Kkh Development Sdn Bhd v Pintaras Geotechnics Sdn Bhd (WA-24C-57-04/2023)

2.1 the Adjudicator had lacked the jurisdiction or acted in excess of his jurisdiction 2.2 to allow Pintaras claim for loss and expense is in excess of the Adjudicator’s Jurisdiction Brief Background [3] Pursuant to a letter of award dated 26.7.2019, Pintaras was appointed by KKH to carry out the piling works for a project consisting of serviced apartment and hotel at Kuala Lumpur. The letter of award was executed by Pintaras on 1/8.2019 (“Letter of Award”) The original contract sum was RM13,280,000.00. [4] Clause 6 of the Letter of Award states that the applicable standard from contract is the Agreement and Conditions of PAM Contract (with quantities). [5] Pintaras states that it had carried out and completed its works under the contract and that by way of a Certificate of Practical Completion issued by the project architect, Pintaras’ works had been certified to achieved practical completion on 12.10.2020. The Certificate of Making Good Defects has also been issued by the project architect certifying that all defects had been made good on 11.10.2022. [6] It is alleged that KKH failed to pay Pintaras for works completed under the contract, resulting in Pintaras having to initiate adjudication proceedings pursuant to the CIPAA against KKH for KKH’s non-certification and non-payment of Pintaras’ Claim No. 18 (Final Claim) dated 10.3.2021 in the sum of RM3,368,212.91. [7] Pintaras’ claim was allowed in part by the Adjudicator and pursuant to the Adjudication Decision (As Corrected) Re-Dated 17th February 2023 i.e the AD, the Adjudicator determined that the adjudicated sum payable by KKH to Pintaras is RM2,143,223.51 and awarded interests and costs in favour of Pintaras. Court’s Findings Non Reply to Affidavit [8] In opposing OS 57, Pintaras had submitted that they had made various assertions on material issues in its Affidavit In Reply affirmed on 28.4.2023 in enclosure of OS 56 which was not contradicted and as such KKH is deemed to have admitted to those assertions. I agree with this submission based on the authority of Ng Hee Thoong & Anor V Public Bank Bhd [1995] 1 MLJ 281 where the Court of Appeal held: “Now, it is a well settled principle governing the evaluation of affidavit evidence that where one party makes a positive assertion upon a material issue, the failure of his opponent to contradict it is usually treated as an admission by him of the fact so asserted: Alloy Automotive Sdn Bhd v Perusahaan Ironfield Sdn Bhd [1986] 1 MLJ 382; Overseas Investment Pte Ltd v Anthony William O'Brien & Anor [1988] 3 MLJ 332.” [9] From the above the said assertions in Pintaras’s Affidavit In Reply affirmed on 28.4.2023, the facts and assertions thereto are unchallenged and must be deemed accepted. Adjudicator’s Alleged Lack of Jurisdiction Or Acting In Excess Of His Jurisdiction [10] Be that as it may, it is alleged by KKH that in delivering the AD, the Adjudicator had lacked the jurisdiction or acted in excess of his jurisdiction as Pintaras’s Payment claim and Adjudication Claim was based on a Final Claim instead of a Final Account is wrong and defective; I have since perused the AD and find that the Adjudicator inter alia:

had referred to the Payment Claim and Progress Claim no. 18 and had referred the latter as a Final Claim as a result of the issues arising thereto where inter alia the Claimant/Pintaras had asserted that it had already submitted all relevant documents via its Progress claim no. 16 (Penultimate) dated 7.12.2020 and that the documents forwarded on 25.1.2022 and 8.2.2022 are in fact re submission of documents upon request by KKH’s architect

the chronology of exchange of correspondences between the parties with regards the Final Claim prior to the Payment

there was submissions by both parties as to the figures in the said Final Claim and the Architect’s draft Final Account dated 26.8.2022

had considered clause 30 of the PAM Contract, read together with the Appendix, and the time periods for submission of the Final Account and found that Pintaras had submitted its Final Claim on 10.3.2021 and that the due date for payment has expired and gave his reasons thereto as to his findings as can be seen in paragraph 60 a to l of the said AD

