DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN)
RAYUAN SIVIL NO.: W-02(C)(A)-1786-10/2014
ANTARA
BRUNSFIELD PROJECT MANAGEMENT SDN BHD …PERAYU
DAN
INGENIUR BERSEKUTU CONSULTING ENGINEERS …RESPONDEN
[DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR
(BAHAGIAN DAGANGAN) SAMAN PEMULA NO.: 24C(ARB) – 4 – 02/2014
Dalam perkara Timbangtara di bawah Kaedah-kaedah Timbangtara Institusi Jurutera Malaysia 2012 antara Brunsfield Project Management Sdn Bhd dan Ingeniur Bersekutu Consulting Engineers;
Dan
Dalam perkara Akta Pendaftaran Jurutera, 1967 (Akta 138) dan Peraturan-peraturan di bawahnya;
Dan
Dalam perkara Skala Fi Lembaga Jurutera Malaysia (Pindaan 1998);
Dan
Dalam perkara Award bertarikh 10.01.2014 made by Ir. Leon Weng Seng;
Dan
Dalam perkara Seksyen 37(1)(b)(ii) dan Seksyen 42(1) Akta Timbangtara, 2005 dan peruntukan-
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peruntukan lain Akta Timbangtara, 2005 dan Akta Timbangtara 2005;
Dan
Dalam perkara Aturan 69 Kaedah-kaedah Mahkamah, 2012 dan Aturan 69 Kaedah 5 dan 6 Kaedah-kaedah Mahkamah, 2012 dan peruntukan-peruntukan lain Kaedah-Kaedah Mahkamah 2012;
Dan
Dalam perkara Aturan 92 Kaedah 4 Kaedah-kaedah Mahkamah Tinggi, 1980 dan kuasa sedia ada Mahkamah.
ANTARA
BRUNSFIELD PROJECT MANAGEMENT SDN BHD … PLAINTIF
DAN
INGENIUR BERSEKUTU CONSULTING ENGINEERS … DEFENDAN
Yang diputuskan oleh Yang Arif Puan See Mee Chun di Mahkamah Tinggi Shah Alam pada 22 September 2014]
CORAM
LIM YEE LAN, JCA VARGHESE A/L GEORGE VARUGHESE, JCA
IDRUS BIN HARUN, JCA
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GROUNDS OF JUDGMENT
INTRODUCTION
[1] The appeal in the present instance emanated from the decision of
the learned High Court Judge dismissing the amended Originating
Summons dated 20.2.2014 which seeks an order to set aside the
arbitration award handed down by the arbitrator on 10.1.2014.
FACTS
[2] The material facts emerging out of the events culminating in this
instant appeal reveal that sometime in 2009, the appellant requested the
respondent, a firm of civil and consulting engineer, to provide civil and
structural engineering design and consultancy services (the services
agreement) for a project known as –
“Cadangan Pembangunan Komersial Yang Merangkumi Blok
Pejabat, Dewan Konvensyen, Hotel & Pangsapuri Servis 12
Tingkat Serta 2 Basemen di Atas Lot No. PT 8, Jalan PJU
1A/2, Mukim Damansara, Daerah Petaling, Selangor Darul
Ehsan untuk Tetuan Sime Darby Brunsfield Damansara Sdn
Bhd.”
The appellant, in this regard, is in the business of project development and
project management. It is owned by Sime Darby Brunsfield Damansara
Sdn Bhd (SDBD). The respondent, on the other hand, is a firm of civil and
consulting engineer.
[3] The services agreement according to the appellant was oral in
nature. There was no formal written agreement. The respondent had
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requested for an appointment letter from the appellant but was not issued
one.
[4] The appellant was unhappy with the respondent’s work.
Consequently the service of the respondent was terminated on 16.5.2011.
The respondent disputed the termination.
[5] As the respondent had rendered professional services until
16.5.2011, it submitted several invoices to SDBD for the total sum of
RM12,537,155.16 as its fees and expense claim for the termination of the
services. These invoices were premised on the BEM Scale of Fees
(Revised 1998) (the Scale of Fees). The appellant disputed the invoices
and refused to make any payment to the respondent contending that
SDBD was not the correct party that had appointed the respondent, the
claim was excessive and unsubstantiated, the work had not reached the
stage as claimed by the respondent and the appellant had never agreed
to adopt the Scale of Fees.
