In Low Koh Hwa v Persatuan Kanak-Kanak Spastik Selangor & Wilayah Persekutuan and another case  10 MLJ 262, the High Court set aside an arbitration award on the ground that the arbitrator had breached his duties under Section 14(1) and (2) of the Arbitration Act 2005 (“the Act”) in failing to provide full and timeous disclosure to the parties on the Arbitrator’s relationship with an interested party in the arbitration.
Section 14(1) And (2) Of The Act
For ease of reference, Section 14(1) and (2) of the Act are reproduced below:
“14. Grounds for challenge
(1) A person who is approached in connection with that person’s possible appointment as an arbitrator shall disclose any circumstances likely to give rise to justifiable doubts as to that person’s impartiality or independence.
(2) An arbitrator shall, without delay, from the time of appointment and throughout the arbitral proceedings, disclose any circumstances referred to in subsection (1) to the parties unless the parties have already been informed of such circumstances by the arbitrator.”
Low, a registered architect who practiced as Messrs Low & Associates, was appointed by the Association to provide architectural consultancy services. Low claimed that the balance of his professional fees was not paid despite completing the services.
Low’s claim was referred to arbitration before a sole arbitrator, Ar. Akbal Singh Sandhu (‘the Arbitrator’). On the first day of the arbitration, Low was not legally represented. The Association was represented by its Honorary Director, Datuk Mohinder and its counsel. Low was cross-examined by the Association’s counsel in the presence of Datuk Mohinder (the Arbitrator allowed Datuk Mohinder to be present at the arbitration while Low gave evidence).
After Low’s cross-examination (and before the commencement of Datuk Mohinder’s examination-in-chief by the Association’s counsel), the Arbitrator informed the parties that he knows Datuk Mohinder. Specifically, he stated as follows:
“Arbitrator: Datuk [Mohinder], you can take your seat. Low, like I told you, I know Datuk [Mohinder]; I know Datuk [Mohinder], but it is not Spastik. So, it is inevitable that in this field, we know counsels [sic], we know about each other …”
Proceedings At The High Court
Low applied to set aside the arbitration award at the High Court based on Section 37(1)(b)(ii) and (2)(b)(i) of the Act on the ground that the award is in conflict with the public policy of Malaysia, specifically based on the Arbitrator’s breach of duty under Section 14(1) and (2) of the Act.
In setting aside the award, the High Court determined 3 main issues below:
- Whether the Arbitrator had a duty to make disclosure under Section 14(1) of the Act? (“Issue 1”)?
- What is the extent of the Arbitrator’s duty to make disclosure under Section 14(1) of the Act? (“Issue 2”)?
- Whether the Arbitrator has a duty to make timeous disclosure under Section 14(2) of the Act? (“Issue 3”)?
Issue 1 – Duty to Make Disclosure – Section 14(1) of the Act
The High Court Judge held that the Arbitrator had a duty to make disclosure under Section 14(1) on the Arbitrator’s relationship with Datuk Mohinder. This was based on the fact that:
- Datuk Mohinder was a material witness in the dispute:
- Datuk Mohinder participated in meetings with Low and all the consultants for the project;
- Datuk Mohinder took part in a discussion with Low with respect to Low’s claim;
- the contents of Datuk Mohinder’s witness statement clearly showed that he was a material witness for the Association in the arbitration; and
- Datuk Mohinder was the sole witness for the Association in the Association’s resistance of Mr Low’s claim;
- Datuk Mohinder’s involvements above are “likely to give rise to justifiable doubts as to the Arbitrator’s impartiality or independence” under Section 14(1) of the Act.
Issue 2 – Extent Of Duty To Make Full Disclosure – Section 14(1) of the Act
The Arbitrator’s duty requires him to make full disclosure on his relationship with Datuk Mohinder based on Section 14(1) of the Act (and not just to inform that the Arbitrator knew Datuk Mohinder).
In deciding whether the Arbitrator was biased, His Lordship adopted the objective perception of a “fair-minded and informed observer” and the “real possibility” test in the Supreme Court (UK)’s decision in Halliburton Co v Chubb Bermuda Insurance Ltd and others (International Court of Arbitration of the International Chamber of Commerce and others intervening)  3 WLR 1474.
His Lordship held that the Arbitrator had breached the requirement of impartiality and independence in Section 14(1) of the Act as a “fair – minded and informed observer” would perceive that there is a real possibility for the presence of a relationship or connection between the Arbitrator and the Association (through Datuk Mohinder) which would make it inappropriate for the Arbitrator to decide the arbitration and/or lead the Arbitrator to favour the Association in the award.
Issue 3 – Duty To Make Timeous Disclosure – Section 14(2) of the Act
The Arbitrator not only has a duty to make full disclosure, he also has a duty to make timeous disclosure to the parties on the Arbitrator’s relationship. The Arbitrator should have made the disclosure to the parties before the hearing (during the Preliminary Meeting) and not on after Low’s cross – examination on the first day of hearing.
This High Court decisions makes it clear that arbitrators: (a) has a duty to make disclosure; (b) such duty requires the arbitrator to make a full disclosure; and (c) the duty to make full disclosure must be made timeously.
As observed by the Arbitrator during the course of the proceedings, it is sometimes inevitable that arbitrators, counsels and parties may know each other being industry players. The knowing, in and of itself, it not the issue. It is the lack of disclosure which makes the relationship problematic.
By reference to the Halliburton case, there is no need to show actual bias, only an appearance of bias would suffice. The failure to disclose therefore feeds this appearance of bias which renders the award susceptible to be set aside.
Written by: Annesha Mary Koshy ([email protected]), Associate at Chong + Kheng Hoe.