DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN)

RAYUAN SIVIL NO.: W-02(C)(A)-1786-10/2014

ANTARA

BRUNSFIELD PROJECT MANAGEMENT SDN BHD …PERAYU

DAN

INGENIUR BERSEKUTU CONSULTING ENGINEERS …RESPONDEN

[DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR

(BAHAGIAN DAGANGAN) SAMAN PEMULA NO.: 24C(ARB) – 4 – 02/2014

Dalam perkara Timbangtara di bawah Kaedah-kaedah Timbangtara Institusi Jurutera Malaysia 2012 antara Brunsfield Project Management Sdn Bhd dan Ingeniur Bersekutu Consulting Engineers;

Dan

Dalam perkara Akta Pendaftaran Jurutera, 1967 (Akta 138) dan Peraturan-peraturan di bawahnya;

Dan

Dalam perkara Skala Fi Lembaga Jurutera Malaysia (Pindaan 1998);

Dan

Dalam perkara Award bertarikh 10.01.2014 made by Ir. Leon Weng Seng;

Dan

Dalam perkara Seksyen 37(1)(b)(ii) dan Seksyen 42(1) Akta Timbangtara, 2005 dan peruntukan-

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peruntukan lain Akta Timbangtara, 2005 dan Akta Timbangtara 2005;

Dan

Dalam perkara Aturan 69 Kaedah-kaedah Mahkamah, 2012 dan Aturan 69 Kaedah 5 dan 6 Kaedah-kaedah Mahkamah, 2012 dan peruntukan-peruntukan lain Kaedah-Kaedah Mahkamah 2012;

Dan

Dalam perkara Aturan 92 Kaedah 4 Kaedah-kaedah Mahkamah Tinggi, 1980 dan kuasa sedia ada Mahkamah.

ANTARA

BRUNSFIELD PROJECT MANAGEMENT SDN BHD … PLAINTIF

DAN

INGENIUR BERSEKUTU CONSULTING ENGINEERS … DEFENDAN

Yang diputuskan oleh Yang Arif Puan See Mee Chun di Mahkamah Tinggi Shah Alam pada 22 September 2014]

CORAM

LIM YEE LAN, JCA VARGHESE A/L GEORGE VARUGHESE, JCA

IDRUS BIN HARUN, JCA

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GROUNDS OF JUDGMENT

INTRODUCTION

[1] The appeal in the present instance emanated from the decision of

the learned High Court Judge dismissing the amended Originating

Summons dated 20.2.2014 which seeks an order to set aside the

arbitration award handed down by the arbitrator on 10.1.2014.

FACTS

[2] The material facts emerging out of the events culminating in this

instant appeal reveal that sometime in 2009, the appellant requested the

respondent, a firm of civil and consulting engineer, to provide civil and

structural engineering design and consultancy services (the services

agreement) for a project known as –

“Cadangan Pembangunan Komersial Yang Merangkumi Blok

Pejabat, Dewan Konvensyen, Hotel & Pangsapuri Servis 12

Tingkat Serta 2 Basemen di Atas Lot No. PT 8, Jalan PJU

1A/2, Mukim Damansara, Daerah Petaling, Selangor Darul

Ehsan untuk Tetuan Sime Darby Brunsfield Damansara Sdn

Bhd.”

The appellant, in this regard, is in the business of project development and

project management. It is owned by Sime Darby Brunsfield Damansara

Sdn Bhd (SDBD). The respondent, on the other hand, is a firm of civil and

consulting engineer.

[3] The services agreement according to the appellant was oral in

nature. There was no formal written agreement. The respondent had

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requested for an appointment letter from the appellant but was not issued

one.

[4] The appellant was unhappy with the respondent’s work.

Consequently the service of the respondent was terminated on 16.5.2011.

The respondent disputed the termination.

[5] As the respondent had rendered professional services until

16.5.2011, it submitted several invoices to SDBD for the total sum of

RM12,537,155.16 as its fees and expense claim for the termination of the

services. These invoices were premised on the BEM Scale of Fees

(Revised 1998) (the Scale of Fees). The appellant disputed the invoices

and refused to make any payment to the respondent contending that

SDBD was not the correct party that had appointed the respondent, the

claim was excessive and unsubstantiated, the work had not reached the

stage as claimed by the respondent and the appellant had never agreed

to adopt the Scale of Fees.

