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2023 MarsdenLR 920
COURT OF APPEAL (PUTRAJAYA)
LEE SWEE SENG, CHE MOHD RUZIMA GHAZALI, AZIZUL AZMI ADNAN, JJ
JSB – Plaintiff
Versus
ACSB – Defendant
RAYUAN SIVIL NO P-02(IM)(NCVC)-2008-10/2022
A party waives its right to arbitration if it invokes court jurisdiction by taking steps in court proceedings despite an existing arbitration agreement.
Headnote:(A) Arbitration Act 2005 - Section 10(1) - AIAC Arbitration Rules - Termination of arbitration - Refusal by defendant to pay portion of AIAC deposit did not render arbitration agreement inoperative - Plaintiff entitled to commence court proceedings upon defendant's breach - Court of Appeal found High Court erred in staying proceedings. (Paras 1, 4, 100)
(B) Waiver of arbitration rights - Conduct of filing application to strike out the claim constituted submission to court's jurisdiction, thus waiving right to arbitration. (Paras 17, 100)
Facts of the case:
The respondent refused to pay its share of the AIAC deposit, leading to the termination of arbitration by the arbitrator, prompting the claimant to file a suit in Court after previously withdrawing a suit on grounds of the arbitration agreement. (Paras 1-2)
Findings of Court:
Since the defendant's non-payment constituted a breach of the arbitration agreement, the arbitration became inoperative, allowing the claimant to pursue litigation. (Paras 100-101)
Issues: The court addressed whether non-payment of costs affects the validity of the arbitration agreement and whether court proceedings should be stayed. (Paras 81, 100)
Ratio Decidendi: The refusal to comply with AIAC Arbitration Rules by not paying the deposit resulted in rendering the arbitration agreement inoperative, and the defendant's application to strike out the claim constituted a submission to the court. (Paras 100)
Result: Appeal allowed, order of the High Court set aside, and costs awarded to the appellant. (Paras 102)
| Table of Content |
|---|
| 1. issue of non-payment leading to arbitration termination. (Para 1) |
| 2. arguments regarding obligation to pay fees. (Para 2 , 4) |
| 3. high court ruled arbitration agreement intact despite non-payment. (Para 5 , 6) |
| 4. discussion of court's duty to stay proceedings under arbitration. (Para 8 , 9 , 10 , 11 , 12 , 13) |
| 5. defendant's actions invoked court jurisdiction and waived arbitration. (Para 18 , 20 , 22) |
| 6. consequences of not following arbitration rules. (Para 70 , 80) |
| 7. court confirmed arbitration agreement inoperative due to non-payment. (Para 100 , 101) |
| 8. court ordered proceedings to continue. (Para 102) |
[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 Enclosure 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 2012court proceedings under s 10Arbitration Act 2005
[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 final award of the arbitrator.
[7]The High Court, having found that principally the arbitration agreement had not become inoperative, ordered a stay of the High Court proceedings under s 10AA 2005Court, had appealed to the Court of Appeal. The parties shall be referred to as they were in the High Court i.e. as plaintiff and defendant respectively. In some instances, the defendant who refused to pay its portion of the AIAC’s Deposit would be referred to as the “refusing party.”
Before the Court of Appeal
[8]The plaintiff as appellant, argued before us that had the High Court followed the principle of law enunciated in Kebabangan Petroleum Operating Co Sdn Bhd v Mikuni (M) Sdn Bhd & Ors [2021] 1 MLJ 693Court would not have granted an unconditional stay of the Court proceedings, only to refer the matter to arbitration again.
[9]The plaintiff further argued before us that had the High Court followed the relevant principles of law as propounded by the full Bench of the Singapore Court of Appeal in L Capital Jones Ltd And Another v Maniach Pte Ltd [2017] SGCA 63; [2017] 1 SLR 312Court would have dismissed the defendant’s application for a stay of the
