Dispute Resolution

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Contributing editor: Simon Bushell 2012

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CONTENTS
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Dispute
Resolution 2012
Contributing editor
Simon Bushell
Herbert Smith LLP
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Dispute Resolution 2012
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Tenth edition 2012
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MALAYSIA Gan Partnership
162 Getting the Deal Through Dispute Resolution 2012
Malaysia
Foo Joon Liang
Gan Partnership
Litigation
1 Court system
What is the structure of the civil court system?
There are two tiers of courts of first instance in Malaysia: the high
courts and the subordinate courts. There are two high courts in
Malaysia: the High Court of Malaya and the High Court of Sabah
and Sarawak. The high courts are of coordinate jurisdiction. They
are branches of either the High Court of Malaya and the High Court
of Sabah and Sarawak. Procedures in the high courts are governed
by the Rules of the High Court 1980.
The subordinate courts are made up of the sessions courts, mag-
istrates courts and the Penghulus Court. The Penghulus Court is
very seldom, if ever, used in a commercial context; its jurisdiction
is limited to hearing disputes concerning the recovery of monetary
sums not exceeding 50 ringgit between persons of an Asian race who
understand and speak the Malay language.
The high courts have unlimited jurisdiction to hear all matters.
Subject to the exception set out below, matters involving monetary
claims from 250,000 ringgit are to be commenced in the high courts;
matters involving monetary claims between 25,000 and 250,000
ringgit are to be commenced in the sessions courts; and matters
involving monetary claims which do not exceed 25,000 ringgit are
to be commenced in the magistrates courts.
An exception is that the sessions courts have unlimited juris-
diction to try all civil actions in respect of motor vehicle accidents,
landlords and tenants, and distress.
Today, most branches of the high court have implemented divi-
sions within the civil high courts for administrative purposes, to
streamline cases filed within broad categories, such as commercial
and non-commercial matters, disputes concerning intellectual prop-
erty, disputes concerning Islamic shariah banking principles, and
family law-related disputes. This allows some level of specialisation
among judges sitting in those courts, and aids consistency in deci-
sions within those areas. A party will therefore have to identify the
appropriate venue to take action.
Appellate courts
There are two tiers of appellate courts in Malaysia: the Court of
Appeal and the Federal Court. Appeals are discussed in question 20.
2 Judges and juries
What is the role of the judge and the jury in civil proceedings?
The Malaysian court system is adversarial in nature. While it is not
unheard of for judges to pose queries in the course of a hearing
or trial, it is not inquisitorial in nature. The burden rests with the
litigants to prove their respective cases in court in accordance with
principles of evidence.
Malaysia has ceased the practice of jury trials. Thus it is for the
judge hearing a matter to evaluate the evidence, fact-find, draw a
factual conclusion, and make a decision based on the applicable laws
in a civil matter.
3 Limitation issues
What are the time limits for bringing civil claims?
In Peninsula Malaysia, time limits for bringing civil claims are
governed by the Limitation Act 1953.
Under section 6 of the Limitation Act 1953, the following actions
shall not be brought after the expiration of six years from the date
on which the cause of action accrued:
actions founded on a contract or on tort;
actions to enforce a recognisance;
actions to enforce an award; and
actions to recover any sum recoverable by virtue of any written
law other than a penalty or forfeiture or of a sum by way of
penalty or forfeiture.
Further:
an action to recover land must be brought within 12 years from
the date on which the right of action accrued (section 9, Limita-
tion Act 1953); and
an action to recover any principal sum of money secured by a
mortgage or other charge on land or personal property or to
enforce such mortgage or charge, or to recover proceeds of the
sale of land or personal property must be brought within 12
years from the date when the right to receive the money accrued
(section 21, Limitation Act 1953).
In the event of a claim against a person acting in pursuance or execu-
tion or intended execution of any written law or of any public duty
or authority (in short, public authorities) the limitation period is
three years from the date the cause of action arose (section 2, Public
Authorities Protection Act 1948).
These limitation periods amount to an absolute defence if pleaded
and raised by the party resisting the claim. There are two situations in
which the commencement of the limitation periods will be deferred
(section 26, Limitation Act 1953):
where there has been an acknowledgement of the claim, the
limitation period will commence afresh from the date of the
acknowledgement; or
where the debtor makes part payment towards the debt, the limi-
tation period will commence afresh from the date of the last part
payment.
4 Pre-action behaviour
Are there any pre-action considerations the parties should take into
account?
Before commencing proceedings in court, a party should identify
his locus standi as a litigant, the legal status of the party against
Gan Partnership MALAYSIA
www.gettingthedealthrough.com 163
whom the proceedings are to be brought, the cause of action and
the remedies sought.
In the event legal proceedings are to be commenced against a
party ordinarily resident outside Malaysia, or if the legal proceedings
are to be served on a party outside Malaysia, leave of court must be
obtained.