[6] The arbitration between the parties arose out of the dispute in

connection with the termination of the services by the appellant and the

claim for the payment of fees by the respondent. By a letter dated

17.5.2012, the Board of Engineers Malaysia confirmed that both the

appellant and the respondent had agreed to arbitrate the dispute. To this

end, Ir. Leon Weng Seng was appointed as the arbitrator.

[7] As the evidence has shown, subsequent to the commencement of

the arbitration proceedings, the respondent reissued a second set of

invoices for a total sum of RM12,476,389.16. This time around it was sent

to the appellant.

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[8] On 10.1.2014 the arbitrator made his award as follows:

a. that the termination of the respondent’s services was not mutual

and not justified.

b. that the professional services provided by the respondent were

adequate within the professional standard of a civil and structural

consulting engineer and / or fit for their intended purpose.

c. that the invoices issued in the name of Sime Darby Brunsfield

Damansara Sdn Bhd were wrongly issued and are therefore

dismissed.

d. that the re-issued invoices are correctly addressed to the claimant

(the appellant) as the party liable for the respondent’s claim.

e. that the parties are not bound to the Scale of Fees (Revised 1998).

f. that the reasonable fee percentage for the respondent’s services

shall be 1.25% of the total cost of construction (as per letter of Award

for substructure work, and the cost estimate dated 20.09.2011 by the

consultant Quantity Surveyor) and the stage of payment of fees shall

be as follows:

Preliminary Stage : 20%

Design Stage (i) : 35%

Design Stage (ii) : 20%

Tender Stage : 5%

Construction Stage : 20%

g. that the claimant is to pay the respondent the sum of

RM2,187,702.86 together with simple interest thereon at 5% per

annum from the date of this award until payment.

h. the appellant is to pay the respondent’s costs together with simple

interest thereon at 5% from the date of this award until payment.

i. that the claimant shall bear the administrative costs of RM1,000.00

which the claimant has paid to the IEM.

j. that the claimant shall bear the room rental charge of RM6,000.00.

k. that the claimant shall bear the costs of transcription which amounts

to RM6,846.32.

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l. that the claimant shall bear all of my fees and expenses in respect of

this award, which fees and expenses I have determined at

RM74,727.96, and to the extent the Respondent had paid any part

thereof the claimant shall forthwith reimburse the Respondent with

that amount and simple interest thereon at 5% p.a. from the date of

the Respondent’s payment until the date of such reimbursement.

m. I reserve my final award determination, if not agreed, of the amount

of recoverable costs and any interest thereon for which purpose

shall give my further direction upon the application of either party.

THE ORIGINATING SUMMONS

[9] Dissatisfied with the decision of the arbitrator, the appellant

commenced the present action by way of an Originating Summons dated

31.3.2014 challenging the award. By an amended Originating Summons

dated 20.2.2014 the appellant challenged the award pursuant to sections

42 and 37 of the Arbitration Act 2005 (the Act) seeking the following orders:

(a) the award be set aside and / or varied in whole or in part

pursuant to determination of the questions of law under

section 42(1) of the Act arising out of the award; and

(b) the award be set aside and / or varied in whole or in part

pursuant to section 37(1)(b) of the Act.

[10] We pause to observe at this point that for the purpose of the

application under section 42(1) of the Act, the appellant advanced 25

questions of law put across in sub-paragraphs 1.1(a) to (x) of the amended

Originating Summons. However in our view, in the end and in essence,

these questions clearly boil down to only one principal question of whether

as a matter of law, the arbitrator, upon making a finding that there was no

agreement reached between the parties with regard to the percentage of

fees for the respondent’s services, was correct in holding that the fee

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percentage of 1.25% of the total construction costs was the reasonable

fee percentage for the respondent’s professional fees, or the learned

arbitrator ought to have held that the respondent was only entitled to claim

from the appellant on the basis of quantum meruit and proceeded to

assess the defendant’s claim on that basis.

[11] Having said that, we take this opportunity to mention that the

appellant in its amended Originating Summons duplicates the grounds

under the section 42 application as grounds under the section 37

application. That being the case, as regards the section 37 application,

these grounds can therefore be summarized and couched in a similar

fashion we have set out in the preceding paragraph.

