Bumimetro Construction Sdn Bhd v Mayland Universal Sdn Bhd (WA-24C-86-05/2017 & WA-24C-93-05/2017)

The adjudicated sum of RM1,689,600.92 (“Adjudicated Sum”);

The sum of RM25,370.29 being reimbursement of BCSB’s contribution to KLRCA’s administrative costs and the Adjudicator’s fees. The sum of RM25,370.29 being reimbursement of the BCSB’s contribution on behalf of Mayland to KLRCA’s administrative costs and the Adjudicator’s fees;

The sum of RM50,000.00 as the Plaintiff’s BCSB’s legal costs for the Adjudication; and

Interest at the rate of 5% per annum on the Adjudicated Sum, RM25,370.29, RM25,370.29 and RM50,000.00 from 7 working days after 22.2.2017 until full payment is made. Prayers [8] There are 2 Originating Summonses heard together with the consent of the parties and for good reason. One is the flip side of the other. There is no application filed to set aside the Adjudication Decision. OS WA-22C-86-05/2017 (“the Enforcement Application”) is filed by BCSB as Plaintiff against Mayland as Defendant for the enforcement of the Adjudication Decision under section 28 of the CIPAA. [9] OS WA-24C-93-05/2017 (“the Stay Application”) is filed by Mayland as Plaintiff against BCSB as Defendant. It is an application by Mayland for Stay of the Adjudication Decision pending disposal of the Arbitration commenced by Mayland against BCSB. There was also a prayer for an injunction to restrain BCSB from filing a Winding Up Petition against Mayland in any High Court for the purposes of executing the Adjudication Decision pending the disposal of the Arbitration. The Stay Application is premised on the ground that the subject matter of the Adjudication Decision is pending final determination by Arbitration. The thrust of the Mayland’s 7 contention on this is that the parties had agreed to refer disputes or differences arising from the Contract to Arbitration and that Mayland had issued a Notice of Arbitration on 18.1.2017 (after the commencement of the Adjudication). [10] In the event the Stay Application is allowed, the natural consequence would be that the Enforcement Application would be dismissed and likewise if the Stay Application is dismissed the Enforcement Application would generally be allowed. [11] The parties shall be referred to as Claimant and Respondent as they were so referred to in the Adjudication or sometimes as BCSB and Mayland respectively. Principles [12] The Stay Application with respect to staying the Adjudication Decision pending reference to Arbitration is made under section 16 of the CIPAA. Section 16 reads as follows: “16. Stay of adjudication decision.

A party may apply to the High Court for a stay of an adjudication decision in the following circumstances: 8

an application to set aside the adjudication decision under section 15 has been made; or

the subject matter of the adjudication decision is pending final determination by arbitration or the court.

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) [13] Learned counsel for the Claimant BCSB had summarized the principles governing a Stay Application under section 16(1)(b) of the CIPAA as follows:

A stay should only be granted in exceptional circumstances; and such circumstances must necessarily refer to the financial status of the other party. (For example, where if it is shown that BCSB is not in a position to repay the adjudicated amount in the event that Mayland eventually succeeds in the Arbitration);

Cogent or credible evidence must be presented to show why stay of that adjudication decision ought nevertheless to be granted.

The merits of the case before the Arbitration or the Court are irrelevant, as is the fact that an Arbitration or litigation has been commenced or otherwise.

The grant of a stay must always weigh in the primary objective of CIPAA which is to ensure the speedy resolution of payment disputes. See: (i) Preamble, and sections 16, 28 and 37 of the CIPAA:

(ii) Subang Skypark Sdn Bhd v Arcradius Sdn Bhd [2015] 11 MLJ 818 at [30];

(iii) Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd [2016] 1 LNS 581 at [45]. [14] However the above proposition of law with respect to a Stay Application has been moulded and modified by the Federal Court in View Esteem Sdn Bhd v Bina Puri Sdn Bhd [2017] 1 LNS 1378 as follows: 10 “[75] We shall now deal with Questions 7 and 8 relating to the setting aside and stay issues. Questions 7 and 8 relate to the interplay between sections 15 and 16 of CIPAA. Question 7 deals with the court's powers under section 16 of CIPAA. Question 8 deals with the timing of an application under section 16 of CIPAA. [76] The High Court in the present case held that an application under section 16 of CIPAA can only be allowed in exceptional circumstances. These exceptional circumstances were then described as necessarily relating "to the financial aspects of payment or repayment; as it is the whole concept behind adjudication and payment disputes". [77] The reasoning adopted by the High Court for such a stringent test was that it took into account the object and purpose of CIPAA to provide for quick payment through adjudication and that it was the approach favoured by the courts in England, Australia and Singapore. The Court placed much emphasis on the decision of the Singapore Court of Appeal in WY Steel Construction Pte. Ltd.. [78] The Court of Appeal in the present case adopted a similar approach. It said that unless there was "overwhelming evidence" that the contractor would be unable to meet its contractual obligations as 11 well as meet its financial obligations to the employer, a stay ought not to be granted. [79] We are of the view that such a stringent test is not justified under CIPAA because section 16 of CIPAA itself contains no such limiting requirement or intent. Section 16 of CIPAA should be treated as one of the safeguards to a likely wrongful adjudication decision and which empowers the court to find a suitable middle ground in cases where there has been clear and unequivocal errors. [80] It is to be noted that after a review of the legislation in the other jurisdictions, the scheme in each jurisdiction is different. Other jurisdictions do review the adjudication awards, and where appropriate, deny enforcement in whole or in part. It can be seen as follows:

In England, statutory adjudication is governed by the HGCR Act and the Scheme and the Arbitration Act, 1996. Under Regulation 24 of the Scheme an order of the adjudicator may be enforced by reference to section 42 of the UK Arbitration Act. At the application for enforcement, the responding party 12 may seek to resist the enforcement on the grounds of want of jurisdiction of the adjudicator or a breach of natural justice.

In Australia, different states have different statutory adjudication schemes. In the state of Victoria in Australia where there is a failure to respond to a payment claim the claiming party must apply for leave to enter judgment at which point a court can review the claim. There is a provision for a court-based review of the adjudicator's decision. Apart from that, judicial review or certiorari is available to challenge any adjudication decision. This includes challenging an adjudication decision by using Wednesbury unreasonableness. Importantly, Victoria, Australia, provides for an automatic stay after an adjudication decision, on the launching of arbitration to challenge the award subject to security being provided by the responding party.

In New Zealand the scheme is again different under the Construction Contracts Act 2002. Here the claiming party is entitled to seek statutory adjudication on progress payment. Those progress payments are statutorily defined under section 17 of the Act to include an accounting of defective works and 13 liquidated ascertained damages. Once an adjudication decision is delivered, section 73 of the Act sets out the steps for applying to court for judgment for enforcement of the award. This is apart from the right of the responding party to seek judicial review against the award.

In Singapore there is a specific provision under section 18 of the S'pore Act 2006 which allows for review of adjudication awards. It is after the review process concludes that the claiming party must then apply to court for an order of enforcement. [81] From observations made on the laws from the other jurisdictions, an adjudication award can be reviewed and challenged in a variety of ways. A stay application in other jurisdictions is made only when the other avenues for review and challenge to the award are exhausted. It therefore makes sense that applications for stay in other jurisdictions are rarely granted. We are of the view that it is however not right to rely on those decisions to justify restricting the statutory power of stay in Malaysia simply on the financial status of the other party. CIPAA contains no such restriction. 14 [82] We are in agreement with the contention of the appellant that a more liberal reading of section 16 of CIPAA would allow some degree of flexibility to the courts to stay the award where there are clear errors, or to meet the justice of the individual case. It is accepted that a stay of the award ought not be given readily and caution must be exercised when doing so. However to restrict the application of section 16 of CIPAA in the manner proposed by the High Court, and the Court of Appeal, would be to strip it of any utility. [83] It is our considered view that on the facts of this case that the appellant was deprived of three of its defences. Of the three at least two defences relate directly to the amount that was being claimed by the respondent. Those are: a. the undisputed advance payment of RM2,000,000.00; and b. the cost of rectification of defective works in the amount of RM1,300,000.00. [84] The High Court and the Court of Appeal in the present case took the view that no stay was available unless the appellant could show that the respondent was unable to repay the adjudication sum. With respect we are of the view that the correct approach for the High 15 Court under section 16 of CIPAA would be to evaluate each case on its merits without the fetter of a pre-determined test not found in the section itself namely the financial capacity of the contractor to repay. It could be a factor but not the only factor. [85] As regards Question 8, the Court of Appeal held that an application under section 16 of CIPAA for stay could only be made after the filing of an application under section 15 of CIPAA. We are of the view that the Court of Appeal fell into error here when it failed to consider that the application for stay was made under section 16(1)(b) and not section 16(1)(a) of CIPAA. In any event, section 16(1)(a) specifically provides that the parties may apply for a stay once an application to set aside an award under section 15 of CIPAA has been made. It does not say that the application must be made separately. It is clear that the provision is there in aid of an application under section 15. [86] It is wholly appropriate that an application for stay under section 16 of CIPAA be filed together with an application to set aside an award under section 15 of CIPAA as a matter of practical utility for the High Court to make the appropriate order in a joint consideration of both. 16 [87] For these reasons it is our view that Questions 7 and 8 should both be answered in the affirmative.” (emphasis added) Whether a Stay should be granted as of right the moment there is shown a pending Arbitration [15] Following the mutual termination of the contract and arising from the final accounts that were being prepared, it was clear that the following disputes or differences arose between BCSB and Mayland as summarized by learned counsel for Mayland as follows:

