Chop Lee Huat Cermin & Aluminium Sdn Bhd v Kerajaan Malaysia (KA-24C-1-04/2025)

This Originating Summons (Enclosure 1) was filed by the Plaintiff, Chop Lee Huat Cermin & Aluminium Sdn Bhd (‘CLH’ or ‘Plaintiff’), a subcontractor, against the Defendant, the Government of Malaysia (‘GOM’ or ‘Defendant’), as the alleged principal, seeking to invoke the direct payment mechanism provided under section 30 of the Construction Industry Payment and Adjudication Act 2012 (‘CIPAA’). CLH sought this statutory relief having secured an adjudication decision against the non-paying party, Orangebeam Construction Sdn Bhd (‘OBC’), which subsequently failed to honour the adjudicated sum, a failure compounded by the commencement of winding-up proceedings against OBC. The resolution of this application, therefore, requires the Court to fundamentally determine two critical and contested inquiries pertaining to the scope and application of section 30 CIPAA: first, whether GOM qualifies as the requisite principal to the incorporated joint venture for the purposes of section 30; and second, whether monies were due or payable by GOM to Seri Libana PPC JV Sdn Bhd ( (‘JV Company’) at the material time of CLH's written request

The Project and Contractual Chain

The dispute originates from works performed on a construction project known as “Hospital Pendang, Kedah (Reka & Bina)” for the Ministry of Health (‘Main Contract’). The contractual hierarchy is as follows:

(i). By way of a contract dated 7 September 2018, GOM through the Director-General Department of Public Works (‘JKR’) had appointed the JV Company, as the main contractor under the Main Contract with JKR as the Project Director.

(ii). Orangebeam Construction Sdn Bhd (OBC), allegedly a member company of the JV Company, subsequently sub- contracted CLH to perform design, fabrication, and installation of the external facade, canopy roof, and other related works (‘the Project’).

(iii). It is undisputed that CLH completed its role as a subcontractor in the Project until the project’s completion.

The Adjudication Proceedings

The failure of payment in the contractual chain led CLH to file an adjudication proceeding under CIPPA against OBC. On 22 July 2024, CLH initiated adjudication proceedings against OBC to claim an outstanding sum of RM502,187.41.

On 13 January 2025, the Adjudicator delivered the Adjudication Decision in favour of CLH. The Adjudication Decision awarded CLH a total Adjudicated Sum of RM470,405.43, in addition to interest and costs for the legal and adjudication proceedings. The relevant excerpts from the Adjudication Decision are reproduced below (see Encl. 2, Exhibit P-1 at p. 23):

I determine that: a. The Respondent shall pay to the Claimant the sum of RM470,405.43. This is hereby recorded as the Adjudicated Sum; b. The Adjudicated Sum shall be paid on or before 13 February 2025 and this date shall be called the Due Date for Payment of the Adjudication Sum; c. The Respondent is to pay interest at the rate of 5% per annum on RM470,405.43 from 13 January 2025 until the date of full and final payment of the Adjudicated Sum to the Claimant; d. The Respondent is to pay the Claimant legal costs in the sum of RM35,000.00 on or before 13 February 2025; e. The Respondent shall bear in full the costs of adjudication proceedings. These costs include RM17,620.58 being the adjudicators fees (inclusive of SST but excluding disbursements and SST on disbursements) and disbursements of RM108.00 (inclusive of SST) and additionally the sum of RM3,524.12 (inclusive of SST) being the AIAC’s Administrative Fees and the Claimant is to be reimbursed the sum of RM265.00 being the Adjudication Registration Fee and the sum of RM424.00 being the fee for the appointment of the adjudicator and this is also to be paid to the Claimant on or before 13 February 2025.

OBC subsequently failed to comply with the Adjudication Decision, having been wound up on 9 January 2025, a few days prior to the issuance of the Adjudication Decision.

Claim under section 30 CIPAA

Following OBC's non-payment of the Adjudicated Sum and inability to do so, CLH sought to invoke its statutory right to seek direct payment from the project's alleged principal, GOM. On 27 February 2025, CLH's solicitors issued a written request under section 30 of CIPAA (the Section 30 Notice) to the following parties for direct payment of the adjudicated sums (refer Encl. 2,

(i). the Ministry of Health; and

(ii). the Attorney-General Chambers, on behalf of GOM.

GOM did not respond to the Section 30 Notice, compelling CLH to file the current Originating Summons supported by an affidavit-in-support seeking to enforce its claim under section 30 of CIPAA.

