KINU SDN. BHD. v Kerajaan Malaysia (Jabatan Kerja Raya Malaysia) (WA-24C-202-12/2023)

2.1 Nukima has failed to settle the Adjudicated Sums within the time period referred to in the AD;

2.2 KSB has sent 4 letters to JKR to seek payment of the Adjudicated Sums as the principal of Nukima for direct payment of the same pursuant to section 30 of CIPAA;

2.3 JKR has replied to KSB via 3 letters to state that there are no payments due to Nukima and enclosed proof of a Certificate of Interim Payment No. 79 and further stated that all IBS Works under the Project have been paid to Nukima;

2.4 KSB through its solicitors that the said Certificate of Interim Payment No. 79 is not proof of all payments made to Nukima. Brief Background [3] By way of a letter of award dated 14.01.2017 (“Contract”) KINU was appointed as a sub-contractor by a main contractor, Nukima Sdn Bhd (“Nukima”) to provide their services in relation to Industrialized Building Systems (“IBS”) works for a construction project knows as “Cadangan Hospital Dungun, Terengganu (110 Katil) (Reka & Bina) Fasa 1B: Kerja Bangunan dan Lain-Lain Kerja Berkaitan” (“Project”). [4] Nukima was appointed as a main contractor by the employer, JKR for the Project under a contract bearing reference no. JKR/IP/CKUB/01/2016 (“Main Contract”) at a contract value of RM125,390,379.66 (“Main Contract Sum”). [5] KINU has completed all the works under the Contract until they were terminated by Nukima on 21.07.2022. Similarly, the Main Contract was also terminated by JKR vide the Termination Notice dated 14.07.2022 (“Termination Notice”).

25.09.2023, 16.10.2023 and 21.11.2023 respectively issued various written notices under Section 30(1) CIPAA to request from JKR for the direct payment of the Adjudicated Sums and/or to disclose all proof of payment to show that JKR has paid all sums due or payable to Nukima, (“Written Notices”). [11] In response, JKR responded with letters to KINU’s solicitor's dated respectively on 22.09.2023, 09.10.2023 and 09.11.2023 averring that JKR does not have any outstanding sums due or payable to Nukima. [12] Due to JKR’s non-payment of the Adjudicated Sums, KINU has commenced this OS against JKR for an order for the direct payment of the Adjudicated Sums under section 30 of CIPAA. Analysis & Findings [13] KSN has submitted that there exists a chain of contracts between JKR and Nukima (the Main Contractor) which in turn sub contracted with KSN and that by the AD it has proven that there are sums due and payable to KSN by Nukima to the tune of RM927,300 together with interest and costs. [14] JKR on the other hand contends that KSB is not a sub contractor as JKR has not given their consent in writing under clause 40 of the Conditions of Contract (CoC). [15] I was referred to the case of Progress Centre Engineering Sdn Bhd v Desaru Corniche Hotel Sdn Bhd & Anor [2023] 12 MLJ 597 where Her Ladyship Justice Aliza Sulaiman held: “[22] The conditions which have to be satisfied before the plaintiff can invoke the remedy in s 30 of the CIPAA are well established, namely:

(a)there must be an adjudication decision whereby the winning party is entitled to an adjudicated amount which is to be paid by the losing party;

(b)the losing party has failed to pay the adjudicated amount to the winning party;

(c)the winning party has made a written request to the principal for the adjudicated amount to be paid directly to the winning party;

(d)the principal did not serve a written notice to the losing party to show proof that the losing party has paid the adjudicated amount to the winning party or having served such notice, the losing party has failed to furnish the proof of payment and in any event, the principal did not pay the adjudicated amount directly to the winning party; and

(e)there is money due or payable by the principal to the losing party at the time when the principal receives the written request for payment from the winning party.” [16] For the sake of completeness, section 30 of CIPAA states: “(1) 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

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).” [17] I must now determine whether KSB has satisfied the above pre conditions. Requirements of Section 30 CIPAA [18] In the matter before me, JKR has submitted that KSB has failed to meet the pre requisite in sec 30(1) CIPAA as:

the Government of Malaysia/ JKR is not the principal to KSSB;

there are no monies due or payable by JKR to Nukima, the party against whom the AD was made at the time of the receipt of the request from KSB under subsection (1) on 11.9.2023;

this Court has no jurisdiction to hear this OS. [19] From the facts before me, I am not satisfied that the burden of proving that Nukima has yet to pay the Adjudicated Sum as required under section 30(3) CIPAA has been fulfilled. I have found that there is no evidence before this Court of the said Adjudicated Sums as not being paid or satisfied by Nukima despite the High Court in Terengganu allowing KSB’s order to enforce the AD against Nukima on 7.11.2023. Is JKR the Principal of Nukima [20] I am bound and guided by the decision of the Court of Appeal in Pali PTP Sdn Bhd v Bond M&E Sdn Bhd and another appeal [2023] 6 MLJ 176 where the said Appellate Court has held that non payment under section 30 is presumed and the burden shifts to the Principal i.e JKR to enquire from KSB if the amounts owed have been paid. [21] Be that as it may, I however hold that KSB has to prove to this Court that JKR is the principal as per the definition under section 4 CIPAA which states: "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” [22] The above section has to be read together with section 30(5) CIPAA which states that: “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).” [23] In coming to my decision on the above to decide if JKR is the principal, this Court has also perused clause 40.2 of the Conditions of Contract (“CoC”) which provides: “The Contractor shall not sub contract the whole or any substantial part of the Works without the prior written consent of the P.D (which consent shall not be unreasonably delayed or withheld). Any such consent if given shall not relieve the Contractor from any liability…” [24] I hold that based on the documents before me, it has not been shown to this Court that such written consent as required under clause 40.2 of the CoC was obtained by Nukima in engaging KSB for the Project, but in my decision this requirement is irrelevant as what is germane is whether JKR comes within the definition of principal under s 4 CIPAA and if so whether s30 CIPAA is then applicable. [25] On this specific point I hold that JKR is from the facts before me the principal of Nukima as JKR has contracted with Nukima as the main contractor for the Project and is therefore liable to make payment to Nukima. It is also evident before me that Nukima had entered into a sub contract with KSB vide the Letter of Award dated 14.1.2017. The facts before me also show that Nukima has obtained the AD as well as an order to enforce the AD on 7.11.2023 and thus the requirements of s 4 CIPAA as mentioned would have been prima facie be fulfilled. [26] With respect, the requirements as specified under clause 40.2 of the CoC is purely a contractual arrangement between Nukima and JKR and cannot override a specific statutory provision such as that in sec 4 CIPAA as the words expressed in sec 4 CIPAA does not and cannot take into consideration the wordings in the CoC that requires Nukima to obtain JKR’s permission before appointing any sub contractors. [27] So long as the facts show that JKR had appointed Nukima and the latter had appointed KSB as its sub contractor, the conditions in sec 4 CIPAA are partly fulfilled. Any provision in the CoC must be read in light of the specific provision in the act in this case s 4 CIPAA. [28] The same goes with respect to the Surat Pekeliling Perbendaharaan Bil 4 Tahun 2003 which is relied on by JKR to contend that they are bound by the same before making any payment to KSB. The said Surat Pekeliling in essence provides the circumstances where the Government or JKR can make direct payment to the Nominated Sub Contractors. [29] Again, I am unable to agree with learned Senior Federal Counsel for JKR on their contention above with regards the effect of the Surat Pekeliling Perbendaharaan Bil 4 Tahun 2003 as I find that this Surat Pekeliling cannot over ride CIPAA and is inapplicable to the issue of direct payment under section 30 CIPAA. At most, the said Surat Pekeliling is an internal requirement or rule or procedure which only binds JKR and that it has nothing to do with KSB who is not and cannot be bound by the same. Are There Monies Due From JKR To Nukima [30] I however hold that the next and most pivotal question which this Court has to decide is whether JKR owes monies which are due or payable by JKR to Nukima as per the requirement of section 30(5) CIPAA. 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, the Court of Appeal has held “[18] The immediate question to ask is when s 30 of the CIPAA would be applicable and the answer stares at us in the face in that s 30(5)provides that ‘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)’. (Emphasis added.) It is thus the over-arching pre-condition before any of the subsections of s 30 may be utilised. By ‘This section’ in the opening words of s 30(5) is meant the whole of s 30. Thus s 30(5) is the foundation and base for the deployment of the other subsections in s 30.” [31] It has been shown to this Court that JKR has denied that they owe any monies to Nukima and this can be seen from various letters dated 22.9.2023, 9.10,2023 and 9.11.2023 issued by JKR to KSB. I have also been shown that JKR has paid to Nukima the sum of RM11,771,230 for works done via Interim Payment Certificates nos 11-28 and 78-79 as per the “Laporan Baucar Bayaran” in exhiit SP6. These payment vouchers also indicate that the sums were paid prior to the receipt of KSB’s Written Request on 11.9.2023. [32] I have also found from the document before me at exhibit SP 4 that the last Interim Payment Certificate is Interim Payment Certificate no 84 (IPC 84) which shows that there is a sum of RM1,788,551.24 due and owing by Nukima to JKR. I have also taken note of JKR terminating Nukima’s contract on 14.7.2022 as per exhibit CHS -5. [33] This Court is however aware that KSB had submitted that there is a discrepancy between the percentage of works in IPC 84 and that in the Termination Notice. With respect this is an issue or dispute which is between JKR and Nukima and relates to the actual value of works done and the physical percentage of physical work progress. There is however nothing before me which shows that Nukima is currently disputing this fact. Thus, I am of the view that prima facie JKR has satisfied this Court that they do not owe any monies to Nukima [34] To this end I therefore hold that there are, as it stands currently before this Court, no monies due or payable to Nukima by JKR and thus the pre condition under sec 30(5) CIPAA i.e there are monies 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, has not been satisfied or proven. Jurisdictional Challenge [35] With regards JKR’s challenge as to this Court’s jurisdiction to hear the matter, I hold that this contention is wholly misconceived and untenable as section 25 of the Courts of Judicature Act 1964 which states “(1) Without prejudice to the generality of Article 121 of the Constitution the High Court shall in the exercise of its jurisdiction have all the powers which were vested in it immediately prior to Malaysia Day and such other powers as may be vested in it by any written law in force within its local jurisdiction.

