Zecon Engineering & Construction Sdn Bhd v Posco Engineering & Construction Co. Ltd. (WA-24C(ARB)-19-03/2024)

the application by the Plaintiff in the Originating Summons (‘O.S.’) for, among others, –

a declaration that the arbitration agreement originally entered between the Plaintiff and Posco Engineering Co Ltd (‘PEN’) is inoperative, including as against the Defendant (prayer 1) and further, or in the alternative, that the Defendant has abandoned or waived any rights to proceed with arbitration against the Plaintiff that it claims under the arbitration agreement between the Plaintiff and PEN (prayer 2);

(ii) an order that the Defendant, its servants or agents be restrained from continuing or proceeding with the arbitration proceedings against the Plaintiff (prayer 3); and

(iii) a consequential order that the Defendant bear all costs in connection or arising from the arbitration against the Plaintiff (prayer 4) (‘Declaration & Permanent Injunction Application’);

the application by the Plaintiff (encl. 3) for an order that the Defendant, its servants or agents be restrained from continuing or proceeding with the arbitration proceedings against the Plaintiff pending disposal of the O.S., which was heard on an opposed ex parte basis (‘Interim Injunction Application’); and

the application by the Defendant (encl. 15) for the proceedings to be stayed pending reference of the disputes between the parties to arbitration at the Asian International Arbitration Centre (‘AIAC’) under the arbitration proceedings already commenced pursuant to s 10 of the Arbitration Act 2005 [Act 646] (‘AA 2005’) (‘Stay Application’). [2] As regards encl. 3, the Plaintiff’s application for an Ad Interim Injunction was allowed on 26.3.2024. [3] On 21.10.2024, after having given careful consideration to the affidavit evidence and oral and written submissions of the parties, I allowed prayers 1, 4 and 5 (for costs of the application) in the Declaration & Permanent Injunction Application and the Interim Injunction Application whilst the Stay Application was dismissed. [4] Dissatisfied, the Defendant has appealed against the decision. [5] These are my full grounds of judgment. The Cause Papers [6] The cause papers for each application are as follows:

the Plaintiff’s O.S. dated 22.3.2024 (encl. 1);

the Plaintiff’s Affidavit In Support (‘AIS’) affirmed by its Senior General Manager (Legal), Mohd Roslan Bin Habibullah on 21.3.2024 (encl. 2);

the Defendant’s Affidavit In Reply (‘AIR’) affirmed by its solicitor, Sivaram a/l Prasad on 22.4.2024 (encls. 17 - 20);

the Defendant’s Notice of Intention To Use Affidavit (3) dated 22.4.2024 (encl. 21);

the Plaintiff’s AIR affirmed by the same deponent on 23.5.2024 (encl. 24); and

the Plaintiff’s Notice of Intention To Use Affidavit (1) on 29.5.2024 (encl. 26).

the Plaintiff’s Notice of Application dated 22.3.2024 (encl. 3);

the Plaintiff’s AIS affirmed by the same deponent on 21.3.2024 (encl. 4);

the Defendant’s Notice of Intention To Use Affidavit (2) dated 22.4.2024 (encl. 22);

the Plaintiff’s AIR affirmed by the same deponent on 23.5.2024 (encl. 25); and

the Plaintiff’s Notice of Intention To Use Affidavit (2) dated 29.5.2024 (encl. 27).

the Defendant’s Notice of Application dated 22.4.2024 (encl. 15);

the Defendant’s AIS affirmed by the same deponent on 22.4.2024 (encl. 16);

the Defendant’s Notice of Intention To Use Affidavit (1) on 22.4.2024 (encl. 23);

the Plaintiff’s AIR affirmed by the same deponent on 23.5.2024 (encl. 25);

the Plaintiff’s Notice of Intention To Use Affidavit (3) dated 29.5.2024 (encl. 28); and

