27 February 2023

Our Partner, Susan Tan Shu Shuen and Associates, Koh Shien Lin and Noor Sumaeya Sofea Shamsudin from Zul Rafique & Partners’ Construction Dispute Resolution Practice Group had represented an Employer of a construction project worth about RM48.3 million (“Project”) in an appeal in the High Court, and succeeded in overturning the Sessions Court decision in dismissing a stay application under Section 10 of the Arbitration Act 2005.

As a matter of background, the Main Contractor of the Project initiated a suit in the Sessions Court to claim for the purchase price of the formwork system against the Employer. The Employer applied pursuant to Section 10 of the Arbitration Act 2005, to stay the proceedings on the basis that the Main Contractor’s claim falls within the arbitration agreement contained in the contract entered into between the parties. The Main Contractor contended that its claim is premised on unjust enrichment and therefore not bound to be referred to arbitration.

The Sessions Court in dismissing the Employer’s stay application agreed with the Main Contractor in that its claim, founded on the cause of action of unjust enrichment, is separate and falls outside the arbitration agreement.

On appeal in the High Court, the High Court found that the Main Contractor’s claim clearly arises out of the contract which contained an arbitration clause and it did not see how the Main Contractor’s claim could be divorced from the aforesaid contract. The High Court accordingly allowed the appeal with costs in favour of the Employer.

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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