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2024 MarsdenLR 2514
FEDERAL COURT PUTRAJAYA
HASNAH MOHAMMED HASHIM, FCJ
TELEKOM MALAYSIA BERHAD – Appellant
Versus
OBNET SDN BHD – Respondent
[Civil Appeal No: 02(f)-97-11-2022(W)]
An oral decision by an arbitral tribunal on liability is not a valid award under the Arbitration Act 2005; it must be in writing to be enforceable.
Headnote:(A) Arbitration Act 2005 - Sections 2 and 33 - Oral pronouncement by an arbitral tribunal on liability - The court ruled that an oral decision on liability does not constitute a valid award as per the AA 2005 and must be in writing to be enforceable - The court set aside the decisions of the High Court and Court of Appeal, confirming the necessity of a written award before proceeding with quantum. (Paras 44, 54)
(B) Bifurcation of proceedings - The court clarified that bifurcation does not exempt the arbitrator from the requirement to publish a written award on liability before moving to the assessment of damages. (Paras 20, 54)
Facts of the case:
The dispute arose from the SELNET Project, where Obnet claimed that Telekom unlawfully interfered with confidential information leading to contract termination. The arbitrator bifurcated the proceedings and delivered an oral decision on liability without publishing a written award. (Paras 3-6)
Findings of Court:
The oral decision on liability was deemed invalid as it did not comply with the requirements of the AA 2005. The arbitrator must issue a written award on liability before assessing damages. (Paras 54, 56)
Issues: The main issues were whether an oral decision on liability constitutes an award under the AA 2005 and the implications of bifurcation on the requirement for a written award. (Paras 12, 54)
Ratio Decidendi: The court held that an oral pronouncement on liability does not satisfy the statutory requirements for an award under the AA 2005, which mandates that awards must be in writing and duly signed. (Paras 33, 54)
Result: Appeal allowed, and the oral decision declared invalid.
JUDGMENT
[1] The appeal raised questions about the significance and the enforceability of oral pronouncements by an arbitral tribunal in bifurcated arbitration proceedings governed by the Arbitration Act 2005 ( AA 2005) and KLRCA Arbitration Rules, now known as the AIAC Arbitration Rules 2021 (Rules 2021). In particular, whether an oral decision by an Arbitral Tribunal on liability being a decision on the substance of a dispute, is a valid decision within the meaning of the 2005. We heard oral submissions by all learned counsel representing the respective parties and at the end of those submissions we indicated that we needed time to consider the respective submissions. We have now reached our decision and what follows below are our deliberations on the issues raised and our reasons as to why we have so decided.
[2] On 3 November 2022, Telekom Malaysia Berhad (Telekom) obtained leave to appeal on the following question of law:
Where an arbitral tribunal directs proceedings be bifurcated (with liability to be heard and decided first followed by determination of quantum, if liability is established), whether an oral pronouncement by the arbitral tribunal on liability is sufficient to (i) amount to a decision on liability and (ii) entitle the arbitral tribunal and parties to proceed with a determination of quantum, in a case where the arbitration is governed by:
(a) the Arbitration Act 2005 ( AA 2005); and
(b) the KLRCA Arbitration Rules (AIAC Arbitration Rules 2021).
Factual Background
[3] In 2003, the Selangor State Government (the State Government) awarded a project to the Respondent, Obnet Sdn Bhd (Obnet), to connect all State Government departments, statutory bodies, municipals/local authorities, Government-linked companies and Government agencies via a high-speed broadband network (SELNET Project). Two agreements were executed between Obnet and the State Government, that is, the Selangor Broadband Internet Access Agreement dated 10 October 2003 and the Subscription Agreement dated 23 September 2005 (SELNET Agreements).
[4] Obnet appointed Telekom, the Appellant in this appeal, as an independent contractor to design and build a network infrastructure for the SELNET Project in 2007. This resulted in a Metro Ethernet Services Agreement (Metro-E Agreement) executed between Obnet and Telekom on 19 April 2007. The Metro-E Agreement contains an arbitration agreement clause stipulating that any disputes arising out of or in connection with the Metro-E Agreement shall be referred to arbitration under the KLRCA Rules.
[5] Unfortunately, a dispute arose between Obnet and the State Government in 2008 regarding the provision of sites under the SELNET Project which resulted in the termination of the SELNET Agreements on 10 September 2009. The Metro-E Agreement with Telekom was also terminated on 30 September 2009.
[6] Unhappy with the termination, Obnet commenced arbitration proceedings against Telekom alleging, inter alia, that Telekom had unlawfully interfered with and used confidential information obtained from the SELNET Project to provide its own network services to the State Government. This ultimately resulted in the State Government terminating the SELNET Agreements. Telekom counterclaimed and claimed for the sums due and owing by Obnet under the Metro-E Agreement.
[7] Parties referred the disputes to arbitration and Dato Hj Azmel bin Haji Maamor, a retired Judge, was appointed as the arbitrator (the Arbitrator) to resolve the dispute between the parties. The Arbitrator decided to bifurcate the arbitration proceedings, that is, firstly, the determination on the issue of liability, and thereafter once liability has been established, he will hear and determine the issue of damages in respect of the claim and/or the counterclaim. The mode of the hearing was reiterated by the Arbitrator during the hearing on 25 October 2016 when evidence in respect of liability was heard.
[8] Almost four years after the arbitration com
