Bond M & E Sdn Bhd v Pali PTP Sdn Bhd (W-02(C)(A)-399-02/2021)

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1 IN THE COURT OF APPEAL MALAYSIA IN PUTRAJAYA (APPELLATE JURISDICTION) IN THE FEDERAL TERRITORY OF PUTRAJAYA CIVIL APPEAL NO: W-02(C)(A)-314-02/2021 BETWEEN PALI PTP SDN BHD …APPELLANT (Business Registration No.:1186116-M) AND BOND M&E SDN BHD … RESPONDENT (Business Registration No.: 108676-V) In the High Court of Malaya at Kuala Lumpur Civil Suit No.: WA-24C-121-06/2020 Between Bond M&E Sdn Bhd ...Plaintiff (Business Registration No.: 108676-V) And Pali PTP Sdn Bhd …Defendant (Business Registration No.:1186116-M) 12/09/2023 09:47:11 W-02(C)(A)-399-02/2021 Kand. 33 HEARD TOGETHER WITH IN THE COURT OF APPEAL MALAYSIA IN PUTRAJAYA (APPELLATE JURISDICTION) IN THE FEDERAL TERRITORY OF PUTRAJAYA CIVIL APPEAL NO: W-02(C)(A)-399-02/2021 BETWEEN BOND M&E SDN BHD …APPELLANT (Business Registration No.: 108676-V) AND PALI PTP SDN BHD … RESPONDENT (Business Registration No.:1186116-M) In the High Court of Malaya at Kuala Lumpur Civil Suit No.: WA-24C-121-06/2020 Between Bond M&E Sdn Bhd ...Plaintiff (Business Registration No.: 108676-V) And Pali PTP Sdn Bhd …Defendant (Business Registration No.:1186116-M) CORAM: VAZEER ALAM BIN MYDIN MEERA, JCA. ABU BAKAR BIN JAIS, JCA. LIM CHONG FONG, JCA. GROUNDS OF JUDGMENT INTRODUCTION [1] There are two (2) related appeals before us which are as follows: i. Civil Appeal No.: W-02(C)(A)-314-02/2021 (“Appeal 314”); and ii. Civil Appeal No.: W-02(C)(A)-399-02/2021 (“Appeal 399”) (collectively “Appeals”) [2] For convenience and clarity, the relevant parties in the Appeals will be addressed as follows: - i. Pali PTP Sdn Bhd, the Appellant in Appeal 314 and Respondent in Appeal 399 – ‘Bond’; and ii. Bond M&E Sdn Bhd, the Respondent in Appeal 314 and Appellant in Appeal 399 – ‘Pali’. [3] The Appeals concerned emanated from Kuala Lumpur High Court Originating Summons No.: WA-24C-121-06/2020 (‘OS 121’) filed by Bond pursuant to section 30 of the Construction Industry Payment and Adjudication Act 2012 (‘CIPAA’) for an order that Pali, as the principal company to JEKS Engineering Sdn Bhd (‘JEKS’), pay directly to Bond the amount which is due and owing to Bond by JEKS pursuant to an Adjudication Decision dated 3rd January 2020 (‘Adjudication Decision’). [4] The learned High Court Judge (‘HCJ’) on 27th January 2021 adjudged and ordered Pali to pay Bond the principal sum of RM 3,387,425.44 (but excluded costs and interests awarded in the Adjudication Decision) as well as costs of RM10,000.00 in favour of Bond (‘Judgment’). [5] Consequently, Pali on 11th February 2021 lodged Appeal 314 against the Judgment. Bond thereafter on 24th February 2021 lodged Appeal 399 against that part of the Judgment which excluded costs and interests awarded in the Adjudication Decision from the ‘adjudicated amount’ pursued by Bond in its section 30 application under the CIPAA. [6] We heard both Appeals together on 9th December 2022 and have unanimously found that there is no merit in Appeal 314 which warranted our appellate intervention. Appeal 314 is therefore dismissed with costs of RM10,000.00 to Bond subject to allocator. [7] Concurrently, we have unanimously allowed Appeal 399 with costs of RM10,000.00 to Bond subject to allocator by reason that the learned HCJ had erred in law in construing the phrase ‘adjudicated amount’ in section 30 CIPAA to mean only the principal claim sum awarded in the Adjudication Decision. We thus ordered that the Judgment be varied in that the adjudicated amount comprising the principal sum of RM3,387,425.44 as well as both interest and costs awarded in the Adjudication Decision be paid directly from Pali to Bond as prayed in items