The Plaintiff’s claims against the Defendant are for:

(i). RM470,405.43 for the Adjudicated Sum;

(ii). Interest at a rate of 5% per annum on the adjudicated amount, from 13 January 2025 until the date of full settlement;

(iii). Legal costs of RM35,000.00;

(iv). Adjudication costs amounting to RM21,941.70; and

(v). Costs relating to and incidental to application be borne by the Defendant. The Parties’ Submissions 9. The parties’ submissions are straightforward. They revolve around the applicability of section 30 of CIPAA to the Defendant, honing on whether the Defendant is truly the ‘principal’ envisaged within its provisions.

CLH’s Submissions 10. CLH submits that GOM is unequivocally the ‘principal’ under a necessary and broad interpretation of section 4 of the CIPAA, contending that the legislative intent of the Act mandates promoting cash flow through the entire chain of construction contracts.

CLH argues that the GOM, as the ultimate beneficiary and contracting entity of the Main Contract, is inherently connected to the subcontract through OBC because as a 49% shareholder in the JV Company, OBC operated as "one unified entity".

Furthermore, CLH asserts that GOM's defence should fail because it did not issue the mandatory notice required under section 30(2) of CIPAA, which is fatal to its defence that no sums are due or payable, and the evidence adduced by GOM is insufficient to discharge its burden under section 30(5).

GOM’s Submissions 13. GOM rebuts the application by firmly denying it is the ‘principal’ to OBC, asserting that its contractual relationship is solely with the JV Company, an incorporated company with a separate legal entity which CLH cannot presumptively lift the corporate veil against due to the relief remain unpleaded.

GOM argues that CLH failed the fundamental prerequisites of section 30(1) by failing to prove OBC’s non-payment of the adjudicated sum and improper service of the Section 30 Notice. Crucially, GOM stresses that even if it were deemed the ‘principal’, the application must fail because Clause 40.2 of the Conditions of Contract, prohibiting subcontracting without prior written consent (which was absent here), limits the chain of contracts.

Finally, GOM submits that it has discharged its evidential burden under section 30(5) by demonstrating, through Interim Payment Certificate No. 62 and supporting documents, that there is no money due or payable to the JV Company under the contract. Findings and Decision of the Court 16. During the proceedings, CLH sought leave to introduce an additional affidavit via Enclosure 23, arguing it was necessary to regularise annexed documents and introduce crucial supplementary evidence: specifically, a warranty document and site memos, to address the GOM’s contention that they were not the principal. This led to a discussion concerning the delay and the subsequent framing of the argument as one of principal and agent.

This Court finds that the reason tendered for the delay i.e. that the client needed time to retrieve documents spanning three and a half years was not a solid reason to justify the late filing, especially given that the written submissions had already been exchanged.

Crucially, this Court agrees with GOM that characterising the relationship between OBC and the JV Company as a “principal and agent” relationship, subsequent to the affidavits being exchanged and the original premise being that they were merely of the “same standing”, constituted the introduction of a new issue and a new course of action at a late stage. To permit this new argument would have necessitated fresh research and reply, being prejudicial to GOM. Therefore, the introduction of the supplementary affidavit was disallowed.

After perusing the written submissions for the Plaintiff and Defendant, and hearing the arguments presented together with the study of the evidence, this Court has decided to dismiss the Plaintiff’s application in Enclosure 1. The following are this Court’s reasons.

OBC is not the ‘principal’ as defined in section 30 CIPAA

The central issue is whether GOM stands as the principal to OBC for the purpose of direct payment under section 30 CIPAA, given that the main contract was executed between GOM and the JV Company of which OBC is a partner. The section is reproduced below:

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 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 (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.

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).

Section 30 concerns the procedure for a winning party in an adjudication proceeding to recover sums due from the principal of the losing party. Its application hinges upon fulfilling specific statutory prerequisites as described in the authoritative decision of Cabnet Systems (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor [2020] 1 LNS 187; [2020] CLJU 187 where Wong Kian Kheong J (now JCA) expounded the four foundational conditions necessary for the successful invocation of this direct payment mechanism:

(i). The party against whom the adjudication decision was made must have failed to make payment of the adjudicated amount.

(ii). The winning party must have made a written request for payment of the adjudicated amount directly from the principal.

(iii). There must be a sum of money due or payable by the principal to the non-paying party at the time the principal received the written request.

(iv). The principal must subsequently fail to make the direct payment to the winning party.

In a regular construction context, this would have been a straightforward affair where the principal is usually the entity appointing the main contractor. However, the arrangement between GOM, the JV Company and CLH was not as simple as it appears to be.

