1. ) Mrcb Builders Sdn Bhd v 1. ) Smm Resources Sdn Bhd (WA-24C-97-05/2020 & WA-24C-147-06/2020)

the application by MRCB Builders Sdn Bhd (‘MRCB’) pursuant to para 12(2)(a) read together with sub-s 12(3) and s 15(b) and (d) of the Construction Industry Payment and Adjudication Act 2012 [Act 746] (‘CIPAA’), and O. 7, O. 28, O. 69A, rr. 2, 3 and 4 and O. 92, r. 4 of the Rules of Court 2012 (‘RoC 2012’) in Originating Summons (‘O.S.’) No. WA-24C-97-05/2020 (‘Setting Aside 3 Application’; encl. 1) to set aside the Adjudication Decision dated 20.3.2020 and revised on 10.4.2020 (‘AD’) delivered by the learned Adjudicator, Ms. Tay Yen Sin (‘Adjudicator’);

the application by SMM Resources Sdn Bhd (‘SMM’) pursuant to s 28 CIPAA and O. 7, O. 28, O. 69A, rr. 1, 2, 5 and 7 and O. 92, r. 4 of the RoC 2012 in O.S. No. WA-24C-147-06/2020 (‘Enforcement Application’) to enforce the AD; and

the application by MRCB pursuant to s 16(1)(a) CIPAA, O. 92, r. 4 of the RoC 2012 and/ or the inherent jurisdiction of the Court in encl. 4 in O.S. No. WA-24C-97-05/2020 to stay the AD pending the disposal of the Setting Aside Application. However, MRCB withdrew this stay application on the hearing date following the preliminary objection by SMM and encl. 4 was accordingly struck out with no order as to cost. SMM had also raised a preliminary objection with regards to prayer 7 in encl. 1 which sought the same relief as in encl. 4. On the date of hearing and decision of 4 the applications, learned counsel who appeared for MRCB, Mr. RK Sharma conceded that prayer 7 was redundant. [2] Having considered the cause papers and written submissions filed, including oral submissions by Mr. RK Sharma, and Ms. K. Sheela for SMM, the Setting Aside Application was decided on the sole ground that the AD is void under sub-s 12(3) CIPAA for failure to comply with para 12(2)(a). Consequent thereto, the Setting Aside Application was allowed with costs of RM7,000.00 and the Enforcement Application was dismissed with costs of RM3,000.00 with both orders as to costs being subject to the payment of the allocator fees. [3] The reasons for the decision of the Court are set out below. Salient Background Facts [4] MRCB is a private limited company which carries out the business of provision of engineering and construction services and investment 5 holding. [5] SMM is similarly a private limited company and it carries out business in general construction, investment holding, dealing in all kinds of industrial products, publishing, importing and exporting and any other business. [6] By a Manpower Supply Agreement dated 30.11.2018 (‘Agreement’), MRCB appointed SMM to supply workers and/ or labours for the “TNB HQ Campus Development (Phase 1) - The Construction and Completion of Balai Islam and Staff Quarters at Part of Lot 490 and Lot 6266, Jalan Bangsar, Kuala Lumpur for Tenaga Nasional Berhad” (‘Project’). [7] The commencement date as stipulated in Schedule 1 of the Agreement is 1.1.2018 and the completion date is 30.4.2018. [8] A dispute arose between the parties with regards to the claims submitted by SMM to MRCB for the manpower supply for the periods 6 ending from October 2018 (which is alleged to be under-certified) until April 2019 (which are said to have not been certified at all) and remains outstanding in the sum of RM654,323.29. [9] This led SMM to engage MAC Construction Consultant Sdn Bhd (‘MAC Construction’) who then issued the Payment Claim dated 4.9.2019

The Respondent shall pay to the Claimant the sum of RM18,436.00 for the costs of the adjudication proceedings;

The Respondent shall pay to the Claimant the sum of RM10,000.00 as the consultant’s costs incurred by the Claimant for the adjudication proceedings; 9

All the sums mentioned in para 1 to 3 above shall be paid by the Respondent to the Claimant within 7 days from the date of this decision in the form of a secured financial instrument; and

5.

