Fortune Facade Treatment Sdn Bhd v 1. ) Pung Tiong Gee (WA-24C-159-10/2024)

PUNG TIONG CHENG (Trading as partnership under the name and style of PUNG & TEE ALUMINIUM WORK (Registration No. 001013755W) …DEFENDANTS Heard Together With ORIGINATING SUMMONS NO. WA-24C-159-10/2024 In the matter of an Adjudication between Pung Tiong Gee and Pung Tiong Cheng (Trading As Partnership Under The Name And Style of Pung & Tee Aluminium Work) and Fortune Façade Treatment Sdn Bhd [Adjudication No. AIAC/D/ADJ- 5377-2024]; And In the matter of Adjudication before Khong Zhi Jian; And In the matter of an Adjudication Decision dated 19.8.2024; And In the matter of Section 15 (a), 15(b), 15(c) and 15(d) of the Construction Industry Payment and Adjudication Act 2012; And In the matter of Order 7 and/or Order 28 and/or Order 69A and/or Order 92 rule 4 of the Rules of Court 2012. FORTUNE FAÇADE TREATMENT SDN BHD …PLAINTIFF

PUNG TIONG CHENG (Trading as partnership under the name and style of PUNG & TEE ALUMINIUM WORK (Registration No. 001013755W) …DEFENDANTS Also To Be Heard Together With ORIGINATING SUMMONS NO. WA-24C-181-11/2024 In the matter of an Adjudication (Reference No. AIAC/D/ADJ-5377- 2024) between Pung Tiong Gee and Pung Tiong Cheng as the Claimants and Fortuna Façade Treatment Sdn Bhd as the Respondent; And In the matter of Adjudication Decision dated 19.08.2024 issued by Khong Zhi Jian; And In the matter of Section 28 of the Construction Industry Payment and Adjudication Act 2012 (‘CIPAA’); And In the matter of Order 69A Rules 2 and 5 of the Rules of Court 2012; And In the matter of Order 92 Rule 4 of the Rules of Court 2012.

PUNG TIONG CHENG (Trading as partnership under the name and style of PUNG & TEE ALUMINIUM WORK (Registration No.001013755W …PLAINTIFFS FORTUNE FACADE TREATMENT SDN BHD …DEFENDANT GROUNDS OF JUDGMENT (Enclosure 1) [1] Originating Summons No. WA-24C-159-10/2024 (OS 159) is Fortune Façade Treatment Sdn Bhd (“FFT”) application to set aside the Adjudication Decision dated 19.8.2024 (“AD”) pursuant to section 15 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) whilst Originating Summons No. WA-24C-158-10/2024 (OS 158) is a stay application by FFT under section 16 of CIPAA to stay the AD pending the disposal of the Arbitration proceedings or the Court finally determining the disputes between the parties or the disposal of OS 159. [2] There is also Originating Summons No. WA-24C-181-11/2024 (OS 181) which is Pung Tiong Gee and Pung Tiong Cheng (“PT”) application to enforce the AD under section 28 CIPAA. [3] In essence FFT had contended that the AD should be set aside based on inter alia:

3.1 the said current Adjudication proceedings which was now before this Court (2nd Legal Claim) involved payment certificate no 17 which was the subject matter of a previous Adjudication proceedings (1st Legal Claim) where there was a full and final settlement agreement entered between the parties

3.2 its filing of a bare Adjudication Response due to a 1st direction given by the Adjudicator which had the effect of the Adjudicator dismissing its application for an interrogatories and barring FFT from filing a proper Adjudication Response [4] FFT thus submits that the above grounds shows in effect that a breach of natural justice has occurred and/or that the Adjudicator had acted in excess of his jurisdiction, whilst PT submits in opposition thereto that the grounds of FFT do not warrant or justify the Setting Aside Application. Background Facts [5] Kerajaan Negeri Pahang is the Employer for the project known as “CADANGAN PEMBINAAN PUSAT PENTADBIRAN SULTAN AHMAD SHAH DI ATAS LOT 26179, MUKIM KUALA KUANTAN DAERAH KUANTAN, PAHANG DARUL MAHMUR” (“the Project”), also known as “Sultan Ahmad Shah Administration Centre”, which consists of 8 blocks, i.e., Block A to Block G and Porte Cochere in Block G. … [6] Gabungan Strategik Sdn Bhd (“GSSB”) is the main contractor of the Project. GSSB appointed 2 main sub-contractors to carry out façade works, namely FFT and a company known as Nakakumi Façade Sdn Bhd, a company owned by PT (“NKSB”). PT are the majority shareholders in NKSB, who identified itself as “formerly named Pung & Tee Aluminium Works” 8. PT and NKSB are one and the same. [7] GSSB appointed FFT for 6 blocks via 2 contracts. These 2 contracts are collectively known as “the Main Sub-Contracts”.