Where a party is seeking to bring an action for a tortious wrong
done to him but is unable to specifically identify the tortfeasor(s),
pre-action discovery commonly known as Norwich Pharmacal
discovery may be sought.
5 Starting proceedings
How are civil proceedings commenced?
High court
In the high court, there are four modes of commencing civil pro-
ceedings: by a writ of summons, by an originating summons, by an
originating motion or by a petition. Proceedings commenced by a
writs of summons will, in their usual course, proceed to trial where
viva voce evidence will be heard in adversarial proceedings. On the
other hand, legal proceedings commenced by an originating sum-
mons, an originating motion or a petition would be usually heard
based on affidavit and documentary evidence, unless the court orders
that viva voce evidence be heard or that the deponent of an affidavit
be cross-examined on his affidavit.
The Rules of the High Court 1980 provides that the following
actions must be commenced by a writ of summons:
where the remedy is sought for any tort other than trespass to
land;
where the claim is based on fraud;
where the claim for damages is based on a breach of duty, where
the damages claimed includes damages for death or personal
injury, or is in respect of damage to property;
where the claim is for a breach of promise to marry; and
where the claim is in respect of an infringement of a patent.
Apart from these circumstances, a writ of summons is also generally
used where a dispute between parties is likely to involve a substantial
disagreement on the facts, thus requiring viva voce evidence at trial.
Proceedings by originating summons, originating motion and
petition are commenced where required by specific statutes, such as
the Arbitration Act 2005 and the Companies Act 1965.
Subordinate courts
In the subordinate courts, civil proceedings may be commenced by a
summons, an originating application, or by a petition.
6 Timetable
What is the typical procedure and timetable for a civil claim?
Timelines differ between proceedings which are heard based on viva
voce evidence and proceedings which are heard based on affidavit
evidence. The former is usually the more lengthy process owing par-
tially to the need for pleadings to be exchanged first, followed by the
requirement of pretrial case management production to be complied
with prior to a trial taking place. One would also have to take into
account the sometimes inevitable protracting of evidence when given
viva voce.
Writ action
In a writ action, upon service of the writ of summons, a defendant
has between eight and 20 days (depending on his location relative to
the issuing court) to enter his appearance in court. Upon expiry of
the time period to enter appearance, a defendant then has 14 days to
file his defence. The plaintiff may then respond to the defence by a
reply within 14 days. Where circumstances justify, courts will allow
an extension of such timelines.
Assuming that there are no interlocutory applications, parties will
then appear in court for pretrial case management. The pretrial case
management procedure usually takes between three and six months,
where parties would appear intermittently in court to inform the
court as to what directions of court have been complied with in
preparation for trial. Case management is discussed in question 7.
Once all case management directions have been complied with,
trial dates will be fixed. It is now the practice of the Malaysian courts
that any action filed must be heard and decided upon within nine
calendar months, save in exceptional circumstances. Based on this
regime, trials are usually fixed in the seventh or eighth month from
the date of the commencement of the proceedings. A decision of the
trial judge would be delivered before expiry of the ninth month.
To a large extent, the subordinate courts adopt similar
timelines.
Proceedings on affidavit evidence
Where proceedings are commenced by an originating summons, an
originating motion or a petition in the high court, given that evidence
(including documentary evidence) are led through affidavits, the
processes involved are less. Affidavits are filed almost immediately
upon commencement of such proceedings. Procedurally, each party
is to file its affidavit within 14 days from its receipt of the affidavit
of the opposing party. Where circumstances justify, courts will allow
an extension of this timeline.
However, it has increasingly become the practice of the courts
that parties are limited in the number of affidavits-in-reply that they
may file, thus curtailing the possibility of either party protracting
proceedings through the filing of multiple affidavits.
As such, proceedings based on affidavit evidence may be con-
cluded within four to six months in the high courts.
7 Case management
Can the parties control the procedure and the timetable?
The Rules of the High Court 1980 provides for a pretrial case man-
agement procedure in respect of writ actions or civil proceedings
which are to proceed to trial. At case management, the court will
issue directions for parties to comply with, in preparation for trial.
The usual directions that will be issued include:
directions for the compilation of documents to be relied upon
at trial. It is usually directed that such documents are placed in
two broad categories depending on whether the existence or
authenticity of the documents is agreed or not;
directions for the compilation of all pleadings;
directions for parties to jointly prepare a statement of facts that
are agreed upon, so that the need to formally prove such facts at
trial is obviated;
directions for parties to prepare a list of issues that require the
courts determination. Such issues should arise from the plead-
ings; and
directions for each party to prepare statements of their witnesses,
which statements are to be exchanged and filed in advance of the
trial.