THE HIGH COURT DECISION

[12] The amended Originating Summons was dismissed by the learned

High Court Judge. It becomes apparent from the grounds of judgment

which we note, were expressed with brevity, the learned Judge found

that –

(a) there was no error of law shown which necessitated the

Court to set aside the award;

(b) there was no conflict of public policy shown; and

(c) the arbitrator, having held that there was no agreement

on the fee percentage and the Scale of Fees did not

apply, did not commit any error of law when he held that

the fee percentage would be 1.25 percent of the total

construction costs.

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THE APPEAL

[13] The appellant specifies 24 grounds of appeal in the memorandum of

appeal. However, the appellant’s written and oral submissions turn on and

is restricted to only that part of the award that had fixed the respondent’s

fees entitlement at 1.25 % of the total project costs.

[14] For the appellant, it is submitted that the questions of law sought for

determination in the High Court falls within section 42(1) of the Act. The

learned Judge, it is submitted, had committed errors of law when Her

Ladyship claimed that the appellant’s application was solely premised on

section 37(1) of the Act when in fact the appellant was seeking a

determination on questions of law pursuant to section 42(1) of the Act. It

is also further submitted that once the arbitrator had declared that there

was no oral agreement reached between the respondent and the appellant

in relation to the fee payable to the respondent, the learned Judge ought

to have held that the arbitrator should not have arbitrarily awarded

damages premised on the fee percentage of 1.25% of the total

construction costs and the stage of payment of the fees based on the

Scale of Fees. Instead, the proper remedy for the measure of damages

to be awarded to the respondent ought to have been based on a quantum

meruit basis under section 71 of the Contracts Act 1950. In the premises,

the appellant seeks a variation of the award and a direction that the fees

be fixed on a quantum meruit basis under the said section 71 and

ultimately the matter be remitted back to the arbitrator for rearbitration by

applying quantum meruit principle.

[15] Thus, at the heart of the matter lies a question which we can

distinctly discern for our determination which is essentially whether the

award of 1.25% of the total construction costs in favour of the respondent

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as its professional fee is correct or the learned arbitrator ought to have

held that the respondent is only entitled to claim from the appellant by

applying quantum meruit principle.

[16] The respondent’s immediate rejoinder to this contention is that the

appellant is treating the questions raised in the application as a question

of law while the matter is actually and undoubtedly a reference in the

nature of a question of fact.

THE LAW [17] To appreciate the contentions that have been raised and before we

go more closely into the merits of this appeal, it would be desirable to state

the law by referring to various judicial pronouncements in a cantenation of

cases relating to sections 37 and 47 of the Act. Section 37 of the Act

empowers the High Court to set aside an award of the arbitrator on certain

grounds provided for in the said section. In the present appeal the

appellant relies on section 37(1)(b) which reads – “37. Application for setting aside

(1) An award may be set aside by the High Court only if –

(a) ……

(b) the High Court finds that –

(i) the subject matter of the dispute is not capable of settlement by

arbitration under the laws of Malaysia; or

(ii) the award is in conflict with the public policy of Malaysia”

[18] Based on the affidavit in support affirmed by Khoo Kong Hooi (the

affidavit in support), the challenge to the arbitration award is mounted on

section 37(1)(b)(ii) of the Act. Sub-paragraph (1)(b)(i) of section 37 in our

view does not apply as the issue in this appeal does not relate to the

question whether the subject matter of the dispute is not capable of

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settlement by arbitration under the laws of Malaysia. We accordingly

express no opinion on this provision.

[19] To succeed under sub-paragraph (1)(b)(ii) of section 37, the

appellant has to show that the award is in conflict with the public policy of

Malaysia. But while the law recognizes the power of the Court to set aside

an award which is contrary to the public policy of Malaysia, it is difficult to

really fathom the meaning of public policy in the sense the term is used in

the section and in the context of arbitration. It is significant to mention that

section 37(2) in this connection, provides for two circumstances under

which an award is in conflict with the public policy of Malaysia.

These are –

(a) the making of the award was induced or affected by fraud

or corruption; and

(b) a breach of the rules of natural justice occurred –

(i) during the arbitral proceedings; or

(ii) in connection with the making of the award.