By a letter of award dated 2.9.2019, GSSB appointed FFT as the subcontractor to execute and complete façade works for 4 blocks in the Project, namely Package Block A, Porte Cochere, Block B, and Block G.

(ii) By a letter of award dated 21.10.2019, GSSB appointed FFT as the sub-contractor to execute and complete façade works for 2 blocks in the Project, namely Package Block D and Block F. [8] The façade works for the remaining blocks, i.e., Block C and Block E were awarded to NKSB by GSSB. FFT NKSB Main Sub-Contract Date Block Block 2.9.2019 Block A Porte Cochere Block B Block G Block C

Block E

10.2019 Block D Block F [9] Out of the 6 blocks awarded to FFT, the latter had appointed PT as the subcontractor for 5 blocks in the following contracts:- a) By a letter of award dated 4.3.2021, FFT appointed PT for Block D and F for RM1,926,080-00 (“Sub-Contract for Block D&F No. 1”). b) By a letter of award dated 16.3.2022 (reference no. FTE18-034- 123- PTAW-LA), FFT appointed PT for the remaining works for Block D and F for RM222,362-00 (“Sub-Contract for Block D&F No. 2”). c) The sub-contracts in (a) and (b) are total sub-contracts and are collectively referred to as “Sub-Contracts for Block D&F”. d) By a letter of award dated 16.3.2022 (reference no. FTE18-037- 141- PTAW-LA), FFT appointed PT for Porte Cochere at Block G for the Project for a sub-contract sum of RM119,566-00 (“Sub-Contract for Block G”) 11. This is a total sub-contract. e) By a letter of award dated 17.3.2022, FFT appointed PT for Block A for RM277,923-00 (“Sub-Contract for Block A”). [10] Due to various delays and problems in the works executed by PT, GSSB edged FFT into “surrendering” its sub-contract works and was subsequently terminated in 2022. FFT then found out GSSB had given its sub-contract works to NKSB for RM13,091,854.44. [11] Evidently, PT knew about the termination of the Main Sub-Contracts in 2022 as they took over FFT’s works through NKSB. a) In a letter dated 6.10.2022, PT wrote to FFT, recognizing the termination between FFT and GSSB, stating that they had handed over their works but were incomplete “due to stop work instruction and termination issue” b) By a letter of award dated 6.3.2023, GSSB appointed NKSB to “Execute And Completion Of Façade Works for Block A, B, D, F, G and Skylight” 15 for RM13,091,854.44, effectively was taking over FFT’s scope of works. In short, PT who took over these works. They knew FFT was no longer on the Project. c) By a letter dated 20.3.2023, GSSB wrote to NKSB to the attention of the 1st Defendant in OS 159 namely Mr. Pung Tiong Gee that FFT’s Main Sub-Contracts had been terminated the “since August 2022”. [12] As a result of the termination of the Main Sub-Contracts, the Sub-Contracts for Block D&F, Sub-Contract for Block G and Sub-Contract for Block A came to an end. [13] FFT subsequently found out that PT and/or NKSB had allegedly wrongfully worked with GSSB to take over FFT scope of works. Instead of receiving sub-contracts of RM2,545,931.00 for the works, now PT was to received RM13,091,854.44 for the works. [14] The works done for Sub-Contracts for Block D&F were certified separately from works done for Sub-Contracts for Block A. As at the termination of the Main Sub-Contracts, PT claims RM387,306.12 was outstanding.

PT submitted the interim progress claim No. 18R dated 10.11.2022 seeking certification for RM133,167-66 for Block D&F to FFT which shows RM307,387-32 payable including certified amount in Payment Certificate No. 16 dated 30.6.2022 and No. 17 dated 31.7.2022 for RM58,581.12 and RM5,279.10 respectively.