The costs of rectifying defects in the works undertaken by BCSB;

(ii) The Preliminary and general conditions claimed by the BCSB;

(iii) The builders works and variation works claimed by the BCSB;

(iv) The quantity of the materials left on site and claimed by BCSB;

The profit and attendance by BCSB for the NSCs’ works;

(vi) Damages the Plaintiff incurred in clearing of the debris left behind by BCSB upon vacating the site including costs of engaging lorries for the clearing works. 17 [16] It was a term of the said Contract that it will be subjected to the Standard Form of Building Contract PAM (Private Edition 1998 with Quantities) issued under the sanction of Pertubuhan Arkitek Malaysia as provided under Clause 23 thereof. [17] Mayland argues that BCSB was fully aware of the Arbitration Clause in the said Contract i.e. Clause 34.1 and 34.2 which provides as follows: “Clause 34.1 In the event that any dispute or difference arises between the Employer, or the Architect on his behalf and the Contractor, either during the progress or after completion or abandonment of the Works regarding:

34.1 (i) any matter or thing of whatever nature arising thereunder or in connection therewith, including any matter or thing left by this Contract to the discretion of the architect; or 34.1 (ii) the withholding by the Architect of any certificate to which the Contractor may claim to be entitled to; or 34.1 (iii) the measurement and valuation in sub-clause 30.5(i); or 18 34.1 (iv) the rights and liabilities of the parties under Clause 25.0,

26.0, 31.0 or 32.0; or 34.1 (v) the unreasonable withholding of consent or agreement by the Employer or the Architect on his behalf or by the Contractor then such disputes or differences shall be referred to arbitration. Clause 34.2 “Upon the disputes or differences having arisen then:

34.2 (i) any party may serve written notice on the other party that such disputes or differences shall be referred to an arbitrator to be agreed between the parties; or 34.2(ii) failing agreement or absence of reply or reluctance to act by the other party then the party serving the written notice may after the expiration of fourteen (14) days from the date of the notice to concur on the appointment of an Arbitrator , apply to the President of Deputy President for the time being of Pertubuhan Akitek Malaysia to appoint an arbitrator and such arbitrator so appointed shall be deemed to be 19 appointed with the agreement and consent of the parties to this Contract.” [18] Learned counsel for Mayland submitted that in view of fact that the disputes and differences aforesaid have been referred to Arbitration via a Notice to Arbitrate dated 17.1.2017 served by Mayland on BCSB, Mayland’s Application ought to be stayed until the said disputes and differences have been heard and disposed of by way of Arbitration. [19] Therefore an Injunction should also be granted to restrain BCSB from filing a Winding-Up Petition against Mayland in any High Court for the purposes of enforcing the Adjudication Decision dated 22.2. 2017. It was further argued that the Application for Stay and an Injunction will not prejudice BCSB. [20] The fact that there is a pending Arbitration only prequalifies the Respondent in an Adjudication to apply for a stay. It is a mere threshold condition to be fulfilled and the Court must have regard to the justice of the case in exercising its discretion with respect to Stay of the Adjudication Decision. [21] To allow an automatic stay of the Adjudication Decision the moment there is a pending Arbitration would operate to thwart the purpose of the 20 CIPAA altogether. The mischief that the CIPAA was designed to address is captured in the long title to the Act as follows: [22] The object of the CIPAA 2012 as stated in its long title is as follows: “An Act to facilitate regular and timely payment, to provide a mechanism for speedy dispute resolution through adjudication, to provide remedies for the recovery of payment in the construction industry and to provide for connected and incidental matters.” (emphasis added) [23] In keeping with the purpose of the CIPAA to alleviate the cash flow problem in the construction industry for the unpaid party and to give a temporary finality to the payment claims, it behoves one to 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 s 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.” 21 [24] As is plain to all, to begin Arbitration one needs only to issue a Notice to Arbitrate to the other party and to commence an action where facts are disputed as in most construction disputes, one needs only to file and serve a Writ and Statement of Claim. If by issuing a Notice to Arbitrate or by filing a Writ and Statement of Claim would suffice to get a Stay of the Adjudication Decision, that can only be too easily open to abuse. If a stay of the Adjudication Decision is granted as of right the moment an Arbitration has commenced, then the over-arching purpose of the CIPAA of providing timely and regular payment would be stultified and rendered sterile. That cannot be the intention of the Legislature. If that alone would automatically have the effect of a stay of the Adjudication Decision upon an application under section 16(1)(b) of the CIPAA, it would be tantamount to a backdoor to denude and deplete the Adjudication Decision of its efficacy with the effect of stultifying and stymieing the purpose of the CIPAA which is to provide cash flow for the contractor Claimant who has done its work and is already out-of-pocket. [25] Due effect must be given to section 13 of the CIPAA which language is clear as follows: “13. Effect of Adjudication Decision 22 The adjudication decision is binding unless—

