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2023 MarsdenLR 1531

COURT OF APPEAL PUTRAJAYA
JSB – Appellant
Versus
ACSB – Respondent
[Civil Appeal No: P-02(IM)(NCVC)-2008-10-2022]

Petitioner Advocates:Mahinder Singh Dulku,Abdul Fareed Abdul Gafoor,Farah Nabilah Shaharuddin ,Respondent Advocate: Ong Yu Shin,Lim Wooi Ying

A party's refusal to pay arbitration fees renders the arbitration agreement inoperative, allowing the other party to pursue litigation.

Headnote:(A) Arbitration Act 2005 [Act 646] - Section 10 - AIAC Arbitration Rules 2018 - Termination of arbitration proceedings due to non-payment of fees - The refusal of the defendant to pay its share of the AIAC's Deposit rendered the arbitration agreement inoperative, allowing the claimant to proceed with litigation in court. (Paras 100, 101)

(B) Jurisdiction - Invocation of Court's jurisdiction - The defendant's application to strike out the plaintiff's claim amounted to taking a step in the proceedings, thus waiving its right to arbitration. (Paras 18, 100)

(C) Legal principles - A party cannot seek to strike out a claim while simultaneously requesting a stay of proceedings pending arbitration, as this constitutes an invocation of the Court's jurisdiction. (Paras 10, 100)

Facts of the case:
The claimant filed a claim in the High Court after the defendant refused to pay its share of the AIAC's Deposit, leading to the termination of arbitration proceedings. The defendant contested the High Court's jurisdiction, claiming the arbitration agreement was still valid.

Findings of Court:
The High Court erred in granting a stay of proceedings; the arbitration agreement was rendered inoperative due to the defendant's refusal to pay.

Issues: Whether the defendant's refusal to pay fees affected the validity of the arbitration agreement and the implications of invoking the Court's jurisdiction.

Ratio Decidendi: The court held that the defendant's refusal to pay its share of the AIAC's Deposit constituted a waiver of its right to arbitration, allowing the claimant to pursue litigation.

Result: Appeal allowed, High Court's order set aside, costs awarded to the appellant.

Table of Content
1. arbitration agreement and payment obligations. (Para 1 , 2 , 3 , 4)
2. court's authority in arbitration disputes. (Para 5 , 6 , 11 , 12 , 13)
3. arguments against stay of proceedings. (Para 8 , 9 , 10)
4. process of striking out claims. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20)
5. implications of invoking court jurisdiction. (Para 21 , 22 , 23 , 24 , 25)
6. historical context of arbitration agreements. (Para 26 , 27 , 28 , 29 , 30)
7. consequences of non-payment in arbitration. (Para 37 , 38 , 40)
8. breach of arbitration rules. (Para 41 , 42 , 43 , 44 , 45)
9. waiver of arbitration rights. (Para 46 , 47 , 48 , 49 , 50)
10. judicial interpretation of arbitration agreements. (Para 51 , 52 , 53 , 54 , 55)
11. court's role in arbitration disputes. (Para 56 , 57 , 58 , 59)
12. arbitration rules compliance. (Para 60 , 61 , 62)
13. judicial discretion in arbitration matters. (Para 63 , 64 , 65 , 66 , 67)
14. material breach in arbitration. (Para 68 , 69 , 70 , 71)
15. implications of non-compliance. (Para 72 , 73 , 74)
16. estoppel in arbitration proceedings. (Para 75 , 76 , 77)
17. court proceedings vs arbitration. (Para 78 , 79 , 80)
18. futility of court stay in arbitration. (Para 81 , 82 , 83)
19. consequences of non-payment on arbitration. (Para 84 , 85 , 86)
20. estoppel's role in arbitration. (Para 87 , 88 , 89)
21. defendant's obligations in arbitration. (Para 90 , 91 , 92)
22. judicial efficiency in dispute resolution. (Para 93 , 94 , 95)
23. finality of court decisions. (Para 96 , 97 , 98)
24. conclusion on arbitration's operability. (Para 99 , 100 , 101)
25. court's order and costs awarded. (Para 102)

Lee Swee Seng JCA:

[1] An interesting problem has arisen in an arbitration which had proceeded at the preliminary stage of settling the pleadings and when the Asian International Arbitration Centre ("AIAC") gave notice to the parties for a further deposit of the arbitrator's fees and the administrative costs of AIAC ("AIAC's Deposit"). The respondent there, who also had a counterclaim, refused to pay its portion of the fees. The arbitrator then proceeded to terminate the arbitration after consultation with the Director of AIAC as provided for in the AIAC Arbitration Rules 2018 ("AIAC Arbitration Rules"). The claimant then proceeded to file its claim in the High Court.

[2] The defendant in the High Court objected on ground that the arbitration agreement is still subsisting and is not abrogated on ground of it not paying its portion of the AIAC's Deposit. According to the defendant, the recourse would be for the claimant to pay the defendant's equal share of the AIAC's Deposit to continue with the arbitration and to then ask for the Arbitrator to include in the final Award, the AIAC Deposit, paid on its behalf by the claimant.

[3] The defendant in the High Court by way of encl 6, applied to have the writ and statement of claim struck out under O 18 r 19(1)(a), (b), (c) and (d) of the Rules of Court 2012 ("ROC 2012"). Alternatively, the defendant prayed for a stay of the Court proceedings under s 10 Arbitration Act 2005 [Act 646] (" AA 2005") and for the matter to be referred to arbitration.

[4] The claimant, on the other hand, argued that non-payment of the AIAC Deposit as required under the rules of governing the arbitration, in this case the AIAC Arbitration Rules, would amount to breach of the arbitration agreement and as such the arbitrator is at liberty to terminate the arbitration and the claimant is entitled to then commence the proceedings in Court. Previously, the claimant had filed a suit in Court but withdrew it because of the defendant's insistence on the arbitration agreement.

At The High Court

[5] The High Court found that the non-payment of the AIAC's further deposit by the defendant did not render the arbitration agreement inoperative or incapable of being performed.

[6] The plaintiff as the claimant in the arbitration could pay the defendant's share of the AIAC's further deposit and recover the same from the defendant in the

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2023 MarsdenLR 1531

COURT OF APPEAL PUTRAJAYAJSB – AppellantVersusACSB – Respondent[Civil Appeal No: P-02(IM)(NCVC)-2008-10-2022]

A party's refusal to pay arbitration fees renders the arbitration agreement inoperative, allowing the other party to pursue litigation.

Cases Referred (6)

COURT OF APPEAL PUTRAJAYA
JSB – Appellant
Versus
ACSB – Respondent
[Civil Appeal No: P-02(IM)(NCVC)-2008-10-2022]