In the case of ESA Jurutera Perunding Sdn Bhd (Appellant) v Universiti Malaya (Respondent) (Civil Appeal No. W-01 (IM) (C)-105-03/2023), the Court of Appeal has recently allowed the Appellant’s appeal against the High Court’s dismissal of the Appellant’s application for a stay of proceedings in the High Court, pursuant to Section 10(1) of the Arbitration Act 2005 (Stay Application).
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The Court of Appeal found that the learned High Court Judge (HCJ) committed an appealable error when her Ladyship failed to fully consider the facts of the case, especially the effect of the Appellant’s reservation of its rights in its cover letter of service.
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Brief Facts
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The Appellant was appointed by the Respondent as a civil and structural engineering consultant for a project known as “CADANGAN PEMBINAAN BANGUNAN TAMBAHAN DEWAN PEPERIKSAAN/DEWAN KULIAH, UNIVERSITI MALAYA”.
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Disputes arose between the parties. However, despite having an arbitration clause in the conditions of engagement (Contract) between the parties, the Respondent filed a Writ & Statement of Claim against the Appellant on 6.10.2022.
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The subsequent salient events have taken place between the parties:
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Stay Application at the High Court
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In dismissing the Stay Application, the learned HCJ found amongst others, as follows:
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(a) The Appellant’s requests for extension of time to file its defence clearly indicated an intention to defend the action and therefore, abandoning the right to arbitration.
(b) The Appellant ought to have filed the Stay Application immediately, if the Appellant did not intend to defend the action and desired to defend itself in the arbitration proceedings.
(c) The Appellant’s service of the Notice to Produce Documents Referred to in Pleadings without making any express or unequivocal reservation of its rights to refer the matter to arbitration amounts to taking a step in the proceedings.
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Court of Appeal’s decision
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The Court of Appeal disagreed with the High Court’s decision, and held amongst others, as follows:
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(a) The Appellant’s application for extension of time, and the service of the notice to produce are not evidence of the Appellant’s unequivocal intention to proceed with the writ action. The extension of time sought does not prove that the Appellant will eventually file its defence.
(b) The effect of the Appellant’s reservation of rights in its letter ought to have been considered. Even though the Appellant’s reservation of rights were put in a general term, it should be read to include the Appellant’s right to invoke the arbitration’s clause to refer the dispute to arbitration.
(c) From the facts, the Appellant has not irreversibly evinced its intention not to be bound by the arbitration agreement.
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KEY TAKEAWAYS – LEGAL PRACTITIONERS
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The Court of Appeal’s decision underscores the importance for one to expressly reserve its rights in its correspondence and/or documents and the said phrase ought not to be deemed as a redundant formality. As can be gleaned from the above case authority, the preservation of rights expressed by the Appellant carried significant legal weight. All stakeholders, including legal practitioners, are reminded to expressly safeguard their and/or their client’s rights and interests.
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However, it is crucial for parties and legal practitioners to thoroughly review the relevant contractual clauses early on. This ensures that all contractual procedural steps are properly followed, which can help prevent unnecessary litigation and associated costs. Understanding the contract from the outset allows legal practitioners to avoid costly delays and ensure efficient case progression.
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About the author
Lim Ren Wei
Senior Associate
Adjudication, Construction & Engineering Disputes
Harold & Lam Partnership
renwei@hlplawyers.com
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