FFT issued Payment Certificate No. 3 and No. 4 for RM48,288.58 and RM31,630-22 respectively for Block A. [15] On 2.8.2023, PT initiated legal action in the Kuala Lumpur High Court for RM143,779-02 consisting of the following claims (“the 1st Legal Claim”).

RM58,581-12 for Block D&F in Payment Certificate No. 16 dated 30.6.2022 stated above (“PC 16 [D&F]”);

RM5,279-10 for Block D&F in Payment Certificate No. 17 dated 31.7.2022 stated above (“PC 17 [D&F]”);

RM48,288-58 for Block A in Payment Certificate No. 3 dated 31.7.2022 stated above (“PC 3 [A]”); and

RM31,630-22 for Block A in Payment Certificate No. 4 dated 31.8.2022 stated in paragraph 3.10(b) above (“PC 4 [A]”); [16] After initiation of the 1st Legal Claim, FFT and PT reached a settlement, with FFT paying RM143,779-02 in 2 instalments27 (“Settlement Agreement”). As a result, PT discontinued the legal action in Court on 27.9.2023 to resolve the entire dispute between FFT and PT. [17] After the last instalment, on 29.3.2024, PT served the Payment Claim dated 29.3.2024 under CIPAA 2012 on FFT (“the 2nd Legal Claim”) 29 allegedly again demanding payments for the Sub-Contracts for Block D&F . [18] The 2nd Legal Claim for RM243,527-10 which they admitted were due before the 1st Legal Claim as follows: a) The RM133,167-66 in Interim Claim No.18R dated 10.11.2022 in Item [A] of Table 4 above, which they claimed was due on 25.12.2022 nearly a year before the 1st Legal Claim was initiated on 2.8.2023. b) Purported retention sums totaling RM110,359-44 which they claimed were due before the 1st Legal Claim on 2.8.2023. [19] FFT vehemently opposed PT’s claim and served a Payment Response dated 15.4.2024 on PT contending there was a settlement of the dispute which meant any adjudicator would have no jurisdiction to adjudicate on the same. [20] Nevertheless, on 17.5.2024, PT issued a Notice of Adjudication dated 17.5.2024, initiating adjudication proceeding against FFT (“the Adjudication Proceeding”). [21] The Adjudicator issued the adjudication decision dated 19.8.2024 (“Adjudication Decision”) allowing PT’s claim. PT immediately issue a section 466 notice dated 4.10.2024. [22] FFT filed an application for a Fortuna Injunction on 14.10.2024 whereupon PT gave an undertaking not to file any winding up petition until disposal of these 3 originating summonses. It was also then that PT filed OS 181 / Enforcement Application. [23] FFT says the Adjudication Decision is bad in law. [24] FFT received a Notice of Acceptance of the Appointment to Act as Adjudicator dated 13.6.202433. The appointed adjudicator (“Adjudicator”) directed the parties to contribute to the advance security deposit (“ASD”) and directed the PT to submit the Adjudication Claim by 11.7.2024. [25] On 11.7.2024, PT submitted an Adjudication Claim dated 11.7.202434. The due date for FFT to submit the Adjudication Response according to section 10 of CIPAA 2012 was 25.7.2024. [26] 3 days after PT’s Adjudication Claim, by a letter dated 14.7.2024 35, the Adjudicator wrote to state that neither party had paid the ASD and directed both parties to pay the ASD on or before 22.7.2024. [27] The Adjudicator directed under sections 25(a), 25(j) and 26(2)(b) of CIPAA 2012 in paragraph 4(b) that FFT shall automatically be “barred from submitting an adjudication response” if it does not pay the ASD on or before the dateline on 22.7.2024 (“the 1st Direction”). “4. Therefore, pursuant to ss.25(a), 25(j) & 26(2)(b), CIPAA 2012, I now direct that both the Claimant and the Respondent must pay the deposit on or before 22.07.2024 and also further direct that the following shall automatically apply in the event of any relevant non-compliance: …