It is set aside by the High Court on any of the grounds referred to in section 15;

The subject matter of the decision is settled by a written agreement between the parties; or

The dispute is finally decided by arbitration or the court.” (emphasis added) [26] The fact that Parliament intended an Adjudication Decision to have immediate bite and not just a mere bark can be seen from remedies provided for in section 30 for instance where a party in whose favour an Adjudication Decision is made may require the principal of the party against whom the Decision is made to make direct payment. Section 30 of the CIPAA reads as follows: “30. Direct Payment from Principal

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 23 the principal of the party against whom the adjudication decision is made.” [27] To clarify the matter and to make it even more explicit there is provided section 31 of the CIPAA as follows: “31. Concurrent Exercise of Remedies

Unless a stay is granted under section 16, a party who obtained an adjudication decision in his favour may exercise any or all of the remedies provided in this Act concurrently to enforce the adjudication decision.” (emphasis added) [28] To allow an automatic stay of an Adjudication Decision would be to take away with one hand what has been given by the other hand on ground that there is a pending arbitration or litigation. [29] Until that dispute has been finally decided by Arbitration or the Court, or that there is a Stay under section 16 of the CIPAA, or that the Adjudication Decision has been set aside, the Adjudication Decision is binding and enforceable. Absent the above, an Adjudication Decision has the element of Interim finality and effect should be given to it. 24 [30] Here though the Notice of Arbitration was issued on 8.1. 2017 it is only at the hearing of this application on 17.7.2017 that learned counsel for the Respondent informed the Court that payment to PAM was about to be made for the appointment of an arbitrator. [31] That slow and snail-paced conduct on the part of the Respondent does not engender confidence that the Respondent is pursuing Arbitration with all due diligence seeing that the Claimant had served its Payment Claim on 4.10.2016 and that the Adjudication Decision had been delivered on 22.2.2017. [32] Mayland further contended that by virtue of the arbitration clause in the Contract the parties had agreed to refer disputes or differences arising from the Contract to arbitration and so effect must be given it. I can only say this: By all means please proceed with Arbitration but that by itself is no good excuse for getting a stay of the Adjudication Decision. [33] Parliament in all its wisdom had provided in section 37 as follows: “37. Relationship Between Adjudication and Other Dispute Resolution Process

A dispute in respect of payment under a construction contract may be referred concurrently to adjudication, arbitration or the court. 25

Subject to subsection (3), a reference to arbitration or the court in respect of a dispute which is being adjudicated shall not bring the adjudication proceedings to an end nor affect the adjudication proceedings.

An adjudication proceeding is terminated if the dispute being adjudicated is settled by agreement in writing between the parties or decided by arbitration or the court.” (emphasis added) [34] Statutory adjudication referred under CIPAA does not require the agreement of the parties to commence the process and prevails over the parties’ agreement to arbitrate in that arbitration cannot stand in the way of Statutory Adjudication and neither can it stultify or have the effect of automatically staying an Adjudication Decision until the Arbitral Award is delivered. In Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd [2017] 1 CLJ 101 it was observed as follows: “[89] Statutory Adjudication does not require the agreement of the parties to commence the process and prevails over any contractual agreements to the contrary between the parties. Statutory Adjudication stand alone and aloof of all other alternative modes of dispute resolution like Arbitration or Litigation. In Ranhill 26 E&C Sdn Bhd v Tioxide (Malaysia) Sdn Bhd [2015] 1 LNS 1435 the High Court held at paragraph [40] of the judgment that: ... the right to refer to adjudication is a statutory right the (sic) cannot be rendered meaningless by reason of a good contractual promise to arbitrate … [93] In all this debate we must not forget Parliament’s intention in enacting CIPAA is to provide a mechanism for speedy dispute resolution through adjudication, to provide remedies for the recovery of payment in the construction industry and to provide for connected and incidental matters. The object and purpose of CIPAA is to provide a solution to payment problems that stifles cash flow in the construction industry. [94] Martego’s claim that CIPAA has no application to the dispute as the parties had made specific contractual arrangements for dispute resolution under Clause 7 of the Contract is totally misplaced. It would lead down the dangerous road of giving tacit consent to the parties contracting out of 27 CIPAA which can only have the effect of thwarting the purpose of CIPAA altogether.” (emphasis added). [35] See also the case of Ranhill E & C Sdn Bhd v Tioxide (M) Sdn Bhd and other appeals [2015] MLJU 1873 at [40]. Whether there are clear and unequivocal errors in the Adjudication Decision that would justify a stay of the Decision [36] The more flexible approach proffered and preferred by the Federal Court in View Esteem (supra) may allow for some room to be had in considering the merits of the case but that is to be understood in the context of an Adjudication Decision “where there has been clear and unequivocal errors”; to use the expression at paragraph [79] of the Federal Court’s Decision. It must also be considered in the context that “a stay of the [adjudication decision] ought not be given readily and caution must be exercised when doing so.” as observed at paragraph [82] of the said Federal Court’s Decision. [37] Otherwise an application under section 15 of the CIPAA would then be akin to an appeal which it is clearly not as can be discerned from the four limited grounds for setting aside an Adjudication Decision as set out below: 28 “15. Improperly Procured Adjudication Decision An aggrieved party may apply to the High Court to set aside an adjudication decision on one or more of the following grounds:

The adjudication decision was improperly procured through fraud or bribery;

There has been a denial of natural justice;

The adjudicator has not acted independently or impartially; or

The adjudicator has acted in excess of his jurisdiction.” [38] Mayland has not shown how the Adjudicator has made clear and unequivocal errors in his Decision. Granted, Mayland had claimed that the sums claimed in BCSB’s Final Account is different from Mayland’s Final Account after their mutual termination of the Contract. [39] BCSB had set out the various heads of claims and so had Mayland and the Adjudicator had set out in paragraph 29 and 30 respectively of his Decision a comparison and contrast of the 2 Final Accounts with that of the Claimant showing a sum of RM3,091,419.42 owing by the Respondent and that of the Respondent showing a sum of RM911,268.54 owing by the Claimant. 29 [40] The Adjudicator had very meticulously dealt with each item of claims and given his reasons for allowing some based on evidence before him and also reasons for rejecting the evidence adduced by the parties in the documents submitted. Some of the Claimant’s claims were allowed as the Respondent had admitted to the sums. [41] The Adjudicator did not uncritically grant the Claimant the whole of the sum claimed but instead, based on the reasons given, allowed only the sum of RM1,689,600.92. [42] With respect to the set-off claimed by the Respondent Mayland, the Adjudicator had disallowed the claim of “Clearing of Debris” and “Waste Disposal Truck” of the sum of RM123,792.21and RM28,730.00 based on the position of the law then in the pre-Federal Court’s Decision in View Esteem (supra) with respect to the fact that since these claims were not set out in the Payment Response the Adjudicator did not have the jurisdiction to hear the said claims. [43] I do not consider the combined sums of RM152,522.21 as being substantially affecting the justice of the case as if indeed, having considered it, it is to be allowed, that can always be corrected in the 30 Arbitration already commenced. In any event there is no application to set aside the Adjudication Decision. [44] An example of a clear and unequivocal error could be like the one mentioned in BM City Realty & Construction Sdn Bhd v Merger Insight

(M) Sdn Bhd and another case [2016] MLJU 1567 where at the hearing of the setting aside of the Adjudication Decision by the Respondent there and the corresponding application for enforcement by the Claimant, there were statutory declarations by 3 Nominated Subcontractors (“NSCs”) exhibited by the Respondent that these NSCs had indeed been paid by the Respondent. The sums came up to RM1,824,805.60 and it was confirmed at the adjourned hearing by learned counsel for the Claimant that indeed these 2 NCSs had been paid the combined said sum. By consent this was agreed to be deducted from the sum of RM4,164,117.98 allowed by the Adjudicator, leaving a balance sum of RM2,339,312.38 (RM4,164,117.98 - RM1,824,805.60) to be paid by the Respondent to the Claimant. [45] This Court observed as follows in the BM City’s case (supra): “[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, 31 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

A party may apply to the High Court for a stay of an adjudication decision in the following circumstances:

An application to set aside the adjudication decision under section 15 has been made; or

The subject matter of the adjudication decision is pending final determination by arbitration or the court.

