Introduction
The Federal Court case of Telekom Malaysia Bhd v Obnet Sdn Bhd [2024] MLJU 2661 highlights a significant legal issue surrounding arbitration procedures under the Arbitration Act 2005 (“AA 2005”). It discusses the validity of an oral decision under the ambit of the AA 2005.
Brief Facts
- The Respondent, Obnet Sdn Bhd (“Obnet”), appointed the Appellant, Telekom Malaysia Bhd (“Telekom”) as an independent contractor to design and build a network infrastructure for a project.
- Disputes arose between Obnet and Telekom and the agreement was eventually terminated.
- Obnet then commenced arbitration proceedings against Telekom for unlawful interference of confidential information from the project. Telekom counterclaimed Obnet for sums due and owing under the agreement.
- A retired judge was appointed as a sole arbitrator to preside over the arbitration. The arbitrator decided to bifurcate the proceedings where issues on liability will be determined first before the assessment of damages.
- After hearing parties on the issue of liability, the arbitrator orally informed the parties that he is allowing both Obnet’s and Telekom’s claim and counterclaim respectively. The arbitrator mentioned that he will not be publishing a written award at that stage and will only do so until after the quantum on damages has been decided.
- Telekom’s solicitors wrote to the arbitrator requesting that he publish his award in accordance with Sections 2 and 33 of the AA 2005 and Article 34 of the UNCITRAL Arbitral Rules.
- Obnet objected to Telekom’s request by claiming that the oral decision of the arbitrator was not meant to be an award but merely an interlocutory order/ruling and that the arbitrator has the discretion on whether to issue an interim award on liability.
- The arbitrator then informed parties that there is no requirement for an award to be published and that the practice of the High Court should be adopted where a written judgment would only be issued once the issue on quantum has been decided.
- Dissatisfied with the arbitrator’s approach, Telekom filed an Originating Summons in the High Court for a declaration that the arbitrator’s oral decision is invalid, and for an injunction to restrain Obnet from taking any further steps to proceed with the arbitration proceedings pending the disposal of the Originating Summons.
High Court Decision
- The High Court dismissed Telekom’s Originating Summons.
- Telekom only made the request for the decision to be made in writing on the day the arbitrator delivered that decision orally on liability in June 2020, when the decision to bifurcate the proceedings was made in September 2016. As such, Telekom could not now insist for the decision to be writing when there was no complaint when the arbitrator decided to just issue one final award after the assessment of damages was completed.
- The AA 2005 does not require the arbitrator to immediately publish his award after the determination on the issue of liability.
Court of Appeal Decision
- Telekom appealed against the High Court’s decision.
- The Court of Appeal affirmed the High Court’s decision. There were no written grounds of judgment by the Court of Appeal to elaborate on the reasons behind this decision.
Federal Court Decision
- Telekom appealed against the Court of Appeal’s decision.
- The main question before the Federal Court was whether the arbitrator’s oral decision on liability is a valid decision under the AA 2005, particularly within the meaning of Section 33 of the AA 2005.
- The Federal Court first ascertained that an “award” under the AA 2005 means that it has the effect to dispose of the issues with finality. As such, any award that is procedural in nature does not come within the ambit of an “award” as envisaged under the AA 2005.
- Since the decision on liability is a substantive issue and not merely procedural, it falls under the definition of an “award” which must be made in writing as mandated by Section 33(1) of the AA 2005. There is no room for the award to be delivered just orally and any award not in writing will be invalid.
- As there is no valid decision on liability, the arbitrator therefore cannot proceed to assess damages. The AA also does not allow for any discretion to defer or delay the publication of the written award.
- The Federal Court recognises that there should ideally be minimal or even no intervention by the Courts on the arbitration proceedings provided that the procedures under the AA 2005 are complied strictly.
- Given the above, the Federal Court also granted Telekom with an injunction to restrain Obnet from taking any further steps in relation to the arbitration proceedings until the arbitrator publishes his award on liability, in writing.
Key Takeaways
The Federal Court’s decision underscores the mandatory nature of Section 33(1) of the AA 2005, which requires that any arbitration award must be in writing to be valid. Oral decisions do not fulfil this statutory requirement and are therefore invalid. Parties to arbitration (and arbitrators) should take note of this case, especially in bifurcated arbitrations.
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This article was written by Sean Ferdinand Ng (Senior Associate) from Donovan & Ho’s dispute resolution practice.
Donovan & Ho is a law firm in Malaysia. Our dispute resolution provides advice and legal representation in the civil and industrial courts. We also represent clients in both domestic and international arbitration, as well as other forms of alternative dispute resolution. Our experienced lawyers are also able to assist in commercial and civil disputes (such as debt recovery, shareholders’ or directors’ disputes, breach of contract and claims for injunctive relief), constructive disputes (arbitration and/or adjudication proceedings, disputes relating to delays, liquidated damages, defects and rectification work) and employment disputes (unfair dismissal claims, judicial review proceedings, and employment-related civil claims). Have a question? Please contact us.
