CHAPTER 1

INTRODUCTION

1.1 Introduction

Construction activities involve many parties like contractors, employers, architects, engineers, and developers1. Because of that, problems may occur such as like miscommunication, misunderstanding, etc, which later drag the parties into conflicts or disputes. If the problem goes in uncomfortable zone, it may cause serious problems such as delay in delivering projects, financial losses and endless dispute dilemmas.

Disputes in construction industry may be in the form of financial2, legal3 or any other forms. It is an important subject that requires attention of the industry players. Depending on the standard form used, under PWD 203A (Rev. 1/2010), once dispute occurs the first means of resolving it is through Superintending Officer

1 Nor Azmi Bin Bakhary (2003). Arbitration in Construction Industry. Universiti Teknologi Malaysia : Master of Construction Management 2 Mersing Construction and Engineering Sdn Bhd v Kejuruteraan Bintai Kindenko Sdn Bhd & Ors [2011] 3 MLJ 264; Lembaga Pelabuhan Kelang v Kuala Dimensi Sdn Bhd and another appeal [2011] 2 MLJ 606; Liew Yin Yin Construction Sdn Bhd v Tan Teck Seng (sued for and on behalf of Pertubuhan Penyokong-Penyokong Tokong Ra-Chiar Jelapang) [2010] 7 MLJ 826 3 Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 3 MLJ 656

2 (S.O.)4. If the dispute is not resolved at the contract administrator‟s level, such dispute shall be referred to arbitration5. There are many types of disputes resolution method available in construction contract such as arbitration, mediation, adjudication, negotiation and litigation6.

Almost all of the contract forms in Malaysia provide arbitration as disputes resolution7. These forms are IEM CE 1/89, CIDB (2000), PWD 203 (rev 1/2010) and PAM 2006. From the above only PAM 2006 and CIDB 2000 provide for a mediation as an option. However in the case of CIDB 2000, mediation is compulsory and disputing parties must attempt to resolve any disputes between them first by mediation before arbitration. Whereas in PAM 2006 provide the dispute resolution through mediation only an option8. The concept of arbitration is a resolution of conflict by submission of a dispute between two parties for a decision to third party of their own choice9. Arbitration is an alternative to litigation and as a method of conflict resolution10.

This alternative resolution must have an agreement to refer disputes to arbitration11. The agreement must be in writing for it to be a valid arbitration agreement12. Arbitration proceedings deemed to start on the date of claimant received notice to arbitration13. According to Abdul Malik Ishak J in Malaysian Newsprint Industries Sdn Bhd v Bechtel International, Inc & Anor14 (), “an agreement to arbitrate is like a contract and it must be clear and certain”. It will be construed to be void for uncertainty if its meaning is so

4 Clause 66 PWD 203 (Rev 1/2010) 5 Ibid 6 Nor Azmi Bin Bakhary (2003). Arbitration in Malaysia Construction Industry. Universiti Teknologi Malaysia : Master of Construction Management 7 Clause 55 for IEM. CE 1/89, Clause 34.5 for PAM 2006 , Clause 47.3 for CIDB (2000) and Clause 66 for PWD 203 (rev 1/2010) 8 Clause 34.5 for PAM 2006 and Clause 47.3 for CIDB (2000) 9 Haniz Zuraiha Zaharullil (2009). Enforcement and Challenging of Arbitration Award. Master Construction Contract Management 10 Vincent Powell, John Sims (1989), Construction Arbitration; A practical guide, at page 1 11 Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 3 MLJ 656 12 Arbitration Act 2005 Section 9(3) 13 Article 3 KLRCA Arbitration Rules (as revised in 2010) 14 [2008] 5 MLJ 254; through Tan Kok Cheng & Son Realty Co Sdn Bhd v Lim Ah Pat (t/a Juta Bena) [1995] 3 MLJ 273

3 ambiguous that it is incapable of being construed to give the agreement a certain degree of certainty.15 The insertion of arbitration clause in the standard forms of contract, in a properly executed contract, provides a valid arbitration agreement16.

In Contracts Act 195017; it is stated that agreement to restrain legal proceedings is void. Under explanation 1, referring dispute which may arise to arbitration agreement does not meant restrain legal proceedings. An arbitration agreement does not restrain or prohibit either one of the contracting parties from referring their disputes to the Court18. In certain circumstances, a contracting party may take a contra step by not referring the dispute to arbitrator but take it directs to court19. Pursuant to section 10 of the Arbitration Act 2005 or section 6 of the Arbitration Act 1952, the opposing party may apply for a stay of proceedings to court. The Court is served to set the discretion whether to continue the dispute in court or through arbitration20.

In dealing with a stay application, if the subject matter of the dispute is within the scope of the arbitration agreement, the Court may grant the stay21. If parties choose to determine for themselves that they will have domestic forum instead of resorting to court, the Court is to act upon such an agreement22. Court could exercise its discretion to stay and require a plaintiff to adhere to the obligation voluntarily undertaken to go to arbitration23. Court has discretion to give effect to the agreement for arbitration and need not do so if it thinks is better to do otherwise24. In making

15 Khutubul Zaman Bin Bukhari. Arbitration and Mediation in Malaysia. at page 2 16 D.A. Stephenson (1993). Arbitration Practice in Construction contract. 3rd Ed. 17 Section 29 18 Croudace v The London Borough of Lambeh (1986) (33 BLR 20) 19 Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 3 MLJ 656 20 Tommy CP Sze & Co v Li & Fung (Trading) Ltd & Ors [2003] 1 HKC 418 21 Susu Lembu Asli marketing Sdn Bhd v Dutch Lady Milk Industries Bhd [2004] 2 MLJ 230; Deutz Asia-Pacific (Pte) Ltd Champ parts & Equipment Sdn Bhd [2002] 6 MLJ 29; Sunway Damansara Sdn Bhd v Malaysia National Insurance Bhd & Anor [2008] 3 MLJ 872 22 Lord Selborne in Willesford v Watson (1873) LR 8 Ch 473; Lee Brothers Construction Co v The Teng Seng Realty Sdn bhd [1988] 1 MLJ 459 23 K.V.Padmanabha Rau (1997). Law of Arbitration (Cases and Commentaries). Kuala Lumpur Malaysia: International Law Book Services at page 60 24 Observation by Gopal Sri Ram JCA in Tan Kok Cheng & Son Realty Co Sdn Bhd v Lim Ah Pat (t/a Juta Bena) [1995] 3 MLJ 273; K.V.Padmanabha Rau (1997). Law of Arbitration (Cases and Commentaries). Kuala Lumpur Malaysia: International Law Book Services at page 63

4 decision in this matter, court is bound by the Arbitration Act 1952 and Arbitration Act 2005.

However, the party that applies for a stay must be very careful because, in the Arbitration Act 200525 it is mentioned that a stay will be granted if the party has not taken any other steps in the proceedings. Taking step in the court proceedings might disentitled parties in contract from stay application. The issue of “before taking any other steps in the proceedings” in the stay application for arbitration is not obsolete to be discussed, but giving the applicant-defendant a plenty space to success in the stay application26.

1.2 Problem Statement.

The Court has power to stay the proceedings if it is satisfied that there is sufficient reason that the matter should be referred to arbitration27. The Arbitration Act 1952 section 6 it provides a discretionary power to grant stay, while the Arbitration Act 2005 section 10 it provides an absolute mandatory power to grant a stay28. Basically, stay will not be granted if the applicant has taken steps in the proceedings. Arbitration Act 1952 section 6 and Arbitration Act 2005 section 10 highlight that a stay of proceedings pending arbitration will be granted if the applicant has not taken any other steps in the proceedings.

Parties entering appearance and files a defense is considered having taken steps in the proceedings within the meaning of Arbitration Act 1952 section 6 and

25 Section 10 and Arbitration Act 1952 Section 6 26 Sundra Rajoo , The Arbitration Act 2005 Perspective 27 Malaysia Government Officers‟ Co operative Housing Society Ltd v United Asia Investment Ltd & Ors [1972] 1 MLJ 113 28 Sundra Rajoo, The New Malaysia Arbitration Regime 2005

5 Arbitration Act 2005 section 10. He then is precluded from taking advantage of the remedy of arbitration29. Taking step in the proceedings without in any manner, questioning the jurisdiction of the Court to try the main action, would amount to waiver of the rights of the parties to go to arbitration30.

Arbitration Act 1952 section 6 provides that the applicant-defendant should apply for a stay before taking any step in the proceedings. According to the Peh Swee Chin J (as he then was)31 OCJ , “the applicant should apply for a stay before taking any step in the proceedings after appearance”. The wording in Arbitration Act 1952 of section 6 regards this condition as in pari material with the corresponding section 4(1) of the English Act of 1950 except for the words before a party has delivered “any pleadings” which appear in the English legislation but not in the Arbitration Act 1952 section 632 and Arbitration Act 2005 section 10.

Hold with the Act and decided cases, entering appearance in arbitration does not the same as entering appearance in litigation which as per the Rules of High Court 1980, it‟s a mandatory procedural step to be taken33. In the arbitration, entering appearance does not amount to taken „step in the proceedings‟34. Basically “taking step” in the proceedings is serving pleading35.

The expression „steps in the proceedings‟ being general in terms has given rise to a number of claims and contentions attempting to bring in various aspects of procedure into its fold so as to achieve the rejection of the applications for stay. Stay will not be granted if the applicant has taken steps in the proceedings after entering

29 Mohtar Abdullah FCJ; Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625 30 Thamesa Design Sdn Bhd Ors v Hotels Sdn Bhd [1993] 3 MLJ 25 31 Lee Brothers Construction Co v The Teng Seng Realty Sdb Bhd [1988] 1 MLJ 459 32 Sim Hiang Kiaw & Ors v Lee Hoi Kim Construction Co [1986] 1 MLJ 347 33 Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625 34 Ibid 35 Ibid

6 appearance in the court proceedings. The applicant must unequivocally elect to refer the matter to arbitration36.

1.3 Objectives of the study

The objective of this dissertation is to determine factors that the Court will take into consideration when the parties have entered an unconditional appearance before granting or rejecting application for a stay based on Arbitration Act 195237 and Arbitration Act 200538.

1.4 Scope and limitation of study

This dissertation is limited to the scope of:

1. Reported and Unreported Cases in application for a stay of court proceedings specific to conditional and unconditional appearance by Malaysian Law Journal. 2. Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6 regarding conditional and unconditional appearance.

36 Seloga Jaya Sdn Bhd v Pembenaan Keng Ting () Sdn Bhd [1994] 2 MLJ 97; Teknik Cekap Sdn Bhd v Nirwana Indah Sdn Bhd [1996] 4 MLJ 154 37 Section 6 38 Section 10

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1.5 Significant of study

The subject of entering conditional and unconditional appearance is an important subject that is involved in the application of stay. Thus by taking appropriate steps it gives the applicant space for a prayer for the court proceedings to be stayed pending reference to arbitration. Whether the application is granted or refused is important for the applicant to know which kind of step does not amount to taking step in proceedings as per Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6. At this stage, appearance will subsequently assist the applicant toward more selective space in facing the dispute without taking step in the proceedings thus entitling the stay application granted.

1.6 Research Methodology

The following are the methodologies and schemes approach that have been applied for this studies:-

a) Primary Data; this would give an introduction to arbitration in the Malaysia‟s construction industry, the concepts of taking step, stay be refuse or grant and fundamental solution to it. This is purposely to identify the issue from an intensive reading material such as books, journal, articles and newspapers cut which can be found from the UTM library.

b) Secondary Data; after the issued has been identified, then the secondary data collection can be collected from the latest reading materials in printing form such as Malayan law journal, building law report, books, journal, research

8 papers, reports, newspaper, internet and etc through UTM database (Lexis Nexis).

c) Data Analysis ; data analysis Methodology will be used so that the research will be conducting in the systematic way to achieve the objective. In addition, the data analysis is major part to support the objective. This part will focus to any court cases decided which has been review and analyze in order to discuss the feature of circumstances of appearance.

d) Summary formation and report writing; this part will included the summary of discussion and conclusion has been made from the analysis. Some recommendation will be suggested for the future study and final report will be formatted accordingly.

9 e) Methodology flow chart

Research Methodology

Secondary Data 1. Malayan Law

Journal Primary Data 2. Building Law 1. Books Report

2. Journal 3. Books 3. Articles 4. Research Papers 4. Newspapers 5. Newspapers

6. Internet 7. UTM database (Lexis Nexis)

Method of Data Analysis

Data Arrangement

Writing & Checking

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1.7 Dissertation Structure

The followings are the summary of each chapter on this research project paper. This project paper will contains 5 chapters as follows:

a) Chapter 1: Introduction

Basically, the first chapter of this research is on the background of the study and it comprises of introduction, issues and problem statements, objectives, scopes and limitations, literature reviews, research significance, methodology and chapter summary to give an overview of the research.

b) Chapter 2 : Stay of Court Proceedings

This chapter is based on literature reviews, Arbitration Act 1952 and Arbitration Act 2005. The topics in this chapter include explanation of factors take into consideration by the Court to grant stay, procedure to be fulfilled in granting stay and taking step in the proceedings based on Arbitration Act 1952 and Arbitration Act 2005.

c) Chapter 3 : Entering Appearance

The topics in this chapter discuss about entering appearance in general. Type of entering appearance in court cases which will be reviewed and analyzed. Influence of entering appearance in successfulness in the striking out application.

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d) Chapter 4 : Unconditional and Conditional Appearance

The topics in this chapter discuss about entering appearance in arbitration. Type of entering appearance in court cases which will be reviewed and analyzed. The influence of entering appearance those make successfulness in the stay application. Factor that court take into consideration to refuse or grant the stay when the defendant has entered appearance.

e) Chapter 5 : Conclusion and Suggestion

The last chapter wills summaries and discusses the finding on the data collected and made the conclusion and recommendation.

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CHAPTER 2

STAY OF COURT PROCEEDINGS

2.1 Introduction

Stay of court proceedings is an order imposing a halt on civil proceedings (apart from taking any step allowed by the civil procedure rules or the term of the stay). A stay is usually ordered because of some misconduct by the claimant. Proceedings may be continued if stay is unsuccessful.39

The Arbitration Act 1952 provide that if any party to an arbitration agreement or any person claiming through or under him commences any legal proceedings against any other party to the arbitration, or any person claiming through or under him in respect of ant matter agreed to be referred to arbitration, any party to the legal proceedings may, before taking any steps in the proceedings, apply to the Court to stay the proceedings, and the Court, if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement, and that the applicant was, at the time when the proceedings were commenced, and

39 Oxford Dictionary of Law

13 still remains, ready and wiling to do all necessary things necessary to the proper conduct of the arbitration may make an order staying the proceedings.40

The new Arbitration Act 2005 provide that „A court which proceedings are brought in respect of a matter which is subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it find (a) that the agreement is null and void, inoperative or incapable of being performed; or (b) that there is in fact no dispute between the parties with regard to the matters to be referred‟41.

Both of this Act deliver that those parties to arbitration agreement against whom legal proceedings in any court are commence by any other party to the agreement in respect of any matter agreed to be referred, may, at any time before taking any other steps in the proceedings, apply to the Court to stay the proceedings42. The normal practice are Court may honour the term of the contract to submit the dispute to arbitration and grant an order to stay of legal proceedings to be referred to arbitration as per contract. But, there is also possibility that the stay is not granted and the disputes were adjudging in the court.

Once the application for stay of proceedings has been made, and before a stay is granted, there are procedures considered by the Court to be fulfilled. These procedures are guidance for court before making any decision to grant or refuse a stay. In the book titled Halsbury‟s Laws of England43, these conditions of obtaining stay are succinctly set out. These conditions are:-

40 Arbitration Act 1952 section 6 41 Arbitration Act 2005 section 10 (1)(a)(b) 42 Perbadanan Kemajuan Negeri v. Asean Security Paper Mill Sdn Bhd [1991] 3 MLJ 309; Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd [1994] 1 MLJ 422 43 Volume 2 Halsbury‟s Law of England (4th Ed.) at paras 560-566 (a-e)

14 a) there must be a valid arbitration agreement covering the question in dispute44, b) the plaintiff must have taken no steps after appearance45, c) the plaintiff is ready and willing to arbitrate46, d) there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement47, and e) the plaintiff must be entitled to rely on the agreement.

These conditions are to be considered by the Court before making any decision to the application whether to grant or refuse a stay order.

Upon the making of the stay application, the other party may oppose the application showing why matters should not go to arbitration48. In other words, he must successfully establish that there are sufficient reasons the dispute should not be referred to arbitration.49 Refer to Anuar J in the case of Hashim Bin Majid v Param Cumaraswamy & Ors50 High Court (Kuala Lumpur) held that “The onus is on the party who wish to object to any stay of proceedings to show why the arbitration clause should not be given effect. In this case, the onus is on the plaintiff to show why the matter should not be referred to arbitration”. Where such burden is not discharged, the legal proceedings will be stayed and the disputes referred to arbitration51.

