1. ) BM City Realty & Construction Sdn Bhd v 1. ) Merger Insight (M) Sdn Bhd (WA-24C-11-04/2016 & WA-24C-22-05/2016)

The second OS ("the Enforcement OS") is with respect to MISB's application to enforce the Adjudication Decision under s 28 CIPAA against BMCRC where MISB is the Plaintiff and BMCRC is the Defendant.

The parties shall be referred to as BMCRC and MISB and when reference is made to them in the Adjudication, as Respondent or Non-Paying Party and Claimant or Unpaid Party respectively.

BMCRC as Employer under a PAM Contract 2006 (Without Quantities) had engaged MISB to be the Main Contractor to carry out a mixed development project in Seberang Perai ("Project") for a contract sum of RM104,600,000.00.

The Project consisted of a 23 storey building block complex comprising of shop offices, kiosks, motorcycles and car park, recreational facilities, swimming pool, jacuzzi and 3 blocks of business suites. 5 [6] The Contract between the parties consisted of:

MISB's submission of Tender dated 3 September 2013, Letter of Award dated 25 September 2013 to be read together with MISB's letter dated 16 October 2013 and BMCRC's Architect's letter dated 18 October 2013; and

Agreement and Conditions of PAM Contract 2006 Private Edition (Without Quantities) as adopted by the Parties. Problem [7] Disputes had arisen between the parties. MISB complained that it had not been paid on time for 3 Progress Claims and so pursued these as payment claims under the statutory adjudication scheme under CIPAA. [8] MISB also submitted 6 Re-calculation of Quantity Interim Progress Claims based on the actual measurement of quantities as reflected in the Construction Drawings given by BMCRC to MISB. [9] The Employer BMCRC on the other hand complained of the delay caused by MISB and terminated the employment of MISB as its Main Contractor by its letter of 11 April 2015. It cited the reason as that MISB had failed to proceed regularly and/or diligently with the Works and that 6

[BMCRC] pay the sum of RM4,164,117.98 to [MISB] within twenty-one (21) days of the date hereof;

[BMCRC] pay the interest sum of RM148,701.23 on the sum of RM4,164,117.98 to [MISB] within twenty-one (21) days of the date hereof; 7

[BMCRC] pay the sum of RM30,989.00 as the cost of Adjudication within twenty-one (21) days of the date hereof;

[BMCRC] pay the sum of RM27,000.00 as legal costs to [MISB] within twenty-one (21) days of the date hereof” [12] He also awarded interest at the simple interest rate of 4.2% per annum on the Adjudicated Sum from the due date for payment until the date of the Adjudication Decision. [13] Pursuant to section 18(1) of CIPAA, costs shall follow the event and the Adjudicator decided to award MISB cost of Adjudication in the sum of RM30,989.00 and legal costs of RM29,000.00. Payment Claim and Payment Response [14] The Payment Claim filed on 30 September 2015 was for the Total Interim Progress Claim Sum amounted to RM11,560,191.18 and that of the Total Re-Calculated Quantity Claim Sum amounted to RM4,735,900.99 making a total claim of RM16,296,092.17. [15] BMCRC in its Payment Response filed on 9 October 2015 raised the following as Defences:

That BMCRC as the Non-Paying party states that its liabilities and obligations to make payment to the Unpaid Party MISB are premised entirely upon the respective Interim Certificates issued 8 by the Architect and not on the Interim Claims made by the Unpaid

That the Unpaid Party's Interim Claims (which were not accepted by the Quantity Surveyor and/or Architect for the construction Project) are ultra vires CIPAA;

That following the breach of contract by the Unpaid Party in regularly and diligently proceeding with the Works, its employment was duly determined and terminated vide a "Notice of Determination of Contract under Clause 25.2 of the Contract" dated 11 April 2015;

The Non-Paying Party pursuant to Clause 25.4(d) of the Terms and Conditions of the PAM Contract 2006 is not bound by any provisions of the Contract to make further payments to the Unpaid Party, including payments which have been certified but not yet paid when the employment of the Unpaid Party was determined;

The Unpaid Party's rights and entitlements to all or any unpaid monies under the Contract (which is not admitted) should and can only be properly calculated and determined upon the completion of the Works as defined and as provided under the provisions of the

The Works for the construction Project is, as at the date of the filing of the Payment Response, still uncompleted;

The contractual rights of the Unpaid Party to receive payment for any unpaid monies shall only arise upon the completion of the

The Unpaid Party's claim under the Payment Claim is pre-mature;

The Non-Paying Party denies in entirety, the claims of the Unpaid Party stated in the Payment Claim;

The Non-Paying Party has lodged a police report (Ref: BK Mertajam /008955/15) against the Unpaid Party for cheating with the use of forged documents and the same is being investigated under sections 420, 468 and 470 of the Penal Code;