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 should be deducted as there is incontrovertible evidence of 32 payment having been made by the Respondent direct to the NSCs.” (emphasis added) [46] It would generally be a breach of natural justice if the Adjudicator had failed to take into consideration the matters properly raised, in this case in the Defence of Set-off raised in the Adjudication Response. However the breach of natural justice must result in substantial injustice to the Respondent’s claim of set-off and in this case even of the whole amount were to be allowed for the set-off, it does not come close to 10% of the Adjudicated Sum awarded to the Claimant and is a matter that can soon be corrected at the Arbitration that the Respondent said they are keen to proceed with all due diligence. [47] In Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC), Akenhead J distilled the following guidelines relating to breaches of natural justice in adjudication cases after reviewing previous decisions: “57 From this and other cases, I conclude as follows in relation to breaches of natural justice in adjudication cases:

It must first be established that the Adjudicator failed to apply the rules of natural justice; 33

Any breach of the rules must be more than peripheral; they must be material breaches;

Breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it is one which is either decisive or of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant.

Whether the issue is decisive or of considerable potential importance or is peripheral or irrelevant obviously involves a question of degree which must be assessed by any judge in a case such as this.

It is only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis which has not been argued or put forward by either side, without giving the parties an opportunity to comment or, where relevant put in further evidence, that the type of breach of the rules of natural justice with which the case of Balfour Beatty Construction Company Ltd v The Camden Borough of Lambeth was concerned comes into play. It follows that, if either party has argued a particular point and the other party does not 34 come back on the point, there is no breach of the rules of natural justice in relation thereto.” (emphasis added) [48] There being no setting aside application made by the Respondent and the error is not of the kind that is clear and unequivocal affecting substantially the justice of the case, this Court would not be inclined to grant a stay of the Adjudication Decision. Whether there is any evidence that the Claimant is not in a position to repay the adjudicated sum in the event that the Respondent should succeed in the arbitration [49] The Federal Court in the View Esteem’s case (supra) had allowed the financial capacity of the successful Claimant to pay back as merely a factor to be considered in deciding whether or not a stay should be granted and that it does not require a stay to be granted only if it is shown that there is a likelihood or even a real danger of the Claimant not being able to pay back. In para [82] of the said judgment of the Federal Court it is stated that the “financial capacity of the contractor to repay” could be a factor but not the only factor to be considered. [50] Learned counsel for the Respondent Mayland submitted that the Claimant BCSB’s financial position is not viable in that the search 35 conducted on BCSB at Suruhanjaya Syarikat Malaysia (Exhibit “RSV-1” of the Affidavit affirmed by Rajindar Singh A/L Kaher Singh on 11.7.2017) showed that out of a total of 23 Charges entered by the relevant financial institution on the BCSB’s assets a total of 18 Charges remain unsatisfied; and BCSB’s audited accounts were last tabled on 29.12. 2012, [51] The fear was expressed by Mayland that should the sums mentioned in the Adjudication Decision be paid to BCSB, Mayland will not be able to recover the said sum from BCSB should Mayland succeed at the Arbitration proceedings. [52] Therefore the circumstances taken together would support the exercise of this Court’s discretion to grant a stay of the Adjudication Decision pending disposal of the Arbitration proceedings. [53] However the accounts of BCSB as exhibited by Mayland the latest account for year ending 31.12.2012 showed BCSB to be in quite a sound financial position. In fact their latest affidavit filed, BCSB showed that out of 18 unsatisfied charges there are now only left 4 charges for existing facilities. [54] As the Banks are comfortable to lend BCSB based on the securities, there appears to be no good reason for this Court to doubt the financial 36 stability of BCSB. BCSB has also exhibited their Fixed Deposits to the tune of RM4.7 m and the Adjudicated Sum is only about RM1.6 million. [55] Overall Mayland has not shown any evidence of a justifiable fear that if BCSB is paid now, they would not be able to have the Adjudicated Sum repaid should Mayland succeed at the Arbitration. [56] For all the reasons and factors considered above there is no justifiable ground to grant a stay of the Adjudication Decision and thus the prayer for a stay of the Decision is dismissed. Whether a Fortuna Injunction should be granted in the circumstances of the case [57] In Mobikom Sdn Bhd v Inmiss Communications Sdn Bhd [2007] 3 MLJ 316 the Court of Appeal explained a Fortuna Injunction as follows: “[5] The kind of injunction by which an intended winding up petition is sought to be restrained is known as a 'Fortuna injunction' taking its name from the case in which the juridical basis for the relief was first explained. See, Fortuna Holdings Ptv Ltd v The Deputy Commissioner of Taxation (1978) VR 83.” 37 [58] Under section 466(1) of the Companies Act 2016, the Party in whose favour an Adjudication Decision is given may proceed to serve a section 466(1) Notice under the Companies Act 2016 on the Party who has to pay the Adjudicated Sum, in this case Mayland. Section 466(1) reads as follows:

“Definition of “inability to pay debts”

