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2022 MarsdenLR 235
HIGH COURT MALAYA SHAH ALAM
HEW CHOONG JENG & ORS – Appellant
Versus
KOK LOW KAU – Respondent
[Civil Appeal No: BA-12ANCC-7-02-2022]
An arbitration clause remains enforceable even without a specified seat; the burden of proof lies with the opposing party to prove its invalidity.
Headnote:(A) Arbitration Act 2005 – Section 10 – Preliminary stay application pending arbitration – The Sessions Court's dismissal of the defendants' stay application was erroneous as the claim fell within the ambit of an enforceable arbitration agreement – The plaintiff opposed the stay without discharging the burden of proof regarding the arbitration clause's validity. (Paras 10, 42, 44)
(B) Law on Arbitration – The absence of a specified seat of arbitration in the arbitration clause does not render the clause null and void; the court must respect the contracting parties' agreement and avoid unnecessary alterations to the statutory provisions. (Paras 20, 34)
Facts of the case: The plaintiff made loans to the defendants under agreements with arbitration clauses. The Sessions Court dismissed the defendants' stay application, prompting defendants to appeal this decision.
Findings of Court: The appeal was allowed, and a stay pending arbitration was granted, highlighting the enforceability of arbitration agreements even when a seat is not specified. (Paras 3, 45)
Issues: Whether the arbitration clause was null and void due to the lack of a specified seat and if the claim fell under the arbitration agreement.
Ratio Decidendi: The law accepts that absent a specific seat, arbitration clauses can still be enforceable, and the burden of proof of the clause's invalidity lies with the party opposing the stay. (Paras 21, 34)
Result: Appeal allowed, stay pending arbitration granted.
JUDGMENT
Introduction
[1] The appellants/defendants and the respondent/plaintiff entered into an agreement with an arbitration clause.
[2] In a suit filed in the Sessions Court by the plaintiff in respect of claims under the agreement, the defendants applied for a stay pending arbitration under s 10 of the Arbitration Act 2005 . This stay application was dismissed by the Sessions Court.
[3] In the appeal by the defendants, this Court on 15 July 2022 allowed the appeal and granted a stay pending arbitration pursuant to s 10 of the Arbitration Act 2005 .
[4] Dissatisfied with the stay decision, the plaintiff has appealed to the Court of Appeal.
Relevant Terms Of Agreement And The Plaintiff's Claim Herein
[5] By Letter of Understanding dated 1 January 2016 signed between the plaintiff as the lender and the defendants (through their authorised representative) as borrowers, the plaintiff agreed to lent RM750,000.00 to the defendants for one year who in turn agreed to repay the following upon maturity either repayment of principal or repayment in kind:
"Repayment of Principal RM750,000 + 5% per annum for 1 year Repayment in kind: RM1,020,000 worth of Listed Vehicle's Ordinary Shares or Visiber Ltd (Cayman)'s Ordinary Shares Moratorium: The Ordinary Shares of the Listing Vehicle shall be subjected to moratorium of 6 months from the IPO Date as required by the regulators and Listing Vehicle"
[See Exh "ECJ-2" at p 58 of the Appeal Records]. The plaintiff admitted that he signed this Letter of Understanding dated 1 January 2016: see para 42 of the plaintiff's Affidavit-in-Reply [page 37 of the Appeal Records].
[6] By Letter of Understanding dated 1 June 2016 signed between the plaintiff as the lender and the defendants (through their authorised representative) as borrowers, it was agreed as follows:
"PREFERENCE SHARES IN 57 SOCIETY INTERNATIONAL LTD (hereinafter referred as "57" SOCIETY")
We refer to our letter of understanding dated 1 January 2016 between your good self and the five of us namely Dato' Hew Choong Jeng, Dato' Eng Chip Jin, Dato' Lai Suen Seng, Mr Kwan Hep Chuen and Mr Lee Chee Herng (herein collectively known as "Borrowers").
This letter of understanding sets out the terms and conditions upon which you have agreed to swap your initial investment of RM750,000.00 into the new subscription in 57 SOCIETY which is targeted to be listed on the OTCQB market in the United States of America via a Reverse Take Over exercise ("RTO").
This agreement shall supersede the above-mentioned letter of understanding. A new subscription agreement shall be signed at the same time as this letter of understanding between your good self and 57 SOCIETY to define the terms and conditions regarding your investment now worth USD300,000.00 in 57 SOCIETY.
A) PROVISIONS
Investment Amount RM750,000.00
New subscription amount USD300,000.00 worth of shares in 57 SOCIETY
Moratorium The Ordinary Shares of Listing Vehicle shall be subjected to moratorium of twelve (12) months from RTO Date as required by the regulators and Listing Vehicles
B) CONFIDENTIALITY
All parties as named in this letter of understanding acknowledge and agree that the information (including business secrets, business plans, business model, operation activities, financial information, technical information and other confidential matters) shall be kept secret and confidential. Neither party shall disclose or make public, any confidential information to a third party or otherwise make use of the confidential information without the written approval of the other party within five (5) years.
C) SETTLEMENT OF DISPUTES
This Agreement shall be governed and interpreted under the laws of Hong Kong SAR. In the event of any dispute, controversy or claim (collectively, "dispute" arising out of or relating to this Agreement, or the breach, termination or invalidity hereof, the Parties shall attempt in the first instance to resolve such dispute through friendly consultations. Any disputes fail to be so re
