Clause 18 of the Development and Contra Transaction Agreement permits either arbitration or litigation for dispute resolution, lacking the requirements for a binding arbitration clause under the Arbitration Act 2005.

JUDGMENT

Moses Susayan JC:

[1] The defendant filed an application to stay the court proceedings and refer the dispute to arbitration under s 10(1) of the Arbitration Act 2005 . The plaintiff argues that there is no valid arbitration clause in the Development and Contra Transaction Agreement ("DACT"), specifically pointing to cl 18, which allows disputes to be referred either to arbitration or to a court. The defendant contends that the DACT requires disputes to be resolved through arbitration and seeks a stay of the court proceedings on this basis.

Brief Facts

[2] The plaintiff, a subsidiary of Syarikat Perumahan Negara Berhad ("SPNB"), entered into a DACT with the defendant, a property developer, on 17th May 2018 for a residential development project in Sitiawan, Perak. Under the DACT, the defendant was to develop the project, and the plaintiff was to purchase 20 plots of land, transferring 1,169 units valued at RM248,035,014.00 as part of the financing. Disputes later arose regarding the timely transfer of land and compliance with the DACT's terms, leading the defendant to terminate the agreement in July 2021 and demand compensation of RM311,897,723.00. In response, the plaintiff filed a lawsuit for breach of the DACT agreement. While the defendant sought for the matter to be stayed as they are of the view that it should, by right, be referred to arbitration.

Issues For Determination

[3] The central issues for determination are:

a) What does cl 18 of the DACT explicitly provide regarding dispute resolution?

b) How should it be determined whether the dispute resolution is through arbitration or courts?

c) Whether the court proceedings should be stayed pending arbitration?

Clause In Dispute

[4] The DACT agreement includes a provision for the settlement of disputes as follows:

"In the event that any dispute or difference whatsoever shall arise between parties touching or concerning this Agreement or its construction or effect or as to the rights, duties or liabilities of either party or of parties hereto under this Agreement in connection with the subject matter of this Agreement the same maybe referred to any court in Malaysia or to arbitration in accordance with the provisions of the Arbitration Act 2005 or any statutory modification or re-enactment thereof."

[5] The clause, therefore, seemingly provides an option for dispute resolution through either arbitration or litigation.

Merits Of The Application

[6] The defendant argues that the arbitration clause in the DACT is valid and binding, relying on Albilt Resources Sdn Bhd v. Casaria Construction Sdn Bhd ; 2009 MarsdenLR 1790 ; [2010] 7 CLJ 785; [2010] 3 AMR 721 and Press Metal Sarawak Sdn Bhd v. Etiqa Takaful Berhad ; 2016 MarsdenLR 1029 ; [2016] 9 CLJ 1; [2016] 5 AMR 635, to support the argument that arbitration is the primary method for dispute resolution. The defendant contends that cl 18 should be interpreted as mandating arbitration.

[7] However, the plaintiff contends that cl 18 is not a valid arbitration clause, as it lacks essential details such as the seat of arbitration, the number of arbitrators, and the methods for their appointment. The plaintiff further argues that s 10(1) of the Arbitration Act 2005 , which mandates a stay of proceedings in favour of arbitration, does not apply, and therefore, the defendant's application should be dismissed.

court's Finding On The Issues

a) What Does Clause 18 Of The DACT Explicitly Provide Regarding Dispute Resolution?

[8] Clause 18 of the DACT explicitly provides that disputes between the parties "may be referred to any court in Malaysia or to arbitration in accordance with the provisions of the Arbitration Act 2005 or any statutory modification or re-enactment thereof." The language of the clause, particularly the use of the word "may," is critical in interpreting its nature. Unlike mandatory arbitration clauses that use terms such as "shall" or "must," the permissive term "may" suggests that cl 18 offers the parties an option betwee