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Zul Rafique & Partners succeeds at the Federal Court in opposing an application for leave to appeal in respect of an application for discovery filed in an application to set aside an arbitration award of over MYR16 Million

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21 October 2021

Please click HERE for the Mandarin version of the case update.

T Kuhendran, Daniel Lau and Jasmeet Kaur from Zul Rafique & Partners’ Construction Dispute Resolution Group, representing  SJIC Bina Sdn Bhd (“Respondent”), succeeded in the Federal Court in opposing an application by Iskandar Regional Development Authority (“Applicant”) for leave to appeal against a Court of Appeal decision upholding the decision of the High Court in Iskandar Regional Development Authority v. SJIC Bina Sdn Bhd and another appeal [2020] MLJU 566.

The Respondent had initiated arbitration proceedings against the Applicant and obtained an award in the Respondent’s favour. The core issue in dispute determined in the arbitration was the interpretation of the contract, the Respondent arguing that it was a lump sum contract whilst the Applicant contended to the contrary that the contract was a cost plus model and therefore entitled the Applicant to unilaterally adjust the contract sum. The arbitrator agreed with the Respondent and found that as the contract was a lump sum, the contractor takes the risk in pricing. Accordingly, the Applicant’s adjustments to the contract sum were deemed a breach of contract and damages for the under-certified deductions was awarded to the Respondent.

Dissatisfied, the Applicant filed an application to set aside the arbitration award under section 37 of the Arbitration Act 2005 on the grounds that the Respondent was pocketing a “windfall” and unjustly enriching itself from the government’s coffers, which was purportedly contrary to public policy. The Applicant thereafter filed an application for discovery pursuant to Order 24 rule 3 of the Rules of Court 2012 seeking downstream Final Accounts between the Respondent and its sub-contractor. Ostensibly, the purpose of discovery was to determine who the beneficiary of the “windfall” was. In the High Court, the Respondent contended that it need only satisfy the requirements under Order 24 rule 3 which were set out in the case of Yekambaran s/o Marimuthu v. Malayawata Steel Sdn Bhd [1993] MLJU 96.

The High Court dismissed the Applicant’s discovery on 3 grounds, namely:
 
i. an application to set aside an arbitration award is not an appeal and cannot encroach or re-litigate the merits of the arbitration award;
 
ii. the Applicant failed to clear the requirement to adduce fresh evidence as laid out in Westacre Investments Inc v. Jugoimport SDRP Holding Company Limited and 4 Ors [1998] 3 WLR 770 which are akin to the criteria set out in Ladd v. Marshall [1954] EWCA Civ 1; and
 
iii. in any event, the Applicant failed to meet the requirement of “relevance” set out in Yekambaran.

The Applicant appealed against the High Court’s decision, the appeal of which was heard before the Court of Appeal on the 16th of March 2021. The Court of Appeal dismissed the appeal and upheld the judgment of the High Court. The Applicant then filed the instant application for leave to appeal to the Federal Court.

The Federal Court heard and dismissed the Applicant’s application for leave to appeal. The key principle that can be gleaned is that in an application for discovery of fresh evidence filed in an application to set aside an arbitration award, an applicant would need to satisfy the test to adduce fresh evidence in Ladd v. Marshall.

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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