had stated in the AD that ‘The Architect itself had acknowledged that the Final claim was received on 10.3.2021 and had asked the Respondent/KKM for their verification by way of an email dated 18.8.2021’ [11] I find that KKH’s challenge on the above, primarily relates to when the dispute arose and that when the Payment claim dated 22.8.2022 was issued, the payment arising from Pintaras Final Claim was not as yet due. [12] From the aforementioned, I find that the Adjudicator had reviewed the contemporaneous documents pertaining to the said subject matter and had come to his findings only after considering the parties submissions and a rather comprehensive assessment of the documents before him. [13] On the issue that the dispute had arisen prior to the Payment Claim, I agree with learned counsel for Pintaras that based on the chronology of correspondences with regards the said Payment Claim, the payment dispute had arisen prior to the Payment Claim and adopt the ratio in the case of Fastrack Contractors Ltd v Morrison Construction Ltd 75 ConLR 33, where the Technology and Construction Court in the United Kingdom held that: “27. A 'dispute' can only arise once the subject-matter of the claim, issue or other matter has been brought to the attention of the opposing party and that party has had an opportunity of considering and admitting, modifying or rejecting the claim or assertion. This is clear from a consideration of two decisions, one concerned with arbitration and the other with the dispute resolution procedure that is required to have been gone through in many civil engineering contracts before arbitration can be commenced. In the arbitration field, the Court of Appeal confirmed in Halki Shipping Corp v Sopex Oils Ltd [1998] 2 All ER 23, [1998] 1 WLR 726that a 'dispute', the existence of which is the statutory pre-condition of a party being entitled to enforce an arbitration clause and to have legal proceedings stayed for arbitration under the Arbitration Act 1996, has a wide meaning. The term includes any claim which the opposing party has been notified of which that party has refused to admit or has not paid, whether or not there is any answer to that claim in fact or in law. In the civil engineering field, the Court of Appeal in Monmouthshire CC v Costelloe & Kemple Ltd (1965) 5 BLR 83 held that cl 66 of the ICE Conditions of Contract (4th edn), which only allowed for arbitration where there was a dispute or difference that had already been referred to and decided by the engineer, required there to have been a claim by one party and its rejection by the other before a dispute or difference could be referred to the engineer. The Court of Appeal held that a rejection of a claim does not necessarily occur when the claim is submitted to the engineer or during subsequent exchanges of views in relation to that claim. A dispute only arises when the claim is rejected in clear language. An obvious refusal to consider the claim or to answer it can, however, constitute such a rejection.

These cases help in showing that a claim and its submission do not necessarily constitute a dispute, that a dispute only arises when a claim has been notified and rejected, that a rejection can occur when an opposing party refuses to answer the claim and a dispute can arise when there has been a bare rejection of a claim to which there is no discernable answer in fact or in law.” [14] As KKH’s submission on this point requires this court to re evaluate the merits of its arguments before the Adjudicator, I disagree with KKH and hold that this issue is a non appealable matter which does not come within section 15 of CIPAA. Case law on this is trite, see Bina Puri Sdn Bhd v TKL Oil & Gas Sdn Bhd [2019] MLJU 1943; [2020] 9 MLJ 119. [15] In any event I do note from paragraph 5 of enclosure 2 in OS 57 that KKH had admitted that a dispute as to the Final Claim has arisen. [16] Accordingly, I dismiss KKH’s jurisdictional challenge on this point of the Adjudicator lacking the jurisdiction or acting in excess of his jurisdiction as Pintaras’s Payment claim and Adjudication Claim was based on a Final Claim instead of a Final Account is wrong and defective as being unmeritorious. Whether Subject Matter Ought To Be Referred To Arbitration [17] In respect of the jurisdictional challenge that the subject matter ought to be referred to Arbitration, I find that the Adjudicator had addressed this in the AD and had exercised sections 25 (m) and (n) of CIPAA in coming to his decision the same. [18] Sections 25(m) and (n) of CIPAA provides that: “The adjudicator shall have the powers to:-

review and revise any certificate issued or to be issued pursuant to a construction work contract, decision, instruction, opinion or valuation of the parties or contract administrator relevant to the dispute;

