Research on cost

Haskell v Zamil
Q1: What is the position of law in cost in the case?
Due to the amount claimed by the Plaintiff was considerably low and both Parties
have agreed to an arbitration term, the ICC Arbitration Rules of 2017 shall apply.
Q2: Malaysia law applicable in this case?
According to the ICC Commission report, decisions on costs in international
arbitration 2015, ICC Dispute Resolution Bulletin 2015 issue 2 (hereinafter the said
“ICC report”) it is states that although the applicable law shall be ICC Arbitration
Rules of 2017, it is also subject to the influence of court practice and or under the
laws of the countries of origin of the parties and the arbitrators or of the place of
arbitration. Hence, Malaysia law is arguably applicable in this case.
Q4: How does the ICC award the cost?
There are 3 approaches reported in the ICC report, many of the arbitral tribunals
would first consider whether the parties had entered into a contractual agreement
over the allocation of costs. Where there was no such agreement, they then tended
to take the approaches:
(i) allocate all or part of the costs to the successful party, or
(ii) apportion costs equally between the parties
(iii) to apportion costs between the parties on a bespoke basis, taking
account of the specific circumstances of the case, rather than starting
from the principle of the loser pays or equal apportionment
Q5: Are the approaches stated anywhere in the ICC rule?
The ICC rule is silent on the presumption and approaches of allocation of cost.
Q6: What is the consideration when the arbitrator allocate the cost?
According to the ICC report, the arbitrator will take into account the following factors:-
a) Agreement of the parties
(i) the parties’ written arbitration (or submission) agreement
(ii) applicable institutional arbitration rules (usually incorporated by
reference in the written arbitration (or submission) agreement)
(iii) terms of reference
(iv) mandatory and other applicable law
(v) any other agreed rules or guidelines.

b) Relative success and failure of the parties

(i) assuming that if a claimant or respondent succeeded in its core or
primary claim or outcome, then it is entitled to all of its reasonable
costs
 (ii) apportioning costs on a claim-by-claim or issue-by-issue basis
according to relative success and failure
(iii) apportioning success against the amount of damages originally
claimed or the value of the property in dispute

c) Reasonableness of legal and other costs incurred by the parties

(i) the reasonableness of the rates and number and level of fee-
earners when evaluating whether the amount of work charged was
reasonable
(ii) the reasonableness of the level of specialist knowledge and
responsibility retained for the dispute, including the legal
qualification of representatives, involvement of specialist teams or
team members and level of seniority
(iii) the reasonableness of the amount of time spent, at various levels
and rates, on the various phases of the arbitration; and
(iv) any disparity between the costs incurred by the parties as a general
indicator of reasonableness as opposed to a separate factor in itself

d) Proof of costs
Any reasonable cost incurred and paid or payable by the party claiming
them provided proper evidence can be shown.

e) Improper conduct/bad faith of the parties

(i) Pre-arbitral behaviour that occurred prior to commencement of the
arbitration proceedings. In particular, arbitrators might look at
improper conduct by a party in its dealings leading up to the
proceedings, including but not limited to attempts to avoid the
arbitration, threatening behaviour, parallel court proceedings in
breach of an arbitration agreement, interference affecting the
counterparty’s business interests and/or unfair or prejudicial press
campaigns. Although uncommon, costs arising from pre-arbitral
behaviour may be expressly provided for in the arbitration statute of
the lex arbitri
(ii) Guerrilla tactics on those rare occasions when parties seek
deliberately to interfere in the conduct of the proceedings in order to
render an award unenforceable or otherwise affect the tribunal’s
ability to finally resolve the dispute between the parties
(iii) Post-formation conflicts aimed at destabilizing the tribunal and the
arbitration. These result, for example, from counsel appointments
late in the proceedings that create a conflict of interest for an
arbitrator. The arbitrator in question may be forced to resign,
otherwise the enforceability of the award could be jeopardized.33
The tribunal may take into account any tactic deployed by a party to
create such a conflict, and any costs arising out of such conduct.
 (iv) Repeated, unsuccessful challenges, known to be unfounded,
against the appointment of an arbitrator or the jurisdiction or
authority of the tribunal
(v) Unnecessary court involvement where parties commence parallel
litigation in breach of the arbitration agreement, seemingly in an
effort to torpedo the arbitration process.35 Although most arbitration
rules and national statutes permit necessary and appropriate court
support for arbitration at the seat or the place of enforcement, which
is consistent with the New York Convention, the tribunal may
consider certain proceedings to be an abuse of the arbitration
process and may take that into account when deciding on costs
(vi) Deliberate undermining of the arbitral process, such as through ex
parte communications with arbitrators that give rise to a conflict of
interest, forcing the arbitrator to resign or jeopardizing the
enforceability of the award
(vii) Overall, the use of documentary evidence in international arbitration
should be efficient, economical and fair. When allocating costs a
tribunal may take into account the extent to which any party has
failed to conduct itself in an efficient, economical or fair manner, or
has otherwise engaged in improper conduct or bad faith in the
production of documents

