Inai Kiara Sdn Bhd v Puteri Nusantara Sdn Bhd (B-02(C)(A)-846-04/2018)

Upon reading all the documents submitted by Parties ie Adjudication Claim, Response, Reply and in their respective written submissions in reply together with all case laws and authorities and based on the reasons above, in summary, I find and hold that the Claimant is entitled for the sum of RM694,451.36 only. 6 [11] At paragraph 70 of the decision, the learned Adjudicator further directed the respondent to pay the adjudicated sum “in full on or by 5 working days from receipt of this adjudication decision in a form of secured financial instrument…”; “interest at a rate of 5% per annum calculated as simple interest on the Adjudicated Sum from the Due Date for Payment of the Adjudicated Sum on any part of the Adjudicated Sum which remains unpaid until the same is paid in full”; and costs. [12] The last date for payment under the adjudication decision was 30.6.2017. The respondent did not pay. In December 2017, the appellant filed an application pursuant to section 28 of CIPAA 2012 seeking inter alia to recognize and enforce the Adjudication decision dated 25.5.2017. This application was filed at the High Court sitting in Shah Alam. The instant appeal arises from this application which was dismissed on 26.3.2018. [13] In the interim period, the respondent sued the appellant before the High Court sitting at Kuala Lumpur [WA-22C-3-01/2018], for non-completion of the subcontract works. In response to that civil action, the appellant filed an application for stay under section 10 of the Arbitration Act 2005. That application was dismissed. Decision of the High Court [14] The appellant’s application for an order to enforce the adjudication decision under section 28 of CIPAA 2012 was opposed by the respondent. The respondent did not file any application to set aside the adjudication 7 decision under section 15. It did, however, file an application for stay under section 16(1)(b) – enclosure 7. That application was ultimately not pursued after the appellant’s application was dismissed. [15] Insofar as the appellant’s application to recognize and enforce the adjudication decision was concerned, the respondent objected to the application, contending that the adjudicator had acted beyond his jurisdiction in allowing the sum of RM773,484.52. The respondent argued that there were “clear and unequivocal errors” committed by the adjudicator in which case the application under section 28 must be refused. The respondent relied on the Federal Court’s decision in View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd [2017] 1 CLJ 123. [16] The appellant submitted in response that since the respondent did not apply to set aside the adjudication decision, the respondent must be taken to have accepted that decision but has “willingly refused to comply”. And, pursuant to section 13 of CIPAA 2012, the decision is binding on the parties. [17] The learned Judge disagreed with the appellant, finding the respondent’s contentions “to have more weight”. Relying on section 15(d) of CIPAA 2012, the learned Judge held that it was for the Court to intervene when the adjudicator has acted beyond his jurisdiction. It was the learned Judge’s findings that the adjudicator had acted in excess of his jurisdiction. [18] According to the learned Judge, since the adjudication claim was in respect of unpaid Progress Claims No. 6, 7 and 8, that these claims were dismissed, that the sum of RM694,451.36 “was counted based on the interim 8 payment No. 5 which was never claimed by the plaintiff in the Adjudication Claim”; that the appellant was only entitled to what they have stated in their adjudication claim, “it is clear that the adjudicator is not allowed to exceed his jurisdiction as the adjudicator’s jurisdiction is limited to and within the confines of the payment claim, and he is not empowered to make an award for something not claimed for in the payment claims.” Our deliberations and decision [19] Having carefully considered the law and facts, we find the decision of the learned Judge, plainly erroneous. [20] It is not in dispute that other than an application for stay under section 16 of CIPAA 2012 [enclosure 7], and filing a civil action [Kuala Lumpur Civil Suit No: WA-22C-3-01/2018], the respondent did not file any application under section 15 to set aside the adjudication decision. Instead, what the respondent did was to oppose the appellant’s application, relying on subsection 15(d), that the learned Adjudicator had exceeded his jurisdiction by awarding a sum outside of the payment claim. [21] Given this backdrop, the issue before us is whether it is open to a party such as the respondent who is resisting or opposing an application for enforcement under section 28, to raise any of the grounds under section 15 without actually filing an application under section 15 itself. 9 [22] In our view, the answer is clearly in the negative. It is not open to the respondent to invoke any of the grounds set out in section 15(a) to (d) in opposition to an application under section 28 without at the same time, filing an application under section 15 itself to set aside the adjudication decision on any of those grounds. Unless and until an application under section 15 has been initiated by the respondent, and an order has been granted setting aside the adjudication decision, the adjudication decision ought to stand unopposed on the grounds found in section 15(a) to (d). To accede to the respondent’s submission that the Court may avail itself to and dismiss an application for enforcement under section 28 by reason of any or all of the grounds under section 15 would, in our view, do violence to the terms of section 28. [23] Section 28 reads as follows: Enforcement of adjudication decision as judgment