44 Arbitration Act 2010 Section 10(1)(a); Chuan Hup Agencies Pte Ltd v Global Minerals () Sdn Bhd [1990] 1 MLJ 305; Teknik Cekap Sdn Bhd v Nirwana Indah Sdn Bhd [1996] 4 MLJ 154 45 Arbitration Act 2010 Section 10(1)(a). Chuan Hup Agencies Pte Ltd v Global Minerals (Sarawak) Sdn Bhd [1990] 1 MLJ 305 46 Arbitration Act 1952 Section 6. Chuan Hup Agencies Pte Ltd v Global Minerals (Sarawak) Sdn Bhd [1990] 1 MLJ 305 47 Ibid 48 Ford v Clarkson Holiday Ltd [1971] 1 WLR 1412 49 Ibid 50 [1993] 2 MLJ 20 at page 24 51 K.V.Padmanabha Rau (1997). Law of Arbitration (Cases and Commentaries). Kuala Lumpur Malaysia: International Law Book Services at page 65

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2.2 General Principle

At the common law position, before stay application is grant, there is guiding principle that court takes consideration. These principles are

a) must have valid arbitration agreement, b) must have a dispute, c) no step taken in the proceedings, d) willing and ready to arbitrate, e) no sufficient reason why the dispute should not go to arbitration.

Through the Arbitration Act 1952, these are the guiding principle set out in the section 6 before the Court grant a stay which are:-

a) before any steps taken in the proceedings, b) applicant must apply to court to stay the proceedings, c) there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement, d) the applicant was, ready and wiling to do all necessary things necessary to the proper conduct of the arbitration.

While in the Arbitration Act 2005, these are the guiding principle set out in the section 10 before the Court grant a stay which are:-

a) must have valid arbitration agreement, b) dispute within arbitration agreement, c) applicant must apply to court to stay the proceedings,

16 d) before any steps taken in the proceedings, e) there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement.

All of the above are necessary and relevant as the basic principle of stay of proceedings in arbitration. Once the party seeking for the stay has satisfied the Court, that there is a dispute between the parties within the meaning of the arbitration clause, and then it is for court jurisdiction in exercising the discretion to grant or not to grant the stay. This discretion of the Court must be exercised according to the proper principles of law.

2.3 General Approach in Exercising the Power to Grant or Refuse the Stay

According to Arbitration act 1952 section 6, if a party to an arbitration agreement applies for a stay of court proceedings, the prima facie duty of the Court is to grant the stay. If certain conditions are met, the Court jurisdiction is discretionary to grant a stay of proceedings52. If the Court is satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement the Court will seldom refuse a stay53. Though the power to grant stay is purely discretionary, yet, the exercise of it must be founded upon judicial principles.

In 1968, Raja Azlan Shah J in the case of Lan You Timber Co. v United General Insurance Co. Ltd.54 OCJ (Kuala Lumpur), said that “the court must hold the parties to their contract, provided they submit to arbitration, unless some

52 Arbitration Act 1952 Section 6 53 Halsbury‟s Laws of Malaysia, 4th Ed. Volume 2, p.555 54 [1968] 1 MLJ 181

17 sufficient reason, adequate in the circumstances, justifies its setting aside the terms of the contract and then exercising a discretion in favour of allowing the action to proceed”.

In 1991, Hashim Yeop Sani CJ in the case of Perbadanan Kemajuan Negeri Perak55 Supreme Court (Kuala Lumpur) said, “It is also a well settled principle that where parties have agreed to refer disputes for arbitration and the court is satisfied that a dispute exists, but one of the parties to the contract commences an action to have the matter determined by the court, the prima facie stand of the court is to stay the action and allow the parties to go to the tribunal to which they have agreed. In other words once the party applies for a stay and there is a dispute within the meaning of a valid and subsisting arbitration clause the inclination of the court is that effect should be given to the arbitration clause”.

Once the party seeking for the stay has satisfied the Court that there is a dispute or difference between the parties within the meaning of the arbitration clause, it does not ipso facto follow that they are entitled for a stay. The Court is still retains a discretion to refuse it. But the general approach of the Court is holding the parties who make a contract to arbitrate their disputes according to their original bargain (arbitration).

The Arbitration Act 2005 section 10 has taken the position and with the use of the word „shall‟ has made it mandatory for the Court to stay the proceedings in respect of any matter before which any proceedings are brought and refer the parties to arbitration. Application for stay of proceedings should be allowed on the ground that the requirement to stay proceedings under Arbitration Act 200556. It is mandatory to grant the stay and the Courts no longer have a general discretion, as before.

55 Perbadanan Kemajuan Negeri Perak v Asean Security Paper Mill Sdn Bhd [1991] 3 MLJ 309 at page 312 56 Section 10

18

The case reveal in 2008, where Vincent Ng J in the case of Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd & Anor 57 High Court (Kuala Lumpur) said, “section 10 of the 2005 Act, has now with the use of the word „shall‟ made it mandatory for the court to stay the proceedings in respect of any matter before which any proceedings are brought and refer the parties to arbitration „unless it finds (a) that the agreement is null and void, inoperative or incapable of being performed; or (b) that there is in fact no dispute between the parties with regard to the matters to be referred.‟ Though the provision of this new Act that the application must be made before any other steps are taken in the proceedings is common with the old Act, it is pertinent to note that the court‟s discretion to impose any direction as it deems fit when making an order for stay is unencumbered under the new Act”.

Also in 2008, Aziah Ali J in the case of Sunway Damansara Sdn Bhd v Malaysia National Insurance Bhd & Anor 58 High Court (Kuala Lumpur) said, “The Arbitration Act 2005 (the new Act) came into force on 15 March 2005. The power of the court to grant a stay of proceedings is as provided under section 10 of the Act. Pursuant to this new provision, the general discretion vested in the court to stay court proceedings is no longer available. Instead, the requirement to stay is mandatory, on an application by the party before taking any other steps in the proceedings”.

In 2010, Low Hop Bing JCA in the case of Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd59 Court of Appeal (Putrajaya) said, “Now section 10 of the Arbitration Act 2005 (Act 646) provides for a mandatory stay of court proceedings where there is an arbitration agreement unless the arbitration agreement is null and void, inoperative or incapable of being performed; or that

57 [2008] 1 MLJ 233 at page 243 58 [2008] 3 MLJ 872 at page 880; Ramly Ali J in Innotec Asia Pacific Sdn Bhd v Innotec GmbH [2007] 3 AMR 67 at p 81 59 [2010] 3 MLJ 656 at page 671

19 there is in fact no dispute between the parties with regard to the matters to be referred.”

Unlike the Arbitration Act 195260, this Arbitration Act 200561 provides a mandatory stay of court proceedings where there is an arbitration agreement unless the arbitration agreement is null and void, inoperative or incapable of being performed. Or in other word there is in fact no dispute between the parties with regard to the matters to be referred. It is an established principle of law that the Arbitration Act 200562 make it mandatory obligation for the Court to grant order of stay in respect of a matter which is subject to an arbitration agreement.

2.4 Valid Arbitration Agreement Covering the Dispute

It is one of the requirements in the Arbitration Act 200563, that there must be a dispute or difference falling within an arbitration clause. One of the principles considered by the Court before deciding whether to grant stay or not is that there must be a valid arbitration agreement covering the disputes between the parties.

In Ives and Baker v. Willans64, the Court of Appeal held that “the fact that a small portion of the relief claimed is not within the scope of arbitration is not in itself a sufficient reason for refusing to stay proceedings”.

60 Section 6 61 Section 10 62 Section 10 63 Section 10 and Arbitration Act 1952 section 6 64 [1894] 2 Ch D 478; The “Dong Moon” Trans Asia Shipping Corporation Co Ltd v “Dong Moon” Owners & Ors [1979] 1 MLJ 152

20 Principle for valid arbitration agreement as one of the conditions considered for court to grant stay is adopted in the book titled Halsbury's Laws of England 4th Ed. Vol 2. Several cases have been delivered that the conditions valid arbitration agreement must satisfied in granting the stay65. Chua J in the case of Woh Hup (Pte) Ltd & Anor v Turner (East Asia) Pte Ltd66ACJ , stated that “where there is a clear intention to arbitrate as per agreement, the court will give effect to the agreement even if the clause is incomplete or lack certain of particulars”.

In 1990, Haidar J in the case of Chuan Hup Agencies Pte Ltd v Global Minerals (Sarawak) Sdn Bhd 67 High Court (Kuching) said, „The conditions that the plaintiff must satisfy in order to succeed were: that there must be a valid arbitration agreement covering the question in dispute‟.

In 2001, J in the case of Chen Chong Fat & Ors v Chua Thian Teng & Anor68 High Court () said, “It would be necessary to restate a few relevant basic principles of stay of action on ground of arbitration. Not only should there be a valid arbitration agreement, the applicant should apply for a stay before taking any step in the proceedings after appearance, and that applicant must satisfy the court that he was, at the time when proceedings were commenced, and still remains, ready and willing to do all things necessary for the proper conduct of the arbitration”.

In 2011, Low Hop Bing in the case of Lembaga Pelabuhan Kelang v Kuala Dimensi Sdn Bhd and another appeal69 Court Of Appeal (Putrajaya), he refers to the English case of Paul Smith International, “Steyn J granted a stay of the plaintiff‟s

65 Woh Hup (Pte) Ltd & Anor v Turner (East Asia) Pte Ltd [1987] 1 MLJ 443; Chuan Hup Agencies Pte Ltd v Global Minerals (Sarawak) Sdn Bhd [1990] 1 MLJ 305; Perbadanan Kemajuan Negeri Perak v Asean Security Paper Mill Sdn Bhd [1991] 3 MLJ 309 ; Usahabina v Anuar Bin Yahya [1998] 7 MLJ 691; Susu Lembu Asli Marketing Sdn Bhd v Dutch Lady Milk Industries Bhd [2004] 2 MLJ 230; 66 Woh Hup (Pte) Ltd & Anor v Turner (East Asia) Pte Ltd [1987] 1 MLJ 443 67 [1990] 1 MLJ 305 at page 308 68 [2001] 5 MLJ 33 at page 38 69 [2011] 2 MLJ 606 at page 626

21 claim in court and held that clause 13 was a self contained agreement providing for the resolution of disputes by arbitration; clause 14 specified the lex arbitri, the curial law or the law governing the arbitration which would apply to this particular arbitration; there was no inconsistency between clause 13 and 14 and both clauses were valid and binding”.

The parties to an arbitration agreement are at liberty to have it worded in the style most suitable and giving clear expression to what has been agreed to refer their differences to an arbitrator. If the issue on the question of an arbitration agreement, covering any particular difference, it is for the Court to interpret it and determine. Whether the matter is within the clause or not, court was in the line for order to decide the question of staying the court proceedings.

2.5 No Other Step was taken in the Proceedings and Entering Appearance

Applicant should apply for a stay before taking any step in the proceedings. The expression „steps in the proceedings‟ being general in terms has given rise to a number of claims and contentions attempting to bring in various aspects of procedure into its fold so as to achieve the rejection of the applications for stay.

In 1966, Thomson LP in the case of Lim Su Sang v Teck Guan Construction & Development Co Ltd70 Federal Court (Civil Appeal) said, “The employer entered an appearance and then without taking any further step applied to have the proceedings stayed on the ground that what was involved was a dispute in connection with the agreement of 30th December 1961, and was therefore subject to the arbitration clause in that agreement. The action in this case related to a dispute

70 [1966] 2 MLJ 29

22 in connection with the agreement to which the arbitration clause applied and therefore the proceedings should be stayed”.

In 1979, Arulanandom J in the case of The “Dong Moon” Trans Asia Shipping Co Ltd v “Dong Moon” Owners & Ors71 OCJ said, “One of the conditions which must be fulfilled in order to obtain a stay of proceedings is that no step should be taken after appearance. An unconditional appearance by itself is not a waiver of the defendants' right to apply for stay”.

Also in 1979, Zakaria Yatim J in the case of D&C Finance Bhd v Overseas Assurance Corporation Ltd72 High Court (Kuala Lumpur) he refers to the Lee Kee Seng v Mohamed Halim Ismail73, “held that the defendant did not take any steps to have the matter referred to arbitration before the action was instituted by the plaintiff and that the defendant was not therefore entitled to have the action stayed under section 6 of the Arbitration Act”.

Basically, stay will not be granted if the applicant has taken steps in the proceedings. Applicant must unequivocally elect to refer the matter of dispute to arbitration74. The conditions of Arbitration Act 200575, the applicant should apply for a stay “before taking any step in the proceedings”.

In 2003, The Journal of Malaysian Bar76 has set a general principle which action constitutes as step in the proceedings. The following act has been held to constitute step in the proceedings:

71 [1979] 1 MLJ 152 72 [1989] 3 MLJ 240 at page 241 73 High Court (Kuala Lumpur) (unreported), the learned judge, following the decision of the House of Lords, in London & North Western Railway v Billington Ltd [1899] AC 79 74 Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd [1994] 1 MLJ 422; Teknik Cekap Sdn Bhd v Nirwana Indah Sdn Bhd [1996] 4 MLJ 154 75 Section 10 and Arbitration Act 1952 section 6 76 Teng Kam Wah (2003), Stay of proceedings to refer to arbitration; conditional or unconditional appearance?

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1) appearing before master and asking for leave to defend77, 2) taking out summons and obtaining an order for further time to deliver a defend78, 3) applying for time to plead and agreeing to accept short notice of trial79, 4) applying for leave for interrogate the defendant on his counterclaim80, 5) applying for a stay until security for cost was given81, 6) defend an application for summary judgment82, 7) attending the hearing of a summon for direction on which an order was made83, 8) including in an application for a stay a prayer to strike out the plaintiff‟s suit under O 18 r 19(1) of the RHC84, 9) agreeing that the case be set down for trial85, 10) filing unqualified bail bond for the release of the vessel after entering a conditional appearance86, and 11) taking part in garnishee proceedings without in any manner questioning the jurisdiction of the Court to try the main action87.

While the following act has been held as action which will not constitute step in the proceedings:

1) giving notice to the plaintiff requiring him to deliver his statement of claim88, 2) asking for more time to deliver defend89,

77 Pitchers Ltd v Plaza (Queensbury) Ltd [1940] 1 All ER 151 78 Ford‟s Hotel Co Ltd v Barlett [1896] AC 1 79 Smith & Co v British Marine, etc. Association [1883] WN 176 80 Chappel v North [1891] 2 QB 252 81 Adams v Catley (1892) 66 LT 687 82 Lee Brothers Construction Co v Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459; Trans Resources Corp Sdn Bhd v Sanwell Corp & Anor 5 MLJ 537 83 Country Theatres and Hotels Ltd v Knowles [1902] 1 KB 480; and Sim Hiang Kiaw & Ors v Lee Hoi Kim Construction Co [1986] 1 MLJ 347 84 PP Persero Sdn Bhd v Bimacom Property & Development Sdn Bhd [1999] 6 MLJ 1. Note that Lee Brothers Construction Co v Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459offers a contrary view. 85 Newacres Sdn bhd v Sri Alam Sdn bhd [1991] 3 CLJ 2781 86 Concord Line Co Ltd v the Owners of the ship „Molly‟ [1997] 4 CLJ Supp 285 87 Thamesa design Sdn Bhd & Ors v Kuching Hotels Sdn Bhd [1993] 3 MLJ 25 88 Ives & Barker v Willians [1894] 2 Ch 478 89 Brighton Marine Palace Ltd v Woodhouse [1893] 2 Ch 486

24 3) appearing before the registrar in an application for summary judgment merely ask for adjournment on the ground of pending applications for stay of action90, 4) filing of affidavits seeking discharge of an ex parte interlocutory injunction91, 5) filing affidavits and contesting an application for an interlocutory injunction92, 6) applying for an interlocutory injunction93, 7) issuing summons to set aside a difficult judgment and asking for leave to defend94, 8) assenting to amendment of a ship in the summons, to which the defendants had appear under protest95, 9) filing affidavits in reply to the plaintiff‟s affidavits in support of a motion for a receiver in a partnership action96, 10) taking out summons to extend the time delivery of defense because the return for a summons for stay, which was fixed earlier, was after the last day for filing of the defense97, 11) counsel remaining silent at hearing after informing the Court that his instruction at that stage were not to oppose or consent to the order sought98, 12) giving bail and security the release of an arrested ship99, and 13) applying to strike out of claim which was so vaguely formulated that the defendants could not know whether it referred to any or to which particular contract containing an agreement to submit disputes to arbitration100.

Entering appearance was the mandatory step to be taken by an applicant in the proceedings in the High Court. It was a step in the proceedings as required by the

90 Lee Brothers Construction Co V Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459. Note that in this case, the defendant not filed any affidavit in opposition to the summary judgment application 91 Seloga Jaya Sdn Bhd V Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97 92 Roussel-Uclaf v GD Searle & Co Ltd [1978] FSR 95 93 Kirames Sdn Bhd v Federal land Development Authority [1991] 2 MLJ 198; and inter Maritime Management Sdn bhd v Kai Tai Timber Co Ltd, Hong Kong [1995] 1 MLJ 322 94 Patel v Patel [2000] QB 551 95 Metropolitan Tunnel and Public Works Ltd v London Electric Ry [1926] 1 Ch 371 96 Zalinoff v Hammond [1898] 2 Ch 92 97 London Sack and Bag Co v Dixon & Lugton Ltd [1943] 2 All ER 763 98 Thiagarajah Pooinpatarsan v Shanmugam Paramsothy & 2 Ors [1900] 2 CLJ 312 99 Drouth v The Ship „GG Paul Doumer‟ [1934] MLJ 72 100 Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd [1978] 1 Llyod‟s Rep 357

25 Rules of High Court. Entering appearance is categories into 2 types, conditional appearance and unconditional appearance. Both of these appearances may constitute as taking step101 and may not102. Further discussion in the entering appearance is discussed in the Chapter 3.