In the event a party fails to comply with any such directions, some
amount of latitude is given. However, if there has been a persist-
ent failure on one party to comply with the directions, courts may
sometimes issue unless orders which are peremptory in nature. If
a party then continues to fail to comply with the case management
directions, the court may then make such orders as meet the ends of
justice, including striking out the suit in a case where the plaintiff has
been the party in default, or granting a judgment in the event it is the
defendant that has been in default.
At case management, courts may also issue directions for further
particulars to be given on pleadings, for discovery, for interrogatories
to be answered, and direct the joinder of any other necessary parties.
MALAYSIA Gan Partnership
164 Getting the Deal Through Dispute Resolution 2012
Essentially therefore, the pretrial case management procedure is put
in place to resolve all outstanding procedural and administrative
matters in order that the action may be set down for trial.
It is now common practice for case management to be also con-
ducted by the high courts to ensure that all necessary affidavits for a
hearing have been complied with, prior to a matter being fixed before
a judge for hearing. This obviates the possibility of the hearing being
adjourned on its scheduled date where the parties are not prepared to
proceed, whatever the reason may be. Thus hearing dates are usually
only fixed when all such affidavits have been complied with.
8 Evidence documents
Is there a duty to preserve documents and other evidence pending
trial? Must parties share relevant documents (including those
unhelpful to their case)?
It is a general rule that original documents are required to be pro-
duced at trial as evidence. There are exceptions, where it can be
shown by a party that the original documents are not available.
However, given the general rule, parties are advised to preserve or
secure original documents for use at trial.
As a matter of practice, to expedite trial proceedings and to
obviate the need for formal witnesses to tender original documents,
courts accept copies of the original documents if both parties agree
that the documents concerned exist and are authentic. These docu-
ments are commonly referred to as agreed documents.
In such a case, it is common for photocopies of such agreed
documents to be compiled into a common bundle of documents and
filed in court to be used for trial. The judge, counsel for each party
and the witness giving evidence will have their respective copies of
the said common bundle of documents.
While the Rules of the High Court 1980 do oblige parties to a
writ action to make discovery of documents within the possession,
custody or control by exchanging a list of such documents within 14
days from the close of pleadings, this is seldom practised. A party to
civil proceedings may, however, apply for and order of court for the
discovery or inspection of documents within the possession, custody
or power of the opposing party. Such an application may also be
made for specific documents to be disclosed. In such an instance,
the opposing party is obliged to disclose all documents relevant to
the dispute in its possession, custody or power, including documents
which may not be favourable to that opposing partys case.
9 Evidence privilege
Are any documents privileged? Would advice from an in-house lawyer
(whether local or foreign) also be privileged?
Communications made between a client and his lawyers in the
course of the appointment of the lawyers, and information which has
come to the knowledge or attention of the lawyers as a result of his
appointment is protected by legal professional privilege. The lawyers
cannot divulge such communication or information unless the com-
munication is in furtherance of an illegal purpose, or the information
concerned shows a crime or fraud has been committed.
10 Evidence pretrial
Do parties exchange written evidence from witnesses and experts
prior to trial?
It is now the practice of the Malaysian courts in an action com-
menced by writ for the evidence-in-chief of witnesses to be given by
way of witness statements, in the form of question and answer, ten-
dered and read at the hearing before the witness is cross-examined on
his witness statement. Such statements of witnesses, unless directed
otherwise by court, are to be exchanged at least seven days prior to
the date the statement is tendered and read out in court.
11 Evidence trial
How is evidence presented at trial? Do witnesses and experts give
oral evidence?
Generally, the plaintiff in a writ action will begin its case by calling his
witnesses. At the conclusion of the plaintiffs case, the plaintiff will
formally close its case and the defendant will then call its witnesses.
The general requirement is for evidence at trial to be given orally.
Each witness may be cross-examined by counsel for the other parties
to have his evidence tested, and matters raised in the course of the
cross-examination may be clarified in re-examination by the partys
own counsel. In limited circumstances, for instance where a child is
giving evidence, evidence may be give behind a screen, by live link
or by video recording.
12 Interim remedies
What interim remedies are available?
To preserve the subject matter of the action and to ensure that the action
is not rendered academic by intervening action by any of the parties, the
high courts have wide powers to grant interim remedies. Such interim
remedies are usually granted in the form of injunctive orders.
In cases where there is concern that a party may dissipate assets
or funds, interim orders may be sought to freeze assets or funds to
prevent their dissipation. Cogent evidence of such risk of dissipation
must, however, be shown. Such orders are commonly referred to as
Mareva injunctions. In the event the injunctive order sought and
obtained are subsequently found to be unjustified, the party which
obtained the order may be liable for damages to the party against
whom the injunctive order was obtained.
Further, interim orders may also be sought to search the premises
within the control or possession of the opposing party, to obtain and
secure evidence or to preserve the subject matter of the action. Again,
cogent evidence of a risk that such evidence or subject matter may
be destroyed must be shown. Such orders are commonly referred to
as Anton Piller orders. In the event the injunctive order sought and
obtained are subsequently found to be unjustified, the party which
obtained the order may be liable for damages to the party against
whom the injunctive order was obtained.