1.1. Absence of Contractual Nexus: Insufficient Basis to Disregard the JV Entity 23. From the facts and evidence adduced, the legal relationship of the parties are as follows:

(i). GOM appointed the JV Company as the main contractor for the design, construction, equipping and maintenance of the Project (see Encl. 7, Exh. MF-1, p. 17); and

(ii). OBC, a member of the JV Company, appointed CLH as a subcontractor to the Project. The contract is in the form of a letter from OBC to CLH dated 4 May 2021 (see Encl. 2, Exh. P-4, pp. 55–60).

Both parties extensively discuss the decision of Aliza Sulaiman J in Progress Centre Engineering Sdn Bhd v Desaru Corniche Hotel Sdn Bhd & Anor [2023] 12 MLJ 597 to interpret this arrangement . The case revolves around the plaintiff’s application under section 30 against the defendants. My learned sister, Aliza J found that conditions 21(i) and 21(ii) was undoubtedly fulfilled. However, the two defendants, Desaru and MRCB, were in contention as to the identity of the principal where one claimed the other as the actual principal within the meaning of CIPAA. Upon examination of the conduct of parties and the adjudicator’s findings, it was found that MRCB and MRCB Builders (whom were the main contractors) were of equal standing, thus their employer, Desaru, would be the principal within the meaning of section 30.

CLH relies heavily upon the facts and decision espoused in Progress Centre specifically at page 611 to bolster its position that GOM is indeed the principal: [33] In the circumstances, the court is satisfied that a principal-agent relationship between MRCB and MRCB Builders has been established by the plaintiff and MRCB, and this relationship was recognised and accepted by Desaru at all material times during the construction period. [34] By its conduct, Desaru has treated MRCB and MRCB Builders as one and the same. Consequently, MRCB and MRCB Builders have been placed on the same lateral level in the chain of construction contracts as the main contractor for the project and this would mean that Desaru is the employer of the project and the ‘principal’ for purposes of s 30 of the CIPAA.

The rationale advanced by CLH rests on three main pillars related to this precedent: statutory interpretation, commercial reality, and the 'unified entity' doctrine. The following is illustrated by CLH in arguing that OBC and the JV Company operate on a "lateral footing" or as a single unified entity.

CLH submits that, consistent with the legislative intent of CIPAA to promote cash flow, the definition of "principal" under section 4 of CIPAA must be interpreted liberally to include the ultimate beneficiary or paymaster in the construction chain, namely, the GOM. Section 4 says, “principal” means a party who has contracted with and is liable to make payment to another party where that other party has in turn contracted with and is liable to make payment to a further person in a chain of construction contracts 28. CLH emphasises that the phrase “further person in a chain of construction contracts” denotes that the definition of principal is not limited to privity of contracts and cited Progress Centre as an instance where the court allowed a section 30 application against the ultimate principal even though that principal was not directly contracted to the losing party in the adjudication proceedings.

Meanwhile, GOM stresses that to disregard the contractual terms limiting subcontracting without prior consent and to enforce payment against GOM would frustrate the definition of ‘principal’ under CIPAA. Since GOM has no contract with OBC and made no payments to OBC, forcing GOM to pay CLH would leave GOM in a precarious position and unable to easily balance its books, as its contractual liability lay solely with the JV Company.

GOM argues that unlike the situation in Progress Centre, where the principal acknowledged and communicated interchangeably with both the main contractor and its subsidiary, GOM has never acknowledged, communicated with, or made payments to OBC. GOM maintains that it strictly deals with the JV Company and further submitted that in Progress Centre, the parties consistently admitted to operating as principal and agent, a key element absent here.

This Court is agreeable with GOM’s observations in this regard. It is evident within the judgment at page 608 that there was a discussion on the standing of MRCB as the defendant and MRCB Builders, the entity appointing the plaintiff were of equal standing through their conduct:

although in the LoA, MRCB Builders was called the ‘Main Contractor’ and it had appointed the plaintiff as the ‘Sub-Contractor’ for the M&E works, in the adjudication proceedings, MRCB Builders, and in the present suit, MRCB, have both taken the consistent position that MRCB had appointed MRCB Builders to act as MRCB’s agent to carry out all matters necessary relating to the project. MRCB affirmed that it has given MRCB Builders ostensible authority to enter subcontracts with subcontractors for the construction and completion of the project and that MRCB Builders operates as a single economic unit as part of MRCB (see para 9, encl 6). Similarly, the plaintiff’s stand is that MRCB has appointed the plaintiff through its agent, MRCB Builders and therefore the employer and the principal for the project is Desaru (see paras 4 and 5, encl 2) …

Unlike the defendants in Progress Centre, GOM has consistently denied any form of communication with OBC and maintained that, at all material times, communication was always with the JV Company. This is corroborated in the Letter of Demand for Payment from the JV Company (Encl. 7, Exhibit MF-2, p. 91), IPC No. 62 paid to the JV Company (Encl. 7, Exhibit MF-3, p. 95) and even in the contract itself within the notification address in clause 77.3 of the Main Contract which stipulated all communication must channelled to the JV Company’s address (Encl. 7, Exhibit MF-1, p. 76).