decide or declare on any matter notwithstanding no certificate has been issued in respect of the matter;…” [19] I hold that pursuant to afore mentioned sections in CIPAA, the Adjudicator has the right to exercise her powers under the same for the purpose of the jurisdictional challenge that the subject matter ought to be referred to Arbitration. [20] It is also to be noted that the Adjudicator had in the AD stated ‘… I find that there is no express prohibition under the contract or in law for the Claimant to commence a statutory adjudication proceeding for payments due’. I hold that this is a matter of interpretation of the provisions of the contract and CIPAA by the Adjudicator and that this Court should thus not interfere in the same. [21] I further wish to quote and rely on the Federal Court’s decision in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd And Another Appeal [2020] 6 MLJ 224 where our Apex Court had stated: “[76] We are not persuaded. We are fully in agreement with the learned High Court judge there is nothing to stop the CIPAA 2012 from applying to the case at hand and there is no need to see adjudication and arbitration to be mutually exclusive to each other. At pp 615–616, R/R (Jld 6) of his ground of judgment, the learned High Court judge stated: [76] I agree that the dispute resolution mechanism under CIPAA is by way of Adjudication and the statutory requirement for dispute resolution under the Architects Act is by way of Arbitration. I must also state that there is nothing strange in this difference as statutory Adjudication came into being only with the coming into force of CIPAA on 10 April 2014 and that there is no need to see Adjudication and Arbitration to be mutually exclusive of each other as Adjudication would only yield a decision of temporary finality and it is only with Arbitration or Litigation that one gets a final and binding decision. The whole scheme of statutory Adjudication was never intended to be set in opposition to Arbitration or Litigation. Adjudication operates independently on a separate track and indeed a fast track and it will not run into collision with Arbitration or Litigation simply because its track is different. Before there was Adjudication, there were already Arbitration and Litigation. After the introduction of Adjudication, both Arbitration and Litigation will still continue except that now there is an additional dispute resolution mechanism of temporary finality that can be embarked upon before or concurrently with Arbitration or Litigation as the case may be. Thus one need not have to choose in an ‘either or’ approach between Adjudication and Arbitration but one can proceed in a ‘both and’ approach in resolving a dispute on an architect’s claim against his client for his professional fees. Adjudication under CIPAA was never designed to be in conflict with Arbitration and Litigation and so its process may be activated at any time where there is a valid payment claim under a construction contract. Premised on that proper perspective, the question of which would prevail over the other does not arise at all. [77] The High Court’s view was endorsed by the majority. The majority stated: [48] In any event, an adjudication award is only of a ‘temporary finality’ in nature against the main contractors and owners. CIPAA 2012 allows parties to take their grievances to the High Court prior to the adjudication process, concurrent with the adjudication application and even after the adjudication process notwithstanding the adjudication decision to determine the very construction dispute before the adjudicator. Reference to an arbitration tribunal is also available to the parties and the factual findings of the adjudicator are not binding on either the High court or the arbitration tribunal. This is specifically provided for in section 37 of CIPAA 2012. [78] Further, s37 of the CIPAA 2012 provides that an adjudication proceeding, arbitration and court litigation may proceed concurrently and in parallel. It is also apparent that adjudication is a mandatory procedure under the CIPAA 2012 and the right to statutory adjudication should not be circumvented by any contract where parties have agreed to arbitrate.’” [22] As to the alleged issue being a matter of core jurisdiction as raised by KKH, I hold that this argument is misconceived due to the fact of my afore mentioned decision that this issue is one which relates to the interpretation of the relevant contract between the parties which means that the Adjudicator has the necessary jurisdiction to determine the dispute as to the payment therein. [23] This has been explained in Terminal Perintis Sdn Bhd v Tan Ngee Hong Construction Sdn Bhd and another case [2017] MLJU 242 where Justice Lee Swee Seng (as he then was) held: “[72] Core jurisdiction would be the question of whether the subject matter of the dispute is one which the Act has conferred on the Adjudicator. Thus if a contract is not a construction contract, but a shipping or mining contract or a contract for legal fees with respect to advice given in construction contract, or that the contract is with respect to construction of a dwelling house for a natural person, then this Court will interfere if the Adjudicator got it wrong. It is a case where the Adjudicator has no jurisdiction to begin with. So too if the construction contract is carried out wholly outside Malaysia.” [24] For all of the above reasons, I thus hold this second ground of challenge as of no merit and dismiss the same. Whether Adjudicator Has Jurisdiction To Adjudicate On Loss And Expense [25] I now come to the 3rd challenge as to jurisdiction being that the Adjudicator has no jurisdiction to adjudicate on loss and expense for the following loss and expense claims:-

Loss and expenses for suspension of work no. 1 and 2: -

Protection cost – RM33,200.00;

