The adjudicator has acted in excess of his jurisdiction.” Whether there had been an excess of jurisdiction in the Adjudicator finding that the written construction contract consisted of the Letters of Undertaking 11 [21] Learned counsel for the Respondent argued that the Adjudicator had not given due consideration to the Letter of Intent dated 14.12.2015 but rather had focused his attention on the Letters of Undertaking dated 18.12.2015, 20.1.2016 and 28.3 2016. [22] It is to be noted that under section 15(d) of the CIPAA an aggrieved party may apply to the High Court to set aside an adjudication decision if the adjudicator has acted in excess of his jurisdiction. An excess of jurisdiction can arise under at least 3 different circumstances as was illustrated in the case of Terminal Perintis Sdn Bhd v Tan Ngee Hong Construction Sdn Bhd and another case [2017] MLJU 242 at paragraphs 70-74, where the High Court held as follows: “[70] In the application of our CIPAA, we are free from the shackles of the language of administrative law and judicial review. The word “jurisdiction” is used in section 15(d) as in the Adjudicator having acted in “excess of his jurisdiction” as a ground for setting aside an Adjudication Decision. It is also used in section 27(1) with respect to an Adjudicator's jurisdiction being limited to the matters raised in the Payment Claim and the Payment Response. Then there is a reference to it in section 27(2) with respect to extending his jurisdiction by way of agreement in writing to deal with matters not specifically raised in the Payment Claim and Payment Response. Finally there is the reference to a “jurisdictional” challenge, which when raised, does not prevent the Adjudicator from proceeding and completing the Adjudication without prejudice the rights of any party to set it aside under Section 15 or to oppose its enforcement under Section 28. 12 [71] There are many senses in which the word “jurisdiction” may be understood. We need only to differentiate between core jurisdiction, competence jurisdiction and contingent jurisdiction. [72] Core jurisdiction would be the question of whether the subject matter of the dispute is one which the Act has conferred on the Adjudicator. Thus if a contract is not a construction contract but a shipping or mining contract or a contract for legal fees with respect to advice given in construction contract, or that the contract is with respect to construction of a dwelling house for a natural person, then this Court will interfere if the Adjudicator got it wrong. It is a case where the Adjudicator has no jurisdiction to begin with. So too if the construction contract is carried out wholly outside Malaysia. [73] If it is a question of the competence of the Adjudicator as in he has not been properly appointed in that what purported to be a Payment Claim, is not on the face of it a Payment Claim or that the Payment Claim was not served or that it was not expressly stated as a claim made under CIPAA, then this Court would be at liberty to set aside the Adjudication Decision on ground of excess of jurisdiction. This is not only because the Adjudicator cannot decide on his own competence or capacity to adjudicate when the very validity of his appointment is questioned but also that it is part of the legislative intent that if there is non-compliance with a basic and essential requirement of CIPAA with respect to a Payment Claim under Section 5, then the Adjudication Proceedings and the Decision made would be a nullity. 13 [74] In a case of contingent jurisdiction, it would be a case where for there to be jurisdiction, there must be further compliance with the requirements of the Act as in that the dispute must be one falling within the matters raised in the Payment Claim and the Payment Response as provided for under section 27(1) CIPAA. In that example the word “jurisdiction" is used in the sense of the scope of the dispute that is before the Adjudicator for decision. So for example an Adjudicator may not be able to decide on the defence of set-off arising out of costs of rectifying defective works if this has not been raised in the Payment Response. If he so decides, then this Court may set it aside as been made in excess of jurisdiction." (emphasis added) [23] Learned counsel for the Respondent argued that since the Adjudicator had found that the Letter of Intent is not a construction contract within the meaning of CIPAA, the Adjudicator therefore had no jurisdiction to deal with disputes herein. He seemed to be arguing that if the base document is not a construction contract in writing then what follows from it, though in writing as in the Letters of Undertaking, cannot ever be a construction contract in writing. [24] It is not unlike a case where a cat can only beget kittens, a dog puppies and a man his begotten sons or daughters, though the word “beget” has largely fallen into disuse through non-use. In anthropomorphic language, a non-construction contract cannot beget a construction contract! However we are talking here of a Letter of Intent morphing into a construction contract in writing. There is nothing unusual and everything to be expected as in a memorandum of understanding maturing into a contract in writing. 14 [25] I can appreciate that argument if one had started off with a mining contract or a shipping contract, then no amount of writing in the subsequent documents of correspondence can ever amount to a construction contract. [26] Indeed the Adjudicator had proceeded to find as a matter of fact that there was nevertheless a contract in writing in the Letters of Undertaking (though not the Letter of Intent) which contained the names of both parties, the construction works or services to be carried out, the amount to be paid and the terms of payment, all of which constitute sufficiently a construction contract in writing within the meaning of section 4 of the CIPAA. The Act has conferred certain original or core jurisdiction on an Adjudicator. [27] One such example is where the construction contract is in writing such that if it is not in writing then an Adjudicator appointed would have no jurisdiction to adjudicate the matter. It is a matter which this Court can consider afresh without being fettered by why the Adjudicator had decided the way he did. [28] Clearly the dispute that had arisen were all arising out of the Letters of Undertaking which contained the scope of work and the terms of payment of the agreed sum which are enforceable under a written contract. [29] Specifically the Letter of Undertaking dated 28.3.2016 had set out a time for payment where the Respondent had to make all payments for an approved and certified diaphragm wall within 60 days from the certification date. [30] The Adjudicator would have jurisdiction as the construction contract was one in writing as evident in the Letters of Undertaking. 15 [31] If it were otherwise as being not in writing, then the Adjudicator would not have jurisdiction to adjudicate the matter under the CIPAA and the Claimant would have to make its claim in a court proceeding and perhaps proceed with a summary judgment application if there are no triable issues or defences. [32] It does not quite matter whether the Letter of Intent should be read alone as a stand-alone document against the question of whether or not by itself it is a construction contract. What is sufficient to carve out and confer jurisdiction for the Adjudicator is that the Letters of Undertaking constituted a legally binding construction contract in writing upon which the Claimant can make a Payment Claim setting out its cause of action for a breach of a construction contract in writing, setting out the works to which the payment relates and the amount claimed and due for payment as required under section 5(2) of the CIPAA. [33] Having considered the Letters of Undertaking against the context of the Letter of Intent I have every good reason as expressed above to conclude that the cause of action is clearly founded on a construction contract in writing in the Letters of Undertaking. Whether there was a denial of natural justice in the Adjudicator confining himself to the Letters of Undertaking as constituting the written construction contract [34] Learned counsel for the Respondent contended that the Adjudicator should have held that the Letter of Intent was part of the construction contract in writing and by disregarding it the Adjudicator had not properly 16 considered the terms as stated in the Letter of Intent with the result that the terms in the Letter of Intent were not considered at all. [35] The Respondent, though they did not serve a Payment Response, had nevertheless raised in their Adjudication Response the defences available to them arising out of the Letter of Intent which they said was disregarded totally. The Federal Court has declared that not to consider a defence properly raised, even for the first time, in the Respondent’s Adjudication Response, would be a breach of natural justice. Thus in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22, the Federal Court observed as follows: “[65] We are of the view that an adjudicator who wrongly rules out considering a defence presented to him would be in breach of natural justice. This point arose in Pilon Ltd v Breyer Group Plc [2010] All ER(D)197(Apr); [2010] EWHC 837 (TCC) which like in our present case was concerned with progress claims that were cumulative in nature. The decision by Justice Coulson bears close reading. At paras [24]–[28] the learned judge observed: [24] It seems to me clear beyond doubt that the adjudicator