13 Remedies
What substantive remedies are available?
The remedies that the high courts may order at the conclusion of an
action may broadly be categorised as follows:
damages damages are awarded for the primary purpose of
compensating a plaintiff for loss or damage actually suffered. It is
generally not intended to punish the defendant. However, aggra-
vated, exemplary or punitive damages may be awarded where
the breach or act by the defendant complained of is shown to
have been calculated to cause injury to the plaintiff;
injunctive relief, either by way of orders to compel or restrain
the performance of a particular act. For example, the court may
order the delivery of property, documents, accounts, etc;
specific performance of a contract;
declaratory orders, determining the rights or obligations of the
parties before the court; and
orders of mandamus, certiorari or prohibition, in cases where
judicial review is sought of decisions of public authorities.
For monetary judgments, where there is no agreement between
parties as to interest payable on such sums payable under the
judgment, the courts retain the discretion to determine if interest
(non-compounded) should be awarded before and/or after the date
of the judgment, and the rate of such interest. However, the courts
discretion to grant interest after the date of judgment is subject to a
statutory limit of 4 per cent per annum.
Gan Partnership MALAYSIA
www.gettingthedealthrough.com 165
14 Enforcement
What means of enforcement are available?
Depending on the nature of the judgment or order of court con-
cerned, they may be enforced by the following means:
judgment debtor summons allows for judgment debtor to be
summoned to court to be examined on what debts are due to the
judgment debtor and the judgment debtors ability to settle debt
to the judgment creditor;
writ of seizure and sale can be levied on moveable and immove-
able property, to attach and sell assets of the judgment debtor to
satisfy debt to judgment creditor;
writ of possession to enforce a judgment or order giving pos-
session of an immoveable property;
writ of delivery to enforce a judgment or order for delivery up
of moveable property or for payment of its assessed value;
garnishee proceedings for the attachment of debts due to the
judgment debtor by third parties;
charging orders to charge government stock, stock of any com-
pany registered in law, including any stock standing in the name
of the accountant-general held by the judgment debtor;
equitable execution the appointment of a receiver over the
assets of the judgment debtor. This mode of enforcement is tra-
ditionally for cases where execution under common law writ of
execution is unlikely to be effective. This is a mode of equitable
relief, which will usually not be ordered if there are alternative
means to enforce the judgment or order concerned;
committal proceedings where there has been a breach of a
judgment or order restraining or requiring the performance a
particular act. This sanction is quasi-penal in nature and carries
penal consequences such as imprisonment or fine, depending on
the severity of the breach; and
bankruptcy (for individual persons) and winding-up proceedings
(for companies).
15 Public access
Are court hearings held in public? Are court documents available to
the public?
Court proceedings may be conducted in chambers or in open court.
Where such proceedings take place depends on the nature of the
application before the court.
It is not uncommon for judges to declare the open court as their
chambers, to hear matters scheduled to be conducted in chambers.
This is usually done for practical reasons, eg, where the number of
parties are too numerous to be accommodated within the chambers.
The reverse may similarly happen, where a judge declares his cham-
bers as open court.
Court proceedings are generally public. They may be observed
by persons from the public gallery. Searches may be conducted to
ascertain documents filed in court and information of matters in
court. However, in practice, most courts now require some form of
justification for a person to conduct a search on the file, especially
if such person is not involved in the particular matter in court. In
appropriate cases, parties may of course seek orders or directions
from a judge that the court file be kept confidential, and that no
copying of documents be permitted. However, the effectiveness of
such an order is doubtful, as it may be practically impossible for the
courts registry to isolate the file concerned for purposes of restrict-
ing access to it.
16 Costs
Does the court have power to order costs?
Courts retain the discretion to award costs to a party in the proceed-
ings, and the amount of such costs. As a general rule, a successful
party ought to recover some cost from the losing party.
In the high courts, the Rules of the High Court 1980 provides for
costs awarded to a party to be taxed. At the taxation proceedings, a
registrar of the high court will determine, based on principles set out
in the Rules of the High Court 1980, the quantum of cost that ought
to be paid by one party to another.
Between parties in litigation, cost is usually awarded on a party-
to-party basis. On this basis, a party is entitled to recover from the
other party only costs necessarily and properly incurred in bringing
or defending the action.
Where specifically permitted by a contract between parties or
where the conduct of the party having to pay costs is found to be rep-
rehensible, the court may award cost on a solicitor-client basis. On
this basis, the court will assess the cost based on what is in its view
reasonably incurred by a solicitor in carrying out the instructions of
its client. This is a more generous basis in determining the amount of
cost to be awarded, as compared to the party-to-party basis.
It is not uncommon that the largest element of the cost claimed
by a party would be its getting-up fee. This refers to the preparatory
work prior to a partys counsel stepping into court for submissions.
