dispute resolution in malaysia 2012

Dispute Resolutionin 47 jurisdictions worldwideContributing editor: Simon Bushell 2012

Published by Getting the Deal Through

in association with:Achour & Hjek

Anderson Mori & TomotsuneAndreas Neocleous & Co LLC

Arajo e Policastro AdvogadosAttorneys-at-law Juridia Ltd

Bharucha & PartnersBiedecki

Bonelli Erede Pappalardo Studio LegaleBredin Prat

Cariola Diez Prez-CotaposCharles Adams Ritchie & Duckworth

Condon & Forsyth LLPELIG Attorneys-at-Law

EnGarde Attorneys at LawFrank Advokatbyr AB

Fulbright & Jaworski LLPGan Partnership

Gilbert + TobinGSK Stockmann + KollegenHabib Al Mulla & Company

Herbert Smith LLPHoet Pelez Castillo & Duque

Ivanyan & PartnersJenner & Block LLPJun He Law Offices

Kleyr Grasso AssocisLiedekerke Wolters Waelbroeck Kirkpatrick

Lund Elmer SandagerMacRoberts LLP

Miller, Canfield, Paddock and Stone PLCMoravcevic Vojnovic Zdravkovic in cooperation with Schnherr

Motieka & AudzeviciusMS Consultores

Nagy s Trcsnyi gyvdi IrodaNiederer Kraft & Frey AG

Odvetniki elih & partnerji, o.p., d.o.o.Polenak Law Firm

Preti Flaherty Beliveau & Pachios LLPRichards Layton & Finger PA

SCA Bulboaca & AsociatiiShin & Kim

Sofunde, Osakwe, Ogundipe & BelgoreSpecht Bhm

Tilleke & GibbinsWerksmans Attorneys

Wiesner & Asociados AbogadosWoods LLP

Contents

www.gettingthedealthrough.com

Dispute Resolution 2012Contributing editor Simon Bushell Herbert Smith LLP

Business development managers Alan Lee George Ingledew Robyn Hetherington Dan White

Marketing managers Ellie Notley Alice HazardMarketing assistants William Bentley Zosia Demkowicz

Subscriptions manager Rachel Nurse [email protected]

Assistant editor Adam MyersEditorial assistant Lydia Gerges

Senior production editor Jonathan Cowie

Chief subeditor Jonathan AllenProduction editor John HarrisSubeditors Davet Hyland Caroline Rawson

Editor-in-chief Callum CampbellPublisher Richard Davey

Dispute Resolution 2012 Published by Law Business Research Ltd 87 Lancaster Road London, W11 1QQ, UK Tel: +44 20 7908 1188 Fax: +44 20 7229 6910 Law Business Research Ltd 2012No photocopying: copyright licences do not apply.First published 2003 Tenth edition 2012 ISSN 1741-0630

The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyerclient relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of June 2012, be advised that this is a developing area.

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LawBusinessResearch

Introduction Simon Bushell Herbert Smith LLP 3

Australia Steven Glass and Airlie Goodman Gilbert + Tobin 4

Austria Erhard Bhm and Paul Proksch Specht Bhm 11

Belgium Joe Sepulchre, Hakim Boularbah and Charlotte Marquet Liedekerke Wolters Waelbroeck Kirkpatrick 17

Brazil Sylvio Fernando Paes de Barros Jr and Alexandre Lins Morato Arajo e Policastro Advogados 27

Canada Quebec James A Woods, Christopher L Richter and Marie-Louise Delisle Woods LLP 32

Cayman Islands Graham F Ritchie QC and David W Collier Charles Adams Ritchie & Duckworth 37

Chile Florencio Bernales and Raimundo Moreno Cariola Diez Prez-Cotapos 43

China Honghuan Liu and Xi Zhou Jun He Law Offices 48

Colombia Dario Cadena Lleras and Eduardo A Wiesner Wiesner & Asociados Abogados 54

Cyprus Panayiotis Neocleous and Costas Stamatiou Andreas Neocleous & Co LLC 60

Czech Republic Daniel Hjek Achour & Hjek 66

Denmark Morten Schwartz Nielsen and David Frlich Lund Elmer Sandager 72

Dominican Republic Enmanuel Monts and Yanna Monts MS Consultores 78

England & Wales Simon Bushell Herbert Smith LLP 83

Finland Martina Kronstrm Attorneys-at-law Juridia Ltd 90

France Tim Portwood Bredin Prat 95

Germany Karl von Hase GSK Stockmann + Kollegen 103

Hungary Zoltn Csehi Nagy s Trcsnyi gyvdi Iroda 110

India Vivek Vashi and Kanika Sharma Bharucha & Partners 117

Italy Vittorio Allavena, Paolo Di Giovanni and Monica Iacoviello Bonelli Erede Pappalardo Studio Legale 124

Japan Tetsuro Motoyoshi and Akira Tanaka Anderson Mori & Tomotsune 131

Korea Benjamin Hughes and Seungmin Lee Shin & Kim 136

Lithuania Ramunas Audzevicius, Tomas Samulevicius and Rimantas Daujotas Motieka & Audzevicius 142

Luxembourg Marc Kleyr Kleyr Grasso Associs 149

Macedonia Tatjana Popovski Buloski and Aleksandar Dimic Polenak Law Firm 156

Malaysia Foo Joon Liang Gan Partnership 162

Nigeria Babajide O Ogundipe and Lateef O Akangbe Sofunde, Osakwe, Ogundipe & Belgore 170

