Majlis Daerah Cameron Highlands v Putra Nilai Builders Sdn Bhd (WA-24C-138-08/2021)

the application by Putra Nilai Builders Sdn Bhd (‘PNB’) pursuant to s 28 of the Construction Industry Payment and Adjudication Act 2012 [Act 746] (‘CIPAA’) and the inherent jurisdiction of the court in Originating Summons No. WA-24C-129-08/2021 (‘O.S. No. 129’) to enforce the Adjudication Decision dated 25.6.2021 (‘AD’) by the learned Adjudicator, Dr. Steven Baptist (‘Adjudicator’) (‘Enforcement Application’); and

the application by Majlis Daerah Cameron Highlands (‘Council’)

the Council’s O.S. dated 12.8.2021 (encl. 1);

the Council’s AIS affirmed by affirmed by its Legal Assistant Officer, Nor Syuaadah Binti Alias on 12.8.2021 (encl. 2);

PNB’s AIR affirmed by affirmed by its Director, Segaran a/l Saundar Rajan on 25.8.2021 (encl. 5); and

the Council’s AIR affirmed by the same deponent on 10.9.2021 (encl. 8).

PNB’s O.S. dated 3.8.2021 (encl. 1);

PNB’s AIS affirmed by the same deponent on 2.8.2021 (encl. 2);

the Council’s AIR affirmed by the same deponent on 13.8.2021 (encl. 3); and

PNB’s AIR affirmed by the same deponent on 25.8.2021 (encl. 4). Salient Background Facts [5] PNB is a private limited company incorporated in Malaysia under the Companies Act 1965 [Act 125] and having its business address at PT7452, Tingkat 2 Putra Point, Jalan BBBN 1/2H, Bandar Baru Nilai, S/N I5l2nqPnFUqFwxkI90d9Gw 71800 Negeri Sembilan. PNB is in the construction business and related works. [6] The Council is a local authority established pursuant to the Local Government Act 1976 [Act 171] and having its address at Peti Surat 66, 39007 Tanah Rata, Cameron Highlands, Pahang Darul Makmur. [7] By the Letter of Acceptance of Tender dated 11.5.2017 (‘LAT’), the Council had accepted PNB’s tender for the project known as “Cadangan Tambahan Blok Bangunan Baru 3 Tingkat Pejabat Majlis Daerah Cameron Highlands, Di Atas Lot 5, PA 24635, Tanah Rata, Daerah Cameron Highlands, Pahang” (‘Project’) for the contract sum of RM4,229,391.30 inclusive of Goods and Services Tax. PNB signified its agreement to the conditions contained in the LAT by signing the same on 19.5.2017. [8] The representatives of the parties had subsequently signed the Standard Form Of Contract PWD Form 2013A (Rev. 1/2010) (‘PWD Form of Contract’). S/N I5l2nqPnFUqFwxkI90d9Gw [9] According to paras 8 and 12 of the LAT and Clause 2.0 of the Conditions of Contract (‘CoC’) read with the Appendix to the CoC, the date for possession of the site is 31.5.2017, the contract period is 42 weeks, and the completion date is 21.3.2018. [10] During the duration of the contract, PNB applied to the Council for five extensions of time (‘EoT’) on 15.1.2018, 2.5.2018, 27.7.2018,

21.9.2018 and 25.2.2019 pursuant to Clause 43 of the CoC for a total of 480 days. These applications were sent to the Council’s consultant for the Project, DZJ & Associates Architects (‘DZJ’). [11] DZJ had advised the Council to grant the EoT to PNB without any claims for additional costs. Based on this advice, the completion date was extended from 21.3.2018 to 31.5.2019 by way of five Certificate of Delay and Extension of Time issued by the Superintending Officer (‘S.O.’) for a total of 434 additional days. S/N I5l2nqPnFUqFwxkI90d9Gw [12] PNB did not complete the Project by the last extended completion date of 31.5.2019 pursuant to EoT No. 5. On the same date, the Council issued the Certificate of Non-Completion (‘CNC’) to PNB. [13] The works were then completed by PNB on 9.7.2019 and the Council issued the Certificate Practical Completion (‘CPC’) on the same date certifying that the works were practically completed on 9.7.2019. [14] Due to the delay in the completion of the Project, the Council imposed Liquidated Ascertained Damages (‘LAD’) against PNB in the sum of RM39,000.00 based on the delay of 39 days via Interim Certificate No. 14 issued on 2.8.2019. [15] Thereafter, PNB claimed for loss and expense from the Council vide five Notice of Intention to Claim pursuant to Clause 44.1 of the CoC dated 16.1.2018, 3.5.2018, 30.7.2018, 24.9.2018 and 26.2.2019 and the Notice pursuant to Clause 44.2 CoC dated 1.10.2019. S/N I5l2nqPnFUqFwxkI90d9Gw [16] The Council sent a letter dated 14.10.2020 to inform PNB that it had failed to comply with Clause 44.1 CoC and that PNB was not allowed to claim for loss and expense. [17] This led PNB to submit the Payment Claim dated 18.1.2021 pursuant to s 5 of the CIPAA. PNB claimed for loss and expense pursuant to the grant of EoT in the sum of RM269,725.35 under Clause 44 of the CoC and the sum of RM39,000.00 for the alleged unlawful deduction of LAD pursuant to Clause 40 of the CoC. [18] The Council did not respond to the Payment Claim and thus, under sub-s 6(4) CIPAA, is deemed to have disputed the entire Payment Claim. [19] PNB submitted the Notice of Adjudication dated 8.2.2021 pursuant to ss 7 and 8 CIPAA and this was followed by the usual adjudication documents, namely the Adjudication Claim dated 29.3.2021, Adjudication Response dated 12.4.2021 and Adjudication Reply dated 19.4.2021. S/N I5l2nqPnFUqFwxkI90d9Gw [20] The Adjudicator’s determination is set out in Part P of the AD consisting of almost two pages and may be summarised as follows:

PNB is entitled to the claim for loss and expense in the sum of RM124,738.07 incurred during the EoT with interest on the same in the amount of RM10,286.62;

PNB should be reimbursed for the unlawful deduction of LAD by the Council in the sum of RM39,000.00 with interest in the amount of RM3,702.33;

the Council shall, with immediate publication of the AD, pay to PNB the abovesaid amounts on or before 6.7.2021;

the Council shall pay to PNB –

the sum of RM10,286.62 being 5% simple interest on the outstanding loss and expense sum owed to PNB for its claim dated 1.10.2019. Pursuant to s 36 CIPAA, the due S/N I5l2nqPnFUqFwxkI90d9Gw date for the payment for the loss and expense claim is on 1.11. 2019 and interest is calculated from this date until the date of the AD;

(ii) the sum of RM3,702.33 being 5% simple interest on the unlawful deduction of LAD from 2.8.2019 until the date of the AD;

(iii) the party to party costs of RM30,000.00;

(iv) the Adjudicator's fees and expenses of RM6,615.63 which was deposited by PNB with the AIAC as Advance Security Deposit;

the Administrative Fee of RM1,190.50 (inclusive of 6% SST) which PNB had paid to AIAC as Advance Security

(vi) the AIAC Appointment of Adjudicator Fee of RM424.00 (inclusive of 8% Service Tax) paid to AIAC; and

(vii) the AIAC Registration fee of RM265.00 (inclusive of 8% Service Tax) paid to AIAC;

PNB shall be entitled to a further 5% simple interest on the adjudicated amount if it remains unpaid after 7 working days have lapsed from the date of the AD which shall be calculated from 6.7.2021 until the date of actual payment; and

in accordance with Rule 10(3) of the AIAC Adjudication Rules, the Adjudicator may on his own initiative or on the application of a party, correct his decision so as to remove any computational or typographical mistake and/ or error. Under Rule 10(4) of the AIAC Adjudication Rules, any correction of a decision shall be made as soon as practicable after the date that the application was received by the Adjudicator or, where the correction is made by the Adjudicator or, where the correction is made by the S/N I5l2nqPnFUqFwxkI90d9Gw Adjudicator on his own initiative as soon as possible after he becomes aware of the need to make a correction. I. O.S No. 138: Setting Aside Application [21] Section 13 of the CIPAA expressly provides that the adjudication decision is binding unless, among others, it is set aside by the High Court on any of the grounds referred to in s 15. [22] Based on the grounds of the application as stated in O.S. No. 13, it is evident that the Council was relying on limbs (b) and (d) of s 15 CIPAA to set aside the AD. Specifically, the Council claimed that the

had acted beyond his jurisdiction and there has been a denial of natural justice when the Adjudicator took into account the alternative/ new claim which was submitted by PNB in the Adjudication Reply, namely the claim based on the Contract Preliminaries even though PNB never submitted such claim in S/N I5l2nqPnFUqFwxkI90d9Gw the Payment Claim and nor has it ever been claimed from the

had acted in excess of jurisdiction when he considered and allowed a refund of the LAD although such refund does not fall under the definition of “payment” under the CIPAA. 1st Issue: Whether the Adjudicator, in determining that PNB is entitled to the claim for loss and expense of RM124,738.07 based on the recurring items in the Contract Preliminaries, had breached the rules of natural justice by not giving the Council the opportunity to submit or comment on this alternative/ new claim - The Parties Submissions [23] The Council contended that the claim for loss and expense submitted by PNB vide its Payment Claim and Adjudication Claim was in the sum RM269,725.35. However, in the Adjudication Reply, PNB made an S/N I5l2nqPnFUqFwxkI90d9Gw alternative or a new claim in the sum of RM124,738.07 based on the recurring items in the Contract Preliminaries (‘New Claim’). [24] Datuk Anandan submitted for the Council that the items and calculations by PNB in the New Claim is different from the list of items and calculations as set out in the Payment Claim. The learned counsel argued, on the authority of London and Amsterdam Properties Ltd v Waterman Partnership Ltd [2003] EWHC 3059 (TCC) that the Adjudicator has breached the principles of natural justice by failing to seek clarification or a response from the Council as to the New Claim before the Adjudicator made his decision. [25] Had the Adjudicator given that opportunity to the Council, it would have highlighted that –