2.6 Willing and Ready to Arbitrate

A party seeking a stay of proceedings must satisfy the Court that he is ready and willing to do all things necessary to the proper conduct of the arbitration. Under Arbitration Act 1952103, “if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement, and that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, may make an order staying the proceedings”.

Where, the party seeking stay show unwillingness to proceed with arbitration as dispute resolution, the Court will not order a stay. The applicant-defendant must show his equivocal intention and still remains ready and willing of the arbitration agreement.

101 Usahabina v Anuar Bin Yahya [1998] 7 MLJ 691; Interscope Versicherung Sdn Bhd v Sime Axa Assurance Bhd [1999] 2 MLJ 529 102 The “Dong Moon” Trans Asia Shipping Co Ltd v “Dong Moon” Owners & Ors [1979] 1 MLJ 152; Lee Brothers Construction Co v Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459; D&C Finance Bhd v Overseas Assurance Corporation Ltd [1989] 3 MLJ 240; Hashim Bin Majid v Param Cumaraswamy & Ors [1993] 2 MLJ 20; Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97; Accounting Publications Sdn Bhd v Ho Soo Furniture Sdn Bhd [1998] 4 MLJ 497; Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625 103 Section 6

26 Refer to Mustill and Boyd's in the Book titled Commercial Arbitration (2nd Ed, 2001 Companion)104, “The applicant must show that he is ready and willing to do all things necessary to the proper conduct of the arbitration. This requirement relates both to the time when the proceedings were commenced and to the time when the court is called on to exercise its discretion. Evidence that the applicant is ready and willing must be furnished by affidavit.”

The principles ready and willing to a proper conduct of arbitration in Arbitration Act 1952105, for application of stay on ground of arbitration, has many time been referred by the judge in delivering their decision106. In fact the phrase ready and willing constitutes necessary condition before an order of stay is granted. The Court has powers to stay proceedings when in its opinion there is no sufficient reason why the matter should not be referred in accordance with the arbitration clause107.

In the book titled Halsbury‟s Laws of Malaysia, ready and willing is a conduct to do all things necessary for arbitration. “The applicant, for a discretionary

104 at page 473 para (d)(i) 105 Section 6 106 Alagappa Chettiar v Palanivelpillai & Ors [1967] 1 MLJ 208; Malaysia Government Officers' Co- operative Housing Society Ltd v United Asia Investment Ltd & Ors [1972] 1 MLJ 113; Swee Pte Ltd v Lim Kian Chai & Anor [1983] 1 MLJ 353; Lee Brothers Construction Co V Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459; D&C Finance Bhd v Overseas Assurance Corporation Ltd [1989] 3 MLJ 240; Chuan Hup Agencies Pte Ltd V Global Minerals (Sarawak) Sdn Bhd [1990] 1 MLJ 305; Perbadanan Kemajuan Negeri Perak v Asean Security Paper Mill Sdn Bhd [1991] 3 MLJ 309; Hashim Bin Majid v Param Cumaraswamy & Ors [1993] 2 MLJ 20; Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd [1994] 1 MLJ 422; Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97; Tan Kok Cheng & Sons Realty Co Sdn Bhd v Lim Ah Pat (T/A Juta Bena) [1995] 3 MLJ 273; Teknik Cekap Sdn Bhd v Nirwana Indah Sdn Bhd [1996] 4 MLJ 154; Accounting Publications Sdn Bhd v Ho Soo Furniture Sdn Bhd [1998] 4 MLJ 497; Usahabina v Anuar Bin Yahya [1998] 7 MLJ 691; Interscope Versicherung Sdn Bhd v Sime Axa Assurance Bhd [1999] 2 MLJ 529; PP Persero Sdn Bhd v Bimacom Property & Development Sdn Bhd [1999] 6 MLJ 1; Trans Resources Corp Sdn Bhd v Sanwell Corp & Anor (No 2) [1999] 2 MLJ 609; Chen Chong Fat & Ors v Chua Thian Teng & Anor [2001] 5 MLJ 33; Oriental Wealth (M) Sdn Bhd v Nakano (M) Sdn Bhd [2001] 3 MLJ 6; Shapadu Energy Engineering Sdn Bhd v Suasa Unik (M) Sdn Bhd [2001] 3 MLJ 520; IJM Construction Sdn Bhd v Cleveland Development Sdn Bhd [2002] 3 MLJ 516; Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625; Malaysian European Production System Sdn Bhd v Zurich Insurance (M) Bhd [2003] 1 MLJ 304; Pekeliling Triangle Sdn Bhd & Anor v Chase Perdana Bhd [2003] 1 MLJ 130; Susu Lembu Asli Marketing Sdn Bhd v Dutch Lady Milk Industries Bhd [2004] 2 MLJ 230; Susu Lembu Asli Marketing Sdn Bhd v Dutch Lady Milk Industries Bhd [2005] 4 MLJ 193; 107 Arbitration Act 1952 section 6

27 stay must satisfy the court not only that he is, but also that he was at the commencement of the proceedings, ready and willing to do everything necessary for the proper conduct of the arbitration.” 108

A simple assertion by the applicant-defendant that he is ready and willing for arbitration is quite enough to be considered by the Court. A party may be „ready and willing‟ within the meaning of this condition notwithstanding his contention that he has a perfect defense, such as that the time limit for reference to arbitration in the arbitration agreement has expired.

In conclusion the absence of a request for arbitration prior to commencement of legal proceedings would not be construed as unwillingness on the part of the applicant to arbitrate. An act purporting to terminate the agreement containing the arbitration clause is does not amount to demonstrating an unwillingness to have the matter resolved through arbitration.

2.7 Sufficient Reason the disputes should not go to Arbitration

In order for the Court to exercise its discretion, the plaintiff must satisfy that there is no sufficient reason why the matter should not be referred to arbitration. In other words, the Court must hold the parties to their contract, provided they submit to arbitration, unless some sufficient reason, adequate in the circumstances.

With reference to Arbitration Act 1952109; the Court has power to stay proceedings when in its opinion there is no sufficient reason why the matter should

108 Vol 13 at page 39

28 not be referred in accordance with arbitration clause110. As adopted in Halsbury's Laws of England 4th Ed. Court will seldom refuse a stay if satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement.

In 1979, Arulanandom J in the case of The “Dong Moon” Trans Asia Shipping Co Ltd111, has used fact in the case Ives & Barker v Willians112 ”a small portion of the relief claimed is not within the scope of the arbitration clause is not in itself a sufficient reason for refusing to stay proceedings where the main subject of the action is within the arbitration clause”.

The onus of giving sufficient reason was on the opposing party, which opposing the stay, to give reasons why the differences should not be referred to arbitration113. Court will satisfy whether he has discharged that onus and shown a good reason why the arbitration should not take place114. The plaintiff has discharged his onus on the issues if court has satisfied the matter should not be referred to arbitration. Its give sufficient ground for the Court for not granting stay and it should

109 Section 6 “If any party to an arbitration agreement or any person claiming through or under him commences any legal proceedings against any other party to the arbitration or any person claiming through or under him in respect of any matter agreed to be referred to arbitration, any party to the legal proceedings may, before taking any other steps in the proceedings, apply to the court to stay the proceedings, and the court, if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement, and that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, may make an order staying the proceedings.” 110 The “Dong Moon” Trans Asia Shipping Co Ltd v “Dong Moon” Owners & Ors [1979] 1 MLJ 152 111 [1979] 1 MLJ 152 112 [1894] 2 Ch 478 113 D&C Finance Bhd v Overseas Assurance Corporation Ltd [1989] 3 MLJ 240 114 Alagappa Chettiar v Palanivelpillai & Ors [1967] 1 MLJ 208; Hashim Bin Majid v Param Cumaraswamy & Ors [1993] 2 MLJ 20; Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd [1994] 1 MLJ 422; Usahabina v Anuar Bin Yahya [1998] 7 MLJ 691; Peri Sentosa Sdn Bhd (In Members‟ Voluntary Liquidation) & Anor v General Soil Engineering Sdn Bhd [2000] 7 MLJ 561; Shapadu Energy Engineering Sdn Bhd v Suasa Unik (M) Sdn Bhd [2001] 3 MLJ 520 114 Lan You Timber Co v United General Insurance Co Ltd [1968] 1 MLJ 181; Lee Brothers Construction Co v Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459; D&C Finance Bhd v Overseas Assurance Corporation Ltd [1989] 3 MLJ 240; Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97; Teknik Cekap Sdn Bhd v Nirwana Indah Sdn Bhd [1996] 4 MLJ 154; Trans Resources Corp Sdn Bhd v Sanwell Corp & Anor (No 2) [1999] 2 MLJ 609; Pekeliling Triangle Sdn Bhd & Anor v Chase Perdana Bhd [2003] 1 MLJ 130

29 not be referred to arbitration115. Failing of discharged that onus, court will assume that there is no sufficient ground for not granting stay and it should be referred to arbitration116.

The onus is on the plaintiff to satisfy the Court that it is proper to refuse the application for stay and strong grounds for refusing a stay must be exhibited by the plaintiff has long been used for determined stay application. If the applicant can satisfy the Court that the conditions for the grant of a stay under Arbitration Act117 are filled, it does not ipso facto follow that they are entitled for a stay to be granted.

2.8 Summary

As a whole, it is concluded in this chapter that application for a stay is an important application for the opposing party to pursue its intention to resolve the dispute through arbitration. It‟s also important for them to know the principles adopted by the Court in considering the application. In general, court will hold parties who make a contract to arbitrate their disputes as per their original bargain118. In other word, when exercising its discretion, it is the prima facie duty of the Court to act upon such an arbitration agreement119.

115 Ibid 116 Lan You Timber Co v United General Insurance Co Ltd [1968] 1 MLJ 181; Lee Brothers Construction Co v Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459; D&C Finance Bhd v Overseas Assurance Corporation Ltd [1989] 3 MLJ 240; Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97; Teknik Cekap Sdn Bhd v Nirwana Indah Sdn Bhd [1996] 4 MLJ 154; Trans Resources Corp Sdn Bhd v Sanwell Corp & Anor (No 2) [1999] 2 MLJ 609; Pekeliling Triangle Sdn Bhd & Anor v Chase Perdana Bhd [2003] 1 MLJ 130 117 Section 10 and arbitration act 1952 section 6 118 Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97 119 Lee Brothers Construction Co v Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459

30 In short, it can be classified that any person claiming through any legal proceedings against other party to the arbitration, in respect of any matter agreed to be referred to arbitration, a party to the legal proceedings may, before taking any other steps in the proceedings, apply to the Court to stay the proceedings. The Court may make an order staying the proceedings, if he is satisfied that there is no sufficient reason for the matter should not be referred in accordance arbitration, and the applicant were still remains ready and willing to do all things necessary to the proper conduct of the arbitration.

Principles to be considered by the Court are important to be known by the applicant during the event. These are the necessary principle prerequisite for a stay of proceedings and necessary to refer the dispute to arbitration. The principle highlighted here will give a shortcut procedure for the applicant familiar with the Court‟s consideration before stay is granted.

31

CHAPTER 3

ENTERING APPEARANCE

3.1 Introduction

The important and controversial issues in an application for stay of proceedings under Arbitration Act 2005120 concerned the types of appearance to be entered. The types of appearance will influence the outcome of the application. One of the conditions contained in the Arbitration Act 2005121, is that the applicant should apply for a stay before taking any step in the proceedings. According to Teh Kam Wah, the wording of “before taking any step in the proceedings” in the section “has excited sharp differences in judicial opinion.” 122

At this point, it is massive significance for the applicant-defendant to be knowledgeable with the type of entering appearance to be used. If he uses the wrong method, even if there is a valid arbitration agreement, the Court may not grant his application for stay. The rules of entering appearance have gone through a rather

120 Section 10 and Arbitration Act 1952 section 6 121 Ibid 122 Teng Kam Wah (2003), Stay of proceedings to refer to arbitration; conditional or unconditional appearance?

32 eventful journey through the Courts process123. For example, it is significant whether the entering of an unconditional appearance is a step in the proceedings and thus denies the stay application granted.

Therefore the kind of appearance to be entered by the opposing party is important to enable its success in the application of stay.

3.2 Entering Appearance

In the Oxford dictionary, appearance presents some of act that appearing in the public or an act of being published or broadcast. In the Wikipedia of law, the word “appearance” is comes from latin word (apparere, to appear). Appearance is an act of coming into court of either of the parties to a suit, and/or the formal act by which a defendant submits himself to the jurisdiction of the court.

A legal dictionary derives appearance as an act coming into court by a party to a suit, either in person or through an attorney, whether as plaintiff or defendant. The formal proceedings by which a defendant submits to the jurisdiction of the court. The voluntary submission to a court's jurisdiction.124

According to Tan Sri Chang Min Tat125 the “conditional appearance” means an appearance in qualified term, reserved to the appearing of the defendant of his right to apply to the court to set aside the writ or service thereof for an alleged

123 Teng Kam Wah (2003), Stay of proceedings to refer to arbitration; conditional or unconditional appearance? 124 http://legal-dictionary.thefreedictionary.com/appearance 11.04.2012, http://www.encyclopedia.com/topic/Appearance.aspx 11.04.2012 125 in Mallal's Supreme Court Practice(2nd Ed) page 68

33 informality or irregularity which renders either the writ or service invalid. The “unconditional appearance”126 is a mode of defendant waiver of any irregularity that perhaps and a submission to the jurisdiction of the Court.

Entering appearance merely entails by completing a Memorandum of Appearance in Form 15 in duplicate and handing it to Registry (Registry of High Court) or posting it. This memorandum should be returned to the registry of high court of which the action was filed127.

3.3 Type of Appearances

An appearance may be either conditional or unconditional. An unconditional appearance is a simple and unqualified or unrestricted submission to the jurisdiction of the Court. Usually an unconditional appearance is made where the defendant waives any defects of service if any and submits to the jurisdiction of the Court.

A conditional appearance is entered when the defendant want to test or object to the sufficiency of service or the jurisdiction of the Court without submitting wholly to the jurisdiction of the Court in that action. If the defendant considers that he has reasonable grounds for an application to Court for an order128, he should consider to entering conditional appearance.

The comprehension of the type of appearance and the purpose of entering that kind of appearance can be summarised as follow:-

126 in Mallal's Supreme Court Practice(2nd Ed) page 68 127 Malaysia High Court Practice; Abridged Edition; at page 78 128 Rules of High Court O 12 r 6

34

Entering Appearance

Conditional Unconditional Appearance Appearance

Applicant-defendant enters appearance “under protest”. Applicant-defendant enters Applicant-defendant reserves the appearance without any objection. right to set aside service of writ of writ or writ. 3.1 Flow Chart of Entering Appearance

3.4 Purpose of Entering Appearance

Entering appearance is a first formal step the defendant takes which he submits the matters in dispute to the jurisdiction of the Court129. Once the writ has been served on the applicant-defendant, at the same time aware of the action has been filed in the Court against him, it is up to him whether to defend the action against him. He may not need to do anything if he has no defend to the action.

129 Rein v Stein [1892] 1 QB 753; Carmel Exporters (Sales) Ltd v Sea-Land Services Inc [1981] 1 All ER 984; and PP Persero Sdn Bhd v Bimacon Property & Development Sdn Bhd [1999] 6 MLJ 1.

35 In default of his entering appearance, the defendant‟s defence may not be heard and judgment may be entered against him in default of his appearance, or judgment is given and made against him in relation to originating summons130. But if the applicant-defendant contended that the claim made against him cannot be maintained, he has to defend the action. This process is made only by entering appearance. The entering appearance is required procedure to be entered once defendant, who wished to defend the action, is served with a writ or originating summons.

Therefore an appearance is a notice to the Court and plaintiff about defendant‟s intention to defend the action. By appearance, defendant has submit to the jurisdiction of the Court and is therefore bound to accept the decision of the Court, subject always to any right of appeal to a higher court. By appearance, the defendant has submitting to the jurisdiction of the Court and the defendant loses whatever immunity he may have from the process.

By entering appearance, the defendant prevents judgment entered against him in default of his appearance. Defendant‟s failure to entering appearance resulted they are deemed to the declaration made by the plaintiff. Therefore, even if the Court allowed defendant to provide evidence, it will be not considered in their defenses.

Until the appearance is entered properly, the defendant is not entitled to take any step in the proceedings. In other word, entering appearance is a process defendant showing his intention to defend the action and submits to the jurisdiction of the Court and loses his immunity from process he may have131.

130 Rules of High Court 1980, O 13 131 Malaysian High Court Practice, Abridged Ed.(1998) at page 78

36 3.5 Time for Entering Appearance

The time limited for entry appearance is eight (8) days after the service of the writ where the defendant resides in the same states as plaintiff132 and ten (10) days in Sabah and Sarawak. Where a defendant resides in other states, the number is twelve (12) days and in Sabah and Sarawak are twenty (20) days133. Entry appearance is made by completing memorandum of appearance.

3.6 Procedure for Entering Appearance

Under the Rules of High Court, parties who start an action in the High Court begin by issuing a writ134, originating summons135, originating motion or petition136. The writ is normally enclosed with notice of appearance137. The defendant may, unless he is a person under disability or a body corporate, enter an appearance and defend the action in person or by solicitor138.

