PBJV GROUP SDN BHD v PETROFAC (MALAYSIA-PM 304) LIMITED

Case Significance

Restates the Master Mulia three-stage test for a natural-justice challenge under section 37 of the Arbitration Act 2005 and confirms that, a tribunal not being bound by the Evidence Act 1950 under section 19, its evidentiary and interpretive decisions are not a basis for setting aside an award absent a serious and material breach.

This High Court decision concerns an application to set aside an arbitral award under section 37 of the Arbitration Act 2005, heard together with the successful party's application to enforce the same award. The award arose from arbitration conducted under the AIAC Arbitration Rules 2018 between a contractor and a sub-contractor in the oil-and-gas sector. In this application the losing party sought to set aside the Final Award under sections 37(1)(b)(ii), 37(2)(b)(i) and 37(2)(b)(ii), contending that the award had been tainted by breaches of the rules of natural justice and was therefore in conflict with the public policy of Malaysia. Its principal complaints were that the tribunal had relied on hearsay evidence and had misconstrued the pleadings as amounting to admissions. Applying the three-stage test in Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd for a natural-justice challenge, the court held that no serious or material breach had been shown. It emphasised that, under section 19 of the Arbitration Act 2005, an arbitral tribunal is not bound by the Evidence Act 1950 and that the admissibility and weight of evidence, including hearsay, lie within the tribunal's discretion, so that the tribunal's reliance on such evidence did not offend natural justice. It further held that the applicant's challenges to the tribunal's assessment of the evidence and its interpretation of the pleadings fell outside the scope of section 37 and amounted to an impermissible attempt to re-open the merits of the award. The court added that a party dissatisfied with how a tribunal weighed the evidence or read the contract cannot recast that dissatisfaction as a natural-justice or public-policy complaint, since the supervisory jurisdiction is not an appeal. Finding no ground made out, the court dismissed the setting-aside application, and, in the companion proceeding, allowed enforcement of the award. The judgment is a useful restatement of the Master Mulia test and of the principle that a tribunal's evidentiary and interpretive decisions are not, without a serious and material breach, a basis for setting aside an award.