Poland Anna Herman Biedecki 175

Romania Valentin Berea and Diana Teodorescu SCA Bulboaca & Asociatii 181

Russia Sergey Chuprygin Ivanyan & Partners 187

Scotland Julie Hamilton and Susan Hill MacRoberts LLP 195

Serbia Matija Vojnovic and Nataa Lalatovic Moravcevic Vojnovic Zdravkovic in cooperation with Schnherr 201

Slovenia Gregor Simoniti and Luka Grasselli Odvetniki elih & partnerji, o.p., d.o.o. 208

South Africa Des Williams Werksmans Attorneys 217

Sweden Marcus Axelryd and Helena Dandenell Frank Advokatbyr AB 223

Switzerland Ernst F Schmid Niederer Kraft & Frey AG 229

Thailand Thawat Damsa-ard and Noppramart Thammateeradaycho Tilleke & Gibbins 235

Turkey Gnen Grkaynak and Aysn Obruk ELIG Attorneys-at-Law 241

Ukraine Irina Nazarova and Dmytro Donenko EnGarde Attorneys at Law 247

United Arab Emirates Habib Al Mulla and Gordon Blanke Habib Al Mulla & Company 254

United States California Scott D Cunningham and Natasha N Mikha Condon & Forsyth LLP 261

United States Delaware Samuel A Nolen, Robert W Whetzel and Chad M Shandler 267 Richards Layton & Finger PA

United States Illinois Lawrence S Schaner Jenner & Block LLP 273

United States Maine Gregory P Hansel Preti Flaherty Beliveau & Pachios LLP 279

United States Michigan Frederick A Acomb and Mary K Griffith Miller, Canfield, Paddock and Stone PLC 285

United States Texas William D Wood, Kevin OGorman and Lance R Bremer Fulbright & Jaworski LLP 291

Venezuela Carlos Dominguez Hoet Pelez Castillo & Duque 299

Malaysia Gan Partnership

162 Getting the Deal Through Dispute Resolution 2012

MalaysiaFoo Joon Liang

Gan Partnership

Litigation

1 Court systemWhat is the structure of the civil court system?

There are two tiers of courts of first instance in Malaysia: the high courts and the subordinate courts. There are two high courts in Malaysia: the High Court of Malaya and the High Court of Sabah and Sarawak. The high courts are of coordinate jurisdiction. They are branches of either the High Court of Malaya and the High Court of Sabah and Sarawak. Procedures in the high courts are governed by the Rules of the High Court 1980.

The subordinate courts are made up of the sessions courts, mag-istrates courts and the Penghulus Court. The Penghulus Court is very seldom, if ever, used in a commercial context; its jurisdiction is limited to hearing disputes concerning the recovery of monetary sums not exceeding 50 ringgit between persons of an Asian race who understand and speak the Malay language.

The high courts have unlimited jurisdiction to hear all matters. Subject to the exception set out below, matters involving monetary claims from 250,000 ringgit are to be commenced in the high courts; matters involving monetary claims between 25,000 and 250,000 ringgit are to be commenced in the sessions courts; and matters involving monetary claims which do not exceed 25,000 ringgit are to be commenced in the magistrates courts.

An exception is that the sessions courts have unlimited juris-diction to try all civil actions in respect of motor vehicle accidents, landlords and tenants, and distress.

Today, most branches of the high court have implemented divi-sions within the civil high courts for administrative purposes, to streamline cases filed within broad categories, such as commercial and non-commercial matters, disputes concerning intellectual prop-erty, disputes concerning Islamic shariah banking principles, and family law-related disputes. This allows some level of specialisation among judges sitting in those courts, and aids consistency in deci-sions within those areas. A party will therefore have to identify the appropriate venue to take action.

Appellate courtsThere are two tiers of appellate courts in Malaysia: the Court of Appeal and the Federal Court. Appeals are discussed in question 20.

2 Judges and juriesWhat is the role of the judge and the jury in civil proceedings?

The Malaysian court system is adversarial in nature. While it is not unheard of for judges to pose queries in the course of a hearing or trial, it is not inquisitorial in nature. The burden rests with the litigants to prove their respective cases in court in accordance with principles of evidence.

Malaysia has ceased the practice of jury trials. Thus it is for the judge hearing a matter to evaluate the evidence, fact-find, draw a

factual conclusion, and make a decision based on the applicable laws in a civil matter.

3 Limitation issuesWhat are the time limits for bringing civil claims?

In Peninsula Malaysia, time limits for bringing civil claims are governed by the Limitation Act 1953.

Under section 6 of the Limitation Act 1953, the following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued: actionsfoundedonacontractorontort; actionstoenforcearecognisance; actionstoenforceanaward;and actionstorecoveranysumrecoverablebyvirtueofanywritten

law other than a penalty or forfeiture or of a sum by way of penalty or forfeiture.

Further: anactiontorecoverlandmustbebroughtwithin12yearsfrom

the date on which the right of action accrued (section 9, Limita-tion Act 1953); and

anactiontorecoveranyprincipalsumofmoneysecuredbyamortgage or other charge on land or personal property or to enforce such mortgage or charge, or to recover proceeds of the sale of land or personal property must be brought within 12 years from the date when the right to receive the money accrued (section 21, Limitation Act 1953).

In the event of a claim against a person acting in pursuance or execu-tion or intended execution of any written law or of any public duty or authority (in short, public authorities) the limitation period is three years from the date the cause of action arose (section 2, Public Authorities Protection Act 1948).

These limitation periods amount to an absolute defence if pleaded and raised by the party resisting the claim. There are two situations in which the commencement of the limitation periods will be deferred (section 26, Limitation Act 1953): where therehasbeenanacknowledgementof theclaim, the

limitation period will commence afresh from the date of the acknowledgement; or

wherethedebtormakespartpaymenttowardsthedebt,thelimi-tation period will commence afresh from the date of the last part payment.

4 Pre-action behaviourAre there any pre-action considerations the parties should take into

account?

Before commencing proceedings in court, a party should identify his locus standi as a litigant, the legal status of the party against

Gan Partnership Malaysia

www.gettingthedealthrough.com 163

whom the proceedings are to be brought, the cause of action and the remedies sought.

In the event legal proceedings are to be commenced against a party ordinarily resident outside Malaysia, or if the legal proceedings are to be served on a party outside Malaysia, leave of court must be obtained.

Where a party is seeking to bring an action for a tortious wrong done to him but is unable to specifically identify the tortfeasor(s), pre-action discovery commonly known as Norwich Pharmacal discovery may be sought.

5 Starting proceedingsHow are civil proceedings commenced?

High courtIn the high court, there are four modes of commencing civil pro-ceedings: by a writ of summons, by an originating summons, by an originating motion or by a petition. Proceedings commenced by a writs of summons will, in their usual course, proceed to trial where viva voce evidence will be heard in adversarial proceedings. On the other hand, legal proceedings commenced by an originating sum-mons, an originating motion or a petition would be usually heard based on affidavit and documentary evidence, unless the court orders that viva voce evidence be heard or that the deponent of an affidavit be cross-examined on his affidavit.

The Rules of the High Court 1980 provides that the following actions must be commenced by a writ of summons: wheretheremedyissoughtforanytortotherthantrespassto

land; wheretheclaimisbasedonfraud; wheretheclaimfordamagesisbasedonabreachofduty,where

the damages claimed includes damages for death or personal injury, or is in respect of damage to property;

wheretheclaimisforabreachofpromisetomarry;and wheretheclaimisinrespectofaninfringementofapatent.

Apart from these circumstances, a writ of summons is also generally used where a dispute between parties is likely to involve a substantial disagreement on the facts, thus requiring viva voce evidence at trial.

Proceedings by originating summons, originating motion and petition are commenced where required by specific statutes, such as the Arbitration Act 2005 and the Companies Act 1965.

Subordinate courtsIn the subordinate courts, civil proceedings may be commenced by a summons, an originating application, or by a petition.

6 TimetableWhat is the typical procedure and timetable for a civil claim?

Timelines differ between proceedings which are heard based on viva voce evidence and proceedings which are heard based on affidavit evidence. The former is usually the more lengthy process owing par-tially to the need for pleadings to be exchanged first, followed by the requirement of pretrial case management production to be complied with prior to a trial taking place. One would also have to take into account the sometimes inevitable protracting of evidence when given viva voce.

Writ actionIn a writ action, upon service of the writ of summons, a defendant has between eight and 20 days (depending on his location relative to the issuing court) to enter his appearance in court. Upon expiry of the time period to enter appearance, a defendant then has 14 days to file his defence. The plaintiff may then respond to the defence by a reply within 14 days. Where circumstances justify, courts will allow an extension of such timelines.

Assuming that there are no interlocutory applications, parties will then appear in court for pretrial case management. The pretrial case management procedure usually takes between three and six months, where parties would appear intermittently in court to inform the court as to what directions of court have been complied with in preparation for trial. Case management is discussed in question 7.

Once all case management directions have been complied with, trial dates will be fixed. It is now the practice of the Malaysian courts that any action filed must be heard and decided upon within nine calendar months, save in exceptional circumstances. Based on this regime, trials are usually fixed in the seventh or eighth month from the date of the commencement of the proceedings. A decision of the trial judge would be delivered before expiry of the ninth month.

To a large extent, the subordinate courts adopt similar timelines.

Proceedings on affidavit evidenceWhere proceedings are commenced by an originating summons, an originating motion or a petition in the high court, given that evidence (including documentary evidence) are led through affidavits, the processes involved are less. Affidavits are filed almost immediately upon commencement of such proceedings. Procedurally, each party is to file its affidavit within 14 days from its receipt of the affidavit of the opposing party. Where circumstances justify, courts will allow an extension of this timeline.

However, it has increasingly become the practice of the courts that parties are limited in the number of affidavits-in-reply that they may file, thus curtailing the possibility of either party protracting proceedings through the filing of multiple affidavits.

As such, proceedings based on affidavit evidence may be con-cluded within four to six months in the high courts.

7 Case managementCan the parties control the procedure and the timetable?

The Rules of the High Court 1980 provides for a pretrial case man-agement procedure in respect of writ actions or civil proceedings which are to proceed to trial. At case management, the court will issue directions for parties to comply with, in preparation for trial. The usual directions that will be issued include: directionsforthecompilationofdocumentstobereliedupon

at trial. It is usually directed that such documents are placed in two broad categories depending on whether the existence or authenticity of the documents is agreed or not;

directionsforthecompilationofallpleadings; directionsforpartiestojointlyprepareastatementoffactsthat

are agreed upon, so that the need to formally prove such facts at trial is obviated;

directionsforpartiestopreparealistofissuesthatrequirethecourts determination. Such issues should arise from the plead-ings; and

directionsforeachpartytopreparestatementsoftheirwitnesses,which statements are to be exchanged and filed in advance of the trial.

In the event a party fails to comply with any such directions, some amount of latitude is given. However, if there has been a persist-ent failure on one party to comply with the directions, courts may sometimes issue unless orders which are peremptory in nature. If a party then continues to fail to comply with the case management directions, the court may then make such orders as meet the ends of justice, including striking out the suit in a case where the plaintiff has been the party in default, or granting a judgment in the event it is the defendant that has been in default.

