BUSUK JAMILAH BTE SALIM & 70 ORS vs SITI RAHFIZAH BINTI MIHALDIN, SAMSURI BIN BAHARUDDIN (2009 b13) RAHMAN SEBLI, 17/12/2009,SS -ARBITRATION

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5 MALAYSIA

IN THE HIGH COURT IN SABAH AND SARAWAK

AT TAWAU

CIVIL SUIT NO. T22-73-2008

10

BETWEEN

BUSUK JAMILAH BTE SALIM & 70 ORS .. PLAINTIFFS

AND

SITI RAHFIZAH BINTI MIHALDIN .. 1ST 15 DEFENDANT

SAMSURI BIN BAHARUDDIN .. 2ND DEFENDANT

GROUNDS OF JUDGMENT

This is an application by the 1st defendant for an order that the

20 whole action be stayed pending arbitration. The application is

supported by the affidavit of the 1st defendant affirmed on 29.6.2009.

In brief the facts leading to this application are as follows. The 70

plaintiffs had entered into various Sale and Purchase Agreements

with the 1st and 2nd defendants for the sale of their respective lots of

25 land located within the 11,000 hectares of land in the Bagahak Oil

Palm Plantation, Lahad Datu. It is the plaintiffs’ pleaded case that

the 1st and 2nd defendants had misled or fraudulently made various

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misrepresentations to them in order to induce them into entering the

Sale and Purchase Agreements.

Pursuant to section 17 of the Sale and Purchase 30 Agreements the

defendants by letter dated 25th June 2009 wrote to the plaintiffs,

suggesting that the action be resolved by way of mediation or

arbitration. The plaintiffs would not agree to the suggestion, hence

this application by the 1st defendant.

35 Clause 17 of the relevant Sale and Purchase Agreements entered

into between the plaintiffs and the defendants are couched in the

following terms:

“17. Dispute Resolution

In the event of any dispute or difference between the parties arising out of

40 or in relation to this Agreement the parties hereby agree on the following:

(a) All dispute or difference shall be first discussed and resolved in good

faith amicably;

(b) Any disputes or proceedings arising out or in connection with this

Agreement shall first be brought before a qualified mediator

45 acceptable by both parties, with the objective of assisting and

facilitating in the dispute resolution on the issues that are in dispute;

(c) If the parties fail to resolve dispute or difference in the manner as set

out in clause 16(b) hereof, such dispute or difference shall be referred

to arbitration in accordance with the Arbitration Act 1952 (Act 93) of

50 Malaysia or any statutory re-enactment thereof. Any such arbitration

shall be conducted in Kota Kinabalu or at any other location in Sabah

mutually agreed by the Parties hereto. The party in whose favour the

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arbitration award is granted shall be entitled to recover costs and

expenses of administration of the arbitration proceedings.”

Learned counsels for the 1st defendant in their written 55 submissions

dated 30th September 2009 raised a preliminary objection on the

filing of the affdavit in opposition and the second affidavit (“the two

affidavits”) both filed by the plaintiffs’ solicitor Mr David Hiew Vui

Chung on behalf of the plaintiffs. The ground of objection is that they

60 contravened Order 41 rule 5 of the Rules of the High Court 1980

(“the Rules”). Order 41 rule 5 of the Rules provides as follows:

“5.(1) Subject to Order 14, rules 2(2) and 4(2), to paragraph (2) of this rule and

to any order made under Order 38, rule 3, an affidavit may contain only such

facts as the deponent is able of his own knowledge to prove.

65 (2) An affidavit sworn for the purpose of being used in interlocutory

proceedings may contain statements of information or belief with the sources

and grounds thereof.”

It was contended that Mr David Hiew Vui Chung has no personal

knowledge of the dispute between the plaintiffs and the 1st

70 defendant and was therefore in no position to affirm the two

affidavits which contained contentious facts. It was further pointed

out that the plaintiffs’ solicitor had failed to state the source of the

information which he had deposed to in the two affidavits.

In my view the point taken is valid. It is obvious that the plaintiffs’

75 solicitor, who is not a party to the suit, failed to state the source or

sources of the information that he was relying on in the two

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affidavits. Neither did he state the grounds of his belief. The solicitor

merely averred as follows in paragraphs 2 of the two affidavits:

“2.The matters to which I hereinafter depose are true to the best of my

knowledge and belief, and are within my personal knowledge 80 unless expressly

stated to the contrary.”

The fact that he acts for the plaintiffs does not mean that he can

affirm disputed facts without regard to the requirements of Order 41

rule 5 of the Rules. This is so even where he has full knowledge of

85 the facts of the case. Solicitors act on the instruction of their clients

and are not supposed to go on a frolic of their own where

contentious facts are in issue. In my view the failure to comply with

Order 41 rule 5 is a serious breach and not the sort that can be

cured by Order 1A of the Rules.

90 For these reasons I upheld the preliminary objection and

disregarded the contents of the two affidavits. In Sabah Bank Bhd v

Pemborong Keningau Sdn Bhd & Ors [1991] 3 CLJ (Rep) 677 it was

held, inter alia, that it is not the business of anyone much less

counsel to depose to contentious facts in their affidavits. And in Re

95 J.L. Young Manufacturing Company, Limited [1900] 2 CH 753 Lord

Alverstone CJ held that affidavit evidence which do not refer to the

source of the information and belief are “worthless” and “not to be

received as evidence in any shape whatever”. Rigby LJ in the same

case added:

100 “In the present day, in utter defiance of the order (Rules of the Supreme Court,

1883, Order XXXVVVIII, r.3) solicitors have got into a practice of filing affidavits

in which the deponent speaks not only of what he knows but also of what he

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believes, without giving the slightest intimation with regard to what his belief is

founded on … I never pay the slightest attention myself to affidavits of that kind,

whether they be used on interlocutory applications or on final 105 ones, because the

rule is perfectly general-that, when a deponent makes a statement on his

information and belief, he must state the ground of that information and belief.”