[6] The arbitration between the parties arose out of the dispute in
connection with the termination of the services by the appellant and the
claim for the payment of fees by the respondent. By a letter dated
17.5.2012, the Board of Engineers Malaysia confirmed that both the
appellant and the respondent had agreed to arbitrate the dispute. To this
end, Ir. Leon Weng Seng was appointed as the arbitrator.
[7] As the evidence has shown, subsequent to the commencement of
the arbitration proceedings, the respondent reissued a second set of
invoices for a total sum of RM12,476,389.16. This time around it was sent
to the appellant.
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[8] On 10.1.2014 the arbitrator made his award as follows:
a. that the termination of the respondent’s services was not mutual
and not justified.
b. that the professional services provided by the respondent were
adequate within the professional standard of a civil and structural
consulting engineer and / or fit for their intended purpose.
c. that the invoices issued in the name of Sime Darby Brunsfield
Damansara Sdn Bhd were wrongly issued and are therefore
dismissed.
d. that the re-issued invoices are correctly addressed to the claimant
(the appellant) as the party liable for the respondent’s claim.
e. that the parties are not bound to the Scale of Fees (Revised 1998).
f. that the reasonable fee percentage for the respondent’s services
shall be 1.25% of the total cost of construction (as per letter of Award
for substructure work, and the cost estimate dated 20.09.2011 by the
consultant Quantity Surveyor) and the stage of payment of fees shall
be as follows:
Preliminary Stage : 20%
Design Stage (i) : 35%
Design Stage (ii) : 20%
Tender Stage : 5%
Construction Stage : 20%
g. that the claimant is to pay the respondent the sum of
RM2,187,702.86 together with simple interest thereon at 5% per
annum from the date of this award until payment.
h. the appellant is to pay the respondent’s costs together with simple
interest thereon at 5% from the date of this award until payment.
i. that the claimant shall bear the administrative costs of RM1,000.00
which the claimant has paid to the IEM.
j. that the claimant shall bear the room rental charge of RM6,000.00.
k. that the claimant shall bear the costs of transcription which amounts
to RM6,846.32.
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l. that the claimant shall bear all of my fees and expenses in respect of
this award, which fees and expenses I have determined at
RM74,727.96, and to the extent the Respondent had paid any part
thereof the claimant shall forthwith reimburse the Respondent with
that amount and simple interest thereon at 5% p.a. from the date of
the Respondent’s payment until the date of such reimbursement.
m. I reserve my final award determination, if not agreed, of the amount
of recoverable costs and any interest thereon for which purpose
shall give my further direction upon the application of either party.
THE ORIGINATING SUMMONS
[9] Dissatisfied with the decision of the arbitrator, the appellant
commenced the present action by way of an Originating Summons dated
31.3.2014 challenging the award. By an amended Originating Summons
dated 20.2.2014 the appellant challenged the award pursuant to sections
42 and 37 of the Arbitration Act 2005 (the Act) seeking the following orders:
(a) the award be set aside and / or varied in whole or in part
pursuant to determination of the questions of law under
section 42(1) of the Act arising out of the award; and
(b) the award be set aside and / or varied in whole or in part
pursuant to section 37(1)(b) of the Act.
[10] We pause to observe at this point that for the purpose of the
application under section 42(1) of the Act, the appellant advanced 25
questions of law put across in sub-paragraphs 1.1(a) to (x) of the amended
Originating Summons. However in our view, in the end and in essence,
these questions clearly boil down to only one principal question of whether
as a matter of law, the arbitrator, upon making a finding that there was no
agreement reached between the parties with regard to the percentage of
fees for the respondent’s services, was correct in holding that the fee
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percentage of 1.25% of the total construction costs was the reasonable
fee percentage for the respondent’s professional fees, or the learned
arbitrator ought to have held that the respondent was only entitled to claim
from the appellant on the basis of quantum meruit and proceeded to
assess the defendant’s claim on that basis.
[11] Having said that, we take this opportunity to mention that the
appellant in its amended Originating Summons duplicates the grounds
under the section 42 application as grounds under the section 37
application. That being the case, as regards the section 37 application,
these grounds can therefore be summarized and couched in a similar
fashion we have set out in the preceding paragraph.