Where the Respondent does not pay the deposit by said due date, the Respondent will be barred from submitting an Adjudication Response and the Claimant shall thereafter on or before 29.07.2024 pay the Respondent’s deposit on behalf of the Respondent, further failing which, the time limit for me to furnish my adjudication decision will be extended in perpetuity and time to calculate my due date to submit the adjudication decision will only begin to run upon payment made in full to the AIAC and upon that notification of payment to me; and…” [Emphasis added] [28] FFT had made its position that the initiation of the adjudication proceeding by PT was allegedly an abuse of the statutory process as parties had already settled the Dispute in its Payment Response dated 15.4.2024. [29] Thereafter, despite allegedly being barred on 24.7.2024, FFT submitted a bare and incomplete Adjudication Response dated 24.7.2024 as an attempt to formally meet its obligation under section 10 CIPAA 2012. [30] By a letter dated 29.7.202437, a week after the 1st Direction has taken effect on 22.7.2022, the Adjudicator directed under sections 19 25(a), 25(c), 25(g), 25(j), 26(2)(a) and 26(2)(b) of CIPAA 2012 that the parties file their submissions to address his 1st Direction (“the 2nd Direction”). At the same time, the Adjudicator directd that the filing of the Adjudication Reply by PT which was due on 31.7.2024 is “kept in abeyance until further directions”. “4. Therefore, pursuant to ss.25(a), 25(c), 25(g), 25(j), 26(2)(a) & 26(2)(b) CIPAA, I am now directing parties as follows:

Parties are to provide brief written submissions and/or written responses by 02.08.2024 and on or before 6.00pm, pertaining to my directions as per my letter dated 14.07.2024 at paragraph 4(b): … i. For the Claimant, whether the Claimant is objecting to the submission of the Adjudication Response in view of the non-compliance for the payment of its deposit and supported with any other grounds to substantiate the objection (if any); and ii. For the Respondent, to furnish reasons why the Respondent should not be barred from submitting its Adjudication Response and/or to have its Adjudication Response disregarded, in view of the Respondent’s non-compliance. …

Pending conclusion of submissions as per paragraph 4(a) and determination on the regularity of the Adjudication Response, the submission of an Adjudication Reply by the Claimant is kept in abeyance until further directions. Where no submissions are forthcoming, I will make any determination as may be just and proper in the circumstances of this noncompliance.

Take further notice that in the absence of any submissions from the Claimant, I will issue further directives assuming that the Claimant has no objections over the Respondent’s noncompliance, and where the Respondent does not offer any submissions, such further directives will be issued on the assumption that the Respondent admits to its noncompliance and that the Respondent has no justifiable excuse for the same.” [Emphasis Added] [31] By a letter dated 1.8.202438, PT stressed that it had no objection to FFT’s submission of the Adjudication Response to avoid any breach of natural justice, biasness or prejudice. [32] By a letter dated 2.8.2024 39 , FFT stated that it had been barred from “submitting an Adjudication Response, and by extension to participate in the proceedings, pursuant to the 1st Direction Under Sections 25 and 26 which had automatically applied” and because of that FFT had not exercised its rights under CIPAA 2012 to make any applications since 14.7.2024. It also stressed that as a result of the 1st Direction, it had only filed a bare Adjudication Response. [33] By a letter dated 3.8.2024 40, the Adjudicator after reading the Belated Submissions On The 1st Direction, decided to “admit” the Adjudication Response but yet directed the parties to “respond” to the Belated Submissions On The 1st Direction (“the 3rd Direction”). [34] As FFT has earlier claimed that it been barred from participating in the adjudication by the 1st Direction, and its Adjudication Response was bare and incomplete, on 8.8.2024, FFT applied for the following orders and directions:- “3. … (a) that the Respondent be allowed to serve on the Claimant interrogatories in writing, pursuant to section 25(k) of CIPAA 2012, a copy of which is served herewith in Appendix A;

that the Claimant shall give evidence on oath to answer the questions in the interrogatories, pursuant to section 25(l) of CIPAA 2012, within 5 working days from the date the Respondent serves the interrogatories on the Claimant;

that the Claimant produce the documents referred to in the interrogatories pursuant to section 25(b) of CIPAA 2012;

