Facts

The plaintiff and the defendant entered into a time charterparty dated January 8 2016. The time charterparty included an arbitration clause which stated that all disputes arising out of the charter would be determined by arbitration in London pursuant to laws relating to arbitration there in force.

The plaintiff purchased 4,000 kilolitres of marine gas oil and instructed the vessel owned by the defendant, the Silver Moon, to sail directly to Male, Maldives. On February 8 2016 the vessel deviated towards a port of refuge, Tanjung Pinang, Indonesia and eventually berthed at Johor Port to undergo multiple repairs.

As the vessel was unseaworthy and as a result of being off-hire for more than seven days, the plaintiff contended that the defendant was in repudiatory breach of the time charterparty, which it terminated. The plaintiff demanded security in the sum of $2 million in the form of a bank guarantee.

The defendant did not provide security. On February 17 2017 a writ of summons was filed. On application by the plaintiff, a warrant of arrest was issued against the Silver Moon.

The plaintiff also applied for an ex parte order to transfer the cargo to another vessel, the Wooshin Ace, which was granted on February 23 2016. Discharge and transshipment operations were carried out and concluded on February 27 2016.

The plaintiff then issued a notice of arbitration, which was served on the defendant on March 24 2016.

On March 29 2016 the plaintiff filed an application for the vessel to be sold pending litigation and the same was allowed by the high court.

On May 31 2016 the plaintiff filed this application (Enclosure 70) to stay the substantive proceedings of the action in rem pursuant to Section 10 of the Arbitration Act 2005 pending arbitration in London. Section 10 of the Arbitration Act 2005 states that:

"A court before which proceedings are brought on respect of a matter which is the subject of an arbitration agreement, shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed."

The defendant held that the plaintiff had taken steps in the proceedings as follows:

  • the ex parte application filed by the plaintiff for an order to discharge the cargo from the Silver Moon to the Wooshin Ace;
  • the plaintiff's application for sale pending litigation of the vessel; and
  • the plaintiff's participation in the case management where trial directions were given.

As such, the defendant contended that the plaintiff had waived its rights to arbitration.

Decision

The high court held that resisting an application for an interlocutory injunction is not a 'step in the proceedings'. Whether an action amounts to a step in the proceedings under Section 10 of the Arbitration Act is determined by the nature of the action and whether it indicates an unequivocal intention to proceed with the suit and to abandon the right to refer the dispute to arbitration. Only where the step amounts to the submission of a statement of substance of the dispute will the procedural requirement be engaged.

In the present case, the substantive dispute in the action was the plaintiff's claim against the defendant for breach of the time charterparty and damages for loss suffered by reason of that breach.

The order to discharge the cargo from the Silver Moon to the Wooshin Ace was held not to be a step in the proceedings as the plaintiff, being the owner of the cargo, was entitled to deal with the cargo in order to secure the protection and preservation of the cargo and the plaintiff's rights over the same. The plaintiff's application for sale pending litigation of the vessel was also unrelated to the substantive issue of the breach of time charterparty. The application was made because the defendant offered no security for the release of the vessel.

Further, compliance by the parties with court directions does not constitute steps taken by the plaintiff to 'advance the dispute'.

The plaintiff had never indicated any unequivocal intention to proceed with the suit and abandon the right to refer the dispute to arbitration. The affidavits affirmed and the issuance of notice of arbitration demonstrated that the plaintiff consistently wanted to invoke the arbitration agreement to have the dispute settled by arbitration in London. The application to stay the Malaysian court proceedings pending the arbitration in London was therefore granted.(1)

Comment

The only steps that amount to a step in the proceedings under Section 10 of the Arbitration Act are those taken to advance the substantive dispute in the action. Parties' compliance with court directions will not constitute steps to advance the dispute.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact K Shanti Mogan at Shearn Delamore & Co by telephone (+60 320 272 727) or email (shanti@shearndelamore.com). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.

Endnotes

(1) SK B&T Pte Ltd v The owners of the ship or vessel 'Silver Moon' of Port Klang (No 4) (2017) 8 MLJ 605 (HC), November 30 2016.