CLH seeks to establish OBC and the JV Company as a unified entity through a similar process as in the decision of Yap Chee Hean v Public Investment Bank Bhd [2014] 8 MLJ 494 where a stockbroking firm and their agent is considered a unified entity by conduct. At page 514, Nallini J (now FCJ) described the facts that led to the conclusion of the firm and agent as a “unified entity”: [71] However, for the purposes of the instant case, the contracting parties are plaintiff and the defendant whereby the defendant contracts to purchase and sell shares upon the plaintiff’s express request in return for a fixed fee. As the primary relationship for the purposes of share trading is between the plaintiff and the defendant, it follows that in so far as the plaintiff is concerned, the defendant and Ms Teh comprise one unified entity. In other words, Ms Teh is, in this context, inextricably connected to, or indivisible from the defendant. The dealer is indivisible from the dealer’s representative in so far as the plaintiff’s requirement for the execution of authorised trades is concerned. Put another way, the dealer and the dealer’s representative are indivisible vis-a-vis the plaintiff. The plaintiff would be unable to execute trades on the Bursa without contracting with the defendant. Equally the plaintiff would not be able to give instructions to Ms Teh about his proposed transactions if she were not a licensed dealer’s representative and agent of the defendant. In so far as the plaintiff who is a client is concerned, it is artificial to seek to draw a distinction between the functions and duties of Ms Teh and the defendant. Ms Teh is the defendant’s agent.

CLH asserts that the JV Company (of which OBC held 49% shareholding) and OBC operated as a unified entity since the JV Company did not enter into subcontracts itself. CLH further alleges that OBC functioned as the vehicle and executing arm of the JV Company, appointing all subcontractors, including CLH, for the Project. CLH insists that deriving the relationship of the JV Company and OBC through shared common features, including common directors and corporate secretaries, and operated from the same business and registered addresses, is adequate to infer they functioned as a unified entity.

However, that was not the position of the authorities relied upon by CLH concerning agency. In Yap Chee Hean, the defendant’s agent was only capable of performing their role because of the agency conferred upon them, without which, would not have been able to be executed, whereas in Progress Centre, there was clear evidence of agency between the principal and agent in the form of contract and admission by both parties.

From both Progress Centre and Yap Chee Hean, it is clearly evident that there is a fundamental flaw in the logic CLH sought to propose. As CLH does not bring the JV Company as defendants to the suit, unlike Aliza Sulaiman J, this Court does not have the benefit of a deposition to explain the relationship between the JV Company and OBC. It is worth reiterating that the court is not in the business of drawing red lines to connect the dots between seemingly related facts. It is the cornerstone of the law of evidence that the burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence. To infer the relationship of OBC and the JV Company in the manner proposed would be entirely speculative. What is evident from the facts adduced from the affidavits is that OBC is capable of acting without the JV Company’s involvement and vice versa, and therefore, they are divisible entities. There is also no credible evidence presented to establish that the JV Company or OBC admits that they are one and the same. Thus, this Court finds CLH’s burden of proof to show that OBC had appointed CLH under the JV Company’s authority remain undischarged.

1.2. JV Company is an incorporated company, and is a separate legal entity from its members 37. CLH also attempts to circumvent the lack of direct contractual privity by asserting that the JV Company and OBC operated as one unified entity or that OBC acted as the agent for the JV Company. CLH advanced this argument based on shared characteristics, such as common directors, shareholders, and operating addresses.

However, this approach runs contrary to the established legal principles governing incorporated entities. GOM correctly highlighted that CLH cannot and should not be allowed to presumptively lift the corporate veil to allege that OBC and the JV Company are interchangeable. The decision in Malaysia Offshore Mobile Production (Labuan) Ltd v PCPP Operating Company Sdn Bhd & Ors [2018] MLJU 1913 by Noorin Badaruddin J (as she then was) explicitly supports the reluctance to lift the corporate veil of an incorporated joint venture: [29] In Adams v Cape Industries Plc [1991] 1 ALL ER 929, the English Court held as follows: “..we do not accept as a matter of law that the court is entitled to lift the corporate veil as against a defendant company which is the member of a corporate group merely because the corporate structure has been used so as to ensure that the legal liability (if any) in respect of particular future activities of the group (and correspondingly the risk of enforcement of that liability) will fall on another member of the group rather than the defendant company. Whether or not this is desirable, the right to use a corporate structure in this manner is inherent in our corporate law…” [30] In applying the principle in Adams (supra), it is of the considered view that the Court cannot simply lift the corporate veil of the 1st Defendant merely because the corporate structure of the 1st Defendant has been used so as to ensure that the legal liability in respect of the particular future activities of the 1st Defendant in essential the MOPU Contract and correspondingly the risk of enforcement of that liability.

