T Kuhendran, Esther Tan and Delvin Singh Mangat from ZUL RAFIQUE & Partners’ Construction Dispute Resolution Practice Group, have successfully obtained an Order from the Kuala Lumpur High Court to enforce an arbitration award (the “Award”), and simultaneously resisted the setting aside of the said Award, in favour of the Employer, East Coast Economic Region Development Council (“ECERDC”) in the sum of MYR10 million against the Principal Consultant, Multi-Spex Architects Sdn Bhd (“MSA”).

MSA was appointed by ECERDC as the Principal Consultant by way of a Letter of Appointment, for the master planning and detailed design for the development of the Besut Setiu Agropolitan Project in Terengganu. Shortly after completion of the construction but prior to taking over the project for use, a number of buildings displayed structural defects. Investigations that were carried out confirmed that the structural defects were caused by MSA’s failure to perform their obligations and to meet the warranties stated in the Letter of Award (“LOA”). MSA denied that the structural defects were attributable to them.

ECERDC then referred the dispute to arbitration. In May 2020, ECERDC was awarded the sum of MYR10 million being the additional cost incurred to remedy the structural defects. ECERDC applied to the High Court to enforce the Award and MSA, being dissatisfied with the Award, sought to set it aside pursuant to section 37(1)(b)(ii)
[1], 37(2)(b)(i)[2] and 37(2)(b)(ii) of the Arbitration Act 2005.

The primary grounds relied upon by MSA to set aside the Award were as follows:

(i) The Tribunal found that the defects arose from the construction by the Main Contractor and not the design by MSA;
(ii) The Tribunal had prevented MSA from referring to the construction contract between ECERDC and the Main Contractor during the hearing;
(iii) The Tribunal had ignored MSA’s submission relating to a final account between ECERDC and the Main Contractor. The establishment of arguments relating to the final account was pivotal to the outcome of the Award; and
(iv) In the circumstances, the quantum of the Award is excessive and would unjustly enrich the Defendant.
Having considered all of the reasons relied on by MSA above, the High Court found that MSA has failed to prove that the Award is in conflict with the public policy of Malaysia, as there was no breach of natural justice which occurred either during the arbitral proceedings or in connection with the making of the Award. The High Court entered a judgment in terms of the Award in favour of ECERDC. 

[1] (1) An award may be set aside by the High Court only if-
(b) the High Court finds that-
 (ii) the award is in conflict with the public policy of Malaysia.
[2] (2) Without limiting the generality of subparagraph (1)(b)(ii), an award is in conflict with the public policy of Malaysia where-
(b) a breach of the rules of natural justice occurred-
(i) during the arbitral proceedings; or
(ii) in connection with the making of the award.

For more insight into this area of law, please contact our Partners in the Construction Dispute Resolution Practice Group:
Kuhendran Thanapalasingam

Susan Tan Shu Shuen

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