When the defendant fails to enter appearance within the time limit specified, the plaintiff is entitled to enter judgment against him. Therefore, “an appearance is a process of the defendant intention to defend the action and submits him to the jurisdiction of the court”.139

132 Rules of High Court 1980, O 12 r 4 133 Rules of High Court 1980, O 12 r 4 134 Rules of High Court 1980, O 6 r 1. 135 Rules of High Court 1980, O 7 r 1 136 Rules of High Court 1980, O 5 r 1 137 Rules of High Court 1980, O 6 r 1 138 O 12 r 1(1). Whether or not he is sued as a trustee or personnel representative or in any other capacity. A solicitor must have necessary to appear for the person. Tan Liang Hong v Min Ngai Knitting Factory (M) Ltd [1974] 1 MLJ 76 139 Tan Sri Datuk Chang Min Tat. Mallal‟s Supreme Court Practice. at page 68

37

In the Rules of High court, a memorandum of appearance must be made in Form 15 in duplicate and handing it in at the Registry or posting it to the same140. “Registry” means the Registry of the High court in which the action was files141. Entering appearance requires the applicant to complete the memorandum of appearance and a copy thereof, hands it in at or sends it to the Registry of the plaintiff which issued the memorandum.

3.7 Mode of Entering Appearance

The applicant-defendant who was served by the notice of writ may enter appearance in the action and defend it by solicitor or in person. If it is a body corporate, no entrance entered otherwise than by a solicitor. He may enter either an unconditional appearance or a conditional appearance.

In the memorandum of appearance, the registry will endorse on the note the numbers of days to make the application. If the defendant objects the notice served on him, he may with leave of court enter a memorandum of conditional appearance in the action by way of Form 16142 which is commonly called appearing „under protest‟. This application will be followed by an application to have the suit be set aside. Submission conditional appearance by Form 16 is purportedly entered when defendant wish to challenge the jurisdiction of the Court.

Where the defendant enters appearance by delivering the memorandum of appearance to the proper officer, he will handed back the sealed copy of

140 Rules of High Court 1980, O 12 r 1(3) 141 Rules of High Court 1980, O 1 r 4 142 Rules of High Court 1980, O 12 r 6, Malaysian High Court Practice, Abridged Ed.(1998), page 78

38 memorandum of appearance by post or otherwise serve by hand to plaintiff. After the entry of conditional appearance, the defendant must within fourteen (14) days make necessary application to court143. Accordingly, if there is no application made by the defendant within the stipulated time allowed, the appearance stood as unconditional appearance and the plaintiff could proceed with the action144.

The set aside application145 if not made within the time stipulated, the applicant-defendant is considered enters unconditional appearance146. According to Mohd Hishamudin J in the case of N Carrupaiya v MBF Property Services Sdn Bhd & Anor147 High Court (Kuala Lumpur), “Normally, a statement of defence is filed only after the filing of an unconditional memorandum of appearance or if a conditional appearance had been previously filed, the statement of defence is filed only after the conditional appearance has, by operation of law, become an unconditional appearance.

The entry of unconditional appearance is an absolute movement to prevent judgment in default being entered against the defendant. At the same time maintaining the defendant„s right to object any irregularity in the issue or the service of the writ and to the jurisdiction of the Court148. If defendant files an unconditional appearance to the suit, the defendant is precluded from raising the issue of the Court‟s lack of jurisdiction. In other word, by unconditional appearance defendant has waived of any irregularity here may be149 and at the same time submission to the jurisdiction of the Court150.

143 Rules of High Court 1980, O 12 r 7(1) 144 In Carmel Exporters (Sales) Ltd v Sea-Land Services Inc [1981] 1 All ER 984, Robert Goff J said at page 987; Usahabina v Anuar Bin Yahya [1998] 7 MLJ 691, Augustine Paul JC said at page 704 145 Rules of High Court ; O 12 r 6 Application to set aside 146 Keymer v. Reddy [1912] 1 KB 215 CA 147 [2000] 4 MLJ 389 at page 393 148 Sheldon v Brown Bayley's Steel Works & Dawnways Ltd [1953] 2 QB 393: PP Persero Sdn Bhd v Bimacom Property & Development Sdn Bhd [1999] 6 MLJ 1, Abdul Malik Ishak J at page 7 149 Keymer v Reddy [1912] 1 KB 215 150 Suncast Sdn Bhd v Padang Indah Sdn Bhd [1999] MLJU 31, Hj Abdul Malik Bin Hj Ishak said at page 31

39 3.8 Failure in Entering Appearance

Default is a failure to take any step in the proceedings which is by the rules necessary to be taken by parties. This rules place a certain emphasis on the necessity to take any required procedural step at the relevant point in time in course of the proceedings.

As mention earlier, failing of the parties to enter conditional or unconditional appearance, may make the judgment entered in default of their appearance. Where there is no appearance entered by defendant within the time stipulated, a Certificate of Non Appearance will be sign by Registrar and accordingly a judgment in default of appearance will be signed against defendant. Rules of High Court provide that when there is no appearance made by defendant, hence the plaintiff may proceed with the action as if that defendant had entered an appearance151.

A judgment in default of appearance can still be set aside when the Court was satisfied that that the defendant was not aware of the proceedings and was not avoiding service which was tantamount to knowledge of the proceedings152. The Court has tolerant discretion to set aside a judgment entered in default153 and no time is prescribed within which the application should be made. However it is a settled principle that to set aside a regularly obtained judgment, there must be affidavit showing a defense on the merit.

In Rules of High Court154, the Court may “at any stage of the proceedings order to be struck out … and may order the action to be stayed or dismissed or judgment to be entered accordingly”. The ordinance rule means that it can be made at any time in the course of the proceedings. Issue here is whether by filing

151 Rules of High Court 1980, O 13 r 6 152 Sockalingam Chettiar & Ors v Somasundram Chettiar [1941] MLJ 103 153 B.Dialdas & Co. (Pte Ltd) v. Sin Sin & Co. [1984] 2 MLJ 223 154 Rules of High Court 1980, O 18 r 19

40 unconditional appearance is precluded the applicant from making application under Order 18 rule 19.

Some of the cases have shown that by filing a conditional appearance is not a pre-condition for the making of an application155. The filing of an unconditional appearance is not a bar to the making of an application under Rules of High Court Order 18 rule 19156. In N Carrupaiya case, Mohd Hishamudin J when delivering the judgment, consider about Alor Janggus157 case, and two High Court cases, namely, Pet Far Eastern158 and Lim Seak Huat159. The decision from Mohd Hishamudin J is differ from that case, and he‟s unable to agree with the above because of obiter dicta160 of the case161.

The Court has an option either to give judgment in default if the defendant fails to entering appearance162 or may make any other order that he thinks fit due to failing of the defendant to entering appearance. This would include the power to require the plaintiff to give evidence in support of his claim before judgment is given163. The Court can give a default judgment at the trial without requiring evidence.

155 Under O 18 r 19 ; Application to striking out 156 Mohd Hishamudin J in N Carrupaiya v MBF Property Services Sdn Bhd & Anor [2000] 4 MLJ 389 supported by Zakaria Yatim J in Bank Bumiputra (M) Bhd & Anor v Lorrain Esme Osman [1987] 2 MLJ 633 and Haidar J in Jamir Hassan v Kang Min [1992] 2 MLJ 46 157 Alor Janggus Soon Seng Trading Sdn Bhd & Ors v Sey Hoe Sdn Bhd & Ors [1995] 1 MLJ 241 158 Pet Far Eastern (M) Sdn Bhd v Tay Young Huat & Ors [1999] 2 CLJ 886 159 Lim Seak Huat v Malayan United Realty Sdn Bhd [1997] 5 CLJ 336 160http://en.wikipedia.org/wiki/Obiter_dicta 16.04.2012; An obiter dicta is a remark or observation made by a judge that, although included in the body of the court's opinion, does not form a necessary part of the court's decision 161 Abdul Malik Ishak J in Pet Far Eastern (M) Sdn Bhd v Tay Young Huat & Ors [1999] 2 CLJ 886, has adopted the obiter dicta of Jemuri Serjan CJ (Borneo) in Alor Janggus Soon Seng Trading Sdn Bhd & Ors v Sey Hoe Sdn Bhd & Ors [1995] 1 MLJ 241, and ruled that a defendant who has entered an unconditional appearance is precluded from making an application under O 18 r 19. In other words, a defendant intending to make an O 18 r 19 application must, upon being served with the writ, file a conditional appearance and not an unconditional appearance. 162 Supreme Court Rules, O 28 r 6; Shaharuddin bin Abdul Rahman v Satisah Ismail Sdn Bhd [1982] 2 MLJ 79 163 Lee Ah Kong v Leong Koo [1996] 2 MLJ 229, at page 237

41 Default judgment also may be entered against defendant with leave from the Court, after defendant failed to enter appearance.164 However, whether it should do so or have an option either to give a judgment in default and make order as it think fit in a particular case is subject to exercising of a judicial discretion.

3.9 Entering Unconditional Appearance and Striking Out Application

The striking out application may be made at any stage of the proceedings and court is empowered to do so165. The power to strike out is not mandatory but permissible and confers a discretionary jurisdiction to be exercised. This rule is applied in the application to strike out of statement of claim or a statement of defend.

It reads as follows “The court may at any stage of the proceedings order to be struck out or amend any pleading or the endorsement of any writ in the action, or anything in any pleading or in the endorsement, on the ground that:-

a) it disclose no reasonable cause of action or defend, as the case may be; or b) it is scandalous, frivolous or vexatious; or c) it may prejudice, embarrass or delay the fair of the action; or d) it is otherwise an abuse of the process of the court; and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.”

164 Supreme Court Rules, O 45 rr 5 & 6 165 Rules of High Court, O 18 r 19

42 Application striking out is something to be done by the Courts and it must be specific166. The Courts are empowered with the discretionary power in relation to striking out proceedings which may be unnecessary, scandalous or which may tend to prejudice, embarrass, or delay the fair trial. These natures are provided in the Rule of Supreme Court. According to Syed Agil Barakbah J in the case of Abu Bakar Bin Haji Yusuf167, has cited that “the discretionary powers of the court in relation to striking out proceedings of this nature are provided by Order 19 rule 27 and Order 25 rule 4 of the Rules of the Supreme Court 1957”.

The effect of entering conditional appearance is to reserve defendant right to set aside the writ168. Hence, the defendant is not barred to invoked the application to striking out pleading when defendant filing unconditional appearance. Refer to judgment delivered by Jemuri Serjan CJ (Borneo) in the case of Alor Janggus Soon Seng Trading Sdn Bhd & Ors v Sey Hoe Sdn Bhd & Ors169 Supreme Court (Kuala Lumpur), “It was open to the defendants to resort to Order 18 rule 19 or Order 33 rule 2 of our Rules of High Court. It is too late now for the defendants to invoke Order 18 rule 19 because they must have filed their unconditional appearance, thereby depriving themselves of the right to invoke Order 18 rule 19 but it is still open to them to have recourse to Order 33 rule 2 if they are so minded.”170

Alor Janggus decision was followed by Low Hop Bing J in the case of Dato‟ Hari Menon @ Dato‟ T Puraharan A/L Cp Ramakrishnan (Suing As Legal Representative Of Dymm Tuanku Ja‟afar Ibni Almarhum Tuanku Abdul Rahman, Yang Di Pertuan Besar Darul Khusus) v Texas Encore Llc & Ors171 High Court (Seremban) state that “The fourth defendant having entered unconditional appearance had deprived itself of the right to invoke Order 18 rule 19(1)(a), (b) or (d) of the Rules of High Court 1980”172

166 Williamson v London & NW Rly Co [1879] 12 Ch D, Hall VC 167 Abu Bakar Bin Haji Yusuf v Mohamed Hamzah Bin Hanapiah & Anor [1978] 2 MLJ 78 168 Malllal‟s Supreme Court Practice, 2nd Ed. para 12.1.3 169 [1995] 1 MLJ 241 170 [1995] 1 MLJ 241 at page 258 171 [2005] 4 MLJ 506 172 [2005] 4 MLJ 506 at page 515

43

Still in the issue of entering unconditional appearance is precluded from making striking out application, in 2007 Mohd Hishamudin J in the case of Sakyo Corp & Anor v Dow Jones & Co Inc & Ors173 High Court (Kuala Lumpur) stated that, “The Rules of the High Court 1980 ('the RHC') has a specified provision for such a complaint (that the statement of claim discloses no reasonable cause of action) and he must invoke that particular provision. The appropriate course of action to be taken by him is to challenge the statement... And he can only do this by first filing an unconditional appearance and thereafter to make an application (by summons in chambers) under Order 18 rule 19.”174

However, this legal view has different interpretation in the High Court. In 2000 Abdul Malik Ishak J in the case of Chan Min Swee v Melawangi Sdn Bhd175 High Court (Kuala Lumpur) stated that “If a party is interested to strike out a writ and the statement of claim on other grounds other than that the writ or service is irregular or for want of jurisdiction, the party can enter an unconditional appearance because the effect of an unconditional appearance (be it for defective writ or for defective service thereof or for want of jurisdiction) will not be relevant to the main ground for the striking out application….a defendant is not precluded from making an application under Order 18 rule 19 merely by reason of the fact that he had filed an unconditional appearance”176. No reference was made to Alor Janggus.

In 2001, Syed Ahmad Helmy JC in the case of Kanciltek (M) Sdn Bhd v Mayban Finance Bhd177 High Court ( Bahru) stated that “an entry of an unconditional appearance by the respondent herein when the provisions of entry of appearance in the RHC does not extend to originating motions can amount to a waiver on the part of the respondent... the question with an emphatic „no‟. The entry

173 [2007] 1 MLJ 677 174 [2007] 1 MLJ 677 at page 678 175 [2000] 7 MLJ 111 176 [2000] 7 MLJ 111 at page 142 177 [2001] 6 MLJ 185

44 of an unconditional appearance by the respondent here cannot amount to a waiver for the simple reason that there178is no necessity or requirement under the Rules of High Court to enter an appearance against an originating motion in the first place179. The defendant by entry unconditional appearance cannot and does not amount to a waiver in application of striking out.

In 2004, Mohd Hishamudin J in the case of Akitek Bersatu v Sempurna Cekap Sdn Bhd180 High Court (Kuala Lumpur) stated that “A defendant in an action is not precluded from making an Order 18 rule 19 application just because he has filed an unconditional appearance. In other words, the filing of a conditional appearance is not a prerequisite for the filing of an Order 18 rule 19 application.”

Nothing in the Rules of High Court stated that once pleading are closed, all striking out actions thereafter will be barred. In 2009, Balia Yusof J in the case of William Singam a/l Raja Singam (suing as the Public Officer of Pertubuhan Persaudaraan Kristian Thaveethin Kudaram, Ipoh Perak) v Meeriam Rosaline a/p Edward Paul & Ors181 High Court (Ipoh), stated that “nothing is provided for under Order 18 rule 19, stating that to strike out the writ a conditional appearance must be filed first, or that once an unconditional appearance has been filed, an interested person is precluded from making an application of striking out on the given grounds.”

Court has inherent jurisdiction in the matter in application under Rules of High Court Order 18 rule 19. Defendant relied on the point court has inherent jurisdiction will not precluded them to invoke the application. In 2007, Abdul Malik Ishak J in the case of Domnic Selvam a/l S Gnanapragasam v Kerajaan Malaysia & Ors182 High Court (Kuala Lumpur) stated that “apart from entering an unconditional

178 [2001] 6 MLJ 185 at page 191 179 [2001] 6 MLJ 185 at page 192 180 [2004] 7 MLJ 45 181 [2009] 7 MLJ 888 182 [2007] 2 MLJ 761

45 appearance, the defendants have filed their Statement of Defense. That would certainly trigger the obiter dicta of Jemuri Serjan CJ (Borneo) in Alor Janggus Soon Seng Trading Sdn Bhd & Ors v Sey Hoe Sdn Bhd & Ors. But it must not be forgotten that the defendants here also relied upon the inherent jurisdiction of this court to strike out the plaintiff‟s writ of summons and the statement of claim. This is what that makes the present case different from that of Alor Janggus Soon Seng Trading Sdn Bhd & Ors v Sey Hoe Sdn Bhd & Ors. The defendants here are entitled to invoke the inherent jurisdiction of this court in order to end the proceedings forthwith without a trial”.183

As far as the Rules of High Court184 concern that the striking out application as stated earlier can be made at any stage of the proceedings. Mohd Hishamudin J in the case of N Carrupaiya v MBF Property Services Sdn Bhd & Anor185 High Court (Kuala Lumpur) stated that “the learned counsel submits that the application under Order 18 rule 19 may be made any at stage of the proceedings, meaning that it can be made at any time in the course of the proceedings, and that the filing of a conditional appearance is not a pre-condition for the making of an Order 18 rule 19 application. In other words the filing of an unconditional appearance is not a bar to the making of an application under Order 18 rule 19186. The filing of an unconditional appearance does not preclude a defendant from making an application under Order 18 rule 19. I find nothing in the Rules of High Court providing, either explicitly or impliedly, to that effect. On the contrary, Order 18 rule 19 expressly provides that such an application may be made at any stage of the proceedings187.”

