Arbitration Update: Universiti Malaya v ESA Jurutera Perunding Sdn Bhd: Federal Court Clarifies "Step in the Proceedings" under section 10 of the Arbitration Act 2005

Introduction

In Universiti Malaya v ESA Jurutera Perunding Sdn Bhd [2026] MLJU 2093, the Federal Court affirmed the Court of Appeal's decision and clarified what constitutes "other steps in the proceedings" under section 10 of the Arbitration Act 2005 ("AA 2005").

Brief facts

Universiti Malaya ("UM") appointed ESA Jurutera Perunding Sdn Bhd ("ESA") as its civil and structural engineering consultant for a construction project. Clause 4 of the Conditions of Engagement required disputes between the parties to be referred to arbitration. 

Despite the arbitration clause, UM commenced a writ action against ESA in the Kuala Lumpur High Court on 6 October 2022. In response, ESA entered appearance on 17 October 2022 and, on multiple occasions, requested extensions of time to file its defence. ESA also issued a Notice to Produce Documents Referred to in Pleadings dated 24 November 2022.

Subsequently, ESA issued a Notice of Arbitration dated 1 December 2022 and on 2 December 2022 applied under section 10(1) of the AA 2005 to stay the Court proceedings in favour of arbitration ("Stay Application"). 

The High Court dismissed the Stay Application, holding that ESA's requests for extensions of time to file its defence and issuance of the Notice to Produce Documents constituted "other steps in the proceedings" under section 10(1) and, therefore, ESA could not stay the Court proceedings.

ESA appealed and the Court of Appeal reversed the High Court's decision. UM then appealed to the Federal Court.

“Other Steps in the Proceedings” under section 10 of the AA 2005

Under section 10(1) of the AA 2005, a party may only stay Court proceedings and refer the parties to arbitration "before taking any other steps in the proceedings". The key issue in the present case was whether ESA had taken any other steps in the proceedings before applying for a stay.

In this regard, the Federal Court held that ESA's conduct in requesting extensions of time to file its defence and issuing the Notice to Produce Documents did not amount to "other steps in the proceedings". As such, the Federal Court found that ESA had not waived its right to refer the dispute to arbitration. 

In reaching this conclusion, the Federal Court emphasised that whether a party has waived its right to arbitrate is a question of fact, to be determined by adopting a "holistic approach" and considering whether the party has unequivocally elected to proceed with litigation instead of arbitration.

Applying this approach, the Federal Court found that:

  • ESA's requests for extensions of time to file its defence did not constitute a step in the proceedings. These requests were reasonable and made in good faith, as the relevant events were long-dated and some of the documents were not in ESA’s possession.
  • ESA's issuance of the Notice to Produce Documents did not "touch on the merits" of the dispute and therefore did not constitute a step in the proceedings. The Notice was also found to be reasonable, necessary and issued in good faith.
  • The above steps were taken by ESA to ascertain the nature of the parties' agreement, including the arbitration clause, rather than to advance its defence on the merits.
  • ESA had consistently reserved its right to arbitration in its correspondence, Notice of Arbitration and Statement of Defence and Counterclaim.
  • ESA also acted with reasonable expedition and there was no undue delay in filing the Stay Application under section 10(1).


Taken together, these factors demonstrated that ESA had not waived its right to refer the dispute to arbitration.

Key takeaways

Following the Federal Court’s decision, it is important to note that:

  • Whether a party has taken "other steps in the proceedings" under section 10 of the AA 2005 is a fact-sensitive question that will be determined based on the circumstances of each individual case.
  • Extra caution should be exercised when a party is entering into communication with the plaintiff’s solicitors in respect of the court proceedings, particularly where the party intends to refer the dispute to arbitration.
  • A party should always assert that it is preserving its right to arbitrate when taking any action in the Court proceedings.

This update is prepared by Austin Tan Ren Tse.

For more information, please reach out to your usual contact from our Arbitration Practice Group.

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THIS UPDATE IS ISSUED FOR THE INFORMATION OF THE CLIENTS OF THE FIRM AND COVERS LEGAL ISSUES IN A GENERAL WAY. 
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