IS IT OR IS IT NOT A STEP?

 A commentary on Life Plaza v Pasukhas Construction by Janice Tay
 

INTRODUCTION

The decision of the High Court in Life Plaza Sdn Bhd v Pasukhas Construction Sdn Bhd [2012] 5 CLJ 120 sets down some guiding principles as to what amounts to taking a positive step in court proceedings to be deemed a waiver of one’s right to refer a dispute to arbitration pursuant to Section 10 of the Arbitration Act 2005 (“2005 Act”).

 

BACKGROUND FACTS

The Plaintiff filed a claim in the High Court against the Defendant for liquidated and ascertained damages for the late completion of a project.

The Defendant contended that the dispute should be referred to arbitration by virtue of Section 10 of the 2005 Act and filed an application to stay all proceedings pending remission of the dispute to arbitration. According to the Defendant, the parties had agreed in the Letter of Award to adopt the Building Contract (Private Edition with Quantities) (“PAM Contract”) and that pursuant to Clause 34.1 of the PAM Contract, the parties had agreed to refer any dispute concerning the project to arbitration.

In response, the Plaintiff contended that the PAM Contract was separate from the Letter of Award (i.e. that there were 2 separate agreements) and the PAM Contract was never prepared and signed by the parties.

The Plaintiff further submitted that the Defendant had waived its right to arbitrate the dispute as the Defendant had taken the following steps in the Court proceedings 

1. Filed an unconditional appearance;

2. Requested an Extension of Time to file its Defence;

3. Made an application to stay proceedings after the due date to file its Defence;

4. Filed its Defence; and

5. Filed a Notice to Produce Documents and issued a letter to seek further and better particulars.

The Plaintiff also contended that the Defendant should have filed its application for a stay of proceedings before the due date for filing the defence.

Two issues required determination by the Court. First, whether the parties were bound by the PAM Contract, in particular the arbitration agreement in Clause 34.1 thereof; and second, whether the Defendant had waived its right to arbitrate the dispute by taking steps in the proceedings.

 

 

THE DECISION

As regards the first issue, the Court held that the signed Letter of Award had incorporated the PAM Contract by express reference. The parties had therefore agreed to refer any dispute to arbitration pursuant to Clause 34.1 of the PAM Contract. The Court followed the decision of the Court of Appeal in Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 7 CLJ 785 by stating that it was not necessary for a letter of award itself to have an arbitration clause for parties to be bound by the need to arbitrate a dispute.

The second issue turned on Section 10 of the 2005 Act which inter alia requires a Court to stay its proceedings where the matter is the subject of an arbitration agreement unless the party who applies for a stay of proceedings has taken any other steps in the proceedings before the Court.

The issue in essence was whether the steps taken by the Defendant in the Court proceedings amounted to “any other steps” so as to operate as a waiver of its right to refer the dispute to arbitration pursuant to Section 10 of the 2005 Act.

The Court referred to Sanwell Corporation Trans Resources Corporation Sdn Bhd & Anor[2002] 3 CLJ 213 (“Sanwell”) where the Federal Court, in relation to a similar provision in Section 6 of the Arbitration Act 1952 (“1952 Act”),held as follows –

(a)     The entry of appearance is a mandatory procedural step to be taken in a High Court proceeding and is therefore a permitted, excluded or exempted step in the proceeding that does not amount to “a step in the proceedings” within the meaning of Section 6 of the 1952 Act;

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

(c)     If the applicant has taken “any other action” in the proceedings (other than step (a) or (b) above), 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 abandon the right to have the dispute disposed of by arbitration.

Applying the principles laid down in Sanwell, the learned High Court Judge held that the Defendant had not taken any positive step in the proceedings which would deny it the right to apply for a stay of proceedings pending remission to arbitration. The reasoning of Her Ladyship is as follows –

1.      The entry of an unconditional appearance by the Defendant, as in Sanwell, is a permitted, excluded or an exempted step in the proceedings which does not amount to taking “any other steps in the proceedings” within the meaning of Section 10 of the 2005 Act;

2.      Although the filing of a Defence usually amounts to a positive step in the proceedings, the Court considered that on the distinct facts of this case, the filing of a Defence fell within the “any other action” category of Sanwell and required the Court to determine the nature of the action and whether it indicates an unequivocal intention to proceed with the suit and abandon the right of having the dispute disposed of by arbitration;

3.      As the Defence had been filed on the express instruction of the Court, failing which judgment in default would have been granted against the Defendant, the learned Judge held that the filing of the Defence in this case did not indicate an unequivocal intention to proceed with the suit and abandon the right of having the dispute disposed of by arbitration;

4.      The issue of the Notice to Produce and the letter seeking further and better particulars likewise fell within the “any other action” category of Sanwell. As these steps were taken to ascertain the exact claim against the Defendant, the Court was of the view that they could not amount to an unequivocal intention to proceed with the suit.

In relation to the Plaintiff’s contention that the Defendant had taken further steps in the Court proceedings by requesting for an extension of time to file its Defence, the Judge noted that the Defendant had already filed its application to stay the Court proceedings at the time when it applied for extension of time to file its Defence. Accordingly, the Judge took the view that the Court should have allowed the Defendant’s application for stay of proceedings to be heard before directing the Defendant to file its Defence.

Accordingly, the Court allowed the Defendant’s application to stay the court proceedings pending remission of the dispute to arbitration.

 

 

COMMENTARY

The principles laid down by the Federal Court in Sanwell in relation to Section 6 of the 1952 Act have now been adopted by the High Court in Life Plaza in relation to Section 10 of the 2005 Act.

Nonetheless, this decision departs from Sanwell in that an exception was made by the learned High Court Judge in relation to the filing of pleadings, namely the Defence, by the Defendant. It is arguable that this exception may be justified in the circumstances of this case as the Defence was filed on the instruction of the Court. 

It should be noted that the Judge did not expressly deal with the Plaintiff’s contention that the Defendant should have filed its stay application before the due date for filing the Defence. It would appear that Her Ladyship may have taken the view that the 2005 Act and the relevant rules of courts do not expressly require such an application to be filed before the deadline for filing of a defence, notwithstanding that a party who does not do so takes the risk of default judgment being entered against it.  

 

Writer's e-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

 

 
ACCOLADES & AWARDS

Skrine Retains Who’s Who Legal Accolade for Malaysia

On 15th May 2017, the Who’s Who Global Awards was held in London, United Kingdom and Skrine was conferred the Award:

Malaysia Law Firm of the Year 2017

Skrine previously received this Award in 2013, 2014, 2015 and 2016.

>> READ MORE

SKRINE Clinches Top Honours at ALB Malaysia Law Awards 2017

On 6th April 2017, the Asian Legal Business Malaysia Law Awards was held and SKRINE was named

Malaysia Law Firm of the Year 2017

SKRINE also bagged 5 other awards

>> READ MORE

Asialaw Profiles 2017

The Asialaw Profiles has ranked Skrine as Outstanding Firm and particularly highlighting the following practice areas:

Outstanding Firm

  • Competition & Antitrust
  • Corporate/M&A
  • Dispute Resolution
  • Energy & Natural Resources
  • Intellectual Property
  • IT, Telco & Media
  • Project & Infrastructure

>> READ MORE

PDPA NOTICE

English | Bahasa Malaysia