the AD was not delivered within 45 working days from the service of the reply to the Adjudication Response;

the Adjudicator is functus officio and has no jurisdiction and/ or power to amend the AD after it was delivered to the parties vide e-mail on 2.4.2020; and 11

the Adjudicator had acted in breach of natural justice and/ or beyond her jurisdiction. [18] With regards to subpara 17(c) above, MRCB submitted that the Adjudicator had exceeded her jurisdiction when she failed to consider relevant material and information submitted by MRCB in the Adjudication Response which pertains to the biometric system implemented by MRCB in August 2018 to monitor and record the working hours of the workers on site whereby payments will only be made by MRCB based on these biometric records. [19] It was additionally submitted that there is a breach of natural justice as the Adjudicator had failed to appreciate the replies raised by MRCB in the adjudication and if the Adjudicator was of the opinion that the biometric system was unstable and unreliable after August 2018, she should have invited the parties to comment on the issue. [20] However, upon scrutiny of the affidavit evidence and submissions of the parties, I found that the Setting Aside Application can be decided 12 based on the first ground put forth by MRCB, which will be examined in greater detail below, and hence, there is no necessity for the Court to make a final determination as to the other grounds of challenge. Whether the AD is invalid as it was released after the stipulated timeframe - The parties’ contentions [21] Mr. RK Sharma relied on para 12(2)(a) CIPAA in submitting that the Adjudicator shall decide the dispute and deliver the AD within 45 working days from the date of service of the Adjudication Reply, which was submitted to be 22.1.2020. Based on this date, it was contended that the Adjudicator is to release her decision on or before 26.3.2020. However, the decision was only released by the Adjudicator by way of e-mail on 2.4.2020. 13 [22] Hence, by applying sub-s 12(3) CIPAA, learned counsel vehemently argued that the AD is void as it was delivered beyond the 45 working days period. [23] I pause here to refer to the letter dated 21.1.2020 from MAC Construction to the Adjudicator and MRCB’s solicitors (exhibit “KJH- 9” in MRCB’s Affidavit In Support (‘AIS’) affirmed by its Director, Mr. Kwan Joon Hoe on 19.5.2020, encl. 2) which shows that MRCB’s solicitors had acknowledged receipt of the Adjudication Reply on 21.1.2020. Nevertheless, in the written submissions, both parties took the same position that the AD was due to be decided and delivered on or before 26.3.2020. This was confirmed by Ms. K. Sheela on the hearing date. Therefore, I had considered the Setting Aside Application on this premise. The difference of one day as the date of service of the Adjudication Reply in this case is de minimis since the alleged delay by the Adjudicator in delivering the AD would, in any event, be in the region of 7 or 8 days. 14 [24] Returning to the parties’ submissions, SMM highlighted sub-s 19(5) CIPAA and regulation 8(1)(e) of the Construction Industry Payment and Adjudication Regulations 2014 [P.U.(A) 103/2014] (‘CIPAA Regulations’) in contending that the Adjudicator had the right to withhold the AD pending payment of the Deposit. [25] MRCB retorted that SMM’s contention is untenable because in Form 16 which is dated 20.3.2020, the Adjudicator had confirmed that full payment of expenses and fees, including AIAC’s administrative fee, have been fully deposited by SMM with the Director of AIAC pursuant to sub-s 19(5) CIPAA. It was further argued that even if the AD was withheld due to incomplete payment of the Deposit, the withholding is irregular as the Adjudicator did not issue Form 14 Notice for withholding the release of the decision until payment of fees and expenses in full (Construction Industry Payment & Adjudication Act 2012, section 19(5)) (‘Form 14’) as prescribed in the AIAC Adjudication Rules. 15 [26] Moreover, the withholding of the AD could have been avoided had the Adjudicator complied with sub-rule 9(4) of the AIAC Adjudication Rules and issued such directions as she thinks fit since she had already issued Form 6 Notice of acceptance of the appointment to act as adjudicator (‘Form 6’) on 17.12.2019 requesting the parties to place the Deposit with AIAC (see exhibit “KJH-6” in MRCB’s AIS, encl. 2). MRCB’s stance is that the word “shall” in sub-rule 9(4) is mandatory in the light of the intention of CIPAA where time is of the essence. - The findings of the Court [27] The provisions in the CIPAA which are relevant for present purposes, including those which pertain to the functions of the AIAC/ KLRCA, are not controversial. By virtue of sub-s 3(1) of the Arbitration (Amendment) Act 2018 [Act A1563] which came into operation on 28.2.2018 (see P.U.(B) 101/2018), all references to the KLRCA in any written law or in any instrument, deed, title, document, bond, 16 agreement or working arrangement subsisting immediately before the coming into operation of Act A1563 shall, from 28.2.2018, be construed as a reference to the AIAC. [28] For ease of reference, the salient provisions in CIPAA are re-produced below (added emphasis is my own): “Interpretation

In this Act, unless the context otherwise requires – … “working day” means a calendar day but exclude weekends and public holidays applicable at the State or Federal Territory where the site is located. … Adjudication and decision

12.

