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2023 MarsdenLR 2121

HIGH COURT MALAYA KUALA LUMPUR
KEBABANGAN PETROLEUM OPERATING COMPANY SDN BHD – Appellant
Versus
MALAYSIA MARINE AND HEAVY ENGINEERING SDN BHD & AN.... – Respondent
[Originating Summons No: WA-24C(ARB)-51-09/2021 & WA-24C(ARB)-52-09/2021]

Petitioner Advocates:Kuhendran Thanapalasingam,Michael Koh,J Agesh ,Respondent Advocate: Mohanadass Kanagasabai,Kalashini Sandrasegaran,Thomas Shaun Mathews

An arbitral award may be set aside if the tribunal fails to address all material issues raised by the parties, constituting a breach of natural justice.

Headnote:(A) Arbitration Act 2005 - Section 38 and Section 37(1)(b)(ii) - Setting aside of arbitral award - Application by Kebabangan Petroleum Operating Company Sdn Bhd for enforcement of the Tribunal's award dismissed - MMHE's application to set aside the award allowed on grounds of breach of natural justice and failure to provide a reasoned award - Tribunal failed to consider essential arguments regarding waiver, acquiescence, estoppel, and mitigation of loss - Award set aside in full with costs. (Paras 112, 115, 116)

(B) Natural Justice - Requirements for an arbitral tribunal - Tribunal must consider and address all material issues raised by the parties - Failure to do so constitutes a serious breach of natural justice, justifying the setting aside of the award. (Paras 86, 115)

Facts of the case:
KPOC and MMHE were involved in arbitration regarding the supply of valves under a contract. KPOC claimed damages for breach of contract, while MMHE sought to set aside the Tribunal's award, arguing that it failed to address key defenses and issues raised during the arbitration. (Paras 4, 19, 39)

Findings of Court:
The Court found that the Tribunal did not adequately address MMHE's defenses and failed to provide a reasoned award, constituting a breach of natural justice. (Paras 115, 116)

Issues: The main issues included whether the Tribunal considered MMHE's defenses regarding waiver and mitigation of loss, and whether the award should be set aside for failing to meet the standards of natural justice. (Paras 86, 115)

Ratio Decidendi: The Court ruled that the failure to address all material issues and provide adequate reasons for the Tribunal's decisions rendered the award in conflict with public policy, justifying its setting aside. (Paras 115, 116)

Result: MMHE's application to set aside the award was allowed, and KPOC's enforcement application was dismissed, with costs awarded to MMHE.

Table of Content
1. overview of applications and court decisions. (Para 1 , 2 , 3)
2. details of cause papers related to applications. (Para 4 , 5 , 6)
3. background of kpoc and mmhe and contractual obligations. (Para 7 , 8 , 9 , 10 , 11 , 12)
4. dispute details related to cost-plus valves. (Para 13 , 14 , 15 , 16 , 17 , 18)
5. discovery of issues with cost-plus valves. (Para 19 , 20 , 21)
6. initiation of arbitration proceedings. (Para 22 , 23)
7. kpoc's claims and mmhe's defenses. (Para 24 , 25 , 26 , 27 , 28)
8. witnesses and evidence in arbitration. (Para 29 , 30 , 31)
9. issues identified for arbitration. (Para 32 , 33 , 34)
10. legal principles for setting aside an award. (Para 35 , 36 , 37)
11. mmhe's grounds for setting aside the award. (Para 38 , 39 , 40 , 41 , 42)
12. legal principles regarding natural justice. (Para 43 , 44 , 45 , 46)
13. court's findings on mmhe's arguments. (Para 47 , 48 , 49 , 50 , 51)
14. court's analysis of arbitration process. (Para 52 , 53 , 54 , 55 , 56)
15. court's observations on the tribunal's findings. (Para 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64)
16. court's analysis on the quantification of claims. (Para 65 , 66 , 67 , 68 , 69 , 70 , 71)
17. court's findings on mmhe's defenses. (Para 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79)
18. court's conclusions on waiver and estoppel. (Para 80 , 81 , 82 , 83 , 84)
19. court's observations on mitigation. (Para 85 , 86 , 87 , 88 , 89)
20. court's findings on mitigation. (Para 90 , 91 , 92 , 93 , 94 , 95 , 96)
21. court's conclusions on mitigation. (Para 97 , 98 , 99 , 100 , 101)
22. court's findings on procedural irregularities. (Para 102 , 103 , 104 , 105 , 106)
23. court's conclusions on the award's reasoning. (Para 107 , 108 , 109 , 110 , 111)
24. legal basis for enforcement application. (Para 112 , 113 , 114)
25. final conclusions and orders. (Para 115 , 116)
26. costs awarded. (Para 117)

