Court affirmed that a valid arbitration agreement necessitates a stay of proceedings pending arbitration, with conditions imposed to preclude limitation defences.

JUDGMENT

Liza Chan Sow Keng JC:

Introduction

[1] This appeal emanates from the learned Sessions Court Judge's decision dated 13 April 2021 in Sessions Court Civil Suit No: WA-A52NCC-1288-09/2020 ("Sessions Court suit") in dismissing the appellant's application pursuant to s 10 of the Arbitration Act 2005 (" AA 2005") for a stay of all proceedings pending reference to arbitration. The appellant also sought for indemnity costs against the respondent in the said application.

[2] In this appeal, the appellant and the respondent will be referred to as the 1st Defendant and Plaintiff respectively as in the Court below.

[3] On 30 July 2021,1 had set aside the Order of the Sessions Court dated 13 April 2021 and allowed the appeal in part in that there will be a stay of proceedings against the 1st Defendant in the Sessions Court suit pending arbitration with the condition that the 1st Defendant shall be precluded from raising the defence of limitation pertaining to the dispute arising from the agreement dated 28 April 2014. As the appeal was allowed in part, I made no order as to the costs of the appeal.

[4] The 1st Defendant has appealed to the Court of Appeal against part of my decision in precluding the 1st Defendant from raising the defence of limitation in the arbitration proceedings, and in failing to award the 1st Defendant indemnity costs.

Background

[5] In September 2020, the Plaintiff filed the Sessions Court suit against the 1st Defendant for breach of a Film Co-Investment Agreement made between the Plaintiff and 1st Defendant dated 28 March 2014 and for return of the sum of RM937,500. The 2nd Defendant was sued as guarantor.

[6] Prior filing the Sessions Court suit, the Plaintiff had sent a letter of demand dated 17 August 2020 to the 1st Defendant at No 8A, 1st Floor, Jalan Astaka L U8/L Bukit Jelutong 40150 Shah Alam ("1st Defendant's address").

[7] The Writ and Statement of Claim ("SOC") were served on the 1st Defendant at the same 1st Defendant's address.

[8] Judgment in Default ("JID") was entered against the 1st Defendant when it did not respond nor appear to defend the suit. A month after the JID was entered, the 1st Defendant applied on 29 December 2020 to set aside the JID and also sought permission to file as 10 AA 2005 stay. The Plaintiff did not object to the order sought by the 1st Defendant.

[9] On 26 January 2021, the 1st Defendant asked if the Plaintiff would discontinue the suit whereupon the Plaintiff on 2 February 2021 offered to have a consent order recorded for a stay pending arbitration in respect of the suit against the 1st Defendant. The 1st Defendant did not agree to the consent order and insisted that the Plaintiff discontinue the suit.

[10] The 1st Defendant then filed the stay application on 9 February 2021.

Decision Of The Sessions Court

[11] The Learned Sessions Court Judge ("SCJ") in dismissing the stay application with costs to the Plaintiff on 13 April 2021 in essence found that:

(i) the 1st Defendant had no basis to request the Plaintiff to discontinue proceedings against the 1st Defendant and referred to s 10 (3) AA 2005 which provides as follows:

"(3) Where the proceedings referred to in subsection (1) have been brought, arbitral proceedings may be commenced or continued, and an award may be made, while the issue is pending before the Court.'

[Emphasis Added];

(ii) the 1st Defendant's application for a stay of all proceedings pending reference of the dispute to arbitration is contrary to 1st Defendant's request that the Plaintiff discontinue the proceedings against the 1st Defendant; and if the Plaintiff fail to do so, the 1st Defendant seek costs of the action including indemnity costs; and

(iii) the 1st Defendant has no basis to seek indemnity costs. The 1st Defendant has had the opportunity to apply for a stay in the application to set aside the JID but has failed to do so. Furthermore, the 1st Defendant has rejected the Plaintiff 's offer to record a consent order to reflect the stay but instead i