Non-Parties And Section 10 Of The Arbitration Act 2005
Some 20 years ago, the Court of Appeal (CA) case of Bina Jati Sdn Bhd v Sum-Projects (Bros) Sdn Bhd  2 MLJ 71(Bina Jati) laid down the foundations for the development of the Malaysian jurisprudence on the Courts’ jurisdiction to allow or refuse a stay of proceedings where a matter before the Court involved non-parties to an AA (Non-Parties).
Bina Jati concerned the Respondent’s application to revoke an arbitrator’s authority to determine a dispute on grounds, amongst others, that the issues to be determined involved non-parties. The CA upheld the High Court’s (HC) decision in granting an anti-arbitration injunction and opined that “where some are parties and others are not parties to the arbitration it is best that their disputes be dealt with by the court”. Further, the CA, having referred to Beaufort Development Ltd v Gilbert-Ash NI Ltd  WLR 860, held that Courts may oust an arbitrator’s jurisdiction:
(a)Where there is an allegation of fraud.
(b)To avoid multiplicity of suits.
(c)Where allegations connected to the subject matter affect Non-Parties.
(d)Where all issues ought to be tried by one tribunal.
Bina Jati was subsequently approved and adopted by the Federal Court (FC) in Chase Perdana Bhd v Pekeliling Triangle Sdn Bhd  7 MLJ 677 (Chase Perdana).
At this juncture, it is appropriate to note that the parties to the suits in Bina Jati and Chase Perdana were all parties to their respective AAs, and there was no discussion on the applicability of Section 10 of the Act as against Non-Parties.
It was only in Protasco Bhd v Tey Por Yee & another appeal  5 CLJ 299 (Protasco) that the CA definitively pronounced that Section 10 of the Act did not apply to Non-Parties.
Briefly, in Protasco, the Plaintiff, Protasco, brought a claim against three defendants in the High Court. The dispute between Protasco and the First Defendant was governed by an AA, whilst the Second and Third Defendants were Non-Parties. The HC granted a stay of proceedings in favour of all the defendants. On appeal, the CA reversed the High Court’s decision and held that Protasco’s claims against the Second and Third Defendants should proceed in priority over the arbitration between Protasco and the First Defendant. This was achieved via a temporary stay of arbitration proceedings between Protasco and the First Defendant.
In its decision, the CA emphasised that Section 10 of the Act did not apply to Non-Parties and Courts had the discretion and power to grant a stay of proceedings in the interests of justice based on its inherent jurisdiction. The considerations for exercising this discretion have been comprehensively distilled by Wong Kian Kheong J (now JCA) in LNH Landscaping Sdn Bhd v TKH Construction Sdn Bhd and other appeals  MLJU 761 (LNH Landscaping).
A year later, the FC in Jaya Sudhir a/l Jayaram v Nautical Supreme Sdn Bhd & Ors  5 MLJ 1 approved of Protasco and deemed it instructive. The FC considered, amongst others, that Courts may decline to uphold an arbitration agreement where interests of third parties are involved or where there is a risk of duplicity of proceedings. In such circumstances, Courts have the discretion under Order 29 and Order 92 Rule 4 of the Rules of Court 2012 to grant an anti-arbitration injunction to protect the integrity of court processes.
More recently, the CA has maintained the inapplicability of Section 10 of the Act as against Non-Parties in its decisions of Abd Rahman bin Soltan & Ors v Federal Land Development Authority & Anor and other appeals  7 CLJ 705 and Lee Fook Yuen & Anor v Lye Ek Seang & Anor and other appeals which affirmed the HC judgment in Lye Ek Seang & Anor v Lee Fook Yuen & Ors (Civil Suit No.: WA-22NCvC-225-04/2021).
In the above premises, it now appears settled that Section 10 of the Act does not apply where Non-Parties—or their interests—are involved in a suit. Courts retain the discretion and are guided by established judicial principles in an application for stay of proceedings in such situation. Non-Parties need not fear that their interests will be prejudiced via the invocation of Section 10 of the Act without their day in court.
 Bina Jati Sdn Bhd v Sum-Projects (Bros) Sdn Bhd  2 MLJ 71, 81.  Bina Jati, 82.  Protasco Bhd v Tey Por Yee & another appeal  5 CLJ 299 COA (‘Protasco’)  & .  Jaya Sudhir a/l Jayaram v Nautical Supreme Sdn Bhd & Ors  5 MLJ 1 FC (‘Jaya Sudhir’) -.  Jaya Sudhir  & .
2 November 2023