Section 10(1) of the Arbitration Act 2005 gives the party against whom court proceedings are brought a right to stay court proceedings if the agreement from which the dispute arises contains an arbitration clause.
However, this right to refer the dispute is forfeited if the party against whom the court proceedings are brought takes any step in the court proceedings.
The question is whether seeking an extension of time amounts to a “step” in the proceedings.
This question was addressed by the Court of Appeal in the recent case of Airbus Helicopters Malaysia Sdn Bhd v Aerial Power Lines Sdn Bhd [2024] 4 CLJ 243.
Brief Facts
Airbus Helicopters Malaysia (“AHM”) entered into a Sales Contract to sell a helicopter manufactured by its headquarters in France to Aerial Power Lines (“APL”). Dissatisfied with the helicopter upon delivery, APL brought a court action against AHM and filed a Statement of Claim of over 100 paragraphs, alleging various technical defects in the helicopter.
Faced with a lengthy Statement of Claim, no proper instructions from their clients at AHM’s French headquarters, and no access to the contractual documents, AHM’s Malaysian solicitors requested a one-month extension to file a defence (“Request”) during the first case management.
Subsequently, it was discovered that the Sales Contract contained an arbitration agreement, and as such AHM filed a stay application under section 10(1) (“Stay Application”). This Stay Application was filed before the next case management date, as well as the original deadline for filing the defence.
APL resisted the Stay Application on the basis that by requesting a one-month extension, AHM had forfeited its right to refer the dispute to arbitration, in favour of proceeding with litigation in court.
The High Court agreed with APL and dismissed the Stay Application. However, following an appeal by AHM, this decision was overturned by the Court of Appeal and the court proceedings were stayed in favour of arbitration.