the Defendant’s AIR affirmed by the same deponent on 6.6.2024 (encl. 29). Salient Facts [7] In the light of the upcoming analysis of the issues which arose for determination at the hearing of this suit, it is necessary to have a full appreciation of the events which had transpired up to the filing of the instant applications before this Court. Hence, the facts below are outlined in greater detail than is usually required. [8] The Plaintiff is a private limited company incorporated under the laws of Malaysia with a business address at Tingkat 8, Menara Zecon, No. 92, Lot 393 Seksyen 5, KTLD Jalan Satok, 9340 Kuching, Sarawak. The Plaintiff is in the business of heavy and civil engineering and construction. [9] The Defendant is a company limited by shares incorporated in Korea having its head office at 180 Daesong-ro, Nam-gu, Pohang, Gyeongsangbuk-do, Korea. Its nature of business is carrying out engineering and construction activities. [10] By the Letter of Acceptance dated 28.1.2014, the Plaintiff awarded PEN the contract in respect of the construction of the project known as “CADANGAN PEMBINAAN HOSPITAL PETRAJAYA, SARAWAK (300 KATIL) PETRAJAYA, KUCHING, SARAWAK (REKA DAN BINA)” for the contract sum of RM162 million. [11] The Plaintiff and PEN, which had its registered address at Lot 2696, 1st Floor, Block 10, No. 264, 2½ Mile, Rock Road, 93200 Kuching, Sarawak, executed the contract on 15.7.2014 by applying the Conditions of Contract (‘CoC’) in the P.W.D. Form 203A (Rev. 1/2010). [12] Pursuant to Clause 66 of the CoC, the parties agreed to refer any dispute or difference arising out of the contract to arbitration at the Kuala Lumpur Regional Centre for Arbitration (‘KLRCA’, under s 2 of the Arbitration (Amendment) Act 2018 [Act A1563], the words KLRCA wherever appearing in the AA 2005 were substituted with the AIAC with effect from 28.2.2018). [13] On 23.11.2016, the Defendant and PEN entered into a Merger Agreement whereby PEN shall merge into the Defendant and as a result thereof, the Defendant shall be the surviving company and PEN shall be dissolved. [14] On 24.11.2016, PEN, through its solicitors, Messrs Wong & Partners, issued the Notice of Arbitration to the Plaintiff pursuant to paragraph 3(a) of Article 3, Part II, KLRCA Rules that the disputes as set out therein be referred to arbitration in accordance with the KLRCA Rules and Clause 66.3 of the principal contract dated 15.7.2014 between the parties. [15] The applicable rules of arbitration of the KLRCA as at the date of commencement of the arbitration is the rules in force as at 24.10.2013 (‘KLRCA Rules 2013’). [16] The Plaintiff responded through its solicitors, Messrs. Mohanadass Partnership on 4.1.2017 where all matters and claims as alleged by PEN were denied. [17] Dato’ Mohamad Ariff bin Md Yusof was appointed as the Sole Arbitrator with the agreement of the Plaintiff. [18] On 4.5.20174, PEN’s solicitors wrote to inform the learned Arbitrator that it has been instructed to make an application to the tribunal for the substitution of PEN with the Defendant as the claimant in the arbitration proceedings (‘Substitution Application’). [19] The Plaintiff’s solicitor sent a letter to the learned Arbitrator on 22.5.2017 requesting the Tribunal to consider the Plaintiff’s application for an interim award that the Tribunal has no jurisdiction to hear and decide the disputes brought by PEN or the Defendant and an order that the Substitution Application be dismissed (‘Application for Interim Award on Jurisdiction’). [20] The Plaintiff’s solicitor wrote again to the learned Arbitrator on 20.6.2017, this time to apply for an order for interim security for costs in the amount of RM450,000.00 to be furnished by the claimant and in the event the security is not furnished, all proceedings in the arbitration be stayed (‘Security for Costs Application’; the Application for Interim Award on Jurisdiction and the Security for Costs Application will hereinafter be referred to as the ‘Said Applications’). [21] PEN’s Written Submissions for the Substitution Application is dated 7.8.2017 and its Reply Submissions is dated 27.2.2018. [22] The Plaintiff’s Written Submission in support of the Application for Interim Award on Jurisdiction and in opposition to the Substitution Application is dated 11.8.2017 and its Further Written Submissions is dated 12.2.2018. [23] Meanwhile there were correspondences in relation to the payment of the Advance Preliminary Deposit (‘APD’). [24] On 9.8.2017, KLRCA wrote to the Plaintiff’s solicitors that it has yet to receive the Plaintiff’s share of the APD amounting to RM116,681.47. KLRCA referred to Rule 13(6) of the KLRCA Arbitration Rules which states: “… If the required deposits are not paid in full, the Director of the KLRCA shall so inform the parties in order that one or another of them may make the required payment. If such payment is not made, the arbitral tribunal, after consultation with the Director of the KLRCA, may order the suspension or termination of the arbitral proceedings or any part thereof.” and asked for the said amount to be remitted to AIAC by 23.8.2017. [25] In the letter by PEN’s solicitors to KLRCA dated 6.9.2017, it was stated, among others, that the KLRCA had – “… via letters dated 2 June 2017 requested that the Claimant and the Respondent deposit an Advance Preliminary Deposit in the sum of RM116,681.47 respectively (the “Advance Preliminary Deposit”). In this regard:- a) the Claimant had remitted its share of the Advance Preliminary Deposit to the KLRCA on 11 August 2017; and b) the Respondent has not paid its share of the Advance Preliminary Deposit to the KLRCA as at the time of writing, and has expressed its intention to not pay its share. … By reason of the Respondent’s non-payment of its share of the Advance Preliminary Deposit, the arbitration proceedings have been temporarily halted on the direction of the Arbitrator. B. Request for continuation of Proceedings Against the backdrop above, we write to request that the KLRCA suspend the requirement for payment of the Respondent’s portion of the Advance Preliminary Deposit pursuant to Rules 13 (6) and (7) of the KLRCA Rules. …”. [26] On 13.9.2017, PEN’s solicitors sent another letter to KLRCA in response to KLRCA’s letter of the same date to the parties to inform that the KLRCA has yet to receive the Plaintiff’s share of the APD and requests that PEN pays the said share. [27] The KLRCA’s Senior International Case Counsel then wrote to the solicitors for PEN and the Plaintiff on 20.10.2017 as follows: “I refer to the above matter and to the multiple communications sent by and between the Parties' representatives and the Arbitrator in the last few weeks. I specifically refer to Dato' Ariff's letter dated 25th September 2017 whereby the Arbitrator asks for the Director's advice regarding the application of Rule 13(6) of the KLRCA Arbitration Rules. The Director has considered the matter, the developing circumstances, and the views of the Parties and Arbitrator. The Director has no objection on proceeding in accordance with the Arbitrator's proposal. This is, the Director concurs with the Arbitrator on the convenience of hearing the application on Jurisdiction before continuing to require payment of the outstanding deposit. Until the Jurisdictional application be decided by the Arbitrator, the requirement for payment of the Advance Preliminary Deposit will be suspended. …” (‘Suspension Ruling’). [28] Subsequently, the learned Arbitrator wrote to the Director of AIAC on 11.10.2018 to withdraw as Arbitrator with the consent of the parties effective immediately in view of his current election as the Speaker of Dewan Rakyat. [29] PEN’s solicitors sent a letter dated 30.10.2018 to the Plaintiff’s solicitor suggesting that Mr. Ivan Loo Yew Fook or Datuk Dr. Prasad Sandosham Abraham be appointed as the