Yeo Eng Lam v Infinity Vantage Sdn Bhd (N-02(IM)(NCVC)-507-03/2018)

Infinity Vantage Sdn. Bhd., the Respondent/Plaintiff, filed an action against one Yeo Eng Lam, the Appellant/Defendant, vide Civil Suit No. NA-22NCvC-57-08/2017 at the High Court in Malaya at Seremban, Negeri Sembilan (the Civil Suit).

The Respondent’s/Plaintiff’s claim was for breach of contract and the Respondent/Plaintiff was seeking a sum of RM 7,000,000.00 pursuant to a Joint Venture Agreement (JVA) dated 3.10.2014 between the parties. Clause 29.3 of the JVA provides that all disputes between the parties are to be referred to arbitration.

On 17.10.2017, the Appellant/Defendant vide Enclosure 8 at the High Court, filed an application under Order 92 rule 4 of the Rules of Court 2012 (ROC) and/or section 10 of the Arbitration Act 2005 (Act 646) to stay the proceedings at the High Court and to essentially refer the dispute to arbitration.

On 8.2.2018, the High Court dismissed the Appellant’s/Defendant’s application in Enclosure 8 with costs of RM 3,000.00 subject to the payment of the allocatur’s fee. 3

Aggrieved by the said decision, the Appellant/Defendant filed an appeal to this Court.

For the purpose of this appeal, the parties will be referred to as they were at the High Court. B.

The facts relevant to this appeal are as follows. The Plaintiff initiated the Civil Suit against the Defendant on 25.8.2017 alleging, amongst others, that the Defendant had breached the JVA between them and as a result of which the Plaintiff is seeking a sum of RM 7,000,000.00 with interest, special damages and other reliefs from the Defendant.

During case management at the High Court on 25.9.2017, the learned Deputy Registrar directed the Defendant to file her Statement of Defence on or before 13.10.2017. The Defendant then filed the Memorandum of Appearance on 3.10.2017.

On 9.10.2017, the Defendant filed an application in Enclosure 5 to disqualify the Plaintiff’s solicitors, Messrs. Ghazi & Lim, to act for the Plaintiff. Enclosure 5 was premised on the basis that the Plaintiff’s solicitors had acted as common solicitors of the parties in the preparation 4 of the JVA. As such, they were privy to confidential information pertaining to the Defendant and there will be a serious conflict of interest if the said solicitors were to represent the Plaintiff against the Defendant in the Civil Suit.

The Defendant alleged in her Affidavit in Support to Enclosure 5, at paragraph 6, that the solicitors for the Plaintiff will be called to testify as witnesses of any material and disputed questions of fact in this action. Enclosure 5 has yet to be heard by the High Court.

Then, on 13.10.2017, the Defendant filed her Statement of Defence and Counter-Claim. Four days after the filing of the Statement of Defence and the Counter-Claim the Defendant filed the Notice of Application Enclosure 8 under section 10 of Act 646, being the subject matter of this appeal, for the proceedings at the High Court to be stayed pending reference to arbitration pursuant to Clause 29.3 of the JVA.

The Plaintiff objected to the application in Enclosure 8 and argued that the Defendant had participated in the proceedings at the High Court and had in fact taken two other steps prior to the filing of the stay application; the two other steps being the filing of Enclosure 5 and the Statement of Defence and the Counter-Claim. The stay application should have been filed before the Defendant had taken any other steps at 5 the High Court proceedings and the Defendant’s failure to comply with the conditions prescribed in section 10(1) demonstrated the Defendant’s participation in the proceedings at the High Court and should be precluded from now referring the matter to arbitration.

On the contrary, the Defendant argued that the Defendant has not taken any steps in the proceedings that would disentitle her to apply for a stay order to be granted. The Defendant argued that application to disqualify the Plaintiff’s solicitors was merely a defensive step to preclude a potential conflict from arising and to protect the Defendant’s position from being subsequently compromised. This step was not in any way evinced any intention on the Defendant’s part to abandon her right to refer the matter to arbitration.

The Defendant further argued that the acts of filing the Statement of Defence and the Counter-Claim were done in compliance with the court’s directions and they were done with “express reservation” that the Defendant reserves her right to refer the matter to arbitration. C.

The sole issue to be determined in this appeal is whether the Defendant has taken “any other steps in the proceedings” to disqualify her from applying for a stay of proceedings under section 10(1) of Act 646. 6

Section 10(1) of Act 646 is reproduced herewith for reference: “Arbitration agreement and substantive claim before court

10.