THE HIGH COURT DECISION
[12] The amended Originating Summons was dismissed by the learned
High Court Judge. It becomes apparent from the grounds of judgment
which we note, were expressed with brevity, the learned Judge found
that –
(a) there was no error of law shown which necessitated the
Court to set aside the award;
(b) there was no conflict of public policy shown; and
(c) the arbitrator, having held that there was no agreement
on the fee percentage and the Scale of Fees did not
apply, did not commit any error of law when he held that
the fee percentage would be 1.25 percent of the total
construction costs.
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THE APPEAL
[13] The appellant specifies 24 grounds of appeal in the memorandum of
appeal. However, the appellant’s written and oral submissions turn on and
is restricted to only that part of the award that had fixed the respondent’s
fees entitlement at 1.25 % of the total project costs.
[14] For the appellant, it is submitted that the questions of law sought for
determination in the High Court falls within section 42(1) of the Act. The
learned Judge, it is submitted, had committed errors of law when Her
Ladyship claimed that the appellant’s application was solely premised on
section 37(1) of the Act when in fact the appellant was seeking a
determination on questions of law pursuant to section 42(1) of the Act. It
is also further submitted that once the arbitrator had declared that there
was no oral agreement reached between the respondent and the appellant
in relation to the fee payable to the respondent, the learned Judge ought
to have held that the arbitrator should not have arbitrarily awarded
damages premised on the fee percentage of 1.25% of the total
construction costs and the stage of payment of the fees based on the
Scale of Fees. Instead, the proper remedy for the measure of damages
to be awarded to the respondent ought to have been based on a quantum
meruit basis under section 71 of the Contracts Act 1950. In the premises,
the appellant seeks a variation of the award and a direction that the fees
be fixed on a quantum meruit basis under the said section 71 and
ultimately the matter be remitted back to the arbitrator for rearbitration by
applying quantum meruit principle.
[15] Thus, at the heart of the matter lies a question which we can
distinctly discern for our determination which is essentially whether the
award of 1.25% of the total construction costs in favour of the respondent
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as its professional fee is correct or the learned arbitrator ought to have
held that the respondent is only entitled to claim from the appellant by
applying quantum meruit principle.
[16] The respondent’s immediate rejoinder to this contention is that the
appellant is treating the questions raised in the application as a question
of law while the matter is actually and undoubtedly a reference in the
nature of a question of fact.
THE LAW [17] To appreciate the contentions that have been raised and before we
go more closely into the merits of this appeal, it would be desirable to state
the law by referring to various judicial pronouncements in a cantenation of
cases relating to sections 37 and 47 of the Act. Section 37 of the Act
empowers the High Court to set aside an award of the arbitrator on certain
grounds provided for in the said section. In the present appeal the
appellant relies on section 37(1)(b) which reads – “37. Application for setting aside
(1) An award may be set aside by the High Court only if –
(a) ……
(b) the High Court finds that –
(i) the subject matter of the dispute is not capable of settlement by
arbitration under the laws of Malaysia; or
(ii) the award is in conflict with the public policy of Malaysia”
[18] Based on the affidavit in support affirmed by Khoo Kong Hooi (the
affidavit in support), the challenge to the arbitration award is mounted on
section 37(1)(b)(ii) of the Act. Sub-paragraph (1)(b)(i) of section 37 in our
view does not apply as the issue in this appeal does not relate to the
question whether the subject matter of the dispute is not capable of
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settlement by arbitration under the laws of Malaysia. We accordingly
express no opinion on this provision.
[19] To succeed under sub-paragraph (1)(b)(ii) of section 37, the
appellant has to show that the award is in conflict with the public policy of
Malaysia. But while the law recognizes the power of the Court to set aside
an award which is contrary to the public policy of Malaysia, it is difficult to
really fathom the meaning of public policy in the sense the term is used in
the section and in the context of arbitration. It is significant to mention that
section 37(2) in this connection, provides for two circumstances under
which an award is in conflict with the public policy of Malaysia.
These are –
(a) the making of the award was induced or affected by fraud
or corruption; and
(b) a breach of the rules of natural justice occurred –
(i) during the arbitral proceedings; or
(ii) in connection with the making of the award.
