Charter Built Construction Sdn Bhd v Amalan Setar (M) Sdn Bhd (WA-24C-160-10/2023)

Originating Summons No. WA-24C-160-10/2023 (OS 160) is Charter Built Construction Sdn Bhd (“CBC”) application pursuant to section 28 of the Construction Industry Payment And Adjudication Act 2012 (“CIPAA”) for the Adjudication Decision (“AD”) dated 18.8.2023 (which was corrected on 28.8.2023) to be enforced as a judgment of the Court against Amalan Setar (M) Sdn Bhd (“AS”).

Originating Summons No. WA-24C-175-11/2023 (OS 175) is AS’s application to set aside the same AD in accordance with section 15 of CIPAA.

The grounds in support of OS 175 are briefly as follows: - S/N RziBEqqv70Ch1hgvCEg6Pg **Note : Serial number will be used to verify the originality of this document via eFILING portal 6 3.1 There has been a denial of natural justice on grounds that the Adjudicator has failed to apply the principles of natural justice by failing to decide on 2 material/decisive issues:

3.1.1 When the Final Certificate ought to have been issued; and 3.1.2 The duration of the Defects Liability Period notwithstanding that both issues have been properly raised by parties in the adjudication.

3.2 The 2 material issues that the Adjudicator failed to rule on are essential to the resolution of the dispute.

3.3 There exists a clear and virtually inescapable inference that the Adjudicator did not apply his mind at all to these issues.

3.4 There is a real possibility that, without such breach on the part of the Adjudicator, the Adjudicator would have reached a different decision in favour of the Plaintiff.

3.5 The breach is material/decisive to the AD/CAD, which warrants this Honourable Court to set them aside.

3.6 The breach is also sufficiently material as to cause prejudice to the Plaintiff in the adjudication.

3.7 The Adjudicator has also acted in excess of jurisdiction and committed a jurisdictional error by adjudicating on the Defendant’s claim, which was premature in that the S/N RziBEqqv70Ch1hgvCEg6Pg Defendant’s cause of action under the Final Certificate had yet to accrue as at the date of the Payment Claim and/or Notice of Adjudication. [4] Originating Summons No. WA-24C-187-11/2023 (OS 187) is AS’s application to stay the AD pursuant to section 16 CIPAA on the grounds that the subject matter of the AD is pending final determination in an Arbitration which was commenced by AS under section 23 of the Arbitration Act 2005 and that there are clear and unequivocal errors in the AD. Background Facts [5] By way of a Letter of Award dated 10.1.2018 that was executed by parties on 2.2.2018 (“LA”), AS appointed CBC as the Contractor for the project known as: PROPOSED CONSTRUCTION AND COMPLETION OF PHASE 1B CONSIST OF 118 UNITS A) 66 UNIT RUMAH TERES 2 TINGKAT 16’ x 55’ (RT8) DI ATAS LOT-LOT PT 15041- 15106; B) 52 UNIT RUMAH TERES 2 TINGKAT 16’ x 60’ (RT8A) DI ATAS LOT-LOT PT 15195- 15246; DI ATAS MUKIM BANDAR SERENDAH, DAERAH HULU SELANGOR, MAJLIS DAERAH HULU SELANGOR, SELANGOR DARUL EHSAN UNTUK TETUAN AMALAN SETAR (“Project”); [6] This Project is part of a township development known as “Alamanda Parklands” in Rawang consisting of many different phases. Disputes S/N RziBEqqv70Ch1hgvCEg6Pg have arisen in respect of 2 phases – Phase 1A and Phase 1B (subject matter of this suit). [7] According to paragraph 4.1 of the LA, the Project was supposed to be completed by 15.3.2019. [8] There were 5 extensions of time (“EOT”) granted, and the extended completion date pursuant to the 5th and final EOT (“Impugned 5th EOT”) was 3.11.2019. AS takes the position that the Impugned 5th EOT was issued in bad faith and is thus invalid, whilst CBC takes the position that it was validly issued. [9] The Certificate of Practical Completion (“CPC”) was issued on 4.12.2019 certifying that CBC’s works were practically completed on 4.12.2019. [10] The Defects Liability Period (“DLP”) commenced on 5.12.2019. Under paragraph 13.1 of the LA, the DLP was 24 months and ought to have ended on 4.12.2021. However, AS takes the position that due to the Covid19 pandemic, the DLP was extended by 167 days and, therefore, ought to have ended on 20.5.2022. CBC takes the position that there was no extension of the DLP and it ended on 4.12.2021. [11] When the LA was executed, both parties contemplated that the Main Contract Standard Form of Agreement and Conditions of PAM Contract 2006 (With Quantities) (“PAM Contract”) would be entered into and executed. Paragraph 1.1 of the LA provides that the conditions of the contract shall be based on the PAM Contract. S/N RziBEqqv70Ch1hgvCEg6Pg [12] However, parties never executed the PAM Contract. CBC proceeded with works notwithstanding that the PAM Contract was not executed. [13] Therefore, AS alleges that the PAM Contract was used by parties only as a general guideline, and the LA was referred to and utilised for, among others, the commencement date, the completion date, duration of the DLP, duration of Period of Honouring Certificates (“POHC”), and rate of liquidated damages (“LAD”). [14] As such, AS takes the position that the LA is the only binding contract between the parties and its terms are to be relied upon where expressly provided for and that the terms of the PAM Contract are not binding and are only relied upon for matters not covered by the LA. [15] CBC, however, takes the position that the PAM Contract is not merely a guideline but it constitutes binding conditions of contract between parties. [16] The AD was delivered on 18.8.2023. The Adjudicator essentially decided as follows:

