Usahasama Spnb-Ltat Sdn Bhd v Abi Construction Sdn Bhd, 29-04-2016

• Judge: YA TUAN LEE SWEE SEN
• Judgment Date: 29 April 2016
• Court: High Court (Malaysia)
• Record Number: WA-24C(ARB)-1-01/2016

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

IN THE STATE OF WILAYAH PERSEKUTUAN, MALAYSIA

(CIVIL DIVISION)

ORIGINATING SUMMONS NO: WA-24C(ARB)-1-01/2016

In the Matter of an arbitration between ABI Construction Sdn Bhd and Usahasama SPNB-LTAT Sdn Bhd

.

And

In the Matter of an appeal under Sections 18(8) and 50 of the Arbitration Act, 2005

And

In the Matter of Order 69 Rule 4 and Order 92 Rule 4 of the Rules of Court 2012

BETWEEN

USAHASAMA SPNB-LTAT SDN BHD ... PLAINTIFF

AND

ABI CONSTRUCTION SDN BHD ... DEFENDANT

THE JUDGMENT OF

YA TUAN LEE SWEE SENG

1. The Plaintiff, as Employer, had entered into a PWD 203 Contract with the Defendant, as Contractor. Under the Contract dated 17 February 2006 the Defendant agreed to perform certain works, more particularly described as “Cadangan Pembangunan Keperluan Perumahan Anggota Tentera dan Kakitangan Awam, Kem Sungai Besi, Kuala Lumpur-Kerja Bangunan di Zon C” (the Works), for the Plaintiff, subject to the terms and conditions therein. A dispute arose between the parties. The Plaintiff terminated the Contract by its letter dated 19 February 2008. The Defendant as Claimant proceeded to arbitration by issuing a Notice of Arbitration dated 12 February 2014 to the Plaintiff. The Arbitrator appointed, Mr Bhag Singh, proceeded to fix a date for the preliminary meeting on 19 May 2015

Problem

2. Before the preliminary meeting, the Plaintiff wrote to the Arbitrator, which letter was copied to the Defendant's solicitors, to state that in accordance with clause 54 of the Contract, the Defendant would first have to refer the dispute or differences to the officer named in the Appendix, the Managing Director of the Plaintiff, for a decision before the dispute is referred to arbitration. As such, the Notice of Arbitration dated 12 February 2014 is premature and accordingly the Arbitrator has no jurisdiction to decide the dispute between the parties

3. The solicitors for the Plaintiff also notified the Arbitrator that they will be making an application under section 18 of the Arbitration Act 2005 and proposed to take directions in this regard at the preliminary meeting

4. On 24 September 2015, a hearing was held by the Arbitrator in respect of the Plaintiff’s Application. By a decision dated 7 December 2015, the Arbitrator held that he did have the jurisdiction to decide the dispute between the parties and he dismissed the Plaintiff’s Application.

Prayer

5. The Plaintiff being dissatisfied with the decision of the said Arbitrator, appealed to this Court under s 18(8) of the Arbitration Act 2005.

6. The Plaintiff contended that the Defendant would first have to refer the dispute or differences to the Superintending Officer ("S.O.") who is the Managing Director of the Plaintiff for a decision before the dispute is referred to arbitration in accordance with clause 54 of the Contract. It argued that no dispute or differences were ever referred to the Managing Director of the Plaintiff or his predecessor as required under clause 54. It was submitted by the Plaintiff that the condition found in clause 54(a) and (b) are mandatory, in the form of a precondition or a condition precedent, which must be fulfilled before the Arbitrator has jurisdiction to hear the dispute between the parties.

7. The Defendant, on the other hand, contended that the various letters between the parties, both before and after the Notice of Arbitration, are sufficient compliance in substance, directly or indirectly, with the requirement of clause 54 of the Contract. In any event the Plaintiff had waived the requirement and is estopped from objecting on that ground, as it had not raised it at the earliest opportunity when it received the Notice of Arbitration on 13 February 2014 and had a few rounds of without prejudice negotiations with the Defendant even after the preliminary meeting before an earlier Arbitrator appointed before the current Arbitrator Mr Bhag Singh.

Principles

8. Clause 54 of the Contract reads:

“54. Arbitration

Reference to S.O. for a decision.