substitute Arbitrator. [30] The Plaintiff’s solicitors replied on 12.11.2018 proposing Dato’ Anantham Kasinather as the substitute Arbitrator. [31] AIAC’s Case Counsel informed the solicitors for PEN and the Plaintiff on 1.10.2019 regarding Article 14 of the AIAC Arbitration Rules 2018 and Rules 4(4), (6) and (7) and requested the parties to nominate a substitute Sole Arbitrator. [32] AIAC sent a reminder on 28.11.2019 for the parties’ nomination of a Sole Arbitrator. At the same time, the parties were informed that the Director of AIAC has requested that PEN remit the Plaintiff’s share of the APD and this was to be done by 12.12.2019. [33] On 10.12.2019, PEN’s solicitor sent an e-mail to AIAC and the Plaintiff’s solicitor to address the issue of the APD as follows: “… It is our respectful view that the issue pertaining to the advance preliminary deposit has been addressed by the earlier decision by the Director of the KLRCA (now known as the AIAC), which was made pursuant to a contested application by the Claimant and upon the proposal made by the then-presiding Arbitrator. That decision is as set out in the KLRCA's letter of 20-10-2017, a copy of which we attach for your convenience. In summary, the Director had decided to exercise his discretion to suspend the requirement for payment of the advance preliminary deposit until the jurisdictional application be decided by the Arbitrator. It may be noted that the jurisdictional application has yet to be decided by any Arbitrator, and as yet, no substitute Arbitrator has been appointed over the matter. In the above circumstance, we trust that the suspension will continue to be in place. It is important to stress that the discretion to suspend the requirement was made pursuant to a contested application, which was fully considered by the then-presiding Arbitrator who in turn recommended accordingly to the Director. …”. [34] In the meantime, the parties had without prejudice settlement discussions. PEN’s former solicitors, Messrs. Wong & Partners, had written to the Plaintiff’s solicitors on 18.12.2020 proposing the terms of the offer for settlement. Two further letters ensued on 1.3.2021 and 12.5.2021. [35] The Plaintiff’s solicitors replied on 1.3.2021 with a counter-proposal. PEN’s erstwhile solicitors responded on 12.5.2021 that PEN is not agreeable to the Plaintiff’s proposal and that “… if there is no realistic attempt at settlement negotiations, our client will seek to resume the arbitration process imminently.”. [36] AIAC’s Deputy Head of Legal Services e-mailed to the solicitors on 16.12.2021 referring to AIAC’s previous letters dated 1.10.2019 and 18.10.2019 and requesting an update on the status of the nomination of a substitute Sole Arbitrator and for PEN to remit the Plaintiff’s share of the APD. [37] On 15.3.2023, Messrs. Wong & Partners sent an e-mail to AIAC enquiring about the status of the arbitration and seeking confirmation whether the Plaintiff’s portion of the APD has been paid and the present directions on the APD. AIAC replied on the next day that the Plaintiff has not paid its portion of the APD. [38] The Defendant averred that its officials had visited the Plaintiff’s office in Sarawak around 3.9.2023 to discuss settlement but no agreement was reached. [39] On 24.11.2023, Messrs. Christopher & Lee Ong wrote to the Plaintiff’s solicitors and requested the Plaintiff to pay the APD to AIAC within seven days, failing which, PEN reserves the rights to take all necessary steps to proceed with the arbitration without further reference to the Plaintiff. [40] In its reply on 1.12.2023, the Plaintiff’s solicitors referred to the e-mail from AIAC dated 24.10.2023, which mentioned PEN’s solicitors’ ex-parte communications with AIAC, and stating that the said e-mail is not confirmation that Messrs. Christopher & Lee Ong is acting for PEN when PEN is dissolved and has ceased to exist. [41] Messrs. Christopher & Lee Ong wrote back to the Plaintiff’s solicitors on 7.12.2023 emphasising that they are acting for PEN and stating the Plaintiff’s “supposed confusion” as to how they can be acting for PEN was presumably in reference to the Application for Interim Award on Jurisdiction. The solicitors said that the necessary steps to progress the arbitration will be taken. On the same date, the solicitors sent a letter to AIAC seeking its relevant payment details for payment of the APD. [42] AIAC provided the payment status of the Preliminary Advance Deposit and APD to PEN’s solicitors vide e-mail dated 9.2.2024. [43] Payment of the Plaintiff’s share of the APD was made and Messrs. Christopher & Lee Ong wrote to AIAC to inform of the same on 27.2.2024. [44] AIAC sent a letter dated 27.2.2024 to the parties’ solicitors advising that a new Tribunal has to be appointed in order to advance the proceedings and AIAC await the parties’ confirmation on whether they have agreed on the new Sole Arbitrator. [45] The Declaration & Permanent Injunction Application and the Interim Injunction Application were then filed in this Court on 22.3.2024. [46] Upon scrutinising the issues which were raised by the parties in the three applications before this Court, I found that there is an overlap in some of these issues. For the sake of brevity, the reasoning in respect of an issue which has been discussed in the earlier part of this judgment will not be repeated. I. The Declaration & Permanent Injunction Application [47] In the Joint Scott Schedule which was re-filed by the parties after the hearing (encl. 49), eight questions or issues were posed for the Court to consider. However, for purposes of these grounds of judgment, the issues have been re-organised as follows: 1st Issue: Whether there is a breach of the Arbitration Agreement 2nd Issue: Whether the Arbitration Agreement had been rendered inoperative Sub-Issue 1: Whether the Defendant was prevented from appointing a substitute Arbitrator due to non-payment of deposit Sub-Issue 2: Whether the Defendant was prevented from appointing a substitute Arbitrator due to “without prejudice” settlement exchanges 3rd Issue: Whether the Defendant has abandoned and/ or waived any rights to proceed with arbitration against the Plaintiff 4th Issue: Whether the Defendant can exercise any right of arbitration that it claims under the Arbitration Agreement 5th Issue: Whether the Defendant must be restrained from proceeding with the arbitration [48] The analysis of these issues is in the succeeding part of this judgment. 1st Issue: Whether there is a breach of the Arbitration Agreement 2nd Issue: Whether the Arbitration Agreement had been rendered inoperative [49] The 1st Issue and the 2nd Issue are inter-related and will be discussed together. [50] The Plaintiff submitted that PEN or the Defendant is in breach of the Arbitration Agreement because they had agreed to the application of the KLRCA Rules 2013 as part of the Arbitration Agreement. However, PEN or the Defendant had breached the KLRCA Rules 2013 when they failed to file a request with the appointing authority within 30 days as provided in Article 8(1) of the KLRCA Rules 2013. [51] Firstly, the relevant provisions in the KLRCA Rules 2013 as submitted by the learned counsels for the parties are re-produced below for ease of reference: Article 4(7): “Where the KLRCA upon the request of a party is to appoint a sole, presiding, second, substitute or emergency arbitrator, the Director of the KLRCA shall appoint such arbitrator in accordance with the Rules and in doing so may exercise all powers and discretions specified in the Rules.” Article 8(1): “If the parties have agreed that a sole arbitrator is to be appointed and if within 30 days after receipt by all other parties of a proposal for the appointment of a sole arbitrator the parties have not reached agreement thereon, a sole arbitrator shall, at the request of a party, be appointed