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2021 MarsdenLR 3742
HIGH COURT MALAYA KUALA LUMPUR
GJ CONSULTANCY SDN BHD – Appellant
Versus
GAN TECK LIM – Respondent
[Civil Suit No: WA-27NCC-97-10/2020]
A Letter of Indemnity can be enforced independently of its backed obligations, distinguishing it from a guarantee, thereby precluding a stay of proceeding for arbitration.
Headnote:(A) Arbitration Act 2005 – Section 10 – Court proceedings regarding a Letter of Indemnity and Guarantee – Defendant sought to stay proceedings for arbitration; however, the Court found that the Letter was an indemnity, allowing the enforcement without establishing the principal's liability first (Paras 14, 29-44).
(B) Rules of Court 2012 – Order 18 Rule 19 – strikability of pleadings – Application to strike out claims was dismissed as the Plaintiff's claim was valid under the indemnity (Paras 14, 44).
Facts of the case: The Plaintiff entered into a shipping arrangement with Detik Timur and claimed for non-payment based on an indemnity provided by the Defendant. Findings of the Court: The Court ruled that the Letter of Indemnity and Guarantee is enforceable independently of any obligation from the principal party, Detik Timur.
Issues: Definition and nature of the Letter of Indemnity and Guarantee versus a guarantee; whether the claim against the Defendant required prior determination against the principal.
Ratio Decidendi: The Court established that an indemnity can be enforced independently, and thus, a stay of proceedings for arbitration was inappropriate.
Result: Defendant's application dismissed.
JUDGMENT
[1] This judgment concerns an application by the Defendant, Gan Teck Lim, against the Plaintiff, GJ Consultancy Sdn Bhd for a stay of proceedings pending arbitration in Singapore (encl 9) and the striking out of the Plaintiff's Writ and Statement of Claim. This arose from a dispute relating to an alleged breach by the Defendant of an indemnity given by the Defendant to the Plaintiff under a Letter of Guarantee and Indemnity dated 29 December 2019.
[2] At the hearing of this application I dismissed encl 9 with costs on 11 March 2021. This judgment contains the full grounds for my decision.
Defendant's Application
[3] In this application, the Defendant prayed for the following:
a) The Plaintiff's Writ and Statement of Claim dated 19 November 2020 to be struck out pursuant to, inter alia, O 18 r 19 (b), (c) and / or (d) Rules of 2012 (" ROC 2012"); or
b) These proceedings to be stayed and this matter to be referred to arbitration pursuant to, inter alia, s 10(1) and /or s 10(4) Arbitration Act 2005 .
Background Facts
[4] On or about 4 December 2019, the Plaintiff entered into a shipping arrangement with a company named Detik Timur Sdn Bhd ("Detik Timur") based on a Fixture Note dated 4 December 2019 ("the Fixture Note") for the purpose of chartering one merchant vessel, MV Antero, to transport a shipment of sand river ("the Cargo") at the shipowner's option from Pekan Port, Pahang, Malaysia to Nansha Port, Guangzhou, China.
[5] For the purpose of loading the Cargo, the laydays and the cancelling date ("laycan") were fixed between 9 December 2019 and 15 December 2019 ("the first laycan"). Subsequently, when the first laycan was approaching at that time, Detik Timur informed the Plaintiff that it was not able to meet its obligation for the first laycan during the period from 9 December 2019 to 15 December 2019. Detik Timur and the Plaintiff agreed for the Plaintiff to defer the laycan to the period between 14 December 2019 and 17 December 2019 ("the second laycan") with a new nominated vessel, MV Dubai Knight. Detik Timur did not proceed to load the Cargo during the second laycan period and the Fixture Note was cancelled at Detik Timur's option.
[6] Subsequently or about 17 December 2019 by way of an e-mail exchange, at the request of Detik Timur, the Plaintiff once again agreed to fix a third laycan for the period between 28 December 2019 and 31 December 2019 ("the third laycan"). The Plaintiff dan Detik Timur also mutually agreed that for the purpose of the third laycan, all other terms in the Fixture Note will remain the same and in the event there is any postponement or cancellation of the shipment by Detik Timur, the total deposit sum of USD154,000.00 shall be forfeited by the Plaintiff and will not be refunded.
[7] To provide a vessel for Detik Timur's shipment, the Plaintiff chartered the vessel MV Nozomi. By way of Detik Timur's letter dated 27 December 2019, the arrangement of the third laycan process was communicated by Detik Timur to the Plaintiff. In relation to the third laycan process, the Defendant who is the Executive Chairman of Detik Timur, signed a personal guarantee and indemnity letter dated 29 December 2019 ("the Letter of Indemnity and Guarantee") in favour of the Plaintiff in respect of the Fixture Note.
[8] The vessel MV Nozomi was ready at Pekan Port from 28 December 2019 to receive the Cargo but the Plaintiff was asked by Detik Timur to defer the loading pending clearance from the relevant authorities. As at 4 January 2020 no further instructions were given by Detik Timur to the Plaintiff either to shift the vessel MV Nozomi or to start the cargo loading operation. On or about 9 January 2020, Detik Timur issued a letter of cancellation dated 8 January 2020 to cancel the Fixture Note. In the letter, Detik Timur informed the Plaintiff that they will accept all responsibilities as per the Fixture Note and requested the Plaintiff to issue an invoice to Detik Timur for payment.
[9] Pu