(a) If any dispute shall arise between the Government and the Contractor, either during the progress or after completion of the Works, or after the determination of the Contractor’s employment, or breach of this Contract, as to:

(i) The construction of this Contract, or

(ii) Any matter or thing of whatsoever nature arising under this Contract, or

(iii) The withholding by the S.O. of any certificate to which the Contractor may claim to be entitled, then such dispute or difference shall be referred to the S.O.

S.O.’s decision to be binding until completion of Works.

(b) The S.O.’s decision which is to be in writing shall subject to sub-clause (e) hereof be binding on the parties until the completion of the Works and shall forthwith be given effect to by the Contractor who shall proceed with the Works with all due diligence whether or not notice of dissatisfaction is given by him.

Reference to arbitration.

(c) If the S.O. fails to give a decision for a period of forty-five (45) days after being requested to do so by the Contractor of if the Contractor be dissatisfied with any decision of the S.O., then in any such case the Contractor may within forty-five (45) days after the expiration of forty-five (45) days after he had made his request to the S.O., or forty-five (45) days after receiving the decision of the S.O., as the case may be, require that such dispute or difference be referred to arbitration and final decision of a person to be agreed between parties to act as the Arbitrator. The arbitration shall be held at the Regional Centre for Arbitration at Kuala Lumpur, using the facilities and assistance available at the Centre.

Reference to arbitration shall not be commenced until after completion of Works.

(d) Such reference, except on any difference or dispute under Clause 52 hereof shall not be commenced until after the completion or alleged completion of the Works or determination or alleged determination of the Contractor’s employment under this contract, or abandonment of the Works, unless with the written consent of the Government and the Contractor.

Power of the Arbitrator.

(e) The Arbitrator shall have power to review and revise any certificate, opinion, decision, requisition or notice and to determine all matters in dispute which shall be submitted to him, and of which notice shall have been given in accordance with sub-clause (c) aforesaid, in the same manner as if no such certificate, opinion, decision, requisition or notice had been given.

Discretion of Arbitrator in respect of costs and award.

(f) Upon every or any such reference the costs of such incidental to the reference and award shall be in the discretion of the Arbitrator who may determine the amount thereof, or direct the amount to be taxed as between solicitor and client or as between party and party, and shall direct by whom and to whom and in what manner the same be borne and paid.

Award of Arbitrator is final.

(g) The award of the Arbitrator shall be final and binding on the parties.

Appointer of Arbitrator.

(h) In the event of the death of the Arbitrator or his unwillingness or inability to act, then the Government and the Contractor upon agreement shall appoint another person to act as the Arbitrator, and in the event the Government and the Contractor failing to agree on the appointment of an Arbitrator, an Arbitrator shall be appointed by the person named in the Appendix to these Conditions.

Arbitration Act 1952.

(i) In this condition, “reference” shall be deemed to be reference to arbitration within the meaning of the Arbitration Act 1952 (Revised – 1972).”

9. Under the Contract, any reference to the "Government" shall be read as a reference to the Plaintiff and that the S.O. is the Managing Director of the Plaintiff.

10. S 18 of the Arbitration Act 2005 provides as follows:

“Competence of arbitral tribunal to rule on its jurisdiction:

(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.

(2) For the purposes of subsection (1) –

(a) an arbitration clause which forms part of an agreement shall be treated as an agreement independent of the other terms of the agreement; and

(b) a decision by the arbitral tribunal that the agreement is null and void shall not ipso jure entail the invalidity of the arbitration clause.

(3) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence.

(4) A party is not precluded from raising a plea under subsection (3) by reason of that party having appointed or participated in the appointment of the arbitrator.

(5) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.

(6) Notwithstanding subsections (3) and (5), the arbitral tribunal may admit such plea if it considers the delay justified.

(7) The arbitral tribunal may rule on a plea referred to in subsection (3) or (5), either as a preliminary question or in an award on the merits.

(8) Where the arbitral tribunal rules on such a plea as a preliminary question that it has jurisdiction, any party may, within thirty days after having received notice of that ruling appeal to the High Court to decide the matter.

(9) While an appeal is pending, the arbitral tribunal...