Aliza Sulaiman J:

Introduction

[1] Two applications were heard together in this Court with the consent of the parties, namely-

(a) the application by Kebabangan Petroleum Operating Company Sdn Bhd ('KPOC') in Originating Summons ('O.S.') No. WA- 24C(ARB)-51 -09/2021 for the Final Award dated 23 July 2021 by the Tribunal comprising of the learned Arbitrators, Dato' Anantham Kasinather, Mr Alan J Thambiayah and Mr Chelva R Rajah SC ('Award') in an arbitration between KPOC and Malaysia Marine And Heavy Engineering Sdn Bhd ('MMHE') be recognised as binding and be enforced by entry as a judgment against MMHE pursuant to s 38 of the Arbitration Act 2005 [Act 646] (' AA 2005') ('Enforcement Application'); and

(b) the application by MMHE in O.S. No. WA-24C(ARB)-52-09/2021 to set aside the Award in part or in full pursuant to subparas 37(1)(a)(iv), 37(1)(a)(v) and/ or 37(1)(a)(vi); subparas 37(1)(b)(ii), 37(2)(b)(i) and/ or 37(2)(b)(ii); and/ or sub-section 37(3) AA 2005 and/ or under the inherent jurisdiction of the Court ('Setting Aside Application').

[2] The Court, after having given utmost consideration to the cause papers and the oral and written submissions by the parties, and upon the withdrawal of prayer 3 in the Setting Aside Application on the date of decision (with MMHE reserving its right to pursue the relief for a consequential order that KPOC reimburses MMHE forthwith all costs and expenses in respect of the arbitration in the sum of RM6,829,097.12 or in a sum to be assessed by the Court, by way of another action), had allowed prayers 1 and 2 in the Setting Aside Application pursuant to subparas 37(1)(b)(ii), 37(2)(b)(ii) and 37(1)(a)(vi) AA 2005 with costs of RM30,000.00, and dismissed the Enforcement Application with costs of RM10,000.00.

[3] These are my full grounds of judgment in respect of the said decision.

The Cause Papers

[4] The cause papers in relation to the applications are as follows:

The Enforcement Application

(a) KPOC's O.S. dated 29 September 2021 (encl 1);

(b) KPOC's Affidavit in Support ('AIS') affirmed by its Legal Manager, Sim Pek Ling on 28 September 2021 (encls 2 - 7)

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2023 MarsdenLR 2121

HIGH COURT MALAYA KUALA LUMPURKEBABANGAN PETROLEUM OPERATING COMPANY SDN BHD – AppellantVersusMALAYSIA MARINE AND HEAVY ENGINEERING SDN BHD & AN.... – Respondent[Originating Summons No: WA-24C(ARB)-51-09/2021 & WA-24C(ARB)-52-09/2021]

An arbitral award may be set aside if the tribunal fails to address all material issues raised by the parties, constituting a breach of natural justice.

Cases Referred (3)

HIGH COURT MALAYA KUALA LUMPUR
KEBABANGAN PETROLEUM OPERATING COMPANY SDN BHD – Appellant
Versus
MALAYSIA MARINE AND HEAVY ENGINEERING SDN BHD & AN.... – Respondent
[Originating Summons No: WA-24C(ARB)-51-09/2021 & WA-24C(ARB)-52-09/2021]