Azhar Yong & Co

Deutz Asia-Pacific (Pte) Ltd v. Champ Parts & Equipment Sdn Bhd [2002] 6 MLJ 29, High Court (Kuala Lumpur).

Matter involving: Civil Procedure – Jurisdiction -Arbitration clause – Distributor agreement governed by laws of Singapore and to be settled by way of arbitration – Unconditional memorandum of appearance filed by the defendant.
Issue:
Whether defendant precluded from relying on their rights under foreign law cum arbitration clause
Facts:
Pursuant to an agreement between the parties, the defendant was to distribute goods supplied by the plaintiff. It was stipulated that payment by the defendant to the plaintiff may be made by way of bills of exchange. The plaintiff alleged that the defendant, having been supplied with goods, did not honour certain bills of exchange. The defendant denied owing the plaintiff any money. Instead, it was alleged that the plaintiff owed the defendant money for not taking back certain goods and for various warranty repairs and/or replacement of parts undertaken by the defendant. The plaintiff took the stand that the defendant’s allegations were irrelevant as the dispute was governed by the Bills of Exchange Act 1949. Consequently, the plaintiff applied for and obtained summary judgment. This was the defendant’s appeal. In the statement of defence and the affidavit opposing the application for summary judgment, the defendant contended that the dispute was governed by the agreement. Therefore, the defendant claimed that pursuant to cl 18, the agreement was governed by the laws of the Republic of Singapore and the dispute was to be settled by arbitration in accordance with the Rules of Reconciliation and Arbitration of the International Chamber of Commerce. The plaintiff countered that even if the dispute was governed by the agreement, cl 18 was irrelevant as the defendant had waived its right to rely on cl 18 by filing an unconditional appearance.
Held, allowing the appeal with costs:
(1) The contention of the defendant that the dispute was governed by the agreement cannot be summarily dismissed but must be accepted because of the following reasons:
(i) there was an agreement in existence between the parties;
(ii) the statement of claim relied substantially on the agreement;
(iii) the affidavit in support of the application for summary judgment also relied substantially on the agreement;
(iv) the statement of claim did not contain any averment that the claim by the plaintiff against the defendant was made purely on the basis of the bills of exchange or that it was made solely pursuant to the Bills of Exchange Act 1949; and
(v) although the alleged payments due to the plaintiff by the defendant were by way of bills of exchange, the payments were not for transactions unconnected with the agreement but for goods sold pursuant to the agreement (see pp 34B-35B).
(2) There is merit in the defence that the dispute ought to be adjudicated upon by applying the substantive laws of the Republic of Singapore and by way of arbitration in accordance with the Rules of Reconciliation and Arbitration of the International Chamber of Commerce (see p 36C);
(3) Where a defendant proposes to rely on a provision such as cl 18 as a defence to the plaintiff’s claim under the agreement, the filing of an unconditional appearance with a view to striking out the writ by reason of such a clause should only be an option open to the defendant. Such a course of action should not be mandatory. A defendant intending to raise such a defence should be allowed the alternative course of filing an unconditional appearance and thereafter to plead the foreign law cum arbitration clause as a defence in the statement of defence and in the affidavit opposing the application for summary judgment (seep 36G-H).
(4) By entering an unconditional appearance and pleading the foreign law cum arbitration clause, the defendant is not in anyway implying – and cannot be taken to have so implied – that it is abandoning the right to have the dispute with the plaintiff settled by way of arbitration in accordance with the laws of Singapore. By filing the unconditional appearance the defendant is submitting to the jurisdiction of the court – but not in the absolute sense. By so submitting, the defendant wants the court to hear the parties and determine whether the defendant can rely on its rights under the foreign law cum arbitration clause. The court must hear and determine the issue and not shut the defendant out merely because the defendant had filed an unconditional appearance instead of a conditional appearance ( see p 3 7 A-C).