[20] However, in our view such circumstances are not exhaustive as the
introductory words to section 37(2) of the Act are formulated in such a way
that these limitations do not affect the generality of sub-paragraph (1)(b)(ii)
of section 37. It follows therefore that what can be properly characterized
as public policy under sub-paragraph (1)(b)(ii) of section 37 is wide and as
such is open to interpretation by the Court. Nevertheless, we hasten to
add that based on the appellant’s affidavit in support, it is plain that the
applicant is relying on sub-paragraphs (2)(b)(i) and (ii) of section 37 when
it alleges that a breach of the rules of natural justice had occurred during
the arbitral proceedings and / or in connection with the making of the
award. Accordingly we do not think that it is necessary to discuss what
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constitutes public policy within the meaning of sub-paragraph (1)(b)(ii) of
section 37 of the Act.
[21] Notwithstanding the appellant’s reliance on sub-paragraphs (2)(b)(i)
and (ii) of section 37, our perusal of the written submission of learned
counsel for the appellant clearly indicates the failure on his part to address
the issue of the application of sub-paragraphs (1)(b)(ii) and (2)(b)(i) and
(ii) of section 37 to the appellant’s case. We should say therefore that,
save for the affidavit in support, the written submission is absolutely of no
assistance to the Court in determining whether the award can be set aside
pursuant to sub-paragraph (1)(b)(ii) of section 37 of the Act. This omission
is somewhat disquieting as the appellant’s case is premised on these
specific provisions apart from section 42(2) of the Act.
[22] As earlier stated, the appellant is also seeking a determination on
questions of law pursuant to section 42(1) of the Act which provides – “42. Reference on question of law
(1) Any party may refer to the High Court any question of law arising out of an award.”
The provisions when properly construed appear to us that in truth only a
question of law may be referred to the High Court. No questions of fact
are allowed. This limitation is undoubtedly in consonance with a long
established legal principle in arbitration that the arbitrators are the masters
of the facts thus recognising that their findings of fact are conclusive.
[23] The law as formulated in section 42(1) of the Act has also imposed
a further restriction. In this regard, the question of law which may be
referred to the High Court should arise out of or be within the narrow
confine of an award itself. It thus precludes a question of law which arises
out of the arbitration. This legal principle is laid down quite clearly in the
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authorities. In the case of Universal Petroleum Co. v Handels und
Transport GmbH [1987] I WLR:176, the Court of Appeal in construing
the words “out of the award” held that the question must arise out of the
award, not out of the arbitration generally [see also Majlis Amanah Rakyat v Kausar Corporation Sdn. Bhd. [2009] 14 MLRH, 331;
Exceljade Sdn. Bhd. v Bauer (Malaysia) Sdn. Bhd. [2013] MLRHU
986].
[24] The Federal Court in Intelek Timur Sdn. Bhd. V Future Heritage
Sdn. Bhd. [2004] 1 MLJ 401, in considering the law on the effect of an
arbitrator’s award under the previous Arbitration Act 1952 regarded it as
well-settled. It succinctly explained that the award was final, binding and
conclusive and could only be challenged in exceptional circumstances. It
was not sufficient to set aside the award if the arbitrator had erred by
drawing wrong inferences of fact from the evidence before him. Citing the
case of Sharikat Pemborong Pertanian & Perumahan v Federal Land Development Authority [1971] 2 MLJ 210, the Federal Court repeated
the pronouncement made by the High Court therein that it would be
contrary to all the established legal principles relating to arbitration if an
award based upon the evidence presented were liable to be reopened on
the suggestion that some of the evidence had been misapprehended or
misunderstood.
[25] The approach adopted in the cases discussed in the preceding
paragraph though concerned the Arbitration Act 1952, in our view has not
changed under the legislative scheme of the present Act which plainly
promotes respect for and adherence to the principle of party autonomy,
minimal court intervention and finality in arbitral awards [see Lembaga Kemajuan Ikan Malaysia v WJ Construction Sdn. Bhd. [2013] 8 CLJ
13
655, Kerajaan Malaysia v Perwira Bintang Holdings Sdn. Bhd. [2015]
2 MLRA 93].
[26] We are acutely aware that while only a question of law is allowed to
be referred under the Act, the addition of sub-section (1A) by the
Arbitration (Amendment) Act 2011 (Act A1395) to section 42 has set a
further limit within which the question of law may be referred which is
clearly evinced from the terms of the said sub-section –
“(1A) The High Court shall dismiss a reference made under sub-section (1) unless the question of law substantially affects the rights of one or more of the
parties.
