Court Grants Request for Anti-Arbitration Injunction Following Vessel Detention – Commentary

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Facts
Problems
Decision

Facts

In MISC Bhd v Cockett Marine Oil (Asia) Pte Ltd,(1) the plaintiff was a shipowner and the defendant was a bunker supplier. The plaintiff invited the defendant and several other bunker suppliers to bid for the supply of bunkers to the ship. The tender was awarded to the respondent. The parties entered into a supply contract and bunkers were supplied by the defendant to the plaintiff’s vessel.

On the same day, the ship was arrested by the Malaysian Maritime Enforcement Agency (MMEA) for potential breaches of the Malaysian Customs Act 1967 in relation to the bunkers provided. The vessel’s tank was sealed and the claimant was ordered not to use the holds pending the completion of an investigation. The held bunkers were then released and the parties entered into an agreement that the claimant would purchase the bunkers at an agreed price.

However, the plaintiff subsequently terminated the supply contract on the grounds that the defendant had breached its obligation to deliver the bunkers free of all claims and charges.

The plaintiff’s attorney sent a letter of demand to the defendant claiming damages arising from the defendant’s breach of contract. Counsel for the defendant responded, denying that the detention of the vessel resulted from the defendant’s negligence or breach of contract.

Claimant commenced proceedings against Respondent, while Respondent simultaneously commenced arbitration in England. Respondent requested a stay of proceedings pending arbitration and Plaintiff requested an anti-arbitration injunction to restrain Respondent from taking further steps in the arbitration proceedings.

Problems

The questions for the court’s decision were whether:

  • the defendant had demonstrated the existence of an arbitration agreement between the parties and that the defendant had taken no steps in the legal proceedings; and
  • the anti-arbitration injunction should be granted.

Decision

Accordingly, the defendant’s claim was dismissed. The plaintiff’s request was granted.

Respondent’s Motion for Stay Pending Arbitration
Claimant argued that there was no agreement to arbitrate between the parties, as the parties had entered into a contract on Claimant’s terms while the contract was exclusively subject to the jurisdiction of the Malaysian courts.

The defendant argued that the supply contract was on the defendant’s terms, as a hyperlink to the defendant’s website with its terms was included in the defendant’s emails regarding the tender. By accepting the bunker supply without any objection, plaintiff had accepted the supply contract on defendant’s terms expressly, by implication and/or by conduct.

The court held that the supply contract was on the plaintiff’s terms and not on those of the defendant and that the tender and the supply contract were based on the plaintiff’s terms. The hyperlink was insufficient. In any other situation, it would be strange for the sale of the plaintiff’s tender bunkers to take place in this manner.

Consequently, the court held that the defendant had not demonstrated the existence of an arbitration agreement between the parties and therefore could not stay the proceedings on this ground.

Has the defendant taken a step in the procedure?
The defendant claimed that asking for an extension to file a defense while the case is being handled is not a step in the process. For a request to extend the time limit for filing a statement of defense to be equivalent to a pleading, a formal request must be made to the court.

The court found that the defendant had in fact taken a step in the procedure. Respondent’s request for an extension of time was not made with reference to the suspension of the arbitration. By requesting an extension of time during the handling of the case, the defendant had invoked the jurisdiction of the court, thus amounting to a step in the procedure.

Plaintiff’s Motion for Anti-Arbitration Injunction
The plaintiff asserted that there were serious issues to be tried in his claim based on the detention of the vessel by MMEA due to an alleged offense by the defendant under the Customs Act. Damages are insufficient if the plaintiff is prevented from suing in the forum of his choice under the supply contract.

The defendant argued that where an arbitration agreement is incorporated into the correspondence, the anti-arbitration injunction should not be allowed. Moreover, the plaintiff’s claim was a pecuniary claim which could be adequately compensated by damages.

The court agreed with the plaintiff that there were serious issues to be tried in the plaintiff’s claim that needed to be resolved at trial. The plaintiff’s anti-arbitration injunction sought to prevent an abuse of process by the defendant by forcing the plaintiff, who was not a party to an arbitration agreement, to arbitrate in London.

For more information on this subject, please contact Rajasingam Gothandapani at Shearn Delamore & Co by phone (+60 3 2027 2911) or email ([email protected]). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.

Endnotes

(1) [2022] 8MLJ 786.

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