To determine the getting-up fee, the Rules of the High Court 1980
set out the following factors to be considered:
the complexity of the matter;
the skill, specialised knowledge and responsibility required of,
and the time and labour expended by, the solicitor or counsel;
the number and importance of documents involved;
the place and circumstances in which the business involved is
transacted;
the importance of the cause or matter to the party;
the value of the subject matter in dispute; and
whether there were any other fees or allowances payable to the
solicitor or counsel for other work done, where such other work
has reduced the amount of work required.
In the subordinate courts, unless the court otherwise orders, costs
will be awarded based on a scale set out in the Subordinate Courts
Rules 1980.
Where a defendant is able to show that the plaintiff is unlikely
to be in a position to settle any award of costs that may eventually
be made against the plaintiff, the court has the power to require the
plaintiff to pay a sum into court towards security of the defendants
costs. It is common for consequential orders to be made, when such
security is ordered. For instance, the court may order that proceed-
ings be stayed pending payment of such security by the plaintiff, and
in the event the plaintiff does fail to make payment of the security
within a specified time period, the suit may be struck out.
17 Funding arrangements
Are no win, no fee agreements, or other types of contingency or
conditional fee arrangements between lawyers and their clients,
available to parties? May parties bring proceedings using third-party
funding? If so, may the third party take a share of any proceeds of the
claim? May a party to litigation share its risk with a third party?
Contingency fee arrangements, where the solicitors or counsel are
paid a portion of sums recovered in litigation or on a success basis,
are not permitted in Malaysia. The financing of litigation as an invest-
ment in a claim is also champertous, and is against public policy.
18 Insurance
Is insurance available to cover all or part of a partys legal costs?
There are no known insurance policies offered in Malaysia specifi-
cally covering the cost of legal proceedings of a party or its potential
liability towards the cost of its opposing party.
MALAYSIA Gan Partnership
166 Getting the Deal Through Dispute Resolution 2012
19 Class action
May litigants with similar claims bring a form of collective redress?
In what circumstances is this permitted?
Class action-type suits do not exist in Malaysia. The only circum-
stance where litigants with similar grievances or claims against a
common party are engaged in similar proceedings is in the insolvency
of a company or individual, where the insolvency action is brought
for the general benefit of the creditors of a debtor. Where a group of
persons have a common claim against a party, they will each have to
be a plaintiff in the civil proceedings (either by themselves or through
a representative in a case where they are under any incapacity).
20 Appeal
On what grounds and in what circumstances can the parties appeal?
Is there a right of further appeal?
Appeals from the high court
Decisions of the high court may generally be appealed to the Court
of Appeal as a matter of right, the exceptions being where the judg-
ment or order concerned was entered into by consent, or where the
judgment or order concerned is rendered final by any written law in
force. In the following instances, leave of the Court of Appeal is first
required before an appeal may be brought from the high court:
where the subject matter of the claim (excluding interest thereon)
is less than 250,000 ringgit; and
where the judgment or order sought to be appealed against
relates only to cost.
A party dissatisfied with the decision of the Court of Appeal may,
with leave of the Federal Court, appeal against the decision of the
Court of Appeal. In that sense, an appeal to the Federal Court can-
not be brought as a matter of right. The party seeking to appeal to
the Federal Court must obtain leave pursuant to section 96 of the
Courts of Judicature Act 1964, by showing that the matter concerned
involves a question of general principle decided for the first time, or a
question of importance upon which a decision of the Federal Court
would be to public advantage, or where it concerns an interpretation
of the effect of the Malaysian Constitution.
Appeals from the subordinate courts
An appeal against the decision of the subordinate courts, be it the
magistrates courts or sessions courts, lies to the high court.
A party dissatisfied with the decision of the high court, in an
appeal from the subordinate courts, may bring a further appeal to
the Court of Appeal with leave of the Court of Appeal. Hence, there
is no automatic right to appeal. The party applying for leave would
essentially have to satisfy the Court of Appeal that there is a good
chance of success in the appeal, or where there is a question of law
of general importance which ought to be decided upon by the Court
of Appeal.
21 Foreign judgments
What procedures exist for recognition and enforcement of foreign
judgments?
Malaysia recognises judgments of superior courts listed in the first
schedule of the Reciprocal Enforcement of Judgments Act 1958. By
this act, the Yang Dipertuan Agong may amend the first schedule to
add a country or territory if he is satisfied that substantial reciprocity
of treatment will be assured by that country or territory of judg-
ments given in the Malaysian high courts. In such an event, judg-
ments given by the superior courts of the country or territory added
may be enforced in accordance with the provisions of the Reciprocal
Enforcement of Judgments Act 1958.
