CMS Energy Sdn Bhd v Poscon Corp [2008]

CMS Energy Sdn Bhd v Poscon Corp [2008]

On 15th October 2008 the High Court in Kuching ruled in CMS Energy Sdn Bhd v Poscon Corp that CMS Energy Sdn Bhd who had applied for and obtained an ex parte injunction to restrain Poscon Corp from proceeding with any arbitration proceedings in respect of an amount in the sum of RM3,337,029, which CMS Energy Sdn Bhd allegedly owed Poscon Corp.

CMS Energy Sdn Bhd was granted an injunction on an ex parte basis and applied for the injunction to continue. Poscon Corp applied for a stay of proceedings in accordance to Section 10 of the Arbitration Act 2005.

CMS Energy Sdn Bhd and Poscon Corp being a Korean company registered in Korea together with another company called Special Triumph Sdn Bhd had set up a joint venture and awarded a subcontract to this same joint venture company. The subcontract was then further subcontracted by the joint venture to Poscon Corp.

CMS Energy Sdn Bhd contended that Poscon Corp could not rely on Section 10 of the Arbitration Act because there was no arbitration agreement between Poscon Corp and CMS Energy Sdn Bhd. They argued that the arbitration agreement, if any, was between Poscon Corp and the joint venture company and that CMS Energy Sdn Bhd was not party to any such arbitration agreement. In response, Poscon Corp claimed that there was no joint venture company as alleged by CMS Energy Sdn Bhd, as it was never set up. CMS Energy Sdn Bhd had subcontracted the subcontract to Poscon Corp and that the purchase orders purportedly raised by the joint venture company were in fact issued by CMS Energy Sdn Bhd to Poscon Corp in Korea.

The court held that after looking at the provisions of the Arbitration Act, and in particular Section 10 (the provision on stay) together with Section 18 (the provision on arbitrators’ powers), the act clearly intended for courts to favour arbitration proceedings. The stay was granted and the injunction set aside.