Q7: How does the arbitrator measure reasonableness?

According to the Singapore High Court decision, VV and Another v. VW, [2008]
SGHC 11, [2008] 2 SLR 929, court would use the common-sense approach to
assess whether the costs are reasonable and proportionate to the amount in dispute
or value of any property in dispute and/or the costs have been (proportionately and
reasonably incurred)
Q8: What does proportionate means?
According to VV and Another v.VW, the proportionality principle was not limited to a
relationship between the amount in the dispute and the amount of costs awarded.
The principle truly meant that when legal costs had to be assessed, all
circumstances of the legal proceedings concerned had to be looked into, and not
only the amount of the dispute though that was an important factor, especially when
assessing whether the amount of work done was reasonable. The factors most
commonly taken into account by tribunals when apportioning costs include the
following:
1. whether the parties could have avoided the arbitration;
2. prevailing cost allocation principles in the applicable law;
3. agreements between the parties with regard to costs;
4. costs incurred in determining preliminary issues such as jurisdiction;
5. procedural behaviour of the parties;
6. reasonableness of the costs incurred;
 7. legal and factual complexity of the case;
8. the parties’ legal fees and expenses (outside counsel);
9. disparities between the costs claimed by each party;
10. recoverability of different types of costs.
Therefore In assessing whether the amount of work done is proportionate and
reasonable tribunals may, and often do, take into account various factors that may
be relevant to the case, including but not limited to:
(i) the overall importance of the dispute and the matters underlying the
dispute to all parties;
(ii) the overall complexity of the matter;
(iii) the accurate representation of the amount in dispute (both in the
claims and counterclaims);
(iv) the existence of unnecessary and meritless claims or
counterclaims;
(v) the length and phases of the proceedings and, in particular,
whether parties have unnecessarily prolonged the proceedings
and/or increased their cost (e.g. as a result of repeated applications
for document production, other procedural motions, unnecessary
steps in the proceedings);
(vi) the withdrawal of any unmeritorious claims in a timely manner;
(vii) the manner in which the parties and their representatives have dealt
with document production, both when requesting the production of
documents and responding to such requests;
(viii) the scope, relevance and extent of fact evidence in written witness
statements and oral testimony, including cross-examination;
(ix) the scope, relevance and extent of expert evidence in written expert
witness reports and oral testimony, including cross-examination
(e.g. number of experts, length of reports, relevance of material);
(x) the length and conduct of any oral hearings, including but not
limited to evidentiary hearings;
(xi) the parties’ approaches to bifurcation and the determination of
preliminary issues, including the outcome of any bifurcated or
preliminary proceedings; and
(xii) where the parties have agreed to allow the tribunal to take into
account settlement discussions after they have reached a
conclusion on the merits, efforts by parties to resolve their dispute
may be taken into account, in the event that such information is
properly available to the tribunal

However, one must also bear in mind cost Is not a punishment.

in England, this historic rationale for allocating costs was set out in Harold v. Smith
(1860) 5 H. & N. 381, 385, where Bramwell B. said: ‘Costs as between party and
party are given by the law as an indemnity to the person entitled to them; they are
not imposed as a punishment on the party who pays them, nor given as a bonus to
the party who receives them.’
Similarly, in France, Art. 700 of the Code of Civil Procedure empowers the judge to
order an unsuccessful party to pay legal costs to compensate the other party but with
regard to ‘equity and the financial situation of the unsuccessful party’. This provision
seeks to ensure the fundamental right of every individual to have access to justice
rather than to punish the losing party. Accordingly, the French Court of Cassation
has held in regard to this provision that it is not necessary to demonstrate the
existence of a dilatory or abusive appeal nor liability on the part of the party ordered
to pay (2d Civil Chamber, 23 June 1982, appeal no. 7917094).