Verily, the conditions required to pierce the corporate veil are settled principles. The Federal Court in Giga Engineering & Construction Sdn Bhd v Yip Chee Seng & Sons Sdn Bhd & Anor [2015] 6 MLJ 449 and Solid Investments Ltd v Alcatel-Lucent (M) Sdn Bhd [2014] 3 MLJ 785 has described two conditions to be fulfilled cumulatively for the piercing of the corporate veil:

(i). there must be evidence either of actual fraud or some conduct amounting to fraud in equity; and

(ii). it is in the interests of justice to do so.

With respect, none of these conditions were ever pleaded by CLH, let alone proven by way of evidence or affidavits. In circumstances where the contract is concluded between a party and a separate legal entity and where the party consistently communicates with and issues payments to the latter, the bare assertions and presumptive arguments regarding shared characteristics are insufficient. It is not open to the courts to disregard the corporate veil purely on the ground that it is in the interests of justice to do so (see Law Kam Loy v Boltex Sdn Bhd [2005] MLJU 225; [2005] 3 CLJ 355). The purpose of setting up an incorporated JV is to maintain a separate legal entity and insulating its members from liability. To agree to CLH’s proposition would be tantamount to imposing liability from individual acts of a member company against the whole corporate entity. This runs contrary to the very principles and protection afforded to a company enshrined in the Companies Act 2016.

Hence, this Court is of the opinion that there is no established contractual chain linking GOM to OBC, and thereafter to CLH. Therefore, it is this Court’s finding that CLH has failed to show that GOM is the principal of their subcontract under section 30.

There are no monies due or payable to JV Company by GOM

The rule of thumb is that the evidential burden to prove that there is no money due or payable shifts and is only triggered if the requirement in section 30(5) is met. For ease of reference, the mandatory provision of section 30(5) is reproduced here:

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).

In JDI Builtech (M) Sdn Bhd v Danga Jed Development Malaysia Sdn Bhd (previously known as Greenland Danga Bay Sdn Bhd) [2024] 4 MLJ 29, Lee Swee Seng JCA (now FCJ) at page 44 stresses that section 30(5) is a mandatory pre-requisite to invoke provisions of section 30: [33] The rationale for making the condition in s 30(5) an essential pre-condition is not difficult to find. It is that if the subcontractor had done the work and an adjudicated amount is due under an adjudication decision, the main contractor ought to be making payment to the subcontractor armed with an adjudication decision in its favour against the main contractor. It stands to reason that if in such a situation, the principal to the main contractor has a sum of money owing to the main contractor, then that sum of money or so much of it not exceeding the adjudicated sum should be ordered to be paid by the principal direct to the subcontractor.

In the case of a subcontractor who do not have a contractual relationship with the principal, Aliza J discussed in Glocal Tech Engineering Sdn Bhd v Panzana Enterprise Sdn Bhd [2021] MLJU 474 at para. 34 and found that the evidential burden falls on the principal: [34] In my view, the opening words in sub-s 30(5) CIPAA viz. “This section shall only be invoked if …” clearly denote a mandatory condition that an applicant seeking direct payment from the principal can only invoke the provision under s 30 CIPAA if there is money is due or payable by the principal to the party against whom the adjudication decision was made at the time when the principal received the written request for direct payment of the adjudicated amount. Since the applicant has no contractual relationship with the principal and thus would have no knowledge or information as to whether there is indeed money due or payable by the principal to the losing party in the adjudication proceeding, the evidential burden then falls on the principal to show that there is in fact no such money which is due or payable. [emphasis added]

To address this, GOM affirms that all payments related to the relevant scope of works (Building Works, which included the alleged works done by CLH) had been made to the contracted party, the JV Company, and thus no payment is due and payable.

For this purpose, GOM has forwarded the Interim Payment Certificate No. 62 (IPC No. 62) dated 19 February 2025, along with annexures such as the Contract Ledger, Summary of Payment, Certificate of Practical Completion, and payment instructions. This documentation indicates that GOM had made a total payment of RM72,956,075.42 for the Building Works scope, being the entirety of the sum allocated for that scope, and that IPC No. 62, being the final interim payment certificate, shows that there is no more money due or payable to the JV Company under the Main Contract.