Idling costs of plant, machineries and manpower – RM483,620.00

(ii) Loss and expenses for Suspension Notice No. 3: -

Protection cost – RM73,870.00

(iii) Idling of plant, machineries and manpower – RM1,223,760.00 [26] On this issue, Section 4 of CIPAA provides that: "payment" means a payment for work done or services rendered under the express terms of a construction contract” [27] I hold, after perusing the CIPAA, that it does not prohibit loss and expense claims and that loss and expense claims are within the definition of ‘payment’ under the said section 4 of CIPAA and that such claims for loss and expense in the context of the matter before me arises from or is a consequence of the claim for work done or services rendered under the construction contract relating to inter alia the protection works, idling of plant, machineries and manpower costs, loss and expenses costs due to the suspension of work for default in payments for the Suspension no.1 , no 2 and no.3. See as guidance the text ‘Adjudication of Construction Payment Disputes in Malaysia by Chow Kok Fong, Lim Ching Fong and Oon Chee Kheng. [28] From the records, KKH does not dispute the claims are payable save that it is payable at a lesser sum and the Adjudicator had in the AD amongst others stated “The construction contract here does expressly allow for loss and expense claims (subject to the contractor’s compliance with the express provisions thereof) when deciding on this issue. [29] I thus agree with the ratios in the line of cases such as Sime Darby Property (Bukit Raja) Sdn Bhd v Alaf Pentawaris Sdn Bhd [2020] MLJU 1554, Syarikat Bina Darul Aman Berhad & Anor V\v Government Of Malaysia [2017] MLJU 673; [2017] 1 LNS 559 and SKS Pavillion Sdn Bhd V Tasoon Injection Pile Sdn Bhd [2019] 9 MLJ 396 that loss and expense claims can be made via a Payment Claim under CIPAA. [30] I also hold that my reasoning is in line with the object of CIPAA which is to facilitate speedy cash flow as per Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd and Anor appeal [2020] 6 MLJ 224 where it was held by the Federal Court amongst others that the interpretation expounded by the majority of the Court of Appeal in that case was consistent with the purpose and structure of the adjudication process outlined in the CIPAA 2012. It was clear from the Preamble, the Explanatory Notes to the Bill and the speech of the Deputy Minister when tabling the CIPAA Bill that the primary objective of the CIPAA 2012 was to alleviate cash flow issues by providing an effective and economical mechanism. [31] I further hold that even if there is an error in the Adjudicator’s decision on the said loss and expense claims, the same can be rectified in the Arbitration Proceedings which decision I make is similar to that of Justice Anand Ponnudurai in Setia Fontaines Sdn Bhd v Pro Tech Enterprise Sdn Bhd and another case [2022] MLJU 2865 where His Lordship held as follow: “[36] Having taken into account all matters, in my considered view, the finding of the Learned Adjudicator in respect of Loss and Expense (L&E), even if possibly made in error, was one that was within his jurisdiction and can be rectified by the Arbitration proceedings. It is trite law that the Court cannot set aside the AD merely on the ground that the Learned Adjudicator has committed an error. [See the cases of Naza Engineering & Construction Sdn Bhd v SSL Dev Sdn Bhd [2020] 9 ML J 499; Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd and another case [2017] 7 MLJ 732 and Alpha Galaxy (supra)]. [37] As such, I am not inclined to set aside the said AD in respect of the Loss and Expense (L&E) and neither am I prepared to or able to conclude that that part of the said AD was one that was made in excess of his jurisdiction.” [32] I am thus not prepared to set aside the AD with regards the loss and expense claim as being made in excess of jurisdiction of the Adjudicator. Enforcement Of The AD [33] In the circumstances, I have thereafter perused OS 34 and find the requirements in section 28 of CIPAA have been fulfilled. Decision [34] I therefore dismiss OS 57 with costs and grant Order In terms of prayers 1, 2 a to f and prayer 3 in enclosure 1 of OS 34. Dated: 04th day of September 2023 sgd. NADZARIN WOK NORDIN HIGH COURT JUDGE CONSTRUCTION COURT 1 COUNSEL FOR THE PLAINTIFF(in suit 34)/DEFENDANT(in suit 57): Wong Li-Wei [Messrs Sanjay Mohan] COUNSEL FOR THE DEFENDANT(in suit 34)/PLAINTIFF(in suit 57): Khew Jo-Von [Messrs CH Tay & Partners]