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Irdk Venture Sdn Bhd v Econpile (M) Sdn Bhd (W-02(C)(A)-645-04/2016)

Court of Appeal of Malaysia1 Jan 1900W-02(C)(A)-645-04/2016

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1 IN THE COURT OF APPEAL MALAYSIA AT PUTRAJAYA (APPELLATE JURISDICTION) CIVIL APPEAL NO. W – 02 (C)(A) – 645 – 04 / 2016 BETWEEN IRDK VENTURE SDN BHD …APPELLANT AND ECONPILE (M) SDN BHD …RESPONDENT [In the matter of High Court in Malaya at Kuala Lumpur In the Federal Territory of Malaysia Originating Summons No. 24C – 41 – 11 / 2015 In the matter of an agreement and terms of a contract PAM 2006 between IRDK Ventures Sdn Bhd and Econpile (M) Sdn Bhd And 2 In the matter under section 28(1), (2) and (3) of the Construction Industry Payment and Adjudication Act 2012 And Under Order 7 and Order 92 rule 4 of the Rules of Court 2012 Between Econpile (M) Sdn Bhd …Plaintiff And IRDK Ventures Sdn Bhd …Defendant] HEARD TOGETHER WITH IN THE COURT OF APPEAL MALAYSIA AT PUTRAJAYA (APPELLATE JURISDICTION) CIVIL APPEAL NO. W – 02 (C)(A) – 646 – 04 / 2016 3 BETWEEN IRDK VENTURE SDN BHD …APPELLANT AND ECONPILE (M) SDN BHD …RESPONDENT [In the matter of High Court in Malaya at Kuala Lumpur In the Federal Territory of Malaysia Originating Summons No. 24C – 40 – 11 / 2015 In the matter of an agreement and terms of a contract PAM 2006 between IRDK Ventures Sdn Bhd and Econpile (M) Sdn Bhd And In the matter under section 28(1), (2) and (3) of the Construction Industry Payment and Adjudication Act 2012 4 And Under Order 7 and Order 92 rule 4 of the Rules of Court 2012 Between IRDK Ventures Sdn Bhd …Plaintiff And Econpile (M) Sdn Bhd …Defendant] CORAM: DAVID WONG DAK WAH, JCA UMI KALTHUM BINTI ABDUL MAJID, JCA HASNAH BINTI DATO’ MOHAMMED HASHIM, JCA 5 GROUNDS OF JUDGMENT A.

Introduction

Econpile Sdn Bhd filed an application vide Originating Summons No. 24C – 40 – 11 / 2015 at the Kuala Lumpur High Court to enforce an adjudicator’s decision dated 30.10.2015. (“Setting Aside application”)

IRDK Ventures Sdn Bhd filed an application to set aside the same adjudicator’s decision dated 30.10.2015 vide Originating Summons No. 24C – 41 – 12 / 2012 at the Kuala Lumpur High Court. (“Enforcement application)

These two originating summonses were heard together at the High Court and by the consent of both parties, the setting aside application was heard first and in the event the setting aside application was to be allowed, the enforcement application shall fail.

On 15.3.2016, the learned High Court Judge had dismissed the Setting Aside application and had allowed the Enforcement application.

Aggrieved with the aforesaid decisions, IRDK Ventures Sdn Bhd filed two appeals before this Court to set aside the decision of the learned High Court Judge. 6

The appeals were filed vide Appeal No. W-02(C)(A)-645-04/2016 in respect of the Enforcement application and Appeal No. W-02(C)(A)-646- 04/2016 in respect of the Setting Aside application. These two appeals were heard together at this Court.

For the purpose of this appeal, the parties shall be referred to as they were at this Court; the Appellant and Respondent respectively. B.

Background Facts

The Appellant was the developer of a project known and referred to as “Cadangan Pembangunan Kondominium Yang Mengandungi 2 Blok Menara Kondominium 23 Tingkat; 1 Blok Podium Tempat Letak Kereta dan 28 Unit Link Villa 4 Tingkat di Atas Lot PT 8790, Pusat Bandar Puchong, Daerah Petaling, Selangor Darul Ehsan” (“the Project”).

