1. ) YEONG MUN FUNG 2. ) TOO WAI HOONG 3. ) LEONG CHUNG CHEN 4. ) ON YONG WEE 5. ) YONG SAI KENG v HOO VOON HIM

Case Significance

Confirms that a stay under section 10 of the Arbitration Act 2005 is mandatory where a valid arbitration agreement exists and no step in the proceedings has been taken, and that waiver of the right to arbitrate is a fact-sensitive question not established by a pre-action notice of termination.

This High Court decision in the Commercial Division at Kuala Lumpur concerns an application to stay court proceedings in favour of arbitration. The plaintiffs were the registered and beneficial owners of shares in a group of companies, and the defendant was the purchaser under a share sale agreement dated 7 November 2023. The plaintiffs alleged that, despite their compliance with their obligations, the defendant had delayed his performance, and after a series of negotiations and a notice of demand the defendant issued a notice of termination the following day. When the plaintiffs sued, the defendant applied under section 10(1) of the Arbitration Act 2005, read with Order 69 rule 10 of the Rules of Court 2012, to stay the action and refer the dispute to arbitration under the dispute-resolution clause of the share sale agreement. The plaintiffs resisted, contending that the defendant had waived or elected to abandon his right to arbitrate — pointing to his pre-action notice of termination — and that he had delayed in applying for a stay. On the question of delay, the Court found that the defendant had acted promptly, taking only about ten days from entry of appearance to file the application, so there was no undue or inordinate delay. On waiver and election, the Court undertook a fact-sensitive assessment of the defendant's conduct and was unable to conclude that he had elected to abandon his contractual right to have the dispute referred to arbitration. Holding that the arbitration clause was valid and binding and that a stay under section 10 is mandatory where a valid arbitration agreement exists and no step in the proceedings has been taken, the Court gave effect to the parties' clearly expressed intention and granted the stay. The decision reflects the pro-arbitration policy of the Arbitration Act 2005, under which the court's role is not to weigh the merits of the dispute but to hold the parties to their agreed forum unless a clear ground for refusing a stay is shown.