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2013 MarsdenLR 239

HIGH COURT MALAYA KUALA LUMPUR
PERWIRA BINTANG HOLDINGS SDN BHD – Appellant
Versus
KERAJAAN MALAYSIA – Respondent
[Originalting Summon NO: D-24NCC(ARB)-8-02/2013]



Arbitral awards must stick to issues submitted for arbitration; addressing unraised disputes renders them legally unsound.

Headnote:(A) Arbitration Act 2005 - Subparagraphs 37(1)(a)(iv), 37(2)(b) and 37(3) - Challenge to Final Award for failing to address disputes within the terms of arbitration - Dispute over extra costs for hard rock excavation - Claimant failed to prove quantity of hard rock, which was not a originally contested issue, leading to rejection of the claim. (Paras 117-125, 138.5, 139, 140)

(B) The court found that while the claimant encountered hard rock, it was unable to substantiate the length bored through such material, which was crucial for the claim's success. (Paras 138.1, 138.4)

Facts of the case:
Disputes related to the construction contract for piling works where the claimant sought remuneration for additional excavation costs due to hard rock encountered during piling, totaling RM4,052,756. (Paras 2-6, 8)

Findings of Court:
The arbitrator found the claimant was entitled to claim for extra costs due to hard rock but dismissed the claim because the quantity of hard rock bored was not proven. (Paragraphs 139, 140)

Issues: Whether the arbitrator's rejection of the claim based on the claimant's failure to prove quantity was justified as it was not an issue raised by the respondent during the arbitration. (Para 92)

Ratio Decidendi: The court ruled that the arbitrator's decision was problematic as it addressed a dispute about the quantity of hard rock that was never put forward by the respondent, rendering the award excessive and requiring judicial intervention. (Paras 76-81)

Result: Relevant paragraphs of the Final Award set aside, and the claimant's remaining claim adjusted to RM3,300,727.00 with costs varied. (Paras 97, 98)

Table of Content
1. jurisdiction and basis for claim submission. (Para 1 , 1 , 2 , 3 , 4)
2. details of claim and contract conditions. (Para 5 , 6 , 7 , 8 , 9)
3. arbitral proceedings summary. (Para 10 , 11)

[1] The Plaintiff is invoking the Court's jurisdiction under subparagraph 37(1)(a)(iv), paragraph 37(2)(b) and sub-s 37(3) of the Arbitration Act 2005 [Act 646] to set aside certain paragraphs of the Final Award dated 24 October 2012; namely paragraphs 117, 118, 120 to 125, 139 and 140. Alternatively, the Plaintiff seeks to set aside that Final Award, be it in whole or in part or to vary the same pursuant to s 42 of Act 646. Under s 42, the Plaintiff identified several questions of law for the Court's determination, the details of which will be examined later.

The Plaintiff's Claim

[2] By Letter of Intent dated 5 February 2003, the Defendant had offered to the Plaintiff a tender for a project known as "Cadangan Pembinaan Kompleks KDN/KA & LOGISTIK, Bukit Aman, Wilayah Persekutuan direct negotiations based on a "design and build" arrangement. The Plaintiff successfully tendered for the works and after negotiations the Defendant accepted the Plaintiff's offer vide letter of acceptance dated 1 September 2005. The consideration for the execution of the works was RM320 million.

[3] A formal agreement was then drawn up between the parties with the Plaintiff as the Contractor for the design, construction, completion and maintenance of the Kompleks KDN/KA & LOGISTIK, Bukit Aman, Wilayah Persekutuan. These works involved piling works for the proposed Office Tower and Multi-purpose Hall but the Hall was subsequently omitted from the works.

[4] The description and the rates of the piling works (provisional) are contained in Section No: 2 of Appendix 5 of Part 5 (Volume I of III) which is the Contract Sum Analysis of the Contract Document. However, these rates only involved all soils, excluding hard rock.

[5] In the course of carrying out piling works, the Plaintiff encountered hard material and rock layer. While it continued with the piling works, additional soil investigation and an expert's report [G.E.M. Exploration Sdn Bhd] which confirmed the presence of hard material/rock was procured. The Defendant was informed of this and copies of the soil investigation report and the report on the "Classification and Strength Determination of Rock in Bored Pile Holes, Bukit Aman, KL" prepared by the Plaintiff's expert were given to the Defendant.

[6] On 3 August 2006, the Plaintiff completed the piling works. On 27 September 2006, it submitted a claim for additional costs for excavation through hard material/rock over and above the normal drilling in soil which additional costs amounted to RM4,052,756.00.

[7] By letter dated 18 July 2007, the Defendant rejected the claim taking the position that the Plaintiff itself was responsible for these extra costs. The Plaintiff appealed. On 15 July 2010, the Defendant's Claims Committee dismissed the appeal on the ground that the claim for additional costs is not in line with the conditions in the Contract Document (tidak sejajar dengan syarat-syarat Kontrak).

[8] Being displeased with the Defendant's decision, the Plaintiff invoked clause 56 of the Conditions of Contract. The dispute was then referred to arbitration with the single arbitrator appointed by the Director of the Kuala Lumpur Regional Centre for Arbitration.

[9] Procedural Directions were given by the Arbitrator after a preliminary meeting with the parties together with their counsel. The Plaintiff filed its Statement of Claim to which the Defendant filed its Defence followed by the Plaintiff's Reply. The substance of the Plaintiff's claim can be found at paragraphs 7 and 8 of the Statement of Claim:

7. The description and the rates of the piling works (provisional) are contained in Section 2 of Appendix 5 of Part 5 (Volume I of III) which is the Contract Sum Analysis of the Contract Document. The rates for the drilling works only involve all soils ex

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