16.1 The Adjudicator allowed CBC’s claim and awarded:

RM802,245.80 for works done pursuant to the

(ii) RM97,899.15 as interest; and

(iii) RM61,363.05 as costs; (“Adjudicated Amount”) S/N RziBEqqv70Ch1hgvCEg6Pg 10 16.2 Simple interest based on the Maybank Base Lending Rate plus 1% per annum on RM797,119.64 from 27.5.2023 until full payment;

16.3 The Adjudicated Amount and interest in paras 16.1 and 16.2 above shall be paid to the Defendant from the date the AD is served on parties (i.e 18.8.2023) until full settlement;

16.4 The Adjudicator did not allow the Plaintiff’s counterclaim for LAD amounting to RM155,000.00 (based on 31 days of delay) or RM405,000.00 (based on 81 days of delay);

16.5 The Adjudicator did not allow the Plaintiff’s counterclaim for unliquidated damages in lieu of LAD amounting to RM13,394.16;

16.6 The Adjudicator allowed the Plaintiff’s counterclaim for unliquidated damages in lieu of LAD amounting to RM5,126.16;

16.7 The Adjudicator did not allow the Plaintiff’s claim for

16.8 The Adjudicator did not consider the Plaintiff’s claim for general damages for loss of reputation. [17] On 4.9.2023, CBC vide its solicitors issued a letter to AS (“Demand”) demanding the sum of RM973,088.5919 in the following breakdown S/N RziBEqqv70Ch1hgvCEg6Pg to be paid to CBC pursuant to the AD, failing which CBC will commence legal proceedings against AS without further notice: No. Head of claim Adjudicated amount (RM)

Adjudicated Sum RM797,119.64

(ii) Interest RM97,899.15

(iii) Simple interest based on the Maybank Based Lending Rate plus 1 percent per annum on the Adjudicated Sum beginning from 27.5.2023 until 4.9.2023 RM16,706.76

(iv) Costs of adjudication RM61,363.05 “Adjudicated Amount” RM973,088.59 [18] For the record, there has been 3 other applications before this Court between the parties but which subject matter was with regards Phase 1 A of the Project whilst today’s matters are in respect of the works in Phase IB Analysis & Findings [19] In essence AS submits that there has been for the Adjudication in respect of Phase 1B

19.1 a failure by the Adjudicator to decide on the date that the Final Claim ought to be issued which has resulted in Charter Build Construction Sdn Bhd (“CBC”) claim being pre mature; and

