Section 11 of the Arbitration Act 2005 empowers the court to issue an injunction pending the resolution of disputes between parties. The High Court recently had occasion to consider the exercise of this power in Plaza Rakyat Sdn Bhd v Datuk Bandar Kuala Lumpur.(1)

Kuala Lumpur City Hall, the defendant, is the holder of a 99-year lease on a piece of land along Jalan Pudu in the city of Kuala Lumpur. Plaza Rakyat Sdn Bhd entered into a joint venture agreement with the defendant in 1992 whereby it was to embark on an urban renewal project to transform the area into a transportation hub which would include, among other things, an integrated terminal for buses, taxis and light rail, and hotels, offices and business premises.

In turn, the defendant granted the plaintiff a registered lease of 88 years for the project. Construction work commenced in 1994 and the project was scheduled to be completed in six years. However, from 1998 until late 2009, the plaintiff was unable to proceed with further construction due to the Asian economic crisis, which resulted in the plaintiff lacking the funds to proceed. Numerous negotiations were held between the parties to restart the project. The parties attempted to enter into a supplementary agreement to grant an extension of time to the plaintiff to complete the project, and to enter into a fresh development agreement, a novation agreement and a privatisation agreement. All attempts were subsequently abandoned by the parties.

In 2010 the defendant sought to terminate the joint venture agreement and the lease and gave notice to take possession of the land. The plaintiff invoked the arbitration clause in the joint venture agreement and the lease agreement and sought an interim injunction to prevent the defendant from repossessing the land, pending the resolution of the dispute by arbitration.

The defendant raised a challenge that the injunction ought not to be granted on the basis that the right to repossess the land constituted a self-help remedy and should not be restrained by injunction. The court did not accept the defendant's challenge and granted the injunction, thereby preserving the subject matter of the arbitration. In granting the injunction, the court took into consideration the definition of 'public interest' in this context; it was concerned why the defendant was now in a hurry to complete the project after it had previously failed to take action against the plaintiff following the expiry of the six-year contractual period and a further lapse of 13 years.

The court took the view that if the arbitral tribunal made a decision against the defendant, the damages that the defendant would be required to pay would be large and would ultimately come out of public funds. On this basis, the court felt that the grant of interim relief by way of an injunction was in order pending the reference to arbitration.

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(1) S-24NCVC-29-2010, [2011] 1 LNS 598, Kuala Lumpur High Court. Judgment by Mah Weng Kwai, JC.