Arbitration Update: One Day Late, But the Award Survives
Introduction
Recently, the Court of Appeal in Bellworth Developments Sdn Bhd v Setiakon Builders Sdn Bhd [2026] MLJU 2849 addressed grounds frequently relied upon by unsuccessful parties in arbitration: procedural non-compliance with arbitral rules, allegations that the arbitrator decided a "new difference" beyond the scope of the reference and attempts to challenge the merits of an award through setting aside proceedings.
Brief facts of the case
Bellworth Developments Sdn Bhd (“Bellworth”) engaged Setiakon Builders Sdn Bhd (“Setiakon”) as the contractor for a mixed development project in Taman Tun Dr Ismail, Kuala Lumpur. Disputes arose concerning the certification of extension of time (“EOT”), the validity of the Certificate of Non-Completion (“CNC”) and the imposition of liquidated and ascertained damages.
The disputes were referred to arbitration before a sole arbitrator. Following the arbitration, the arbitrator declared the CNC invalid and awarded Setiakon RM11,452,910 for unpaid works, together with interest and costs. Bellworth subsequently commenced proceedings to set aside the award while Setiakon applied to enforce the same award. The High Court dismissed the setting aside application and allowed enforcement of the award.
Bellworth appealed against both decisions.
Court of Appeal decision
Issue 1: Does a One-Day Delay in Submitting a Draft Award Invalidate the Award?
Bellworth argued that the arbitrator failed to comply with Rule 12(2) of the AIAC Arbitration Rules 2018 (“AIAC Rules”) because the draft final award was allegedly submitted to the AIAC Director one day outside the prescribed three-month period. According to Bellworth, the non-compliance deprived the arbitrator of jurisdiction and authority to issue the final award.
The Court rejected the challenge. The Court interpreted Rule 12(1) of the AIAC Rules from the phrase “date when the arbitral tribunal declares” and held that the relevant three-month period commenced from 28 February 2023, being the date on which the arbitrator formally declared the proceedings closed, rather than the date on which the proceedings were closed. Accordingly, the draft award was submitted within the prescribed period.
The Court further held that even if there had been non-compliance, Rule 12(2) was directory rather than mandatory as it merely regulates the administrative timeline for submitting a draft award for technical review and does not prescribe any consequence rendering an award invalid upon non-compliance. Further, Article 32 of the UNCITRAL Arbitration Rules contemplates waiver in the event of non-compliance with procedural rules.
Issue 2: Did the Arbitrator Decide a "New Difference"?
Bellworth next contended that the arbitrator exceeded his jurisdiction by relying on the architect’s letter dated 19 June 2015 in determining that the CNC was invalid. Bellworth argued that this constituted a “new difference” because Setiakon’s case in the arbitration was only in relation to the architect’s failure to assess its EOT entitlement.
The Court disagreed. After examining the pleadings, documentary evidence and submissions in the arbitration, the Court found that the architect’s letter dated 19 June 2015 formed part of the evidence and the parties must have been aware of the legal implications arising from it.
The Court observed that Bellworth was not contending that there was any evidence or factual material which it had been denied the opportunity to adduce. Rather, Bellworth could have advanced further legal submissions in response to the issue but failed to do so. Accordingly, this was not a case where Bellworth had been denied the chance to present its case. Instead, it was a case where Bellworth failed to make full use of the opportunity available to advance all legal arguments in answer to Setiakon’s case during the arbitration.
The Court further emphasised that an arbitrator is entitled to pick and choose the arguments and evidence he considers necessary and may rely on his own legal expertise in reaching his findings.
Issue 3: Can a Party Challenge the Merits of an Award Through a Setting Aside Application?
Bellworth further argued that the arbitrator’s conclusion that the CNC was invalid was illogical, inconsistent and defective.
The Court rejected the argument, finding that it was no more than an attempt to challenge the merits of the award under the guise of a setting aside application. The Court reiterated that Malaysian courts do not sit as an appellate body over arbitral awards. Errors of fact or law committed by an arbitrator within the scope of his jurisdiction are generally not grounds for setting aside an award.
Key takeaways
This decision serves as a reminder of Malaysian courts’ pro-arbitration approach in upholding arbitral awards, unless a recognised ground for curial intervention is established under the Arbitration Act 2005.
First, procedural irregularities will not automatically invalidate an arbitral award.
Second, an arbitrator does not exceed his jurisdiction merely because he adopts a line of reasoning that differs from the parties' submissions. The courts will examine the pleadings, evidence and submissions as a whole to determine whether the issue formed part of the dispute referred to arbitration.
Third, the courts will not permit setting aside proceedings to be used as a disguised appeal on the merits.
This update is prepared by Ching Hao Yan.
For more information, please reach out to your usual contact from our Arbitration Practice Group.
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