DOCTRINE OF SEPARABILITY IZZAH ZAHIN BINTI ALIMAN A project report submitted in partial fulfillment of the requirements for the award of the degree of Master of Science (Construction Contract Management) Faculty of Built Environment Universiti Teknologi Malaysia SEPTEMBER 2016
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DOCTRINE OF SEPARABILITY
IZZAH ZAHIN BINTI ALIMAN
A project report submitted in partial fulfillment of
the requirements for the award of the degree of
Master of Science (Construction Contract Management)
Faculty of Built Environment
Universiti Teknologi Malaysia
SEPTEMBER 2016
iii
Dedicated with deepest love and greatest affection to
Abah and Mak,
Aliman Musri and Fuziyah Mamad…
iv
ACKNOWLEDGEMENT
In preparing this thesis, I am fortunate to have with me the pillars of support
in providing the sheer willpower needed to see this through. Sincere and deepest
gratitude are due to:
My family who stick by my side through everything and love me no
matter what;
my supervisor, for her unrelenting efforts and encouragement
throughout every stage of the research which were significant in the
completion of this study;
my beloved lecturers for their guidance and invaluable inputs
throughout this programme;
librarians at UTM and KLRCA for their kind assistance in supplying
the relevant literatures; and
my friends for their help at various occasions.
For the final result, with all it contains in the way of imperfection, I alone am
responsible.
v
ABSTRACT
Arbitration is one of the mechanisms to resolve disputes. Parties that want to
arbitrate their dispute, must have an arbitration agreement. Arbitration agreement can
be a clause and forming part of the main contract or parties may opt to have a
separate agreement. The importance of having an arbitration agreement is that it can
preserve one party‘s choice of the favourable forum to settle if dispute arises. There
were cases where, despite having arbitration agreement, one of the parties continued
to bring the dispute straight to court. Doctrine of separability ensures that parties‘
intent to arbitrate notwithstanding a party challenging the validity of the parties‘
contract or the arbitration clause it contains. Hence, the objective of this research is
to identitfy the application of the doctrine of separability in Malaysia. Analysis of the
various cases is conducted to see how the court tackles such challenge. From the
analysis, it is found that the unenforceability of the contract that contains the
arbitration clause does not automatically redeem the arbitration clause unenforceable.
vi
ABSTRAK
Timbang tara adalah salah satu mekanisma untuk mendamaikan
pertelingkahan. Bagi pihak-pihak yang ingin merujuk pertikaian mereka kepada
penimbang tara, mereka mesti mempunyai perjanjian timbang tara. Perjanjian
tinbang tara boleh menyerupai klausa dalam penjanjian antara pihak-pihak ataupun
pihak-pihak boleh memilih untuk memasuki satu perjanjian khas timbang tara.
Kepentingan mempunyai penjanjian timbang tara adalah pihak-pihak bebas
menentukan forum bagi menyelesaikan pertelingkahan antara mereka, sekiranya ada.
Terdapat kes di mana walaupun mempunyai perjanjian timbang tara, satu pihak telah
memfailkan terus permohonan untuk menyelesaikan pertelingkahan ke mahkamah.
Doktrin pemisahan memastikan kehendak pihak-pihak untuk bertimbang tara
terpelihara walaupun ada kemungkinan pihak yang ingin mencabar kesahihan
perjanjinan timbang tara tersebut. Oleh itu, kajian in dijalankan untuk megenalpasti
aplikasi doktrin pemisahan di Malaysia. Analisis yang dijalankan terhadap kes-kes
adalah untuk melihat bagaimana mahkamah mengatasi cabaran tersebut. Hasil kajian
mendapati kontrak yang tidak dapat dikuatkuasakan tidak bermakna klausa
perjanjian timbang tara itu terbatal.