by the appointing authority.” Article 14(1): “Subject to paragraph (2), in any event where an arbitrator has to be replaced during the course of the arbitral proceedings, a substitute arbitrator shall be appointed or chosen pursuant to the procedure provided for in articles 8 to 11 that was applicable to the appointment or choice of the arbitrator being replaced. This procedure shall apply even if during the process of appointing the arbitrator to be replaced, a party had failed to exercise its right to appoint or to participate in the appointment.” Article 17(1): “… The arbitral tribunal, in exercising its discretion, shall conduct the proceedings so as to avoid unnecessary delay and expense and to provide a fair and efficient process for resolving the parties’ dispute.” [52] Based on Articles 14(1) and 8(1) as above quoted, the parties are to agree to the appointment of a substitute arbitrator within 30 days after receipt of a proposal for such appointment and if no agreement is reached within 30 days, a sole arbitrator shall, at the request of a party, be appointed by the appointing authority. [53] As outlined earlier, letters were sent by PEN’s solicitors and the Plaintiff’s solicitors on 30.10.2018 and 12.11.2018, respectively, on the proposals for the appointment of a substitute Arbitrator. However, neither PEN nor the Defendant responded to the Plaintiff’s proposal. And neither did any of them submit a request for the appointment of a substitute Arbitrator to the AIAC. [54] In fact, AIAC had alerted the solicitors on 1.10.2019 regarding Article 14 of the AIAC Arbitration Rules 2018 and Rules 4(4), (6) and (7) and requested the parties to nominate a substitute Sole Arbitrator. [55] Mr. Avinash drew my attention to the words used in Article 8(1) and Rule 4(7) of the KLRCA Rules 2013 where in the former, the word(s) “required” or “have to be filed” do not appear whilst in the latter, the words “all powers and discretions” are used. This goes to show that the right to request for the appointment of a substitute Arbitrator, if no agreement is reached between the parties, is a right which is available to either party. Thus, the Plaintiff could have made the request to the AIAC to appoint the Arbitrator. [56] Based on slide 14 in the Plaintiff’s presentation slides for the hearing, the Plaintiff accepts that it did not take any steps to invite the Director of AIAC to appoint the substitute Arbitrator as it could have been done under Article 8(1) of the KLRCA Rules 2013. However, the Plaintiff submitted that, in terms of the obligation to do so, this falls on PEN or the Defendant as either one is the claimant in the arbitration. PEN or the Defendant is the party who is interested in pursuing the arbitration and should prosecute the arbitration expeditiously. [57] The Plaintiff further cited s 47 of the Contracts Act 1950 [Act 136] and the decisions in Hock Huat Iron Foundry (suing as a firm) v Naga Tembaga Sdn Bhd [1999] 1 MLJ 65 and Nyap Kui Fah v Len On Contractor [1978] 1 MLJ 208 to support the submission that it is implicit and obvious that the right to appoint a substitute Arbitrator must be exercised within reasonable time. [58] I was persuaded by the above-mentioned submissions by the Plaintiff. The Defendant’s argument that it does not need not invoke the right under Article 8(1) of the KLRCA Rules 2013 is untenable because PEN is the party who had commenced the arbitration. If I was to accept this argument, and the other argument that it is for the Plaintiff to make the request to AIAC and in the situation where the Plaintiff does not do so, this would mean that the arbitration can be kept in abeyance and subsequently revived at the whims and fancies of PEN or the Defendant. This would surely run counter to the objective of the KLRCA Rules 2013 as stated in Article 17(1) (see too, the answer to Question 17 in the Guide to KLRCA Arbitration Rules which alludes to there being certain mechanisms which ensure that arbitration proceeds in a time efficient manner). [59] Mr. Avinash further submitted that the facts of the instant case fall squarely with the case of Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corpn Ltd [1981] 2 WLR 141. In that case, disputes arose between the parties, a German shipbuilding company and an Indian ship owning company. Pursuant to the arbitration agreement, the disputes were referred to arbitration by the ship owners. In January 1972, the parties appointed a London arbitrator and in April 1972, they agreed to a procedure by which the ship owners were to deliver a full Statement of Claim so that the ship builders could plead the time-bar defence to specific claims to which they contended this defence applied. [60] In 1972, the ship owners alleged that structural defects had been discovered in the stern frames of the vessels and in May 1973, it was agreed between the parties that claims in respect of the alleged defects should be added to the points of claim. A similar agreement was reached on April 1975 in respect of an alleged defect which was discovered in November 1974. [61] The ship owners delivered a very long and detailed points of claim on 23.4.1976. Thereafter, neither party applied to the arbitrator for directions and nothing happened until the ship builders issued a writ on 25.4.1977 seeking an injunction to restrain the ship owners from proceeding with the arbitration because of their alleged dilatoriness from the time the arbitrator was appointed, and a declaration that the arbitrator had power to dismiss the ship owners claim for want of prosecution. [62] The High Court Judge granted the injunction sought and this decision was affirmed by the Court of Appeal. The ship owners appealed to the House of Lords and by a majority decision, the appeal was allowed. [63] Lord Scarman, who together with Lord Fraser of Tullybelton had dissented, had observed that “There is no earlier case like this in the books.”. The Plaintiff in the present case relied on the judgment by the majority of the English Lords which is encapsulated in the following last paragraph of the speech by Lord Diplock for the proposition that, in an arbitration, both parties can move the procedure forward and therefore, it was completely open for the Plaintiff to exercise its right to have the AIAC appoint a substitute arbitrator when no agreement was reached by the parties: “In the instant case, however, as in Crawford v AEA Prowting Ltd, the respondents, Bremer Vulkan, were content to allow the claimants, South India, to carry out voluntarily the preparation of detailed points of claim. They never made an application for directions to the arbitrator and none were made by him. For failure to apply for such directions before so much time had elapsed that there was a risk that a fair trial of the dispute would not be possible, both claimant and respondent were in my view in breach of their contractual obligations to one another; and neither can rely on the other’s breach as giving him a right to treat the primary obligations of each to continue with the reference as brought to an end. Respondents in private arbitrations are not entitled to let sleeping dogs lie and then complain that they did not bark”. [64] A contrary view was expressed by Lord Fraser, among others that, “Once the tribunal has been chosen, I agree with Donaldson J and with Roskill LJ that proceedings in the arbitration, like those in litigation, are in most cases, and certainly in the present case, adversarial in character. It is therefore for each party to act in what he conceives to be his own interest, subject of course to any agreement on procedure that may have been made between them, and to the relevant statutory provisions including the obligation to obey orders made by the arbitrator. But, if no order is made, the respondent in an arbitration, like the defendant in an action, is in my opinion entitled to sit back and await a formal claim. In the words used by Donaldson J, he is entitled to let sleeping dogs lie. If the sleep lasts long enough and he is prejudiced thereby, he may seek a remedy for the delay.”