Q9: what is the Malaysian position of arbitration cost?

According to the case of Magnificient Diagraph Sdn Bhd v JWC Ariatektura Sdn
Bhd [2009] MLJU 583 in a situation where the parties have not stated the costs in
the agreement, Section 44 of the Arbitration act 2005 will strictly apply:

"44. Costs and expenses of an arbitration.

o (1)Unless otherwise agreed by the parties—
 (a)the costs and expenses of an arbitration shall be
in the discretion of the arbitral tribunal who may—
 (i)direct to and by whom and in
what manner those costs or any
part thereof shall be paid;
 (ii)tax or settle the amount of
such costs and expenses; and
 (iii)award such costs and
expenses to be paid as between
solicitor and client;
 (b)any party may apply to the High Court for
the costs to be taxed where an arbitral tribunal has in
its award directed that costs and expenses be paid
by any party, but fails to specify the amount of
such costs and expenses within thirty days of having
being requested to do so; or
 (c)each party shall be responsible for its own legal
and other expenses and for an equal share of the
fees and expenses of the arbitral tribunal and any
other expenses relating to the arbitration in the
absence of an award or additional award fixing and
allocating the costs and expenses of the arbitration.
o (2)Unless otherwise agreed by the parties, where a party makes an
offer to the other party to settle the dispute or part of the dispute and
the offer is not accepted and the award of the arbitral tribunal is no
more favourable to the other party than was the offer, the arbitral
tribunal, in fixing and allocating the costs and expenses of
the arbitration, may take the fact of the offer into account in
awarding costs and expenses in respect of the period from the making
of the offer to the making of the award.
o (3)An offer to settle made under subsection (2) shall not be
communicated to the arbitral tribunal until it has made a final
 determination of all aspects of the dispute other than the fixing and
allocation of costs and expenses.
o (4)Where an arbitral tribunal refuses to deliver its award before the
payment of its fees and expenses, the High Court may order the
arbitral tribunal to deliver the award on such conditions as the High
Court thinks fit.
o (5)A taxation of costs, fees and expenses under this section may be
reviewed in the same manner as a taxation of costs."

Q10: How would the arbitrator exercise his discretion?

According to the case of Kebabangan Petroleum Operating Co Sdn Bhd v Mikuni
(M) Sdn Bhd & Ors [2021] 1 MLJ 693 the local tribunals lean towards the “loser pay
the winner” approach. The cost of the arbitration shall be borne by the party whose
contention was not upheld by the arbitration tribunal:-

31.3 The award of the arbitrators shall be final and binding upon the parties. The costs of
the arbitration shall be borne by the party whose contention was not upheld by
the arbitration tribunal, unless otherwise provided in the arbitration award. (Emphasis added.)

However, there may be circumstances where the successful party may have to bear
part of the cost as per the case of TEONG PILING CO v ASIA INSURANCE CO
LTD [1994] 1 MLJ 444:-

In his 'appraisal of award' under the sub-heading 'Arbitration costs', the arbitrator said this:
As established, the party predominantly in default was the respondent and logically, they would
bear most of the arbitration  costs of this proceeding. However, the claimant was not absolutely
blameless and, in submitting their dispute to this arbitration, they had engaged many expensive
expert witnesses in support of their claims. The engagement of these expensive witnesses was
outside the jurisdiction and control of the respondent who had been reasonably responsive to the
present arbitration in the true spirit that it was intended.
In awarding the costs, therefore, it would not be fair for the respondent to wholly shoulder the
expensive costs of witnesses of the claimant. In this respect, a ratio of 7:3 in favour of the
claimant was considered fair and had accordingly been apportioned.
The costs of arbitration would involve the arbitrator's fee, his disbursements on travel,
accommodation and expenses, PAM's charges, Mr G Moffatt's fees as well as the fees and
expenses for the legal counsel and the witnesses of both parties. (Emphasis added.)