At case management, courts may also issue directions for further particulars to be given on pleadings, for discovery, for interrogatories to be answered, and direct the joinder of any other necessary parties.



Essentially therefore, the pretrial case management procedure is put in place to resolve all outstanding procedural and administrative matters in order that the action may be set down for trial.

It is now common practice for case management to be also con-ducted by the high courts to ensure that all necessary affidavits for a hearing have been complied with, prior to a matter being fixed before a judge for hearing. This obviates the possibility of the hearing being adjourned on its scheduled date where the parties are not prepared to proceed, whatever the reason may be. Thus hearing dates are usually only fixed when all such affidavits have been complied with.

8 Evidence documentsIs there a duty to preserve documents and other evidence pending

trial? Must parties share relevant documents (including those

unhelpful to their case)?

It is a general rule that original documents are required to be pro-duced at trial as evidence. There are exceptions, where it can be shown by a party that the original documents are not available. However, given the general rule, parties are advised to preserve or secure original documents for use at trial.

As a matter of practice, to expedite trial proceedings and to obviate the need for formal witnesses to tender original documents, courts accept copies of the original documents if both parties agree that the documents concerned exist and are authentic. These docu-ments are commonly referred to as agreed documents.

In such a case, it is common for photocopies of such agreed documents to be compiled into a common bundle of documents and filed in court to be used for trial. The judge, counsel for each party and the witness giving evidence will have their respective copies of the said common bundle of documents.

While the Rules of the High Court 1980 do oblige parties to a writ action to make discovery of documents within the possession, custody or control by exchanging a list of such documents within 14 days from the close of pleadings, this is seldom practised. A party to civil proceedings may, however, apply for and order of court for the discovery or inspection of documents within the possession, custody or power of the opposing party. Such an application may also be made for specific documents to be disclosed. In such an instance, the opposing party is obliged to disclose all documents relevant to the dispute in its possession, custody or power, including documents which may not be favourable to that opposing partys case.

9 Evidence privilegeAre any documents privileged? Would advice from an in-house lawyer

(whether local or foreign) also be privileged?

Communications made between a client and his lawyers in the course of the appointment of the lawyers, and information which has come to the knowledge or attention of the lawyers as a result of his appointment is protected by legal professional privilege. The lawyers cannot divulge such communication or information unless the com-munication is in furtherance of an illegal purpose, or the information concerned shows a crime or fraud has been committed.

10 Evidence pretrialDo parties exchange written evidence from witnesses and experts

prior to trial?

It is now the practice of the Malaysian courts in an action com-menced by writ for the evidence-in-chief of witnesses to be given by way of witness statements, in the form of question and answer, ten-dered and read at the hearing before the witness is cross-examined on his witness statement. Such statements of witnesses, unless directed otherwise by court, are to be exchanged at least seven days prior to the date the statement is tendered and read out in court.

11 Evidence trialHow is evidence presented at trial? Do witnesses and experts give

oral evidence?

Generally, the plaintiff in a writ action will begin its case by calling his witnesses. At the conclusion of the plaintiffs case, the plaintiff will formally close its case and the defendant will then call its witnesses.

The general requirement is for evidence at trial to be given orally. Each witness may be cross-examined by counsel for the other parties to have his evidence tested, and matters raised in the course of the cross-examination may be clarified in re-examination by the partys own counsel. In limited circumstances, for instance where a child is giving evidence, evidence may be give behind a screen, by live link or by video recording.

12 Interim remediesWhat interim remedies are available?

To preserve the subject matter of the action and to ensure that the action is not rendered academic by intervening action by any of the parties, the high courts have wide powers to grant interim remedies. Such interim remedies are usually granted in the form of injunctive orders.

In cases where there is concern that a party may dissipate assets or funds, interim orders may be sought to freeze assets or funds to prevent their dissipation. Cogent evidence of such risk of dissipation must, however, be shown. Such orders are commonly referred to as Mareva injunctions. In the event the injunctive order sought and obtained are subsequently found to be unjustified, the party which obtained the order may be liable for damages to the party against whom the injunctive order was obtained.

Further, interim orders may also be sought to search the premises within the control or possession of the opposing party, to obtain and secure evidence or to preserve the subject matter of the action. Again, cogent evidence of a risk that such evidence or subject matter may be destroyed must be shown. Such orders are commonly referred to as Anton Piller orders. In the event the injunctive order sought and obtained are subsequently found to be unjustified, the party which obtained the order may be liable for damages to the party against whom the injunctive order was obtained.

13 RemediesWhat substantive remedies are available?

The remedies that the high courts may order at the conclusion of an action may broadly be categorised as follows: damagesdamagesareawardedfortheprimarypurposeof

compensating a plaintiff for loss or damage actually suffered. It is generally not intended to punish the defendant. However, aggra-vated, exemplary or punitive damages may be awarded where the breach or act by the defendant complained of is shown to have been calculated to cause injury to the plaintiff;

injunctiverelief,eitherbywayoforderstocompelorrestrainthe performance of a particular act. For example, the court may order the delivery of property, documents, accounts, etc;

specificperformanceofacontract; declaratoryorders,determiningtherightsorobligationsofthe

parties before the court; and ordersofmandamus,certiorariorprohibition,incaseswhere

judicial review is sought of decisions of public authorities.