. [65] Mr. Avinash submitted that it is worth noting that Bremer Vulkan is a 1981 House of Lords decision and the UNCITRAL Model Law on International Commercial Arbitration was introduced in 1985 and revised in 2006. The AA 2005 was modelled extensively on the 1985 UNCITRAL Model Law and was later amended by the Arbitration (Amendment) (No. 2) Act 2018 [Act A1569] with the objective of minimizing curial intervention (see s 8 of the AA 2005 which provides that “No court shall intervene in matters governed by this Act, except where so provided in this Act.”). [66] The learned counsel zealously submitted that, as in Bremer Vulkan, the Plaintiff as a respondent in a private arbitration sat on the alleged “breach” since 2018 and is thus not entitled to let sleeping dogs lie and then complain that they did not bark. If the Plaintiff’s objection was upheld, this would be a serious and unprecedented attack on the principle of non-interference and nominal judicial intervention, for which there is no authority. There is no policy reason to depart from Bremer Vulkan and weaken the country’s standing as a pro-arbitration jurisdiction. [67] I have accorded serious consideration to the Defendant’s submission, however in my view, the facts in Bremer Vulkan can be distinguished because the House of Lords held that the shipbuilders did not apply to the arbitrator for directions and had been content to allow the ship owners voluntarily to prepare the points of claim. The shipbuilders were as much in breach of the contractual obligation to proceed with the arbitration with dispatch as were the shipowners in being dilatory in delivering the points of claim. This was a case where neither party was entitled to rely on the other’s breach as bringing the arbitration to an end. [68] By contrast, the instant suit involves the scenario of there being no Arbitrator after Dato’ Mohamad Ariff bin Md Yusof withdrew as the Sole Arbitrator on 11.10.2018. The issues which were raised at the hearing require a consideration of the contractual rights under the Arbitration Agreement and KLRCA Rules 2013. Needless to say, without an Arbitrator, the arbitration proceedings simply cannot proceed. [69] Based on the Plaintiff’s averments, this is not a case where this Court is being asked to interfere with the arbitration process but rather, the Court is invited to find that the Arbitration Agreement is inoperative for the reasons as proffered by the Plaintiff, namely, breach, waiver and/ or abandonment of the Arbitration Agreement by PEN or the Defendant. It is within the express jurisdiction of this Court to consider the issue on whether the Arbitration Agreement is not null and void, inoperative or incapable of being performed under s 10 AA 2005, a provision which has been invoked by the Defendant itself in the Stay Application. [70] Hence, the Defendant’s other contention that, even if there is a breach of the Arbitration Agreement, it is for the Arbitral Tribunal to determine the same as provided under s 18 of the AA 2005 on the “Competence of arbitral tribunal to rule on its jurisdiction” read together with s 8 is, with respect, erroneous. [71] Notwithstanding s 18 AA 2005, the Court is not precluded from deciding on the existence or validity of an arbitration agreement (see Viridis Engineering Sdn Bhd v RP Chemicals (Malaysia) Sdn Bhd [2021] MLJU 1914 and CLLS Power System Sdn Bhd v Sara Timur Sdn Bhd [2015] 11 MLJ 485). [72] The existence of the Arbitration Agreement is, of course, not in dispute in this suit. At the risk of repetition, it is the operability of that Arbitration Agreement that is being challenged. On the authority of Asia Pacific Higher Learning Sdn Bhd v. Stamford College (Malacca) Sdn Bhd [2025] 1 MLRA 740 and Gise Kam Kwan International Trade Ltd v Antara Steel Mills Sdn Bhd [2024] 6 MLJ 662, this Court can consider whether it is “just and convenient” to decide on the operability of the Arbitration Agreement. [73] In my opinion, it is just and convenient for this Court to decide on the question of the operability of the Arbitration Agreement as the facts surrounding the issue on whether PEN or the Defendant took any steps to appoint a substituted Arbitrator speak for themselves. Moreover, the question of breach of the Arbitration Agreement is purely a question of law and construction of the KLRCA Rules 2013. [74] The same reasoning would apply in respect of the Defendant’s submission that the issue on whether the Arbitration Agreement is inoperative against the Defendant should be referred to arbitration. The Defendant’s reliance on the judgments in Press Metal Sarawak Sdn Bhd v. Etiqa Takaful Bhd [2015] 4 CLJ 734 and Cockett Marine Oil (Asia) Pte Ltd v MISC Bhd [2023] 1 CLJ 20 is misconceived for the reasons as stated in paragraph 72 above. [75] In Kebabangan Petroleum Operating Co Sdn Bhd v Mikuni (M) Sdn Bhd & Ors [2021] 1 MLJ 693, the Court of Appeal heard the appeal against the decision of the High Court in allowing the respondents’ application for stay of proceedings of the civil suit pending the matter being referred for arbitration pursuant to s 10 AA 2005. The Court was unanimous in allowing the appeal for the reason, among others, that “the learned judge had failed to appreciate that the first respondent had committed a repudiatory breach which rendered the arbitration agreement between the appellant and the first respondent inoperative when it repeatedly refused (after numerous reminders from the appellant and KLRCA from November 2016 to March 2017) to pay its portion of the total provisional advance deposit to KLRCA.”. [76] Later, in JSB v ACSB [2024] 1 MLJ 195, the respondent, who had a counterclaim in the arbitration proceeding, refused to pay its portion of the fees. The arbitrator then terminated the arbitration after consultation with the Director of AIAC. The claimant proceeded to file its claim in the High Court. However, the respondent/ defendant objected to the civil suit on the ground that the arbitration agreement is still subsisting and had filed an application to have the Writ and Statement of Claim struck out under O. 18, r. 19(1) of the Rules of Court 2012 or alternatively, for a stay of the court proceedings under s 10 AA 2005. The High Court allowed the application in the alternative. On appeal, it was held, among others, that: “[52] Little wonder that the expression ‘breach of the arbitration agreement’ is not used in s 10 of the AA 2005 or for that matter anywhere in the AA 2005 but rather the arbitration agreement is ‘null and void, inoperative or incapable of being performed’. It would be fair for us to surmise that the test to be applied for the arbitrator to decide on whether to stay or terminate the arbitral proceedings would be whether the arbitration agreement has become inoperative through the refusal of one party to pay its share of the arbitrator’s fees and that it has waived its right to arbitration when it refuses to comply with the applicable AIAC Arbitration Rules which has been incorporated as a term of the arbitration agreement under cl 66.3 of the PWD 203A contract. … [56] If one has to decide the matter on whether there has been a repudiation of the arbitration agreement then we would say that we know of no clearer repudiation of an arbitration agreement than to refuse to abide by the Arbitration Rules with respect to paying its share of the arbitrator’s fees or the administrative body’s deposit. … … [72] Clearly the defendant is not entitled to take advantage of its own breach and insist on continuing with the arbitration. It would be a case of the defendant not walking its talk. The practical effect of not paying one’s share of the arbitrator’s fees would be that the arbitrator is not obliged to continue with the hearing and may indeed terminate the arbitration before him. Parties are then at liberty to pursue litigation in court as the arbitration agreement has been rendered inoperative. The refusing party that has defaulted in the equally binding contractual obligation to pay its share of the AIAC’s deposit cannot insist in wanting the benefits of arbitration without wanting to pay the costs that come with it.”