Court’s right to refer cases to an arbitrator or special referee

Ashok Kumar provides a summary of the High Court's decision in Bank Simpanan Nasional v Cyber Business Solutions Sdn Bhd (Suit No: D-22NCC-279-2009)

 

 

BRIEF FACTS

The Plaintiff, a financial institution, had engaged the Defendant to develop, install and integrate computer hardware and software to replace the Plaintiff’s existing integrated loan management system. The main bone of contention between the parties is what formed part of the Defendant’s scope of work.

 

 

APPLICATION BEFORE THE COURT

The case relates to an interlocutory application filed by the Defendant for the matter to be referred to arbitration. The application was made pursuant to Section 24A of the Courts and Judicature Act 1964 ("CJA") which provides as follows:

 

(1) The High Court may refer any question arising in any cause or matter, other than a criminal proceeding by the Public Prosecutor, for inquiry or report to any special referee. The report of a special referee may be adopted wholly or partially by the High Court and enforced as a decree, judgment or order to the same effect.

(2) In any cause or matter other than a criminal proceeding by the Public Prosecutor -

(a) if all the parties interested who are not under disability consent;

(b) if the cause or matter requires any prolonged examination of documents or any scientific or local investigation which cannot in the opinion of the High Court, conveniently be conducted by the Court through its ordinary officers; or

(c) if the question in dispute consists wholly or in part of matters of account,

the High Court may at any time order the whole cause or matter or any question or issue of fact arising therein to be tried before a special referee or arbitrator respectively agreed on by the parties or before an officer of the Court.

(3)(a) In all cases of reference to a special referee or arbitrator under an order of the High Court in any case or matter, the special referee or arbitrator shall be deemed to be an officer of the Court and shall have such authority and shall conduct the reference in such manner as is prescribed by rules of court, and subject thereto as the High Court may direct.

(b) The report or award of any special referee or arbitrator on any such reference shall, unless set aside by the High Court, be equivalent to the decree, judgment or order of the Court.

(c) The remuneration to be paid to any special referee or arbitrator to whom any matter is referred under order of the High Court shall be determined by the Court.

(4) The High Court shall, as to references under order of the Court, have all the powers which are by the Arbitration Act 1952, [Act 93], conferred on the High Court as to references by consent out of Court.

 

The grounds relied upon by the Defendant in support of its application are the issue in dispute (i) is highly technical in nature; (ii) involves voluminous documentary evidence; (iii) involves lengthy oral evidence from witnesses and will lead to prolonged trial which cannot be conveniently conducted by the Court; and (iv) involves a combined claim of a substantial sum.

 

The Plaintiff objected to the Defendant's application on various grounds, including (i) the issues in dispute are not technical or voluminous to warrant the involvement of Section 24A of CJA 1964; (ii) the technical issues could be dealt with by expert evidence; (iii) the reference to an arbitrator under Section 24A will delay the trial; and (iv) the Plaintiff does not consent to the application.

 

 

THE COURT’S FINDINGS

After considering the cause papers and submissions by the parties, the Court had to deal with the following issues:

 

(1) Whether the conditions set out in Section 24A(2) of CJA is to be read conjunctively or disjunctively;

(2) Whether consent of the parties was essential before the court can exercise its discretion under Section 24A of CJA;

(3) Whether such reference can be resort to in the absence of rules of court relating to the procedure for such an application;

(4) Whether a judge can delegate his powers to a special referee under Section 24A CJA; and

(5) Whether Section 24A(4) is still applicable as the Arbitration Act 1952 had been repealed.

 

The Judge allowed the Defendant’s application and made the following findings in respect of the above issues.

 

 

Conjunctive v disjunctive

On the issue as to whether the conditions set out in Section 24A(2) has to be read conjunctively or disjunctively, the High Court noted that the word "or" at the end of Section 24(2)(a) had been omitted when Section 15 of the Arbitration Ordinance 1950 was repealed and was imported and inserted into CJA as Section 24A. Given the historical nature of the provision and reason for its importation into the CJA, the learned Judge held that Section 24A(2)(a), (b) and (c) must be read disjunctively, “failing which the whole part of the provision will become more or less otiose and will have no practical significance”.

 

The Judge went on to state that there is further merit in the argument that Section 24A(2) should be read disjunctively because Section 24A does not prevent consenting parties from referring the matter to arbitration. If it is to be read conjunctively, it would necessarily mean that even if the parties agreed to refer the matter to arbitration, there is a need to invoke Section 24A. This would be an absurd interpretation as parties in a commercial transaction are at liberty to agree on the person or forum adjudicating their disputes without having to resort to the court for leave or approval.

 

 

Requirement for consent

In view of the learned Judge's ruling that sub-paragraphs (a) to (c) of Section 24A(A)(2) are to be construed disjunctively, his Lordship held that the court was entitled to refer the matter to a special referee or arbitrator even if any party objects, provided that the criteria set out in Section 24A are satisfied.

 

 

Delegation of judge's role to special referee or arbitrator

The High Court also took the view that Section 24A does not prohibit the court from delegating its role to a special referee or arbitrator. The Court was of the opinion that under Section 24A, the final decision rests with the court on the report or award by the special referee or arbitrator. Therefore the final arbiter is the court and in that respect, the constitutional role of the court is preserved.

 

 

Absence of rules of procedure

The Court rejected the Plaintiff's contention that the absence of rules of procedure meant that Section 24A could not be resort to. According to the Judge, Section 24A(3) is wide enough to cater for rules.

 

 

Effect of repeal of Arbitration Act 1952

On the effect of the repealed Arbitration Act 1952, with the coming into force of Arbitration Act 2005, the High Court held that it can rely on the procedural provisions of a repealed statute in relation to references by the Court pursuant to Section 24A CJA.

 

 

THE RELEVANT CONSIDERATIONS

According to the Judge, the real issue before a matter can be referred under Section 24A will depend on the complexity in respect of the facts and cannot be one of law. Where it is a mixed question of law and facts, it will be a proper exercise of discretion to preserve the issues of law for the court's determination and frame the relevant questions relating to facts to the special referee as provided in Section 24A(1).

 

However, where the issues of law are not complex and will be within the competence of the special referee or arbitrator or officer of court (who may be a registrar or a sessions judge who has the special knowledge or learning to deal with the issues) to deal with, the complex issues of fact may be referred wholly to the special referee or arbitrator or officer.

 

As the Judge was of the view that the present case involved scientific investigations relating to computers and software and prolonged examination of documents, he concluded that it was appropriate for the matter to be referred to an arbitrator under Section 24A(2)(b) of the CJA.

 

 

COMMENTARY

It is interesting to see how this decision will affect other complex matters filed in Court that involve technical issues. The approach of the Court of interpreting what constitutes complex issues filed in court as set out in Section 24A(2) is rather simplified to say the least.

 

It is unfortunate that the High Court did not formulate a comprehensive test to be applied for an application of such a nature so as to provide litigants with a guide as to what falls within the ambit of Section 24A(2)(b).

 

While this decision is welcomed by the arbitral community, it should not be taken as authority to refer all matters which are complex or technical in nature to a special referee or arbitrator. Each case should turn on its facts. The cost of arbitration may also not make it a suitable option for all complex matters involving technical issues to be referred to arbitration.

 

The Court has however moved in the right direction in recognizing Alternative Dispute Resolution as a method of resolving disputes where the adjudicator is armed with technical expertise.

 

 

ASHOK KUMAR MAHADEV RANAI ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

Ashok Kumar is a Partner in the Alternative Dispute Resolution Practice Group of SKRINE

 
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