A company shall be deemed to be unable to pay its debts if -

the company is indebted in a sum exceeding the amount as may be prescribed by the Minister and a creditor by assignment or otherwise has served a notice of demand, by himself or his agent, requiring the company to pay the sum due by leaving the notice at the registered office of the company, and the company has for twenty-one days after the service of the demand neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor;”(emphasis added) [59] There is a rebuttal presumption of inability of a company to pay its debts after the expiry of 21 days after the service of the said section 466 Notice (previously section 218 Notice). 38 [60] As provided for under section 465(1) of the Companies Act 2016 the Court may wind up a company for its inability to pay its debts as follows:

“Circumstances in which company may be wound up by Court

The Court may order the winding up if—

... ...

the company is unable to pay its debts;” [61] Where Parliament had allowed a company to be so wound up, this Court must not put any obstacle to the presentation of a winding up petition by way of a Fortuna injunction unless there is a bona fide serious dispute on the debt, here arising from an Adjudication Sum or that otherwise there is an abuse of the Court’s process. [62] Under the new section 467(2) of the Companies Act 2016, much of the severe consequences upon a presentation of the petition in Court have been buffeted by declaring that the commencement of winding up shall be at the date of the winding up order unlike previously when it was upon the presentation of the winding up petition. 39 [63] Learned counsel for the Respondent Mayland submitted that there are serious issues to be tried in that the Adjudication Decision only has the element of temporary finality and that since the same dispute is already before the contractually agreed mode of resolution through Arbitration the balance of convenience is in favour of an Injunction being granted to restrain the Claimant, its servants and/or agents from filing a Winding –Up Petition against Mayland in any High Court pending disposal of the Arbitration proceedings. [64] Reference was made to Order 29 rule 1 of the Rules of Court 2012 (“ROC 2012”) and the locus classicus in Keet Gerald Francis Noel John v Mohd Noor @ Harun Abdullah & Ors [1994] MLRA 454. [65] However based on the Court of Appeal case of Westform Far East Sdn Bhd v Connaught Heights Sdn Bhd [2010] 2 CLJ 541, it was held the applicant in applying for such an injunction must establish that the winding-up petition would be a prima facie abuse of the process of the court and that the guidelines of American Cyanamide Co. v Ethicon Ltd [1975] 2 WLR 316 and Keet Gerald Francis v Mohd Noor (supra) which require a 'serious question to be tried' would not be applicable to applications to restrain a winding-up petition which seeks to stop proceedings in limine. 40 [66] Whilst the Adjudication Decision has the element and effect of temporary or Interim finality, it does not mean that it is denuded and devoid of any effect unless of course a stay of the Adjudication Decision is granted. [67] Its binding effect cannot be ignored and it is precisely because of that, Parliament had allowed a party in whose favour an Adjudication Decision is given to be able to proceed to exercise the remedies available to it under the CIPAA. To avoid any ambiguity section 31 of the CIPAA provides for Concurrent Exercise of Remedies in that “unless a stay is granted under section 16, a party who obtained an adjudication decision in his favour may exercise any or all of the remedies provided in this Act concurrently to enforce the adjudication decision.” (emphasis added) [68] Section 30 of the CIPAA is one remedy available to a successful Claimant for it reads as follows: “30. Direct Payment from Principal

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 41 from the principal of the party against whom the adjudication decision is made.

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.

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.

The principal may recover the amount paid under subsection

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.

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).” (emphasis added) 42 [69] Any remedy that the successful Claimant may exercise if the Adjudicated Sum is not paid would be under section 29 of the CIPAA for “Suspension or Reduction of Rate of Progress of Performance”. [70] It is to be noted that Parliament has allowed these remedies to be exercised even before the Adjudication Decision has been enforced under section 28 of the CIPAA by way of an order from the High Court as if it is a judgment of the High Court. Section 28 reads as follows: “28. Enforcement of adjudication decision as judgment

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.

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.

