Alauddin Mohd Sheriff JCA:

This appeal against the decision of the High Court Kuala Lumpur arises out of a building contract in PAM Form (exh. S1 in encl. 1). The contract was entered into between the respondent (plaintiff) as employer and the appellant (defendant) as the main contractor for a hotel and hotel apartment project in Port Dickson. The articles of agreement and conditions of contract are set out in exh. S1 to Sum Weng Kuan's affidavit of 8 September 1999. The conditions of contract contain an arbitration cl. 34(1), which states that all disputes shall be referred to arbitration (see p. 62 encl. 1).

On 10 March 1998, the appellant determined its employment as contractor pursuant to cl. 26(1)(a) without prejudice to its other remedies for non-payment of certified sums amounting to RM6,992,831.95. Then on 11 March 1998, the appellant served a statutory notice under s. 218 of the Companies Act on the respondent in respect of the certified sums of RM6,992,831.95. The respondent contested the validity of the appellant's termination notice by letter dated 12 March 1998 and urged the appellant to continue and complete the works. However, by a letter dated 8 April 1998 the respondent gave their own notice terminating the appellant's employment under cl. 25(1)(b) of the contract. Thereafter, by way of Kuala Lumpur High Court (Bahagian Dagang) OS. No. D2-24-129-98, the respondent took steps to restrain the appellant from bringing a winding-up petition based on the statutory demand. Finally, the learned judge in those proceedings found for the respondent on the basis that there were grounds for contesting liability as at the date of the statutory demand and issued the restraining order (see exh. S10).

Both before and after the first set of High Court proceedings, the respondent had always insisted that the arbitration clause should be honoured and all disputes referred to arbitration. This is evidenced by four letters written by the respondent to the appellant on various dates in 1998 (see exh. NLL 6, 7, 8, 10). By their letter dated 18 December 1998 the respondent's solicitors agreed to refer all issues to arbitration and proposed several names of arbitrators. Thereafter as the parties were unable to agree to the choice of an arbitrator, the appellant, at the respondent's suggestion, applied on 5 January 1999 to the Kuala Lumpur Regional Centre for Arbitration (KLRCA) for the appointment of an arbitrator pursuant to the arbitration clause. It must be emphasised that at this stage both parties were fully 'ad idem' that all disputes arising out of the contract should be dealt with by arbitration. However, the respondent had not signed the Letter of Acceptance of the arbitrator until now (see para. 15 encl. 1).

On 22 January 1999, the KLRCA appointed one Mr. Khoo Choong Keow as arbitrator and his first preliminary meeting was held on 30 March 1999. At this meeting a detailed 'case management' programme was mapped out by the arbitrator. There was absolutely no suggestion of any limitation on the arbitrator's authority or of any intention of referring matters back to court. The statement of claim (S/C) was filed by the appellant on 23 April 1999. In summary, the statement of claim raised the following issues:

a) A claim for RM8,799,995.77 in respect of architect's certificate of payment under certificates 14-19;

b) A claim for RM3,791,713.94 being the balance of work carried out by the defendant (appellant) but uncertified as at date of termination (including RM1,345,500 retention money);

c) A claim for extension of time (EOT) for package A up to 3 December 1997, or that the claimant had completed Package A within a reasonable time;

d) That the claimant is entitled to reasonable extension of time to Complete Package B;

e) Claim for reimbursement of RM808,000 liquidated damages (LAD) wrongfully deducted;

f) The sum of RM510,000 acceleration costs resulting from acceleration at plaintiff's (respondent's) request;

g) The sum