Subsection

(1) If a party against whom an adjudication decision was made fails to make payment of the adjudicated amount, the party who obtained the adjudication decision in his favour may make a written request for payment of the adjudicated amount direct from the principal of the party against whom the adjudication decision is made.

Subsection

(2) Upon receipt of the written request under subsection (1), the principal shall serve a notice in writing on the party against whom the adjudication decision was made to show proof of payment and to state that direct payment would be made after the expiry of ten working days of the service of the notice.

Subsection

(3) In the absence of proof of payment requested under subsection (2), the principal shall pay the adjudicated amount to the party who obtained the adjudication decision in his favour.

Subsection

(4) The principal may recover the amount paid under subsection (3) as a debt or set off the same from any money due or payable by the principal to the party against whom the adjudication decision was made.

Subsection

(5) This section shall only be invoked if money is due or payable by the principal to the party against whom the adjudication decision was made at the time of the receipt of the request under subsection (1).” Appeal 314 [33] In Appeal 314, Pali focussed its submission that Bond failed to prove that JEKS has failed to make payment of the adjudicated amount to Bond prior to Bond making its written request for payment of the adjudicated amount directly from Pali. Moreover, Pali also submitted that the learned HCJ had erroneously allowed Bond's application that was wrongly based on the adjudication decision between Pali and JEKS when it should have been based on the construction contract between Pali and JEKS. [34] Bond in retort counter-contended that it had fully complied with the provisions in section 30 CIPAA and should hence be paid directly by Pali as correctly decided by the learned HCJ. [35] After hearing submissions by both parties, we are of the view that there is no necessity for the unpaid party Bond to provide affirmative evidence that Bond has not been paid by JEKS. Based on sections 30(1) and (2) CIPAA read together as a whole, we construe that this non-payment is presumed and Bond only has to assert the same in the Notice of Direct Payment. The onus is accordingly shifted to Pali to enquire from JEKS whether Bond has been paid. Since Pali has failed to do so, we conclude that Bond has not been paid by JEKS following PCOM Pacific Sdn Bhd v. Apex Communications Sdn Bhd & Anor (supra); see also HSL Ground Engineering Sdn Bhd v. Civil Tech Resources Sdn Bhd (and Another Originating Summons) [2020] 5 AMR 757. [36] We are also satisfied from the evidence adduced that there were monies due or payable by Pali to JEKS at the material time based on the adjudication decision in the adjudication proceeding between JEKS and Pali. Hence the adjudicated amount in the Adjudicated Decision must be paid directly by Pali to Bond as principal pursuant to section 30 CIPAA. [37] Thus, we do not find any appealable error in the findings of the learned HCJ that would warrant appellate intervention. Appeal 399 [38] In Appeal 399, Bond primarily contended that the phrase ‘adjudicated amount’ in section 30 CIPAA should be liberally construed to include interest and costs to protect and/or safeguard the payment rights of the small contractors and/or sub-contractors. This is consistent with the purpose of the CIPAA statute to facilitate regular and timely payment and provide remedies for recovery of payment. [39] However, Pali counter-contended that the learned HCJ is correct in deciding that the phrase 'adjudicated amount' excluded interest and costs because if the legislature intended for 'adjudicated amount' to encompass interest and costs, this would have been expressly provided for in sections 30(3) as well as sections 28(1) and 28(2) of CIPAA. Instead, the usage of 'adjudicated amount', 'costs', and 'interest' appear in different sections 12(5), 18(1), 25(o), 28(2) and 30 CIPAA meant that they refer to different matters. [40] It is also apposite at this juncture to reproduce the following other relevant provisions in the CIPAA with emphasis added:

Subsection

(5) The adjudication decision shall also determine the adjudicated amount and the time and manner the adjudicated amount is payable.