28.

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. [24] Section 28 confers discretion on the High Court. Although there are no express terms as to how that discretion is to be exercised, in our opinion, the discretion must be exercised judiciously, having regard to the underlying 10 facts and the applicable principles under CIPAA 2012. We must also bear in mind principles of statutory interpretation; that we cannot read into section 28 terms which are not there, or give section 28 a construction which cannot bear up when the other provisions in the Act are read and taken into consideration. [25] From a reading of CIPAA 2012, in particular, sections 13, 15, 16, 27 and 31, it is plain that though section 28 vests the High Court with discretionary power, it does not extend to requiring the applicant to show that there are no grounds for setting aside the adjudication decision under section

All that the applicant needs to do is to satisfy the High Court that there is an adjudication decision that has been rendered in the applicant’s favour, that there has been non-payment of the adjudicated sum by the date specified in the adjudication decision, and that there is no prohibition to the grant of the order that is sought. [26] By this, we mean that the adjudication decision has not been set aside or stayed, that there is no written settlement of the subject matter between the parties, or that there is no final decision rendered on the payment claim, whether made in arbitration or by a Court of law. Once these matters are established as matters of fact, the order to enforce ought to be granted. When making the order, the High Court may also make appropriate orders in respect of the whole or part of the adjudicated sum including make orders on interest – see subsection 28(2). [27] From the facts in this appeal, the appellant has amply satisfied the conditions that we have outlined. The learned Judge was plainly wrong in 11 dismissing an application in which case, the decision must be set aside and the appeal, allowed. [28] In reaching the above decision, we state in clear and firm terms that we are unequivocal in our appreciation and agreement on the principles related to the application and operation of CIPAA 2012; that it is intended to “facilitate regular and timely payment” and “to provide a mechanism for speedy dispute resolution through adjudication, to provide for remedies for the recovery of payment in the construction industry and to provide for connected and incidental matters”. There is no lack of authority on this: see for instance Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd [2017] MLJU 1382; UDA Holdings v Bisraya Construction Sdn Bhd & Another & Another Case [2015] 5 CLJ 527; View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd [supra]; MRCB Builders Sdn Bhd v Southern Builders (J) Sdn Bhd [Civil Appeal No: J-02(NCVC)(A)-2136-10/2017]. [29] This then sets the approach of the Court when interpreting and construing CIPAA 2012. In the occasions of dispute on interpretation, an approach which best facilitates as opposed to militating the object and purpose of the legislation is generally adopted by the Court. [30] CIPAA 2012 contains fairly comprehensive provisions relating to inter alia the adjudication mechanism or regime. Broadly, the Act provides for the process prior to the appointment of the adjudicator, where payment claims and responses have to be exchanged between the parties. This first part of the process defines the payment disputes between the parties. Where no payment response is filed, subsection 6(4) provides that the payment claim 12 is deemed disputed. And this is where the Federal Court decision in View Esteem Sdn Bhd v Bina Puri Sdn Bhd [2017] 1 CLJ 123 becomes relevant, a decision which we will return to later. [31] The second part of the Act relates to the process where an adjudicator is appointed to adjudicate and resolve the payment dispute; where the necessary documents such as the adjudication claim, adjudication response and the adjudication reply are exchanged between the parties. There are fairly comprehensive provisions on the adjudicator’s powers – see for instance, section 25. [32] The third part of CIPAA 2012 relates to the adjudication proceedings, where it is the adjudicator who takes charge of the payment dispute. The adjudicator deals with the payment dispute and determines that dispute. What merits mention here is the strict and relatively tight timelines for the various processes, with provisions for agreement to vary. This is understandable given the object and purpose of adjudication as a regime or mechanism for the speedy resolution of disputes over payments in construction contracts. [33] Then comes the fourth part of the Act, dealing with enforcement matters. Upon determination, a decision is rendered. The parties to the adjudication are not required to go to Court for a declaratory order as to the effect of the adjudication decision. The application to Court, in the case of the successful claimant, is only for an order to enforce the adjudication decision and thence to execute it as if it is an order or judgment of the High Court – see section 28(3). 13 [34] The effect of an adjudication decision is clearly provided in section 13. It binds the parties to the adjudication save in three circumstances, as set out in section 13 itself: Effect of adjudication decision