The Appellant had awarded to the Respondent a contract (“the Contract”) for the piling works of the Project. The Contract was based on a standard form of a building contract published by Persatuan Arkitek Malaysia (PAM) (“PAM Standard Form”), a standard form that is regularly used in building contract in Malaysia. 7

The Appellant had subsequently terminated the Contract and the Respondent then invoked the application of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) against the Appellant to pursue its payment.

The claim against the Appellant was for Payment Certificate No. 5 R1 for RM 1,805,866.65 and Progress Claim No. 6 for RM 2,229, 515.22. Originally, the Adjudicator was scheduled to deliver his decision on 15.10.2015. However, it was subsequently extended to 30.10.2015 by agreement of both parties under section 12 (2)(c) of the Act.

The fees had been computed by the Adjudicator and the parties had duly paid the fees. The Adjudicator then was obligated to issue his decision on 30.10.2015 and this extension was consented by all parties.

However, on 6.10.2015, the Adjudicator had instructed the parties to make further payment of RM 258.32 being the GST to be deposited with the KLRCA.

On 29.10.2015, the Appellant’s solicitors enclosed a scanned copy of a cheque for the amount of RM 258.32 to the KLRCA. The documentary evidence showed that the Appellant’s cheque dated 8.10.2015 was delivered to the KLRCA on Friday, 30.10.2015 at 5.20pm. However, the 8 cheque only reached the KLRCA’s Case Counsel unit on Monday,

2.11.2015.

On Friday, 30.10.2015 at 6.54pm, the Respondent’s solicitors wrote an email to the Adjudicator to request that the Adjudicator’s decision be issued forthwith.

16.

The Adjudicator only replied to the aforesaid email on Monday,

11.2015 at 4.58pm that the said decision was already deposited with KLRCA on 30.10.2015.

The Adjudicator’s was only formally informed of the receipt of the Appellant’s cheque on Monday 2.11.2015. The Adjudicator’s decision was then delivered to the parties on Tuesday, 3.11.2015 after having received the payment.

The Appellant was not satisfied with the decision of the Adjudicator filed the Setting Aside application and the Respondent filed the Enforcement application at the High Court. C. AT THE HIGH COURT 9

The Appellant, in its application to set aside the Adjudication’s decision argued that the Adjudicator was late by 3 days in making his decision and as such the whole decision is void.

The Appellant were of the view that the Adjudicator had no authority to withhold the release of the decision on account of the non-payment of the GST by the parties.

The Appellant further challenged the decision of the Adjudication on the basis that the contract which sets the basic premise of the adjudication claim had been terminated and thus, the Appellant shall not be bound to make further payment to the Respondent until a final account is determined upon completion of the works.

After having heard both parties, the learned High Court Judge decided against the Appellant. The Setting Aside application was dismissed and the Enforcement application was allowed. Since both originating summonses were heard together, the learned High Court Judge granted a single cost of RM 10,000.00 to be paid to the Respondent. D. THE APPEAL 10

There are two issues before this Court and they are as follows:

23.1 Whether an adjudication decision delivered within time but released to the parties only after the payment of the GST for KLRCA’s fees is void and/or whether there is a delay in making and serving the Adjudication decision to the Parties; and 23.2 Whether the Adjudicator has the jurisdiction to decide on the payment claims when the contract has been terminated and/or whether the Respondent was entitled to commence an adjudication proceeding under CIPAA after the contract had been terminated.

In respect of the first issue, the Appellant’s main contention was that the true purpose of CIPAA. The Appellant argued that CIPAA as an interim dispute resolution mechanism main purpose is a speedy dispute resolution. As such, strict adherence to the time as stipulated in the Act is necessary.

In this appeal, the Appellant’s argument focused on the fact that the decision was only made available to the parties on 3.11.2015 instead of on the 30.10.2015 as previously agreed by the parties. As such, the Appellant submitted that the Adjudicator had clearly gone beyond the stipulated date. Failure on the part of the Adjudicator to abide by this timeline rendered the decision to be void as per section 12(3) of CIPAA. 11

The Appellant submitted to this Court that the Adjudicator lacked the jurisdiction after 30.10.2015 and the void decision cannot be enforced and thus, must be set aside.

