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2022 MarsdenLR 1860
HIGH COURT MALAYA KUALA LUMPUR
PADDA GURTAJ SINGH & ORS – Appellant
Versus
AXIATA GROUP BERHAD & ORS – Respondent
[Originating Summons No: WA-24NCC(ARB)-41-09/2021]
Interim measures under the Arbitration Act 2005 can be granted against non-parties to an arbitration agreement to preserve the status quo pending arbitration, focusing on party autonomy and minimum judicial intervention.
Headnote:(A) Arbitration Act 2005 – Sections 11 and 19J – Application for interim measures against a non-party to an arbitration agreement – Plaintiffs sought an injunction to prevent AGB from selling shares included in a proposed merger with a competitor, Digi – The court deliberates on the jurisdiction to issue interim measures under the AA 2005, emphasizing party autonomy and minimum intervention – Decision ruled that even without being a party to the agreement, the injunction was warranted to maintain the status quo pending arbitration as the prospective sale could cause irreparable harm to the Plaintiffs by infringing their shareholder rights under the shareholders agreement – Injunctive order allows status preservation until arbitration concludes. (Paras 8, 26-89)
(B)
Jurisdiction Over Non-Party – Court’s power to issue prior measures extends to non-parties under specific provisions of the AA 2005 where necessary to support arbitration – The court acknowledges that intervention is limited to supporting the arbitrational process without prejudging outcomes. (Paras 27-54)
Based on the provided legal document, here are the key points regarding the jurisdiction to grant interim measures against non-parties under the Arbitration Act 2005:
Jurisdiction Over Non-Parties * The High Court has the power to issue interim measures against non-parties to an arbitration agreement under Section 19J(1) of the Arbitration Act 2005 to preserve the status quo pending arbitration. (!) (!) (!) * While Section 11(1) applies only to parties to an arbitration agreement, Section 19J(1) contains no such restrictions, provided the measures are "in relation to arbitration proceedings." (!) (!) * The Court's intervention is limited to supporting the arbitral process without prejudging the outcome or determining the merits of the dispute. (!) (!) (!) * The amendment to the Act in 2018 was intended to align with the UNCITRAL Model Law, specifically to allow courts to grant interim measures against third parties where the arbitral tribunal lacks jurisdiction. (!) (!) (!) * The Court is not required to apply the strict "American Cyanamid" test (serious issue to be tried) for interim measures under the Act, as the existence of a dispute is presumed once referred to arbitration. (!) (!)
Application to the Case (Prayer A) * The Plaintiffs sought an injunction to prevent the 1st Defendant (AGB), a non-party to the Shareholders Agreement, from selling shares in a subsidiary (CMSB) included in a proposed merger with a competitor (Digi). (!) (!) (!) * The Court ruled that granting the injunction was necessary to prevent irreparable harm and ensure the arbitration proceedings would not become academic. (!) (!) (!) * The injunction was granted as it merely preserved the status quo (preventing a change in control) without usurping the arbitrator's authority to determine if a breach occurred. (!) (!) (!) * The Court rejected the argument that no cause of action existed against AGB, adopting the reasoning from TSB Private Bank International SA v. Chabra that an injunction can be granted against a non-party if it is ancillary and incidental to a cause of action against other defendants. (!) (!) (!) (!) (!) * An undertaking given by the parties (CAB and CMSB) was deemed insufficient to preserve the status quo regarding the control of the company and the risk of a competitor gaining indirect influence. (!) (!) (!)
Other Prayers * The Court declined to grant further interim measures (Prayers B and C) regarding the MVNo agreement and board voting rights, as these would alter the status quo rather than preserve it and could be addressed by the arbitral tribunal. (!) (!) (!) (!)
Group of Companies Doctrine * The Court noted the "Group of Companies" doctrine but deemed it unnecessary to address since jurisdiction to grant the injunction against the non-party was already established under Section 19J. (!) (!) (!) (!)
JUDGMENT
Introduction
[1] The Amended Originating Summons ('Enclosure 57') seeks interim measures under ss 11 and 19J of the Arbitration Act 2005 or under the inherent jurisdiction of this Court. The purpose is to preserve the status quo to ensure that the arbitration proceedings in relation to the shareholders agreement of the 9th Defendant company ('the Company' or 'TTSB') will not become academic.
[2] The 3rd Defendant ('CMSB') is a wholly owned subsidiary of the 2nd Defendant ('CAB'), who in turn is a wholly owned subsidiary of the 1st Defendant ('AGB'). CMSB became a registered shareholder of shares in the 9th Defendant on 18 June 2021. Prior to this date, CAB was the registered shareholder of the shares.
[3] The dispute revolves around the proposed sale by AGB of its entire shareholding in CAB. It is the plaintiffs' case that this proposed sale triggered an 'Event' and constitutes a 'Material Breach' of the shareholders agreement between the parties, resulting in CMSB being compulsorily required to sell its entire shareholding in TTSB to the remaining shareholders of the Company at par plus 10%. Both CAB and CMSB categorically deny the Plaintiffs' allegation.
[4] Notwithstanding that AGB is a non-party to the shareholders agreement which contains an arbitration agreement, the Plaintiffs seek interim measures in the form of injunctive orders against AGB as well as CAB and CMSB.
[5] Not surprisingly, AGB's main objection to the application is that the Arbitration Act 2005 ('the AA 2005') does not permit injunctive reliefs to be granted against a non-party to the arbitration agreement. It is further contended that there is no preexisting cause of action against AGB to enable this Court to grant the injunction sought.
[6] As regards CAB and CMSB, the main objection to the application is that the interim measures sought are unnecessary given that an undertaking has been given that CMSB's entire shares in TTSB shall remain unencumbered and that in the event the Plaintiffs were to prevail in the arbitration, CMSB will be able to transfer their entire shareholdings in TTSB in accordance with the terms of the shareholders agreement. In addition, it is contended that the scope of the interim measures will result in a change to the status quo.
[7] Both AGB and CAB/CMSB have filed their respective applications under encls 7 and 8 to strike out the Plaintiffs' action herein. The decision on encl 37 will also determine the striking out applications.
Background Facts
[8] The Plaintiffs are shareholders of TTSB which is a Mobile Virtual Network Operator ('MVNO').
[9] A complete list of shareholders and, where relevant, key persons within the shareholders, with their abbreviations, is set out below:
[10] The Company was incorporated in 2006. It is regulated by both its Articles of Association ('the Articles'), and the Shareholders Agreement dated 23 December 2008 ('the SHA').
'Article 168 of the Articles and cl 7.1 of the SHA provide that where there is a conflict between the Articles and the SHA, the SHA shall prevail.'
[11] CAB is one of Malaysia's three leading mobile telecommunications providers. It became a shareholder of TTSB upon the signing of the SHA. Further,
(1) CAB is a wholly owned subsidiary of AGB, a public company listed on the Main Market of the Bursa Malaysia ('Bursa');
(2) AGB was previously known as TM International Bhd, and is indirectly a successor to the Malaysian government's telecommunications agency known as Telekom Malaysia ('TM').;
(3) AGB owns and operates mobile telecommunications services in various countries in Asia through a network of subsidiaries;
(4) At the time the agreement was signed, AGB made an announcement on the Bursa website of its investment in TTSB through CAB.
[12] CMSB is in turn a wholly owned subsidiary of CAB.
[13] TTSB is a mobile virtual network operator or MVNO.
(1) In simple terms, this means TTSB provides mobile communications services to consumers, using the network infrastructure of a