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] [35] Both the claimant and the respondent are bound by the adjudication decision. Both parties are expected to fully abide by the terms of the decision unless any or all of the three circumstances specified in section 13(a) to (c), present. In the instant appeal, none of the circumstances mentioned in section 13 took place. The civil action that was filed had yet to be concluded, and there was no application to set aside the adjudication decision on any of the grounds referred to in section 15. [36] Up to this stage of the adjudication regime, the Court does not play any role. Again, this makes perfect logical sense because of what CIPAA 2012 is in the whole scheme of payment dispute resolution. 14 [37] It is only where there has been non-compliance or, where a party is aggrieved with the adjudication decision or is unhappy with any of its terms, such a party would then invoke the jurisdiction of the Court. For the party who has not been paid the adjudicated sum, by an application to Court seeking an order to enforce the adjudication decision under section 28; whilst for the party who is aggrieved by the adjudication decision, by an application to either stay the effect [section 16] or to set aside [section 15], whether in whole or in part, the adjudication decision. [38] Where the parties resolve the payment dispute by abiding by the terms of the adjudication decision and there is payment of the sum adjudicated, the matter ends. That resolution is, at least, for the interim period until final determination by arbitration or litigation, or where the subject matter of the decision has been settled by written agreement between the parties. As is frequently pointed out, parties may run other dispute resolution processes concurrently with adjudication. This is clearly provided under sections 31 and 37 of CIPAA 2012: Concurrent exercise of remedies

31.

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.

The remedies provided by this Act are without prejudice to other rights and remedies available in the construction contract or any written law, including any penalty provided under any written law. Relationship between adjudication and other dispute resolution process

37.

A dispute in respect of payment under a construction contract may be referred concurrently to adjudication, arbitration or the Court. 15

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. [39] The parties are, of course, entirely free to accept that adjudication decision and do nothing else in terms of challenge; or to even take the dispute, either on its own or together with other issues or disputes, be it to arbitration or to the Courts. [40] In the instant appeal, that was not the case. There was non-compliance with the adjudication decision. The respondent did not pay the adjudicated sum by the last date, that is, 30.6.2017. The appellant then invoked section 28, seeking an order that the adjudication decision may be enforced and then “be executed in accordance with rules on execution of the orders or judgments of the High Court” under subsection 28(3). [41] In our view, from a proper reading of sections 13, 15, 16 and 28, the binding effect of the adjudication decision is automatic; hence the need for any dissatisfied or aggrieved party to first apply to set aside the adjudication decision. This is evident from the terms of section 15 which requires an aggrieved party to file an application before the jurisdiction of the Court under section 15 may be invoked. In that application, the aggrieved party must specify in a supporting affidavit, the ground(s) relied on. It is important to note that section 15 envisages an exhaustive list of grounds as found in 16 paragraphs (a) to (d). Arguably, the Court has no jurisdiction to entertain any other ground. [42] Section 28 has already been set out while sections 15 and 16 read as follows: 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. Stay of adjudication decision

16.

