In Mascom (M) Sdn Bhd v Ken Grouting System Specialist 4CL 803 [2003]

In Mascom (M) Sdn Bhd v Ken Grouting System Specialist 4CL 803 [2003]

The Court of Appeal outlined the factors it will take into account when considering an application for extension of time for the appointment of an arbitrator under Section 28 of the Arbitration Act.

Mascom (M) Sdn Bhd and Ken Grouting System Specialist entered into an agreement to finance the execution and implementation of a Government project. Disputes that arose between the parties eventually led to a settlement agreement executed on 30th October1997. The agreement provided for the mutual termination of the joint venture agreement, and reimbursement by Mascom (M) Sdn Bhd of certain expenses and costs incurred in the execution of works under the project by the Ken Grouting System Specialist.

Clause 10 of the settlement agreement required that any dispute in relation to expenses should be referred to a quantity surveyor who would be appointed by the president of the Institute of Quantity Surveyors Malaysia. It was further agreed that the surveyor’s decision would be final and binding on the parties. The settlement agreement stated that the surveyor’s decision was to be handed down within seventy five days of the date of the agreement and clause 16 of the agreement stressed that time was of the essence.

There was a disagreement between the parties on expenses Ken Grouting System Specialist claimed to have incurred. On 27th November 1997 Ken Grouting System Specialist wrote to the president of the Institute of Quantity Surveyors Malaysia seeking the appointment of an independent quantity surveyor in accordance with clause 10 of the settlement agreement. The chairman of the Quantity Surveyor Sectional Committee of the Institute of Quantity Surveyors replied on November 3 1997, appointing an independent quantity surveyor to provide a decision in respect of the disputed expenses.

Ken Grouting System Specialist notified Mascom (M) Sdn Bhd in writing of the appointment of the independent quantity surveyor by the Institute of Quantity Surveyors Malaysia. On the 2nd January 1998 Mascom (M) Sdn Bhd rejected the appointment, claiming that the appointment had not been made by the president as per clause 10 of the agreement. On the 7th January 1998 Ken Grouting System Specialist wrote directly to the president requesting his assistance in the appointment of the quantity surveyor. On the10th January 1998 the president appointed an alternative as the independent quantity surveyor. Ken Grouting System Specialist did not inform the Mascom (M) Sdn Bhd of the new appointment until six months later and as a result of this delay, time had run out as far as clause 10 of the agreement was concerned.

Ken Grouting System Specialist applied to the High Court under Section 28 of Arbitration Act for an extension of time for the appointment of the alternative quantity surveyor as the independent quantity surveyor/ arbitrator. The High Court allowed the application and Mascom (M) Sdn Bhd appealed.

The Appeal Court found that there was indeed a culpable delay on the part of the Ken Grouting System Specialist in informing Mascom (M) Sdn Bhd of the appointment of the alternative quantity surveyor as the independent quantity surveyor, and in bringing the application. However, the court held that such delay was merely one of the factors to be considered in the application.

The court added that Mascom (M) Sdn Bhd had contributed to the initial delay by taking twenty-four days (after receipt of Ken Grouting System Specialist’s letter of notification) to point out the error in the appointment of the initial quantity surveyor. The Appeal Court held that it was unjust for Mascom (M) Sdn Bhd to delay for twenty-four days and then to insist on the strict adherence of the time limit imposed under the settlement agreement.

The court held that under Section 28 of the Arbitration Act there was an added dimension of undue hardship which the court must consider, notwithstanding that the delay was solely due to Mascom (M) Sdn Bhd. ‘Undue hardship’ means greater hardship than the circumstances warrant or hardship greater than that which the applicant should justly be expected to bear.

On the facts of the case, the court noted that although there was an inordinate delay by Ken Grouting System Specialist, it would suffer undue hardship if the extension were not granted. A refusal to extend time would effectively bar Ken Grouting System Specialist’s claim and absolve Mascom (M) Sdn Bhd of any liability under the settlement agreement. This would, in the court’s view, outweigh any prejudice that may have been suffered by Mascom (M) Sdn Bhd and the court dismissed the appeal.

The court advised the parties that each application for extension will invariably depend on its particular facts and the courts will take all the relevant circumstances of the case into account.

Below is an excerpt from the Arbitration Act

Section 28

“Where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed, or some other step to commence arbitration proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the High Court, if it is of the opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may, on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper.”

This case was cited in Visage Continental Sdn Bhd v Smooth Track Sdn Bhd [2001]