For monetary judgments, where there is no agreement between parties as to interest payable on such sums payable under the judgment, the courts retain the discretion to determine if interest (non-compounded) should be awarded before and/or after the date of the judgment, and the rate of such interest. However, the courts discretion to grant interest after the date of judgment is subject to a statutory limit of 4 per cent per annum.



14 EnforcementWhat means of enforcement are available?

Depending on the nature of the judgment or order of court con-cerned, they may be enforced by the following means: judgmentdebtorsummonsallowsforjudgmentdebtortobe

summoned to court to be examined on what debts are due to the judgment debtor and the judgment debtors ability to settle debt to the judgment creditor;

writofseizureandsalecanbeleviedonmoveableandimmove-able property, to attach and sell assets of the judgment debtor to satisfy debt to judgment creditor;

writofpossessiontoenforceajudgmentorordergivingpos-session of an immoveable property;

writofdeliverytoenforceajudgmentororderfordeliveryupof moveable property or for payment of its assessed value;

garnisheeproceedingsfortheattachmentofdebtsduetothejudgment debtor by third parties;

chargingorderstochargegovernmentstock,stockofanycom-pany registered in law, including any stock standing in the name of the accountant-general held by the judgment debtor;

equitableexecutiontheappointmentofareceiverovertheassets of the judgment debtor. This mode of enforcement is tra-ditionally for cases where execution under common law writ of execution is unlikely to be effective. This is a mode of equitable relief, which will usually not be ordered if there are alternative means to enforce the judgment or order concerned;

committalproceedingswheretherehasbeenabreachofajudgment or order restraining or requiring the performance a particular act. This sanction is quasi-penal in nature and carries penal consequences such as imprisonment or fine, depending on the severity of the breach; and

bankruptcy(forindividualpersons)andwinding-upproceedings(for companies).

15 Public accessAre court hearings held in public? Are court documents available to

the public?

Court proceedings may be conducted in chambers or in open court. Where such proceedings take place depends on the nature of the application before the court.

It is not uncommon for judges to declare the open court as their chambers, to hear matters scheduled to be conducted in chambers. This is usually done for practical reasons, eg, where the number of parties are too numerous to be accommodated within the chambers. The reverse may similarly happen, where a judge declares his cham-bers as open court.

Court proceedings are generally public. They may be observed by persons from the public gallery. Searches may be conducted to ascertain documents filed in court and information of matters in court. However, in practice, most courts now require some form of justification for a person to conduct a search on the file, especially if such person is not involved in the particular matter in court. In appropriate cases, parties may of course seek orders or directions from a judge that the court file be kept confidential, and that no copying of documents be permitted. However, the effectiveness of such an order is doubtful, as it may be practically impossible for the courts registry to isolate the file concerned for purposes of restrict-ing access to it.

16 CostsDoes the court have power to order costs?

Courts retain the discretion to award costs to a party in the proceed-ings, and the amount of such costs. As a general rule, a successful party ought to recover some cost from the losing party.

In the high courts, the Rules of the High Court 1980 provides for costs awarded to a party to be taxed. At the taxation proceedings, a registrar of the high court will determine, based on principles set out in the Rules of the High Court 1980, the quantum of cost that ought to be paid by one party to another.

Between parties in litigation, cost is usually awarded on a party-to-party basis. On this basis, a party is entitled to recover from the other party only costs necessarily and properly incurred in bringing or defending the action.

Where specifically permitted by a contract between parties or where the conduct of the party having to pay costs is found to be rep-rehensible, the court may award cost on a solicitor-client basis. On this basis, the court will assess the cost based on what is in its view reasonably incurred by a solicitor in carrying out the instructions of its client. This is a more generous basis in determining the amount of cost to be awarded, as compared to the party-to-party basis.

It is not uncommon that the largest element of the cost claimed by a party would be its getting-up fee. This refers to the preparatory work prior to a partys counsel stepping into court for submissions. To determine the getting-up fee, the Rules of the High Court 1980 set out the following factors to be considered: thecomplexityofthematter; theskill,specialisedknowledgeandresponsibilityrequiredof,

and the time and labour expended by, the solicitor or counsel; thenumberandimportanceofdocumentsinvolved; theplaceandcircumstancesinwhichthebusinessinvolvedis

transacted; theimportanceofthecauseormattertotheparty; thevalueofthesubjectmatterindispute;and whethertherewereanyotherfeesorallowancespayabletothe

solicitor or counsel for other work done, where such other work has reduced the amount of work required.

In the subordinate courts, unless the court otherwise orders, costs will be awarded based on a scale set out in the Subordinate Courts Rules 1980.

Where a defendant is able to show that the plaintiff is unlikely to be in a position to settle any award of costs that may eventually be made against the plaintiff, the court has the power to require the plaintiff to pay a sum into court towards security of the defendants costs. It is common for consequential orders to be made, when such security is ordered. For instance, the court may order that proceed-ings be stayed pending payment of such security by the plaintiff, and in the event the plaintiff does fail to make payment of the security within a specified time period, the suit may be struck out.

17 Funding arrangementsAre no win, no fee agreements, or other types of contingency or

conditional fee arrangements between lawyers and their clients,

available to parties? May parties bring proceedings using third-party

funding? If so, may the third party take a share of any proceeds of the

claim? May a party to litigation share its risk with a third party?

Contingency fee arrangements, where the solicitors or counsel are paid a portion of sums recovered in litigation or on a success basis, are not permitted in Malaysia. The financing of litigation as an invest-ment in a claim is also champertous, and is against public policy.

18 InsuranceIs insurance available to cover all or part of a partys legal costs?

There are no known insurance policies offered in Malaysia specifi-cally covering the cost of legal proceedings of a party or its potential liability towards the cost of its opposing party.