[20] However, in our view such circumstances are not exhaustive as the

introductory words to section 37(2) of the Act are formulated in such a way

that these limitations do not affect the generality of sub-paragraph (1)(b)(ii)

of section 37. It follows therefore that what can be properly characterized

as public policy under sub-paragraph (1)(b)(ii) of section 37 is wide and as

such is open to interpretation by the Court. Nevertheless, we hasten to

add that based on the appellant’s affidavit in support, it is plain that the

applicant is relying on sub-paragraphs (2)(b)(i) and (ii) of section 37 when

it alleges that a breach of the rules of natural justice had occurred during

the arbitral proceedings and / or in connection with the making of the

award. Accordingly we do not think that it is necessary to discuss what

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constitutes public policy within the meaning of sub-paragraph (1)(b)(ii) of

section 37 of the Act.

[21] Notwithstanding the appellant’s reliance on sub-paragraphs (2)(b)(i)

and (ii) of section 37, our perusal of the written submission of learned

counsel for the appellant clearly indicates the failure on his part to address

the issue of the application of sub-paragraphs (1)(b)(ii) and (2)(b)(i) and

(ii) of section 37 to the appellant’s case. We should say therefore that,

save for the affidavit in support, the written submission is absolutely of no

assistance to the Court in determining whether the award can be set aside

pursuant to sub-paragraph (1)(b)(ii) of section 37 of the Act. This omission

is somewhat disquieting as the appellant’s case is premised on these

specific provisions apart from section 42(2) of the Act.

[22] As earlier stated, the appellant is also seeking a determination on

questions of law pursuant to section 42(1) of the Act which provides – “42. Reference on question of law

(1) Any party may refer to the High Court any question of law arising out of an award.”

The provisions when properly construed appear to us that in truth only a

question of law may be referred to the High Court. No questions of fact

are allowed. This limitation is undoubtedly in consonance with a long

established legal principle in arbitration that the arbitrators are the masters

of the facts thus recognising that their findings of fact are conclusive.

[23] The law as formulated in section 42(1) of the Act has also imposed

a further restriction. In this regard, the question of law which may be

referred to the High Court should arise out of or be within the narrow

confine of an award itself. It thus precludes a question of law which arises

out of the arbitration. This legal principle is laid down quite clearly in the

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authorities. In the case of Universal Petroleum Co. v Handels und

Transport GmbH [1987] I WLR:176, the Court of Appeal in construing

the words “out of the award” held that the question must arise out of the

award, not out of the arbitration generally [see also Majlis Amanah Rakyat v Kausar Corporation Sdn. Bhd. [2009] 14 MLRH, 331;

Exceljade Sdn. Bhd. v Bauer (Malaysia) Sdn. Bhd. [2013] MLRHU

986].

[24] The Federal Court in Intelek Timur Sdn. Bhd. V Future Heritage

Sdn. Bhd. [2004] 1 MLJ 401, in considering the law on the effect of an

arbitrator’s award under the previous Arbitration Act 1952 regarded it as

well-settled. It succinctly explained that the award was final, binding and

conclusive and could only be challenged in exceptional circumstances. It

was not sufficient to set aside the award if the arbitrator had erred by

drawing wrong inferences of fact from the evidence before him. Citing the

case of Sharikat Pemborong Pertanian & Perumahan v Federal Land Development Authority [1971] 2 MLJ 210, the Federal Court repeated

the pronouncement made by the High Court therein that it would be

contrary to all the established legal principles relating to arbitration if an

award based upon the evidence presented were liable to be reopened on

the suggestion that some of the evidence had been misapprehended or

misunderstood.

[25] The approach adopted in the cases discussed in the preceding

paragraph though concerned the Arbitration Act 1952, in our view has not

changed under the legislative scheme of the present Act which plainly

promotes respect for and adherence to the principle of party autonomy,

minimal court intervention and finality in arbitral awards [see Lembaga Kemajuan Ikan Malaysia v WJ Construction Sdn. Bhd. [2013] 8 CLJ

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655, Kerajaan Malaysia v Perwira Bintang Holdings Sdn. Bhd. [2015]

2 MLRA 93].

[26] We are acutely aware that while only a question of law is allowed to

be referred under the Act, the addition of sub-section (1A) by the

Arbitration (Amendment) Act 2011 (Act A1395) to section 42 has set a

further limit within which the question of law may be referred which is

clearly evinced from the terms of the said sub-section –

“(1A) The High Court shall dismiss a reference made under sub-section (1) unless the question of law substantially affects the rights of one or more of the

parties.

