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2025 MarsdenLR 2925
COURT OF APPEAL PUTRAJAYA
ENG HAN ENGINEERING SDN BHD – Appellant
Versus
TOSHIBA ELEVATOR (M) SDN BHD & OTHER APPEALS – Respondent
[Civil Appeal Nos: W-02(C)(A)-1082-07-2023 W-02(C)(A)-1083-07-2023 & W-02(IM)(C)-1084-07-2023]
The court ruled that an arbitrator's reliance on new matters without notifying the parties constitutes a breach of natural justice, justifying the setting aside of the award.
Headnote:(A) Arbitration Act 2005 - Section 8, 21(3)(b), 33(3), 36(1), 37(1)(b)(ii), 37(2)(b)(ii) - Dispute over delays in construction project - Appellant's claims for liquidated damages dismissed by arbitrator while respondent's counterclaim allowed - High Court upheld arbitrator's award - Appellant appealed claiming breach of natural justice due to arbitrator's reliance on new matters not presented during arbitration - Court found arbitrator breached natural justice by not allowing parties to address new matters, leading to setting aside of the award. (Paras 34, 35, 48)
(B) Natural Justice - Requirement for parties to be given opportunity to address all matters before the arbitrator - Arbitrator's reliance on unarticulated expertise without notice to parties constituted a breach. (Paras 34, 36)
(C) Public Policy - Court's discretion in setting aside an award based on public policy considerations - Award set aside due to serious breach of natural justice. (Paras 30, 31, 48)
Facts of the case:
The Appellant was appointed as the main contractor for a construction project and engaged the Respondent as a subcontractor. Delays occurred, leading to disputes and arbitration, where the Appellant's claims were dismissed, and the Respondent's counterclaim was allowed. The Appellant challenged the arbitrator's award in the High Court, which was upheld, leading to further appeals.
Findings of Court:
The Court found that the arbitrator's failure to provide notice regarding new matters constituted a breach of natural justice, warranting the setting aside of the award.
Issues: The primary issues were whether the arbitrator breached natural justice by relying on new matters without giving notice and whether the award conflicted with public policy.
Ratio Decidendi: The Court ruled that the arbitrator's failure to notify the parties of new matters before making the award constituted a serious breach of natural justice, justifying the setting aside of the award.
Result: Appeals allowed; the award set aside.
| Table of Content |
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| 1. factual background of the case (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
A. Background
[1] Capital Avenue Development Sdn Bhd (Employer) had appointed the appellant company (Appellant) as the replacement main contractor (Replacement Main Contractor) for a project known as "Cadangan Pembinaan 2 Blok... di atas Lot 37,... Sembulan, Jalan Pantai Baru, Kota Kinabalu, Sabah (Sutera Avenue)" (Project).
[2] Prior to the Employer's appointment of the Appellant as the Replacement Main Contractor, the respondent company (Respondent) had already been appointed as a nominated subcontractor for, among others, the supply, delivery, installation, testing, commissioning and maintenance of lift and escalator services in the Project (Sub-Contract Works).
[3] The Sub-Contract Works were originally divided into two sections [2 Original Sections (Sub-Contract Works)], namely, "OC1" (Block A of the Project) [Works (OC1)] and "OC2" (Block B and the Pedestrian Mall of the Project) [Works (OC2)].
[4] By way of a "Letter of Acceptance" dated 13 July 2015 (LA), the Appellant formally appointed the Respondent for the Sub-Contract Works.
[5] The 2 Original Sections (Sub-Contract Works) could not be completed within the agreed time periods [Delay (Works)].
[6] There was a dispute between the Appellant and Respondent regarding the causes for the Delay (Works) [Causes (Delay)].
[7] In view of the Delay (Works), the Project's architect (Architect) issued two "Certificates of Non-Completion" (CNCs) to the Appellant with regard to the 2 Original Sections (Sub-Contract Works) {Architect's 2 CNCs [2 Original Sections (Sub-Contract Works)]}. Consequently, the Appellant also issued two CNCs to the Respondent for the non-completion of the 2 Original Sections (Sub-Contract Works) {Appellant's 2 CNCs [2 Original Sections (Sub-Contract Works)]}.
[8] The Appellant applied for an extension of time (EOT) from the Architect to complete the 2 Original Sections (Sub-Contract Works). By way of a letter dated 9 August 2017, the Architect granted an EOT for the Appellant to complete the 2 Original Sections (Sub-Contract Works) by 12 June 2017.
[9] The Respondent did not apply for an EOT to complete the 2 Original Sections (Sub-Contract Works).
[10] The Employer and Appellant entered into a "Supplementary Agreement' dated 28 June 2017 [Supplementary Agreement (Employer-Appellant)]. According to the Supplementary Agreement (Employer-Appellant), among others-
(1) instead of the 2 Original Sections (Sub-Contract Works), the SubContract Works were divided into five sections [5 New Sections (Sub-Contract Works)], namely OC1, OC2A, OC2B, OC3 and OC4 ["Works (OC1)", "Works (OC2A)", "Works (OC2B)", "Works (OC3)" and "Works (OC4)"]; and
(2) the new completion dates (New Completion Dates) and "liquidated damages" (LD) for the 5 New Sections (Sub- Contract Works) were as follows-
[11] On 21 October 2017, the Appellant sent a draft supplementary agreement to the Respondent regarding the New Completion Dates and LD sums for the 5 New Sections (Sub-Contract Works) [Draft Supplementary Agreement (Appellant-Respondent)]
[12] The Respondent did not accept the Draft Supplementary Agreement (Appellant-Respondent) because, according to the Respondent-
(1) when the Respondent received the Draft Supplementary Agreement (Appellant-Respondent) on 21 October 2017-
(a) the completion date for the Works (OC1), Works (OC2A) and Works (OC2A), ie., 12 June 2017, had lapsed; and
(b) the New Completion Date for the Works (OC3) and Works (OC3), namely, 31 October 2017, would expire in 10 days [from the date of the Respondent's receipt of the Draft Supplementary Agreement (Appellant-Respondent)];
(2) it was "impossible" for the Respondent to meet the New Completion Date for Works (OC1), Works (OC2A) and Works (OC2A) because-
(a) permanent power supply to the development site (Site) was only made available on 29 May 2017; and
(b) the Respondent required three weeks per lift-
(i) to c