Without prejudice to the generality of subsection (1) the High Court shall have the additional powers set out in the Schedule: Provided that all such powers shall be exercised in accordance with any written law or rules of court relating to the same.” [36] It is my view that the Courts of Judicature Act 1964 empowers this Court to hear matters by CIPAA as CIPAA is one of the written laws referred to in section 25 therein by virtue of the words “such other powers as may be vested in it by any written law in force within its local jurisdiction”. I hold that the respective sections in CIPAA cannot be compartmentalized in isolation and indeed CIPAA is to and can only be read as a whole as it would indeed be absurd for only certain sections to be referred to the High Court whilst the other sections would not come within the jurisdiction of the High Court. I must add that this is not a situation where the High Court is enlarging its jurisdiction. [37] Further, this alleged contention by JKR would surely go against Parliament’s wisdom in enacting CIPAA, which purpose and objective is for inter alia the facilitation of regular and timely payment as well as to provide remedies thereto, when there is nothing expressed in CIPAA to prevent this High Court from hearing a section 30 CIPAA application or for that fact any application under CIPAA. [38] Be that as it may, to surmise, this Court holds that the application in enclosure 1 under OS 202 is untenable and not proven in accordance with CIPAA. I therefore dismiss enclosure 1 herein with costs. Dated: 26th day of July 2024 sgd. NADZARIN WOK NORDIN HIGH COURT JUDGE CONSTRUCTION COURT 1 COUNSEL FOR THE PLAINTIFF: Chooi Wai Seng (Messrs Chang Chooi & Co.] COUNSEL FOR THE DEFENDANT: Nurul Badariah binti Yusof (Peguam Persekutuan, Jabatan Peguam Negara Malaysia]