In 2009, Sulaiman Daud JCA in the case of BPI International Finance Ltd (formerly known as Ayala Finance (HK) Ltd) v Tengku Abdullah Ibni Sultan Abu Bakar188 Court of Appeal (Putrajaya) stated that “regard to the filing of the

183 [2007] 2 MLJ 761 at page 776 184 O18 r 19 185 [2000] 4 MLJ 389 186 [2000] 4 MLJ 389 at page 391 187 [2000] 4 MLJ 389 at page 393 188 [2009] 4 MLJ 821; in reference to Chan Min Swee v Malawangi Sdn Bhd [2000] 7 MLJ 111; N Carrupaiya v MBf Property Services Sdn Bhd & Anor [2000] 4 MLJ 389 , Fu Yen Development Sdn

46 unconditional appearance, we are unable to agree with learned counsel for the respondent that the appellant, having filed such an appearance has, abandoned its right to file the application under Order 18 rule 19 of the Rules of High Court. The said rule clearly provides that a striking out order may be made „at any stage of the proceedings‟. It must necessarily follow that neither the entry of an unconditional appearance, nor the serving of the statement of defense, precludes the appellant from making an application under the said rule.”

However in the position of defendant filing unconditional appearance and not challenging the writ but stand on the premise that the suit bring against him does not have locus standi and abuse the process of the Court. Idris Yusoff J in Tengku Jaafar189 High Court (Kota Bharu) case, cited “the defendant in support of his application to strike out the suit, maintains that to institute any proceedings in the court of law, the plaintiff must possess the necessary standing (locus standi), whereas the circumstances of this case show that the plaintiff possesses none190... The position in the instant case, the defendant is not challenging the validity of the writ or service thereof but proceeds on the premise that the plaintiff has no locus standi to bring the said suit against him, the suit is clearly scandalous, frivolous, vexatious and/or an abuse of the process of the court as the alleged publication does not amount to defamation or sedition. The allegations do not evince any cause of action against him”191. The writ of summon and the statement of claim are therefore struck out.

The right of defendant for application to striking out plaintiff can be made at any stage in the proceedings. If the striking out application is made and at the same time defendant entering unconditional appearance, defendant does not barred in the application. Eventually the Court has inherent jurisdiction in the consideration in the application striking out. The plaintiff which has no locus standi may not deprived

Bhd v Shelley Yap Leong & Co [2001] 3 AMR 3736 , and Doree Industries (M) Sdn Bhd & Ors v Sri Ram & Co (sued as a firm) & Ors [2001] 6 MLJ 532 189 Tengku Jaafar bin Tengku Ahmad v [1993] 3 MLJ 156 190 [1993] 3 MLJ 156 at page 161 191 [1993] 3 MLJ 156 at page 165

47 defendant‟s right in the application192. When defendant entered unconditional appearance, he must equivocally elect that the plaintiff has no locus standi to bring the said suit against him.

3.10 Summary

The defendant entering appearance is a process of defendant showing his intention to defend the action and submits to the jurisdiction of the Court and loses his immunity from process he may have193. The entry appearance is subject to the judicial principles and Rules of High Court whether it will be unconditional appearance or conditional appearance.

Conditional appearance is entered when defendant wish to challenge the jurisdiction of the Court while unconditional appearance is entered to prevent judgment in default being entered against the defendant. At the same time maintaining the defendant„s right to object any irregularity in the issue or the service of the writ and to the jurisdiction of the Court194.

Defendant application in striking out application is subject to inherent jurisdiction of the Court. Court may order the action to be stayed or dismissed or judgment to be entered accordingly. However, court empowered the discretion in determine the defendant‟s success in application of striking out when unconditional appearance has been entered. Most of the cases prove that while entering

192 Rules of High Court 1980, O 18 r 19 193 Malaysian High Court Practice, Abridged Ed.(1998), page 78 194 Sheldon v Brown Bayley's Steel Works & Dawnways Ltd [1953] 2 QB 393: PP Persero Sdn Bhd v Bimacom Property & Development Sdn Bhd [1999] 6 MLJ 1, Abdul Malik Ishak J at page 7

48 unconditional appearance, defendant are not abandoned its right to file the application under the Rules of High Court 195.

Legal view of this situation is the entry appearance is a mandatory step to be taken by the applicant in the proceedings in the High Court. This step is a step in the proceedings as required by the Rules of High Court 196 to prevent judgment being obtained by default.

195 O 18 r 19 196 Rules of High Court 1980, O 12 r 6, O 18 r 19

49

CHAPTER 4

UNCONDITIONAL AND CONDITIONAL APPEARANCE

4.1 Introduction

Stay may be granted permanent or temporary, and also may be made contingent to some event. In the arbitration law, type of appearances to be entered will influence the stay application granted for a reference to arbitration agreement.

As a general rule, any application made to the Court, whether filing of pleading or documents, does invoke court‟s jurisdiction on and does amount to a step in the proceedings. In fact, stay may not be granted and the proceedings continued. However, such action may not amount to a step.

50 In the Arbitration Act 1952 section 6, the phrase of “before taking any other steps in the proceedings” was a thrilled to the surface of appearance before application stay was granted197. This phrase also found in the Arbitration Act 2005 section 10 which carried almost the same as Arbitration Act 1952 section 6. Therefore, it is important for the defendant not taking any steps in the proceedings so the application for stay could be granted.

As discussed in Chapter 3, applicant-defendant is required to enter appearance as per Rules of High court to avoid judgment entered against him in default of his appearance. Entering appearance is a process applicant-defendant showing his intention to defend the action and submits to the jurisdiction of the Court and loses his immunity from process he may have198. Through the rules, the appearance is subject to conditional or unconditional appearance.

The principles of this chapter are to determine the kind of appearance circumstances which would give huge impact to the stay application. Either the application is granted or not, it would give a challenge in their application for stay of court proceedings.

4.2 Entering Appearance

The Arbitration Act 2005199 does not define the amount of „appearance‟ in the application for stay. Entering appearance in the proceedings is a one of the necessary step for seeking an order of stay200. It does not constituting a step in

197 Teng Kam Wah (2003), Stay of proceedings to refer to arbitration; conditional or unconditional appearance? 198 Malaysian High Court Practice, Abridged Ed.(1998), page 78 199 Section 10 and arbitration 1952 section 6 200 Drouth v The Ship “G.G.Paul Doumer” [1934] MLJ 72

51 proceedings within the meaning of Arbitration Act 2005201, but is a necessary step to do by the defendant after receiving any such notice from the Court. The rest of the transaction is determined by court whether matters referred within the jurisdiction of arbitrator as per arbitration agreement.

Appearance is a very important process which a defendant shows his intention to defend and submits himself to the jurisdiction of the Court202. There are two options available for an applicant-defendant under Rules of High Court203 in entering appearance. First is to enter an unconditional appearance and second is to enter a conditional appearance.204

The logic behind appearance is to avoid adverse orders against applicant- defendant as well as to inform the Court of the steps intended to be taken before the filing of a written statement of defence205. By entering appearance, either conditional or unconditional, this will preclude applicant-defendant to invoke the arbitration as per their contract is important to be discussed further. Judges have different view in both appearances206.

4.3 Conditional Appearance

With the leave of the Court, applicant-defendant may enter conditional appearance by completing Form 16 to challenge the jurisdiction of the Court. It is

201 Section 10 and arbitration act 1952 section 6 202 Concord Line Co Ltd v The Owners of the Ship "Molly" [1997] 4 CLJ Supp 285 203 Ordinance 12 and Ordinance 18 204 Teng Kam Wah (2003), Stay of proceedings to refer to arbitration; conditional or unconditional appearance? 205 Mr Baldev Norataram Varma and Two Others v Mr Robert Scheltens and Another Commercial Case No. 26/2004, (Unreported) 206 Teng Kam Wah (2003), Stay of proceedings to refer to arbitration; conditional or unconditional appearance?

52 also to enable applicant-defendant to prevent a judgment in default being entered against him and at the same time remaining entitled to object to any irregularity in the issue or service of the writ. “Conditional appearance” means not more than an appearance reserving to the defendant who has entered an appearance the right to apply to the Court to set aside the writ, or service thereof, for an alleged informality or irregularity which renders either the writ or service invalid or lacking in jurisdiction207.

In 1990, Haidar J in the case of Chuan Hup Agencies Pte Ltd v Global Minerals (Sarawak) Sdn Bhd208 High Court (Kuching) stated that “the defendant has entered conditional appearance without prejudice to an application to stay the proceedings. However, the defendant elected to contest the proceedings in the Kuching High Court instead”. The plaintiff later conceded that a stay of the defense could not be ordered but asked that the proceedings in respect of the counterclaim be stayed and that the matters be referred to arbitration chooses to settle the matter by way of arbitration. By entering conditional appearance, it does not preserve the proceedings to proceed. The Court still has discretion jurisdiction to make order which it thinks fit.

In 1994, Edgar Joseph Jr in the case of Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd209 Supreme Court (Ipoh) stated “the contractor entered a conditional appearance and applied by summons for a stay of the proceedings under the Arbitration Act210. The contractor did not take any step in the action between the date of appearance and delivery of pleading such as to debar them from relief by way of stay211. The conditional appearance with application to refer to arbitration does not constitute step in proceedings.

207 Rein v Stein [1892] 1 QB 753 208 [1990] 1 MLJ 305 209 [1994] 2 MLJ 97 210 Arbitration Act 1952 section 6 211 [1994] 2 MLJ 97 at page 111

53 Conditional appearance does not abandoning the right of parties to have the dispute settled by way of arbitration. By entering conditional appearance indeed the applicant-defendant‟s right to apply for a stay is not void. Intention to raise such a defense through arbitration should be allowed by filing a conditional appearance and thereafter plead to arbitration as a defense in opposing the plaintiff‟s notice212. The Court is to dealing with the matter according to their original bargain and the act213 when applicant-defendant had filed an unconditional appearance.

4.4 Unconditional Appearance

The applicant-defendant may enter conditional appearance by completing Form 15, Memorandum of Appearance. The entering of unconditional appearance is made to avoid default judgment entered by plaintiff against applicant-defendant in default of his appearance. The applicant-defendant enter unconditional appearance does not have an effect as taking any step in the proceedings, nor to disentitle the defendant to get the order of stay of court proceedings disqualified.

Success in this application is depends on other conditions to be satisfied214. In a few cases, it was challenged (by the plaintiff) while opposing the application for a stay of court proceedings that when the defendant has entered an unconditional appearance, he will no longer have the right to apply for a stay of the proceedings.

212 Writ, Originating summon, petition 213 Arbitration Act 2005 section 10 (mandatory stay), Arbitration Acct 1952 section 6 (discretion to stay) 214 Hashim Bin Majid v Param Cumaraswamy [1993] 2 MLJ 20

54 When, the applicant-defendant entered unconditional appearance he may lose his right and such action may fulfill “taking any other steps in the proceedings”.215 However, if the unconditional appearance is entered with a clear reservation to seek arbitration, that step may be construed otherwise216. Most of cases showed that by entering appearance unconditionally, it does not mean taking step in the proceedings thus denying entitlement for a reference to arbitration.

In several cases, the applicant-defendant‟s by conduct of entering appearance unconditionally had not construed as taking any step in the proceedings and disentitle the right of defendant for arbitration and to get the order of stay. In order for a stay is granted it was subject to certain conditions to be satisfied217. According to Peh Swee Chin J in Lee Brothers Construction Co. v. Teh Teng Seng Realty Sdn. Bhd.218, it was submitted for the plaintiffs that by appearing before the learned Registrar in Order 14 applications for summary judgment, the defendant had taken a step in the proceedings and hence was not entitled to seek stay of the proceedings but it was held that unconditional appearance did not constitute any step in the proceedings since it was clear the appearance before the learned Registrar was merely to ask for adjournment on the ground of pending applications for stay of action219.

In 1958, J in the case of Cheah Wai Poh v. Chin Brothers & Co. Ltd.220, stated “it was contended that the words “any other steps” in “before taking any other steps in the proceedings” meant “whatever steps” and that the entry of unconditional appearance was a step in a proceedings and that the application for stay should have been made before entering an appearance”. Syed Sheh Barakbah J rejected the contention and granted an order of stay, expressed the view that the defendant was merely asking for a stay of proceedings, and that the

215 K.V.Padmanabha Rau (1997). Law of Arbitration (Cases and Commentaries). Kuala Lumpur Malaysia: International Law Book Services at page 88 216 Teng Kam Wah (2003), Stay of proceedings to refer to arbitration; conditional or unconditional appearance? 217 Hashim Bin Majid v Param Cumaraswamy [1993] 2 MLJ 20 218 [1988] 1 MLJ 459 219 K.V.Padmanabha Rau (1997). Law of Arbitration (Cases and Commentaries). Kuala Lumpur Malaysia: International Law Book Services at page 88 220 [1958] MLJ 215

55 defendant desired to do when he entered an unconditional appearance was merely to prevent judgment being obtained by default.

The Court plays an important role in determining the effect of unconditional appearance and which protocol to be followed. Pursuant to decide case and Arbitration Act 2005221 in regards to an unconditional appearance in arbitration law has devoted much knowledge related to appearance. What we want to discuss further is the effect of unconditional appearance in the stay application whether it‟s jeopardising the rights of the parties to have the matter referred to arbitration pursuant to the statutory provision222 or it is not vitiate the right to invoke the arbitration.

Filing an unconditional appearance does not amount to taking step in the proceedings, and then entitled the applicant from the order staying the proceedings. According to Arulanandom J, in the The “Dong Moon”223 OCJ Penang, “the fact that defendants entered an unconditional appearance did not preclude the court's right to entertain the application and make such order as its thinks fit”. Here, by entering unconditional appearance does not jeopardising the rights of the parties to arbitration.

However, in 1998, Augustine Paul JC in the case of Usahabina v Anuar Bin Yahya224 High Court (Melaka) has made a groundbreaking in view of entry appearance, where Augustine Paul stated that “the defendant has taken a step in the proceedings by entering unconditional appearance and has thereby precluded himself from an order staying the proceedings” has broken the tradition. Augustine Paul unable to subscribe the views expressed by Arulanandom J in the “The Dong Moon”225. Two reasons given which are first, Arulanandom J views appeared to be anchored on English law as indicated by the statement that no steps should be taken

221 Section 10 and arbitration act 1952 section 6 222 Trans Resources Corporation Sdn Bhd v Sanwell Corp & Anor (No 2) [1999] 2 MLJ 609; IJM Construction Sdn Bhd v Cleveland Development Sdn Bhd [2002] 3 MLJ 516 223 The “Dong Moon” Trans Asia Shipping Co Ltd v “Dong Moon” Owners & Ors [1979] 1 MLJ 152 224 [1998] 7 MLJ 691 at page 706 225 The “Dong Moon” Trans Asia Shipping Co Ltd v “Dong Moon” Owners & Ors [1979] 1 MLJ 152

56 'after appearance'. The English provision is so worded as specifically to exclude appearance as a step in the proceedings. Secondly, the reliance on Wilkinson v Barking Corp226 is not appropriate. That case was concerned with a matter over which the Court had no jurisdiction. When the Court has been claimed no jurisdiction to hear the dispute, it will finally become he has jurisdiction to decide whether it has jurisdiction to hear that matter or not. Entry of unconditional appearance in such case does not amount to a submission to the jurisdiction of the Court for the plain reason that it does not exist.

In 1999, Gopal Sri Ram JCA in the case of Interscope Versicherung Sdn Bhd v Sime Axa Assurance Bhd227 Court of Appeal (Kuala Lumpur), stated “entry of an unconditional appearance does indeed constitute the taking of a step in the proceedings within section 6 of the Act” which was inclined to follow Usahabina v Anuar bin Yahya case. “If a defendant intends to apply to stay an action in reliance of section 6 of the Act, he must enter a conditional appearance before moving the court. On the facts, since the respondent had taken a step in the proceedings, it lost the right to invoke section 6 of the Act”. Gopal Sri Ram has relied on the Usahabina v Anuar Yahaya where an unconditional appearance constitute step in the proceedings.

In 2002, Steve Shim CJ in the case of Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor228, in delivering judgment cited that “appearance was a mandatory step in the proceedings as required by the Rules of High Court. However, it was a permitted step in the proceedings that did not amount to a step in the proceedings within the Arbitration Act 1952 section 6. It will not be an offence whether conditional or unconditional appearances in granting application for a stay.

226 [1948] 1 All ER 564 227 [1999] 2 MLJ 529 at page 534 228 Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625

57 The parties which apply for a stay must clearly not serve any pleading but equivocally selection to go for arbitration as per their initial bargain. Taking step in the proceedings may bar the applicant from success in an application for a stay. By serving any pleading, defendant thereby elected to proceed with proceedings in the high court. Thus, it would barred application for stay to refer dispute to arbitration.

Unconditional appearance does not abandon the right of parties to have the dispute settled by way of arbitration. By entering unconditional appearance, applicant-defendant‟s right to apply for a stay is not void229. Proposal of relying on an arbitration agreement is a provision as a defence.

An applicant-defendant intending to raise such a defense should be allowed the alternative course of filing an unconditional appearance and thereafter to plead the arbitration clause as a defense in opposing the plaintiff‟s notice230. When applicant-defendant had filed an unconditional appearance instead of conditional appearance, the Court needs to deal with this matter according to their original bargain and the Act231. This step is similar if the party intents to enter conditional appearance.

4.5 Any Other Steps in the Proceedings

Under the Arbitration Act232 there is no specific detail of the “any other steps in the proceedings”. This Act was a model of English Arbitration Act 1950 and subsequently, it was modified and extended to apply throughout Malaysia. The word

229 The “Dong Moon” Trans Asia Shipping Corporation Co Ltd v “Dong Moon” Owners & Ors [1979] 1 MLJ 152 230 Writ, Originating summon, petition 231 Arbitration Act 2005 section 10 (mandatory stay), Arbitration Act 1952 section 6 (discretion to stay) 232 2005 section 10 and Arbitration act 1952 section 6

58 “before delivering any pleadings” in English Arbitration Act233 does not appear in our version234. Hence it made a dilemma in the interpretation of any other steps taken in the proceedings.

The new Arbitration Act 2005 provide that „A court shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration‟. Appearance is an important process where a defendant shows his intention to defend and submits himself to the jurisdiction of the court235. However, in the arbitration process, failing of the defendant to enter appearance will make judgment in default entered against him in default of his appearance. By entering appearance, either unconditional or conditional, the applicant-defendant is deemed to taking step in the proceedings.

In the Arbitration Act 1952 section 6 and Arbitration Act 2005 section 10, the word „any other‟ in „any other steps in the proceedings‟ is like a reference to something else. The Act only mentions application to stay in the proceedings. Hence, the appearance is very subjective in the determining of the status whether to step in the proceedings or not. If the applicant-defendant has not entered an appearance, judgment entered in default against him. If the appellant-defendant enters an unconditional appearance, the opposing party will claim that it has taken a step in the proceedings. Thus, preclude its application for stay of the proceedings. The appellant-defendant also cannot file a conditional appearance because he is not challenging the jurisdiction of the Court or applying to set aside the writ or service of the writ.

The expression „steps in the proceedings‟ appear in the Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6 as well as in English Arbitration Act 1950 section 4 have contributed to the forefront one single pattern. That pattern is a

233 1950 Section 4 234 Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6 235 Lee Hun Hoe CJ (Borneo) in Malayan Banking Bhd v Swasta Jaya Sdn Bhd [1990] 2 MLJ 12

59 stay will not be granted if the applicant has taken steps in the proceedings after entering appearance in the Court proceedings236. This contention and controversy has brought a different opinion and view among the judges against the step taken in the proceedings.

According to Augustine Paul JC in the case of Usahabina v Anuar Bin Yahya237 High Court (Melaka), he has pointed out the difference in the wording of the English provision compared to Malaysia provision. Under the English Act, it is very clear that entering an appearance is the first step and is not included in the phrase „other steps in the proceedings‟. However, in Malaysia, the words at any time after appearance and before delivering any pleadings do not appear in the Malaysia Arbitration Act. Since the time frame is not prescribed precisely in Malaysia Arbitration Act, the Court would follow the English provision in delivering their decision whether appearance is considered as taking step or become first step before a step in the proceedings.

Under the Rules of High Court, conditional or unconditional appearance is a required step to avoid judgment entered in default of appearance. However, if the applicant-defendant has taken first step by entering appearance, that step is permissible step which does not amount to be a step in the proceedings that would bar an application for stay.238 It is permissible to exclude or to exempt step in the proceedings that did not amount to a step in the proceedings239 within the meaning of the Arbitration Act240.

236 PP Persero Sdn Bhd v Bimacom Property & Development Sdn Bhd [1999] 6 MLJ 1, High Court (), Abdul Malik Ishak J at page 15 237 [1998] 7 MLJ 691 238 Usahabina v Anuar Bin Yahya [1998] 7 MLJ 691, High Court (Melaka), Augustine Paul JC at page 706 239 Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625, Federal Court (Kuala Lumpur), Mohtar Abdullah FCJ at page 626 240 2005 section 10 and arbitration act 1952 section 6

60 The entry of an unconditional appearance does not constitute a step in the proceedings within the meaning of the Arbitration Act241. Although conditional appearance is entered with a view of making an application to set aside the writ or service of the writ under Rules of High Court242, it would also not amount to a step in the proceedings. In short, an entry of appearance under Order 12 of the Rules of High Court would not amount to a step in the proceedings within the meaning of the Act243. The fact is either conditional or unconditional appearance is a first step permitted that did not amount to step in the proceedings under Rules of High Court.

If the applicant-defendant has delivered any pleadings, or taken any other step in the proceedings which indicates his election to allow the action to proceed in the Court, it would trigger to a different view. By this action, the applicant-defendant will be considered have abandoned his right to seek stay to arbitration and would be barred from applying for a stay of the proceedings.

4.5.1 Interlocutory Injunction

During a trial interlocutory injunction is issued to maintain the status quo or preserve the subject matter of the litigation until the trial is over. If the applicant- defendant enters conditional appearance to oppose the plaintiff's application, that would not be considered as steps taken in the proceedings and would not waive the arbitration clause. Applicant-defendant resist an application for an interlocutory injunction by putting in evidence and appearing in court is not a step244 at all.

241 Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6 242 O 12 r 7 243 Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625, Federal Court (Kuala Lumpur), Mohtar Abdullah FCJ at page 637 244 The Law and Practice of Commercial Arbitration in England (2nd Ed) by Mustill and Boyd

61 Filing affidavits and contesting proceedings for an interlocutory injunction is not considered as a „step in the proceedings‟245. As long as the applicant-defendant makes the application for stay of the proceedings before taking any other steps in the proceedings, the right of stay of the proceedings is preserved on him. This is important for the applicant-defendant for not taking any offensive and obvious steps or action, the defendant is entitled to participate in all interlocutory proceedings in court. However, it is still subject to application for stay has been made.

Using this principle in the book titled Russell on the Law of Arbitration (20th Ed) by Walton and Victoria, Ee Chin Sen JC in the case of Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd246 High Court (Kuala Lumpur) agreed with the principle. The applicant-defendant is not waived his right in arbitration after filing affidavits and contesting of proceedings for interlocutory injunction. “so as long as the defendant does not take any offensive steps or actions which the defendant is entitled to participate in all interlocutory proceedings in court provided they have made an application for stay of the proceedings in court. This is to prevent the plaintiff from avoiding the arbitration clause simply by taking out any application which would prejudice the defendant if they do not respond”.

Rogers JJA in the case of Foundation Contractor & Engineering Sdn Bhd v Cosmic Insurance Sdn Bhd247 Court of Appeal ( Darussalam) stated “The judge considered that the respondent had not taken any active step in these proceedings so as to preclude it from applying for stay”. The decision was followed in 2010, where Lee Swee Seng JC in the case of Nam Fatt Corporation Berhad and Anor v Petrodar Operating Co. Ltd. and Anor248 High Court (Kuala Lumpur) cited that “an application for an interlocutory injunction by putting in evidence in affidavit

245 Russell on the Law of Arbitration (20th Ed) by Walton and Victoria 246 [1994] 1 MLJ 422 at page 427; Queens College Kanetra v The Collector AIR [1974] All 431, Mathur J, “I am unable to accept the contention that taking steps to set an ex parte injunction vacated amounts to taking such a step in the suit as would disentitle the defendants for applying for a stay under s 34 of the Indian Arbitration Act”. 247 [2010] MLJU 720; Roussel-Uclaf v. G. D. Searle and Co. Ltd and G. D. Searle and Co. [1978] 1 Lloyd's Law Reports, Graham J, at page 225. 248 [2010] MLJU 938

62 form and through counsel, appearing in court to argue against the injunction cannot amount to 'taking any other steps in the proceedings'”.

Hence, an interlocutory injunction is issued to maintain the status quo and preserve the subject matter of dispute until the trial is over. The applicant-defendant opposes the interlocutory injunction to preserve certain matters, it would not be considered as taken step in the proceedings. Eventually, this would not preclude them in stay for arbitration as per their contract. Defense against an application for an interlocutory injunction by putting evidence and appearing in court is not considered a step in the proceedings249.

4.5.2 Entitlement to Set Aside Injunction

Once the applicant-defendant entitled for a stay application, he is allowed to proceed with the application to set aside the injunction and would not construed as taking step in the proceedings. Under Arbitration Act250, a party to a proceedings may, before taking any other steps to the proceedings, apply to the court for a stay of the proceedings to enable the parties to the proceedings to refer their dispute to arbitration. In general after a consent order for stay of proceedings has been obtained, the defendant is still at liberty to proceed with the application.

According to Zakaria Yatim J in the case of Kirames Sdn Bhd v Federal Land Development Authority251 High Court (Kuala Lumpur), stated that “Even before an order for stay of proceedings was obtained, that is, when the applicant must not take

249 The Law and Practice of Commercial Arbitration in England (2nd Ed) by Mustill and Boyd 250 2005 section 10and arbitration act 1952 section 6 251 [1991] 2 MLJ 198

63 any other steps in the legal proceedings, it is entitled to ask for an interlocutory injunction or to apply to set aside an ex parte injunction”252.

The applicant-defendant in application to oppose the injunction is still behind the expression of taking step. However, the applicant-defendant must not take any step in the legal proceedings253. Applicant-defendant is entitled to ask for the injunction or apply to set aside the ex parte injunction.

4.5.3 Security for Cost

The applicant-defendant can proceed with the interlocutory injunction application and may be entitled to set aside the injunction. Yet, the interlocutory injunction is a step which does not amount to a step in the proceedings as per Arbitration Act. Although the injunction restrained the defendant from enforcing the security deposit or forfeiting the said deposit, the application is still behind the expression of taking step in the proceedings.

Whether the injunction succeeds is subject to the initial agreement entered between them. Zakaria Yatim J in the case of Kirames Sdn Bhd v Federal Land Development Authority254 High Court (Kuala Lumpur) stated that “the court will not restrain a bank which gives a performance guarantee, from honouring it according to its terms except when there is a clear case of fraud”. It is clear only cases limited to the issue of fraud will be restrained from making any demand according to the cost.

252 [1991] 2 MLJ 198 at page 199; Roussel-Uclaf v GD Searle & Co Ltd [1978] FSR 95; Queens College Kanetra v The Collector AIR 1974 All 431 253 Kirames Sdn Bhd v Federal Land Development Authority [1991] 2 MLJ 198 254 [1991] 2 MLJ 198 at page 200

64

The application in opposing the injunction for security for cost will be determined as per their original agreement. Accordingly, the Court only takes exception where fraud has been established and the bank had notice of the fraud. There is no issue by application security for cost, the applicant-defendant has take step in the legal proceedings.

4.6 Power of Court to Grant Stay

Generally, those who have made contract to arbitrate their disputes should be held to their original bargain which is arbitration. In reference to the Arbitration Act255, the power of court to grant stay is discretionary. The approach with discretionary power is subject to court whether to grant stay as per their original contract. The Court‟s prima facie duties when dealing with disputes which is subject to arbitration agreement is to act upon such arbitration agreement.

4.6.1 Discretionary Power

Generally, where the Court found that there were good reasons for not staying the action, the Court may exercise its discretion power for the matter not to be referred to arbitration. In exercising the discretion power, the Court have to consider sufficient reason for the matter to proceed to arbitration then discharging dispute parties from the legal proceedings. Highlighted in the Chapter 2, the onus of showing sufficient reason was on the opposing party. Plaintiff need to give reasons

255 Arbitration Act 1952 Section 6

65 why the differences should not be referred to arbitration256. The Court will be satisfied that he has discharged the onus and shown a good reason why the arbitration should not take place257.

In 1967, case Raja Azlan Shah J in the case of Alagappa Chettiar v Palanivelpillai & Ors258 OCJ Kuala Lumpur, has stated that “in the circumstances where there were good reasons for not staying the action and in the exercise of the court's discretion the matter ought not to be referred to arbitration”.

In 1972, Abdul Hamid J in the case of Malaysia Government Officers' Co- Operative Housing Society Ltd v United Asia Investment Ltd & Ors259 has stated that “in law the decision lies with the discretion of the court. However, this discretion must be founded upon judicial principles”.

In 1986, Raja Azlan Shah J in the case of Lan You Timber Co. v. United General Insurance Co. Ltd.260 OCJ Kuala Lumpur, “it is not a simple matter of discretion to be exercised by the court. In order to exercise the discretion, the court must first of all be satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission”

In 1987, Chua J in the case of Woh Hup (Pte) Ltd & Anor v Turner (East Asia) Pte Ltd261 ACJ Singapore stated that “if the Court is satisfied that there is no

256 D&C Finance Bhd v Overseas Assurance Corporation Ltd [1989] 3 MLJ 240 257 Alagappa Chettiar v Palanivelpillai & Ors [1967] 1 MLJ 208 258 [1967] 1 MLJ 208 259 [1972] 1 MLJ 113 at page 115; in reference to Alagappa Chettiar v Palanivelpillai & Ors [1967] 1 MLJ 208 260 [1968] 1 MLJ 181; decided with reference to under section 5 of the Arbitration Ordinance; There are a number of decision in which the same view has been reiterated; D&C Finance Sdn Bhd v Overseas Assurance Corporation Ltd [1989] 3 MLJ 240; Malaysia Government Officers Co operative Housing Society Ltd v United Asia Investment Ltd & Ors [1972] 1 MLJ 113; Lian Seng Construction Co v Yuzin (1970) 1 MLJ 108; Ismail Bin Abd Halil & Ors v National Union of Newspaper Workers [1993] 3 MLJ 541 261 Who Hup (Pte) Ltd & Anor v Turner (East Asia) Pte Ltd [1987] 1 MLJ 443

66 sufficient reason why the matter should not be referred to arbitration in accordance with the agreement, the Court will seldom refuse a stay”.

In 1988, Peh Swee Chin J in the case of Lee Brothers Construction Co v Teh Teng Seng Realty Sdn Bhd262 OCJ Ipoh, stated that “if the plaintiff fails to discharge that onus, the court will assume there is no sufficient ground for not granting a stay. In exercising its discretion, it is the prima facie duty of the court to act upon such an arbitration agreement”.

In 1990, Haidar J in the case of Chuan Hup Agencies Pte Ltd v Global Minerals (Sarawak) Sdn Bhd263 High Court (Kuching) stated that “the court has in certain cases a discretion to give effect to the agreement for arbitration and need not do so if it thinks it better to do otherwise. However, as master of its own affairs, the court has an inherent power to stay any action which it considers should not be allowed to continue”.

In 1991, Hashim Yeop A Sani CJ in the case of Perbadanan Kemajuan Negeri Perak v Asean Security Paper Mill Sdn Bhd264 Supreme Court (Kuala Lumpur), stated that “once the party asking for a stay has satisfied the court that there is a dispute, difference or question between the parties within the meaning of the arbitration clause, then it is a question of exercising the discretion to grant or not to grant the stay. If the court satisfied that the discretion was properly exercised, the order granted should not be disturbed”.

In 1993, Anuar J in the case of Hashim Bin Majid v Param Cumaraswamy & Ors265 High Court (Kuala Lumpur) stated that “the court has discretion either to stay

262 [1988] 1 MLJ 459; in reference to Drouth v The Ship „GG Paul Doumer‟ [1934] MLJ 72 which as per Lord Selbourne L.C. in Willesford v Watson (1873) 8 Ch App 473 480 263 [1990] 1 MLJ 305at page 308 264 [1991] 3 MLJ 309 at page 314 265 [1993] 2 MLJ 20

67 or refuse a stay of proceedings pending arbitration. The onus is on the party who wish to object to any stay of proceedings to show why the arbitration clause should not be given effect”.

In 1994, Ee Chin Sen JC in the case of Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd266 High Court (Kuala Lumpur) stated that “the court had to exercised proper and judicious discretion based on the settled principle of laws to refuse the stay of proceedings to refer the dispute to the arbitration tribunal for determination”. The fact of this case is that the stay application was refused without giving reasons. It was later appealed to the Supreme Court.

In the same year Edgar Joseph JR in the case of Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd267 Supreme Court (Ipoh) has stated that “for the grant of a stay, the defendant must demonstrate to the court by affidavit evidence that at the time when proceedings were commenced up to the time when the exercise of the court's discretion is sought for the grant of a stay, he is ready and willing to do all things necessary to the proper conduct of the arbitration. The onus on the plaintiff is to satisfy the court that he ought to be allowed to continue the action”. Appeals are allowed and referred to arbitration.

In 1995,Gopal Sri Ram JCA in the case of Tan Kok Cheng & Sons Realty Co Sdn Bhd v Lim Ah Pat (T/A Juta Bena)268 Federal Court (Kuala Lumpur) stated that “the court could, in the exercise of its discretion, stay an action and require a plaintiff to adhere to the obligation voluntarily undertaken to go to arbitration. This power is now embodied in section 6 of the Arbitration Act 1952”.

266 [1994] 1 MLJ 422 267 [1994] 2 MLJ 97 at page 98 268 [1995] 3 MLJ 273 at page 277-278

68 In 1998, Gopal Sri Ram JCA in the case of Accounting Publications Sdn Bhd v Ho Soo Furniture Sdn Bhd269 Court of Appeal (Kuala Lumpur) stated that “the judicial commissioner appeared to have reversed the burden imposed by law where required the defendant to show why the parties should arbitrate and not litigate. However, it was for a plaintiff to demonstrate why an agreement to arbitrate that was plainly binding upon the parties should be thrown overboard. Further, she appeared to have proceeded upon the basis that the arbitration clause had the effect of ousting her jurisdiction. This was misdirection as such a clause did not oust the jurisdiction of the court but gave the court discretion to grant a stay pending arbitration.”

In 1998, Paul JC in the case of Usahabina v Anuar Bin Yahya270 High Court (Melaka), has stated that “The residual discretion which the court retains is limited to a very narrow class of cases, such as those involving fraud or where there is, on a proper construction of the arbitration clause, no dispute that falls within its purview or where the third party procedure under the rules of court will most probably be resorted to”. The discretion power is limited only certain circumstances, which concurrent to the general obligation of court to hold dispute parties to their original contract agreement.

Still in 1998, Augustine Paul JC in the case of Yip Chee Seng & Sons Sdn Bhd v Ornaconstruction Corp Sdn Bhd271 High Court (Melaka) stated that “There is no doubt that the court has jurisdiction to grant such a declaration. But the relief is discretionary, and will not be granted automatically. The court will take into account, when deciding to allow the claim to proceed”.

269 [1998] 4 MLJ 497 270 [1998] 7 MLJ 691 at page 718 271 [1998] 7 MLJ 655 at page 674

69 In 1999, Gopal Sri Ram JCA in the case of Interscope Versicherung Sdn Bhd v Sime Axa Assurance Bhd272 Court Of Appeal (Kuala Lumpur) stated that “there are conditions to be met before the court may exercise its discretion in the defendant's favour. One of these is that the defendant must not have taken 'any other steps in the proceedings' before applying for a stay”.

In 1999, Abdul Malik Ishak J in the case of PP Persero Sdn Bhd v Bimacom Property & Development Sdn Bhd273 High Court (Johor Bahru) stated that “the plaintiff was opposing the stay, the onus was on them to satisfy the court that there were good grounds for the case to proceed to trial. It was entirely discretionary on the court's part whether to grant the stay of proceedings and refer the matter to arbitration; a discretion that must be exercised judicially”.

From the chronology of the cases, it can be seen that the discretionary power of the Court in granting stay is discretionary inline with the Act274 that will allow staying the action. The chronology shows a pattern that in exercising its discretionary power, the Court is to act upon judicial principles. It is subject to court whether to grant stay or not. As highlighted in the Chapter 2, certain criterias are necessary for the satisfaction of the Court before stay is granted.

If parties seeking stay can satisfied the Court that the conditions for the grant of a stay under the Act275 are fulfilled, it does not ipso facto follow that he will be entitled for stay. The Court still retains discretion to refuse it276. Though the power to grant a stay is purely discretionary the exercise of it must be founded upon judicial principles277.

272 [1999] 2 MLJ 529 at page 533 273 [1999] 6 MLJ 1 at page 11 274 Arbitration Act 1952 section 6 275 Arbitration Act 1952 section 6 276 Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97 277 Tan Kok Cheng & Sons Realty Co Sdn Bhd v Lim Ah Pat (t/a Juta Bena) [1995] 3 MLJ 273

70 In exercising the discretion, the Court will have to regard all the circumstances of the particular case278. In the absence of any reason being shown to the contrary the discretion will generally be exercised in favour of the applicant seeking stay of the action before the Court279. Where a party seeking stay of the legal proceedings has satisfied with all the conditions stipulated by the Act280 the onus opposing it will be on the party seeking litigation to satisfy the Court that there are sufficient reasons for the case not referred to arbitration281.

4.6.2 Mandatory Power

The Arbitration Act 2005 repealed and replaced the Arbitration Act 1952. With the presence of the word „shall‟ in section 10 of the New Arbitration Act has made it mandatory for the Court to stay the proceedings in respect of any matter before which proceedings are brought and refer the parties to arbitration as per their original contract. The general rule282 is that where proceedings are brought in respect of a matter which is the subject of an arbitration agreement, the peremptory word „shall‟ makes it mandatory for the Court to grant a stay of those proceedings and refer the parties to arbitration283.

In 2007, Ramly Ali J in the case of Innotec Asia Pacific Sdn Bhd v Innotec GmbH284 said, “The Arbitration Act 2005 (the new Act) came into force on 15 March

278 Teknik Cekap Sdn Bhd v Nirwana Indah Sdn Bhd [1996] 4 MLJ 154 279 Lim Su Sang v Teck Guan Construction & Development Co Ltd [1966] 2 MLJ 29 280 Arbitration Act section 6 281 Alagappa Chettiar v Palanivelpillai & Ors [1967] 1 MLJ 208 282 Arbitration Act 2005 Section 10 283 Borneo Samudera Sdn Bhd v Siti Rahfizah bt Mihaldin & Ors [2008] 6 MLJ 817; Innotec Asia Pacific Sdn Bhd v Inotec GMBH [2007] 8 CLJ 304; Standard Chartered bank Malaysia Bhd v City Properties Sdn Bhd & Anor [2008] 1 MLJ 233; Sunway Damansara Sdn Bhd v Malaysia National Insurance Bhd & Anor [2008] 3 MLJ 872; CMS Energy Sdn Bhd v Poscon Corp [2008] 6 MLJ 561; Chut Nyak Isham bin Nyak Ariff v Malaysian Technology Development Corp Sdn Bhd & Ors [2009] 6 MLJ 729; Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 3 MLJ 656 (CA) 284 [2007] 3 AMR 67 at p 81

71 2005. The power of the court to grant a stay of proceedings is as provided under section 10 of the Act. Pursuant to this new provision, the general discretion vested in the court to stay court proceedings is no longer available. Instead, the requirement to stay is mandatory, on an application by the party before taking any other steps in the proceedings”

In 2008, according to Vincent Ng J in the case of Standard Chartered bank Malaysia Bhd v City Properties Sdn Bhd & Anor285 High Court (Kuala Lumpur) stated that “Unlike the previous provision in section 6 of the 1952 Act, where the court could exercise its discretion in deciding whether a stay pending arbitration ought to be granted, it is now mandatory that proceedings be stayed”.

In 2008 also, Ramly Ali J in the case of Putrajaya Holdings Sdn Bhd v Digital Green Sdn Bhd286 High Court (Kuala Lumpur) stated “The court agrees that from the reading of section 10(1) of the Arbitration Act 2005, it is mandatory for the court to stay proceedings and to refer the parties to arbitration, if the requirements under paras (a) and (b) are fulfilled”.

In 2009, Mary Lim Thiam Suan JC in Winsin Enterprise Sdn Bhd v Oxford Talent (M) Sdn Bhd287 High Court (Kuala Lumpur) stated that “In such an instance the grant of a stay will be mandatory. However, because the Defendant has taken other steps in the proceedings, namely by requesting and obtaining an extension of time to filed Defence, the Defendant is deprived of the right to invoke section 10(1) Arbitration Act 2005”.

285 [2008] 1 MLJ 233 at page 241 286 [2008] 7 MLJ 757 at page 767 287 [2009] MLJU 286

72 In 2010, case Low Hop Bing in the case of Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd288 Court Of Appeal (Putrajaya) stated that “The parties, who had made a contract to arbitrate their disputes, should be held to their bargain. As the contract had been shown to be subject to an arbitration agreement and the exceptions under s 10(1) are inapplicable the word „shall‟ contained in s 10(1) made it mandatory for the court proceedings to be stayed”.

In 2011, Azahar Mohamed J in the case of AV Asia Sdn Bhd v MEASAT Broadcast Network Systems (M) Sdn Bhd & Anor289 High Court (Kuala Lumpur) stated that “The word „shall‟ that appears in section 10 imposes a mandatory obligation to stay the proceedings and refer the parties to arbitration in respect of matter which is the subject of an arbitration agreement”.

From the chronology of the cases highlighted, it can be seen that the power of court in granting stay for arbitration is now mandatory in line with the Act290. These matters are exception to the situation where the arbitration agreement is null and void, inoperative or incapable of being performed or that there is in fact no dispute between the parties with regard to the matters to be referred.291

The chronology shows a pattern of mandatory obligation to grant stay. Accordingly, the Court still possess inherent jurisdiction to stay all the proceedings

288 [2010] 3 MLJ 656 at page 656. In delivering judgment, Low Hop Bing has referred to Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd & Anor [2008] 1 MLJ 233; [2008] 1 CLJ 496; Sunway Damansara Sdn Bhd v Malaysia National Insurance Bhd & Anor [2008] 3 MLJ 872; CMS Energy Sdn Bhd v Poscon Corp [2008] 6 MLJ 561; [2008] 1CLJ 496; Borneo Samudera Sdn Bhd v Siti Rahfizah bt Mihaldin & Ors [2008] 6 MLJ 817; [2008] 5 CLJ 43 (CA) and Majlis Ugama Islam dan Adat Resam Melayu v Far East Holdings Bhd & Anor [2007] 10 CLJ 318. 289 [2011] 8 MLJ 792 at page 796 In delivering judgment, Azahar Mohamed J has referred to Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd & Anor [2008] 1 MLJ 233; [2008] 1 CLJ 496; Busuk Jamilah Salim & 70 Ors v Siti Rahfizah Mihaldin & Anor ; [2009] 1 LNS 1358; Chut Nyak Isham bin Nyak Ariff v Malaysian Technology Development Corp Sdn Bhd & Ors [2009] 6 MLJ 729; [2009] 9 CLJ 32; Renault SA v Inokom Corp Sdn Bhd & Anor and other appeals [2010] 5 MLJ 394; and Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 3 MLJ 656; [2010] 7 CLJ 785). 290 Arbitration Act 2005 section 10 291 Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 3 MLJ 656

73 in this action and referred to arbitration. As highlighted in Chapter 2, certain criterias are necessary for the satisfaction of the Court before stay is granted.

4.7 Summary

In general, a contract agreement between parties to refer to arbitration does not bar neither both parties from instituting proceedings in the Court nor preclude the Court from entertaining a suit filed in breach of the contract to arbitrate. Therefore, for a party to enter arbitration proceedings, it is important before a stay of application is granted, there should be no step taking by them (applicant-defendant).

According to the Act292, there is no specific interpretation about kind of appearance to be entered when applicant-defendant intends to proceed to arbitration as per original bargain. Courts have inherent jurisdiction in determining the amount of appearance whether the dispute are suitable to be settled by way of arbitration or not.

Appearance is a very important process where by a defendant shows his intention to defend and submit himself to the jurisdiction of the Court293. Entering appearance is to avoid applicant-defendant from adverse orders against him as well as to inform the Court of the steps intended to be taken before the filing of a written statement of defense.

292 Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6 293 Concord Line Co Ltd v The Owners of the Ship "Molly" [1997] 4 CLJ Supp 285

74 Prior to the law cases, an entry of an unconditional appearance does not constitute a step in the proceedings within the meaning of the Act294. A conditional appearance would not amount to a step in the proceedings either. An entry of appearance under the RHC295 would not amount to a step in the proceedings within the meaning of the Act296.

If the applicant-defendant had served pleadings, then he had taken a step in the proceedings within the meaning of Arbitration Act. He had preserved his right from order of stay of proceedings to refer the dispute to arbitration297.

As a whole, in determining whether to grant or refuse a stay, the Court still have inherent jurisdiction to the application. The methodology and chronology to grant or refuse stay whether court‟s power is discretionary or mandatory, is within court‟s jurisdiction. Accordingly, the Court must hold disputes parties to their original bargain.

294 Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6 295 O 12 296 Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6 297 Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625 at page 637

75

CHAPTER 5

FINDING AND CONCLUSION

5.1 Introduction

The previous Chapter 2, Chapter 3 and Chapter 4 have explained the basis in common law and Arbitration Act position. Application for stay of proceedings to refer to arbitration in fact is not depends only to the requirement of application stay to success on the Act298 but also concurrent whether has taken step in the proceedings.

This chapter will conclude the whole research and the finding result from the case analysis.

298 Arbitration act 2005 section 10 and arbitration act 1952 section 6

76 5.2 Research Finding

This study is about the influence of appearance in the application stay of proceedings for a reservation to settle in arbitration. The aim is to determine the factors that the Court will take into consideration when parties have entered appearance henceforth resulting in the stay application granted or otherwise.

According to the Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6, these Acts deliver to the parties to arbitration agreement against whom legal proceedings in court are commenced may make the application to stay before taking any other step in the proceedings. Before stay is granted, court has to fulfill certain condition and if it is met, stay may be granted accordingly.

One of the important conditions is no step taken in the proceedings. When applicant-defendant entering appearance whether it is conditional or unconditional, these resulted different view among the judges. Through the law cases, it reveals that entering appearance is considered not taking step in the proceedings within the meaning of the act. Eventually in arbitration situation, an appearance is considered as step in the proceedings which is not regarded as a step in the proceedings as per Rules of High Court.

5.2.1 Taking Step in the Proceedings

In order for court to grant application stay in term of appearance, it is necessary for court to ensure the party applies for a stay must make an application

77 “before taking any other steps in the proceedings”. This is an important step to ensure that the stipulated conditions are met.299

Under the Arbitration Act 1952300 granting stay is court‟s discretion301 and even if the conditions above are met, court still has authorities to do otherwise. Examples can be seen when there were inordinate delay in applying stay302, bona fide allegation of fraud303, disputed element is legal nature or appointing arbitrator itself is will not settle the disputed304.

According to Hashim Yeop Sani CJ in the case of Perbadanan Kemajuan Negeri Perak v Asean Security Paper Mill Sdn Bhd 305“where parties have agreed to refer disputes for arbitration and the court is satisfied that a dispute exists, the prima facie stand of the court is to stay the action and allow the parties to go to the tribunal to which they have agreed. In other words once the party applies for a stay and there is a dispute within the meaning of a valid and subsisting arbitration clause the inclination of the court is that effect should be given to the arbitration clause”. With reference to Arbitration Act 1952 section 6 granting stay is prima facie duties and discretion of the Court306.

Development of arbitration act has entered a new phase in handling matters related to stay application. It makes court‟s obligation to grant stay is mandatory and refer the parties to arbitration in respect of matter which is subject to arbitration

299 Arbitration Act 1952 Section 6 ; Arbitration Act 2005 Section 10 300 Section 6 301 Refer to Arbitration Act 1952 302 Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd [1994] 1 MLJ 422 303 Malaysia Government Officers' Co-Operative Housing Society Ltd V United Asia Investment Ltd & Ors [1972] 1 MLJ 113 304 Hashim Bin Majid v Param Cumaraswamy & Ors [1993] 2 MLJ 20 305 [1991] 3 MLJ 309 at page 312 306 Perbadanan Kemajuan Negeri Perak v. Asean Security Paper Mill Sdn Bhd [1991] 3 MLJ 309, Hashim Yeop Sani CJ at page 312

78 agreement307. Refer to Arbitration Act 2005 granting stay is a mandatory duty of court in dealing with stay application308.

Referring to Arbitration Act 2005 section 10 and Arbitration Act 1952 section 6, it is court obligation to filter out both parties have not taken any other step than application to stay. If the applicant had served any pleadings in the appearance, then he had clearly taken a step in the proceedings309. A step must be a clear which constitute step in the proceedings. Step taken with a clear reservation of defendant to seek to the arbitration agreement may be construed otherwise.

5.2.2 Enter Appearance is Not Contain Step in the Proceedings

Entering appearance is not a step in the proceedings and therefore will not preclude an applicant from applying for a stay of proceedings pursuant to Arbitration Act 1952 section 6310 and Arbitration Act 2005 section 10. In addition, the fact of each case will reveal to what extend the entering appearance does not considered as step in the proceedings within the Arbitration Act.

307 AV Asia Sdn Bhd v MEASAT Broadcast Network Systems (M) Sdn Bhd & Anor [2011] 8 MLJ 792; Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd & Anor [2008] 1 MLJ 233; [2008] 1 CLJ 496; Busuk Jamilah Salim & 70 Ors v Siti Rahfizah Mihaldin & Anor ; [2009] 1 LNS 1358; Chut Nyak Isham bin Nyak Ariff v Malaysian Technology Development Corp Sdn Bhd & Ors [2009] 6 MLJ 729; [2009] 9 CLJ 32; Renault SA v Inokom Corp Sdn Bhd & Anor and other appeals [2010] 5 MLJ 394; and Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 3 MLJ 656; [2010] 7 CLJ 785) 308 Ibid 309 Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625 310 Drouth v The Ship „GG Paul Doumer‟ [1934] MLJ 72; Lee Brother Construction Co v Teh Teng Seng Realty Sdn Bhd [1988] 1 MLJ 459; D&C Finance Sdn Bhd v Overseas Assurance Corporation Ltd [1989] 3 MLJ 240; Ablemerge (M) Sdn Bhd v Emville Sdn Bhd [2000] 6 MLJ 769; IHM Sdn Bhd v AIZ Information Services (M) Sdn Bhd [2003] 4 MLJ 247; Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625

79 In 1979, Arulanandom J in the case of The“Dong Moon” Trans Asia Shipping Co Ltd v “Dong Moon” Owners & Ors311, OCJ Penang stated the fact that by referring Asquith L.J. in Wilkinson v Barking Corporation312, an unconditional appearance by itself is not a waiver of the defendants' right to apply for stay. “The Supreme Court may by statute lack jurisdiction to deal with a particular matter. It has however jurisdiction to decide whether or not it has jurisdiction to deal with such matters and by entering an unconditional appearance a litigant submits to the former jurisdiction (which exists) but not to the latter (which does not).” The fact of the case is defendant did not preclude his right for a stay application by the Court after entering unconditional appearance. Entering unconditional appearances gives defendant space for the case to be referred to the jurisdiction of the Court and the Court may makes such order as they think fit.

