A party must raise timely objections regarding arbitration proceedings; failure to do so leads to waiver of rights and cannot be used to set aside the arbitral award.

JUDGMENT

Hadhariah Syed Ismail JCA:

Introduction

[1] The appeal by the appellants (the plaintiffs) is against the decision of the High Court dated 14 February 2020, in dismissing the appellants' application to set aside the arbitral Final Award with costs of RM10,000.00.

[2] We heard the appellants' and the respondent's submissions on 29 September 2021 and unanimously dismissed the appeal.

Background Facts

[3] On 30 October 2004, the appellants together with one company named Syarikat Tanah dan Harta Sdn Bhd and the respondent (defendant) entered into a Privatisation Agreement (the Agreement) to develop a new General Operations Force (Pasukan Gerakan Am (PGA)) Complex in Sibu and Limbang with the contract sum of RM68,100,000.00 through land swap (the Project).

[4] The Agreement is conditional upon the respondent fulfilling the condition precedent stipulated in cl 2 of the Agreement which reads as follows:

"2. CONDITION PRECEDENT

2.1 This Agreement Is conditional upon the Company's fulfilment of the following conditions precedent:

(a) The Company shall prior to the commencement date acquired Project Land 2B at its own risks, costs and expenses; and

(b) Submit to the Government the appropriate documents evidencing to the satisfaction of the Government that the company has fulfilled the condition specified in clause

2.1 (a) above;

Within six (6) months from the Execution Date.

2.2....In the event the company fails to transfer Project Land 2B within the specified period or such other period as may be agreed in writing by the Government this Agreement may be terminated in accordance with clause 22.2."

[5] It is not in dispute that the respondent had failed to fulfil the condition precedent.

[6] Nine years later, the appellants terminated the Agreement through a letter dated 20 August 2013. The appellants informed the respondent that the Agreement is unenforceable and no longer binding on the parties as the respondent had failed to fulfil the condition precedent.

[7] The respondent disputed the termination and wrote a letter to the appellants dated 3 November 2014 requesting the formation of a Dispute Resolution Committee under cl 27 of the Agreement to settle the dispute through arbitration. However, the appellants through a letter dated 6 January 2015 rejected the request on reason that the Agreement was no longer effective and that all the clauses therein were no longer applicable and not binding on the parties.

[8] The procedure for appointing an arbitrator is specifically provided in cl 28.2 of the Agreement and it reads as follows:

"28.2 Any matter, dispute or claim referred to arbitration pursuant to cl 28.1 shall be referred to an arbitrator to be agreed by the relevant parties or, failing agreement, to be nominated on the application of any of the relevant parties by the Director of Regional Centre for Arbitration in Kuala Lumpur.."

[9] The respondent's solicitor then wrote a letter dated 12 December 2016 to the appellants to refer the dispute to arbitral tribunal and proposed En Ameir bin Hassan as sole arbitrator. There was no reply by the appellants to the said letter.

[10] Therefore, in default of parties' agreement on an arbitrator, the mechanics of cl 28.2 would require any party to make an application to the Director of AIAC for the nomination of the arbitrator.

[11] It is an undisputed fact that no reference was made to the KLRCA in respect of the nomination of an arbitrator.

[12] Instead, on 13 February 2017, the respondent filed Originating Summons No 24 NCVC-23-02/2017 at Kangar High Court, Perlis (Kangar 1st OS) applying for an order to refer the dispute to arbitral tribunal and to appoint En Ameir bin Hassan as sole arbitrator. The appellants did not file affidavit in reply. On 21 April 2017, the learned Judicial Commissioner (JC) allowed the respondent's application (Kangar 1st Order). The appellants did not appeal against the Kangar 1st Order.

[13] The 1st arbitral meeting was held on 15 August 2017 wherein the arbitrator fixed the