19.2 a failure by the Adjudicator to decide on the duration of the Defect Liability Period (“DLP”). [20] AS further submits that there has been a breach of the audi alteram partem rule which has caused a breach of natural justice to them and that the Adjudicator would, had the breach not been present, reached a different decision in AS’s favour and that such breach is decisive or material to the AD which warrants the Court to set aside the AD. Alleged Failure By The Adjudicator To Decide On The Date That The Final Claim Ought To Be Issued [21] I have looked at the alleged chronology of material dates and event provided to this Court by the learned counsel for AS which is as follows: - Date Event 4.12.2019 CPC issued 4.12.2021

Expiry of original DLP

12.2021 Date CBC alleges CMGD should have been issued 2.1.2022 Date CBC alleges FC should have been issued [22] I have also observed from the evidence before this Court that there is a Final Statement of Account which have been signed off on 13.9.2022 (Final Account), as seen at exhibit LSP-5 in enclosure 8 of OS 175, stating the sum of RM11,549,571.38 as the Final Contract S/N RziBEqqv70Ch1hgvCEg6Pg Sum. It has been submitted to this Court that CBC has referred to this Final Account in its Payment Claim, which I have found and noted is as per exhibit P7 in enclosure 2 of OS 179, and that the sum owing to them was RM899,716.92 after taking into account the sum referred to in the Final Account and the amounts previously paid being RM10.639,037.96 as well as the backcharges of RM10,816.50. The same figure of RM899,716.92 was also repeated in the Adjudication Claim which can be found at enclosure 2 of OS 175. [23] After examining clause 30.10(a) of the PAM Contract, I have found that the said clause deems the Final Account as being conclusive and deemed agreed by the parties 3 months from the date of the receipt of the Final Account form the Architect or QS, which in this case would be 13.12.2022. [24] It is also clear from the AD that the Learned Adjudicator had addressed this point and applied his mind to the same where he states at paragraph 40 of the AD that “It appears that the Respondent is not challenging the Final Contract Sum under the Final Account....” and at paragraph 41 therein “The above is subjected to whether the Respondent as a valid counter claim against the Claimant.”. I hold that CBC has therefore succeeded in showing this Court that it has prima facie a right to make the claim based on the Final Account. [25] I have in coming to my decision also considered AS’s submissions that the Final Claim was not referred to as a “Main Issue” in the AD in section D of the same, as well as the numerous case law authorities referred to by learned counsel for AS being allegedly relatable to the case at hand. S/N RziBEqqv70Ch1hgvCEg6Pg [26] Be that as it may, from the aforesaid evidences, I find that the alleged failure by the Adjudicator to decide on the date that the Final Claim ought to be issued which has allegedly resulted in CBC’s claim being pre mature as being misconceived and merely an attempt by AS to cherry pick on an issue. The fact that the date that the Final Claim ought to be issued is not mentioned in the AD is in my view not material in nature and irrelevant when looking at the AD in toto. I agree with Justice Lim Chong Fong (as he then was) in Genting Malaysia Berhad v PLM Interiors Sdn Bhd And Another Case [2020] MLJU 344 where Justice Lim aptly put it as follows: “[31] Put it simply in another way in a practicable manner, I find that the principle of procedural fairness in relation to statutory adjudication proceedings has to be construed contextually. There is therefore no uniform exactness in its application as itwould be case sensitive depending on the facts of each case. Thus as to the way to deal with the issues in the adjudication proceedings as well as the right to be heard specifically, it is plain that the adjudicator has to deal with the issues identified by the parties. Generally, there are principal issues and subsidiary issues but it may not be easy to segregate and classify them. There will invariably be subsidiary issues within a principal issue too. It can safely be concluded that the adjudicator must address and answer each and every principal issue because they are pivotal and hence material in nature. There is leeway in respect of subsidiary issues especially if they are peripheral or irrelevant but the adjudicator has to be mindful of subsidiary issues which are material when they are pivotal in deciding the principal issue. Consequently, the parties S/N RziBEqqv70Ch1hgvCEg6Pg must be afforded the right to be heard on all principal issues as well as subsidiary issues that are material too.” [27] I am also guided in my decision and on what is the law of natural justice by the Court of Appeal in ACFM Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd And Another Appeal [2016] MLJU 1776 which held and followed: “..the decision of the Court of Appeal in Carillion Construction Limited v Devonport Royal Dockyard Limited [2005] EWHC 778 where at paragraphs 85 and 86 of the judgment, the Court said: “85. The objective which underlies the Act and the statutory scheme requires the Courts to respect and enforce the adjudicator’s decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should only be in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which (contrary to the DML’s outline submissions, to which we have referred in paragraph 66 of this judgment) may, indeed aptly be described as “simply scrabbling around to find some argument, however tenuous, to resist payment.”