In 1993, Anuar J in the case of Hashim Bin Majid v Param Cumaraswamy & Ors313 High Court (Kuala Lumpur) stated that the “defendants may apply to the court for stay of proceedings under Arbitration Act 1952 section 6”. The Court has rejected the objection by the plaintiff's counsel that the defendants entering an unconditional appearance has no longer have the right to apply to the Court to stay the proceedings. The fact of this case is by entering an appearance did not or could not be regarded as a step in the proceedings and at this instance the defendants may apply to the Court for stay of proceedings.

In 1994, Edgar Joseph Jr SCJJ in the case of Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd314 Supreme Court (Ipoh), stated the fact by referring Roussel-Uclaf v GD Searle & Co Ltd315. In this case, though application for interlocutory injunction is opposed by putting in evidence and appearing in court, it did not bar them from apply for stay. Therefore, a stay ought to be granted in respect of the action against defendants.

311 [1979] 1 MLJ 152 312 [1948] 1 All ER 564 567 313 [1993] 2 MLJ 20 314 [1994] 2 MLJ 97 315 [1978] 1 Lloyd's Rep 225

80

In 1994 also, Ee Chin Sen JC in the case of Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd316 High Court (Kuala Lumpur), again has refer to the conceptual set up in the book Russell on the Law of Arbitration (20th Ed) by Walton and Victoria that, “filing affidavits and contesting proceedings for an interlocutory injunction is not considered a „step in the proceedings”. It further adds that as long as one makes an application for stay of the proceedings before taking any other steps in the proceedings, the right of stay of the proceedings is preserved. Principle in the case above complied with Arbitration Act 1952 section 6 and there is no question of waiver of the arbitration clause in the agreement. This is particularly as long as the applicant does not take any offensive steps or actions which the defendant is entitled to participate in all interlocutory proceedings in court provided they have made an application for stay of the proceedings in court. This is to prevent the plaintiff from avoiding the arbitration clause simply by taking out any application which would prejudice the silent defendant.

In 1998, Gopal Sri Ram JCA in the case of Accounting Publications Sdn Bhd v Ho Soo Furniture Sdn Bhd317 Court of Appeal (Kuala Lumpur), stated the fact by referring Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd318. Gopal Sri Ram stated that “the defendant after entering an appearance took out its summons for a stay of proceedings. That application was disposed of by the judicial commissioner on 26 September 1996. The defendant then delivered its defense and counterclaim on 13 November 1996”. From the chronology and all events appear in this case, there is no reference whether the appearance is conditional or unconditional. From chronology, its seem like conditional appearance entered and Gopal Sri Ram therefore delivered in his view that the defendant did not take any step in the proceedings before moving the Court for a stay. This was supported from the decision in the case of Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah)

316 [1994] 1 MLJ 422 317 [1998] 4 MLJ 497 318 [1994] 2 MLJ 97

81 Sdn Bhd319 where a similar pattern of the fact did not deter the Supreme Court from ordering a stay of the action.

However, in 1998, Augustine Paul JC in the case of Usahabina v Anuar Bin Yahya320 High Court (Melaka) stated that “the defendant by failing to file the defense and request for extension of time did not amount to the „taking of any steps in the proceedings‟. But the filing of an unconditional appearance, that meant he had elected to allow the action taken to go on and had submitted to the jurisdiction of the court”. The unconditional appearance was amounted to a step in the proceedings thereby applicant-defendant are precluded from an order staying the proceedings. In Usahabina v Anuar Bin Yahya321, Augustine Paul JC declined to follow several cases for the reason that they were all anchorages on English Law as indicated by the statement that no step should be taken “after appearance” referring to The“Dong Moon” Trans Asia Shipping Co Ltd v “Dong Moon” Owners & Ors322.

This case was referred in 1999 where Gopal Sri Ram JCA in the case of Interscope Versicherung Sdn Bhd v Sime Axa Assurance Bhd323 Court of Appeal (Kuala Lumpur) stated that “after a careful consideration of the cases upon the subject, I have reached the conclusion that Usahabina v Anuar bin Yahya was rightly decided and that the entry of an unconditional appearance does indeed constitute the taking of a step in the proceedings within Arbitration Act 1952 section 6”. Court found that from the judgment of Augustine Paul JC, that the decisions of Malaysian Courts held the entry of an unconditional appearance not to amount to a step in the proceedings without properly appreciating that the two provisions in Arbitration Act 1952324 and of the English Arbitration Act325, which are differently constructed where the wording after appearance and before delivering pleading. Court has gratefully adopted all that has been said by Augustine Paul JC upon the point

319 [1994] 2 MLJ 97 320 [1998] 7 MLJ 691 321 [1998] 7 MLJ 691 322 [1979] 1 MLJ 152 323 [1999] 2 MLJ 529 324 Section 6 325 Section 4(2)

82 in Usahabina. It follows that the line of cases that take the contrary view were wrongly decided and ought no longer to be followed. In the judgment, if the defendant intends to apply to stay an action in reliance of Arbitration agreement, he must enter a conditional appearance before moving to court.

However, entering appearance issue has taken a different review in 1999 where Kamalanathan Ratnam J in the case of Trans Resources Corp Sdn Bhd v Sanwell Corp & Anor (No 2)326 High Court (Kuala Lumpur), after referring the fact from several cases327 which has been delivered that by entering of an unconditional appearance, it does not amount to waivered defendant's right to proceed to arbitration. The basis is the plaintiff's filing of the civil suit herein does not amount to either an irregularity or a defect in the writ or service thereof and in opposing the action it has not been the first defendant's contention that the Court has no jurisdiction to deal with the dispute.

Still in 1999, Abdul Malik Ishak J in the case of PP Persero Sdn Bhd v Bimacom Property & Development Sdn Bhd328 High Court (Johor Bahru), after referring to several cases329 stated a stay will not be granted if the applicant has taken steps in the proceedings after entering appearance in the Court proceedings. This

326 [1999] 2 MLJ 609 327 Gopal Sri Ram JCA in the Federal court decision in Tan Kok Cheng & Sons Realty Co Sdn Bhd v Lim Ah Pat (t/a Juta Bena) [1995] 3 MLJ 273; Syed Sheh Barakbah J in Cheah Wai Poh v Chin Brothers & Co Ltd [1958] MLJ 215; Anuar J in Hashim Bin Majid V Param Cumaraswamy & Ors 328 [1999] 6 MLJ 1 329 Alagappa Chettiar v Palanivelpillai & Ors [1967] 1 MLJ 208; Cheah Wai Poh v Chin Brothers & Co Ltd [1958] MLJ 215; D&C Finance Bhd v Overseas Assurance Corp Ltd [1989] 3 MLJ 240; Drouth v The Ship „GG Paul Doumer‟ [1934] MLJ 72; Hashim bin Majid v Param Cumaraswamy & Ors [1993] 2 MLJ 20; Inter Maritime Management Sdn Bhd v Kai Tai Timber Co Ltd, Hong Kong [1995] 1 MLJ 322; Kirames Sdn Bhd v Federal Land Development Authority [1991] 2 MLJ 198; Malaysia Government Officers‟ Co-operative Housing Society Ltd v United Asia Investment Ltd & Ors [1972] 1 MLJ 113; Pembenaan Keng Ting (Sabah) Sdn Bhd v Seloga Jaya Sdn Bhd [1994] 1 MLJ 422; Pembenaan Leow Tuck Chui & Sons Sdn Bhd v Dr Leela's Medical Centre Sdn Bhd [1995] 2 MLJ 57; Perbadanan Kemajuan Negeri Perak v Asean Security Paper Mill Sdn Bhd [1991] 3 MLJ 309; Roussel-Uclaf v GD Searle & Co Ltd & GD Searle Co [1978] FSR 95; [1978] 1 Lloyd's Rep 225; Seloga Jaya Sdn Bhd v Pembenaan Keng Ting (Sabah) Sdn Bhd [1994] 2 MLJ 97; Sim Hiang Kiaw & Ors v Lee Hoi Kim Construction Co [1986] 1 MLJ 347; Suncast Sdn Bhd v Padang Indah Sdn Bhd [1999] MCL para 219; Tan Kok Cheng & Sons Realty Co Sdn Bhd v Lim Ah Pat (t/a Juta Bena) [1995] 3 MLJ 273; Teknik Cekap Sdn Bhd v Nirwana Indah Sdn Bhd [1996] 4 MLJ 154; Thamesa Designs Sdn Bhd & Ors v Kuching Hotels Sdn Bhd [1993] 3 MLJ 25. Note that Trans Resources Corp Sdn Bhd v Sanwell Corp & Anor (No 2) [1999] 2 MLJ 609 does not take part in delivering judgment

83 consideration take places after the question of what constitutes taking steps in the proceedings arise. It has been referred in the Pembenaan Leow Tuck Chui & Sons Sdn Bhd v Dr Leela's Medical Centre Sdn Bhd330 case also in Thamesa Designs Sdn Bhd & Ors v Kuching Hotels Sdn Bhd 331 case. The remedy of arbitration is waivered when a party to an arbitration clause entered an appearance and filed a defense. In other words, taking part in proceedings and questioning the jurisdiction of the Court constitute an act to be a step in the proceedings.

In 2000, again Kamalanathan Ratnam J in the case of Ablemerge (M) Sdn Bhd v Emville Sdn Bhd332 High Court (Kuala Lumpur), decided that the Court of Appeal in Interscope could not depart from its earlier decision in Accounting Publications, based on the accepted principles. In these circumstances, with the greatest respect, Ablemerge333 does not bound by the decision of the Court of Appeal in Interscope and accept as binding the decision of the Court of Appeal in Accounting Publications. The entering of an unconditional appearance could not amount to a waiver of the defendant's right to precede to arbitration and the does not a contention that court has no jurisdiction to deal with the dispute.

In 2002, Mohtar Abdullah FCJ in the case of Sanwell Corp v Trans Resources Corp Sdn Bhd & Anor334 Federal Court (Kuala Lumpur), he has summarised that “an entry of an unconditional appearance does not constitute a step in the proceedings within the meaning of section 6 of the Arbitration Act 1952. It is obvious that a conditional appearance entered with a view of making an application to set aside the writ or service of the writ under Order 12 rule 7 of the Rules of High Court would not amount to a step in the proceedings either. In short, an entry of appearance under Order 12 of the Rules of High Court would not amount to a step in the proceedings within the meaning of section 6 of the Arbitration Act 1952.”335

330 [1995] 2 MLJ 57 331 [1993] 3 MLJ 25 332 [2000] 6 MLJ 769 333 [2000] 6 MLJ 769 334 [2002] 2 MLJ 625 335 [2002] 2 MLJ 625 at page 636

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Therefore, entering appearance either conditional appearance or unconditional appearance does not constitute a step in proceedings. However, when another step is taken after entering appearance, this step will be determined as a step in the proceedings. By the general principle set up by Teng Kam Wah336 in Chapter 2, it would be helpful to determine whether a step in the proceedings has been entered and waive the right to arbitration.

Where the dispute is subject to arbitration agreement, court would examine the steps and determine whether the matter falls within the circumstances that allow the stay to be granted. Appearance is a step required to avoid judgment in default against applicant-defendant in default of his appearance. However where there is application made for the proceedings to be stay, court has jurisdiction to grant stay if no any steps has been taken and before any pleading which pleading delivered does not amount to the step in the proceedings.

336 Teng Kam Wah (2003), Stay of proceedings to refer to arbitration; conditional or unconditional appearance?

85 5.2.3 Summary of Case – Entering Appearance

From the relevant fact of the cases, entering appearance either conditional or unconditional can be summarised as follows:-

STAY OF PROCEEDINGS – APPEARANCE YEAR APPEARANCE CASE COURT 1979 Unconditional The“Dong Moon” Trans Asia OCJ Appearance Shipping Co Ltd v “Dong Moon” Penang Owners & Ors an unconditional appearance by itself is not a waiver of the defendants' right to apply for stay. 1993 Unconditional Hashim Bin Majid v Param High Appearance Cumaraswamy & Ors Court - entering appearance could not be (Kuala regarded as a step in the Lumpur) proceedings. 1994 Conditional Seloga Jaya Sdn Bhd v Pembenaan Supreme Appearance Keng Ting (Sabah) Sdn Bhd Court an application for interlocutory (Ipoh) injunction was a step, indeed did not debar them from relief by way of stay. 1994 Conditional Pembenaan Keng Ting (Sabah) Sdn High Appearance Bhd v Seloga Jaya Sdn Bhd Court - filing affidavits for an interlocutory (Kuala injunction is not considered a „step in Lumpur) the proceedings. 1998 Conditional Accounting Publications Sdn Bhd v Court of Appearance Ho Soo Furniture Sdn Bhd Appeal - conditional appearance has been (Kuala entered and the defendant did not Lumpur) take any step in the proceedings before moving the court for a stay. 1998 Unconditional Usahabina v Anuar Bin Yahya High Appearance an unconditional appearance meant Court he had elected to allow the action (Melaka) taken to go on and had submitted to the jurisdiction of the court. Table 5.1 Summary of Cases

86 STAY OF PROCEEDINGS - APPEARANCE YEAR APPEARANCE CASE COURT 1999 Unconditional Interscope Versicherung Sdn Bhd Court of appearance v Sime Axa Assurance Bhd Appeal entry of an unconditional appearance (Kuala does indeed constitute the taking of a Lumpur) step in the proceedings within Arbitration Act 1952 section 6. 1999 Unconditional Trans Resources Corp Sdn Bhd v High Appearance Sanwell Corp & Anor (No 2) Court - entering of an unconditional (Kuala appearance does not amount to Lumpur) waivered defendant's right to proceed to arbitration. 1999 Conditional PP Persero Sdn Bhd v Bimacom High Appearance Property & Development Sdn Bhd Court entered an appearance and filed a (Johor defense is waivered party‟s right to Bahru) an arbitration. 2000 Unconditional Ablemerge (M) Sdn Bhd v Emville High Appearance Sdn Bhd Court - unconditional appearance could not (Kuala amount to a waiver of the defendant's Lumpur) right to precede to arbitration. 2001 Conditional Jak Kwang Builders & Developers High Appearance Sdn Bhd v Pembinaan TJL (Sarawak) Court Sdn Bhd (Kuching) conditional appearance or unconditional appearance does not expressly requires to be entered within the s 6. 2002 Unconditional IJM Construction Sdn Bhd v High appearance Cleveland Development Sdn Bhd Court an unconditional appearance herein (Johor does not and cannot amount to a step Bahru) in the proceedings to deprive the defendant of his recourse to refer the dispute to arbitration. Table 5.2 Summary of Cases

87 STAY OF PROCEEDINGS - APPEARANCE YEAR APPEARANCE CASE COURT 2002 Unconditional Sanwell Corp v Trans Resources Federal appearance Corp Sdn Bhd & Anor Court - an unconditional appearance does (Kuala not constitute a step in the Lumpur) proceedings within the meaning of the Act. It is obvious that a conditional appearance entered with a view of making an application to set aside the writ or service of the writ under O 12 r 7 of the RHC would not amount to a step in the proceedings either. 2003 Conditional IHM Sdn Bhd V Aiz Information High appearance Services (M) Sdn Bhd Court appearance and thereafter applied (Kuala for a stay pending arbitration, the Lumpur) defendant has already complied with s 6 of the Act by filing an application before taking any further step in these proceedings. Therefore, the issue of the defendant being guilty of taking a step in the proceedings does not arise at all. 2003 Conditional Malaysian European Production High appearance System Sdn Bhd v Zurich Insurance Court (M) Bhd (Pulau - conditional appearance pursuant of Pinang) the Rule of the Rules of High Court is only available to cases where the defendant complained of an irregularity in the originating process, the entering of an unconditional appearance could not amount to a waiver of the defendant‟s right to proceed to arbitration . 2003 Conditional Pekeliling Triangle Sdn Bhd & Anor Court Of appearance v Chase Perdana Bhd Appeal - the defendants had entered a (Kuala conditional appearance and applied Lumpur) for stay, the same did not amount to the taking of a step in the proceedings within the meaning of the Arbitration Act . Table 5.3 Summary of Cases

88 STAY OF PROCEEDINGS - APPEARANCE YEAR APPEARANCE CASE COURT 2009 Conditional Winsin Enterprise Sdn Bhd v Oxford High appearance Talent (M) Sdn Bhd Court - defendant taking more than one step (Kuala in the proceedings, ie one step in Lumpur) filing the conditional appearance and another step by applying for the extension of time, clearly indicating an intention to go on with the proceedings instead of asserting his right to arbitration. Table 5.4 Summary of Cases

5.3 Suggestion for Future Research

The same method of study can be used for a research about the type of entering appearance in the civil procedure to support the striking out application. Under the Rules of High Court 1980 Order 12 rule 7, conditional appearance cannot be denied to setting aside the writ or service of the writ. However if applicant- defendant planned to striking out the proceedings, which types of appearance suitable and should be entered to avoid the application refused. This future study will help other parties to know which appropriate appearance will influence them in the striking out pleading application.

Another future study is about comparison of the effect of unconditional appearance in the civil procedure and arbitration act can be held. Either court has same consideration when delivering the judgement in both situations or not.

89 5.4 Problem occurring during research process

There are a few problems occurred during the research process:

a. Resource of the research

The resource for this research is not only limited to the law cases but also reference to the legal books. Lack of resources at UTMIC especially legal books hinders the efforts when drafting the chapter. A lot of resources were referred to the civil procedure books. However, due to the time constraint and lack of resources; these did not stop me to go to other libraries around the Klang Valley.

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