JDI BUILTECH (M) SDN BHD v DANGA JED DEVELOPMENT MALAYSIA SDN BHD (Dulu dikenali sebagai Greenland Danga Bay Sdn Bhd) (JA-24C-13-10/2021)

By a letter of award dated 26.8.2019, CTMCC had appointed the Plaintiff as the sub-contractor for the works known as for the demolition works and new structure works at plot 3 podium (“sub-contract works”) in the Project for a contract sum of RM3,280,000.00.

On 22.11.2019, the Defendant and CTMCC subsequently entered another contract for the Project vide a construction agreement as to revise and reduce the CTMCC’s scope of works for the Project. The parties agreed that the original contract dated 30.6.2015 would be mutually terminated and put to an end.

As a result of the termination, the Defendant and CTMCC have to finalise the final account for the works carried out by CTMCC in the original contract in order to determine whether there is any money payable and if so, the quantum and which party is liable to pay after taking into account all the past payments and set-offs. However, as of to date, the final account has yet to be determined. __________________________________________________________________________________________ 3

Due to payment disputes between the Plaintiff and CTMCC, the Plaintiff commenced adjudication proceedings pursuant to the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) against CTMCC to recover the outstanding payment.

On 24.8.2021, the adjudicator (Madam Rammit Kaur Charan Singh) awarded the Plaintiff an adjudication sum of RM2,556,576.77 (“the adjudication sum”), interest on the adjudication sum (or on any part thereof which remains unpaid) at the rate of 5% per annum calculated from 24.8.2021 until full and final payment and RM58,322.55 being the adjudication costs, which have to be paid within 14 working days from the date of the decision against CTMCC (“the adjudication decision”).

As CTMCC failed to comply with the adjudication decision, the Plaintiff filed an Originating Summons No. JA-24C-14-10/2021 in the Johor Bahru High Court to enforce the adjudication decision against CTMCC as if it is a decision of the High Court. Nevertheless, to date, according to the Plaintiff, CTMCC failed to enter appearance in the action and the High Court had fixed 16.2.2022 as the hearing date.

By way of a letter dated 8.9.2021, the Plaintiff had requested the Defendant to make a direct payment for the adjudication sum to the Plaintiff pursuant to s. 30 of the CIPAA. On 15.9.2021, the Defendant replied the letter by stating that there is no sum due and payable by the Defendant to CTMCC and thus there is no basis for the Plaintiff to invoke s. 30 of the CIPAA.

On 8.10.2021, the Plaintiff filed an Originating Summons in this court for an order that the Defendant makes a direct payment for the __________________________________________________________________________________________ 4 adjudication sum under the adjudication decision pursuant to s. 30 of the CIPAA. Direct payment under s. 30 of the CIPAA [10] S. 30 of the CIPAA reads – Direct Payment from Principal 30.

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). __________________________________________________________________________________________ 5 [11] In Cabnet Systems [M] Sdn Bhd v. Dekad Kaliber Sdn Bhd & Anor [2020] 1 LNS 187; [2020] 3 MLRH 83, the court held that it is incumbent for the Plaintiff to prove to the court the following four conditions against the Defendant under s. 30 of the CIPAA:

the party against whom the adjudication decision is made has failed to pay the adjudicated amount to the Plaintiff;

the Plaintiff's demand had been made for the Defendant to make direct payment of the adjudicated amount to the Plaintiff;

there is a sum of money "due or payable" from the Defendant to the party against whom the adjudication decision is made at the time of the receipt of the Plaintiff's Demand by the