The Non-Paying Party reserves all its rights and remedies against the Unpaid Party. Prayers [16] The Employer BMCRC applied by the first OS to set aside the whole of the Adjudication Decision on the ground that the Adjudicator had exceeded his jurisdiction in holding that the 3 Certificates issued by the Architect were due for payment when under clause 25.4(d) of the PAM Contract 2006 the payment is deferred until the completion of Works upon determination of the employment of MISB by BMCRC. 10 [17] BMCRC also contended that there was a breach of natural justice when the Adjudicator held that there was no evidence to prove that a sum of RM1,824,805.60 had been paid by BMCRC direct to 3 Nominated Sub-contractors when in fact it had been paid and therefore the decision amounted to an unjust enrichment of the Unpaid Party. Principles Whether the Adjudicator had exceeded his jurisdiction in holding that the Payment Claims under the 3 certificates issued by the Architect were due when under clause 25.4(d) of the PAM Contract 2006 the payment is deferred until the completion of Works upon determination of the employment of MISB by BMCRC [18] The learned Adjudicator had found as a matter of fact that the mode of payment under the Terms and Conditions of the PAM Contract 2006 was that the Architect is to certify the Progress Claims submitted by the Main Contractor MISB within 14 days of receipt of the submission. Upon the Architect certifying the Progress Claims the Architect will issue the Interim Certificates which are due for payments by the Employer BMCRC within 30 days of the date of issuance of the Certificates. [19] The Architect of course would have to independently verify the Unpaid Party's submissions of Progress Claims to verify the scope of work done and the value of the work. The Architect did value the 11 Progress Claims No. 15, 16 and 17 and issued Payment Certificates 15,16 and 17. The Adjudicator found as a matter of fact in paragraph 46.1 as follows: "46.1 ...Payment Claim No. 15, 16 and 17 based on re-measurement and re-evaluated BQ items and the disputed, re-valued contract price are also not allowed for the grounds stated in my determination of the core issues. I have reviewed the Architect's Certificate No. 15,16 and 17 and I find that they were properly issued by the Architect based on the contract price.

46.2 There is no dispute that the Respondent did value claims No. 15,16 and 17 and issued payment certificates. These are as follows: a) Interim Certificate No. 15 Amount:RM2,026,441.27 dated 26/03/2015. Date for Payment 25/04/2015 (within 30 days from date of certificate) b) Interim Certificate No. 16 Amount: RM1,467,229.31 dated 9/04/2015. Date of Payment 8/05/2015 c) Interim Certificate No. 17 Amount: RM 670,447.40 issued on 30/09/2015. Date for payment 29/10/2015. _____________ Total RM4,164,117.98 12

In its Payment Response, the Respondent admits that its obligations to make payment to the unpaid party are premised on interim certificates issued by the Architect..." [20] Learned counsel for BMCRC pointed out that termination of the contract was on 11 April 2015 whereas Certificate 15 dated 26 March 2015 due on 25 April 2015 which is after the termination. Certificate 16 dated 9 April 2015 was due on 8 May 2015 which is also after termination. [21] As for Progress Claim 17, it was made on 31 July 2015 which was clearly after termination. The Adjudicator found as a matter of fact that it must be certified within 14 days. However it was not so certified until Certificate 17 was issued on 30 September 2015 and was due on 29 October 2015, when had it been issued timeously it would have been due much earlier and certainly before the filing of the Payment Claim. [22] The learned Adjudicator had done a comprehensive analysis on the payment provisions in the Letter of Award and the PAM Contract in paragraph 45.6 of his Decision and concluded as follows: “I determine that the payment provisions in the Letter of Award are applicable. The mechanism for payment is as follows: The Architect shall issue the payment certificate within 14 days from the date of 13 receipt of payment application and payment shall be within 30 days from the date of the Architect's certificate." [23] The Employer BMCRC relied on Clause 25.4(d) of the PAM Contract (2006) which it said, allowed it to withhold payments which have been certified but yet to be paid when the employment of the Main Contractor was determined on 11 April 2015 until the completion of the Works on the Project. [24] Clause 25.4(d) of the PAM Contract states: “...the Contractor shall allow or pay to the Employer all cost incurred to complete the Works including all loss and/or expense suffered by the Employer. Until after the completion of the Works under Clause 25.4(a), the Employer shall not be bound by any provision in the Contract to make any further payment to the Contractor, including payments which have been certified but not yet paid when the employment of the Contractor was determined. Upon completion of the Works, an account taking into consideration the value of works carried out by the Contractor and all cost incurred by the Employer to complete the Works including loss and/or expense suffered by the Employer shall be incorporated in a final account prepared in accordance with Clause 25.6.” (emphasis added) 14 [25] Learned counsel for BMCRC submitted that the learned Adjudicator had exceeded his jurisdiction: a) when he failed and/or neglected to appreciate that the ‘contractual due date of payment’ had been deferred by the issuance of the “Notice of Determination under Section 25.2 of the Contract” dated 11/4/2015 and the provision as set out under Section 25.4(d) of the PAM Contract 2006 (Without Quantities); and b) when he applied the Adjudication Process and/or Award under CIPAA to “override” and “substitute” the clear and unequivocal terms of the Contract Documents executed between parties that being the PAM Contract 2006 (Without Quantities). [26] The point that BMCRC wanted to drive home was that when the Contract was terminated on 11 April 2015, all the 3 Interim Certificates were not due for payment yet and so MISB as the Main Contractor would have to wait until all the Works have been completed, presumably now by the new Main Contractor appointed and final accounts prepared. It cannot be over emphasized that an Adjudicator derives his jurisdiction to decide on the issues raised by the Unpaid Party in its Payment Claim filed and the Non-Paying Party in the Payment Response filed. Clearly both the Payment Claim and the Payment Response taken together conferred jurisdiction on the Adjudicator to decide if the 3 Progress 15 Claims No. 15,16 and 17 submitted by the Unpaid Party should be allowed by the Adjudicator in the light of the Defence raised that upon the determination of the employment of the Unpaid Party, the Employer as the Non-Paying Party is not bound to make any further payments to the Contractor, including payments which have been certified but not yet paid when the employment of the Contractor was determined. [27] The Adjudicator identified this issue at paragraph 41.3 of the Adjudication Decision as one of the core issues to be decided by him i.e. “Is the Respondent entitled to rely on Clause 25.4(d) of the PAM Conditions of Contract not to pay on progress claim certified by its Architect?”. [28] The fact that BMCRC as Respondent in the Adjudication is unhappy with the decision of the Adjudicator in that it said the Adjudicator should have decided that no payments are due to the Claimant as contractually the parties have agreed under Clause 25.4(d) that the Employer (Respondent) is not bound to make any payments to the Main Contractor (Claimant), cannot mean that the Adjudicator, having jurisdiction to decide on the issue, had exceeded his jurisdiction by deciding against the Employer BMCRC. 16 [29] The Adjudicator may have arrived at a wrong interpretation of Clause 25.4(d) and thus arriving at a wrong decision, but that does not mean that he had exceeded his jurisdiction. [30] In fact the learned Adjudicator had given his reasons, which in the opinion of the Court, is both cogent and valid, for holding that so much of the Progress Claims as have been certified by the Architect, are due for payments in Interim Certificates No. 15, 16 and 17. [31] The learned Adjudicator gave his reasons as follows in his Adjudication Decision: "44.2 ...I am of the view that the statutory provisions under CIPAA override the provisions of clause 25.4(d). CIPAA provides a right to payment for work done and a mechanism to resolves disputes on payment. Termination of the contract is not a ground to refuse payment for work done or services rendered. I find that [BMCRC] for the reasons stated here, is not entitled to rely on clause 25.4(d) to refuse payments on interim certificates it had issued.” (emphasis added) [32] This Court has occasion to deliberate on this same issue in the case of Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd & Another 17 Case [2016] 5 CLJ 882. In determining the interpretation of clause 25.4(d) of the Contract, it was held as follows: "[77] In our case too, keeping in mind the mischief that CIPAA was designed to address i.e. to alleviate the cash flow problem in the construction industry for the unpaid party and to give a temporary finality to the payment claims I would follow an interpretation that would best promote the purpose and object of the Act than that which would not promote it in line with the requirement of Section 17A of the Interpretation Acts 1948 and 1967 which states that: "In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object." [78] Further under s 35 CIPAA there is a Prohibition of Conditional Payment. S 35 reads as follows: "(1) Any conditional payment provision in a construction contract in relation to payment under the construction contract is void.