erred in failing to take into account Breyer’s defence by reference to the over-payment on batches 1–25. Whilst he was quite correct to regard the notice of adjudication as setting out the boundaries of his jurisdiction, he failed to appreciate that what Pilon were seeking by that notice was not only an interim valuation of batches 26–62, but also an interim payment of any sum considered owing to them. Whilst the valuation required him to have regard to batches 26–62 only, the concomitant 17 claim for payment meant that the adjudicator was obliged to consider whether Breyer were right to say that a much smaller net payment was due than that contended for by Pilon, because Pilon had already been overpaid on batches 1–25. In other words, the notice of adjudication gave the adjudicator the jurisdiction to consider what, if any, further sum should be paid by way of interim payment from Breyer to Pilon and that issue, of necessity, involved a consideration of Breyer’s defence based on the alleged over-payment on batches 1–25. [25] It is not uncommon for adjudicators to decide the scope of their jurisdiction solely by reference to the words used in the notice of adjudication, without having regard to the necessary implications of the words: that was, for example, what went wrong in Broardwell. Adjudicators should be aware that the notice of adjudication will ordinarily be confined to the claim being advanced; it will rarely refer to the points that might be raised by way of a defence to that claim. But, subject to questions of withholding notices and the like, a responding party is entitled to defend himself against a claim for money due by reference to any legitimate available defence (including set-off), and thus such defences will ordinarily be encompassed within the notice of adjudication. [26] As a result, an adjudicator should think very carefully before ruling out a defence merely because there was no mention of it in the claiming party’s notice of adjudication. That is only common sense: it would be absurd if the claiming party could, through some devious bit of drafting, put beyond the 18 scope of the adjudication the defending party’s otherwise legitimate defence to the claim. [27] I understand that it may be tempting for a claiming party in an adjudication to seek to limit the adjudicator’s jurisdiction in a way in which that party believes to be to its advantage. I am in no doubt that is what happened here: Pilon did not wish the adjudicator to have any regard to batches 1–25, and therefore deliberately limited the scope of the adjudication notice to batches 26–62. It was their case that the over-payment claim was outside the adjudicator’s jurisdiction, and that is what they (successfully) urged on the adjudicator. Thus, this is a case where Pilon sought a tactical advantage by putting forward an erroneous statement of the adjudicator’s jurisdiction and, as the decision in Quartzelec shows that can be a dangerous tactic to adopt. [28] In the result therefore, I consider that the adjudicator deliberately placed an erroneous restriction on his own jurisdiction, which amounted to a breach of natural justice ...” (emphasis added) [36] Having read and examined the Adjudicator’s Decision more closely, I am satisfied that the Adjudicator had carefully considered the matters raised as defences in the Adjudication Response even though to the Adjudicator the Contract consisted in the Letters of Undertaking that superseded the Letter of Intent. [37] To be clear the Adjudicator had first set out in summary what was raised by the Respondent for the first time in its Adjudication Response. 19 [38] The Adjudicator had summarized the Adjudication Response dated 16.11.2017 as follows: a) The Subcontract with the Claimant was “Back to Back” and the Claimant was made aware of this fact from the beginning; b) The Respondent’s Progress Claims were not certified by the Client as a result no payments were issued to the Respondent. Therefore the Claimant is not entitled to any payment under the contract; c) The Claimant did not complete the Works before the contractual completion date of 11.4.2016. Based on the Respondent’s last Payment Certificate (Certificate No.6) dated 25.6.2016 only 65% of the Works were completed. The Respondent believes it is entitled to damages to be used as set-off against the Payment Certificates; d) The Respondent refutes that the retention sum of RM524,728.09 is due to the Claimant. In the absence of any contractual provision between the Parties, the Respondent is of the opinion that the retention sum can only be released to the Claimant upon issuance of Certificate of Practical Completion and/or the expiry of the Defects Liability Period, neither one of which has yet to happen. [39] The Adjudicator had stated that one of the issues for his determination is: a) Does the Respondent have an obligation to pay for the Works carried out by the Claimant given that the contractual payment terms were “Back to Back”? 