Subsection

(1) 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.

Subsection

(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. [41] We have accordingly in the exercise of our appellate function reviewed the Judgment of the learned HCJ. After detail deliberation, we find that the learned HCJ has erred in construing the phrase ‘adjudicated amount’ in section 30 CIPAA to exclude ‘interest’ and ‘costs’ and are of the view that a proper construction of ‘adjudicated amount’ in section 30 CIPAA would include both and interest and costs too aside from the principal claim sum awarded. [42] First and foremost, we find that the learned HCJ made an erroneous reliance on the case of CT Indah Construction (supra) because it was not the case on whether the phrase 'adjudicated amount' in section 30 of CIPAA includes or excludes interest and costs. [43] We further noted that the phrase ‘adjudicated amount’ has not been defined in section 4 CIPAA. As such, we are required to interpret and provide a reasonable meaning to it. For this purpose, we are guided by the case of Tebin Mostapa v. Hulba-Danyal Balia & Anor [2020] 7 CLJ 561 FC wherein Vernon Ong Lam Kiat FCJ held as follows with emphasis added: “Statutory Interpretation [30] In our opinion, the rules governing statutory interpretation may be summarised as follows. First, in construing a statute, an effect must be given to the object and intent of the Legislature in enacting the statute. Accordingly, the duty of the court is limited to interpreting the words used by the Legislature and giving effect to the words used by it. The court will not read words into a statute unless clear reason for it is to be found in the statute itself. Therefore, in construing any statute, the court will look at the words in the statute and apply the plain and ordinary meaning of the words in the statute. Second, if, however the words employed are not clear, then the court may adopt the purposive approach in construing the meaning of the words used. Section 17A of the Interpretation Acts 1948 and 1967 provides for a purposive approach in the interpretation of statutes. Therefore, where the words of a statute are unambiguous, plain, and clear, they must be given their natural and ordinary meaning. The statute should be construed as a whole and the words used in a section must be given their plain grammatical meaning. It is not the province of the court to add or subtract any word; the duty of the court is limited to interpreting the words used by the Legislature and it has no power to fill in the gaps disclosed. Even if the words in a statute may be ambiguous, the power and duty of the court “to travel outside them on a voyage of discovery are strictly limited.” Third, the relevant provisions of an enactment must be read in accordance with the legislative purpose and applies especially where the literal meaning is clear and reflects the purposes of the enactment. This is done by reference to the words used in the provision; where it becomes necessary to consider every word in each section and give its widest significance. An interpretation which would advance the object and purpose of the enactment must be the prime consideration of the court, so as to give full meaning and effect to it in the achievement to the declared objective. As such, in taking a purposive approach, the court is prepared to look at much extraneous materials that bears on the background against which the legislation was enacted. It follows that a statute has to be read in the correct context and that as such the court is permitted to read additional words into a statutory provision where clear reasons for doing so are to be found in the statute itself. [44] It is plain from Tebin Mostapa v. Hulba-Danyal Balia & Anor (supra) that the Federal Court ruled in the circumstances where a word and/or phrase used in the statute is unclear or ambiguous, such word or phrase will be construed in the light of the purpose and object of the statute. It is the prime consideration in that scenario. This is in consonance with section 17A of the Interpretation Act 1948 and 1967 which requires the Courts to interpret the statute that would fulfils the purpose or object of the statute. The provision in Section 17A reads as follows:

Subparagraph

(ii) the objective of CIPAA was to offer a simple, fast and cheap mechanism for resolving payment problems and payment disputes faced in the construction industry as opposed to the existing dispute resolution through arbitration or the courts; and