For the purpose of this section, it is a conditional payment provision when: 18

The obligation of one party to make payment is conditional upon that party having received payment from a third party; or

The obligation of one party to make payment is conditional upon the availability of funds or drawdown of financing facilities of that party." [79] Mr Oon for the respondent submitted that by a "conditional payment" is meant the two definitions in s 35(2)(a) and (b) and nothing more. Mr Lam for the claimant submitted that it is open for the Court to interpret "conditional payment" to be wider than the two instances provided in s 35(2)(a) and (b) and to interpret it expansively to cover all cases of a conditional payment term which has the effect of defeating the purpose of the Act. [80] We are aware that when if the subsection had use the words "(2) For the purpose of this section, "conditional payment" means-" then we are left in no doubt that the 2 examples are exhaustive and permits of no other additional instances of conditional payment terms. If that subsection had used the word "includes" instead of "means" we would also be quite clear and confident that the examples given are by no means exhaustive. [81] However seeing that Parliament had chosen to state a general principle first in s 35(1) and has couched it to be all-encompassing as in the use of the expression "Any conditional 19 payment provision..." I would prefer a more expansive interpretation that would accord with the purpose of the Act. Parliament could have used the expression in s 35(1) as "A conditional payment provision within the meaning of subsection

(2)...is void." It could be safely concluded that Parliament had left it to the Court to determine on a case by case basis as to whether a conditional payment term would be defeating the purpose of the Act. [82] For instance if a conditional payment term is merely that the unpaid party as contractor must show proof of payment to his subcontractors before the Employer needs to pay the contractor, such a condition might not be unreasonable and might be good in enhancing corporate governance and efficiency in contracts management. There might well be a myriad of conditions not all of which would be defeating the purpose of the Act. In fact the Explanatory Statement to the Bill reads: "The proposed Act further provides default payment terms in the absence of provisions to that effect and prohibits conditional payment terms that inhibit cash flow." (emphasis added) [83] On the contrary, a condition like Clause 25.4(d) has the effect, upon the termination of the contract, of postponing payment due until the final accounts are concluded and the works completed 20 and that would be defeating the purpose of the Act. Therefore such a clause is void and unenforceable and the Adjudicator may disregard it altogether." (emphasis added) [33] The position in Singapore is even more explicit in their Building and Construction Industry Security of Payment Act (Chapter 30B) ("SOPA") as it provides for no contracting out in s 36 as follows:

"No contracting out —(1) The provisions of this Act shall have effect notwithstanding any provision to the contrary in any contract or agreement.

The following provisions in any contract or agreement (whether in writing or not) shall be void:

a provision under which the operation of this Act or any part thereof is, or is purported to be, excluded, modified, restricted or in any way prejudiced, or that has the effect of excluding, modifying, restricting or prejudicing the operation of this Act or any part thereof;

a provision that may reasonably be construed as an attempt to deter a person from taking action under this Act.

The Minister may, for the purpose of subsection (2) (a), prescribe the type of provisions in any contract or agreement, 21 or any class thereof, which are deemed to have the effect of excluding, modifying, restricting or prejudicing the operation of this Act or any part thereof.

