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2021 MarsdenLR 1806
HIGH COURT MALAYA KUALA LUMPUR
TANJUNG ENERGY SDN BHD – Appellant
Versus
TENAGA NASIONAL BERHAD – Respondent
[Originating Summons No: WA-24NCC(ARB)-21-04/2021]
The court has the power to grant injunctions under Section 11 of the Arbitration Act 2005 to maintain the status quo pending arbitration, balancing the rights of parties without displacing arbitrator's authority.
Headnote:(A) Arbitration Act 2005 – Section 11 – Originating Summons filed to restrain set-off of RM191,624,300.74 by TNB from payments due to Plaintiff pending arbitration – Plaintiff claims set-off breaches the 'no set-off' clause in PPA while TNB asserts entitlement under Clause 7.2(a)(i) – Court granted injunction to maintain status quo – Fusion of contractual rights and arbitration affirmed. (Paras 1-62)
(B) Court's powers under Section 11 AA for interim relief are limited; principal aim is to support arbitration without displacing arbitrator's power. (Paras 16-20)
(C) Status quo defined as pre-set-off state before TNB issued payment notice. (Paras 48-50)
(D) Balance of convenience favors injunction to prevent jeopardy of Plaintiff's operational viability against delays in arbitration proceedings. (Paras 52-54) (E) Order allowed with costs against TNB and condition to pursue arbitration without delay. (Paras 60-62)
JUDGMENT
Introduction
[1] This Originating Summons ("OS") was filed by the Plaintiff under s 11 Arbitration Act 2005 " AA ") against the Defendant ("TNB") seeking to restrain the TNB from setting off a sum of RM191,624,300.74 as Availability Target Payment ("ATP") against amounts payable by the TNB to the Plaintiff pursuant to a Power Purchase Agreement dated 2 December 2011 ("the PPA") made between the parties pending arbitration.
The Parties And Background
[2] The Plaintiff is an independent power producer (IPP). It owns and operates an electric generating facility known as Tanjung Bin Energy Power Plant or Tanjung Bin 4.
[3] TNB is the national electricity company which owns, maintains and operates the Malaysian Grid System, a high voltage electric power transmission network that s the whole of Peninsular Malaysia, transporting electricity in bulk to the whole of Peninsular Malaysia from power generators owned by TNB and IPPS. It purchases electricity from IPPs like the Plaintiff.
[4] The PPA amongst others govern the sale and purchase of electricity between the Plaintiff and TNB. Amongst others, pursuant to the PPA:
(i) TNB makes monthly payments to the Plaintiff on its invoices for the supply of electricity;
(ii) the Plaintiff is set an Availability Target of 91 % for each contract year and a Contracted Average Availability Target of 91% for each Contract Year block of 5 years (Appendix G, attachment D, PPA);
(iii) the 1st Contract year block was from 2016 to 2020;
(iv) in the event the Contracted Average Availability Target for a Contract year Block is below 91%, TNB is entitled to claim from the Plaintiff payment of an Availability Target Payment calculated based on a formula (Appendix G1.7(E), PPA).
[5] By an email dated 23 February 2021, TNB claimed the sum of RM191,624,300.74 as ATP payable by the Plaintiff for not meeting the Contracted Average Availability Target of 91 % for the 1st Contract Year Block from 2016-2020. TNB intends to deduct and set-off the Disputed Sum against amounts that are payable by TNB to the Plaintiff every month.
[6] The Plaintiff by a Notice of Dispute dated 30 March 2021 disputed that the ATP is payable to TNB. The Plaintiff stated that the Contracted Average Availability Target fell to 87.77% due to a parts recall and replacement exercise by an internationally renown supplier, General Electric, which affected the operations of Tanjung Bin 4. The Plaintiff further stated TNB should not penalise the Plaintiff for circumstances beyond the Plaintiff's control that neither the Plaintiff nor TNB had contemplated at the time of the PPA.
[7] The Notice of Dispute requested that TNB designate a representative in accordance with the dispute resolution provisions in clause 24.1(a) of the PPA to resolve the dispute. For the purpose in the Notice of Dispute, the Plaintiff had designated its representative.
[8] The dispute resolution clause housed in paragraph 24 of the PPA inter alia:
(i) defines "Dispute": Dispute shall mean any dispute, controversy, claim or difference of whatsoever nature and howsoever arising under, out of or in connection with this Agreement, including the breach, termination or validity thereof";
(ii) requires the parties to attempt to resolve a dispute through designated representatives (in the first instance) and then by senior officers of the respective parties;
(iii) provided that if any dispute cannot be resolved by the parties within 3 months (or such further period as the parties may agree) after it arises, or if either party fails to designate a representative or to participate in any attempt to resolve any dispute pursuant to clause 24.1, then such dispute shall be settled exclusively and finally by arbitration.
Plaintiff's Case
[9] The essence of the Plaintiff's case for an injunction pending arbitration can be summarised as follows:
(i) the Defendant is contractually bound not to deduct or set-off the Disputed Sum pending arbitration and this status quo ought to b