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) 43 [71] If it is a case where the debt pursuant to an Adjudication Decision could still be bona fide disputed, then Parliament would not have stated in section 13 that the Adjudication Decision is binding or in section 30(1) “If a party against whom an adjudication decision was made fails to make payment of the adjudicated amount...” A party against whom an Adjudication Decision is made is expected to make payments even before the enforcement of the Adjudication Decision under section 28 of the CIPAA. [72] If an adjudicated sum may still be seriously disputed under a section 30 remedy under the CIPAA, then there would not have been any need for the Principal to pay the sum over to the successful Claimant. [73] It is in this sense that one cannot use cases with respect to enforcement of an Arbitral Award by way of analogy to say that it has to be enforced by the High Court before a winding up petition may be presented as was the case in the Court of Appeal case of Mobikom Sdn Bhd v Inmiss Communications Sdn Bhd [2007] 3 MLJ 316, p 322, which cited the case of Fortuna Holdings Ptv Ltd v Deputy Commissioner of Taxation (1978) VR 83 in setting out the rationale for the granting of injunctions to prevent the presentation of Winding Up Petitions following an Arbitral Award that has not been granted an enforcement order yet. The 44 Court of Appeal quoted from that case and from the dicta of McGarvie J as follows at page 322: “...The law has long recognized that with proceedings to wind up a company, intervention after the commencement of proceedings would often be too late to relieve the company of oppression and damage. The courts have recognized that irreparable damage may be done to a company merely through public knowledge of the presentation of a petition. Usually the damage flows from the loss of commercial reputation which results. The courts have also been conscious of the pressure which may be put on a company, by a person with a disputed claim against it, threatening to present a winding up petition unless, the company meets his claim. While that threat exists, the company, in order to avoid the damage involved in the presentation of a petition, is pressed to meet the claim although it may have substantial and genuine grounds for regarding itself as not required to do so.” [74] The Court of Appeal further observed as follows: “[15] ...Here too the defendant has no registered award. All it has is a cause of action at common law to enforce the award in the usual way 45 by means of a civil suit. The application by the plaintiff to set aside the award constitutes, in my judgment, a bona fide dispute of the alleged debt. The present case, in my view, comes within the second branch of the Fortuna principle.” (emphasis added) [75] In the present case there is no application by Mayland to set aside the Adjudication Decision; only an application for Stay of the Adjudication Decision that has been dismissed. There is no good ground to grant a Fortuna injunction here as the debt in the Adjudicated Decision cannot be seriously disputed until that that Decision is set aside or stayed. [76] Here there has been no application to set aside the Adjudication Decision and further as set out above, this Court has dismissed the application by Mayland for Stay of the Adjudication Decision. [77] This is not a case of an interim injunction granted to prevent companies from suffering oppression and irreparable damage upon a presentation of a Winding Up Petition. It is a case where having in mind the purpose of the CIPAA to facilitate cash flow for contractors who have done their work they should be paid forthwith upon the expiry of the time frame to pay as set out in the Adjudication Decision. 46 [78] It is because of the efficacy of a winding up petition that a party against whom an Adjudication Decision is made would try every means to stultify and sterilize the effect of the Adjudication Decision. This Court at the stage of a Fortuna injunction application is only concerned as to whether there is a debt that cannot be bona fide disputed. In this context the Court has to ask if there is an Adjudication Decision that has been stayed or set aside. Absent that this Court sees no serious issues to be tried and that any serious harm that may ensue arising from the presentation of a Petition may be averted by paying the Adjudicated Sum. In fact it would be bad faith on the part of the Respondent here to still refuse to pay when it is not setting aside the Adjudication Decision and further when its application for Stay has been dismissed. [79] The fact that the Plaintiff continues to dispute the debt and deny owing the judgment sum does not make the debt one that is disputed bona fide. See Kosma Palm Oil Mill Sdn. Bhd. & Ors v Koperasi Serbuasaha Makmur Bhd. [2003] 4 CLJ 1, Chase Perdana Berhad v Md. Afendi Hamdan (No.2) [2006] 5 CLJ 575 and Walter Pathrose Gomez & Ors v Sentul Raya Sdn.Bhd. [2005] 7 CLJ 385. 47 [80] It is for Mayland to persuade the winding up Court that it is able to pay its debts from its assets and that it has a cross claim against BCSB that would result in BCSB owing it a substantial sum. [81] The prayer for the Fortuna injunction would have to be dismissed. Pronouncement [82] For the reasons set out above and having taken all relevant considerations into account, this Court had dismissed Mayland’s application for Stay of the Adjudication Decision and also for the Fortuna injunction. [83] Correspondingly and consequently I had allowed BCSB’s application for Enforcement of the Adjudication Decision. [84] I had also ordered costs of RM5,000.00 to BCSB for the Application for stay and another RM5,000.00 for the Application for enforcement. Dated: 5 December 2017. - signed - YA LEE SWEE SENG Judge Construction Court Kuala Lumpur 48 For the Plaintiff in : OS WA-24C-86-05/2017 : Hor Shirley and Denise Cheong and for the Defendant in : (Messrs Raja, Darryl & Loh) OS WA-24C-93-05/2017 : For the Defendant in : OS WA-24C-86-05/2017 : Rajinder Singh and Clinton Gomez and for the Plaintiff in : (Messrs Rajindar Singh Veriah & Co.) OS WA-24C-93-05/2017 : Date of Decision : 17 July 2017