Ktcc Mall Sdn. Bhd. v Tcs Construction Sdn. Bhd. (BA-24C-7-01/2023)

The entire contract sum amounting to RM224,053,767.00 and GST have been paid to MPM;

There is a waiver given by KTCC for Retention Sum and

MPM owes KTCC LAD amounting to RM7,950,000.00; and

As MPM has been wound up, TCS KTCC will contravene the winding up rules of undue preferences and/or pari passu principle of the Insolvency Law. [19] KTCC also contents that TCS is not entitled to the interests and costs of the AD as Section 30 of CIPAA 2012 only provides for direct payment of the adjudicated amount. [20] The CPC has been issued on 23.1.2020 and as such the Defect Liability Period (DLP) ended on 24.1.2022. Since the rectification of defects are not completed, Certificate of Making Good Defects (CMGD) has yet to be issued. [21] Retention Sum and Performance Bond, rectifications of defects will have to be done by MPM or if done by third party appointed by KTCC, payment claims for the rectification will be made against MPM. [22] The said Letter of Undertaking given by KTCC to TCS is only for non-payment of undisputed sum by MPM and not on disputed amounts such as this claim. Therefore, KTCC is not obliged to honour the said Letter of Undertaking. E. ISSUES [23] The issues which this court has to consider in relation to this Originating Summons are as stated below: i. Whether this Originating Summons contravenes the principle of pari passu of the Insolvency Law and the rule of undue preference?; ii. Whether the service of Section 30(1) CIPAA 2012 was defective?; iii. Whether TCS has discharged its legal burden to establish there are monies due and payable to MPM by KTCC?; iv. Whether KTCC has discharged its evidential burden to prove that there are no monies due and payable to MPM?; v. Whether Adjudication Amount includes interest and cost?; and vi. Whether KTCC has the obligation to honour the said Letter of Undertaking? F. FINDINGS OF THE COURT [24] Section 30 CIPAA 2012 which provides as follows:

(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 (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 unde i. Whether this Originating Summons contravenes the principle of pari passu of the Insolvency Law and the rule of undue preference? [25] It is the contention of KTCC that since MPM has been wound-up, this action pursuant to Section 30 CIPAA is against the pari passu principle of the Insolvency Law and the rule of undue preference i.e TCS as any other unsecured creditor who has its interest on the assets of MPM arising from the AD has to register that interest in the list of unsecured creditors in order for the appointed liquidator to deal or manage MPM assets and liabilities. [26] Whatever sum (if any) that is owed to MPM by KTCC should be paid to the appointed liquidator in order for it to be dealt with in accordance to the Insolvency Law. It is contented by KTCC that Section 30 CIPAA 2012 in allowing the plaintiff to recover the unpaid Adjudication Amount from the principal of MPM (in this case) contravenes the rule of undue preference and is against the pari passu principle. [27] KTCC in its attempt to establish its objection had referred to the Federal Court case of Dubon Bhd (in liquidation) v Wisma Cosway Management Corp [2020] 4 MLJ 288 (Dubon case). In the Dubon case, it was held that: at the material time, provides that after the payment of preferential debts, the liquidator acts to safeguard the interest of the unsecured creditors. That in turn is ensured by the collection and distributions of the assets of the company pari passu amongst unsecured 446; [1985] 1 LNS 47 (FC)). [26] Any interpretation which seeks to dislodge these statutory provisions and settled principles of insolvency law cannot be support [Emphasis added] [28] In the Court of Appeal case CT Indah Construction Sdn Bhd v BHL Gemilang Sdn Bhd [2019] MLJU 1215 (CT Indah case) it was held that Section 30 CIPAA 2012 creates an independent statutory obligation on the principal on its own right to pay the subcontractor, notwithstanding that the contractor was wound up. Since the CT Indah case was decided prior to the Dubon case the principles of CT Indah case is no longer applicable in this case. Therefore, Section 30 CIPAA 2012 cannot be invoked against KTCC in this case as MPM has been wound up. [29] This argument by KTCC was rebutted by TCS by citing the Dubon case as not relevant to the context of direct payment from principal imposed by Section 30 CIPAA 2012. It was highlighted by the Plaintiff that unlike the CT Indah case, the Dubon case involves payment of property owned by the wound-up company. The question of law