Subparagraph

(iii) the CIPAA was intended to remedy an existing problem in the construction industry [24] From the above, the third finding made by the High Court in examining Parliament’s intention that the CIPAA was intended to remedy an existing problem is important. This problem relates to the problem over payments experienced by the construction industry which is either there is non-payment, late payment or insufficient payment… [46] Furthermore, it is important to note that the CIPAA is meant to protect and/or safeguard the rights of the small contractors and/or sub-contractors as seen in the case of ACFM Engineering & Construction Sdn Bhd v. Esstar Vision Sdn Bhd & Another Appeal [2016] 1 LNS 1522 CA, wherein David Wong Dak Wah JCA (later CJ of Sabah & Sarawak) held as follows with emphasis added: “[15] The philosophy is simply this. Prior to the introduction of CIPAA 2012, claims by subcontractors against the main contractors were not able to be resolved in a speedy and economical manner. The only redress was to launch a suit in Court and then apply for summary judgments with the hope that the Courts would grant such summary judgments. Such applications invariably have difficulties as the threshold for such application to succeed is quite high as the subcontractor has to show that there are no triable issues for the Court to adjudicate or in short the defence of the contractor has no merit at all. It cannot be disputed that this sort of litigation has given rise to financial hardship to the subcontractors so much so that some had lost all the benefits of the subcontracts. It also cannot be disputed that the contractors have taken advantage of the intricacies of the judicial system by withholding payments without valid reasons. [16] To overcome the aforesaid shortcomings and with the aim of making the construction industry a fair playing field for the players, Parliament in various Commonwealth countries saw it fit to introduce an adjudication regime in which interim claims made by subcontractors can be dealt with by appointed adjudicators in a speedy and economical manner. The benefit of such regime is plain and obvious in that claims of subcontractors, being the lifeline of their survival, must not be delayed without valid reasons by the contractors. In short, the unnecessary stoppage of money flow would be avoided. [17] In the context of our jurisdiction, CIPAA 2012 was enacted and from section 12 we can discern features such as a specific time frame of 90 days for the adjudicator to decide on the dispute between the subcontractor and contractor with the specific provision that any decision reached after the aforesaid period is deemed void and the non-applicability of the Evidence Act which evoke the intentions of the Parliament to ensure claims of the subcontractors are dealt with within a reasonable time frame. [47] These findings in both aforementioned cases are fortified by the Second and Third Readings of the Construction Industry Payment and Adjudication Bill 2011 (‘Bill’) on 2nd April 2012 as follows with emphasis added: “Dato’ Ismail Kasim [Arau]: … Selari dengan itu apabila akta ini dibuat kita melihat banyak perkara yang menjadi masalah sekarang seperti projek terbengkalai, projek-projek serangan kulat seperti yang berlaku di bangunan SPRM di Melaka, kemudian bangunan-bangunan yang dihasilkan dalam keadaan yang kurang berkualiti. Begitu juga ada bangunan yang sehingga sekarang sekolah misalnya tidak selamat diduduki walaupun beberapa cara dan masalah telah dibuat. Jadi di antara punca yang berlaku keadaan-keadaan seumpama ini adalah disebabkan oleh soal kekurangan modal pusingan atau aliran tunai yang perlu ada kepada setiap syarikat pembinaan yang terlibat dalam industry ini. Justeru kerana itu saya menyedari bahawa kerajaan telah menyedari hakikat ini apabila berlaku pertikaian soal antara main contractor dengan izin, dengan sub-contractor dan sebagainya dan sub, sub yang berlaku. Jadi di sini berlaku apabila pihak yang kedua atau ketiga kadang-kadang mereka tidak dapat mengadu ataupun membuat satu aduan kepada mana-mana tempat yang mereka boleh dapat balik payment supaya mereka dapat melakukan kerja-kerja berkenaan dengan lebih lancer apabila mereka mempunyai aliran tunai yang kukuh. Saya memuji pihak kementerian apabila ada cadangan. … Tuan