…

Subject to subsection 19(5), the adjudicator shall decide the dispute and deliver the adjudication decision within – 17

forty-five working days from the service of the adjudication response or reply to the adjudication response, whichever is later; …

An adjudication decision which is not made within the period specified in subsection (2) is void. … Adjudicator’s fees and expenses, etc.

(1) The parties and the adjudicator shall be free to agree on the terms of appointment of the adjudicator and the fees to be paid to the adjudicator.

If the parties and the adjudicator fail to agree on the terms of appointment and the fees of the adjudicator, the KLRCA’s standard terms of appointment and fees for adjudicators shall apply.

The parties to the adjudication are jointly and severally liable to pay the adjudicator’s fees and expenses and the adjudicator may recover the fees and expenses due as a debt. 18

The parties shall contribute and deposit with the Director of the KLRCA a reasonable proportion of the fees in equal share as directed by the adjudicator in advance as security.

Before releasing the adjudication decision to the parties, the adjudicator may require full payment of the fees and expenses to be deposited with the Director of the KLRCA. … Functions of KLRCA

The KLRCA shall be the adjudication authority and shall be responsible for the following:

… …

administrative support for the conduct of adjudication under this Act; and

any functions as may be required for the efficient conduct of adjudication under this Act. 19 Policy directions

(1) In carrying out its functions under section 32, the KLRCA shall obtain policy directions from the Minister charged with the responsibility for legal affairs.

The Minister charged with the responsibility for legal affairs shall consult the Minister before making any policy directions on the functions of the KLRCA under section 32. … Regulations

The Minister may, upon considering the recommendation of the KLRCA, make regulations as may be expedient or necessary for giving full effect or the better carrying out of the provisions of this Act.”. [29] In exercise of the powers conferred by the above quoted s 39 CIPAA, the Minister, upon considering the recommendation of the KLRCA, had made the CIPAA Regulations which came into operation on the same 20 date as the CIPAA i.e. 15.4.2014. The relevant regulations for purposes of the Setting Aside Application are quoted below: “2. Responsibility of KLRCA The KLRCA is responsible, in accordance with the policy directions from the Minister charged with the responsibility for legal affairs – a) … … d) for determining fees for the services and expenses of an adjudicator; e) for receiving and holding any fees and expenses deposited by the parties in dispute on behalf of an adjudicator. …

