The court ruled that a valid arbitration agreement necessitates a stay of court proceedings if a party has not taken other procedural steps, affirming mandatory compliance under Section 10 of the Arbitration Act 2005.

JUDGMENT

Lim Chong Fong J:

Introduction

[1] This is an application to stay the suit to be referred to arbitration.

[2] The Plaintiff is a private limited company involved in the construction business.

[3] Likewise, the Defendant is a private limited company involved in the construction business.

Background Facts

[4] By a letter of award dated 2 September 2014 ("Contract"), the Defendant appointed the Plaintiff to carry out and complete the supply, delivery, installation, testing and commissioning of the fire fighting services, cold water, sanitary system and LPG system ("Works") for the 'Revitalization works for the Kompleks Tun Abdul Razak (KOMTAR) building' in Penang ("Project").

[5] After having carried out the Works, the Plaintiff made a claim against the Defendant for RM1,910,405.52 for unpaid work done.

[6] By reason of the failure, neglect or refusal of the Defendant to make the payment as claimed, the Plaintiff instructed its solicitors Messrs T G Lim & Partners to make a written demand dated 18 April 2019 upon the Defendant.

[7] However as the result of the Defendant's continuing failure to make payment, the Plaintiff commenced this suit on 30 September 2019.

[8] After having been served the writ by the Plaintiff, the Defendant entered its appearance on 15 October 2019.

[9] The Defendant then on 1 November 2019 filed third party proceedings against Magnificent Empire Sdn Bhd which appointed the Defendant to carry and complete the Project that formed the subject matter of the disputes and differences between the Plaintiff and Defendant. The third party proceedings was subsequently discontinued on 14 November 2019.

[10] On 5 November 2019, the Defendant simultaneously filed its defence as well as this application to stay the suit to be referred to arbitration ("Application").

[11] The affidavits that were filed for purposes of this Application are as follows:

(i) Defendant's application in support affirmed by Lim Chip Keong dated 4 November 2019;

(ii) Plaintiff's affidavit in reply affirmed by Tan Bak Eam dated 21 November 2019;

(iii) Plaintiff's further affidavit affirmed by Tan Bak Eam dated 21 November 2019;

(iv) Defendant's further affidavit affirmed by Lim Chip Keong dated 7 February 2020; and

(v) Plaintiff's affidavit in reply to Defendant's further affidavit affirmed by Tan Bak Eam dated 19 February 2020.

[12] The Application came before me for hearing on 23 January 2020, 5 and 21 February 2020. After hearing counsel, I adjourned my decision to deliberate on the arguments advanced by them.

[13] Now having done so, I hereby furnish my decision below together with the supporting grounds.

Contentions And Findings

[14] It is provided as follows in cl 1 of the Contract:

"The Articles of Agreement and Conditions of Contract shall be those contained in the PAM form of contract 2006 (without quantity)."

Hence, it is common ground which is not seriously disputed by the parties that there is a binding arbitration agreement as contained in cl 34 of the PAM form of contract. It suffices if an arbitration agreement has been incorporated by reference following the Federal Court case of Ajwa For Food Industries Co (MIGOP), Egypt v. Pacific Inter-Link Sdn Bhd, 2013 MarsdenLR 1284 .

[15] In the Federal Court case of Tan Kok Cheng & Sons Realty Co Sdn Bhd v. Lim Ah Pat, [1995] 3 MLJ 273, Gopal Sri Ram JCA (later FCJ) held as follows:

"At common law, a prior agreement between contracting parties to refer their disputes to arbitration did not operate to bar either of them from instituting proceedings in the ordinary Courts. Neither did such a clause preclude the Court from entertaining a suit filed in breach of the contract to arbitrate. However, the Court could, in the exercise of its discretion stay an action and require a plaintiff to adhere to the obligation voluntarily undertaken to go to arbitration. The judicial philosophy behind this approach is based upon sound principle. It is this. Since consent cannot confer jurisdiction upon a Court which has non