in the Dubon case was payment from a proprietor under section 33 and 77 of the Strata management Act 2013 respectively, gives it a lawful preference as a secured creditor over the assets of a compan [30] It is thus argued by TCS that any payment of outgoing and service charges as in the Dubon case would be from the assets of the wound-up company unlike in the CT Indah case where the Court of Appeal held that the payment made by the principal to the subcontractor would not be from the assets of the wound up company which in this case is MPM. [31] It is TCS n the CT Indah case, it was decided by the Court of Appeal that Section 30 CIPAA 2012 creates an independent statutory obligation on the part of BHL Gemilang, as a principal in its own right, to pay CT Indah and this is a separate obligation to pay imposed by the statutes. His Lordship Abdul Rahman Sebli (CJ Sabah & Sarawak) held the following: In the instant case, the liability of the respondent to make payment is imposed by statute, i.e. by section 30(3) of CIPAA. Thus, payment made by the respondent to the appellant would not be from the assets of BHL Builders but because the adjudicated sum is paid by the respondent, it will be debt due from BHL Builders to the respondent (once the respondent makes direct payment to the appellant) which the respondent will have to recover from BHL Builders pursuant to subsection 30(4). [15] We agree with learned counsel for the appellant that a legal obligation to pay may arise either by statute (as in the present case) or by contract. In fact, an obligation imposed by statute, in this case by subsection 30(3) of CIPAA, is stronger because in the absence of proof of payment by BHL Builders as requested by the respondent under subsection (2), it becomes mandatory for the respondent as the principal to pay the adjudicated sum of RM9,065,335.67 to the appellant. It is a requirement of law which the respondent has no discretion not to comply with it. [16] We are also in agreement with learned counsel for the appellant that section 30 of CIPAA creates an independent statutory obligation on the part of the respondent, as a principal in its own right, to pay the appellant and that this is a separate obligation to pay imposed by contractor to pay the appellant under the adjudication decision. [Emphasis added] [32] The CT Indah case was subsequently followed among others by the case of Cabnet System (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor [2020] MLJU 311 and the case of Peck Chew Piling (M) Sdn Bhd v Panzana Enterprise Sdn Bhd [2022] MLJU 390. [33] On this issue, KTCC has failed to steer this court away from the well-established principle set in the CT Indah Case by using the principles set in the Dubon case. It is undoubtedly clear that the Dubon case can be distinguished and that the authority which had addressed the statutory requirement under Section 30 CIPAA 2012 in relation to a wound-up company is the CT Indah Case. [34] As such, I am of the view that TCS has successfully established its right to pursue for payment from KTCC being the principal to MPM in the Project. Therefore, despite KTCC objection, I find that TCS does not contravene the rule of undue preference and is not against the pari passu principle as alleged by the Defendant. ii. Whether the s.30(1) CIPAA 2012 notice was defective? [35] ion that the written request sent by TCS to KTCC pursuant to Section 30(1) CIPAA 2012 is defective as TCS did not allow the time frame of fourteen (14) days to expire i.e 27.9.2022 before it invoked Section 30. [36] t being made prior to the expiry of the 14 days given is based on the fact that Section 30(1) CIPAA 2012 states that a written request may be made if there is failure to pay the Adjudication Amount, as such in this case, since the 14 days has yet to lapse, a written request pursuant to this sub-section is defective. [37] KTCC had referred to the case of Ideal City Development Sdn Bhd v PWC Bina Sdn Bhd and other appeals [2018] MLJU 1711101, where the Court of Appeal held that a payment claim issued before the due date for payment under the contract, is invalid. [38] TCS on the other hand argued that Section 31 CIPAA 2012 allows a concurrent action to be exercised in order to recover the Adjudication Amount awarded in its favour: se of Remedies