On this note, the Appellant further argued that the GST payment is payable by KLRCA to the Government of Malaysia and it is not part of the “fees and expenses” as provided under section 19 of the CIPAA which the Appellant argued solely deals with the “fees and expenses” of the Adjudicator.

The Appellant argued that as the word “fees” is being used in section 19(1), (2) and (4) of the CIPAA and the phrase “fees and expenses” also appears in section 19(3) and 19(6) of the CIPAA. As such, it would not be apt to stretch the aforementioned sections and sub sections to include GST and to do that would result in absurdity.

The Appellant submitted that any party who wishes to collect tax on behalf of the taxing authority or imposed with a statutory authority to collect GST must indicates their intention to do so from the very beginning. The collection agency must also be the one authorised by the GST Act to do so and in this appeal, the Adjudicator was not imposed, or burdened, with such role and/or function. 12

On this issue, the Appellant argued that the Adjudicator had taken irrelevant matters into his consideration in withholding the decision and as a result of that, the decision is delivered after the agreed date thereby making the decision void and must be set aside.

On the second issue, whether the Adjudicator has the jurisdiction decide on the payment claims when the contract has been terminated, the Appellant argued that it must be answered in the negative. The Appellant submitted that the prerequisite elements before a dispute can be referred to the Adjudication is when there is a crystallised dispute and the dispute must arise from a payment of claim made under Section 5 of the CIPAA.

The Appellant submitted that in this appeal, under the context section 5 and in reference to Clause 25.4(d), it was clear that there is no due date for any payment after the underlying contract has been determined. The simple and clear wordings of the clause is such that no payment is due, “…including payments which have been certified but not yet paid…” encompasses all payments which are allegedly due. Thus, with no payment being due, the Appellant argued that there cannot be a crystallised dispute to be referred to adjudication.

In addition to that, the Appellant argued that there is no valid payment claim under section 5 of the Act and in the absence of a valid 13 payment claim, there cannot be any valid payment response under Section 6 of the Act. The Appellant made a reference to section 27(1) of the Act where it stated as follows: “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 section 5 and 6.”

Thus, once again, in the absence of any valid payment claim and payment response, the Adjudicator cannot have any valid jurisdiction as the dispute within the context of section 27(1) does not exists.

Conversely, the Respondent argued that the Adjudication decision shall only be released to the parties after all the outstanding fees and expenses have been paid in full. In this appeal, the Respondent argued that the very reason the Adjudicator withhold the decision was due to the non-payment of the GST (which was later paid by the parties). The KLRCA standard terms of appointment of adjudicator allows the Adjudicator to delay in delivering his decision due to non-payment of the GST. Thus, the Appellant submitted the learned High Court Judge was correct in holding that the decision was made and served to the parties within the specified time under the Act. 14

In respect of whether the Adjudicator has the jurisdiction to decide on the payment claim when the contract has been terminated, the Respondent submitted that the CIPAA applies to every construction contract in writing pursuant to section 1 and 2 of CIPAA. Such sections do not have any time frame to limit the application of CIPAA.

Besides that, CIPAA was enacted for the purpose of providing a right to payment for work done and to serve as a mechanism to resolves disputes on payment. It was intended to ensure cash flow in the construction industry is maintained and the parties are to be paid speedily for the work that has been carried out.

The termination of the contract is submitted by the Respondent to not be a good ground to refuse payment for work done or services that have been rendered. Thus, the learned High Court Judge was right in holding that the Respondent can proceed with an adjudication for the payment claim before the determination of the contract. E.

Our Decision

In order to determine whether there is a delay in making and serving the Adjudication decision to the Parties, it is pertinent to refer to section 12(2) and section 19 of CIPAA as follows: 15 “Adjudication and decision 12.

Subsection

(1) The adjudicator shall conduct the adjudication in the manner as the adjudicator considers appropriate within the powers provided under section 25.