Under the Reciprocal Enforcement of Judgments Act 1958, a
judgment of a country listed in its first schedule may be registered
in the Malaysian high courts and thereafter enforced as a judgment
of the Malaysian high courts. The registration process is administra-
tive, with little arguments on the merits of the judgment that may be
raised by a party seeking to oppose the registration. The Malaysian
courts have refused to go behind a judgment that is being registered,
on the basis that it is not its task to do so when hearing an application
to register the judgment.
In respect of judgments which do not originate from a country
listed in the first schedule to the Reciprocal Enforcement of Judg-
ments Act 1958, an action will have to be commenced in the Malay-
sian courts based on the judgment concerned as a cause of action. In
such an instance, merits may be raised to oppose the action.
22 Foreign proceedings
Are there any procedures for obtaining oral or documentary evidence
for use in civil proceedings in other jurisdictions?
Evidence of witnesses may be obtained in writing in the form of
statutory declarations and affirmed before a notary public. It will
then depend on whether evidence in such nature is sufficient under
the laws of the jurisdiction in which such evidence is required.
Malaysia is not a party to the Hague Evidence Convention
1970.
Arbitration
23 UNCITRAL Model Law
Is the arbitration law based on the UNCITRAL Model Law?
The Arbitration Act 2005 (AA 2005) substantially adopts the UNCI-
TRAL Model Law. The AA 2005, which came into force on 15
March 2006, repeals the Arbitration Act 1952.
24 Arbitration agreements
What are the formal requirements for an enforceable arbitration
agreement?
Section 9 of the AA 2005 requires that an arbitration agreement
must be in writing. The arbitration agreement may be in the form
of an arbitration clause in an agreement or in the form of a separate
agreement. It could even arise from pleadings exchanged between
parties, where the existence of an arbitration agreement is alleged by
one party, and is not denied by the other.
25 Choice of arbitrator
If the arbitration agreement and any relevant rules are silent on the
matter, how many arbitrators will be appointed and how will they
be appointed? Are there restrictions on the right to challenge the
appointment of an arbitrator?
Appointing an arbitrator
In line with the autonomy of parties in an arbitration, they are free to
decide the number of arbitrators in an arbitration between them.
Where, however, the parties have not agreed to the number of
arbitrators, section 12 of the AA 2005 provides that there shall be
three arbitrators in an international arbitration, and one arbitrator in
a domestic arbitration. An international arbitration is defined in the
AA 2005 as an arbitration where one of the parties to the arbitration
agreement, the seat of arbitration, the subject matter of the dispute,
or a substantial portion of the commercial obligations of the parties
lie in a state outside Malaysia. An international arbitration could also
arise where parties expressly agree that the arbitration relates to more
than one state. A domestic arbitration, on the other hand, is defined
as any arbitration which is not an international arbitration.
Gan Partnership MALAYSIA
www.gettingthedealthrough.com 167
Challenging the appointment of an arbitrator
An arbitrator is under statutory duty to disclose, without delay, cir-
cumstances giving rise to justifiable doubts as to his impartiality or
independence. An arbitrators appointment may be challenged only if
it can be shown that there are justifiable doubts as to the impartiality
or independence of the arbitrator, or where the arbitrator does not
possess the necessary qualifications agreed to by the parties (section
14, AA 2005).
A party seeking to make this challenge would have to do so
within 15 days after becoming aware of the constitution of the arbi-
tral tribunal or of any such grounds to challenge the appointment of
the arbitrator. A written statement of the reasons for the challenge
to the arbitral tribunal is to be sent to the arbitrator. The arbitrator
may then rule on this challenge. A party dissatisfied with the decision
of the arbitrator may appeal to the high court, whose decision shall
be final. Pending such a decision of the high court, barring any order
otherwise, the arbitration is to proceed (section 15, AA 2005).
26 Arbitral procedure
Does the domestic law contain substantive requirements for the
procedure to be followed?
Procedures in arbitrations are largely consensual; parties are free to
agree the procedure of the arbitration. Failing such agreement, the
AA 2005 allows the appointed arbitrator to direct procedures to be
followed.
The Malaysian courts have time and again cited with approval
the principle enunciated by the English House of Lords in Bremer
Vulkan v South India Shipping Corporation [1981] 1 All ER 289,
that the arbitrator is the master of the procedures in the arbitra-
tion. Consequently, the courts have consistently rejected arguments
against procedures adopted by the arbitrators, unless it can be shown
that there has been a breach of natural justice or some substantial
injustice has been occasioned to one of the parties.
27 Court intervention
On what grounds can the court intervene during an arbitration?
Section 11 of the AA 2005 gives express powers to the high court to
make the following interim orders in aid of the arbitration process:
security for costs;
discovery of documents and interrogatories;
giving of evidence by affidavit;
appointment of a receiver;
securing the amount in dispute, whether by way of arrest of
property or bail or other security pursuant to the Admiralty
jurisdiction of the high court;
the preservation, interim custody or sale of any property which
is the subject matter of the dispute;
ensuring that any award which may be made in the arbitral pro-
ceedings is not rendered ineffectual by the dissipation of assets
by a party; and
an interim injunction or any other interim measure.