Fees and expenses of adjudicator 1) For the purpose of section 19 of the Act – a) the adjudicator appointed under subsection 19(1) or (2) of the Act shall submit to the Director of the KLRCA a copy of his terms of appointment and fees to be paid by the parties in dispute prior to 21 the commencement of the adjudication proceedings; b) the adjudicator shall submit to the Director of the KLRCA a copy of his direction to the parties in dispute to contribute and deposit with the Director of the KLRCA proportion of fees in advance as security including the date of payment to be made by the parties in dispute; c) the adjudicator shall submit to the Director of the KLRCA a copy of his direction to the parties in dispute to require full payment of fees and expenses payable including the date of payment to be made by the parties in dispute; d) the adjudicator may submit to the Director of the KLRCA a copy of his direction to the parties in dispute to pay the fees and expenses if the parties in dispute fail to make such payment within the period as directed by the adjudicator; e) the adjudicator shall release the adjudication decision to the parties in dispute upon full payment of the adjudicator’s fees and expenses to be deposited with the Director of the KLRCA by the parties in dispute; …”. (emphasis added) 22 [30] As alluded to earlier, the parties agree over at least one matter and that is the due date for the Adjudicator to deliver the AD which is on or before 26.3.2020. Another fact which was not disputed by SMM is that the Adjudicator had transmitted the AD to the parties vide the e-mail she sent at 5.24 p.m. on 2.4.2020. The Adjudicator has no power to unilaterally extend the time limited for delivery of the AD. Pursuant to para 12(2)(c) CIPAA, the Adjudicator is required to obtain the agreement of the parties for an extension of time beyond the mandatory statutory period as provided in para 12(2)(a) CIPAA. There is no evidence that this was done in this case. Therefore, based on the dates alone, the Adjudicator has exceeded the timeline of 45 working days by 7 days. [31] However, sub-s 12(2) CIPAA is expressly stated to be subject to sub-s 19(5). Under sub-s 19(5) CIPAA, the adjudicator has the right to withhold delivery of his decision to the parties until full payment of the fees and expenses is deposited with the Director of KLRCA/ AIAC. The provision came up for consideration by the High Court in Econpile (M) 23 Sdn Bhd v. IRDK Ventures Sdn Bhd & Another Case [2016] 5 CLJ 882 and on appeal, by the Court of Appeal in IRDK Venture Sdn Bhd v Econpile (M) Sdn Bhd and another appeal [2020] MLJU 939. [32] In the abovementioned case, the adjudicator was originally scheduled to deliver his decision on 15.10.2015 but this date was extended to 30.10.2015 by agreement of the parties under s 12(2)(c) CIPAA. On 6.10.2015, the adjudicator had instructed the parties to make further payment of RM258.32 being the Goods and Services Tax (‘GST’) to be deposited with KLRCA. Payment was made by way of IRDK’s cheque dated 8.10.2015 which was delivered to KLRCA on late Friday afternoon, 30.10.2015. Later, on the same date, Econpile’s solicitors wrote an e-mail to the adjudicator to request that the decision be issued forthwith. The adjudicator replied on Monday, 2.11.2015 informing that the decision was already deposited with KLRCA on 30.10.2015. The cheque reached KLRCA’s Case Counsel Unit on 2.11.2015 after which the adjudicator was duly notified. The adjudication decision was delivered to the parties on 3.11.2015. In its application to set aside the 24 adjudication decision, IRDK argued that the adjudicator was late by 3 days in making his decision and as such, the decision was void. [33] The issue that arose before the Court of Appeal was whether an adjudication decision delivered within time but released to the parties only after payment of GST for KLRCA’s fees is void and/ or whether there is a delay in making and serving the adjudication decision to the parties. Umi Kalthum Abdul Majid JCA in delivering the decision of the Court held that the act of withholding the delivery of the decision by the adjudicator was with a legitimate basis as there was still an outstanding fees and payment in the form of GST that was still pending to be paid to KLRCA. In para 47 of the judgment, the Court opined that “It is only natural and in keeping with the efficient conduct and support of the adjudication practice that all outstanding fees, expenses and tax of both the adjudicator and the adjudication authority to be paid in full before the Adjudicator deliver his decision. This practice of making of payment of the KLRCA’s fees, expenses and taxes as a condition precedent to the release of an adjudicator’s decision is not inconsistent with CIPAA.”. The Court was of the unanimous view that the 25 adjudication decision was valid as it was delivered within time and the same was released to the parties soon after confirmation that the GST payment to KLRCA had been duly paid (see too, Construction Adjudication in Malaysia, Second Edition, Sweet & Maxwell, 2018 by Lam Wai Loon and Ivan YF Loo at pp 337, 445 and 446). [34] Turning now to the facts in the instant case, in the 17.3.2020 Letter, the Adjudicator wrote that: “… With reference to the email dated 23 December 2019 from AIAC (Ref: AIAC/D/ADJ-2806-2019), 3 January 2020 was the deadline for the parties to make the payment of their respective shares towards the Advance Security Deposit as directed by AIAC. It is noted that the Respondent has yet to pay its share of RM9,218.00 as at to-date. I would therefore like to invite SMM RESOURCES Sdn Bhd to make such missing payment of RM9,218.00 pursuant to Rule 9(4) of the KLRCA Adjudication Rules, in order for the adjudication proceedings to proceed accordingly without any delay. 26 If you are agreeable to the above, kindly arrange to deposit the payment of RM9,218.00 with AIAC within five (5) days from the date of this letter and confirm your acceptance by signing and returning the original signed copy of the Letter. The adjudication decision shall be withheld until the Advance Security Deposit is fully paid. …”. [35] The composition of the Deposit and the Adjudicator’s right not to release the AD to the parties until full payment of the fees and expenses is deposited with the Director of AIAC can be found in sub-rules 9(2) and (5) of the AIAC Adjudication Rules. The AIAC Adjudication Rules were drawn up by AIAC pursuant to ss 32 and 33 CIPAA. There is consensus between the parties that the AIAC Adjudication Rules have binding effect. Sub-rules 9(1) to (5) lay out the procedure to be followed in these terms: “Rule 9 Fees and Expenses 27

The adjudicator, whether appointed under Section 19(1) or 19(2) of the Act, shall within seven (7) days upon his acceptance of his appointment send a copy of his terms of appointment and fees to be paid to the adjudicator to the Director of the AIAC.

2.

The adjudicator shall upon issuing a direction under sub-rule 9(2) above furnish a copy of his direction to the Director of the AIAC indicating the full payment of fees and expenses payable by the parties to be deposited 28 with the Director of the AIAC and the date by which such fees and expenses are to be paid.

If any parties fails to make payment within the time ordered by the adjudicator, the adjudicator shall within seven (7) days thereafter issue such direction as he thinks fit including inviting another party or parties to make such payment and notify the Director of the AIAC accordingly.