Subsection

(2) Subject to subsection 19(5), the adjudicator shall decide the dispute and deliver the adjudication decision within-

(a) forty-five working days from the service of the adjudication response or reply to the adjudication response, whichever is later;

(b) forty-five working days from the expiry of the period prescribed for the service of the adjudication response if no adjudication response is received; or

Subsection

(1) The parties and the adjudicator shall be free to agree on the terms of appointment of the adjudicator and the fees to be paid to the adjudicator.

Subsection

(2) If the parties and the adjudicator fail to agree on the terms of appointment and the fees of the adjudicator, the KLRCA’s standard terms of appointment and fees for adjudicators shall apply.

Subsection

(3) The parties to the adjudication are jointly and severally liable to pay the adjudicator’s fee and expenses and the adjudicator may recover the fees and expenses due as a debt.

Subsection

(4) The parties shall contribute and deposit with the Director of the KLRCA a reasonable proportion of the fees in equal share as directed by the adjudicator in advance as security.

Subsection

(5) Before releasing the adjudication decision to the parties, the adjudicator may require full payment of the fees and expenses to be deposited with the Director of the KLRCA.

Subsection

(6) An adjudicator is not entitled to any fees or expenses relating to the adjudication if the adjudicator fails to decided the dispute within the period specified under subsection 12(2) except when the delay in the delivery of the decision is due to the failure of the parties to deposit the full payment of the adjudicator’s fees and expenses with the Director of the KLRCA under subsection (5). (Emphasis added) 16

To further elucidate the KLRCA’s standard terms of appointment ad fees for adjudicator, we now refer to Regulation 7, 9 and 12 under

