![Apex Communications Sdn Bhd v Sumber Khazanah Sdn Bhd (Dalam likuidasi) and another appeal [2025] MLJU 3914 Court of Appeal](https://azmandavidson.com.my/wp-content/uploads/bfi_thumb/dummy-transparent-rjy4h9pi16ryrv50t12linz2m4rtyx3c2pgezpxolg.png "Apex Communications Sdn Bhd v Sumber Khazanah Sdn Bhd (Dalam likuidasi) and another appeal [2025] MLJU 3914 Court of Appeal")
Apex Communications Sdn Bhd v Sumber Khazanah Sdn Bhd (Dalam likuidasi) and another appeal [2025] MLJU 3914 Court of Appeal
Salient Facts:
A sub-contract agreement contained the following clauses (emphasis ours):
38. ARBITRATION
38.1 If any dispute or difference shall arise between APEX and the Sub-Contractor, either during the progress or after completion of the S8 Works Package – Structural Steel Works, or after the determination of the Sub- Contractor’s employment or breach of this Agreement, as to:
(a) the construction of this Agreement;
(b) any matter or thing of whatsoever nature arising under this Agreement;
(c) the withholding by the P.D. of any certificate to which the Sub-Contractor may claim to be entitled, then such dispute or difference shall be referred to the officer named in Appendix 1 for a decision.
38.2 The decision of the officer named in Appendix 1 which is to be in writing shall subject to sub-clause 38.5 hereof be binding on the parties until after the completion of the S8 Works Package – Structural Steel Works and shall forthwith be given effect by the Sub- Contractor who shall proceed with the S8 Works Package-Structural Steel Works with all due diligence whether or not notice of dissatisfaction is given by him.
38.3 If the officer named in Appendix 1 fails to give a decision for a period of forty-five (45) days after being requested to do so by the Sub-Contractor or if the Sub- Contractor be dissatisfied with any decision of the officer named in Appendix 1, then in any such case the Sub-Contractor may within forty-five (45) days after the expiration of the forty-five (45) days after he had made his request to the officer named in Appendix 1 or forty five (45) days after receiving the decision of the officer named in Appendix 1, as the case may be, require that such dispute or difference be referred to a single Arbitrator agreed for that purpose, or in default of agreement appointed by the Director of the Regional Centre for Arbitration Kuala Lumpur.
39. LAW GOVERNING THIS AGREEMENT
39.1 This Agreement shall be deemed to be a Malaysian Contract and shall accordingly be construed according to he laws for the time being in force in Malaysia and the Malaysian Courts shall have exclusive jurisdiction to hear and determine all actions and proceedings arising out of this Agreement and the Sub-Contractor hereby submits to the jurisdiction of the Malaysian Courts for the purposes of any such actions and proceedings.
Issue(s):
1. Whether the arbitration clause which states that the sub-contractor “may” require disputes to be referred to arbitration denotes that the parties agreed for reference of disputes to arbitration to be merely optional, not mandatory.
2. Whether the existence of the exclusive jurisdiction clause in which the parties agreed to submit to the jurisdiction of the Malaysian courts requires the arbitration clause to be interpreted as giving an option to the sub-contractor to opt for litigating the disputes?
Decision(s)
1. The word “may” in clause 38.3 carries a directory effect in that the sub-contractor is allowed to make a decision whether to refer the dispute to arbitration or not to refer the dispute to arbitration. At the same time, it carries a mandatory effect in that the sub-contractor is not at liberty to opt for litigation before the court. The arbitration clause imposes mandatory reference to arbitration.
2. The mere fact that clause 39 stipulates that the sub-contractor submits itself to the jurisdiction of the Malaysian courts for all actions or proceedings arising out of the agreement does not denote an intention to litigate before the courts. It simply means that for all the statutory remedies that the sub-contractor can pursue before the Court under the Arbitration Act 2005, the sub-contractor must necessarily seek those remedies in an action before the Malaysian High Court and not a Court of another jurisdiction.
Written by
Datin Chu Ai Li,Partner
(Construction Dispute Resolution)
chu.aili@azmandavidson.com.my