CLH challenges this, arguing that the failure of GOM to issue the mandatory notice under section 30(2) is fatal to the defence that there is no monies due or payable. Furthermore, CLH argues that the single IPC No. 62 and its annexures are insufficient to discharge the evidential burden, citing the need for proof of all previous payments, final account documents, and issued certificates from the Project Director, who contractually is the Department for Public Works.

CLH also cites five cases to support its contention that GOM’s IPC No. 62 is untrustworthy. This Court finds that none of them supports CLH’s contention that there is a need for the defendant to show “all of their work”. The only common thread between them is that every document that is exhibited by their respective defendants is a document capable of showing the project’s financial standings, and whether payment has truly been made to the main contractor. A multitude of documents have been used to exhibit this:

(i). A statement of account for a reconciliation exercise (PCom Pacific Sdn Bhd v Apex Communications Sdn

(ii). A statement of final account (LDE Project Sdn Bhd v Kay Pride Sdn Bhd [2024] MLJU 1459; and HSL Ground Engineering Sdn Bhd v Civil Tech Resources Sdn Bhd and another case [2021] 8 MLJ 347)

(iii). Three statements of final account (Otis Elevator Company (M) Sdn Bhd v Desaru Convention Centre Sdn Bhd and other cases [2023] 1 LNS 769)

(iv). Numerous payment vouchers, official receipts, and director’s reports and audited financial statements (Lua Yik Hor v KTCC Mall Sdn Bhd [2022] MLJU 3244)

With relation to the required evidence, this Court agrees with GOM’s observation. Evidence should not be voluminous for the sake of it, with deference to the description Wong Kian Kheong J (as he then was) provided in Lua Yik Hor at para 21. Nevertheless, if a single document is sufficient to prove the case, then it would be appropriate to provide that document. The court will still subject these documents to rigorous scrutiny to ascertain whether payment is due and payable to the winning party of the Adjudication Decision. It is only natural that brevity benefits such an exercise.

The document exhibited by GOM, i.e. IPC No. 62 appears to do so. The IPC has shown not only a summary of the payment as to the date of the claim, but it also particularises known subcontractors in Annex A (which CLH is absent), and itemisation of payments made together with their respective Payment Instructions (Arahan Pembayaran). The level of granularity leaves no stone unturned and showcases without doubt that the payment have been disbursed. The specific section relating to CLH’s claim is within “Section 3: Building Works” (Encl. 7, Exhibit MF-3, p. 154). This section of the IPC indicates that the works were at 100% completion, and all sums were disbursed for the work done. The only aspects not completed were at the Preliminaries and Turnkey Elements, Environmental Protection and Enhancement Requirements, Provisional Sum, and Maintenance Works sections which brings the Project at 98.98% completion and 99.02% of the budget disbursed.

In the above cited cases by CLH, the defendants’ accounts were dismissed because of reluctance to show documents to prove it (see Lua Yik Hor), because of the lack of credibility due to being suspicious (see HSL Ground Engineering), unsupported by cogent substantiating documents (see PCom Pacific), or a moiety remain unpaid (see LDE Project). These issues are not apparent in this Court’s inspection of the accounts or books provided by GOM in their affidavit-in-reply.

For that reason, this Court is satisfied with the documentation tendered by GOM. As CLH correctly notes that case law does not mandate a particular format for documentation pertaining to money payment, GOM’s submission of IPC No. 62 and its annexures, including the Contract Ledger, Summary of Payment, and Certificate of Practical Completion, sufficiently provides the details concerning the work done, its valuation, and payments made to the JV Company.

Based on this evidence, it is established that money had been paid to the main contractor for that particular part of the project. Given that the GOM was unaware of CLH’s involvement, and monies had already been disbursed to the party with whom GOM had contracted i.e. the JV Company, the documentation is sufficient to establish the fact that money has been paid and there is nothing left for direct payment to CLH.

Irregular Service of the Section 30 Notice 54. Service of a notice to a principal under section 30 has been well discussed by Wong Kian Kheong J (now JCA) in Cabnet Systems in the form of four foundational conditions:

(i). The party against whom the adjudication decision was made must have failed to make payment of the adjudicated amount.

(ii). The winning party must have made a written request for payment of the adjudicated amount directly from the principal.

(iii). There must be a sum of money due or payable by the principal to the non-paying party at the time the principal received the written request.

(iv). The principal must subsequently fail to make the direct payment to the winning party.

CLH claims to have submitted its written request dated 27 February 2025 for direct payment to the Ministry of Health and GOM (via the Attorney General’s Chambers).

GOM vehemently asserts that CLH has failed to comply with the requirements of section 30(1), specifically regarding the proper delivery of the written request for direct payment:

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.

