Arbitration clauses using 'may' imply optional arbitration, and subsequent jurisdiction agreements can override prior arbitration intentions, establishing litigation as the preferred dispute resolution method.

Headnote:(A) Arbitration Act 2005 - Section 10 - Dispute resolution clause - Appeals by Port Klang Authority against the High Court's stay of proceedings in favor of arbitration invoked by Kuala Dimensi Sdn Bhd - The arbitration clause, employing 'may', is permissive, suggesting non-mandatory reference to arbitration - The subsequent agreements indicate a shift towards litigation and submission to court jurisdiction - High Court's stay was deemed erroneous. (Paras 1, 10, 30-33)

(B) Estoppel - Parties bound by previous assumptions regarding dispute resolution - Previous intent to arbitrate considered compromised by later agreements favoring litigation. (Paras 31-32)

Facts of the case:
Port Klang Authority appealed against a High Court decision granting a stay of proceedings pending arbitration following disputes in a series of agreements with Kuala Dimensi Sdn Bhd.

Findings of Court:
The court found that the parties intended to resolve disputes through litigation, as the arbitration clause was effectively abandoned.

Issues: The court examined whether the parties had intended to abandon arbitration in favor of litigation and if the arbitration clause was rendered inoperative by subsequent agreements.

Ratio Decidendi: The framing of 'may' in the arbitration clause was indicative of its non-mandatory nature, and the subsequent clauses in the supplementary agreements signified a clear intent to litigate.

Result: Appeal allowed; stay set aside.

Low Hop Bing JCA:

Appeals

[1] In both these appeals, the relevant clauses (governing the forum for dispute resolution) became the bone of contention in the Shah Alam High Court. On the application of the defendant, Kuala Dimensi Sdn Bhd (KDSB), the High Court invoked s 10 of the Arbitration Act 2005 ("s. 10") and granted a stay of proceedings in High Court Writ of Summons No: 22-1411-2009 and Originating Summons No: MT2-24-2186-2009 (collectively, "the High Court Actions") pending reference to arbitration. Being dissatisfied, the plaintiff, Port Klang Authority ("PKA"), lodged these appeals against the stay.

Factual Background

[2] The parties had entered into a total of six agreements viz:-

(1) Principal Development Agreement dated 27 February 2003 ("DA1");

(2) Supplemental Agreement dated 26 May 2003 ("DA2");

(3) Supplemental Agreement dated 27 May 2004 ("DA3");

(4) Supplemental Agreement for Additional Development Works dated 30 November 2005;

(5) Supplemental Agreement for Additional Development Works dated 26 April 2006; and

(6) Supplemental Agreement for New Development Works dated 26 April 2006.

[3] The relevant clauses (contained in DA1, DA2 and DA3) merit reproduction as follows:-

(1) DA1 cl 11.1

Settlement of Disputes

If any dispute or difference of any kind whatsoever shall arise between the Parties herein arising out of or in connection with this Agreement (either during the progress or after the completion or abandonment of the Development Works) it shall if possible be resolved amicably between the Parties. Any such dispute or difference which cannot be resolved amicably may be referred to arbitration in accordance with this Agreement. (emphasis added).

(2) DA2 cls 2.3 and 2.4

2.3 Subject only to the variations and modification herein contained and such alterations, if any, as may be necessary to make the Principal Agreement consistent with this Supplemental Agreement, the Principal Agreement remains in full force and effect and shall be read and construed and be enforceable as if the terms of this Supplemental Agreement were incorporated therein. In the event there is any conflict in the interpretation of the terms of the Principal Agreement and this Agreement, the interpretation of the terms of this Supplemental Agreement shall prevail.

2.4 This Supplemental Agreement shall be governed and construed in all respects in accordance with the laws of Malaysia and the parties hereto hereby submit to the jurisdiction of the Courts of Malaysia in all matters connected with the obligation and liabilities of the parties under this Supplemental Agreement. (Emphasis added)

(3) DA3 cls 4.3 and 4.4

4.3 Subject only to the variations and modification herein contained and such alterations, if any, as may be necessary to make the Principal Agreement consistent with this Supplemental Agreement, the Principal Agreement remains in full force and effect and shall be read and construed and be enforceable as if the terms of this Supplemental Agreement were incorporated therein. In the event there is any conflict in the interpretation of the terms of the Principal Agreement and this Agreement, the interpretation of the terms of this Supplemental Agreement shall prevail.

4.4 This Supplemental Agreement shall be governed and construed in all respects in accordance with the laws of Malaysia and the parties hereto hereby submit to the jurisdiction of the Courts of Malaysia in all matters connected with the obligation and liabilities of the parties under this Supplemental Agreement. (Emphasis added)

[4] Subsequently, pursuant to the aforesaid six agreements, disputes arose between the parties, resulting in the commencement of the High Court Actions by PKA against KDSB.

[5] After the commencement of the High Court Actions, KDSB vide letter dated 27 October 2009 informed PKA of its (KDSB's) intention to have their disputes referred to arbitration.

[6] On 29 October 2009, KDSB applied to the High Court to stay the proceedings in the High Court actions pending refere

Click Here to Read the rest of this document

2010 MarsdenLR 557

COURT OF APPEAL PUTRAJAYALEMBAGA PELABUHAN KELANG – AppellantVersusKUALA DIMENSI SDN BHD & ANOTHER APPEAL – Respondent[Civil Appeal Nos: B-02(IM)-1746-2010 & B-02(IM)-1747-2010]

Arbitration clauses using 'may' imply optional arbitration, and subsequent jurisdiction agreements can override prior arbitration intentions, establishing litigation as the preferred dispute resolution method.

Cases Referred (1)

COURT OF APPEAL PUTRAJAYA
LEMBAGA PELABUHAN KELANG – Appellant
Versus
KUALA DIMENSI SDN BHD & ANOTHER APPEAL – Respondent
[Civil Appeal Nos: B-02(IM)-1746-2010 & B-02(IM)-1747-2010]