vii
TABLE OF CONTENTS
CHAPTER TITLE PAGE
DECLARATION ii
DEDICATION iii
ACKNOWLEDGEMENT iv
ABSTRACT v
ABSTRAK vi
TABLE OF CONTENTS vii
LIST OF CASES xii
LIST OF TABLES xv
LIST OF FIGURES xvi
LIST OF ABBREVIATIONS xvii
1 INTRODUCTION
1.1 Background 1
1.2 Problem Statement 4
1.3 Objective 6
1.4 Scope 6
1.5 Significance 6
1.6 Research Methodology 7
1.6.1 Stage 1: Initial Study 7
1.6.2 Stage 2: Data Collection 8
1.6.3 Stage 3: Data Analysis 8
1.6.4 Stage 4: Writing Up and Completion 8
1.7 Research Flow Chart 9
viii
2 ARBITRATION AGREEMENT
2.1 Introduction 10
2.2 Arbitration 12
2.3 Elements of the Arbitration Agreement 13
2.3.1 Source of Arbitrator‘s Power 14
2.3.1.1 The Arbitration Act 2005 14
2.3.1.2 The Arbitration Rules 14
2.3.2 Existence of a Dispute between the Parties 16
2.3.2.1 The Arbitration Clause 17
2.3.2.2 The Submission Agreement 17
2.4 Forms of the Arbitration Agreement 20
2.4.1 Made in Writing 20
2.4.2 Incorporation by Reference 22
2.5 Enforcement of the Arbitration Agreement 23
2.5.1 Multi-tiered Dispute Resolution Clause 24
2.5.2 Stay of Proceeding 27
2.6 Conclusion 30
3 DOCTRINE OF SEPARABILITY
3.1 Introduction 32
3.2 Party Autonomy 33
3.3 Arbitrability 34
3.4 Competence-competence 37
3.5 Separability and Competence-competence 38
3.6 Separability and Legal Fiction 40
3.7 Rationale for Separability 41
3.7.1 Theoretical Reason 41
3.7.2 Practical Reason 42
3.8 Effects of Separability 43
3.9 Position in England 44
3.10 Conclusion 50
ix
4 RESEARCH METHODOLOGY
4.1 Introduction 52
4.2 Stage 1: Initial Study 53
4.3 Stage 2: Data Collection 54
4.4 Stage 3: Data Analysis 57
4.5 Stage 4: Writing-up and Completion 57
4.6 Conclusion 58
5 APPLICATION OF THE DOCTRINE OF SEPARABILITY
IN MALAYSIA
5.1 Introduction 59
5.2 Summary of the Cases 59
5.2.1 Borneo Samudera Sdn Bhd v Siti Rahfizah
binti Mihaldin & 820 Others
[2008] MLJU 293 (COA) 60
5.2.2 Chut Nyak Isham bin Nyak Ariff v
Malaysian Technology Development
Corporation Sdn Bhd & Ors
[2009] 6 MLJ 729 (HC) 60
5.2.3 Cyber Business Solutions Sdn Bhd v
Elsag Datamat Spa [2010] MLJU 2079 (HC) 60
5.2.4 Assar Senari Holdings Sdn Bhd v
Teratai Sanjung Holdings (M) Sdn Bhd 10
[2011] MLJU 834 (HC) 61
5.2.5 Arul Balasingam v Ampang Puteri Specialist
Hospital Sdn Bhd (formerly known as Puteri
Specialist Hospital Sdn Bhd)
[2012] 6 MLJ 104 (HC) 62
5.2.6 AV Asia Sdn Bhd v Pengarah Kuala Lumpur
Regional Centre For Arbitration & Anor
[2013] MLJU 183 (HC) 62
5.2.7 TNB Fuel Services Sdn Bhd v China National
Coal Group Corp [2013] 4 MLJ 857(COA) 63
x
5.2.8 Capping Corp Ltd & Ors v Aquawalk Sdn Bhd
& Ors [2013] 6 MLJ 579 (COA) 64
5.2.9 Masenang Sdn Bhd v Sabanilam Enterprise
Sdn. Bhd [2014] MLJU 1777 (HC) 64
5.2.10 Kukdong Engineering &Construction
Co. Ltd. v Bauer (M) Sdn. Bhd.
