MODKHA MARINE SDN. BHD. v RAIN INTERNATIONAL SDN. BHD.

Case Significance

Confirms that once a stay for arbitration under section 10 of the Arbitration Act 2005 is granted and left unchallenged, a party cannot use an interlocutory application to reroute the dispute into court-directed mediation, and such an attempt may be treated as an abuse of process.

This High Court decision at Shah Alam addresses what a party may and may not do after proceedings have been stayed in favour of arbitration. Earlier, on 25 June 2024, the court had stayed the action pending reference of the dispute to arbitration, on finding that the parties' agreement contained an arbitration clause and that the defendant had not taken any step in the proceedings, so that a stay under section 10 of the Arbitration Act 2005 was warranted. That stay order was neither appealed nor set aside by the plaintiff. Some months later, however, the plaintiff filed an application asking the court to direct the parties to undertake mediation to finalise the arbitration agreement or to determine the dispute that was the subject matter of the action.

The court refused the application. It reasoned that, the matter having been stayed for arbitration, the plaintiff was obliged to commit to complying with the procedural requirements of the arbitral institution, and that a reference to arbitration is mandatory once the relevant requirements have been met. While the court remained seised of a supervisory or monitoring role because the case retained a pending status and was not yet functus officio, it regarded the plaintiff's fresh application as, in substance, an abuse of the court's process — an attempt to divert the matter away from the arbitration the plaintiff had not challenged. The court added that the parties remained free to negotiate a consensual settlement if both were willing, since the very purpose of arbitration is to resolve the dispute, but any such course required mutual agreement.

The court dismissed the plaintiff's application with costs of RM1,000, subject to allocator. The judgment illustrates that once a stay for arbitration is granted and left unchallenged, a party cannot use an interlocutory application to reroute the dispute into court-directed mediation, and such an attempt may be treated as an abuse of process.