19 Class actionMay litigants with similar claims bring a form of collective redress?

In what circumstances is this permitted?

Class action-type suits do not exist in Malaysia. The only circum-stance where litigants with similar grievances or claims against a common party are engaged in similar proceedings is in the insolvency of a company or individual, where the insolvency action is brought for the general benefit of the creditors of a debtor. Where a group of persons have a common claim against a party, they will each have to be a plaintiff in the civil proceedings (either by themselves or through a representative in a case where they are under any incapacity).

20 AppealOn what grounds and in what circumstances can the parties appeal?

Is there a right of further appeal?

Appeals from the high courtDecisions of the high court may generally be appealed to the Court of Appeal as a matter of right, the exceptions being where the judg-ment or order concerned was entered into by consent, or where the judgment or order concerned is rendered final by any written law in force. In the following instances, leave of the Court of Appeal is first required before an appeal may be brought from the high court: wherethesubjectmatteroftheclaim(excludinginterestthereon)

is less than 250,000 ringgit; and where the judgmentororder sought tobeappealedagainst

relates only to cost.

A party dissatisfied with the decision of the Court of Appeal may, with leave of the Federal Court, appeal against the decision of the Court of Appeal. In that sense, an appeal to the Federal Court can-not be brought as a matter of right. The party seeking to appeal to the Federal Court must obtain leave pursuant to section 96 of the Courts of Judicature Act 1964, by showing that the matter concerned involves a question of general principle decided for the first time, or a question of importance upon which a decision of the Federal Court would be to public advantage, or where it concerns an interpretation of the effect of the Malaysian Constitution.

Appeals from the subordinate courtsAn appeal against the decision of the subordinate courts, be it the magistrates courts or sessions courts, lies to the high court.

A party dissatisfied with the decision of the high court, in an appeal from the subordinate courts, may bring a further appeal to the Court of Appeal with leave of the Court of Appeal. Hence, there is no automatic right to appeal. The party applying for leave would essentially have to satisfy the Court of Appeal that there is a good chance of success in the appeal, or where there is a question of law of general importance which ought to be decided upon by the Court of Appeal.

21 Foreign judgmentsWhat procedures exist for recognition and enforcement of foreign

judgments?

Malaysia recognises judgments of superior courts listed in the first schedule of the Reciprocal Enforcement of Judgments Act 1958. By this act, the Yang Dipertuan Agong may amend the first schedule to add a country or territory if he is satisfied that substantial reciprocity of treatment will be assured by that country or territory of judg-ments given in the Malaysian high courts. In such an event, judg-ments given by the superior courts of the country or territory added may be enforced in accordance with the provisions of the Reciprocal Enforcement of Judgments Act 1958.

Under the Reciprocal Enforcement of Judgments Act 1958, a judgment of a country listed in its first schedule may be registered

in the Malaysian high courts and thereafter enforced as a judgment of the Malaysian high courts. The registration process is administra-tive, with little arguments on the merits of the judgment that may be raised by a party seeking to oppose the registration. The Malaysian courts have refused to go behind a judgment that is being registered, on the basis that it is not its task to do so when hearing an application to register the judgment.

In respect of judgments which do not originate from a country listed in the first schedule to the Reciprocal Enforcement of Judg-ments Act 1958, an action will have to be commenced in the Malay-sian courts based on the judgment concerned as a cause of action. In such an instance, merits may be raised to oppose the action.

22 Foreign proceedingsAre there any procedures for obtaining oral or documentary evidence

for use in civil proceedings in other jurisdictions?

Evidence of witnesses may be obtained in writing in the form of statutory declarations and affirmed before a notary public. It will then depend on whether evidence in such nature is sufficient under the laws of the jurisdiction in which such evidence is required.

Malaysia is not a party to the Hague Evidence Convention 1970.

Arbitration

23 UNCITRAL Model LawIs the arbitration law based on the UNCITRAL Model Law?

The Arbitration Act 2005 (AA 2005) substantially adopts the UNCI-TRAL Model Law. The AA 2005, which came into force on 15 March 2006, repeals the Arbitration Act 1952.

24 Arbitration agreementsWhat are the formal requirements for an enforceable arbitration

agreement?

Section 9 of the AA 2005 requires that an arbitration agreement must be in writing. The arbitration agreement may be in the form of an arbitration clause in an agreement or in the form of a separate agreement. It could even arise from pleadings exchanged between parties, where the existence of an arbitration agreement is alleged by one party, and is not denied by the other.

25 Choice of arbitratorIf the arbitration agreement and any relevant rules are silent on the

matter, how many arbitrators will be appointed and how will they

be appointed? Are there restrictions on the right to challenge the

appointment of an arbitrator?

Appointing an arbitratorIn line with the autonomy of parties in an arbitration, they are free to decide the number of arbitrators in an arbitration between them.

Where, however, the parties have not agreed to the number of arbitrators, section 12 of the AA 2005 provides that there shall be three arbitrators in an international arbitration, and one arbitrator in a domestic arbitration. An international arbitration is defined in the AA 2005 as an arbitration where one of the parties to the arbitration agreement, the seat of arbitration, the subject matter of the dispute, or a substantial portion of the commercial obligations of the parties lie in a state outside Malaysia. An international arbitration could also arise where parties expressly agree that the arbitration relates to more than one state. A domestic arbitration, on the other hand, is defined as any arbitration which is not an international arbitration.