20 [40] The Adjudicator had given his reasons why he rejected the Letter of Intent as a binding construction contract in writing. It had stipulated a number of contractual matters such as the expected construction time-frame and payment terms which was stated as “Back to Back” basis and that payment to the Claimant would be made within seven days from receiving the same from the Respondent’s Client. [41] The Adjudicator reasoned that the Claimant did not accept this letter as a satisfactory basis for a contract and two days later on 16.12.2015 in a letter asked for certainty of payment for the work performed by the Claimant. [42] The Adjudicator noted that it was then that the Respondent issued the first of three Letters of a Undertaking on 18.12.2015 stating that it will undertake to honour payment to the Claimant for all approved physical work done provided the work is certified by the Respondent. Each of the 3 Letters of Undertaking issued by the Respondent was signed by both the Claimant and the Respondent, with the Claimant confirming its acceptance and agreement to the Terms and Conditions mentioned therein. [43] In place of the “Back to Back” payment arrangement there was then substituted a new payment term of 60 days from the date of issuance of the payment certificate by the Respondent. [44] Whilst it is stated that as and when a Letter of Award is issued the Letter of Undertaking would be considered null and void, no Letter of Award was ever issued. [45] The Adjudicator cannot be faulted for having concluded in the circumstances that the Letters of Undertaking constituted a valid construction contract in writing. Not only is the scope of Works stated, the 21 payment term was also stated and each of the 5 Tax Invoice and the corresponding Payment Certificate were clear on the value of works certified by the Respondent. [46] With respect to Second Letter of Undertaking dated 20.1.2016 the Respondent raised its payment commitment for “all approved permanent diaphragm Wall works to a maximum work done of RM2,500,000.00 only.” [47] The Third Letter of Undertaking dated 28.3.2016 raised the Respondent’s payment commitment to RM5,000,000.00. [48] Even if for the sake of argument the “Back to Back” payment arrangement is the applicable payment term, yet under section 35 of the CIPAA it is prohibited and such a term is void. Section 35(1) and (2)(a) of the CIPAA reads as follows: “35. Prohibition of Conditional Payment 1) Any conditional payment provision in a construction contract in relation to payment under the construction contract is void. 2) For the purposes of this section, it is a conditional payment provision when: a) The obligation of one party to make payment is conditional upon that party having received payment from a third party;....” (emphasis added) [49] There is thus no basis for asserting and arguing that there has been a denial of natural justice when the Adjudicator had clearly considered the “Back to Back” payment term and rejected its application to the contract on ground that the term of payment had been superseded by the subsequent 22 3 Letters of Undertaking and that in any event the “Back to Back” payment term is prohibited under section 35 of the CIPAA. [50] All that natural justice requires here is that the Adjudicator must give the parties the opportunity to be heard fairly and that he has considered the relevant documents and evidence before him. It does mandate that the Adjudicator must arrive at a certain decision. Failure to arrive at a decision to one party’s liking is only an error of fact or law or mixed fact and law and if it does not deal with a jurisdictional issue, it cannot then be a breach of natural justice so long as both sides had been heard. [51] The Singapore case of Am Associaties (Singapore) Pte Ltd v Laguna National Golf and Country Club Ltd [2009] SGHC 260 explains this requirement of natural justice as follows: “24. Laguna submitted that the Adjudicator had failed to comply with the rules of natural justice in that in coming to the Adjudication Determination, he had failed to take into consideration and/or give proper weight to materials tendered by AMA which showed a discrepancy in AMA’s claim, in particular, its claim that the Concept Design had been approved. Its submissions went into the evidence in order to establish the alleged discrepancy and it then argued that if the Adjudicator had given proper consideration and weight to such discrepancy and had taken into consideration the relevant evidence tendered by the parties, he would have held that all payment claim made by AMA had been made prematurely.