Schedule

Schedule II of the KLRCA Standard Terms of Appointment and they are as follows: “7. The adjudicator shall be entitled to: a) Be paid the agreed fee and expenses.; b) Be reimbursed by the parties for expenses reasonably incurred in carrying out his duties; c) Direct the parties to contribute and deposit with the Director of the KLRCA, anticipated fees and expenses in equal shares in advance as security; d) Exercise a lien on his decision until any outstanding fees and expenses, including the KLRCA’s administrative fee and any taxes as may be imposed by the Government, have been paid in full in accordance with section 19(5) of the Act … 9. The adjudicator’s fees and expenses incurred shall be paid in full prior to the delivery of the adjudication decision and the parties are, and shall remain jointly and severally liable to the adjudicator for payment of the fees and expenses in accordance with these terms. 12. The adjudicator shall determine the matter and serve his decision to the parties within the time period stipulated in Section 12(2) of the Act. The decision shall be made in writing and shall, subject to the settlement of all outstanding fees and expenses, be served on the parties and the Director of the KLRCA.” (Emphasis added) 41. After having perused the abovementioned provisions and after careful perusal of the chronology of facts, we were of the view that the act of withholding the delivery of the decision by the Adjudicator was with a 17 legitimate basis. It was clear to us there was still an outstanding fees and payment in the form of GST that was still pending to be paid to the KLRCA. 42. To recapitulate, both parties have agreed that the Adjudicator is to deliver his decision on 30.10.2015. This was by way of an extension from 6.10.2015, that was consented by both parties. The Adjudicator had then sent a reminder to both parties on 6.10.2015 for parties to make the necessary payment of RM 258.32 on 29.10.2015 being the GST to the KLRCA. 43. It is pertinent to note that the Appellant only sent an email enclosing a scanned copy of a cheque for the amount of RM 258.32 on 29.10.2015 and the said cheque was only received by the KLRCA on Friday, 30.10.2015 at 5.20pm. The said cheque only reached the KLRCA’s legal department on Monday, 2.11.2015. We observed the fact that the cheque was sent on a late Friday afternoon and as such, it only natural that it will only be processed on the next working day. 44. Having said that, it is crucial to note that the Adjudicator had in fact, delivered his decision vide KLRCA Form 15 and 16, to KLRCA on 30.10.2015 as per his letter dated 30.10.2015. An acknowledgment of receipt of the same can be seen on the cover letter enclosing the said 18 decision where there is a date stamped of 30.10.2015 with a handwritten note stating it was duly received by KLRCA at 4.41pm. 45. The same fact was communicated by the Adjudicator in responding to the Respondent’s email asking the Adjudicator to release his decision forthwith. The Adjudicator’s email was sent on 2.11.2015 at 4.58pm. 46. We were also of the view that the GST payment forms part of the KLRCA’s Standard Terms of Appointment and since the parties in this appeal had failed to agree on the terms of appointment and the fees of the Adjudicator, the KLRCA Standard Terms of Appointment and Fee’s for Adjudicator shall apply and as such, Regulation 12 of the same shall be applicable. 47. In addition to that, this Court would like to highlight the fact that both parties including the Appellant vide its email dated 7.10.2015 had agreed to pay the GST and for the Appellant to now argue that such payment does not form part of the fees to our mind is rather perverse. It is only natural and in keeping with the efficient conduct and support of the adjudication practice that all outstanding fees, expenses and tax of both the adjudicator and the adjudication authority to be paid in full before the Adjudicator deliver his decision. This practice of making of payment of the 19 KLRCA’s fees, expenses and taxes as a condition precedent to the release of an adjudicator’s decision is not inconsistent with CIPAA. 48. It is our unanimous view that the Adjudication’s decision was delivered within time and the same was released to the parties soon after confirmation that the GST payment to the KLRCA had been duly paid pursuant to the KLRCA Standard Terms of Appointment of the Adjudicator as provided under Schedule II of the KLRCA Adjudication Rules and Procedure, to which the parties had agreed to adhere to. Thus, it is our decision that the Adjudicator’s decision was valid. 49. We now shift our minds to the issue whether the Adjudicator has the jurisdiction to decide on payment claim when the contract has been terminated. The Appellant relied on Clause 25.4 (d) of the PAM 2006 and alleged that the Adjudicator had failed to appreciate that the underlying construction contract had ben terminated and the dispute arising from the contract is no longer in existence. Clause 25.4 (d) of the PAM 2006 is reproduced herewith: “…Until completion of the works under clause 25.4(a), the employer shall not be bound by any provision in the Contract to make further payment to the Contractor including payments which have been certified but not yet paid when the employment of the Contractor was determined.” 20 50. We were of the view that it was erroneous of the Appellant to overlook the provisions under CIPAA specifically section 2 and 3 of CIPAA that empowers the Act to apply to every construction contract in writing. We observed that the statutory provisions under the Act would trump the clause under PAM 2006. 