Nothing in this Act shall, except as provided in subsection (1), limit or otherwise affect the operation of any other law in relation to any right, title, interest, privilege, obligation or liability of a person arising under or by virtue of a contract or an agreement." (emphasis added) [34] Whilst we in Malaysia do not have a similar "No Contracting Out" provision, the terms of s 35(1) CIPAA are clear in that it casts a wide net to cover "Any conditional payment provision in a construction contract in relation to payment under the construction contract" and it expressly declared it to be "void". [35] The Singapore Legislature appreciates that it is not always easy to determine if certain contractual provisions has the effect of excluding, modifying, restricting or prejudicing the operation of their Act or any part thereof and so the Courts would have to determine this on a case by case basis as it comes before them under s 36(2)(a) SOPA. Likewise too the Minister in charged may prescribe the type of provisions that are deemed to have such an effect on their SOPA. This is on top of their prohibition of a "pay when paid provisions" under their s 9 SOPA. We 22 should likewise not restrict our s 35(2) two examples which are merely prohibiting "pay when paid provisions", as confining to just these 2 types of provisions that are prohibited. Any conditional payment provision in a contraction contract in relation to payment that has the deleterious effect of defeating the purpose of CIPAA has to be declared to be void. [36] For the scheme of statutory adjudication to work, having in mind the over-arching purpose of CIPAA, which is to facilitate payments for those down the chain of construction contracts for work done or services rendered, contractual terms which would be defeating the purpose of the Act should be struck down and the power and discretion is given to the Court to discern and declare if a certain contractual term would be prohibited under a statutory adjudication under CIPAA as being a conditional payment provision that is void and unenforceable under CIPAA. [37] Otherwise there would be nothing preventing an Employer under a construction contract, be it a Standard Form Contract like the PAM Contract for example, or otherwise, to rely on a contractual term to defer payment upon termination, rightly or wrongly done. That would have the effect of allowing a party to contract out of CIPAA which would have the effect of thwarting CIPAA and the mischief that CIPAA was intended to 23 address. Parliament does not act in vain and such a conditional payment provision is void and unenforceable under CIPAA. [38] Learned counsel for BMCRC cited the dicta below in Koh Siak Poo v Perkayuan OKS Sdn Bhd & Ors [1989] 3 MLJ 164 as a reminder to the Court that it must enforce the terms of a contract that parties have contractually agreed and perhaps more so when it is an industry's prescribed Standard Form Contract such as the PAM Contract

(2006): “It is clear that the action by the appellant was to enforce the terms of the deed and the letter of guarantee. It was a claim based on the respondent’s contractual obligation arising from the deed and the letter of guarantee which are couched in words which are clear and unambiguous. Where the written contracts are clear and unambiguous the court should not go behind the written terms of the contract to introduce or add new terms to it.” [39] Again that is misplaced and misconceived. Parliament has on various occasions interfered with the freedom of contract to further its legislative purpose of protecting often times the weaker party and also consumer at large who might not have much of a bargaining power where the freedom to contract is concerned. 24 [40] One example is in S 8A of the Housing Development (Control and Licensing) Act 1966 which reads: "8A.

Notwithstanding anything contained in any agreement, a purchaser shall at any time be entitled to terminate the sale and purchase agreement entered into in respect of a housing development which the licensed housing developer is engaged in, carries on, undertakes or causes to be undertaken if -

the licensed housing developer refuses to carry out or delays or suspends or ceases work for a continuous period of six months or more after the execution of the sale and purchase agreement;

the purchaser has obtained the written consent from the end financier; and

the Controller has certified that the licensed housing developer has refused to carry out or delayed or suspended or ceased work for a continuous period of six months or more after the execution of the sale and purchase agreement." (emphasis added) [41] Another example of Parliament intervening in the freedom of contract of the parties can be seen in s 10P(3) of the Moneylenders Act 1951 as follows: 25 "(3) Any moneylending agreement which does not comply with the prescribed form shall be void and have no effect and shall not be enforceable." [42] Sometimes Parliament would use the device of prohibiting contracting out. For example in s 149 of the Strata Management Act 2013 we read: "(1) The provisions of this Act shall have effect notwithstanding any stipulation to the contrary in any agreement, contract or arrangement entered into after the commencement of this Act.

No agreement, contract or arrangement, whether oral or wholly or partly in writing, entered into after the commencement of this Act shall operate to annul, vary or exclude any of the provisions of this Act." (emphasis added) [43] Having appreciated the prophylactic properties of CIPAA as intended by Parliament, the learned Adjudicator was perfectly entitled to proceed to adjudicate on the 3 Certificates of Payments filed in the Payment Claim and to make a decision ordering the amount due to be paid. 26 Whether there was a breach of natural justice when the Adjudicator failed to consider the evidence of payment of RM1,824,805.60 made by the Employer to the Nominated Sub-Contractors [44] The Non-Paying Party, BMCRC, had in its “Adjudication Response” dated 14 January 2016 stated that the sum of RM1,824,805.60 had been paid by the Plaintiff to the Nominated Sub-Contractors (“NSCs”). It was submitted that this fact and/or statement had never been disputed, denied nor challenged by the Unpaid Party, MISB, in the Adjudication Proceedings. [45] BMCRC had again in its Affidavit In Support of the OS to set aside the Adjudication Decision, averred that very same fact supported by the Statutory Declaration made by the Nominated Sub-Contractors. [46] This fact, averment and/or statement was never disputed, denied nor challenged by MISB in its Affidavit affirmed by Wong Chin Fah on 23 May 2016. Learned counsel for BMCRC submitted that it is an undisputed fact that BMCRC had paid RM1,824,805.60 to the Nominated Sub-Contractors. [47] In support of this proposition BMCRC relied on the dicta below in Ng Hee Thoong & Anor v Public Bank Bhd [1995] 1 MLJ 281 at page 286: 27 “Now, it is a well-settled principle governing the evaluation of affidavit evidence, where one party makes a positive assertion upon a material issue, the failure of his opponent to contradict it is usually treated as an admission by him of the fact so asserted” (emphasis added) [48] Learned counsel for BMCRC concluded that:

since RM1,824,805.60 paid by the Plaintiff to the Nominated Sub-Contractors;

the Adjudication Decision is in error when the sum of RM4,164,117.98 [such which includes the RM1,824,805.60 paid by BMCRC to the Nominated Sub-Contractors] was awarded to MISB. [49] Learned counsel for BMCRC submitted that this Adjudication error if not corrected would lead to an ‘unjust enrichment’ to MISB in the Adjudication Decision which would amount to grave ‘denial of natural justice’. BMCRC prayed therefore that the whole of Adjudication Decision has to be set aside. [50] The learned Adjudicator had in his Adjudication Decision found as follows: 28 "48 ...The Respondent [BMCRC] has provided no evidence of payment to nominated sub-contractors. Perusal of certificates No. 15,16 and 17 under the items nominated sub-contractor shows no deductions made. I find that the Respondent [BMCRC] is not entitled to deduct this amount from the certified sums." [51] Strictly speaking this is a matter of assessment of the evidence before the Adjudicator and it is at the end of the day a finding of fact, which this Court should not intervene, as this is not an appeal. [52] This finding, based as it is on the evidence submitted, even if there be error in its finding, is not the subject matter of a setting aside. To bring it under the ground of a "breach of natural justice" would be disingenuous as the learned Adjudicator has come to a decision after looking at the documents presented before him by both sides. [53] Further, if the Respondent BMCRC had wanted to raise the fact of payment to NSCs in diminution of the Claimant MISB's Payment Claim, it should have been raised specifically in the Payment Response. However it was raised only in the Adjudication Response. [54] Reliance on the above dicta in Ng Hee Thong is misplaced as, if the finding of fact of the Adjudicator cannot be challenged based on ground of wrong assessment of evidence, then an advantage cannot be 29 had in a setting aside application based on a non-reply by the other side to a specific allegation raised, in this case payments to NSCs. [55] BMCRC further exhibited the Statutory Declarations of the 3 Nominated Sub-contractors all affirmed on 11 April 2016 stating the various amounts received direct from BMCRC under Claims No. 15 and 16 and the dates on which payments were received, which were mainly before the termination of the employment of MISB and before the commencement of the filing of the Payment Claim. [56] It is true that those Statutory Declarations were never produced at the Adjudication Proceeding. In fact, MISB came across the Statutory Declarations for the very first time through the exhibits of BMCRC's Affidavit in Support of the Setting Aside OS. I agree with MISB's counsel that this is not the appropriate forum for BMCRC to now show evidence of payment to the NSCs. It ought to have produced evidence of such payment during the Adjudication. [57] BMCRC further alleged that the Adjudicator in considering the issue of quantum ought to have exercise his powers under section 25(i) of CIPAA and seek clarification from the parties whether payment was made to the NSCs. 30 [58] In the first place, to properly raise the fact of payment to NSCs in diminution of the Unpaid Party's claim, the Non-Paying Party must raise it in the Payment Response under s 6 CIPAA. Then only would it be an issue that falls within the jurisdiction of the Adjudicator to decide for s 27(1) and (2) CIPAA clearly provides as follows: "27. Jurisdiction of Adjudicator 1) Subject to subsection (2), the adjudicator’s jurisdiction in relation to any dispute is limited to the matter referred to adjudication by the parties pursuant to sections 5 and 6. 2) The parties to adjudication may at any time by agreement in writing extend the jurisdiction of the adjudicator to decide on any other matter not referred to the adjudicator pursuant to sections 5 and 6." (emphasis added) [59] As it was not so raised and as there was no agreement in writing by both the parties, the Claimant and the Respondent, to extend the jurisdiction of the Adjudicator, then the Adjudicator cannot proceed to decide on whether a certain sum ought to be deducted from the sum claimed. Raising the matter of payment to the NSCs by BMCRC in its Adjudication Response is a tad too late for the Adjudicator to consider. [60] The question that the learned Adjudicator should have exercised his power under s 25(i) CIPAA to "Inquisitorially take evidence to 31 ascertain the facts and the law required for the decision" does not arise as, strictly speaking, it was not an issue for the learned Adjudicator to decide. [61] At any rate he did consider what was being presented by the Non-Paying Party and concluded that there was no evidence of such a payment having been made. [62] I agree with learned counsel for MISB that even if there was a failure to take into account of payment made to the NSCs, it is merely an error of findings of facts/law. Such an error does not require the Adjudication Decision to be set aside. There will not be a denial of natural justice if the Adjudicator had addressed all the right issues even in the wrong way. The adjudicator’s decision will nevertheless be temporary binding. It is only when the adjudicator has answered the wrong issues that his decision will be a nullity. See Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2001] 1 All ER (Comm) 1041; Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd [2015] 8 CLJ

[63] In Bouygues (UK) Ltd's case, the Court of Appeal in UK laid down the following tests with respect to determining if an adjudicator has acted within jurisdiction though arriving at a so-called wrong decision. 32 Alluding to the scheme of statutory adjudication in UK Chadwick LJ gave this helpful guide at pp 1047-1048: "26. The purpose of those provisions is not in doubt. They are to provide a speedy method by which disputes under construction contracts can be resolved on a provisional basis. The adjudicator's decision, although not finally determinative, may give rise to an immediate payment obligation. That obligation can be enforced by the courts. But the adjudicator's determination is capable of being reopened in subsequent proceedings. It may be looked upon as a method of providing a summary procedure for the enforcement of payment provisionally due under a construction contract.