that the Respondent be allowed to submit a supplementary Adjudication Response or re-file the Adjudication Response, within 5 working days from the date the Claimant serves the answers to the questions in the interrogatories on the Respondent.” [35] By an email dated 11.8.202443, the Adjudicator requested PT to respond to FFT’s application by 14.8.2024. By a letter dated 14.8.202444, PT replied that stating very clearly “..the Claimants state that the Claimants have no objection to the Respondent’s request for filing a supplementary Adjudication Response or refile Adjudication Response”. [36] By a letter dated 15.8.2024, the Adjudicator dismissed FFT’s application for interrogatories, i.e., in paragraph 3(b) of FFT’s letter dated 8.8.2024, but allegedly did not address FFT’s application to file a supplementary Adjudication Response or re-file the Adjudication Response. [37] After dismissing the application for interrogatories on a Thursday, within 1 working day, whilst FFT was still waiting for a decision on the Adjudication Response, the Adjudicator issued the Adjudication Decision on 19.8.2024, Monday allowing PT’s claim. Analysis & Findings PT’s Case [38] In response to FFT’s applications, PT had argued that there is no breach of natural justice as:-

FFT’s Adjudication Response had been admitted and deemed as regular;

(ii) The Learned Adjudicator is the master of procedure and entitled to dismiss FFT’s application for interrogatories when he finds that the proposed question for interrogatories were largely answered in the Adjudication Response;

(iii) FFT was given full opportunity to submit its Adjudication Response and FFT’s allegation that it only filed a “bare” Adjudication Response is baseless;

(iv) The necessity to refile Adjudication Response does not arise as the request for interrogatories were dismissed. [39] It was also argued by PT that the Adjudicator did not act in excess of jurisdiction as:-

There was no prohibition to refer multiple contract to CIPAA;

(ii) The Adjudicator was adjudicating dispute arising from single unified contract;

(iii) There was no full and final settlement and the previous settlement only relates to certified claim pursuant to Certificate 16 and Certificate 17 while the CIPAA claimed sum is for uncertified claim pursuant to Progress Claim 18R The Issue Of The Filing Of A Bare Adjudication Response [40] Following from the above, FFT submits that the Adjudicator could have considered the above defence of res judicata but did not do so as FFT was barred from the proceedings in the 2nd Legal Claim as it could only file a bare Adjudication Response. [41] In considering FFT’s arguments on the above contention, I have had to examine the chronology of events which FFT claims had occurred which disentitled them to file a proper and detail Adjudication Response. [42] From the facts of the current Adjudication proceedings before this Court, I had observed that the Adjudicator had issued a direction on 14.7.2024 (1st Direction) with regards the payment of the Advance Security Deposit (“ASD”) which was not paid and which was due on or before 22.7.2024 where in the said 1st Direction the Adjudicator had stated amongst others that automatically ‘…FFT would be barred from submitting an Adjudication Response if it does not pay the ASD….’ [43] It is also before me that FFT had in its Payment Response raised the issue of the settlement of the dispute in the 1st Legal Claim and that FFT had filed its ‘bare Adjudication Response’ on 2.8.2024 to which they had informed the Adjudicator in FFT’s solicitors letter, Messrs Richard Kok, dated 2.8.2024 that the Adjudication Response was bare and incomplete. [44] Subsequently I note that the Adjudicator had issued a 2nd Direction vide a letter dated 29.7.2024 seeking the parties to file their submissions to address the 1st Direction and that the submission of the Adjudication Reply by PT was ‘…kept in abeyance until further directions’. [45] Pausing here, I would like at this juncture to address the Adjudicators right with regards the ASD and for this I must first refer to the AIAC Adjudication Rules & Procedure (“AIAC Rules”) which supplements CIPPA, in particular rules 9(2) (4) (5) with regards the rules on “fees And Expenses” which are as follows:

The adjudicator, whether appointed under Section 19(1) or 19(2) of the Act, shall within seven (7) days upon his acceptance of his appointment send a copy of his terms of appointment and fees to be paid to the adjudicator to the Director of the AIAC. Pursuant to subregulations 8(1)(b) and 8(1)(c) of the Regulations, the adjudicator shall not later than fourteen (14) days after his acceptance of the appointment issue a direction ordering the parties to deposit with the AIAC the following fees and expenses in advance as security: a) the full adjudicator’s fees and expenses as estimated by the adjudicator, and any taxes as may be imposed by the Government; and Asian International Arbitration Centre (AIAC) b) all administrative fee payable to the AIAC as provided in