Sumber Khazanah Sdn Bhd [Dalam Likuidasi] v Apex Communications Sdn Bhd

Appellant(s): Apex Communications Sdn Bhd

Respondent(s): Sumber Khazanah Sdn Bhd (Dalam Likuidasi)

• YAA Datuk Seri Utama Wan Ahmad Farid Bin Wan Salleh
• YAA Datuk Hajah Azizah binti Haji Nawawi
• YA Datuk Azimah binti Omar

• The dispute arose from a multi-layered subcontracting arrangement for a project, where the 3rd layer subcontractor (the plaintiff) was assigned the rights and terms of a 2nd Subcontract between the 1st layer subcontractor (the defendant) and a 2nd layer subcontractor (IESB).
• The 2nd Subcontract contained an Arbitration Clause (Clause 38) and an Exclusive Jurisdiction Clause (Clause 39), which the plaintiff covenanted to strictly follow and comply with through a Letter of Appointment (IESB LA).
• The plaintiff initiated a High Court action against the defendant for alleged unpaid works, prompting the defendant to apply for a stay of proceedings under Section 10 of the Arbitration Act 2005 to refer the dispute to arbitration, which the High Court dismissed.

• Whether the Arbitration Clause and Exclusive Jurisdiction Clause within the 2nd Subcontract were enforceable against the plaintiff, given the express incorporation and adoption of the 2nd Subcontract within the IESB LA.
• Whether the Arbitration Clause, when read harmoniously with the Exclusive Jurisdiction Clause, meant that reference to arbitration was optional or mandatory.
• Whether the defendant's requests for extensions of time to prepare a defence constituted an abandonment of its right to refer the dispute to arbitration.

• The Court held that the Arbitration Clause and Exclusive Jurisdiction Clause were enforceable against the plaintiff, clarifying that the mechanism was a contractual assignment, not a novation, and applying Section 9(5) of the Arbitration Act 2005 which allows for incorporation by general reference.
• The Court found that the reference to arbitration was mandatory if the plaintiff was dissatisfied with the appointed officer's decision, interpreting the word "may" in the Arbitration Clause as offering a choice between acceding to the decision or proceeding to arbitration, not between arbitration and Court litigation.
• The Court ruled that the defendant's requests for extensions of time did not amount to an unequivocal abandonment of its right to arbitrate, aligning with recent jurisprudence that encourages arbitration and holds parties to their contractual bargain. Consequently, the defendant's appeal was allowed, the High Court's dismissal of the stay application was set aside, and the plaintiff's suit was stayed pending arbitration; the plaintiff's cross-appeal was dismissed.