. [77] The above cited cases have therefore established that a breach of the arbitration rules can be a repudiatory breach of the arbitration agreement, which renders the arbitration agreement inoperative. I accept the Plaintiff’s submission that, although the Court of Appeal decisions were made in the context of breach of the arbitration rules arising from a failure to pay deposit, the legal principles are of general application and a failure to appoint a substitute Arbitrator as in the present case, is a repudiatory breach. There can be no arbitration without an Arbitrator. [78] The Defendant contended that even if there is repudiatory breach, it was not accepted by the Plaintiff. [79] It is trite that an act of acceptance of repudiation requires no particular form. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as at an end (see Sutures (M) Sdn Bhd v Worldwide Holdings Bhd & Ors [2015] 8 MLJ 659). The filing of a suit can amount to an acceptance of the repudiation of the contract by the other party (see Lee Fah Pin & Anor v Great Five Development Sdn Bhd [2022] MLJU 885). [80] Based on the facts of the case, it is indisputable that the Plaintiff did not make any request to the Director of the AIAC to appoint a substitute Arbitrator and neither did it pay its share of the APD. The Plaintiff plainly manifested its intention not to proceed further with the arbitration after the process of the appointment of a substitute arbitrator came to a standstill. With the filing of the O.S., it has been clearly and unequivocally conveyed to the Defendant that the Plaintiff accepts the repudiation of the Arbitration Agreement by the Defendant. [81] A final argument raised by the Defendant was that the Plaintiff’s objection on the Arbitration Agreement being inoperative is an afterthought. At all material times before the commencement of the current court proceedings, the Plaintiff continued to receive correspondences from the AIAC and PEN’s or the Defendant’s solicitors as outlined under the “Salient Facts” above. These included the letters from the Plaintiff’s solicitors dated 1.3.2021 on the proposed terms of settlement and those sent in 2023. However, not once did the Plaintiff mention its position that the Arbitration Agreement is deemed inoperative because no replacement arbitrator was appointed “within 30 days from 12.11.2018”. [82] In my considered view, the genuineness or bona fides of the Plaintiff’s act in raising the 1st Issue in the instant application is unquestionable. The past correspondences show that the Defendant had reserved its rights and remedies and, in the letter dated 12.5.2021 from Messrs. Wong & Partners, the Defendant even indicated that it will seek to restart the arbitration process very soon, but yet, the Defendant did not take the necessary action to appoint the substitute Arbitrator, a crucial step in order for the arbitration proceedings to continue from the point where it was left off. The Plaintiff filed the instant suit when it was clear that the Defendant intended to re-initiate the arbitration after all these years. Sub-Issue 1: Whether the Defendant was prevented from appointing a substitute Arbitrator due to non-payment of deposit [83] The Defendant referred to AIAC’s e-mail on 16.12.2021 to the parties’ solicitors requesting for an update on the nomination of the substitute Sole Arbitrator and the remittance of the unpaid portion of the APD, and to its solicitors’ letter to the Plaintiff’s solicitors dated 24.11.2023 requesting payment of the Plaintiff’s share of the APD to support its submission that the Plaintiff never objected to these requests until the current court proceedings. [84] The short answer to Sub-Issue 1 is in the negative. This is because the Suspension Ruling has made it clear that “Until the jurisdictional application be decided by the Arbitrator, the requirement for payment of the Advance Preliminary Deposit will be suspended.”. Hence, there was no obligation on either party to pay the balance sum of the APD for the arbitration to proceed following the withdrawal of the Sole Arbitrator. [85] The Defendant was well aware of the Suspension Ruling as evident from its solicitors’ e-mail to AIAC and the Plaintiff’s solicitors dated 10.12.2019. [86] The Suspension Ruling was never revoked. Therefore, the Defendant’s suggestion that the Plaintiff is benefitting from its own breach in failing to pay its share of the APD is flawed. [87] A correct reading of AIAC’s e-mail on 16.12.2021 is that the nomination of a substitute Arbitrator and payment of the Plaintiff’s share of the APD are two separate matters whereby the former was not stated as being conditional or subject to the latter. Sub-Issue 2: Whether the Defendant was prevented from appointing a substitute Arbitrator due to “without prejudice” settlement exchanges [88] The Defendant asserted that the “without prejudice” exchanges in 2021 prove the Plaintiff’s allegation that the Arbitration Agreement is deemed inoperative because no replacement Arbitrator was appointed “within 30 days from 12.11.2018” is a sham. Otherwise, there would be no logical reason for the Plaintiff to engage in settlement discussions three years after the alleged inoperative breach. [89] Similarly, the short answer to Sub-Issue 2 is in the negative. The communications between the parties in an attempt to explore the possibility of settlement do not have the effect of suspending the arbitration and did not in any way prevent the Defendant from taking the necessary steps to appoint a substitute Arbitrator. [90] In any event, these exchanges concluded with the letter from Messrs. Wong & Partners dated 12.5.2021 wherein it was stated that the arbitration process will be resumed imminently if there is no realistic attempt at settlement negotiations. Despite its own position, the Defendant did nothing to resume the arbitration until the threat to do so in late 2023. [91] No explanation is forthcoming from the Defendant for its non-action. This is a classic case of a party sleeping on its legal rights. [92] In sum, I find and hold that PEN or the Defendant had breached the KLRCA Rules 2013 when they failed to file a request with the AIAC within 30 days as provided in Article 8(1) of the KLRCA Rules 2013 and to appoint a substitute Sole Arbitrator within a reasonable time. This amounts to a repudiatory breach of the Arbitration Agreement, which was accepted by the Plaintiff as demonstrated by its conduct. [93] Consequently, I also find and hold that the Arbitration Agreement has been rendered inoperative. The declaration sought by the Plaintiff in prayer 1 of the O.S. was therefore allowed. 3rd Issue: Whether the Defendant has abandoned and/ or waived any rights to proceed with arbitration against the Plaintiff 4th Issue: Whether the Defendant can exercise any right of arbitration that it claims under the Arbitration Agreement [94] The 3rd Issue and the 4th issue can also be discussed together. [95] Prayer 2 of the O.S. is in furtherance or as an alternative to prayer 1, whereby the Plaintiff sought a declaration that the Defendant has abandoned and/ or waived any rights to proceed with arbitration against the Plaintiff. [96] In support of its application for declaratory relief, the Plaintiff relied on the fact that neither PEN nor the Defendant –