The GOM contends that CLH’s service was improper because the underlying contract was entered into through the JKR, not the Ministry of Health Malaysia. Furthermore, the contract stipulated in Clause 77.3 that the service address for the Government is the address of JKR’s Kedah branch and not any other parties or addresses:

77.3 The address of the Government and the Contractor is as shown below or such other address as either party may have notified the sender: to the Government: Address: PENGARAH, JABATAN KERJA RAYA NEGERI KEDAH DARUL AMAN, Tingkat 5, Bangunan Sultan Abdul Halim, Jalan Sultan Badlishah, 05582 Alor Setar, Kedah Darul Aman 58. CLH’s counterargument is that Clause 77.3 is a contractual provision concerning the GOM and governs service relating only to the Main Contract. CLH maintains that this clause has nothing to do with service of documents under the statutory act of CIPAA.

GOM's position, however, was that the contractual stipulation regarding the address for service must be adhered to, and failure to do so meant the fundamental prerequisite for invoking Section 30 CIPAA was not met. GOM argues that CLH failed to comply with the second requirement of subsection 30(1) of CIPAA 2012—that the written request must be properly served. GOM countered CLH's implicit assertion that the general rules of serving the GOM (i.e., via AGC) suffice, by stating that: a) GOM entered into the contract for the Project (Hospital Pendang) through Ketua Pengarah Jabatan Kerja Raya Malaysia (JKR), not the Ministry of Health Malaysia; b) The contract itself provided the address of service for GOM for the purpose of this project under Clause 77.3; and c) CLH did not provide any reasons for choosing to issue the written request to the Ministry of Health Malaysia, which is not a party to the contract.

The core of GOM's rebuttal is that proper receipt of the written request is the prerequisite that triggers all subsequent mandatory statutory duties under CIPAA. GOM submitted that the principal’s duty only begins upon the receipt of the written request. Since the notice was not served on the correct party (JKR as stipulated by Clause 77.3/contracting party), GOM asserts that it never received the written request to enable the exercise of assessing whether money was due or payable. This Court finds this strict interpretation to be fair, just, and consistent with commercial common sense.

Consequently, GOM cannot be held responsible for not responding to the written request or for not issuing the mandatory notice pursuant to Section 30(2) CIPAA 2012.

Indeed, this is further strengthened by premise of the learned Federal Counsel for GOM during oral submission that while the AGC handles civil suits, service of a letter on the vast AGC department often results in delays in sending it to the correct department, which should have been JKR—the right party to the contract. Without a written request properly served, Section 30(2) cannot be triggered, meaning there was no failure on the GOM's part to comply with the mandate.

This Court finds that the established case law GOM relied on provides solid support to this. It is to be emphasized that the failure to meet the prerequisites of Section 30(1), including proper service, renders the application defective. The requirement is that the claimant must prove the four conditions for Section 30 to apply, as set out in Cabnet Systems (Supra). In particular, one of these conditions is that the winning party

(X) has made a written request for the principal (Z) to pay (the 2nd Condition). Clearly, CLH has failed to satisfy this condition.

GOM also refers to the Court of Appeal case JDI Builtech (Supra) to support their argument. While this case primarily deals with Section 30(5) (money due or payable), GOM argues that, to which this Court agrees, the whole of Section 30 is only invoked if the fundamental conditions are met. The statutory obligations under subsections 30(2) and (3) will only be triggered if the requirement under subsection 30(5) (existence of money due or payable) has been met. By extension, if the earlier requirement of proper service under Section 30(1) is unmet, the section cannot be invoked.

In summary, this Court is with the GOM's rebuttal that although CIPAA creates statutory rights, these rights are contingent on CLH meeting the initial procedural requirement of serving the correct party as determined by the underlying contract (Clause 77.3 pointing to JKR) to ensure the notice was effectively "received" and the mandatory subsequent statutory duties could be practically executed.

Thus, it is the finding of this Court that CLH fails to definitively satisfy fundamental prerequisites for invoking section 30. Specifically, the evidence regarding the proper service of the Section 30 Notice which was served on the Ministry of Health and not the designated contracting body, JKR, as stipulated in the contract . As convincingly contested by GOM, this failure constitutes a serious and unresolved procedural hurdle. CLH’s failure to properly trigger the mandatory obligations under section 30(2) prevents the imposition of legal consequences upon GOM. Conclusion 67. The gravamen of the matter rested upon the CLH's failure to sufficiently establish that GOM, being the principal to the JV Company, is also the principal to OBC for the purposes of section 30 of CIPAA.

