Singapore procedural law or not or the content of that principle or the issue of whether the Costs Award offends the principle….”

For the above reasons, I find that the issue of costs as found by the arbitrators and the orders made is not against public policy. As parties had agreed to have the issues between them subject to an agreement to arbitrate, the decision as to the costs to be awarded against the Plaintiff for the said arbitration lies solely within the purview of the arbitrators and is not against public policy.

Alleged Breach of Natural Justice – that the arbitrators had reversed the burden of proof

The Plaintiff relies on Kuala Ibai Development Sdn Bhd v Kumpulan Peruding (1988) Sdn Bhd [1999] 5 MLJ 137 where Nik Hashim J held: - “(d) Refusing To Grant A Proper Hearing As To The Question Of Costs And Reversing The Burden Of Proof In Deciding The Quantum Of Costs Payable To The 1st Respondent After the Interim Award was made the applicant and the 2nd respondent took objection to the manner in which the arbitrator has dealt with the question of costs payable to the 1st respondent as a result of the arbitrator dismissing the applicant's application before the arbitration. Briefly, the applicant's complaints are that:

The arbitrator's exercise of his discretion in directing that the costs of the 1st respondent be paid forthwith, and

(ii) The arbitrator in arriving at the decision to award costs of RM23,650 to the 1st respondent, reversed the burden of proof. On the issue of costs, thoughs. 19(1) gives the arbitrator the discretion "to direct and by whom and in what manner those costs or any part thereof shall be paid..." nevertheless, the discretion must be exercised judiciously, in accordance with the law and with the principles of natural justice. In this case, he failed to observe them. The arbitrator directed the costs of the 1st respondent to be paid forthwith without a request by the 1st respondent and without affording the applicant and the 2nd respondent an opportunity to respond to the views and comments of the 1st respondent's letter dated 8 April 1998. Moreover, there is no exceptional circumstances shown to the arbitrator to warrant the costs to be paid forthwith (see The Law and Practice of Commercial Arbitration in England by Sir Michael Mustill 1982 p. 354). In arriving at the decision to award the costs of RM23,650 to the 1st respondent, without the 1st respondent justifying them that its claim was reasonable, the arbitrator has reversed the burden of proof, and his failure to afford the applicant and the 2nd respondent an opportunity to make submissions and thus offending the rules of natural justice, has vitiated the award. Failure to observe the rules of natural justice is misconduct and therefore, fatal to the award. This misconduct could also be perceived that the arbitrator was not to give a fair trial to the parties.”

After considering the award of costs as found by the arbitrators, I find that the panel did not reverse the burden of proof as suggested by the Plaintiff. The panel had only accepted the costs claimed by the Defendant based on the evidence and arguments relied on by the said party. In fact, the award by the tribunal shows that at all material times, they had correctly identified that the burden lies with the Defendant and did not shift the burden to the Plaintiff. The panel had only chosen not to accept the contention by the Plaintiff’s solicitors that these costs were not proven and were not reasonable. This does not mean that the said burden was reversed as claimed by the Plaintiff.

This is evident in paragraphs 114 to 118 reproduced earlier. Therefore, I find that this issue goes to the merits of the decision of the arbitrator and this Court is not empowered to interfere unless it is shown that there has been a breach of natural justice. I find that the arbitrators had given the Plaintiff ample opportunity to present their arguments and had carefully considered the arguments put forth opposing the claim for costs by the Defendant. Therefore, I do not find that the award should be set aside and I do not accept the contention raised by the Plaintiff.

Alleged Deprivation of the Plaintiff from an opportunity to present its case

The Plaintiff’s complaint on this issue arises from the alleged failure by the tribunal to direct that the Defendant produce supporting documents and rejection of the Defendant’s request or application for further particulars of the costs sought by the Defendant.

I find that this allegation is incorrect. The award clearly shows that the arbitrators had given the Plaintiff ample opportunity to present its case. The complaints by the Plaintiff relate to the manner in which the tribunal decided as to the amount of costs to be awarded considering various factors including the (i) the team involved in the said arbitration, (ii) the complexity of the claim and (iii) the Plaintiff’s contention that the claim of the costs was grossly inflated. The issues raised by the Plaintiff were laid down in detail from paragraphs 84 to 100 of the Award and it cannot be said that the Plaintiff was not given every opportunity to present their arguments to the claim of costs.

Furthermore, I also find that the Plaintiff did not at any material time file any application for discovery or disclosure from the Defendant of any particulars of the claim for costs lodged by the Defendants. As correctly laid down by the arbitrators that this determination is at their absolute discretion and need not be based on a process adopted by our Courts: -

On this issue, I again refer to the decision of Judith Prakash J in the earlier cited case. A similar issue was raised in this case where the litigants complained that no sufficient information or evidence was produced to justify the costs and this allegedly lead to a breach of natural justice. In rejecting the said argument, her ladyship held:- … …

Therefore, I am of the opinion that the allegations levelled against the arbitrators are not warranted and do not justify setting aside the award. The complaint lodged is based on the merits of the award by the arbitrator and does not fall within the purview of section 37 of the Arbitration Act.

Alleged Fraud – The Original Contract that contained the agreement to arbitrate was fraudulently created

On the issue of the alleged fraud, I do not accept that the said final award on costs is tainted by any procedural fraud as alleged by the Plaintiff.

I refer to Uncitral Model Law & Arbitration Rules at page 540 paragraph 37.57 where the learned author stated: - “The party’s right to present its case entails two steps. The first is the obligation of the party to present its case comprising the facts and the applicable law, and the right to be informed of the opposite party’s viewpoint. The second is that the arbitral tribunal is obliged to consider the arguments presented and to account for them in its decision-making process”

The complaints lodged by the Plaintiff lie with the original award undertaken in London and the agreement that was enforced by the said arbitration panel. This does not mean that the award of costs made by the Malaysian tribunal is tainted with fraud. I therefore reject the said contention.

(V) Alleged Bias against members of the Malaysian Tribunal

Finally, I find that the award made by the Malaysian Tribunal on costs is not tainted with bias. The complaints by the Plaintiff are not warranted and I find that the tribunal had painstakingly considered the submissions by the Plaintiff. Ample opportunity was given to each party to present their arguments. I do not believe that the Plaintiff has proven the existence of any form of bias alleged against the arbitrators.

The complaint here lies with the amount and the method as to how the assessment of costs was undertaken by the arbitrators. That is within their scope and powers. It is not for this Court to interfere especially when the tribunal had assessed costs based on what they believe to be reasonable and fair considering the complexity of the case and what they believed to be fair in this case. I do see that the amount awarded may seem excessive and substantially higher than what our Courts would have awarded, but that goes to the merits of the award and cannot be said to have been made in breach of natural justice.

I have also considered the application filed by the Plaintiff in Enclosure 12. The said application is premised on the argument that this Originating Summons should be stayed pending the appeal filed by the Plaintiff against the decision of this Court in the Originating Summons No: WA-24NCC-(ARB)-07/2023.

I do not believe that the said argument holds water and do not believe that there exist any special circumstances justifying the stay of this Originating Summons.