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 Kuala Lumpur Regional Centre for Arbitration or make any other order as it thinks fit. [emphasis added] [43] We must point out that even in an application for stay of an adjudication decision under section 16, an application under section 15 to set aside the 17 adjudication decision must still first be filed – see section 16(1)(a). Unless and until there is a positive challenge to the adjudication decision on any or all of the grounds statutorily provided under section 15, the respondent, at best, can only oppose the appellant’s application for enforcement. Even then, the basis for opposing the enforcement application ought to be confined to the matters that we had averted to earlier. This construction is necessary so that the adjudication scheme may work effectively within the object and purpose of the Act. [44] Further support for this view may be inferred from a reading of section 27(3). Section 27 provides:

Jurisdiction of Adjudicator

Subject to subsection (2), the adjudicator’s jurisdiction in relation to any dispute is limited to the matter referred to adjudication by the parties pursuant to sections 5 and 6.

The parties to adjudication may at any time by agreement in writing extend the jurisdiction of the adjudicator to decide on any other matter not referred to the adjudicator pursuant to sections 5 and 6.

Notwithstanding a jurisdictional challenge, the adjudicator may in his discretion proceed and complete the adjudication proceedings without prejudice to the rights of any party to apply to set aside the adjudication decision under section 15 or to oppose the application to enforce the adjudication decision under subsection 28(1). [emphasis added] [45] We have no argument with the understanding of the learned Judge that under section 27(1) of CIPAA 2012, the jurisdiction of the adjudicator in relation to any dispute is limited to the matters referred to adjudication by the 18 parties pursuant to sections 5 and 6 of CIPAA 2012. Like arbitrations, adjudications are dispute resolution mechanisms enacted as alternatives to judicial process or litigation in Courts of law. Unlike the judicial process, the decision maker in these alternative dispute resolution mechanisms are chosen by the parties. Hence, it is imperative that the adjudicator keeps within the limits of the dispute that was referred. [46] However, we are not inclined to the view that the right to oppose the enforcement application that is found in section 27(3) extends to incorporating a right to oppose on the grounds found in section 15, without more. On the contrary, section 27(3) is of limited application in that it pertains to jurisdictional challenges that despite being raised at the adjudication proceedings, the adjudicator decided to proceed and complete the adjudication. In such circumstances, the right to oppose the enforcement is not prejudiced but is preserved. The opposition nevertheless requires the respondent to apply and invoke the jurisdiction of the Court under section

Section 27(3) does not confer passive jurisdiction of judicial intervention. [47] Consequently, it was erroneous for the learned Judge to have referred to and relied on the grounds found in section 15 when refusing the order sought by the appellant. [48] In any event, the learned Judge was plainly in error in his appreciation of the adjudication claim, what was in dispute between the parties, and the adjudication decision. According to the learned Judge, the adjudication was in respect of unpaid Progress Claims Nos. 6, 7 and 8. Although these claims were dismissed, the learned Adjudicator nevertheless proceeded to allow a 19 sum of RM694,451.36, calculated based on Interim Payment Certificate No.