In the event full payment of the fees and expenses, including the AIAC’s administrative fee and any taxes as may be imposed by the Government, are not deposited with the Director of the AIAC under Section 19(5) of the Act, the adjudicator shall not release the adjudication decision to the parties.”. (emphasis added) [36] In the course of her submissions for SMM, Ms. K. Sheela had also drawn the attention of the Court to paras 7, 9 and 12 in Schedule II, KLRCA Standard Terms of Appointment, Part IV: KLRCA Adjudication Rules & Procedures (Revised as at 14 May 2014) as follows: 29 “7. The adjudicator shall be entitled to: a) Be paid the agreed fee and expenses; … c) Direct parties to contribute and deposit with the Director of KLRCA, anticipated fees and expenses in equal share in advance as security; d) Exercise a lien on his decision until any outstanding fees and expenses, including the KLRCA’s administration fee and any taxes as may be imposed by the Government including, inter alia, goods and services taxes, has been paid in full. …

The adjudicator’s fees and expenses incurred shall be paid in full prior to the delivery of the adjudication decision and the parties are, and shall remain jointly and severally liable to the adjudicator for payment of the fees and expenses in accordance with these terms. … 30

The adjudicator shall determine the matter and serve his decision to the parties within the time period stipulated in Section 12(2) of the Act. The decision shall be made in writing and shall, subject to the settlement of all outstanding fees and expenses, be served on the parties and the Director of the KLRCA.”. [37] Ms. K. Sheela submitted that the KLRCA Standard Terms of Appointment are the de facto terms to be applied where the parties and adjudicator fail to agree on the terms of the appointment and fees of the adjudicator. Learned counsel contended that on the facts, these de facto terms of appointment apply since the parties did not agree to any other terms of appointment as fortified by Form 6. [38] In Form 6, the Adjudicator referred to the Letter of Appointment dated 4.12.2019 sent by the Director of KLRCA pursuant to sub-s 23(1) CIPAA and she accepted the appointment “… as per the KLRCA’s standard terms of appointment. …”. In para 6 of the Notice, the Adjudicator wrote: 31 “6. I further direct the parties to contribute and deposit with the Director of the AIAC For Arbitration a sum of RM14,963.70, disbursements of RM300.00, the AIAC's administrative fees of RM2,992.75 and any taxes as may be imposed by the Government in equal share as security in advance within seven working days from the date of receipt of this notice. The total payable by each of the parties is RM9,128.20.” [39] In the letter dated 31.12.2019, MAC Construction stated that it received Form 6 on 17.12.2019. I am unable to find any exhibit which shows the date that MRCB received Form 6. What is clear from AIAC’s e-mail dated 17.3.2020 is that, as at that date, only SMM has paid its share of the Deposit and there was no prior notification or reminder by AIAC to the Adjudicator as to MRCB’s non-payment and nor did the Adjudicator issue any direction pursuant to sub-rule 9(4) of the AIAC Adjudication Rules. The said AIAC’s e-mail prompted the Adjudicator to send the 17.3.2020 Letter inviting SMM to pay MRCB’s share of the Deposit and stating that “The adjudication decision shall be withheld until the Advance Security Deposit is fully paid.”. However, the 32 Adjudicator did not signify the exercise of her right to withhold the release of the AD by issuing Form 14 which is in the following format: “FORM 14 Notice for withholding the release of the decision until payment of fees and expenses in full (Construction Industry Payment & Adjudication Act 2012, section 19(5)) … NOTICE FOR WITHHOLDING THE RELEASE OF THE DECISION UNTIL PAYMENT OF FEES AND EXPENSES IN FULL [pursuant to section 19(5) of the Construction Industry

This is to notify the parties that the adjudication decision has been completed and is ready to be delivered to the parties.

As of this date, the full sum of [amount] representing full payment of my fees and expenses, the AIAC’s 33 administrative fee [and any taxes as may be imposed by the Government] has not been deposited with the Director of the Asian International Arbitration Centre as requested in my letter dated [date].

In accordance with section 19[5] of the Construction Industry Payment and Adjudication Act 2012, I will release the adjudication decision only after the full sum of [amount] has been deposited with the Director of the Asian International Arbitration Centre, and after being duly notified and served with proof of such payment.”. [40] Mr. RK Sharma argued that the withholding of the AD by the Adjudicator is irregular as the Adjudicator did not issue any Form 14 as prescribed in the AIAC Adjudication Rules. [41] Ms. Sheela endeavored to convince the Court that the 17.3.2020 Letter suffice as a notice to the parties that the Adjudicator is withholding the AD by referring to footnote 1 in Schedule 1 “Forms” of the AIAC Adjudication Rules which states that “…These Forms contained in