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 [39] In considering both the parties arguments on this matter, it cannot be denied that Section 31 certainly provides for concurrent exercise of remedies. Therefore, TCS is certainly entitled to invoke Section 30 CIPAA 2012 so long as no payment of the Adjudication bligation to pay the Adjudication Amount is immediately upon the pronouncement of the decision and not upon expiry of the time frame given. [40] The facts of the case referred by KTCC in order to substantiate its argument i.e Ideal City Development Sdn Bhd v PWC Bina Sdn Bhd and other appeals (supra) (Ideal City case) can be distinguished from this case. In the Ideal City case, the Court of Appeal allowed the appeal on the basis that a situation of non-payment can only arise if payments for the interim progress certificate was not made upon expiry of the due date to pay so. This was to establish whether the claimant at the adjudication in that case was indeed an unpaid party. Unlike the Ideal City case, here, the obligation to pay the Adjudication Amount is immediate. [41] It must also be realised that by virtue of subsection 30(2) CIPAA 2012, there is a mandatory requirement for KTCC to issue a notice to MPM and on failure to still pay within 10 days of the said notice, KTCC can then make the direct payment to TCS. Hence, even though the written request was made within the 14 days, if MPM had any intention obligation to pay is not immediate upon the written request is made. Hen written request within the 14 days period given to pay the Adjudication Amount. [42] of a written request pursuant to Section 30(1) CIPAA 2012 was defective. iii. Whether TCS has discharged its legal burden to establish there are monies due and payable to MPM by KTCC? [43] The defence raised by KTCC in an attempt to resist Section 30 application is that there is no money due or payable to MPM as at the date of receipt of TCS written request. [44] In the case of Chong Lek Engineering Works Sdn Bhd v PFCE Integrated Plant And Project Sdn Bhd [2020] 1 LNS 2251, Wong Kian Kheong J (as he then was) held that it was inadequate for the Employer to simply make a bare assertion, as the burden is on the Employer to prove that there is no money due to be paid to the main contractor. Failure to substantiate its assertion with documentary evidence would lead the court to invoke an adverse inference against the Employer. [45] His Lordship had further stated that whilst the Defendant had the evidential burden to prove that there is no money due or payable, the Plaintiff bears the legal burden to prove there is money due or payable. [46] he court in, among others, Chong Lek Engineering Works (supra) , HSL Ground Engineering Sdn Bhd v. Civil Tech Resources Sdn Bhd and another [2020] 1 LNS 526; [2021] 8 MLJ 347, MKP Builders Sdn Bhd v. Turnpike Synergy Sdn Bhd [2021] 1 LNS 1238, WTK Engineering Sdn Bhd v. Seriemas Development Sdn Bhd [2021] 1 LNS 424; [2021] MLJU 520 and Zeta Letrik Sdn Bhd v. Jaks Island Circle Sdn Bhd [2022] 1 LNS 427 have considered the words "due or payable" in Section 30(5) CIPAA 2012 and interpreted the same literally, according to their ordinary plain meaning. [47] I make specific reference to the case of HSL Ground Engineering Sdn Bhd v. Civil Tech Resources Sdn Bhd and another summons [2020] 1 LNS 526 where the meaning of "due or payable" in the context of Section 30(5) CIPAA 2012 was considered and Lim Chong Fong J (as he then was) held, inter alia, that: "[29] It is plainly provided in s. 30(5) of the CIPAA that the defendant is only obliged to make direct payment if there is money due or payable to CTSB. It is not due and payable. In the English Court of Appeal case of Videocon Global Ltd & Anr v. Goldman Sachs International [2016] EWCA Civ 130, it was held that there is a distinction between due and payable in that a debt accrues when it is due whilst an obligation to pay arises when it is payable. They are thus not synonymous and it seems that the former is stricter when compared to the latter. In the English building contract case of Dunlop & Ranken Ltd v. Hendell Steel Structures Ltd, Pitchers Ltd (Garnishees) [1957] 1 WLR 1102 on garnishment, it was held that money under a building contract based on the RIBA form is not due for attachment until a certificate by the architect has been issued for that sum of money. It is plain that for purposes of garnishment under the then Rules of the Supreme Court of England, only debt due or accruing debt could be garnished. Thus, in my view, if it is just payable instead of due and payable, it suffices so long there is an obligation or liability to pay upon it being properly claimed. (Emphasis added) [48] argument that KTCC had never declared that the Certificate of Practical Completion (CPC) had been issued for this project and as such, there will surely be payments which are due or payable to MPM. Even if there are no outstanding payments due