Challenging the appointment of an arbitratorAn arbitrator is under statutory duty to disclose, without delay, cir-cumstances giving rise to justifiable doubts as to his impartiality or independence. An arbitrators appointment may be challenged only if it can be shown that there are justifiable doubts as to the impartiality or independence of the arbitrator, or where the arbitrator does not possess the necessary qualifications agreed to by the parties (section 14, AA 2005).

A party seeking to make this challenge would have to do so within 15 days after becoming aware of the constitution of the arbi-tral tribunal or of any such grounds to challenge the appointment of the arbitrator. A written statement of the reasons for the challenge to the arbitral tribunal is to be sent to the arbitrator. The arbitrator may then rule on this challenge. A party dissatisfied with the decision of the arbitrator may appeal to the high court, whose decision shall be final. Pending such a decision of the high court, barring any order otherwise, the arbitration is to proceed (section 15, AA 2005).

26 Arbitral procedureDoes the domestic law contain substantive requirements for the

procedure to be followed?

Procedures in arbitrations are largely consensual; parties are free to agree the procedure of the arbitration. Failing such agreement, the AA 2005 allows the appointed arbitrator to direct procedures to be followed.

The Malaysian courts have time and again cited with approval the principle enunciated by the English House of Lords in Bremer Vulkan v South India Shipping Corporation [1981] 1 All ER 289, that the arbitrator is the master of the procedures in the arbitra-tion. Consequently, the courts have consistently rejected arguments against procedures adopted by the arbitrators, unless it can be shown that there has been a breach of natural justice or some substantial injustice has been occasioned to one of the parties.

27 Court interventionOn what grounds can the court intervene during an arbitration?

Section 11 of the AA 2005 gives express powers to the high court to make the following interim orders in aid of the arbitration process: securityforcosts; discoveryofdocumentsandinterrogatories; givingofevidencebyaffidavit; appointmentofareceiver; securingtheamount indispute,whetherbywayofarrestof

property or bail or other security pursuant to the Admiralty jurisdiction of the high court;

thepreservation,interimcustodyorsaleofanypropertywhichis the subject matter of the dispute;

ensuringthatanyawardwhichmaybemadeinthearbitralpro-ceedings is not rendered ineffectual by the dissipation of assets by a party; and

aninteriminjunctionoranyotherinterimmeasure.

The right of a party to seek the interim measures under section 11, AA 2005 cannot be contracted out of.

Additionally, a party may refer a question of law arising in the course of the arbitration to the high court for determination pursuant to section 41 of the AA 2005. This is, however, a provision of the AA 2005 which may be contracted out of by parties.

28 Interim reliefDo arbitrators have powers to grant interim relief?

Arbitrators have almost similar powers to grant interim relief to those of the high court. Section 9 of the AA 2005 empowers arbitra-tors to make the following interim awards:

securityforcosts; discoveryofdocumentsandinterrogatories; givingofevidencebyaffidavit;and thepreservation,interimcustodyorsaleofanypropertywhich

is the subject matter of the dispute.

Parties may, however, expressly agree to exclude such powers from the arbitrators. Where the arbitrators have such powers, the courts have insisted that applications for such interim relief be brought before the arbitrator first, and not to the high court. This is based on the rationale that all facts and possibly documents are already before the arbitrator in the pending arbitration, and therefore the arbitrator would be better placed to make an expeditious and informed deci-sion on the interim relief sought. It is, however, submitted that this can only be a general proposition, as ex parte and urgent applications to the courts for such interim relief must still be available where a similar application to the arbitrator may give notice to the other party or result in delay (eg, where only a notice of arbitration has been issued, and no arbitrator has been appointed as yet).

29 AwardWhen and in what form must the award be delivered?

The requirements of an award are set out in section 33 of the AA 2005. An award must be in writing and be signed by the arbitrator. In a case where there is more than one arbitrator, the signature of a majority of the arbitrators shall be sufficient. However, the reason for the omitted signature is required to be stated. The award shall also state the date and seat or arbitration, and be delivered to the parties. In practice, the arbitral tribunal or the institution under whose rules the arbitration is instituted may withhold the issuance of the award to parties pending the payment of all fees and charges incidental to the arbitration.

Unless parties agree otherwise, the award has to be a reasoned award.

30 AppealOn what grounds can an award be appealed to the court?

An arbitration award is final (section 36 of the AA 2005). There is no right of appeal.

A party may, however apply to set aside an award on limited grounds under section 37 of the AA 2005. In particular, an award may be set aside on, and only on, the following grounds: apartytothearbitrationagreementwasunderanyincapacity; thearbitrationagreementisnotvalidunderthelawtowhichthe

parties have subjected it, or, failing any indication thereon, under the laws of Malaysia;

thepartymakingtheapplicationwasnotgivenpropernoticeofthe appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that partys case;

theawarddealswithadisputenotcontemplatedbyornotfallingwithin the terms of the submission to arbitration;

subjecttosubsection3,theawardcontainsdecisionsonmattersbeyond the scope of the submission to arbitration;

thecompositionofthearbitraltribunalorthearbitralprocedurewas not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this act which the parties cannot derogate, or, failing such agreement, was not in accordance with this act;

thesubjectmatterofthedisputeisnotcapableofsettlementbyarbitration under the laws of Malaysia; or

theawardisinconflictwiththepublicpolicyofMalaysia.

It will be observed that the merits of the decision in the award is not a ground to challenge the award; the high court does not sit on appeal over the award.