51. We were also of the view that the Appellant had once again overlooked the main intention of CIPAA. To elucidate the intention of the Parliament, we now refer to Hansard Bil. 7 Dated 7.5.2012 which stated as follows: “…Buat masa ini, mekanisme yang diguna pakai bagi menyelesaikan pertikaian pembayaran adalah melalui tindakan Mahkamah dan prosiding timbang tara. Walau bagaimanapun, proses perbicaraan kes di Mahkamah lazimnya mengambil masa yang lama manakala prosiding timbang tara melibatkan kos yang tinggi. Prosiding timbang tara hanya boleh dimulakan dengan persetujuan pihak-pihak terlibat. Pada lazimnya perjanjian bertulis akan memperuntukkan bahawa timbang tara boleh dimulakan selepas kerja pembinaan siap atau kontrak ditamatkan. Tempoh masa yang lama dan kos prosiding yang tinggi adalah factor utama yang mengekang kepada pihak-pihak terlibat untuk merujuk pertikaian kepada mahkamah dan timbang tara. Rang Undang-undang Pembayaran dan Adjudikasi Industri Pembinaan 2011 memberi satu opsyen kepada pihak-pihak terlibat menyelesaikan pertikaian dengan kos yang rendah dan cepat. Oleh yang demikian Jemaah Menteri dalam mesyuaratnya pada 15 Julai 2009 telah bersetuju agar suatu akta khusus digubal bagi menangani pembayaran dan membantu pihak-pihak dalam industri pembinaan untuk menyelesaikan pertikaian pembayaran. Susulan daripada itu, Rang Undang-undang Pembayaran dan Adjudikasi Industri Pembinaan 2011 telah diwujudkan oleh Kementerian Kerja Raya selepas mengadakan beberapa siri perbincangan dan dialog Bersama agensi pekerjaan, penggiat industry, pihak-pihak berkepentingan, stakeholders, dan badan professional yang berkaitan… … 21 Pertikaian yang boleh dirujuk kepada adjudikasi adalah berkaitan dengan pembayaran bagi kerja siap atau perkhidmatan yang dibekalkan yang sepatutnya dibayar di bawah terma-termanya atau kontrak dalam kontrak pembinaan. Ia termasuklah bayaran interim mengikut kemajuan kerja. Prosiding adjudikasi boleh dimulakan sebaik sahaja timbul pertikaian pembayaran sama ada semasa projek pembinaan sedang dijalankan atau selepas projek disiapkan. Melalui peruntukan Rang Undang-undang Pembayaran dan Adjudikasi Industri Pembinaan 2011 proses Adjudikasi mengambil masa tidak melebihi 75 hari iaitu dari mula tarikh notis adjudikasi diserahkan oleh pihak yang menuntut kepada pihak yang dituntut sehingganya keputusan adjudicator.” 52. We now refer to the long title of the Act where it is prescribed as follows: “to facilitate regular and timely payment, to provide a mechanism for speedy dispute resolution through adjudication, to provide remedies for the recovery of payment in the construction industry and to provide for a connected and incidental matters.” 53. The intention and objective of CIPAA is very clear. It was specifically enacted to address issues in the construction industry such as to alleviate cash flow problem for the unpaid party and to give a temporary finality to the payment claims. The Act was designed to assist the parties to be paid speedily for the work which they had carried out and for adjudication proceeding for payment claim that is due and payable before the determination of the contract. 54. We agreed with the learned High Court Judge that interpretation that would best promote the purpose and object of the Act is to be favoured than that which would not promote it. This is consistent with the 22 requirement of section 17A of the Interpretation Acts 1948 and 1967 which states that: “17A. Regards to be had to the purpose of Act In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.” 55. We were of the view that condition like Clause 25.4(d) has the effect whereby upon the termination of the contract, of postponing payment due until the final accounts are concluded and the works are completed would defeats the purpose of CIPAA. We also observe that CIPAA is only intended as an interim measure and the aggrieved party may still find recourse in an arbitration proceeding and/or in Court. 56. Thus, we were of the unanimous view that none of the requirements under section 15 of CIPAA has been established by the Appellant to convince this Court to set aside the Adjudicator’s decision. We were also mindful that an adjudication decision should only be set aside in a rare and extreme circumstances in order to give effect to the provisional resolution of payment disputes in construction contracts. 23 F. CONCLUSION 57. Based on the abovementioned, we found no merit in both appeals and we unanimously dismissed both appeals with costs of RM 10,000 subject to the payment of the allocatur’s fees. The deposit is to be refunded, if any. sgd (UMI KALTHUM BINTI ABDUL MAJID) Judge Court of Appeal Putrajaya Dated: 9.07.2020 Counsels For the Appellant - Tan Sri Mohd Shafee Abdullah, CK Oon (together with him Sara Aun Chang Sue May) from Messrs. C.K. Oon & Co. For the Respondent - Lam Wai Loon (together with Paul Lee, Serene Hiew, and Lynn Foo) 24 Amicus Curae - Rajendra Navaratnam (together with him Mak Hon Pan) from Messrs. Azman Davidson & Co. James Monteiro (together with him Suren Rajah). WM Chang (together with him Joshua Chong).

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Schedule

Irdk Venture Sdn Bhd v Econpile (M) Sdn Bhd (W-02(C)(A)-645-04/2016)

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Introduction

Background Facts

Our Decision

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Irdk Venture Sdn Bhd v Econpile (M) Sdn Bhd (W-02(C)(A)-645-04/2016)

How this case connects

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Authorities cited

Introduction

Background Facts

Our Decision

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