In the second place, the principle of the High Court that 'costs follow the event' or in other
words, that the successful party should have his costs, applies to an arbitrator (see Lewis v
Haverfordwest Rural District Council 3.) Put bluntly, in the terms of a game, the expression
'costs follow the event' means the loser pays the costs of the winner, including his lawyer's
fees, costs and charges. This principle, is, of course, subject to exceptions so that in
exceptional circumstances, an arbitrator may, in the exercise of his discretion, deprive a
successful party of the whole or, as happened in the present case, part of his own costs. In
doing so, I note that the arbitrator did give his reasons, the effect of which was that he
considered that there had been extravagance on the part of the plaintiff in the conduct of the
hearing; to wit, by the employment of an excessive number of expensive expert witnesses in
support of his claim. In my view, the arbitrator was entitled to do so and I need no more than
refer to the case of P Rosen & Co Ltd v Dowley and Selby 4.
Now, I, the said Chin Wai Yeong, an associate of the Chartered Institute of Arbitrators, London,
having accepted the said appointment and having visited the site, heard and considered the
allegations, witnesses and evidence of both parties do hereby award and determine as follows:

(1) the respondent to pay the claimant the sum of RM379,824.90 within 14 days from the receipt
of this award, failing which payment, interest at 8%pa shall be added thereon until the actual
receipt of the said payment by the claimant;

(2) the counterclaim of the respondent brought against the claimant is dismissed hereof; and
(3)  the respondent and the claimant shall jointly pay for the costs of this arbitration including that of the arbitrator's fees,
expenses and disbursements of RM23,740 in the ratio of 7:3 respectively. (Emphasis added.)

There may also be a situation where a successful party have to bear all of the cost
as per the case of Tan Kong Han v QDB Ventures Sdn Bhd [2016] MLJU 1510:-

Tan Kong Han, the plaintiff seeks to set aside or to vary, in whole or in part, the arbitration award
rendered on 3.3.2015. His application is made under sections 37 and 42 of the Arbitration Act
2005 [Act 646].

[54]  On the last issue of arbitration  costs, which the Arbitrator ordered the plaintiff to fully
bear costs. The question posed is:
“Whether in awarding costs of the arbitration against me, the Arbitrator has failed to properly
exercise her discretion in determining the apportionment of costs?”
[55]  The plaintiff’s submission is that the exercise of discretion here has not been judicious and
proper. This is because no reasons were given by the Arbitrator as to why the plaintiff has to
bear the full costs despite a dismissal of a substantial portion of the defendant’s claim for
damages, and despite the findings of fact were substantially in his favour.

[72]  These same problems or difficulties that the Arbitrator found and faced permeated
throughout the Award; that she was not thereby able to determine that the completion was at a
date as late as that claimed by the plaintiff. There was simply no evidence led. The LAD claim
was awarded from that basis. Given those conditions, the learned Arbitrator did what she could
and I do not believe she can be blamed for that.
[73]  As for the costs of completion and rectification, it appears that the plaintiff had claimed both
items together without any differentiation. With the lack of documentary evidence of the
defendant being instructed on the list of defects or incomplete works, the Arbitrator could not
make any other order save to dismiss the claim for costs for completion.
[74]  On the item of rectification costs, what I believe the learned Arbitrator did was to proceed
from the position of admission that the works needed rectification. In the Award, the learned
Arbitrator confined the sum awarded to the available moiety which was the second moiety. It
would appear that this award was made because of the inescapable truth, that there were
defects and the defects were not rectified. However, the learned Arbitrator found that the costs
for these works were lumped together with the costs of completion. Although there were invoices
shown, the Arbitrator found them inadequate. Hence, it seems the Award was really an attempt
at still granting some compensation for this loss. That is a finding of fact which is outside the
preview of this application. In any case, for the reasons already adumbrated earlier, this
application is without merit.
[75]  Finally, on the question of interest and costs. While this Court may have awarded costs
differently, that is irrelevant as such order was entirely within the learned Arbitrator’s jurisdiction
and discretionary power to make. Unless and until the plaintiff shows that the order here is
blatantly wrong and unjust, which I do not find to be the case, the orders here should not be
disturbed. The Arbitrator had full conduct of the arbitration and the arbitral proceedings. She
would be in the best position to decide on the factors that will influence the exercise of her
discretion on these matters. The arguments articulated here are not cogent to warrant any
intervention by the Court. The decision of the Arbitrator on costs is certainly not perverse.
[76]  The application is consequently dismissed. However, I am not minded to order any costs
given the total facts, circumstances and reasons as discussed earlier; and none are ordered.
In conclusion, the local tribunal is leaning towards the “loser pay the winner”
approach. However, if there are extraordinary circumstances like the winning party
has not been reasonable in incurring some of the costs or there is no evidence to
show that cost should be award to a party then the winning party shall not be
awarded with the full cost.

