The court ruled that a judgment on admission cannot proceed if there are pending arbitration proceedings and the admission is not clear, emphasizing the primacy of arbitration as per the Arbitration Act.

[1] This is an appeal against the decision of the learned Judicial Commissioner of the High COURT at Tawau, Sabah dated 14 June 2010 in giving judgment in favor of the 1st and 2nd Respondents (the 2nd and 3rd Plaintiffs at the COURT below) based on the Appellants' alleged admission of a disputed amount allegedly due to the 1st Defendant, a sub-contractor company in the present action. In the decision, the learned Judicial Commissioner had allowed the 1st and 2nd Respondents' application to enter judgment on admission of liabilities against the Appellants whereby the Appellants were ordered to pay a sum of RM2,056,093.90 with 8% interest to the Respondents.

[2] In this case, the 1st Defendant (Sedia Gaya Sdn Bhd) as the contractor had entered into an agreement with the municipal council to build a central market in Tawau, Sabah. The works were sub-contracted to the 1st Plaintiff (Big Team Construction Sdn Bhd) as a sub-contractor. The 1st & 2nd Appellants in this appeal, were directors in Sedia Gaya Sdn Bhd. They were respectively the 2nd and 3rd Defendants at the High COURT. The 1st and 2nd Respondents were directors in Big Team Construction Sdn Bhd and they were respectively the 2nd and 3rd Plaintiffs at the High COURT. For the purpose of this judgment, Big Team Construction shall be referred to as the 1st Plaintiff, the 1st and 2nd Respondents shall be referred to as the 2nd and 3rd Plaintiffs respectively; Sedia Gaya Sdn Bhd shall be referred to as the 1st Defendant, and the 1st and 2nd Appellants shall be referred to as the 2nd and 3rd Defendants respectively.

[3] There was a Deed of Indemnity (dated 12 May 1995) entered into between the parties whereby the 2nd and 3rd Defendants as directors of the 1st Defendant, were required to indemnify the directors of Big Team Construction Sdn Bhd (2nd and 3rd Plaintiffs in this action) for money due to the 1st Plaintiff (Big Team Construction) for works carried out on the central market. The Deed of Indemnity stipulated that the 2nd and 3rd Defendant were only liable to indemnify the 2nd and 3rd Plaintiffs if the sub-contractor (1st Plaintiff) did not breach the sub-contract agreement or the contractor (1st Defendant) did not dispute the sub-contractor's claims for payment.

[4] The Plaintiffs' claim against the Defendants is based on clause 2 of the Deed of Indemnity which reads:

"The First Party agree that they shall jointly and severally indemnify and keep indemnified the Second Party against the non-payment of any moneys due to the company for any part of the said works so long as the company shall not be in breach of any of the obligations under the said Agreement and/or the quantum of claims made by the company is not the subject or any dispute."

[5] The 1st Plaintiff completed the project and forwarded its final claim for payment; but the 1st Defendant disputed the claim on the ground that the 1st Plaintiff did not complete the works within time and had failed to carry out remedial works during the defective liability period as stipulated in the sub-contract agreement between them. The parties disagreed on the amount of payment due from the 1st Defendant to the 1st Plaintiff under the said agreement. In essence, the Defendants alleged that the 1st Plaintiffs had breached the sub-contract agreement and therefore the indemnity liability does not arise.

[6] The Plaintiffs sued the 1st Defendant for the said non-payment vide Civil Suit T(22) 49 of 2008 which was filed on 11 August 2008 claiming among others for RM3,191,473.74 which the Plaintiffs alleged to be the final claim under the said sub-contract agreement.

[7] The sub-contract agreemen