The upshot of my ruling on the preliminary objection is that the 1st

defendant’s affidavit in support remains unopposed. The relevant

110 paragraph of the affidavit is paragraph 10, which states:

“10. I have not taken any further step in this action save the filing of the

memorandum of appearance. A true copy of the memorandum of appearance is

now produced and shown to me marked “SR-5”.”

The plaintiffs are therefore deemed to accept that the 1st defendant

115 has not taken any other steps in the proceedings other than filing

the memorandum of appearance. Section 10(1) of the Arbitration

Act, 2005 (“the 2005 Act”) provides as follows:

“A court before which proceedings are brought in respect of a matter which is

the subject of arbitration agreement shall, where a party makes an application

120 before taking any other steps in the proceedings, stay those proceedings and

refer the parties to arbitration unless it finds:-

(a) That the agreement is null and void, inoperative or incapable of being

performed; or

(b) That there is in fact no dispute between the parties with regard to the

125 matters to be referred.”

In Sanwell Corporation v Trans Resources Corporation Sdn Bhd &

Anor [2002] 3 CLJ 213 the Federal Court held that the entry of an

unconditional appearance does not amount to a step in the

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proceedings. The 1st defendant is therefore not estopped from

making the present 130 application.

The use of the word “shall” in section 10(1) of the 2005 Act makes it

mandatory for the court to make an order of stay unless paragraphs

(a) or (b) applies. The onus is on the plaintiffs to show that either

paragraph (a) or (b) applies. I have considered the submissions of

135 both sides carefully and I am of the view that the plaintiffs have

failed to discharge that onus. It is clear to me that the question as to

whether the Sale and Purchase Agreements are null and void and of

no legal effect due to the alleged fraudulent or reckless

misrepresentation by the defendants is a question that comes within

140 the scope of clause 17 of the Sale and Purchase Agreements,

namely “any dispute or difference between the parties arising out of

or in relation to this Agreement”.

In this connection the decision of the English Court of Appeal in

Harbour Assurance Co. (UK) Ltd v Kansa General International

145 Assurance Co. Ltd [1993] All ER 897 is relevant. In delivering the

judgment of the court Leggatt LJ said at page 908:

“The arbitration agreement, if sufficiently widely drawn, is from its nature

intended by the parties to govern any dispute that may arise between them,

including the dispute about the initial illegality of the contract. There is no

150 reason why the parties should have intended to exempt from the scope of the

arbitration clause a dispute such as the respondents saw fit to instigate here

about whether the retrocession agreement was itself infected by illegality of the

underlying insurance agreements. Otherwise it would put it in the power of one

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contracting party to prevent arbitration from taking place simply by alleging that

the contract was void for initial 155 illegality..”

In Perbadanan Kemajuan Negeri Perak v Asean Security Paper Mill

Sdn Bhd [1991] 3 MLJ 309 the Supreme Court said at page 312:

“It is also a well-settled principle that where parties have agreed to refer

disputes for arbitration and the court is satisfied that a dispute exists, but one of

160 the parties to the contract commences an action to have the matter determined

by the court the prima facie stand of the court is to stay the action and allow the

parties to go to the tribunal to which they have agreed. In other words once the

party applies for a stay and there is a dispute within the meaning of a valid and

subsisting arbitration clause the inclination of the court is that effect should be

165 given to the arbitration clause.”

In Heyman and Anor v Darwins Ltd [1942] 1 All ER 337 Lord Porter

succinctly said:

“If two parties purport to enter into a contract and a dispute arises as to whether

they have done so or not, or as to whether the alleged contract is binding upon

170 them, I see no reason why they should not submit that dispute to arbitration..”

And in Fiona Trust Holding Corporation and Others v Privalov and

Others [2007] 4 All ER 951 HL, Lord Hoffman said at page 958:

“In my opinion the construction of an arbitration clause should start from the

assumption that the parties, as rational businessman, are likely to have

175 intended any dispute arising out of the relationship into which they have entered

or purported to enter to be decided by the same tribunal. The clause should be

construed in accordance with this presumption unless the language makes it

clear that certain questions were intended to be excluded from the arbitrator’s

jurisdiction. As Longmore LJ remarked, at [17]: ‘[i]f any businessman did want

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to exclude disputes about the validity of a contract, it would 180 be comparatively

easy to say so.’”

On the authorities and for the reasons stated above I am of the view

that this is a fit and proper case for a stay of the whole proceeding

pending arbitration. I had therefore allowed the 1st defendant’s

application in terms of the summons in chambers dated 27th 185 July

2009.

190 (DATO’ ABDUL RAHMAN SEBLI)

Judicial Commissioner

High Court Kota Kinabalu

Dated: 17th December 2009

For the 1st 195 Defendant: Alex Decena (Christina Liew and Wilson Lai

with him) of Messrs CJ Liew & Co.

For the Plaintiffs: David Hiew Vui Chung of Messrs MF Poon,

Hiew & Associates.