Tuesday October 27, 2009
Choosing law and courts
ARTICLES OF LAW
By BHAG SINGH
A right to resort to court exists. However parties may choose the law to be applied and the tribunal as well as its allocation event within a different jurisdiction.
IT IS accepted that if in the course of business dealings there is a dispute that cannot be resolved the way out is to enlist the aid of a suitable tribunal.
However, can parties to a transaction in anticipation of such a dispute agree on the tribunal that they will go to, whether inside or outside the country?
Ordinarily, parties involved in such disputes will bring the matter before the courts of the land. Such a claim may be brought in the Magistrate’s Court, Sessions Court or High Court. Beyond that, only appeals can be made, whether to the Court of Appeal or Federal Court.
Unless a disability exists, every person has a right to seek relief in the courts of the country. The right cannot be restricted in any way unless provided for in a law. In contractual matters, this is prohibited.
Section 29 of the Contracts Act 1950 states that “every agreement by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.”
However, this does not prevent a party to the transaction being governed by a law of their choice or the location of a tribunal. They may, for example, agree that the transaction is to be governed by the law of a specific foreign country. If parties merely agree for the law of another country to apply to their transaction, the Malaysian courts would still be entitled to adjudicate. However, the court would have to take cognisance of the foreign law. For this purpose, expert opinion of the foreign law may be sought to assist the court.
The parties may also agree for the dispute to be adjudicated in the courts of a foreign country. In the absence of any step taken contrary to such an agreement, the Malaysian courts will usually recognise and give effect to such an agreement. An example of such a clause is to be found in Ng Lai Tein v Peregrine Finance Limited which is set out in the following paragraph:
“This agreement and its enforcement shall be governed by the laws of Hong Kong and its provisions shall be continuous; shall cover individually and collectively all accounts which the customer may open or re-open with Peregrine, and shall inure to the benefit of and bind Peregrine. Peregrine’s successors and assigns ... and the customer hereby submits to the jurisdiction of the court of Hong Kong.” However, the right to rely on such a clause may be lost if one of the parties ignores the provision and the other party remains indifferent and does not seek to assert its rights to have the dispute in the pre-agreed venue.
Thus in the case of Ng Lai Tein v Peregrine Finance Limited, the appellant Ng Lai Tein who was the customer living in Malaysia was said to be owing Peregrine a commodities and securities brokerage firm for purchase of commodities and securities by reason of an account maintained by him.
Peregrine, disregarding what was earlier agreed to, commenced an action for the amount due in a Malaysian court. This was followed up by a successful application for summary judgment. It appears that only bare allegations had been made. The customer appealed.
On appeal, the judgment ought to have been set aside for the reason that the dispute ought to have been decided according to Hong Kong law and in the Hong Kong courts. Whether this contention is correct would depend on whether the Malaysian court also has jurisdiction.
Existence of jurisdiction
Pursuant to Section 23(a) of the Courts of Judicature Act 1964, the High Court has jurisdiction to try all civil proceedings where amongst others the cause of action arose, or the defendant or one of several defendants resides or has his place of business, or the facts on which the proceedings are based exist ...”.
As the customer resided within its jurisdiction, the court went on to hold that it had jurisdiction to adjudicate the claim, and the earlier decision was upheld.
Meaningless clause?
This does not mean that such a clause is meaningless. Where a party wishes to rely on such a provision, it ought to take objection to the proceedings at the outset and ask for the proceedings in the Malaysian courts to at least be stayed.
Where this is done, then, in the absence of other compelling circumstances, the courts are likely to give recognition to the desire of the parties to have the dispute adjudicated upon in another jurisdiction. Failure to do so will be construed as the party now seeking to rely on such terms as having waived its rights in this regard. This is also what happened in the case referred to earlier.
The right to the usual legal proceedings being modified can also come about where the parties have agreed to refer any dispute to arbitration. It may also have been agreed that arbitration be held under the auspices of a particular body in a specific foreign venue.
A reference to arbitration does not completely remove resort to the courts because an arbitrator’s decisions are always subject to judicial review. But the opportunity to challenge an arbitrator’s award has been considerably curtailed by the current Arbitration Act 2005.
On other occasions, the right may be statutorily restricted. Thus exception 3 to section 29 of the Contract Acts 1950 states that “nothing shall render illegal any contract in writing between the Government and any person with respect to an award of a scholarship by the Government wherein it is provided that the discretion exercised by the Government that contract shall be final and conclusive and shall not be questioned by any court”.
Otherwise a party may also lose its rights because an action it not commenced within a period of six years provided by the law of limitations. There are variations to this on the basis of the specific situations and the geographical locations of the dispute. That needs to be discussed separately.
Source:
RSS