[27] Accordingly, even if the question raised falls within the expression

“any question of law”, sub-section (1A), construed in the context of sub-

section (1), has nevertheless made it mandatory for the High Court to

dismiss a reference of the question of law if such question does not

substantially affect the rights of one or more of the parties. Thus, it is

abundantly clear that for a reference under section 42(1) to succeed the

party referring the question of law must satisfy the Court that the

determination of such question will substantially affect his rights.

[28] For clarity, we wish to reiterate an oft-repeated reminder in various

previous judicial pronouncements that the very purpose parties conclude

an arbitration agreement is because they do not wish to litigate in the

Court. This in our opinion, can produce a desired result only if the parties

also agree to be bound by the decision of the arbitrator and refrain from

subsequently approaching the Court to obtain hair splitting decisions. The

legislative scheme of the Act on its part ensures that this purpose is

possible of fulfilment and obviates the necessity of approaching the Court

when the exercise of judicial powers of the Court is strictly monitored and

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circumscribed under section 8 thereof which almost prohibits its

intervention in matters governed by the Act except where so provided

therein. The arbitrators being the masters of the fact, it is irrelevant

whether the Court considers those findings of fact to be right or wrong.

The Court too is not seised of jurisdiction to remit or set aside the award

of an arbitrator even if the arbitrator has committed an error of law if such

error does not vitiate the whole award. These principles are clearly

enunciated in several case authorities such as SDA Architects (sued as

a firm) v Metro Millenium Sdn. Bhd. [2014] 2 MLJ 627, Taman Bandar

Baru Masai Sdn. Bhd. v Dinding Corporation Sdn. Bhd., supra, Exceljade Sdn. Bhd. v Bauer (Malaysia) Sdn. Bhd., supra and Pembinaan LCL Sdn. Bhd. v SK Styrofoam (M) Sdn. Bhd. [2007] 3 CLJ 183.

[29] It is noteworthy that sub-section (4) of section 42 inter alia allows the

Court to set aside an award upon the determination of a reference under

sub-section (1). Besides this sub-section, section 37 of the Act too confers

a specific power on the High Court to set aside an award. It is pertinent to

mention that section 37 provides for circumstances under which an award

may be set aside. Section 42(4), bereft of any provisions providing for

such circumstances, however allows the Court to also confirm, vary or

remit an award of the arbitrator. Section 37 does not confer such power

on the High Court. Consequently, in the event the Court sets aside the

award under sub-section (4), it appears that the grounds upon which the

Court may do so shall be those provided under sub-paragraphs (1)(a) and

(b) of section 37 of the Act.

[30] For completeness, it is appropriate to refer to the Court of Appeal’s

decision in Kerajaan Malaysia v Perwira Bintang Holdings Sdn. Bhd,

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supra which summarised several propositions as guidelines based on the

authorities, without intending to be exhaustive in order to ensure that any

reference of a question of law is made in accordance with section 42 of

the Act. These are –

a. the question of law must be identified with sufficient precision [Taman Bandar

Baru Masai Sdn. Bhd. V Dindings Corporations Sdn. Bhd. [2009] 4 MLRH 171; Maimunah Deraman v Majlis Perbandaran Kemaman [2010] 3 MLRH 948];

b. the grounds in support must also be stated on the same basis;

c. the question of law must arise from the award, not the arbitration proceeding

generally [Majlis Amanah Rakyat v Kausar Corporation Sdn. Bhd. supra, Exceljade Sdn. Bhd. V Bauer (Malaysia) Sdn. Bhd. [2013] MLRHU 986;

d. the party referring the question of law must satisfy the court that a determination

of the question of law will substantially affect his rights;

e. the question of law must be a legitimate question of law, and not a question of fact

‘dressed up’ as a question of law (Georges SA v Trammo Gas Ltd. (the Belarus) [1993] 1 Lloyd’s Rpe 2015);

f. the court must dismiss the reference if a determination of the question of law will

not have a substantial effect on the rights of parties Exceljade v Bauer (Malaysia) Sdn. Bhd. supra;

g. this jurisdiction under section 42 is not to be lightly exercised, and should be

exercised only in clear and exceptional cases Lembaga Kemajuan Ikan Malaysia v WJ Construction Sdn. Bhd. supra;

h. nevertheless, the court should intervene if the award is manifestly unlawful and

unconscionable;

i. the arbitral tribunal remains the sole determiners of questions of fact and evidence

(Gold and Resources Development (NZ) Ltd. v Doug Hood Limited [2000] 3 NZ LR 318);

j. while the findings of facts and the application of legal principles by the arbitral

tribunal may be wrong (in instances of findings of mixed law and fact), the …….

should not intervene unless the decision is perverse).

