The court reaffirmed the principle of minimal curial intervention in arbitration and upheld the validity of an arbitration award despite challenges on public policy and natural justice grounds.

[1] In Originating Summons No. WA-24C(ARB)-37-06/2024 (OS 37) Sungai Lui Construction Sdn Bhd ("SLC") had applied to enforce the Award dated 31 May 2024 ("Award") in its favour pursuant to inter alia s 38 of the Arbitration Act 2005 .

[2] Whereas in Originating Summons No. WA-24C(ARB)-57-08/2024 (OS 57), Pembinaan Jaya Zira Sdn Bhd ("PJZ") had sought to set aside the Award on various grounds of which are as follows:

2.1 the Letter of Award/ Total Sub Contract is in conflict with the public policy of Malaysia as it is tainted with illegality;

2.2 the Arbitrator has breached the rules of natural justice when the Arbitrator failed to take into account the relevant and pertinent facts in determining the existence of the Addendum;

2.3 the Award is in conflict with the public policy of Malaysia as its sets a dangerous precedent in relation to the issue of termination;

2.4 the Award is in conflict with the public policy of Malaysia as the Arbitrator's findings in respect of Category 1 and Category 2 claims are against the fundamental principles of law and justice.

Brief Background Facts

[3] Pursuant a Letter of Award dated 18 July 2019, SLC was appointed by PJZ as the total sub-contractor for a project known as the Central Spine Road, Pakej 3: Gua Musang, Kelantan ke Kg. Relong, Pahang, s S Bulatan Gua Musang ke Mentara (No Kontrak: JKR/IP/CKUB/44/2018) ("Project").

[4] Due to non-payment of fees and the wrongful termination by PJZ, SLC initiated the suit in the High Court of Kuala Lumpur Suit No WA-22C-106-11/2020. By consent of the parties, Justice Lim Chong Fong on 26 February 2021 ordered that the said suit be tried before an arbitrator Mr IR Oon Chee Kheng pursuant to s 24A of the Court of Adjudicator Act 1964 ("Consent Judgment").

[5] On 31 May 2024, the arbitrator Mr IR Oon Chee Kheng delivered his final award in favour of SLC as follows ("Final Award"):

a) PJZ is required to pay SLC a sum of RM13,647,485.47;

b) PJZ is required to pay SLC simple interest at the rate of 5% p.a on the sum of RM13,647,485.47 from 5 March 2020 until 31 May 2024;

c) PJZ is required to pay SLC simple interest at the rate of 5% p.a on the award of RM13,647,485.47 commencing the day after the Award date, ie 1 June 2024 until full settlement;

d) SLC's alternative claim for Quantum Meriut is not allowed;

e) PJZ's counterclaim for backcharge is not allowed;

f) PJZ is required to pay SLC costs of RM236,621.39; and

g) Except for the claims allowed above, all other claims of SLC and PJZ are disallowed.

Analysis & Findings

Public Policy Issue

[6] It is submitted by PJZ that the Letter of Award/Total Sub Contract amounts to an 'Ali Baba' arrangement as the entire works were subcontracted to SLC and as such were contrary to s 24(a) of the Contracts Act 1950 .

[7] Under s 24(a) of the Contracts Act 1950 it is provided that:

The consideration or object of an agreement is lawful, unless:

(a) it is forbidden by a law;

(b) it is of such a nature that, if permitted, it would defeat any law;

(c) it is fraudulent;

(d) it involves or implies injury to the person or property of another; or

(e) the Court regards it as immoral, or opposed to public policy.

In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

[8] In essence the aforesaid section provides that the consideration or object of the agreement becomes unlawful when it is inter alia immoral or opposed to public policy.

[9] I ha