Section 10 (1) has set out clear requirements for a stay application to be granted. The requirements are, amongst others, for the application to be made before a party (the Defendant) has taken any other steps in the proceedings. The next question posed to this Court was, what would constitute “steps in the proceedings”?

This Court was guided by the principles laid out in the Federal Court decision of Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625 as to what would tantamount to “steps in the proceedings” and “any other action in the proceedings” as per Mohtar Abdullah FCJ (as he then was) at page 638: “…Therefore, the legal position in Malaysia may be neatly summarized as follows:

(a) the entry of appearance is the mandatory procedural step to be taken by an applicant in proceedings in the High Court. It is a step in the proceedings as required by the RHC. However, it is a permitted, excluded or an exempted step in the proceedings that does not amount to a step in the proceedings within the meaning of the s 6 of the Act which would prejudice the applicant’s right to apply for a stay of the proceedings; 7

(b) if the applicant has served any pleadings, then he has clearly taken a step in the proceedings within the meaning of s 6 of the Act. He has thereby elected to proceed with the proceedings in the High Court and would be barred from applying for a stay of proceedings to refer the dispute to arbitration;

(c) if he has taken any other action in the proceedings (other than steps (a) or (b) abovementioned), the court will then have to consider whether such action amounts to a step in the proceedings by determining the nature of the action and whether or not it indicates an unequivocal intention to proceed with the suit and to abandon the right to have the dispute disposed off by arbitration.”

This Court was also referred to a decision in the case of PP Persero Sdn Bhd v Bimacom Property & Development Sdn Bhd [1999] 6 MLJ 1, H.C. where, in dismissing the appeal to the Judge in Chambers for a stay application pending reference to arbitration, Abdul Malik Ishak J (as he then was) held, at page 1, as follows: “(1) A stay will not be granted if the applicant has taken steps in the proceedings after entering appearance in the court proceedings. The applicant must unequivocally elect to refer the matter only to arbitration and nothing else. The conduct of the defendant in seeking the prayer [to strike out the plaintiff’s writ] clearly demonstrated a desire to abandon the application for a stay in favour of allowing the matter to proceed to trial. The act of the defendant had the effect of invoking the jurisdiction of the court to proceed to hear the case in open court and not to refer the matter to arbitration nor to stay the matter. By seeking the prayer, the defendant had taken the necessary steps in the proceedings thereby precluding a stay and reference to arbitration. The defendant did not unequivocally elect to refer the matter to arbitration. In the technical sense, the defendant took a step in the proceedings thereby barring resort to s 6 of the Arbitration Act 1952 (see p 22G-I).”

Two things are clear from the decisions referred above. First, save for filing the Memorandum of Appearance, if the intention of a party to an agreement is to give effect to the arbitration clause in their agreement, 8 that party must ensure the stay application is filed at the soonest possible time before taking any other steps in the proceedings that would indicate an intention to proceed with the litigation in court. Second, it can be surmised that any application made to the court must clearly and unequivocally state that it was made whilst reserving that party’s right to refer the matter to arbitration.

Prior to the filing of Enclosure 8, but after filing her Memorandum of Appearance on 3.10.2017, the Defendant had filed an application to disqualify Messrs. Ghazi & Lim, the Plaintiff’s solicitors in Enclosure 5 on 9.10.2017. The Defendant then filed her Statement of Defence and the Counter-Claim on 13.10.2017. We were of the view that these two steps taken by the Defendant (that is, filing of Enclosure 5 and Statement of Defence and Counter-Claim) were made without express nor unequivocal reservation on her rights to refer the matter to arbitration, notwithstanding paragraphs 1 and 3 of her Statement of Defence where it is stated as follows : “1. Prosiding yang dibawa oleh Plaintiff di hadapan Mahkamah Yang Mulia ini adalah perkara subjek perjanjian timbangtara. Pembelaan ini oleh itu difailkan tanpa prejudis kepada hak Defendan untuk penggantungan prosiding dan membawa perkara yang dirujuk kepada timbangtara. …

Sementara menunggu resolusi tersebut, pemfailan Pembelaan ini tidak boleh dianggap sebagai langkah dalam prosiding.” 9

Moreover, the Defendant had not only filed her Statement of Defence but also went on to even include her Counter-Claim, albeit making reference to refer the dispute to arbitration in paragraph 25, where the reliefs sought are mainly for declarations and as an alternative prayer 31(h) for the claims to be referred to arbitration. The pleadings of the Defendant ran counter to her wish to refer the dispute to arbitration as stated in Sanwell (supra). We took this position notwithstanding the fact that it was as per the learned Deputy Registrar of the High Court’s direction that the Defendant filed her Statement of Defence. The Defendant could not be heard to excuse herself from filing the Statement of Defence because of the learned Deputy Registrar’s directions as she could have easily told the same that she would be filing an application for stay of the High Court proceedings soonest.