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Accordingly, before stating our grounds of decision in due course, it is

necessary to stress that in doing so we are guided by the law governing

arbitral proceedings fully considered under this part.

OUR ANALYSIS AND DECISION

[31] We shall first deal with the appellant’s contention that the learned

Judge had committed an error of law when Her Ladyship claimed that the

appellant’s application was solely premised on section 37(1) of the Act.

We are satisfied, after thorough scrutiny of the entire grounds of judgment,

that the learned Judge had clearly stated that the application was based

on two broad grounds under sections 42(1) and 37(1)(b)(ii) of the Act. At

no time and nowhere in the grounds of judgment did the learned Judge

say that the appellant’s claim was premised solely on section 37(1)(b)(ii)

of the Act. With deference to learned counsel, this argument, in our

judgment, is wholly devoid of any merit and must be rejected.

[32] The appellant as earlier mentioned, had framed 25 questions which

it envisioned as questions of law arising out of the award of the arbitrator

premised on both sections 37(1)(b)(ii) and 42(1) of the Act. The affidavit

in support clearly demonstrates the appellant’s position that it has

assumed in that the arbitrator had committed an error of law when upon

making a finding that there was no agreement reached between the

appellant and the respondent with regard to the percentage of fees, he

held that the reasonable fee percentage for the respondent’s professional

fees was 1.25% of the total construction costs.

[33] In our judgment, the determination of fee percentage of 1.25% of the

total construction costs as being reasonable is without any doubt a finding

of fact made by the arbitrator after he had carefully considered the

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evidence adduced. We agree with the learned Judge’s decision that the

figure was not one that was plucked from the air. It was in fact arrived at

after due consideration of what would be a reasonable percentage of fee.

It cannot be denied that the arbitrator in his award had found that there

was no agreement reached between the parties with regard to the

percentage of fee. This Court finds that the basis for such finding is

derived from the evidence that the agreed fee as claimed by the appellant

was 1.15% of the total construction costs while the respondent on the

other hand had submitted four fee proposals to the appellant as follows:

a. fee proposal 1.5% dated 5.1.2010 for the project;

b. fee proposal of 1.5% dated 5.4.2010 for 198 units of apartment

and substructure of B1, B2 & GF;

c. fee proposal of 1.0% dated 19.4.2010 for superstructure’s key

plan set, checking of design drawing and submission to authority;

and

d. fee proposal of 1.25% dated 8.7.2010 for superstructure of hotel,

conventional hall and linkway.

The appellant, it was found, did not respond in writing to the respondent’s

fee proposals. The arbitrator next stated that the fact that the appellant

had not responded in writing or kept silent could not be taken that it had

agreed with the respondent’s fee proposals or the Scale of Fees. This

evidence had in consequence led the arbitrator to find that there was no

agreement reached between the parties with regard to the percentage of

fee. This is undoubtedly a finding of fact and it is not flawed.

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[34] The finding would in our view necessitate a determination by the

arbitrator of what would be the reasonable percentage of fee payable to

the respondent in the circumstances of this particular arrangement for

services. We would like to add that in any event the quantum for the said

reasonable fee was one of the questions clearly raised in the agreed

issues number 1 and 8 for determination during the arbitration

proceedings. The appellant cannot now claim that since the finding was

made that there was no agreement reached in relation to the fee payable,

the arbitrator ought not to have ‘arbitrarily’ (as the appellant argued)

awarded the fee percentage of 1.25% of the total cost of construction.

