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2025 MarsdenLR 644
HIGH COURT MALAYA KUALA LUMPUR
ZECON ENGINEERING & CONSTRUCTION SDN BHD – Appellant
Versus
POSCO ENGINEERING & CONSTRUCTION CO LTD – Respondent
[Originating Summons No: WA-24C(ARB)-19-03/2024]
The failure to appoint a substitute arbitrator within a reasonable time constitutes a repudiatory breach of the arbitration agreement, rendering it inoperative.
Headnote:(A) Arbitration Act 2005 [Act 646] - Section 10 - KLRCA Rules 2013 - Arbitration Agreement - Plaintiff sought a declaration that the arbitration agreement with Posco Engineering Co Ltd is inoperative due to breach and failure to appoint a substitute arbitrator - Court found that the Defendant failed to take necessary steps to proceed with arbitration, thus rendering the agreement inoperative. (Paras 47, 49, 96, 113)
(B) Waiver and Abandonment of Rights - Plaintiff argued that Defendant waived rights to arbitration by failing to act for over five years - Court held that the Defendant's silence constituted a waiver of rights. (Paras 96, 113)
(C) Injunction - Court granted injunction to restrain the Defendant from proceeding with arbitration, citing irreparable harm to the Plaintiff. (Paras 104, 113)
Facts of the case:
The Plaintiff, a construction company, entered an arbitration agreement with Posco Engineering Co Ltd. The Defendant, having merged with PEN, failed to appoint a substitute arbitrator after the original arbitrator withdrew, leading to a dispute about the operability of the arbitration agreement. (Paras 8-13, 47)
Findings of Court:
The Court found that the arbitration agreement was inoperative due to the Defendant's failure to appoint a substitute arbitrator and that the Plaintiff had accepted the repudiation of the agreement. The Stay Application was dismissed. (Paras 113)
Issues: The main issues included whether there was a breach of the arbitration agreement, whether it was rendered inoperative, and whether the Defendant had waived rights to arbitration. (Paras 47, 94)
Ratio Decidendi: The Court ruled that the Defendant's failure to act within a reasonable time to appoint a substitute arbitrator constituted a repudiatory breach, rendering the arbitration agreement inoperative. The Plaintiff's actions indicated acceptance of this breach. (Paras 92-96)
Result: The Court allowed the Plaintiff's applications and dismissed the Stay Application.
| Table of Content |
|---|
| 1. court's decision on applications (Para 1 , 2 , 3) |
| 2. defendant's appeal against decision (Para 4 , 5 , 6) |
| 3. background of parties and agreements (Para 7 , 8 , 9 , 10 , 11 , 12) |
| 4. arbitration process and agreements (Para 13 , 14 , 15 , 16 , 17) |
| 5. applications related to arbitration (Para 18 , 19 , 20) |
| 6. communications regarding arbitration (Para 21 , 22 , 23) |
| 7. advance preliminary deposit issues (Para 24 , 25 , 26) |
| 8. arbitrator's withdrawal and appointment (Para 27 , 28 , 29) |
| 9. nomination of substitute arbitrator (Para 30 , 31 , 32 , 33) |
| 10. settlement discussions between parties (Para 34 , 35 , 36 , 37) |
| 11. defendant's actions regarding arbitration (Para 38 , 39 , 40) |
| 12. payment of apd and arbitration status (Para 41 , 42 , 43) |
| 13. filing of applications for injunction (Para 44 , 45 , 46) |
| 14. issues for court's consideration (Para 47 , 48) |
| 15. breach of arbitration agreement (Para 49 , 50 , 51) |
| 16. court's jurisdiction over arbitration (Para 52 , 53 , 54) |
| 17. implications of arbitration rules (Para 55 , 56 , 57) |
| 18. legal precedents regarding arbitration (Para 58 , 59 , 60) |
| 19. court's analysis of arbitration issues (Para 61 , 62 , 63) |
| 20. defendant's arguments against plaintiff (Para 64 , 65 , 66) |
| 21. court's reasoning on arbitration (Para 67 , 68 , 69) |
| 22. jurisdiction and validity of arbitration (Para 70 , 71 , 72) |
| 23. court's conclusions on arbitration (Para 73 , 74 , 75) |
| 24. breach of arbitration agreement consequences (Para 76 , 77 , 78) |
| 25. acceptance of repudiation (Para 79 , 80 , 81) |
| 26. defendant's attempts to argue waiver (Para 82 , 83 , 84) |
| 27. impact of settlement discussions (Para 85 , 86 , 87) |
| 28. court's decision on injunction application (Para 88 , 89 , 90) |
| 29. court's conclusion on injunction (Para 91 , 92 , 93) |
| 30. defendant's waiver of arbitration rights (Para 94 , 95 , 96) |
| 31. plaintiff's arguments on waiver (Para 97 , 98 , 99) |
| 32. court's reasoning on waiver (Para 100 , 101 , 102) |
| 33. court's analysis of injunction necessity (Para 103 , 104) |
| 34. court's final considerations (Para 105 , 106) |
| 35. interim injunction application outcome (Para 107 , 108 , 109) |
| 36. stay application outcome (Para 110 , 111) |
Introduction
[1] The Court heard the following applications with the consent of the parties:
(a) the application by the Plaintiff in the Originating Summons ('O.S.') for, among others,:
(i) 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');
(b) 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
(c) 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 March 2024.
[3] On 21 October 2024, after having given careful consideration to the affidavit evidence and oral a