responded to the Plaintiff’s solicitors letter dated 12.11.2018 proposing Dato’ Anantham Kasinather as the substitute

filed a request with AIAC for appointment of a substitute Arbitrator within reasonable time;

took any steps to appoint a substitute arbitrator in accordance with the KLRCA Rules 2013; and

responded to any of the reminders from AIAC to appoint a substitute arbitrator. Instead, PEN and the Defendant remained completely silent on matters pertaining to the arbitration for more than five years without any reasonable explanation. The Defendant has waived its rights to arbitration and must now be estopped from purporting to exercise such right. [97] The Plaintiff contended that it is now established in Malaysia that failure to comply with arbitration rules amounts to an abandonment and/ or waiver of the Arbitration Agreement [see JSB v ACSB (supra)] and that there can be no clearer evidence of abandonment than a failure to take steps to appoint an Arbitrator. [98] It was further contended that the Defendant cannot take advantage of its own breach and cannot exercise any right of arbitration (see JSB v ACSB (supra) and Dato’ Abd Rahim Mohamad v. Abdul Farish Rashid [2009] 1 CLJ 395). [99] The Defendant countered the Plaintiff’s submission on waiver of the Arbitration Agreement on the ground that the Plaintiff did not produce any authority on the applicable test of waiver and what is the estoppel on the part of the Defendant to give rise to the waiver. Moreover, based on the correspondence, the parties operated on the basis that the arbitration was afoot and hence, there can be no waiver. [100] With regards to the Plaintiff’s argument on abandonment of the Arbitration Agreement, Mr. Avinash submitted that the Plaintiff has not produced any authority on this issue. The learned counsel referred to the judgment in The Government of India v Vedanta Ltd (legal successor to Cairn India Ltd) & Anor [2018] MLJU 630 to submit that, on the facts of the instant case, there is no abandonment as there is no clear and unequivocal conduct on the part of either party of having abandoned the Arbitration Agreement. [101] To the Defendant, the issue of it taking advantage of its own breach does not arise at all and the only party who is guilty of this is the Plaintiff for failure to pay its share of the APD. In addition, the Defendant took the position that Article 14 of the KLRCA Rules 2013 provides for the exercise of its rights of arbitration. [102] As I was inclined to allow prayer 1 in the O.S. on the grounds as explicated previously, I find that it is not necessary for the 3rd Issue to be answered. [103] As for the 4th Issue, in the light of my findings and conclusions under the 1st Issue and the 2nd Issue in favour of the Plaintiff, there is merit to the Plaintiff’s submission that the Defendant cannot take advantage of its own breach of the Arbitration Agreement and cannot exercise any right of arbitration pursuant thereto. 5th Issue: Whether the Defendant must be restrained from proceeding with the arbitration [104] The Plaintiff contended that the Defendant must be restrained from proceeding with the arbitration. It was postulated, on the case authority of Federal Land Development Authority & Anor v Tan Sri Hj Mohd Isa bin Dato’ Hj Abdul Samad & Ors [2021] 8 MLJ 214 quoting from the English case of J Jarvis & Sons Ltd v Blue Circle Dartford Estates Ltd [2007] EWHC 1262 (TCC), that the legal test for an injunction is satisfied on the facts of the present case viz. –