However, parties may refer questions of law arising out of an award, which substantially affects the rights of one or more of the parties, to the high court for a decision under section 42, AA 2005. In determining the question of law, the high court may affirm, vary, set aside the award, or remit the award to the arbitral tribunal for a reconsideration of the relevant issue. It has been held by the Malay-sian courts that section 42, AA 2005 preserves the common law ground of an error on the face of the award, as a basis of challenging the award. However, this stands inconsistent with the provisions of section 37, AA 2005, which states that the only grounds on which an award may be set aside are those expressed in section 37. It is submitted that section 42, AA 2005 must be given a restrictive read-ing in order not to derogate from the clear restriction of section 37, AA 2005.

31 EnforcementWhat procedures exist for enforcement of foreign and domestic

awards?

Section 38 of the AA 2005 gives recognition to arbitration awards made in an arbitration either where the seat of arbitration is in Malaysia or where the award is issued from a foreign state. Such awards will be recognised by Malaysian courts as being binding and enforceable in Malaysia and be entered as a judgment of the Malay-sian courts, subject only to limited circumstances for where such awards may be set aside. This is commonly known as the registration of an award.

Section 38 of the AA 2005 requires that a duly authenticated original award or a duly certified copy of the award and the original arbitration agreement or a duly certified copy of the agreement be produced. Where the award or arbitration agreement is in a language other than the national language or the English language, the party making the application to have the award registered in court must provide a duly certified translation of the award or agreement, as the case may be, in the English language.

The circumstances for registering an award are mostly the same circumstances in which one may seek to set aside the award (pursu-ant to section 37, AA 2005, described above). By virtue of section 39 of the AA 2005, a party may oppose the registration of the award where: apartytothearbitrationagreementwasunderanyincapacity; thearbitrationagreementisnotvalidunderthelawtowhichthe

parties have subjected it, or, failing any indication thereon, under the laws of the state where the award was made;

thepartymakingtheapplicationwasnotgivenpropernoticeofthe appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that partys case;

theawarddealswithadisputenotcontemplatedbyornotfallingwithin the terms of the submission to arbitration;

subjecttosubsection3,theawardcontainsdecisionsonmattersbeyond the scope of the submission to arbitration;

thecompositionofthearbitraltribunalorthearbitralprocedurewas not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this act;

theawardhasnotyetbecomebindingonthepartiesorhasbeen set aside or suspended by a court of the country in which, or under the law of which, that award was made;

thesubjectmatterofthedisputeisnotcapableofsettlementbyarbitration under the laws of Malaysia; or

theawardisinconflictwiththepublicpolicyofMalaysia.

Public policy is not defined in section 39, AA 2005. One may, however, get guidance on its definition from section 37, AA 2005.

It will be observed that none of the grounds set out in section 39, AA 2005 concerns the merits of an arbitration award. The Malay-sian courts will not sit on appeal over the correctness of an award, when deciding if the award ought to be registered. If, however, the merits of the award may be attacked under the laws of the country in which the award was issued and the award is set aside on that basis, then such an award cannot be registered in Malaysia (section 39(1)(a)(vii), AA 2005).

32 CostsCan a successful party recover its costs?

A discretion lies with the arbitrator to decide on which party is to pay the cost and expenses of the arbitration, in what manner and in what amount (section 44, AA 2005). In this connection, the arbitrator is empowered under the AA 2005 to tax the cost concerned, and may do so on a solicitor-client basis.

Generally, the successful party will be awarded costs.

Alternative dispute resolution

33 Types of ADRWhat types of ADR process are commonly used? Is a particular ADR

process popular?

In Malaysia, arbitration is the most widely used alternative dispute resolution process. This is followed by mediation, which is now increasingly practised in courts. At the moment, mediation has not enjoyed much success as it should, particularly in the court environ-ment, as it is not a process regulated by rules of procedures. It is largely still left to the good sense of parties to compromise.

Adjudication is, at the time of writing, the subject of the Construction Industry Payment and Adjudication Act, which is awaiting royal assent. It has been debated and approved by both houses of parliament. Once passed into law, it is anticipated that adjudication will be widely used, especially in the construction industry.

Other ADR processes such as expert adjudication and conciliation are not known to be widely used.

34 Requirements for ADRIs there a requirement for the parties to litigation or arbitration to

consider ADR before or during proceedings? Can the court or tribunal

compel the parties to participate in an ADR process?

There are currently no requirements for parties to go through one ADR process or another before litigation. It is only where parties indicate their preparedness to mediate that the courts will direct parties to mediation.

In arbitration agreements, where it is a condition precedent for some process of mediation or conciliation to take place prior to parties arbitrating, parties would be obliged to go through the mediation or conciliation before an arbitration can be commenced, unless they waive such a condition precedent.

At present, there is a preliminary proposal for a single set of civil procedure rules for both the High Court and subordinate courts. The Malaysian bar is at present working together with members of the attorney generals chambers and members of the judiciary to work on the said proposal. However, this proposal is only at its initial stages and is unlikely to be finalised and implemented any time in the near future.

Update and trends



Miscellaneous

35 Are there any particularly interesting features of the dispute resolution system not addressed in any of the previous questions?

In 2009, a fast-track system was introduced in the Malaysian courts and as stated above, the court dispose off matters within

nine months. As such, with the increase of speed of the litigation process, the plaintiff must be prepared and ready for trial from the commencement of the suit. Accordingly, the plaintiff must be prepared with all pertinent matters necessary to prove his claim and this must be done within a short period of time.

Gan Partnership

Foo Joon Liang [email protected]

Unit A-35-3A, Menara UOA Bangsar Tel: +603 2201 1130

5 Jalan Bangsar Utama 1 Fax: +603 2201 1136

59000 Kuala Lumpur www.ganlaw.my

Malaysia

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