Since this was never claimed by the appellant in the adjudication claim, the adjudication decision allowing the sum of RM694,451.36 must be set aside as it was made in excess of jurisdiction. [49] A closer examination of the adjudication decision ought to dispel that misunderstanding – see paragraphs 11, and 44 to 48, in particular. Adjudication is about resolving disputes on the value of and payment for work done or services rendered. In the present appeal, the appellant was clearly claiming for under and non-payment of its claims and it was open to the learned Adjudicator to arrive at the decision that he did. [50] From the adjudication decision, it is evident that what had happened was this. The appellant claimed that its works had achieved 95% completion. The Adjudicator did not agree with the appellant on the percentage of completion. The Adjudicator was, however, of the view that work was done by the appellant and that the appellant was entitled to payment. What the Adjudicator did then was to use what he perceived to be the most reliable evidence of value of that work done, and that was the Perakuan Bayaran Interim No. 5 prepared by the consultant. That Interim Certificate certified that the appellant’s works were of the value of RM694,451.36. The learned Adjudicator relied and used that certificate as the basis of his decision. Given the extensive powers of the adjudicator under section 25 of CIPAA 2012, we do not see any merit in the respondent’s complaints, even if for a moment for argument’s sake, a case may be made for allowing the respondent to rely on section 15(d) when opposing the enforcement application. 20 [51] Aside from the reasons already set out, we also cannot agree with the learned Judge on the application of the Federal Court’s decision in View Esteem [supra] to the present appeal. The factual matrix in that appeal is entirely different from our instant appeal. [52] View Esteem was actually a decision involving three separate applications which were consolidated and heard together at the High Court. In View Esteem, the appellant had filed not only an application to stay the adjudication decision, it had also challenged and filed an application to set aside the adjudication decision under section 15 by reason inter alia that the adjudicator had acted in excess of jurisdiction; while the third application was the respondent’s application for enforcement under section 28. [53] On the issue of jurisdiction, the challenge there was on the non-application of CIPAA 2012 to the particular construction contract under which the payment dispute arose. That question involved an interpretation of section 41 of CIPAA 2012. The Federal Court took the view that such a jurisdictional challenge, described as an “absolute lack of jurisdiction” may be taken up at any time. It was in coming to that view that the Federal Court remarked in the manner cited by the learned Judge. Following its agreement with the appellant that there was an excess of jurisdiction, the appeal was allowed and the adjudication decision was set aside. [54] That is not the case in our present appeal. The respondent’s arguments never concerned the non-application of CIPAA 2012. Its complaints were of the adjudicator acting in excess of the jurisdiction agreed by the parties; that instead of deliberating on the Progress Claims 21 complained of, the learned Adjudicator allowed the claim on a Progress Claim which was never the subject of the payment claim or adjudication claim. [55] As repeatedly mentioned, we do not have any application to set aside the adjudication decision in the appeal before us. Even if for one moment, though we do not agree, that we could entertain the arguments of the respondent on the question of excess of jurisdiction in the manner proposed, the decision will nevertheless stand and be binding on the parties until it is set aside. [56] It is our opinion that a dismissal of the appellant’s application for enforcement on the ground of excess of jurisdiction without at the same time, setting aside that adjudication decision would not only give a construction and interpretation which will defeat the purpose of CIPAA 2012, but would leave the parties and the Court in an incongruous and untenable position. That is unpalatable. On the one hand, a refusal to grant an enforcement order because it is purportedly an improperly procured adjudication decision; and on the other hand, the binding effect of that adjudication decision. [57] The law gives the aggrieved party, the respondent, the option of filing an application to set aside the adjudication decision on any or all of the grounds provided in section 15. Unless that option is exercised, the respondent must comply with the decision. This is regardless the complaint of jurisdiction, whether it is of core jurisdiction, competence jurisdiction or contingent jurisdiction, challenges on jurisdiction which are within the scope of section 15. 22 Conclusion [58] With the above findings and conclusions, we are not required to go on and consider the matter of excess of jurisdiction and whether the learned Judge was correct in his findings that there was excess of jurisdiction. The law, as it stands, does not warrant that examination. We have nevertheless conducted that examination but only for the sake of completeness. [59] The facts show that there was more than adequate evidence before the Court to warrant the grant of the application under section 28. The appeal is therefore allowed and the appellant’s application for enforcement is accordingly allowed, with costs. Dated: 9th November 2018 (MARY LIM THIAM SUAN) Judge Court of Appeal Malaysia 23 Counsel/Solicitors For the appellant: Kamraj Nayagam (Maya Gayathri with him) Messrs Mah-Kamariyah & Philip Koh 3A07, Block B Phileo Damansara 11 15, Jalan 16/11 Off Jalan Damansara 46350 Petaling Jaya Selangor Darul Ehsan For the respondent: R. Jayasingam Messrs B H Lawrence & Co. Unit No. B11-09, Block B Phileo Damansara 2 15, Jalan 16/11 Off Jalan Damansara 46350 Petaling Jaya