or payable to MPM, the fact that CPC has not been issued as yet, the retention sum should still be held by KTCC. [49] However, in this case, KTCC has declared that CPC has been issued on 23.1.2020 but there is no issuance of Certificate of Making Good Defects (CMGD) as yet. This being the case, since CPC has been issued by its own admission, by that the 1st moiety of the retention sum should have been released by KTCC to MPM. Since CMGD has not been issued as yet, the 2nd moiety of the retention sum should still be held by KTCC. By this assumption there should be monies still payable to MPM by KTCC. [50] Therefore, by having complied with the requirement pursuant to Section 30(1) of CIPAA 2012, it is my view that TCS has proven on a balance of probabilities that there is money to the least payable if not due from KTCC to MPM at the time the request pursuant to Section 30(1) CIPAA 2012 was made to the Defendant. v. Whether KTCC has discharged its evidential burden to prove that there are no monies due and payable to MPM? [51] According to KTCC there are no monies due or payable to MPM at the tim Section 30(1) of CIPAA 2012 due to the following reasons: i. The contract sum of RM224,053,767.00 and a sum of RM5,403,962.75 being the GST have been paid in full to MPM; ii. Due to 53 days of delay in completing the Project, MPM owes KTCC a sum of RM7,950,000.00 for LAD; and iii. There is a waiver granted to MPM for Retention Sum and Performance Bond, so there is no monies held by KTCC. [52] In support of its case, KTCC had produced the followings:- a) Payment vouchers for all payments made to MPM; b) Payment receipts issued by MPM for all payments received; c) Remittance forms bearing the letterheads of the respective banks to illustrate the respective transfers of payments to MPM; d) Letters of instruction from Tang Yeam Soon to transfer the payments from his account to MPM; e) Letters of instruction from Tang Yeam Soon to drawdown the term loans from RHB Bank; f) Letters from RHB Bank charging interests on the released loan; g) Bank account statements of Y.S Tang Holdings, Tang Yeam Soon, and KTCC to show that the amounts had been credited from the respective accounts; h) Cheques issued by KTCC to MPM; and i) Tax invoices issued by MPM. [53] TCS disputes that some of the payments were in fact made to MPM for this project. The payment vouchers that are produced as evidence by KTCC lacks pertinent details, there are no acknowledgements of receipt, there are no [54] The receipts issued by MPM which are produced as evidence by KTCC also lacks pertinent details inclusive of signatory names, dates as purpose of payment. [55] Further observation also shows that although both the payment [56] Based on KTCC, a sum of RM100,051,683.70 had been paid to MPM pursuant to Progress Claim Certificate Nos. 1- 33 of the Project prior to the contract being entered between TCS and MPM. However, according to TCS, the payment of this sum cannot be correct as the Preliminaries, Earthworks, Piling Works and Sub-Structure Works would only have amounted to RM67,497,797.69 as shown through the Summary of Contract Sum in the contract between KTCC and MPM. The breakdown of this sum is as shown below: No. Description Amount (RM)

Preliminaries 13,187,164.57 2. Earthworks 8,514,043.15 3. Piling Works 18,730,894.92 4. Sub-Structure Works 27,065,695.05 Total 67,497,797.69 [57] If KTCC had indeed paid MPM a sum of RM100,051,683.70 for MPM has not even started as yet, this would mean that a sum of almost RM32.5 million had been paid in advance to MPM by KTCC for works which are yet to be carried out by TCS. An advance payment of such large amount is certainly unimaginable. [58] Although KTCC had declared that CPC was issued on 23.1.2020, TCS had raised doubts as to the genuineness of the CPC as the same was never declared in all its dispute with MPM and or TCS. In fact, TCS had been said to have delayed its work and that the issuance of CPC was not possible for this same project in other suits. [59] On the issue of the waiver of Retention Sum and Performance Bond, though correspondences have been produced by KTCC to correspondences were not produced by KTCC in other suits [Lua Yik KTCC Mall Sdn Bhd [2022] MLJU 3244] (the Better One Marketing case) but is made available now. [60] Upon considering all of the above and perusing through the documents filed by KTCC in support of its case assertions, my conclusions are as follows: i. I agree with TCS that the documents that were filed by KTCC certainly are lacking of pertinent details including there being no acknowledgements by MPM. ii. There are also no evidences