The right of a party to seek the interim measures under section 11,
AA 2005 cannot be contracted out of.
Additionally, a party may refer a question of law arising in the
course of the arbitration to the high court for determination pursuant
to section 41 of the AA 2005. This is, however, a provision of the AA
2005 which may be contracted out of by parties.
28 Interim relief
Do arbitrators have powers to grant interim relief?
Arbitrators have almost similar powers to grant interim relief to
those of the high court. Section 9 of the AA 2005 empowers arbitra-
tors to make the following interim awards:
security for costs;
discovery of documents and interrogatories;
giving of evidence by affidavit; and
the preservation, interim custody or sale of any property which
is the subject matter of the dispute.
Parties may, however, expressly agree to exclude such powers from
the arbitrators. Where the arbitrators have such powers, the courts
have insisted that applications for such interim relief be brought
before the arbitrator first, and not to the high court. This is based on
the rationale that all facts and possibly documents are already before
the arbitrator in the pending arbitration, and therefore the arbitrator
would be better placed to make an expeditious and informed deci-
sion on the interim relief sought. It is, however, submitted that this
can only be a general proposition, as ex parte and urgent applications
to the courts for such interim relief must still be available where a
similar application to the arbitrator may give notice to the other
party or result in delay (eg, where only a notice of arbitration has
been issued, and no arbitrator has been appointed as yet).
29 Award
When and in what form must the award be delivered?
The requirements of an award are set out in section 33 of the AA
2005. An award must be in writing and be signed by the arbitrator.
In a case where there is more than one arbitrator, the signature of a
majority of the arbitrators shall be sufficient. However, the reason for
the omitted signature is required to be stated. The award shall also
state the date and seat or arbitration, and be delivered to the parties.
In practice, the arbitral tribunal or the institution under whose rules
the arbitration is instituted may withhold the issuance of the award
to parties pending the payment of all fees and charges incidental to
the arbitration.
Unless parties agree otherwise, the award has to be a reasoned
award.
30 Appeal
On what grounds can an award be appealed to the court?
An arbitration award is final (section 36 of the AA 2005). There is
no right of appeal.
A party may, however apply to set aside an award on limited
grounds under section 37 of the AA 2005. In particular, an award
may be set aside on, and only on, the following grounds:
a party to the arbitration agreement was under any incapacity;
the arbitration agreement is not valid under the law to which the
parties have subjected it, or, failing any indication thereon, under
the laws of Malaysia;
the party making the application was not given proper notice of
the appointment of an arbitrator or of the arbitral proceedings
or was otherwise unable to present that partys case;
the award deals with a dispute not contemplated by or not falling
within the terms of the submission to arbitration;
subject to subsection 3, the award contains decisions on matters
beyond the scope of the submission to arbitration;
the composition of the arbitral tribunal or the arbitral procedure
was not in accordance with the agreement of the parties, unless
such agreement was in conflict with a provision of this act which
the parties cannot derogate, or, failing such agreement, was not
in accordance with this act;
the subject matter of the dispute is not capable of settlement by
arbitration under the laws of Malaysia; or
the award is in conflict with the public policy of Malaysia.
It will be observed that the merits of the decision in the award is
not a ground to challenge the award; the high court does not sit on
appeal over the award.
MALAYSIA Gan Partnership
168 Getting the Deal Through Dispute Resolution 2012
However, parties may refer questions of law arising out of an
award, which substantially affects the rights of one or more of the
parties, to the high court for a decision under section 42, AA 2005.
In determining the question of law, the high court may affirm, vary,
set aside the award, or remit the award to the arbitral tribunal for a
reconsideration of the relevant issue. It has been held by the Malay-
sian courts that section 42, AA 2005 preserves the common law
ground of an error on the face of the award, as a basis of challenging
the award. However, this stands inconsistent with the provisions of
section 37, AA 2005, which states that the only grounds on which
an award may be set aside are those expressed in section 37. It is
submitted that section 42, AA 2005 must be given a restrictive read-
ing in order not to derogate from the clear restriction of section 37,
AA 2005.
31 Enforcement
What procedures exist for enforcement of foreign and domestic
awards?
Section 38 of the AA 2005 gives recognition to arbitration awards
made in an arbitration either where the seat of arbitration is in
Malaysia or where the award is issued from a foreign state. Such
awards will be recognised by Malaysian courts as being binding and
enforceable in Malaysia and be entered as a judgment of the Malay-
sian courts, subject only to limited circumstances for where such
awards may be set aside. This is commonly known as the registration
of an award.
Section 38 of the AA 2005 requires that a duly authenticated
original award or a duly certified copy of the award and the original
arbitration agreement or a duly certified copy of the agreement be
produced. Where the award or arbitration agreement is in a language
other than the national language or the English language, the party
making the application to have the award registered in court must
provide a duly certified translation of the award or agreement, as the
case may be, in the English language.