the Defendant did not comply with the Plaintiff's demand by not paying directly the adjudicated amount to the Plaintiff. [12] As alluded to earlier, the original contract in 2015 between the Defendant and CTMCC had been terminated on 22.11.2019 and the parties are still finalising the final account as to determine whether there is any money payable to any party. I agree with the Defendant that, at the time of the receipt of the Plaintiff's demand by the Defendant, there was yet a sum of money "due or payable" from the Defendant to CTMCC. [13] Wong Kian Kheong J in Chong Lek Engineering Works Sdn Bhd v. PFCE Integrated Plant and Project Sdn Bhd [2020] 1 LNS 2251; [2020] MLJU 2389 held as follows: __________________________________________________________________________________________ 6 "[18] Secondly, as explained in HSL Ground Engineering, at [29], the second limb (payable) of s. 30(5) CIPAA is wider than its first limb (due). This is clear from the meaning of "payable" as stated in "Black's Law Dictionary", Ninth Edition, at p. 1243, as follows: "payable, adj.... (Of a sum of money or a negotiable instrument) that is to be paid - An amount may be payable without being due. Debts are commonly payable long before they fall due."" [27] For the avoidance of confusion and in expansion of what was stated in the case of HSL Ground Engineering, I wish to clarify that there must be accrual of the debt cause of action before money pursuant thereto is either payable or due. In other words, the accrual crystallizes the obligation or liability to pay. Thus for purposes of illustration on its applicability to s. 30 of the CIPAA, the interim and final payment debt pursuant to a typical construction contract accrues when the interim and final certificate are issued (otherwise on the expiry of the prescribed time for certification stipulated in the construction contract if the certificate has been withheld) but if there is no certification mechanism stipulated in the construction contract, then it accrues on the receipt of the invoice pursuant to the default provision set out in s. 36(3) of the CIPAA. Upon such accrual, the money is payable. However, the money is only due after the expiry of the date of payment on the certificate stipulated in the construction contract but if there is no certification mechanism stipulated in the construction contract, then only after 30 days from the receipt of the invoice as provided in s. 36(3) of the CIPAA. For purposes of retention money, this is similarly payable upon the issuance of the relevant certificate such as the certificate of practical completion and/or certificate of making good defects as prescribed in the construction contract and only due after the expiry of the date of payment on the relevant certificates. This is notwithstanding that the retention money has already been earned much earlier and is thus a debt but which is withheld as permitted by the construction contract. The aforementioned illustrations apply to an on-going and completed construction contract. However if the construction contract is prematurely terminated, the debt accrues forthwith __________________________________________________________________________________________ 7 upon the occurrence of the termination and the money is accordingly both due and payable." [14] In Glocal Tech Engineering Sdn Bhd v. Panzana Enterprise Sdn Bhd [2021] 1 LNS 429; [2021] MLJU 474 Aliza Sulaiman J held that – [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. [15] Since there is no sum of money due or payable from the Defendant to CTMCC yet, it is clear that the Plaintiff failed to comply with one of the preconditions set out in s. 30 of the CIPAA. [16] Further, it is pertinent to note that, the Plaintiff had filed an action in the Johor Bahru High Court to enforce the adjudication decision against CTMCC in which CTMCC had not entered appearance. Allowing the Plaintiff’s application for direct payment in the present case would lead to double recovery should the court allow the Plaintiff’s action against CTMCC in the other court proceedings. This results the Plaintiff will have two enforceable judgments against two separate parties for the same sum and most likely be unjustly enriched. __________________________________________________________________________________________ 8 [17] The power to allow a direct payment under s. 30 of the CIPAA is to be exercised with great caution, and only where it is clear that the mandatory requirements in that section have been duly complied with. Conclusion [18] Having considered the facts and the circumstances of the present case, it is my considered view that the Plaintiff failed to establish any merit in this application. As such the Plaintiff’s application in Enclosure 1 is dismissed with costs. Date: 7.8.2022 -SIGNED- (SHAMSULBAHRI BIN HAJI IBRAHIM) Judicial Commissioner, High Court, Johor Bahru Date of decision: 7.6.2022 Counsels: For the Plaintiff – Kenneth Liew Vui Khen (Cheah Hoong Min with him); Messrs T.s. Liew, Nurzila & Co For the Defendant – Zack Tan Zhang Wei; Messrs Raja, Darryl & Loh Cases referred to: • Cabnet Systems [M] Sdn Bhd v. Dekad Kaliber Sdn Bhd & Anor [2020] 1 LNS 187; [2020] 3 MLRH 83 __________________________________________________________________________________________ 9 • Chong Lek Engineering Works Sdn Bhd v. PFCE Integrated Plant and Project Sdn Bhd [2020] 1 LNS 2251; [2020] MLJU 2389 • Glocal Tech Engineering Sdn Bhd v. Panzana Enterprise Sdn Bhd [2021] 1 LNS 429; [2021] MLJU 474 Legislations referred to: • Construction Industry Payment and Adjudication Act 2012 – s.