On 25 April 1982 a bill of lading was issued at Johor Port by or on behalf of the defendants whereby 489,390 long tons of palm fatty acid distillate in bulk was shipped on board the defendants' vessel Stolt Loyalty at Pasir Gudang, Johor. The cargo was then in good order and condition for carriage by sea to Greenhithe, London. The plaintiffs are the owners of the cargo and/or the holders or indorsees of the bill of lading. The cargo was apparently shipped to Rotterdam and then transhipped onto the Maya, which carried the cargo to London.

Upon delivery, the cargo was found to be damaged with water as a consequence of which the plaintiffs suffered loss which has been valued at MYR 27,035.77. This action is for the recovery of that loss and consequential relief by reason of the alleged breach of the contract and/or breach of duty and/or negligence of the defendants, their servants or agents. The plaintiffs filed this writ on 26 April 1983. On 19 October 1983 an unconditional memorandum of appearance was entered for Thoresen & Co (S) Pte Ltd. On 7 November 1983 an unconditional memorandum of appearance was entered for the owners of the ship Stolt Loyalty in this action. On 10 November 1983 the owners applied by way of a summons in chambers for all further proceedings to be stayed pursuant to s 6 of the Arbitration Act 1952. The owners alleged that the plaintiffs are bound by a contract of affreightment made between Anthony Redcliff Steamship Co Ltd UK and Pan Century Edible Oils Sdn Bhd. This contract of affreightment included a Tanker Voyage Charterparty which in cl 4 provided for disputes to be settled in New York by arbitration. The plaintiffs vigorously resisted the defendants' application for stay and averred that the disputes arising out of the bill of lading were not subject to this arbitration clause.

Held: Defendants' application for a stay of proceedings is denied.

The criteria set out by Kulasekaram J in Amerco Timbers Pte Ltd v Chatsworth Timber Corp Pte Ltd [1977] 2 MLJ 181 (CMI930) apply equally to the present case:

• The evidence on the issues of fact insofar as it relates to the condition of the cargo when it was shipped is more readily available in Johor. Whilst the evidence relating to the issue of the damage may be contained in the surveyor’s report which originates from the United Kingdom, the effect of that on the relative convenience and expense of a trial as between Johor Bahru and an arbitration in New York must of necessity favour Johor Bahru, the more so as the defendants' operations assistant is in Singapore and the English evidence can be made available by letters of request or on commission.
• It has not been suggested that any foreign law is applicable in this matter by virtue of some special agreement between the parties and therefore Malaysian law would apply. Furthermore, the Hague Rules, art 3, are contained in the bill of lading and such Rules have been imported into Malaysian law.
• On any view of the matter, the United States of America is not connected with the contract except that the arbitration is to be held there.
• In all the circumstances, there is no convincing evidence that the defendants genuinely desire this trial to take place by way of an arbitration in New York. There is a sense that the defendants are seeking a procedural advantage only.
• The plaintiffs in this case would be severely prejudiced in having to sue in New York because they would:

i) be deprived of security for their claim;
ii) be faced with a possible time bar;
iii) The economics of the situation are such that it would make it wholly punitive for them to go to New York. There are telexes in evidence to the effect that US arbitrations are very expensive and that the economics of the exercise will not make the claim worthwhile.

Where there are reasonable grounds for thinking that an arbitration clause is being used to stifle an otherwise legitimate claim, the Courts should properly refuse to stay proceedings particularly if the arbitration envisaged is to be held in some remote part of the world which has little or nothing to do with the place where the contract is to be performed or the place where the witnesses are located. The Malaysian courts have a discretion whether or not to grant a stay. In all the circumstances of the case, the courts have an inherent jurisdiction to prevent an injustice or an abuse of process.