This Court must conclude that CLH's position, seeking to invoke the direct payment mechanism, is fundamentally compromised by the fact that the principal had never acknowledged CLH, and that CLH has failed to adduce any form of cogent evidence to show the relationship between OBC and the JV Company. The attempts to extend the liability by establishing a "single entity idea" or "unified entity idea" between OBC and the JV Company are insufficient since the existence of the joint venture structure serves the purpose of maintaining a separate legal entity. This failure to prove the relationship of principal and main contractor between GOM and OBC would inevitably translate to the relief sought under section 30 being unenforceable against GOM.

Furthermore, regarding the question of whether money is still due or payable by GOM to the contractor, the documentation adduced i.e. IPC No. 62, is deemed sufficient to establish that payment had been made for the particular part of the project, leaving nothing left for the payment. Hence, section 30(5) remains unfulfilled and the fact does not trigger section 30 to begin with.

Thus, the Plaintiff’s application for direct payment fails decisively, resting upon the cumulative failure to satisfy the foundational prerequisites of CIPAA. Specifically, this Court finds that the Plaintiff failed on three material fronts: first, by failing to establish that the Defendant qualified as the requisite principal to OBC for the purposes of section 30; second, by failing to surmount the evidential burden confirming that monies were due or payable by the Defendant to the JV Company, thereby leaving the mandatory condition under section 30(5) unfulfilled; and third, by failing to meet the procedural hurdle of proper service required under section 30(1), which limited the statutory consequences that could be imposed upon the Defendant.

For these reasons, the Plaintiff's Enclosure 1 is hereby dismissed, and this Court orders the costs of RM7,000 to be paid by the Plaintiff to the Defendant, subject to allocatur. Dated: 13th November, 2025 -------------------------------------------------------------------- DR. JOHN LEE KIEN HOW @ MOHD JOHAN LEE JUDGE HIGH COURT OF MALAYA ALOR SETAR For The Plaintiff : Naveen Sri Kantha (together with Ng Zhi Keat) Messrs. Lee & Poh Advocates & Solicitors For The Defendant : Khairun Neesha binti Raj Mohamed Federal Counsel Attorney-General Chambers Index of Authorities Statutes Construction Industry Payment and Adjudication Act 2012, section 30 ...................................... 9, 10, 11, 12, 13, 19, 21, 24, 27, 28, 29 Construction Industry Payment and Adjudication Act 2012, section 30(1) ........................................................................................7, 25 Construction Industry Payment and Adjudication Act 2012, section 30(5) .................................................................................. 7, 19, 29 Construction Industry Payment and Adjudication Act 2012, section 4 ................................................................................................6, 13 Cases Cabnet Systems (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor [2020] 1 LNS 187; [2020] CLJU 187 ..................................... 11, 27 Giga Engineering & Construction Sdn Bhd v Yip Chee Seng & Sons Sdn Bhd & Anor [2015] 6 MLJ 449 .............................................. 20 Glocal Tech Engineering Sdn Bhd v Panzana Enterprise Sdn Bhd [2021] MLJU 474 ........................................................................ 23 HSL Ground Engineering Sdn Bhd v Civil Tech Resources Sdn Bhd and another case [2021] 8 MLJ 347 ...................................... 25, 26 JDI Builtech (M) Sdn Bhd v Danga Jed Development Malaysia Sdn Bhd (previously known as Greenland Danga Bay Sdn Bhd) [2024] 4 MLJ 29 ..................................................................................... 22 Law Kam Loy v Boltex Sdn Bhd [2005] MLJU 225; [2005] 3 CLJ 355 ................................................................................................... 21 LDE Project Sdn Bhd v Kay Pride Sdn Bhd [2024] MLJU 1459 25, 26 Lua Yik Hor v KTCC Mall Sdn Bhd [2022] MLJU 3244 ............ 25, 26 Malaysia Offshore Mobile Production (Labuan) Ltd v PCPP Operating Company Sdn Bhd & Ors [2018] MLJU 1913 ............. 19 Otis Elevator Company (M) Sdn Bhd v Desaru Convention Centre Sdn Bhd and other cases [2023] 1 LNS 769 ............................... 25 PCom Pacific Sdn Bhd v Apex Communications Sdn Bhd & Anor [2020] MLJU 118 .................................................................. 25, 26 Progress Centre Engineering Sdn Bhd v Desaru Corniche Hotel Sdn Bhd & Anor [2023] 12 MLJ 597 ............................................ passim Solid Investments Ltd v Alcatel-Lucent (M) Sdn Bhd [2014] 3 MLJ 785 ............................................................................................. 20 Yap Chee Hean v Public Investment Bank Bhd [2014] 8 MLJ 494 16, 18