as to the acceptance of payment of the contract sum as the final sum payable by KTCC to MPM. KTCC has failed to show to this court the payments made were indeed payments made for the purpose of the project and not for other purposes. iii. I find it strange and as such questionable that the final sum payable to MPM has no variations of any sort i.e. the final sum is the exact contract sum, especially in a project as huge as this involving over 200 million ringgits where even the sub-contractors including TCS had incurred additional costs due to variation orders. However, no additional sum has been incurred by MPM in its final sum. Not only the final sum is the exact contract sum, KTCC had also paid this sum to MPM prior to the completion of the Project. The court finds it very difficult to comprehend such evidence to be true, especially in the Construction Industry. iv. On the issue of payments made to MPM inclusive of works yet to be carried out by TCS, KTCC advance payments made to MPM and that such payment methods are among several commercial decisions made with the intention to ease the workflow in completing the Project. However, the court finds explanations regarding the adopted payment methods lack coherence, especially when viewed in the context of the Construction Industry where payments are made upon certifications of work done based on the progress claims made by contractors. v. It is also incomprehensible that KTCC has waived the requirement of not just the Retention Sum but also the Performance Bond for a project worth over 200 million ringgits. There may be possibilities for a waiver of Performance Bond in a construction contract due to special reasons but waiver of Retention Sum is very unlikely as it forms part of the construction works process i.e. up to rectification of defects. vi. Finally, unlike the Better One Marketing case, this case has a list of rectification of defects which has been shown to this court. By right the same should have been made available in the Better One Marketing case as it involves the same employer and main contractor and for the same Project. Although, according to KTCC, these defects are to be rectified by MPM and if it fails to do so a third party contractor will be engaged to carry out the rectifications. The costs of the rectifications will be imposed on MPM. It is illogical that KTCC would allow itself to be subjected to making claims and chasing for payments from MPM when this situation could have been avoided if a Retention Sum had been collected from MPM, especially now that MPM has been wound-up. [61] In the absence of clear answers to these doubts, incomprehensible facts, illogical practices and supporting documents, KTCC has failed to discharge its evidential burden on a balance of probabilities that no monies are due or payable to MPM at the time the written request was made by the Plaintiff. [62] Based on the foregoing, TCS has successfully fulfilled the four (4) conditions in respect of an application as enunciated in the case of Cabnet System (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor [2020] MLJU 311 : i. MPM has failed to pay the adjudication amount to the Plaintiff; ii. The Plaintiff has made a written request to the Defendant to pay the adjudicated amount directly to the Plaintiff; iii. There is money due or payable from the Defendant to MPM at the time of receiving the written request; and iv. The D Request and did not pay the adjudication amount to the Plaintiff vi. Whether Adjudication Amount includes interest and cost? [63] The final issue to be determined is whether the adjudication amount includes interest and cost. The Court of Appeal in the case of Pali PTP Sdn Bhd v. Bond M&E Sdn Bhd & Another [2023] 9 CLJ 740 [2023] 1 LNS 1787 had decided as follows on this issue: In the absence of definition of the phrase 'adjudicated amount' in CIPAA, we therefore find on our purposive construction or interpretation that it includes interest and costs in furtherance of the purpose and object of the statute to protect and/or safeguard the rights particularly of the small contractors and/or subcontractors. The phrase 'adjudicated amount' shall be [64] Therefore, I conclude that adjudication amount includes interest and costs. vii. Whether KTCC has the obligation to honour the said LU? [65] On the issue of the said LU that it is only bound by payments not paid under the contract and not more than that certainly is not reflected in the said LU. Counsel for KTCC Mall: Mr/Mrs. Wong Li Wei & Mr/Mrs. Tan Jia Shen (Messrs. Sanjay Mohan) Counsel for TCS: Mr/Mrs. Lim Ren Wei (Messrs. Harold & Lam Partnership)