It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator’s reasons and identify points upon which to present a challenge under the labels of “excess of jurisdiction” or “breach of natural justice”. It must be kept in mind that the S/N RziBEqqv70Ch1hgvCEg6Pg majority of the adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not more likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case. Parliament may be taken to have recognised that, in the absence of an interim solution, the contractor (or sub-contractor) or his subcontractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting legitimate cash-flow requirements of contractors and their subcontractors. The need to have the “right” answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions. Indeed, it may be open to doubt whether Parliament contemplated that disputes involving difficult questions of law would be referred to adjudication under the statutory scheme. We have every sympathy for an adjudicator faced with the need to reach a decision in a case like the present.

In short, in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator. If he does not accept the adjudicator’s decision as correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position. To seek to challenge the adjudicator’s decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead S/N RziBEqqv70Ch1hgvCEg6Pg to a substantial waste of time and expense - as, we suspect, the costs incurred in the present case will demonstrate only too clearly.” [28] In any event, it has been decided by the Courts previously that an Adjudicator can allow an unpaid party to claim in an Adjudication proceedings based on the Final Account, see for example the judgment of Lee Swee Seng J (as he then was) in Tidalmarine Engineering Sdn Bhd v Conlay Construction Sdn Bhd and another appeal [2017] MLJU 738. Alleged Failure By The Adjudicator To Decide On The Duration Of The Defect Liability Period (DLP) [29] I now turn to the issue of the alleged failure by the Adjudicator to decide on the duration of the Defect Liability Period (“DLP”). Premised on exhibit LSP-1 in enclosure 8 of OS 170, the Certificate of Practical Completion (“CPC”) is dated 4.12.2019 and based on submissions by learned counsel for CBC and to which I have also confirmed after perusal of the PAM Contract, is that at clause 30.14(b) it is expressly provided that the Final Certificate shall be issued ‘within 28 days after the Certificate of Making Good Defects (“CMGD”) has been issued..”. [30] It was also pointed out to this Court that the LOA had at clause 12 stated that “The period of honouring progress payment shall be 45 days from the date of presentation of the Interim Certificate certified by the S.O”. S/N RziBEqqv70Ch1hgvCEg6Pg [31] Clause 30.4 of the PAM Contract provides that on the entitlement to set off vis a vis the rectification costs, it is required that the Architect or QS has submitted to the Contractor i.e CBC, complete details of the assessment of set off and given the Contractor a written notice delivered by hand or registered post specifying their intention to set off and the grounds thereto. [32] I had also considered inter alia the argument by AS that all the defect rectification works were allegedly only properly completed by AS on 17.2.2023 i.e the date when the CMGD was issued by the Architect, and that if there was a delay in issuing the CMGD, it was entirely the result of CBC’s own doing, the DLP was extended to 20.5.2022 due to the Covid 19 pandemic. [33] In addressing the issue of the Final Certificate, I have found that the Adjudicator in the AD had looked at the Respondent’s/AS submissions and issues on this point including inter alia the rectification defects and when the same was allegedly completed as well as the date when the CMGD was issued on 17.2.2023 and clauses 30.4 and 30.14(b) of the PAM Contract as mentioned above, and the due date for payment of the Final Certificate. [34] I have thus observed after perusing the AD, that the Adjudicator had after considering all of the above then found that CBC’s claims