Q11: Is Malaysia Law relevant in this case?

Yes, the agreement expressly states that Malaysia law should govern the contract.
Besides, according to the case of Cyber Business Solutions Sdn Bhd v Elsag
Datamat Spa [2010] MLJU 2079, the court is of the view that even if there is an
arbitration clause, the jurisdiction of the Malaysian courts could never be outsted.

The Defendant is contending that since the ICC Arbitration Clause is binding, the jurisdiction of

this court is thus ousted.
This argument by the Defendant is misconceived. Authorities have shown that, even with the
presence of an Arbitration Clause, the jurisdiction of the Malaysian courts could never be
ousted.
One such case is ISC Technology Sdn Bhd v Premium Systems Technology Pte. Ltd [2008] 7 CLJ
239 which illustrates the very same point. The case in question relates to an application made by
the Defendant therein, to set aside the writ on ground inter alia that the agreement on which the
Plaintiff's suit was based on, contained an arbitration clause. Hishamuddin J (as he then was)
had this to say:
 [7]I am of the view that just because of the existence of the provision of cl. 21 in the
distribution agreement it does not necessarily follow that this court has no jurisdiction at
all over the dispute between the Plaintiff and the Defendant and that the latter
automatically has the right to make an application to set aside the writ under 0 12 r 7."
 [8]In my opinion, whether this court has the jurisdiction or not to adjudicate over the
dispute must be determine by examining the content of the statement of claim and to test
it against the provision of s. 23 (1) of the Courts of Judicature Act 1964....
 [9]by so doing, the court is satisfied that prima facie the high Court of Malaya has
jurisdiction over the dispute then prima facie this court has the jurisdiction. The point that
I wish to stress here is that the issue of jurisdiction can never be determined merely by
pointing to the existence of such a clause as cl. 21 alone."(emphasis mine)
Hishamuddin J had referred to the judgment of Lord Denning in The Fehmarn [1958] 1 AER
333 at page 335 when he stated as follows:
"The next question is whether the action ought to be stayed because of the provision in the bill of
lading that all disputes are to be judged by the Russian courts. I do not regard this provision as
equal to an arbitration clause, but I do say that the English Courts are in charge of their own
proceedings; and one of the rules which they apply is that a stipulation that all disputes should
be judged by the tribunals of a particular country is not absolutely binding. Such a stipulation is a
matter to which the courts of this country will pay much regard and to which they will normally
give effect, but it is subject to the over riding principle that no one bv his private stipulation can
oust these courts of their jurisdiction in a matter that properly belongs to them." (emphasis mine)
A similar point was also stated in the Federal Court case of Sanwell Corporation v Trans Resources
Corp. Sdn Bhd & Anor [2002] 2 MLJ 625 where the Federal Court agreed with the arguments as
forwarded by counsel of the appellant. The relevant passages of the judgment are reproduced as
follows:
"Mr. Loh argues that where the Plaintiff sues the defendant upon a contract containing
an arbitration clause, the defendant does not make an application to set aside a writ or a service
of the writ within the meaning of 0 123 r 7 Rules of the High Court 1980 ("the Rules of the High
Court 1980"). This is because the court always has jurisdiction in respect of a contract containing
an arbitration clause and subject to the jurisdiction in respect of a contract containing
an arbitration clause and, subject to the jurisdiction of the court under the Act to send the matter
for arbitration, there is nothing irregular on the part of the plaintiff to file a writ in court
notwithstanding the existence of the arbitration clause...
We agree with Mr. Loh's submission..."
Hence, by virtue of the above cases cited, it is obvious that there can never be an occasion
where an arbitration clause ousting the jurisdiction of the courts. This lends credence to the fact
that arbitration forum are consensual as opposed to court forums which are "compulsory non
consensual", hence demarcating the line as to the dissimilarity between the jurisdiction of
an Arbitration body and the courts.

In conclusion, the ultimate consideration of the tribunal (ICC or Malaysia) when

allocating cost to the parties is based on reasonableness and proportionality.
The tribunal will apportion costs between the parties taking into account the specific
circumstances of each case.