[27] Accordingly, even if the question raised falls within the expression
“any question of law”, sub-section (1A), construed in the context of sub-
section (1), has nevertheless made it mandatory for the High Court to
dismiss a reference of the question of law if such question does not
substantially affect the rights of one or more of the parties. Thus, it is
abundantly clear that for a reference under section 42(1) to succeed the
party referring the question of law must satisfy the Court that the
determination of such question will substantially affect his rights.
[28] For clarity, we wish to reiterate an oft-repeated reminder in various
previous judicial pronouncements that the very purpose parties conclude
an arbitration agreement is because they do not wish to litigate in the
Court. This in our opinion, can produce a desired result only if the parties
also agree to be bound by the decision of the arbitrator and refrain from
subsequently approaching the Court to obtain hair splitting decisions. The
legislative scheme of the Act on its part ensures that this purpose is
possible of fulfilment and obviates the necessity of approaching the Court
when the exercise of judicial powers of the Court is strictly monitored and
14
circumscribed under section 8 thereof which almost prohibits its
intervention in matters governed by the Act except where so provided
therein. The arbitrators being the masters of the fact, it is irrelevant
whether the Court considers those findings of fact to be right or wrong.
The Court too is not seised of jurisdiction to remit or set aside the award
of an arbitrator even if the arbitrator has committed an error of law if such
error does not vitiate the whole award. These principles are clearly
enunciated in several case authorities such as SDA Architects (sued as
a firm) v Metro Millenium Sdn. Bhd. [2014] 2 MLJ 627, Taman Bandar
Baru Masai Sdn. Bhd. v Dinding Corporation Sdn. Bhd., supra, Exceljade Sdn. Bhd. v Bauer (Malaysia) Sdn. Bhd., supra and Pembinaan LCL Sdn. Bhd. v SK Styrofoam (M) Sdn. Bhd. [2007] 3 CLJ 183.
[29] It is noteworthy that sub-section (4) of section 42 inter alia allows the
Court to set aside an award upon the determination of a reference under
sub-section (1). Besides this sub-section, section 37 of the Act too confers
a specific power on the High Court to set aside an award. It is pertinent to
mention that section 37 provides for circumstances under which an award
may be set aside. Section 42(4), bereft of any provisions providing for
such circumstances, however allows the Court to also confirm, vary or
remit an award of the arbitrator. Section 37 does not confer such power
on the High Court. Consequently, in the event the Court sets aside the
award under sub-section (4), it appears that the grounds upon which the
Court may do so shall be those provided under sub-paragraphs (1)(a) and
(b) of section 37 of the Act.
[30] For completeness, it is appropriate to refer to the Court of Appeal’s
decision in Kerajaan Malaysia v Perwira Bintang Holdings Sdn. Bhd,
15
supra which summarised several propositions as guidelines based on the
authorities, without intending to be exhaustive in order to ensure that any
reference of a question of law is made in accordance with section 42 of
the Act. These are –
a. the question of law must be identified with sufficient precision [Taman Bandar
Baru Masai Sdn. Bhd. V Dindings Corporations Sdn. Bhd. [2009] 4 MLRH 171; Maimunah Deraman v Majlis Perbandaran Kemaman [2010] 3 MLRH 948];
b. the grounds in support must also be stated on the same basis;
c. the question of law must arise from the award, not the arbitration proceeding
generally [Majlis Amanah Rakyat v Kausar Corporation Sdn. Bhd. supra, Exceljade Sdn. Bhd. V Bauer (Malaysia) Sdn. Bhd. [2013] MLRHU 986;
d. the party referring the question of law must satisfy the court that a determination
of the question of law will substantially affect his rights;
e. the question of law must be a legitimate question of law, and not a question of fact
‘dressed up’ as a question of law (Georges SA v Trammo Gas Ltd. (the Belarus) [1993] 1 Lloyd’s Rpe 2015);
f. the court must dismiss the reference if a determination of the question of law will
not have a substantial effect on the rights of parties Exceljade v Bauer (Malaysia) Sdn. Bhd. supra;
g. this jurisdiction under section 42 is not to be lightly exercised, and should be
exercised only in clear and exceptional cases Lembaga Kemajuan Ikan Malaysia v WJ Construction Sdn. Bhd. supra;
h. nevertheless, the court should intervene if the award is manifestly unlawful and
unconscionable;
i. the arbitral tribunal remains the sole determiners of questions of fact and evidence
(Gold and Resources Development (NZ) Ltd. v Doug Hood Limited [2000] 3 NZ LR 318);
j. while the findings of facts and the application of legal principles by the arbitral
tribunal may be wrong (in instances of findings of mixed law and fact), the …….
should not intervene unless the decision is perverse).
