IMSML Website Article 01/2024: The Delta Corp Shipping Case, The Necessity of a Valid Arbitration Clause

Welcome 2024. This is the first website article for the year. The first few months of 2024 will mostly be spent on looking at some cases decided in 2023. I will kick off 2024 by looking at a case which reiterates some basic principles of arbitration law in the context of a contract of carriage of good by sea.

The honour of being the first case of being the subject-matter of IMSML's Website Article series is Delta Corp Shipping Pte Ltd v Michael Lwee Wan Thoo & Ors [2023] MLJU 630. In this case, an application was made to stay proceedings which were commenced in court. Counsel for the fifth defendant argued that a stay had to be order because there was a valid arbitration agreement.

It is indeed trite law that court actions should be stayed when there is a valid arbitration agreement between the parties to a contract of carriage. The key word here is the term 'valid'. However, the stay of court proceedings should not be given when there is no valid arbitration agreement.

On the facts of this case, the arbitration agreement was with the 5th Defendant. It was in the ‘fixture recap’, but it was null and void because:

[1] The company was technically insolvent at the time when the application for the stay was made, ie the company was no longer in existence and therefore no longer a part of the arbitration agreement.

[2] There was no ‘dispute’ to be referred to arbitration. A mere refusal to pay was not a ‘dispute’, ie because the amount owing was admitted. Technically this was merely a refusal to pay, see Tan Kok Cheng & Sons Realty Co. Sdn Bhd v Lim Ah Pat (T/1 Juta Bena) [1995] 3 MLJ 273. Note that this was followed by two decisions of VC George in both Elf Petroleum SE Asia Pte Ltd v Winelf Petroleum Sdn Bhd [1986] 1 MLJ 177 and KSM Insurance Bhd v Ong Ah Ba & Anor [1986] 1 MLJ 237.

Further, the court considered the phrase ‘arbitration in London’. The learned judge concluded that it was vague. At para [9], when his Lordship looked at the ‘… International Council for Commercial Arbitration website ... [T]here are 10 arbitration institutes which were based in London and [therefore] at least 5 arbitration institute which they can submit to’. Hence, even if there was an arbitration clause in existence, its validity could be questioned on the basis of a lack of certainty.

Thank you for reading IMSML Website Article 1/2024

Stay tuned for the next IMSML Website Article 2/2024: Sarmiina Sdn Bhd v Gerry Ho & Ors [2023] 2 MLJ 395

Signing-off for today,

Dr Irwin Ooi Ui Joo, LL.B(Hons.)(Glamorgan); LL.M (Cardiff); Ph.D (Cardiff); CMILT

Professor of Maritime and Transport Law

Head of the Centre for Advocacy and Dispute Resolution

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

Wednesday, 3 January 2024

Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my