[35] We cannot accede to the argument urged for the appellant that the

fee percentage awarded was arbitrary and without any basis. The

arbitrator had observed that the four fee proposals had fee quantum and

stages of payment of fee different from the Scale of Fees. The

respondent’s fee proposal was a fixed percentage based on the cost of

construction. The arbitrator, as clearly demonstrated in the award, found

that the Scale of Fees was not normally adhered to, it merely provided

guidelines and was not mandatory. He added that consulting engineer

would normally submit a fee, scope of services and schedule of fee

payment proposal for the client’s consideration. It would then be followed

by a process of negotiation and several factors would affect such

negotiation viz –

“(1) Reputation of the client when it comes to honouring payment of fee claim, the

quantum he will pay and the duration he takes to pay;

(2) The relationship with the client, whether he is a client for whom the consulting

engineer has been providing services over a long duration or a new client;

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(3) Whether the client has been known to be difficult with other consulting

engineers from the technical aspects, imposing unreasonable restriction

technically and one who allocates short duration for production of works;

(4) Whether a substantial bulk of the consulting engineer’s income comes from one

particular client;

(5) The financial standing of the consulting engineer;

(6) The local and international economic landscape i.e. Global Financial Crisis; and

(7) The complexity of the project.

[36] An important factor which was considered by the arbitrator was the

fact that the reasonable fee for a similar project of this magnitude

(RM586,366,877.00), could range from 1% to 2% in the construction

industry, which was more likely to be towards the lower end because of

the project’s enormous costs. Having found that the respondent’s fee

proposals did not run foul of the law and the respondent was not bound to

follow the Scale of Fees, the arbitrator decided that the respondent’s

proposed fee percentages were within the range of fee charged by most

practising consulting engineers.

[37] We were next pressed with the argument that the arbitrator had

decided that the appellant and the respondent were “not bound to the

Scale of Fees”, and that there was no agreement to the fee percentage of

the total construction costs and stage of payment, yet he went on to

declare that the reasonable fee percentage for the respondent’s services

should be 1.25% and that the stage of payment of fees would follow the

Scale of Fees.

[38] Having perused the award in its entirety, we are of the opinion that

learned counsel’s submission on this point is not entirely correct. What

was determined by the arbitrator was that Part A of the Scale of Fees and

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paragraph 3 of Part B should be used. It is relevant to note that Part A of

the Scale of Fees deals with Professional Services and paragraph 3 of

Part B thereof deals with stages of fees. Both obviously do not provide for

the scale of fees. In fact, the scale of fees is provided in paragraph 1 of

Part B which was not relied on by the arbitrator. Paragraph 3 provides for

the proportions, (not quantum to be paid), of the total fee for the works to

be paid to the consulting engineer against the relevant stages of

professional services which are representative of the work done.

[39] We are completely in agreement with the learned Judge that there

is a difference between not being bound by the Scale of Fees and using

the various stages of work for the computation of fees for the respondent’s

services. It is abundantly clear that the arbitrator did not contradict his own

findings. Having found that the appellant was liable to pay the respondent

for its services, the arbitrator had correctly exercised his discretion in

assessing the fees payable to the respondent in the manner he did.

Accordingly, the learned Judge was correct when Her Ladyship held that

there was no error of law in the arbitrator using Part A and Part B

paragraph 3 of the Scale of Fees to determine the stages of service and

stages of payment of fee. Even if there was, on the authority of the Court

of Appeal’s decision in Pembinaan LCL Sdn. Bhd. v SK Styrofoam (M) Sdn. Bhd. supra, we find that the error if any, does not vitiate the whole

award. Accordingly the Court is not seised of jurisdiction to set aside or

remit the award of the arbitrator.

[40] It is not disputed that the respondent is entitled to be paid fees for

its professional services to the appellant. The appellant had had the

benefit of the respondent’s professional services for almost one and half

years for which fees were payable. The dispute between the parties is in

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respect of the issue of quantum. In fact as earlier mentioned, the arbitrator

in his award found that the appellant claimed that the appellant’s agreed

fee for civil and structural engineering professional services was 1.15% of

the total construction costs. The arbitrator had awarded the fee

percentage of 1.25% of the total construction costs to the respondent. In

determining the said fee percentage, the arbitrator had given his reasons

and considered various relevant factors deliberated in the preceding

paragraphs. It must be emphasised that the fixation of the fee percentage

of 1.25% of the total construction costs as being reasonable and the

determination that the professional services provided were adequate

within the standard of a civil and structural consulting engineer and fit for

their intended purpose, that the termination of the respondent’s services

was not justified and that the re-issued invoices were valid were

pronounced by the arbitrator pursuant to the submission of the agreed

issues for his determination.