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Accordingly, before stating our grounds of decision in due course, it is
necessary to stress that in doing so we are guided by the law governing
arbitral proceedings fully considered under this part.
OUR ANALYSIS AND DECISION
[31] We shall first deal with the appellant’s contention that the learned
Judge had committed an error of law when Her Ladyship claimed that the
appellant’s application was solely premised on section 37(1) of the Act.
We are satisfied, after thorough scrutiny of the entire grounds of judgment,
that the learned Judge had clearly stated that the application was based
on two broad grounds under sections 42(1) and 37(1)(b)(ii) of the Act. At
no time and nowhere in the grounds of judgment did the learned Judge
say that the appellant’s claim was premised solely on section 37(1)(b)(ii)
of the Act. With deference to learned counsel, this argument, in our
judgment, is wholly devoid of any merit and must be rejected.
[32] The appellant as earlier mentioned, had framed 25 questions which
it envisioned as questions of law arising out of the award of the arbitrator
premised on both sections 37(1)(b)(ii) and 42(1) of the Act. The affidavit
in support clearly demonstrates the appellant’s position that it has
assumed in that the arbitrator had committed an error of law when upon
making a finding that there was no agreement reached between the
appellant and the respondent with regard to the percentage of fees, he
held that the reasonable fee percentage for the respondent’s professional
fees was 1.25% of the total construction costs.
[33] In our judgment, the determination of fee percentage of 1.25% of the
total construction costs as being reasonable is without any doubt a finding
of fact made by the arbitrator after he had carefully considered the
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evidence adduced. We agree with the learned Judge’s decision that the
figure was not one that was plucked from the air. It was in fact arrived at
after due consideration of what would be a reasonable percentage of fee.
It cannot be denied that the arbitrator in his award had found that there
was no agreement reached between the parties with regard to the
percentage of fee. This Court finds that the basis for such finding is
derived from the evidence that the agreed fee as claimed by the appellant
was 1.15% of the total construction costs while the respondent on the
other hand had submitted four fee proposals to the appellant as follows:
a. fee proposal 1.5% dated 5.1.2010 for the project;
b. fee proposal of 1.5% dated 5.4.2010 for 198 units of apartment
and substructure of B1, B2 & GF;
c. fee proposal of 1.0% dated 19.4.2010 for superstructure’s key
plan set, checking of design drawing and submission to authority;
and
d. fee proposal of 1.25% dated 8.7.2010 for superstructure of hotel,
conventional hall and linkway.
The appellant, it was found, did not respond in writing to the respondent’s
fee proposals. The arbitrator next stated that the fact that the appellant
had not responded in writing or kept silent could not be taken that it had
agreed with the respondent’s fee proposals or the Scale of Fees. This
evidence had in consequence led the arbitrator to find that there was no
agreement reached between the parties with regard to the percentage of
fee. This is undoubtedly a finding of fact and it is not flawed.
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[34] The finding would in our view necessitate a determination by the
arbitrator of what would be the reasonable percentage of fee payable to
the respondent in the circumstances of this particular arrangement for
services. We would like to add that in any event the quantum for the said
reasonable fee was one of the questions clearly raised in the agreed
issues number 1 and 8 for determination during the arbitration
proceedings. The appellant cannot now claim that since the finding was
made that there was no agreement reached in relation to the fee payable,
the arbitrator ought not to have ‘arbitrarily’ (as the appellant argued)
awarded the fee percentage of 1.25% of the total cost of construction.