[2015] MLJU 455 (HC) 65
5.2.11 Juara Serata Sdn Bhd v Alpharich Sdn. Bhd.
[2015] 6 MLJ 773 (FC) 66
5.3 Analysis of the Cases 66
5.3.1 Borneo Samudera Sdn Bhd v Siti Rahfizah
binti Mihaldin & 820 Others
[2008] MLJU 293 (COA) 66
5.3.2 Chut Nyak Isham bin Nyak Ariff v
Malaysian Technology Development
Corporation Sdn Bhd & Ors
[2009] 6 MLJ 729 (HC) 67
5.3.3 Cyber Business Solutions Sdn Bhd v
Elsag Datamat Spa [2010] MLJU 2079 (HC) 68
5.3.4 Assar Senari Holdings Sdn Bhd v
Teratai Sanjung Holdings (M) Sdn Bhd
[2011] MLJU 834 (HC) 68
5.3.5 Arul Balasingam v Ampang Puteri Specialist
Hospital Sdn Bhd (formerly known as Puteri
Specialist Hospital Sdn Bhd)
[2012] 6 MLJ 104 (HC) 69
5.3.6 AV Asia Sdn Bhd v Pengarah Kuala Lumpur
Regional Centre For Arbitration & Anor
[2013] MLJU 183 (HC) 69
5.3.7 TNB Fuel Services Sdn Bhd v China National
Coal Group Corp [2013] 4 MLJ 857(COA) 70
5.3.8 Capping Corp Ltd & Ors v Aquawalk Sdn Bhd
& Ors [2013] 6 MLJ 579 (COA) 71
xi
5.3.9 Masenang Sdn Bhd v Sabanilam Enterprise
Sdn. Bhd [2014] MLJU 1777 (HC) 72
5.3.10 Kukdong Engineering &Construction
Co. Ltd. v Bauer (M) Sdn. Bhd.
[2015] MLJU 455 (HC) 74
5.3.11 Juara Serata Sdn Bhd v Alpharich Sdn. Bhd.
[2015] 6 MLJ 773 (FC) 75
5.4 Summary of the Analysis 77
5.5 Conclusion 84
6 CONCLUSION AND RECOMMENDATION
6.1 Introduction 85
6.2 Study Conclusion 85
6.2 Study Constraint 87
6.3.1 Duration of the Research 87
6.3.2 Resources 87
6.4 Future Research 88
REFERENCES 89
xii
LIST OF CASES
Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 7 CLJ 785
Ajwa for Food Industries Co (MIGOP), Egypt v Pacific Inter-link Sdn Bhd [2013] 7
CLJ 18
Arul Balasingam v Ampang Puteri Specialist Hospital Sdn Bhd (formerlyknown as
Puteri Specialist Hospital Sdn Bhd) [2012] 6 MLJ 104
Assar Senari Holdings Sdn Bhd v Teratai Sanjung Holdings (M) Sdn Bhd [2011]
MLJU 834
AV Asia Sdn Bhd v Pengarah Kuala Lumpur Regional Centre For Arbitration &
Anor [2013] MLJU 183
Bauer (M) Sdn Bhd v Daewoo Corp [1999] 4 MLJ 545
Beijing Jianlong Heavy Industry Group v. Golden Ocean Group Limited and
others [2013] EWHC 1063 (Comm)
Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corp [1981]
1 All ER 289
Borneo Samudera Sdn Bhd v Siti Rahfizah binti Mihaldin & 820 Others [2008]
MLJU 293
xiii
Cheng Keng Hong v. Government of the Federation of Malaya [1966] 2 MLJ 33
Capping Corp Ltd & Ors v Aquawalk Sdn Bhd & Ors [2013] 6 MLJ 579
Christopher Brown Ltd v Genossenschaft Osterreichischer [1954] 1 QB 8
Chut Nyak Isham bin Nyak Ariff v Malaysian Technology Development Corporation
Sdn Bhd & Ors [2009] 6 MLJ 729
Cyber Business Solutions Sdn Bhd v Elsag Datamat Spa [2010] MLJU 2079
Dallah Real Estate and Tourism Holding Co. v Ministry of Religious Affairs,
Government of Pakistan [2011] 1 All ER 485
Fiona Trust & Holding Corp v Privalov [2007] UKHL 40
Heyman v Darwins Ltd [1942] 1 All ER 337
Juara Serata Sdn Bhd v Alpharich Sdn. Bhd. [2015] 6 MLJ 773
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