The first question raised by this appeal is whether the adjudicator's determination in the present case is binding on the parties—subject always to the limitation contained in s 108(3) and in paras 4 and 31 of the Model Adjudication Procedure to which I have referred. The answer to that question turns on whether the adjudicator confined himself to a determination of the issues that were put before him by the parties. If he did so, then the parties are bound by his determination, notwithstanding that he may have fallen into error. As Knox J put it in Nikko Hotels (UK) Ltd v MEPC plc [1991] 2 EGLR 103 at 108, in the passage cited by Buxton LJ, if the adjudicator has answered the right 33 question in the wrong way, his decision will be binding. If he has answered the wrong question, his decision will be a nullity.

I am satisfied, for the reasons given by Buxton LJ, that in the present case the adjudicator did confine himself to the determination of the issues put to him. This is not a case in which he can be said to have answered the wrong question. He answered the right question. But, as is accepted by both parties, he answered that question in the wrong way. That being so, notwithstanding that he appears to have made an error that is manifest on the face of his calculations, it is accepted that, subject to the limitation to which I have already referred, his determination is binding upon the parties." (emphasis added) [64] I have no doubt if these evidence in the Statutory Declarations had been before the learned Adjudicator, his decision would have been different. [65] I had asked learned counsel for MISB to confirm if these payments of RM1,824,805.60 had indeed been received by the 3 NSCs, for if they had, then there is no need for MISB to pay these 3 NSCs from the undeducted amount decided by the Adjudicator to be paid by BMCRC to MISB. 34 [66] Learned counsel for MISB on the adjourned date for decision of this Court was candid in confirming to this Court that from their investigation, the said amount had indeed been paid by BMCRC direct to the 3 NSCs. [67] MISB through its counsel also consented to have this sum deducted from the amount decided by the learned Adjudicator to be paid by BMCRC to MISB, leaving a balance sum of RM2,339,312.38 (RM4,164,117.98 - RM1,824,805.60) to be paid by BMCRC to MISB. [68] Both parties were also able to agree on the reduced interest amount that should correspondingly be paid by BMCRC to MISB which is RM77,471.71 with BMCRC maintaining that it would still want to reserve its rights to appeal on the point of excess of jurisdiction as set out above. [69] This Court therefore with the consent of the parties had made the necessary orders set out below. [70] It must be stressed that ordinarily, if not for the consent of the parties, this Court would not be able to set aside part of an Adjudication Decision or vary it as there is no provision in law under CIPAA allowing for it to be done on a setting aside application. 35 [71] This Court, in a case where there is incontrovertible evidence of payment having been made direct to an NSCs, whether disclosed at Adjudication or in a setting aside application, may allow only so much of the adjudicated amount that is the amount paid direct to the NSCs to be stayed. [72] The powers of the Court to stay an Adjudication Decision is provided in S 16(1) CIPAA as follows: "16 Stay of Adjudication Decision 1) A party may apply to the High Court for a stay of an adjudication decision in the following circumstances: a) An application to set aside the adjudication decision under section 15 has been made; or b) The subject matter of the adjudication decision is pending final determination by arbitration or the court. 2) The High Court may grant a stay of the adjudication decision or order the adjudicated amount or part of it to be deposited with the Director of the KLRCA or make any other order as it thinks fit." (emphasis added) [73] As can be seen, the High Court may make any other order as it thinks fit, and that must necessarily include an order that would result in a fair and just payment of the adjudicated amount or so much of it as 36 should be deducted as there is incontrovertible evidence of payment having been made by the Respondent direct to the NSCs. [74] If judgment is to be entered pursuant to s 28 CIPAA then judgment may be entered less the amount stayed by the Court. Even if there is no amount stayed by the Court though there is evidence of payment having been made, there is nothing preventing the Court when the Claimant applies for enforcement of the adjudicated sum, for the Court to allow enforcement of only so much of the adjudication amount that has not been paid to the Claimant after taking into consideration the amount paid by the Respondent to the Claimant's sub-contractors. S 28 CIPAA provides as follows: "28. Enforcement of adjudication decision as judgment 1) A party may enforce an adjudication decision by applying to the High Court for an order to enforce the adjudication decision as if it is a judgment or order of the High Court. 2) The High Court may make an order in respect of the adjudication decision either wholly or partly and may make an order in respect of interest on the adjudicated amount payable. 3) The order made under subsection (2) may be executed in accordance with the rules on execution of the orders or judgment of the High Court." (emphasis added) 37 [75] If judgment had already been entered pursuant to s 28 CIPAA, then in an application to stay the judgment, this Court may be inclined to stay so much of the judgment sum that is represented by the amount already paid direct to the NSCs. [76] As the Adjudication Decision is only of temporary finality, the Non Paying who claims that such a payment has been made to NSCs must immediately commence an action in litigation or arbitration to recover a double payment made, once directly from an Employer to NSCs and another time to make the same payment to the Main Contractor pursuant to the Adjudication Decision. Whether the Adjudicator had acted in excess of jurisdiction in granting costs to the Claimant and the quantum of the costs [77] The Unpaid Party MISB as Claimant had claimed for costs of the Adjudication and legal costs as well in its Payment Claim. The Adjudicator clearly had acted within its jurisdiction in awarding costs for Section 18(1) of CIPAA confers this power on him: “The adjudicator, in making the adjudication decision in relation to costs of the adjudication proceedings shall order the costs to follow the event and shall fix the quantum of costs to be paid.” (emphasis added) 38 [78] I agree with learned counsel for MISB that the Adjudicator has the discretion to decide on the quantum of costs by taking into account of all relevant circumstances including those set out in Regulation 7 of the Construction Industry Payment & Adjudication Regulations 2014. The relevant circumstances include:

the complexity of the claim or matter arises from the claim and the difficulty or novelty of the issues relating to the claim;

specialized skill, knowledge and responsibility of, and time and labour expended by, any party to the dispute, its consultant, expert or representatives;

the preparation of documents in the adjudication proceedings; and

the amount or value of the adjudication claim. [79] As for the meaning of “Costs to follow event” it means that the unsuccessful party has to pay the costs to the successful party in the Adjudication Proceedings. See Malaysian Newsprint Industries Sdn Bhd v Bechtel International, Inc & Anor [2008] 5 MLJ 254. [80] Given that the Adjudicator had decided in favour of MISB and MISB was the successful party in the Adjudication proceeding, MISB is statutorily entitled to costs and the Adjudicator has the jurisdiction to determine the quantum of costs on such basis as he thinks fit. Further, 39 parties were given opportunity and had addressed the Adjudicator on the issue of costs. [81] The Adjudicator had reasoned as follows: "51.2 The Claimant has sought legal costs of RM51,400.00. I have considered the matters and issues brought up by the Parties, the complexity of the Adjudication Claim and Adjudication Response and the degree of difficulty of the issues raised, special skills required, knowledge, time and labour expanded. I find that the sum of RM27,000.00 is a fair assessment of the Claimant's legal costs. The Claimant's claim for disbursements is not substantiated. The Parties each had paid the sum of RM30,300.00 toward the Adjudicator's fees and the KLRCA administrative costs. The Claimant is entitled to the reimbursement of RM30,300.00 from the Respondent. The Claimant also can claim reimbursements of the sum of RM689.00 inclusive of GST for Adjudication registration and Adjudicator appointment fees. The total sum of RM30,989.00 shall be described as the cost of Adjudication." [82] Where quantum of costs is concerned, it is something within the discretion of the Adjudicator unless it can be shown that he has acted on 40 wrong principles. This is certainly not an area for this Court to interfere and clearly not a case where the learned Adjudicator had acted in excess of his jurisdiction. Whether the Adjudicator had acted in excess of jurisdiction in his failure to consider the issue of set-off for LAD claimed by BMCRC [83] BMCRC further alleged that the Adjudicator has acted in excess of his jurisdiction in failure to consider the issue of set-off for damages. This allegation is unsubstantiated. The issue in relation to BMCRC’s alleged set-off for Liquidated And Ascertained Damages (LAD) was identified, dealt with and dismissed by the Adjudicator at paragraph 45.7 of the adjudication decision : “LAD Set Off in Adjudication Response 45.7 The Respondent’s Notice to exercise its right of set off or Liquidated and Ascertained Damages (LAD) is found in its Adjudication Response. Clause 22.1 of the Conditions of Contract clearly provides that the imposition of LAD shall not be taken into account by the Architect in the issue of payment certificates and is not subject to set off procedures under Clause 30.4 and Adjudication. The Clauses referred to under Clause 30.4 do not cover LAD. 41 A claim for set off, even if it can be claimed under the contract requires the Respondent to comply with CIPAA by making a statutory claim as an unpaid party. The Respondent has not done so. The alleged set off therefore cannot be considered in this Adjudication and is disallowed.” [84] In the first place for the Adjudicator to properly consider the issue of LAD claimed as a set-off, BMCRC must raise it in its Payment Response under s 6 CIPAA so as to allow the Adjudicator to assume jurisdiction in determining the issue before him. [85] It was not raised as a specific Defence of set-off but only raised for the first time in the Adjudication Response. That simply would not do. At any rate, I agree with the Adjudicator that it is not to be deducted from the Payment Certificates by the Architect as contractually agreed. [86] Whilst the Adjudicator had stated that BMCRC may proceed to file a separate statutory adjudication claim as an unpaid party, this Court would highlight that the LAD claim must first qualify to be a payment claim within the meaning of "payment" under s 4 of CIPAA and within the meaning of a "payment claim" under s 5 CIPAA. 42 [87] "Payment" under s 4 CIPAA is defined as "a payment for work done or services rendered under the express terms of a construction contract." [88] A "payment claim" under s 5(2)(a) includes the due date for payment of the amount claimed and (c) a description of the work or services to which the payment relates. [89] Clearly an LAD claim is a damages claim which would not fit into the definition of a "payment claim" that is susceptible to adjudication under CIPAA. It is undeniably and indisputably a claim for damages for breach of contract in failure of the contractor to complete on time by the completion date and it has to be pursued by way of arbitration or litigation and not an adjudication under CIPAA. Whether the Adjudicator had failed to act independently or impartially [90] Under s 15(c) CIPAA, an Adjudication Decision may be set aside on ground that the Adjudicator has not acted independently or impartially. [91] BMCRC had sought a declaration that the Adjudication Decision be declared null and void on the ground that the Adjudicator had not 43 acted independently or impartially. BMCRC did not indicate and substantiate its allegation therein. It is therefore a bare averment as pointed out correctly by the learned counsel for MISB. [92] It is more an attempt at clutching at straws to try to set aside the Adjudicator's Decision should the other 2 grounds of excess of jurisdiction and breach of natural justice fail. [93] BMCRC may disagree with the Adjudicator and even be convinced that the Adjudicator's Decision is wrong in law, but that is no justification for accusing the Adjudicator of having failed to act independently and impartially. [94] Such a ground should not be lightly latched on as reflecting a lackadaisical attitude in setting aside an Adjudicator's Decision considering the seriousness of the accusation that goes to the character of the Adjudicator. [95] Under s 24 CIPAA the Adjudicator shall at the time of the acceptance of appointment as an adjudicator make a declaration in writing that - a) There is no conflict of interest in respect of his appointment; 44 b) He shall act independently, impartially and in a timely manner and avoid incurring unnecessary expense; c) He shall comply with the principles of natural justice; and d) There are no circumstances likely to give rise to justifiable doubts as to the adjudicator’s impartiality and independence. (emphasis added) [96] An affidavit in support of the ground under s 15(c) CIPAA must descend to particulars of failure of the Adjudicator to comply with s 24(a)-(e) CIPAA such as the Adjudicator's failure to disclose a conflict of interest in the matter before him or that because of family relationship, familiar relationship or financial relationship with the parties or their counsel or firm appearing before him. It may perhaps arise from the Adjudicator's unilateral communication with one party, excluding the other party altogether as in WRP Asia Pacific Sdn Bhd v NS