[41] We are satisfied, under the circumstances that the questions raised

by the appellant are essentially one of fact. The learned Judge was

correct in not interfering with the arbitrator’s award based on unqualified

findings of fact. To do otherwise would in our view go to the root of the

settled arbitral principle that the arbitrators are the master of the facts. We

are also satisfied that the learned Judge was also correct in her finding

that the arbitrator did not commit any error of law when he determined that

the appropriate reasonable fee percentage would be 1.25% of the total

construction costs. The arbitrator in our view had full discretion and he

had exercised that discretion correctly.

[42] Additionally it is apt at this stage to mention that the appellant, by

submitting the bundle of drawings referred to in paragraphs 10.9 to 10.16

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of the affidavit in support, was for all intents and purposes treating the

reference on questions of law as an appeal to the High Court. It was in

effect asking the High Court to have another look at these documents and

second-guess the arbitrator’s decision. This, in our opinion, is clearly a

reference of a question of fact which falls outside the scope of section 42

of the Act and the High Court is undoubtedly incompetent to do so. The

Court therefore must resist substituting its views for that of the arbitral

tribunal’s which the parties had already freely chosen to determine their

dispute in the first place [Lembaga Kemajuan Ikan Malaysia v WJ

Construction Sdn. Bhd. supra].

[43] Reverting back to section 42(1A) of the Act, we feel compelled at

this point to move on to consider, that is on the assumption that the

reference under sub-section (1) indeed involves the questions of law,

whether the appellant has overcome the statutory requirement of sub-

section (1A). Sub-section (1A) imposes a further threshold, as we

understand it, not merely whether the question of law has affected the

right of the appellant, but whether the answer to such a question would

substantially affect the right of the appellant. We do not find in the

Originating Summons and the affidavit in support thereof any evidence

that the questions referred to the High Court have fulfilled the mandatory

statutory requirement of sub-section (1A). Neither does the written

submission of learned counsel for the appellant deal with this mandatory

statutory requirement. The questions, if it was indeed a question of law,

merely affected the appellant’s right in not being able to pay a measly sum

for the professional services rendered by the respondent. It certainly was

not a question of law which we were persuaded or convinced to hold as

one that has substantially, significantly or considerably affected the

appellant’s right.

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[44] In our judgment, it is obvious that the questions referred to the Court

for determination which the appellant perceives as the questions of law

are indeed the appellant’s empty rhetoric which is intended to camouflage

its real intention when it chooses to come to the Court which is to have a

second bite of the cherry so that the matter can be relitigated before the

Court. Needless to say, to allow the appellant to do so would be contrary

to the law which is firmly established through several judicial

pronouncements by the Court. There is no room for any doubt that the

arbitrator did not commit any error in applying the correct formula to fix the

rate of fee in his award and such award is not perverse. The question of

applying the quantum meruit principle therefore does not arise. Under the

circumstances we decline to give an order pursuant to sections 37 and 42

of the Act for the award to be set aside or remitted back to the arbitrator

for rearbitration by applying the quantum meruit principle.

CONCLUSION

[45] For the reasons stated above, we conclude that the appellant’s

application is ill-founded and ought inevitably to be dismissed, and our

judgment goes upon the basis that the questions referred are indeed the

questions of fact not one of law. We find no appealable errors in the

judgment of the learned trial Judge. There are no merits in the appeal and

consequently Her Ladyship’s decision is affirmed. We dismiss this appeal

with costs.

signed

( TAN SRI IDRUS BIN HARUN ) Judge

Court of Appeal, Malaysia Putrajaya.

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Dated: 10.8.2015 Counsel: 1. For the Appellant - Dato’ Dr. Cyrus Das Abdul Rashid Bin Ismail Azreen Binti Ahmad Rastom

Tetuan Rashid Zulkifli D2-5-5, Blok D Solaris Dutamas No. 1, Jalan Dutamas 1 50480 Kuala Lumpur. 2. For the Respondent: - Yahya Bin Abd. Rahman Tetuan A.R Yahya & Co No. 57-1, Jalan Wangsa Delima 5 (1/2F) Bandar Wangsa Maju (KLSC) 53300 Kuala Lumpur.