The circumstances for registering an award are mostly the same
circumstances in which one may seek to set aside the award (pursu-
ant to section 37, AA 2005, described above). By virtue of section
39 of the AA 2005, a party may oppose the registration of the award
where:
a party to the arbitration agreement was under any incapacity;
the arbitration agreement is not valid under the law to which the
parties have subjected it, or, failing any indication thereon, under
the laws of the state where the award was made;
the party making the application was not given proper notice of
the appointment of an arbitrator or of the arbitral proceedings
or was otherwise unable to present that partys case;
the award deals with a dispute not contemplated by or not falling
within the terms of the submission to arbitration;
subject to subsection 3, the award contains decisions on matters
beyond the scope of the submission to arbitration;
the composition of the arbitral tribunal or the arbitral procedure
was not in accordance with the agreement of the parties, unless
such agreement was in conflict with a provision of this act from
which the parties cannot derogate, or, failing such agreement,
was not in accordance with this act;
the award has not yet become binding on the parties or has
been set aside or suspended by a court of the country in which,
or under the law of which, that award was made;
the subject matter of the dispute is not capable of settlement by
arbitration under the laws of Malaysia; or
the award is in conflict with the public policy of Malaysia.
Public policy is not defined in section 39, AA 2005. One may,
however, get guidance on its definition from section 37, AA 2005.
It will be observed that none of the grounds set out in section 39,
AA 2005 concerns the merits of an arbitration award. The Malay-
sian courts will not sit on appeal over the correctness of an award,
when deciding if the award ought to be registered. If, however, the
merits of the award may be attacked under the laws of the country
in which the award was issued and the award is set aside on that
basis, then such an award cannot be registered in Malaysia (section
39(1)(a)(vii), AA 2005).
32 Costs
Can a successful party recover its costs?
A discretion lies with the arbitrator to decide on which party is to pay
the cost and expenses of the arbitration, in what manner and in what
amount (section 44, AA 2005). In this connection, the arbitrator is
empowered under the AA 2005 to tax the cost concerned, and may
do so on a solicitor-client basis.
Generally, the successful party will be awarded costs.
Alternative dispute resolution
33 Types of ADR
What types of ADR process are commonly used? Is a particular ADR
process popular?
In Malaysia, arbitration is the most widely used alternative dispute
resolution process. This is followed by mediation, which is now
increasingly practised in courts. At the moment, mediation has not
enjoyed much success as it should, particularly in the court environ-
ment, as it is not a process regulated by rules of procedures. It is
largely still left to the good sense of parties to compromise.
Adjudication is, at the time of writing, the subject of the
Construction Industry Payment and Adjudication Act, which is
awaiting royal assent. It has been debated and approved by both
houses of parliament. Once passed into law, it is anticipated that
adjudication will be widely used, especially in the construction
industry.
Other ADR processes such as expert adjudication and conciliation
are not known to be widely used.
34 Requirements for ADR
Is there a requirement for the parties to litigation or arbitration to
consider ADR before or during proceedings? Can the court or tribunal
compel the parties to participate in an ADR process?
There are currently no requirements for parties to go through one
ADR process or another before litigation. It is only where parties
indicate their preparedness to mediate that the courts will direct
parties to mediation.
In arbitration agreements, where it is a condition precedent
for some process of mediation or conciliation to take place prior
to parties arbitrating, parties would be obliged to go through the
mediation or conciliation before an arbitration can be commenced,
unless they waive such a condition precedent.
At present, there is a preliminary proposal for a single set of civil
procedure rules for both the High Court and subordinate courts.
The Malaysian bar is at present working together with members
of the attorney generals chambers and members of the judiciary
to work on the said proposal. However, this proposal is only at its
initial stages and is unlikely to be finalised and implemented any
time in the near future.
Update and trends
Gan Partnership MALAYSIA
www.gettingthedealthrough.com 169
Miscellaneous
35 Are there any particularly interesting features of the dispute resolution
system not addressed in any of the previous questions?
In 2009, a fast-track system was introduced in the Malaysian
courts and as stated above, the court dispose off matters within
nine months. As such, with the increase of speed of the litigation
process, the plaintiff must be prepared and ready for trial from
the commencement of the suit. Accordingly, the plaintiff must be
prepared with all pertinent matters necessary to prove his claim and
this must be done within a short period of time.
Gan Partnership
Foo Joon Liang joonliang@ganlaw.my
Unit A-35-3A, Menara UOA Bangsar Tel: +603 2201 1130
5 Jalan Bangsar Utama 1 Fax: +603 2201 1136
59000 Kuala Lumpur www.ganlaw.my
Malaysia
DISPUTE RESOLUTION 2012 ISSN 1741-0630
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