M. Manogaran [Telok Intan]: … Seterusnya, selepas sesuatu projek itu selesai, mangsa yang sebenarnya adalah bukan sahaja sub-con tetapi sub-sub con dan downstream industries players dengan izin termasuk pekerja-pekerja yang mungkin tidak dapat pembayaran atau gaji mereka atau apa-apa pembayaran professional mereka, dan ini kita telah banyak tengok pada amalan yang ada sekarang, kadang-kadang sesuatu projek yang telah disiapkan apabila main con tidak bayar, mereka pergi ke mahkamah dan main con memberi satu dengan izin ultimatum, take it or leave it, dengan apa-apa jumlah yang mereka fikir sesuai dan adil dan patut. Akan tetapi kerja telah dibuat dan telah selesai dan pengusaha-pengusaha kecil ini terbiar dengan begitu sahaja. Mereka tidak dapat melawan kontraktor-kontraktor yang besar ini walaupun di mahkamah ataupun di PTSKL di mana PTSKL kadang-kadang memerlukan pembayaran yang tinggi untuk yuran adjudicator atau arbitrator dengan izin. Jadi kementerian harus memberi satu ruang atau peluang kepada pengusaha-pengusaha kecil ataupun dalam industri pembinaan ini – the small contractors …” [48] These findings are likewise fortified during the Second and Third Readings of the Bill on 7th May 2012 as follows with emphasis added: “Timbalan Menteri Kerja Raya [Dato' Yong Khoon Seng]: … Justeru, inisiatif pelaksanaan undang-undang berkaitan dengan pembayaran adjudikasi ini merupakan satu daripada agenda transformasi kerajaan bagi merealisasikan aspirasi tersebut. Dengan adanya Rang Undang-undang Pembayaran dan Adjudikasi Industri Pembinaan 2011, masalah pembayaran dalam sektor pembinaan yang meliputi masalah ketidakbayaran, kelewatan pembayaran dan ketidakcukupan pembayaran dapat ditangani. Tidak dapat dinafikan juga bahawa ia menyediakan ruang bagi menyelesaikan masalah berkaitan pembayaran di pihak kontraktor khususnya kontraktor-kontraktor kecil. … Datuk Chin Su Phin: … Saya ingin mengetengahkan isu sub kontraktor dahulu. Kita sedar bahawa sub kontraktor ini memainkan peranan yang sangat penting dalam menjayakan sesebuah projek. Cabaran yang paling utama dihadapi mereka ialah aliran tunai dan kelewatan mendapat bayaran daripada main contractor. Kita semua sedar bahawa tiada alasan untuk main con lambat membuat pembayaran kerana salah satu pemilihan kontraktor untuk sesebuah projek adalah kekuatan kewangan kontraktor.” [49] In the absence of definition of the phrase ‘adjudicated amount’ in CIPAA, we therefore find on our purposive construction or interpretation that it includes interest and costs in furtherance of the purpose and object of the statute to protect and/or safeguard the rights particularly of the small contractors and/or sub-contractors. The phrase ‘adjudicated amount’ shall be interpreted in the light of that spirit. [50] We are mindful that the learned HCJ traversed the other sections 12(5), 18(1), 25(o) and 28(2) CIPAA but upon our review, we do not find that they stood in contradiction of the phrase ‘adjudication amount’ to include interest and costs. They must be read in context. In particular, we find that nothing in section 12(5) CIPAA prohibits the adjudicated amount to include interest and costs even though the adjudicator is specifically empowered to award interest in section 25(o) CIPAA and costs in section 18 CIPAA respectively. We further find that by virtue of section 28(2) CIPAA, the High Court is also empowered discretionarily to award interest on the adjudicated amount, say when the adjudicator unreasonably omitted to award interest on the principal claim sum. [51] That notwithstanding, we find that if the phrase ‘adjudicated amount’ did not include interest and costs, then the unpaid Bond would in the factual circumstances here necessarily have to seek recovery twice, once against Pali for the principal claim sum awarded and then again against JEKS separately for interest and costs only. This cannot in our view be contemplated by the legislature. [52] In the premises, we find the learned HCJ erred by excluding interest and costs from 'adjudicated amount' in section 30 CIPAA which warranted our appellate intervention. CONCLUSION [53] It is for the foregoing reasons that we dismissed Appeal 314 and allowed Appeal 399 accordingly as so ordered. Dated this 1st September 2023 -Sgd-LIM CHONG FONG JUDGE COURT OF APPEAL MALAYSIA LIST OF COUNSELS: