CHIROPRACTIC SPECIALTY CENTRE SDN BHD v ORTHORELIEF & CARE SDN BHD
Court of Appeal (Putrajaya)
Civil Appeal No. W-02(NCC)-1484-08/2016
[Judgement Date: 23rd October 2017]Coram:
Hamid Sultan bin Abu Backer, JCA; Harminder Singh Dhaliwal, JCA; Yeoh Wee Siam, J
Arbitration – Commercial dispute – Arbitration Act 2005(AA 2005) – Section 37 AA 2005 – setting aside – Section 42 AA 2005 – franchise agreement – misrepresentation – exclusion clauses – excluding liability in exclusion clauses – duty of courts not to intervene to set aside an arbitration award – appeals
Brief Facts
Orthorelief & Care Sdn Bhd (Orthorelief) entered into a Franchise agreement together with Chiropractic Specialty Centre Sdn Bhd (CSC) where after Orthorelief purchased several machines from CSC based on the representations made by CSC’s director, Dr. Yama Zafer. Subsequently, Orthorelief found that the said representations were false and sought rescission of the Franchise Agreement and restitution of the sum of RM 629,344.50 – the value of the machines. CSC denied any false representations and claimed that the machines failed due to Orthorelief’s inability to operate the machines correctly due to mishandling and poor management. With Orthorelief acting as Claimant, the matter was then referred to arbitration where after the learned arbitrator partly awarded Orthorelief’s claim. Orthorelief thereafter sought to enforce the award of the arbitrator at the High Court as a court order while CSC sought to set aside the decision and award delivered by the arbitrator.
The High Court refused to set aside the award of the arbitrator pursuant to Sections 37 & 42 of the Arbitration Act 2005 and CSC subsequently appealed against the judgment by the High Court.
Issue
CSC argued that the arbitrator was wrong in law to deal with the issue of misrepresentation made by CSC’s Director, Dr. Yama Zafer, before the Franchise Agreement was executed in light of exclusion clauses and the entire agreement clause. The gist of the matter incorporated in the exclusion clauses and agreement clause in the Franchise Agreement stated that Orthorelief, as the Franchisee, shall not rely upon any statement, representation or waiver made by CSC as the Franchisor, its servant or agent. In addition, one of the clauses stated that the agreement sets forth the entire agreement and understanding between the parties and supersedes any prior discussion, representations, conditions and warranties. In short, the learned counsel for CSC anchors the argument on the fact that the arbitrator had erred by law in erroneously interpreting the clauses of the agreement by considering evidence and submission beyond the Franchise Agreement.
Held
After considering the factual matrix of the case, Hamid Sultan Bin Abu Backer JCA in delivering the grounds of judgment of the court, relied on the case of Inntreprenuer Pub Co v East Crown Ltd [2000] 2 Lloyds Rep 611 to establish that representation and misrepresentation are not one and the same in the legal sense. Depending on the facts and gravity of impropriety of clauses in a contractual document, exclusion clauses may not have the effect of excluding liability, and it is the duty of the courts not to recognize clauses that exclude misrepresentation, fraud, deceit and etc. due to public policy. The honorable court judge also relied on the Malaysian case of Crystal Realty Sdn Bhd v Tenaga Insurance (Malaysia) Sdn Bhd [2008] 3 CLJ 791 to establish that the court will not intervene to set aside an arbitration award unless it has been shown that the award was manifestly unlawful and unconscionable to subsist. The appeal was dismissed.
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