Aside from the fact that the stay application was filed after the aforementioned two steps taken, it is pertinent to scrutinize the contents of the Defendant’s application in Enclosure 5, specifically paragraph 6. The Defendant explained and impressed upon the court on the necessity of her application to disqualify the Plaintiff’s solicitors. This application was premised on the Defendant’s contention that the solicitors may be called to testify as witnesses of any material and disputed questions of fact in the Civil Suit. This was what she deposed – 10 “6. I verily aver that since Messrs Ghazi & Lim was involved in the preparation and drafting of the Joint Venture Agreement and the Power of Attorney in this action, advised me thereon and affirmed the Statutory Declaration for the lodgement of the Plaintiff’s caveats, the solicitors of Messrs Ghazi & Lim may be called to testify as witness of any material and disputed questions of fact in this action.” To us, this, as well as the declaratory reliefs sought by her in her Counter-Claim, let alone praying in the alternative for the claims before the court be referred to arbitration, showed a clear intention of the Defendant to proceed with the trial and the abandonment of her choice to refer the dispute to arbitration. In other words, her reservation to refer the dispute to arbitration is not unequivocal.

Therefore, upon perusing the chronology of events in this appeal, it was apparent to us that the filing of Enclosure 8 was made after the Defendant had taken steps in the proceedings within the meaning of section 10(1) of Act 646 and that the filing of Enclosure 8 was merely as an afterthought. Failure of the Defendant to comply with the prerequisite requirements under section 10(1) disqualified her from obtaining a stay under the same.

Whilst the Defendant’s contention that the filing of the Notice of Application in Enclosure 5 did not fall within the definition of pleadings as discussed in the decision of Sanwell (supra) is true [see definition of 11 “pleadings” in “A Concise Law Dictionary” by P.G. Osborn, Sweet & Maxwell, 1964, Fifth Edition where “pleadings” is defined – “Written or printed statements delivered alternately by the parties to one another, until the questions of fact and law to be decided in an action have been ascertained; i.e., until issue is joined. The pleadings delivered (a) by the plaintiff, (b) by the defendant, are as follows: (1)(a) statement of claim; (b) defence. (2)(a) reply…”. Sell also Order 18, Rules of Court 2012.], however, we viewed the substance of Enclosure 5, and not the form, where the said application to our minds was a clear indication of the intention and direction of the Defendant’s mind, that is, to litigate the matter in the court of law. We were also not persuaded by the Defendant’s contention that Enclosure 5 was a mere peripheral defensive manoeuvre nor was it a tactical strategy of the defence. We were of the view that it was a clear further step taken by the Defendant to proceed with the trial.

Upon careful perusal of Enclosure 5, the Statement of Defence and the reliefs sought in the Counter-Claim, we were unable to find any indication or a clear and unequivocal reservation of the Defendant’s right to refer the matter to arbitration. The absence of such specific and unequivocal reservation only confirmed our findings that the Defendant had taken active steps to litigate the matter in the court of law prior to making an application for a stay under section 10(1). 12 D.

Thus, based on the abovementioned reasons, we were of the view that the learned Judicial Commissioner had not erred either in fact or in law in dismissing the Defendant’s application in Enclosure 8. We were also of the view that this appeal did not warrant any appellate intervention.

Hence, we unanimously dismissed the appeal. We ordered the costs in the sum of RM 10,000.00 to be paid by the Defendant to the Plaintiff, subject to the payment of the allocatur’s fee. sgd (UMI KALTHUM BINTI ABDUL MAJID) Judge Court of Appeal Putrajaya Dated: 10.06.2020 13 Counsels/Solicitors Solicitors for the Appellant/Defendant : Anantha Krishnan from Messrs. Anantha Krishnan. Solicitors for the Respondent/Plaintiff : Arumugam Ganapathy (together with Kiranjeet Kaur A/P Baldeep Singh) from Messrs. Ghazi & Lim.