It may arise in a case where the Adjudicator was involved in another adjudication involving one of the parties arising from the same project as was the case of Beumer Group UK Ltd v Vinci Construction UK Ltd [2016] EWHC 2288 (TCC). [97] Bereft of that, the accusation would not bite and must be dismissed for being scurrilous and not deserving any serious 45 consideration. It might be apposite in closing to echo the advice of Fraser J of the TCC in UK in Beumer Group UK Ltd (supra) as follows:

"The Law It is trite law that adjudication is a speedy process designed only to provide what is called “interim finality” on construction disputes. Parliament intended that the parties should be given a quick answer, and that quick answer should be binding on the parties until the dispute, whatever it may be, is resolved finally either by litigation or arbitration. It has been said in a case concerning what is called the statutory Scheme, namely the statutory instrument entitled the Scheme for Construction Contracts (England and Wales) Regulations 1998 (“the Scheme”), by Chadwick LJ in paragraph [86] of Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358 [2006] BLR 15 that: “The need to have the 'right' answer has been subordinated to the need to have an answer quickly.” Although made in a case under the Scheme, that statement is of wide application to adjudications generally, whether under the Scheme or otherwise. Adjudicators' decisions will be enforced by the court by summary judgment regardless of errors of fact and/or law by the adjudicator. Aggrieved losing parties can and should 46 comply with the adjudicator's decision, as long as that decision was made by an adjudicator with jurisdiction over the dispute, who has conducted the adjudication fairly and in accordance with the rules of natural justice.

The rules of natural justice have two limbs, and these are firstly, that a party must have an opportunity to present his own case and meet the case against him, and secondly, that the matter is decided by an impartial tribunal. It is the second of those two limbs that concerns bias, both actual and apparent.

The submissions concerning natural justice relied upon by Vinci encompass both limbs of the rules of natural justice, although the first limb is emphasised more than the second. Chadwick LJ in paragraph [85] of Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358 [2006] BLR 15 stated that a decision should be enforced: “…unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair”. In paragraph [87] he continued: “To seek to challenge the adjudicator's decision on the ground that he has exceeded his jurisdiction or breached the rules of 47 natural justice (save in the plainest cases) is likely to lead to a substantial waste of time and expense…” The proper course is to comply with the decision – which is after all only an interim solution – and resolve the dispute with finality if the losing party considers it is wrong." (emphasis added) Pronouncement [98] Therefore, for the Enforcement OS, the Court allowed judgment to be entered for the balance sum of RM2,339,312.38 and interest as decided by the adjudicator shall run on this balance sum from the dates stated which parties agree to be the sum of RM77,471.71. Interest thereafter shall run at 5% per annum from date of judgment to realization. The rest of the Adjudicator's decision remains and so judgment was correspondingly entered for the Adjudication Costs and Legal Costs of RM30,989.00 and RM27,000.00 respectively. [99] As for the Setting Aside OS, by consent the Adjudicator's Decision was thereby also varied accordingly such that the sum as decided by the learned Adjudicator was reduced accordingly taking into consideration the sum of RM1,824,805.60 already paid to the Nominated 48 Sub-contractors, leaving a balance of RM2,339,312.38 and reduced interest of RM77,471.71 to be paid from the payment due date. [100] I had exercised my discretion that in the circumstances of this case each party shall bear its own costs for both OS. Dated: 23 September 2016. - signed - Y.A. LEE SWEE SENG Judge Construction Court Kuala Lumpur For the Plaintiff in : KL Chan, PL Lim, KK Yap and OS WA 24C-11-04/2016 : BK Ong and for the Defendant in : OS WA 24C-22-05/2016 : (Messrs JB Lim & Associates) For the Plaintiff in : Ashok Kumar, Jocelyn Lim OS WA 24C-22-05/2016 : and Eg Kaa Chee and for the Defendant in : OS WA 24C-11-04/2016 : (Messrs Skrine) Date of Decision: 27 June 2016.