were established by the Final Account and the admissions by AS. This decision by the Adjudicator is therefore not challengeable by AS as it would be a review which goes to the findings by the Adjudicator and the merits of the Adjudicator’s decision even if the decision is factually or legally incorrect. S/N RziBEqqv70Ch1hgvCEg6Pg [35] I am therefore not able to agree with AS that there has been a failure by the Adjudicator to decide on the duration of the Defect Liability Period (“DLP”) as this is again, with respect, was not a substantive issue in the Adjudication proceedings based on the claim for the rectification costs by AS had not complied with Clause 30.4 of the PAM Contract, which I had referred to above, and thus with respect, even if the DLP period was determined by the Adjudicator, the decision not to allow the set off would in my view still culminate in the same decision by the Adjudicator in AS’s favour. Stay under Section 16 CIPAA [36] One of the additional grounds relied on by AS for the Stay Application in OS 187 is the validity of the impugned 5th EOT dated 3.12.2019 which they claim was issued mala fide by the Architect and gave several reasons for it including the contention that it was backdated and issued without AS’s knowledge, and not properly served on AS. The same was of course denied and countered by CBC. [37] I find that the Adjudicator had considered the arguments which went towards the validity of the 5th EOT and the arguments of AS pertaining to the same as well as clause 22.1 of the PAM Contract with regards a written notice required to be given to the Architect for CBC’s intention to claim EOT and clause 10.1 of the LOA pertaining to the LAD rate, after which the Adjudicator held that he found no merits in AS’s contention. S/N RziBEqqv70Ch1hgvCEg6Pg [38] After considering AS’s contention on this issue and the decision of the Adjudicator as per the AD, I am unable to accept that there is a clear and unequivocal error in the Adjudicator’s decision on this point as I am unable to find any documents before me that shows that AS did not know of the said 5th EOT. Despite the said EOT 4 had been titled “Final”, I have however observed that EOT No 4 was dated 28.6.2019 (which AS was aware of) and had extended the completion date to 14.9.2019, as seen in enclosure 4 exhibit D 1 of OS 187. However, I have also found that after that date there is nothing in evidence which shows that AS had written to CBC on the delay of works after the said date of 14.9.2019 and/or the imposition of LAD. These same findings appear also in the AD. [39] In the decision of the Federal Court in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 it was held that the correct approach for a stay under section 16 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. Under section 16 of CIPAA the courts could stay an adjudication decision when there were clear errors, or to meet the justice of the individual case and any attempt. [40] Since this Court has based on all of the above findings of this Court, found no clear and unequivocal errors in the AD and after evaluating this case on its merits as per View Esteem Sdn Bhd (supra) I hold that this Court is to dismiss OS 187 with costs. S/N RziBEqqv70Ch1hgvCEg6Pg

[41] I hold that there is no breach of the audi alteram partem rule and I do not find any valid grounds to grant a stay under OS 187 or to set aside the AD and henceforth I dismiss OS 187 & OS 179 with costs. [42] Accordingly, since there are no impediments on the AD and the amount due thereunder is still due and owing, I hereby grant Order in Terms for prayers 1, 2 and 3 of enclosure 1 in OS 160. Dated: 06th day of May 2024 sgd. NADZARIN WOK NORDIN HIGH COURT JUDGE CONSTRUCTION COURT 1 COUNSEL FOR THE PLAINTIFF(SUIT 160)/DEFENDANT (SUIT 175 & 187): Chan Kheng Hoe and Pung Kian Bang (suit 160) (Messrs Kheng Hoe & Lee Yuen] COUNSEL FOR THE DEFENDANT(SUIT 160)/PLAINTIFF (SUIT 175 & 187): Aizurra Mirsya Binti Mohd Aminudin, Liew Sheng Yang and Kamran Rajendran (suit 160) (Messrs Cheah Teh & Su] S/N RziBEqqv70Ch1hgvCEg6Pg