Malaysia – The Race Against Time — When Does The Limitation Period Stop?
In issue April 2023 of our Arbitration Update, we spoke of the High Court decision in SH Builders & Marketing Sdn Bhd v Bongsor Bina Sdn Bhd [2022] 1 LNS 2839 where it was held that the limitation period stops to run for arbitration proceedings when an action is filed in court, not upon the subsequent issuance of the notice of arbitration.
The Court of Appeal has considered this issue recently in Bongsor Bina Sdn Bhd v SH Builders & Marketing Sdn Bhd [2024] CLJU 965 (“Bongsor”) and affirmed the High Court decision.
Brief Facts of the Case
A dispute arose from a construction contract where the plaintiff commenced civil proceedings in the Sessions Court against the defendant, for unpaid amounts in the sum of RM430,030.78 (“Sessions Court suit”).
The Sessions Court suit was filed before the expiration of the limitation period. Subsequently, the defendant filed an application pursuant to section 10 of the Arbitration Act 2005 (“AA 2005”) to stay the civil proceedings (“Section 10 Stay Application”).
The Sessions Court Judge allowed the Section 10 Stay Application. However, by the time the plaintiff served its notice of arbitration, the limitation period had expired. Following this, the plaintiff made an application to the High Court pursuant to section 41 of the AA 2005.
The question of law that was posed for determination by the High Court was whether time stops to run when the plaintiff/applicant commenced the suit in the Sessions Court, or when the plaintiff/applicant served the notice of arbitration on the defendant/respondent.
In dismissing the plaintiff’s application, the High Court held the limitation period stops to run when proceedings are filed in court, even if the dispute is later referred to arbitration as a result of a successful stay application. Dissatisfied with the High Court’s decision, the defendant appealed to the Court of Appeal.
