Case Update: Federal Court Decides on Final Payments Claimed in Adjudication

The Federal Court in its grounds of judgment dated 1 August 2019 in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd decided on important points of law on adjudication and final payments under a construction contract. The Federal Court had to decide whether the Construction Industry Payment and Adjudication Act 2012 (CIPAA) could apply. Further, it was also determined whether CIPAA could apply to payment disputes between an architect and client. The grounds of judgment were written by Justice Mohd Zawawi Salleh FCJ.

Continue reading

Federal Court Grants Anti-Arbitration Injunction to a Non-Party to the Arbitration

The Federal Court in its grounds of judgment dated 1 July 2019 reinstated the injunction of a non-party to an arbitration. The anti-arbitration injunction was made against the parties to an ongoing arbitration to restrain them from proceeding and continuing with the arbitration proceedings, pending the parallel Court proceedings.

The Federal Court ruled on the questions of law that sections 8 and 10 of the Arbitration Act 2005 (AA 2005) would not apply to a party litigant who is not a party to the arbitration agreement and/or arbitration proceedings. Section 8 of the AA 2005 essentially states that no court shall intervene in matters governed by the AA 2005. Section 10 of the AA 2005 allows for the court to stay court proceedings and refer parties to arbitration.

In this decision, the Federal Court allowed a non-party to the arbitration to resort to the Court’s inherent jurisdiction to grant an anti-arbitration injunction to restrain the arbitrating parties from proceeding with the arbitration. The test to be applied is the American Cyanamid-like test of a serious issue to be tried (or as applied in Malaysia via the Keet Gerald Francis test) instead of a higher threshold in the English High Court decision in J Jarvis v Blue Circle Dartfort Estates [2007[ EWHC 1262 (TCC).

Where there are parallel court proceedings involving some parties in an arbitration and non-parties to an arbitration, this Federal Court decision appears to favour giving primacy to the court proceedings and to allow an injunction or stay of the arbitration proceedings. Continue reading

Case Update: Federal Court Decides that Retention Sum in a Construction Contract is Not Held on Trust

The Federal Court in the Pembinaan Legenda case has decided on significant areas of law on whether retention sum monies under a construction contract are held on trust. There was uncertainty in light of two conflicting Court of Appeal decisions in Qimonda and Pembinaan Legenda.

In its grounds of judgment dated 13 March 2019, the Federal Court has held that there is no implication at law of retention sum monies being held on trust. The creation of a trust depends on the construction of the contractual terms and also the separation of the monies into a trust account. Continue reading

Case Update: Federal Court Confirms Jurisdiction to Set Aside a Winding Up Order

The Federal Court in grounds of judgment dated 22 November 2018 in the SKS Foam decision confirmed the Court’s jurisdiction to set aside a perfected winding up Order in certain limited instances.

The Court is able to exercise its jurisdiction under the Federal Court case of Badiaddin to set aside its own Order where the defect is of such a serious nature that there is a need to set aside the Order in the interests of justice. Continue reading

Federal Court Rules on Forfeiture of Deposits and Liquidated Damages Clauses

Malaysia’s apex court, the Federal Court, has decided on significant points of law relating to the right to forfeit deposits and the application of liquidated damages clauses. This is seen in the grounds of judgment of Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd.

These issues relate to the interpretation of section 75 of the Contracts Act 1950, whether there is a need to prove actual loss, and whether there has been an alignment of Malaysia law with the UK Supreme Court position in Cavendish.

This Federal Court decision significantly clarifies the previous position under Selva Kumar. Continue reading