the Defendant suffers no injustice by an order to restrain the arbitration because the Arbitration Agreement is inoperative and the Defendant has waived or abandoned the Arbitration

the Plaintiff will be prejudiced or will suffer irreparable harm if the arbitration is allowed to continue because the Plaintiff will be deprived of a right to a fair hearing if the Arbitration continues as:

the Plaintiff no longer retains the project documents;

(ii) potential witness privy to issues in relation to the Project are no longer in the Plaintiff’s employment;

(iii) there no means of verifying the Defendant’s contentions in the arbitration as neither party has access to the site and the site conditions have changed substantially over the years since a new third party contractor has been appointed to complete the Project; and

(iv) the Plaintiff will be forced to defend claims under the contract which would otherwise have been barred pursuant to paragraph 6(1)(a) of the Limitation Act 1953 [Act 254] if a fresh action is commenced. [105] On the other hand, the Defendant asserted that there are no cogent reasons to restrain the Defendant from continuing with the arbitration and that the test for a permanent injunction has not been met. [106] During the hearing, I posed the question to the learned counsel for the Plaintiff on whether prayer 3 in the O.S. for a permanent injunction is necessary if I was minded to grant the declaration(s) as sought in prayer 1 and/ or prayer 2. Mr. K. Mohanadass answered that prayer 3 would not be necessary. [107] As I was inclined to allow prayer 1 in the O.S. for the reasons as elaborated earlier, it is thus not necessary for me to consider and answer the 5th Issue. II. Interim Injunction Application [108] Only two issues arose for determination in the Interim Injunction Application, namely whether –

the issue on whether the Arbitration Agreement is inoperative against the Defendant should be referred to arbitration. My reasons for answering this issue in the negative can be seen in the earlier part of this judgment; and

the Plaintiff has failed to give full and frank disclosure. The Plaintiff contended that this is not a legal requirement to be satisfied since the Interim Injunction Application was heard on an inter parte basis. In this regard, the Defendant’s accurately described the hearing as an opposed ex parte hearing where the Defendant was allowed to submit on points of law only, and the hearing was not converted into an inter partes hearing (see Lim Kit Siang v. United Engineers (M) Bhd & Ors [1987] CLJ Rep 722, Dato' Oon Ah Baa & Ors v. Eagle & Pagoda Brand Teck Aun Medical Factory & Ors [2003] 7 CLJ 81 and Lim Nyook Yin v. Ultratech Sdn. Bhd. [1995] 1 CLJ 215). The Defendant submitted that there is a duty of full and frank disclosure to disclose material facts that may persuade the Judge to grant or not to grant the ex parte injunction (see Prinsiptek (M) Sdn Bhd v Naza TTDI Sentralis Sdn Bhd (formerly known as Ikhlas Murni Sdn Bhd) [2020] MLJU 2426). In the present case, it was argued that the Plaintiff has failed to comply with its obligations of full and frank disclosure as it did not state that –

there is a live issue on whether the Court has the jurisdiction to grant the orders sought by the Plaintiff;

(ii) the primary reason that the arbitration has not progressed is due to the Plaintiff’s non-payment of the its share of the APD; and

(iii) on 24.11.2023, the Defendant’s solicitors had written to the Plaintiff’s solicitors and requested the Plaintiff to pay the APD to AIAC within seven days, failing which, PEN reserves the rights to take all necessary steps to proceed with the arbitration without further reference to the Plaintiff. I have given due consideration to the submissions of the parties and in my view, there is no failure by the Plaintiff to give full and frank disclosure because, as alluded to previously, the Court has jurisdiction to grant the orders as sought by the Plaintiff; the progress of arbitration was not conditional upon payment of the Plaintiff’s share of the APD; and the letter dated 24.11.2023 was expressly mentioned in the AIS (encl. 4). [109] Furthermore, the Plaintiff has provided valid grounds in support of the interim injunction sought, among others, –

to preserve the status quo of the parties pending disposal of the O.S.;

that otherwise, the Plaintiff will be forced to incur further costs in connection with the arbitration which it may not be able to recover as PEN has been dissolved and the Defendant is a foreign company with no known assets within the jurisdiction of this

the Substitution Application and Application for Interim Award on Jurisdiction are complex arbitrations where the parties have filed up to three affidavits, three expert reports, four submissions and held two to three days of hearing including the cross-examination of experts on Korean law; and

there is a real risk of duplicity of proceedings and conflicting decisions leading to the filing of further applications in the court (see paragraphs 44 - 56, encl. 4). [110] Premised on the foregoing reasons, the Interim Injunction Application was allowed. III. Stay Application [111] The following four issues were raised by the parties:

in light of the Stay Application under s 10 AA 2005, what is the threshold for the Court’s consideration;

accordingly, as a matter of law, does this Court have the jurisdiction to grant the injunction sought;

whether the Arbitration Agreement is inoperative; and

whether the Defendant has taken steps in these proceedings [112] The parties’ respective position and submissions in relation to the issues in subparagraphs 111(a) to (c) above are a repetition of the arguments as set out in the earlier part of this judgment. Suffice to say that, with my finding that the Arbitration Agreement is inoperative and the decision to allow the declaration sought by the Plaintiff in prayer 1 of the O.S., it necessarily follows that the Stay Application must be dismissed. Conclusion [113] Based on all the above said considerations, I allowed prayers 1, 4 and 5 of the Declaration & Permanent Injunction Application with costs of RM15,000.00, and the Interim Injunction Application with costs of RM5,000.00. The Stay Application was dismissed with costs of RM5,000.00. All order as to costs are subject to the payment of the standard allocator fees. Dated: 27 January 2025 (ALIZA SULAIMAN) Judge High Court in Malaya Kuala Lumpur Counsels/ Solicitors: For the Plaintiff: Mohanadass Kanagasabai (Syarihah Razman and Thomas Shaun Mathews with him) Messrs. Mohanadass Partnership Advocates & Solicitors B-21-8, The Vertical, Avenue 3 Bangsar South City No. 8, Jalan Kerinchi 59200 Kuala Lumpur For the Defendant: Avinash Pradhan (Rubini Murugesan and Sivaram Prasad with him) Messrs. Christopher & Lee Ong Advocates & Solicitors Level 22, Axiata Tower No. 9, Jalan Stesen Sentral 5