[35] We cannot accede to the argument urged for the appellant that the
fee percentage awarded was arbitrary and without any basis. The
arbitrator had observed that the four fee proposals had fee quantum and
stages of payment of fee different from the Scale of Fees. The
respondent’s fee proposal was a fixed percentage based on the cost of
construction. The arbitrator, as clearly demonstrated in the award, found
that the Scale of Fees was not normally adhered to, it merely provided
guidelines and was not mandatory. He added that consulting engineer
would normally submit a fee, scope of services and schedule of fee
payment proposal for the client’s consideration. It would then be followed
by a process of negotiation and several factors would affect such
negotiation viz –
“(1) Reputation of the client when it comes to honouring payment of fee claim, the
quantum he will pay and the duration he takes to pay;
(2) The relationship with the client, whether he is a client for whom the consulting
engineer has been providing services over a long duration or a new client;
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(3) Whether the client has been known to be difficult with other consulting
engineers from the technical aspects, imposing unreasonable restriction
technically and one who allocates short duration for production of works;
(4) Whether a substantial bulk of the consulting engineer’s income comes from one
particular client;
(5) The financial standing of the consulting engineer;
(6) The local and international economic landscape i.e. Global Financial Crisis; and
(7) The complexity of the project.
[36] An important factor which was considered by the arbitrator was the
fact that the reasonable fee for a similar project of this magnitude
(RM586,366,877.00), could range from 1% to 2% in the construction
industry, which was more likely to be towards the lower end because of
the project’s enormous costs. Having found that the respondent’s fee
proposals did not run foul of the law and the respondent was not bound to
follow the Scale of Fees, the arbitrator decided that the respondent’s
proposed fee percentages were within the range of fee charged by most
practising consulting engineers.
[37] We were next pressed with the argument that the arbitrator had
decided that the appellant and the respondent were “not bound to the
Scale of Fees”, and that there was no agreement to the fee percentage of
the total construction costs and stage of payment, yet he went on to
declare that the reasonable fee percentage for the respondent’s services
should be 1.25% and that the stage of payment of fees would follow the
Scale of Fees.
[38] Having perused the award in its entirety, we are of the opinion that
learned counsel’s submission on this point is not entirely correct. What
was determined by the arbitrator was that Part A of the Scale of Fees and
20
paragraph 3 of Part B should be used. It is relevant to note that Part A of
the Scale of Fees deals with Professional Services and paragraph 3 of
Part B thereof deals with stages of fees. Both obviously do not provide for
the scale of fees. In fact, the scale of fees is provided in paragraph 1 of
Part B which was not relied on by the arbitrator. Paragraph 3 provides for
the proportions, (not quantum to be paid), of the total fee for the works to
be paid to the consulting engineer against the relevant stages of
professional services which are representative of the work done.
[39] We are completely in agreement with the learned Judge that there
is a difference between not being bound by the Scale of Fees and using
the various stages of work for the computation of fees for the respondent’s
services. It is abundantly clear that the arbitrator did not contradict his own
findings. Having found that the appellant was liable to pay the respondent
for its services, the arbitrator had correctly exercised his discretion in
assessing the fees payable to the respondent in the manner he did.
Accordingly, the learned Judge was correct when Her Ladyship held that
there was no error of law in the arbitrator using Part A and Part B
paragraph 3 of the Scale of Fees to determine the stages of service and
stages of payment of fee. Even if there was, on the authority of the Court
of Appeal’s decision in Pembinaan LCL Sdn. Bhd. v SK Styrofoam (M) Sdn. Bhd. supra, we find that the error if any, does not vitiate the whole
award. Accordingly the Court is not seised of jurisdiction to set aside or
remit the award of the arbitrator.
[40] It is not disputed that the respondent is entitled to be paid fees for
its professional services to the appellant. The appellant had had the
benefit of the respondent’s professional services for almost one and half
years for which fees were payable. The dispute between the parties is in
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respect of the issue of quantum. In fact as earlier mentioned, the arbitrator
in his award found that the appellant claimed that the appellant’s agreed
fee for civil and structural engineering professional services was 1.15% of
the total construction costs. The arbitrator had awarded the fee
percentage of 1.25% of the total construction costs to the respondent. In
determining the said fee percentage, the arbitrator had given his reasons
and considered various relevant factors deliberated in the preceding
paragraphs. It must be emphasised that the fixation of the fee percentage
of 1.25% of the total construction costs as being reasonable and the
determination that the professional services provided were adequate
within the standard of a civil and structural consulting engineer and fit for
their intended purpose, that the termination of the respondent’s services
was not justified and that the re-issued invoices were valid were
pronounced by the arbitrator pursuant to the submission of the agreed
issues for his determination.
[41] We are satisfied, under the circumstances that the questions raised
by the appellant are essentially one of fact. The learned Judge was
correct in not interfering with the arbitrator’s award based on unqualified
findings of fact. To do otherwise would in our view go to the root of the
settled arbitral principle that the arbitrators are the master of the facts. We
are also satisfied that the learned Judge was also correct in her finding
that the arbitrator did not commit any error of law when he determined that
the appropriate reasonable fee percentage would be 1.25% of the total
construction costs. The arbitrator in our view had full discretion and he
had exercised that discretion correctly.
[42] Additionally it is apt at this stage to mention that the appellant, by
submitting the bundle of drawings referred to in paragraphs 10.9 to 10.16
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of the affidavit in support, was for all intents and purposes treating the
reference on questions of law as an appeal to the High Court. It was in
effect asking the High Court to have another look at these documents and
second-guess the arbitrator’s decision. This, in our opinion, is clearly a
reference of a question of fact which falls outside the scope of section 42
of the Act and the High Court is undoubtedly incompetent to do so. The
Court therefore must resist substituting its views for that of the arbitral
tribunal’s which the parties had already freely chosen to determine their
dispute in the first place [Lembaga Kemajuan Ikan Malaysia v WJ
Construction Sdn. Bhd. supra].
[43] Reverting back to section 42(1A) of the Act, we feel compelled at
this point to move on to consider, that is on the assumption that the
reference under sub-section (1) indeed involves the questions of law,
whether the appellant has overcome the statutory requirement of sub-
section (1A). Sub-section (1A) imposes a further threshold, as we
understand it, not merely whether the question of law has affected the
right of the appellant, but whether the answer to such a question would
substantially affect the right of the appellant. We do not find in the
Originating Summons and the affidavit in support thereof any evidence
that the questions referred to the High Court have fulfilled the mandatory
statutory requirement of sub-section (1A). Neither does the written
submission of learned counsel for the appellant deal with this mandatory
statutory requirement. The questions, if it was indeed a question of law,
merely affected the appellant’s right in not being able to pay a measly sum
for the professional services rendered by the respondent. It certainly was
not a question of law which we were persuaded or convinced to hold as
one that has substantially, significantly or considerably affected the
appellant’s right.
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[44] In our judgment, it is obvious that the questions referred to the Court
for determination which the appellant perceives as the questions of law
are indeed the appellant’s empty rhetoric which is intended to camouflage
its real intention when it chooses to come to the Court which is to have a
second bite of the cherry so that the matter can be relitigated before the
Court. Needless to say, to allow the appellant to do so would be contrary
to the law which is firmly established through several judicial
pronouncements by the Court. There is no room for any doubt that the
arbitrator did not commit any error in applying the correct formula to fix the
rate of fee in his award and such award is not perverse. The question of
applying the quantum meruit principle therefore does not arise. Under the
circumstances we decline to give an order pursuant to sections 37 and 42
of the Act for the award to be set aside or remitted back to the arbitrator
for rearbitration by applying the quantum meruit principle.
CONCLUSION
[45] For the reasons stated above, we conclude that the appellant’s
application is ill-founded and ought inevitably to be dismissed, and our
judgment goes upon the basis that the questions referred are indeed the
questions of fact not one of law. We find no appealable errors in the
judgment of the learned trial Judge. There are no merits in the appeal and
consequently Her Ladyship’s decision is affirmed. We dismiss this appeal
with costs.
signed
( TAN SRI IDRUS BIN HARUN ) Judge
Court of Appeal, Malaysia Putrajaya.
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Dated: 10.8.2015 Counsel: 1. For the Appellant - Dato’ Dr. Cyrus Das Abdul Rashid Bin Ismail Azreen Binti Ahmad Rastom
Tetuan Rashid Zulkifli D2-5-5, Blok D Solaris Dutamas No. 1, Jalan Dutamas 1 50480 Kuala Lumpur. 2. For the Respondent: - Yahya Bin Abd. Rahman Tetuan A.R Yahya & Co No. 57-1, Jalan Wangsa Delima 5 (1/2F) Bandar Wangsa Maju (KLSC) 53300 Kuala Lumpur.