the New Claim is premature by reason of non-fulfilment of the condition in Clause 44.2 of the CoC which requires any claim for loss and expense to be first submitted to the S.O.; and

the Adjudicator must examine and assess the New Claim as several items as listed in the Adjudication Reply are not recurring. [26] PNB retorted that such contention is unfounded by referring to the decisions in Enra Engineering And Fabrication Sdn Bhd v Gemula Sdn Bhd And Anor [2020] 7 MLJ 482 and Encorp Iskandar Development Sdn Bhd v Konsortium Ipmines Merz Sdn Bhd And Anor [2020] MLJU 1503 as the Adjudicator has the absolute discretion to obtain clarification should he wish so by virtue of sub-s 12(1) read together with s 25 of the CIPAA which provides that: “12. (1) The adjudicator shall conduct the adjudication in the manner as the adjudicator considers appropriate within the powers provided under section 25. …

The adjudicator shall have the powers to – …

call for meetings with the parties; …

inquisitorially take the initiative to ascertain the facts and the law required for the decision; …”. [27] Mr. Suren stressed that the Council’s claim for breach of natural justice is baseless because this is not a case where the Council was denied a proper and fair hearing to make submission on issues raised in the Adjudication Reply. The Adjudicator cannot be accused of having been procedurally unfair if he does not exercise his discretion under s 25 CIPAA and especially when such request was never made to him in the first place. - Analysis and Findings of the Court [28] The arguments by the parties in this case did not canvass on the issue as to whether loss and expense claims arising from delay fall within the S/N I5l2nqPnFUqFwxkI90d9Gw definition of the word “payment” in s 4 CIPAA (see the differing views in Syarikat Bina Darul Aman Berhad & Anor v Government of Malaysia [2017] MLJU 673 and Integral Acres Sdn Bhd v BCEG International

(M) Sdn Bhd and other cases [2021] MLJU 1889 for comparison). [29] In his submissions for the Council, Datuk Anandan relied on the following oft quoted excerpt from the judgment of Akenhead J in Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC), which has been largely applied by the courts in this country, on breaches of natural justice in adjudication cases: “… (a) it must first be established that the adjudicator failed to apply the rules of natural justice; (b) any breach of the rules must be more than peripheral; they must be material breaches; (c) breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it is one which is either decisive or of considerable potential S/N I5l2nqPnFUqFwxkI90d9Gw importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant; (d) whether the issue is decisive or of considerable potential importance or is peripheral or irrelevant obviously involves a question of degree which must be assessed by any judge in a case such as this; (e) it is only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis which has not been argued or put forward by either side, without giving the parties an opportunity to comment or, where relevant put in further evidence, that the type of breach of the rules of natural justice with which the case of the Balfour Beatty Construction case was concerned comes into play. It follows that, if either party has argued a particular point and the other party does not come back on the point, there is no breach of the rules of natural justice in relation thereto.” (emphasis added). S/N I5l2nqPnFUqFwxkI90d9Gw [30] Meanwhile, PNB chose to refer to paras 19 to 21 of the judgment in ACFM Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd And Anor [2016] MLJU 1776 to emphasise the legal principle that natural justice involves the concept of procedural fairness which needs to be accorded to the parties in a hearing among disputants. Further, the function of the court is to look at the manner in which the adjudicator conducted the hearing and whether he had committed an error of law during that process where such error relates to whether he had accorded procedural fairness to the complaining party. [31] There is no doubt that the first item in PNB’s Payment Claim is for loss and expense in the sum of RM269,725.35, the full particulars of which were alleged to have been submitted to the Council on 1.10.2019

(e), (f) and (h), and Contractor has incurred direct loss and/or expense beyond that reasonably contemplated and for which the Contractor would not be reimbursed by a payment made under any other provision in this Contact, then the Contractor shall within thirty (30) days of the occurrence of such events or circumstances or instructions give notice in writing to the S.O. of his intention to claim for such direct less or expense together with an estimate of the amount of such loss and/or expense, subject always to clause 44.2 hereof.

44.2 As soon as is practicable but not later than ninety (90) days after practical completion of the Works, the Contractor shall submit full particulars of all claims for direct loss or expense under clause 44.1 together with all supporting documents, vouchers, explanations and calculations which may be necessary to enable the direct loss or expense ascertained by the S.O.. The S/N I5l2nqPnFUqFwxkI90d9Gw amount of such direct loss or expense ascertained by the S.O. shall be added to the Contract Sum.

44.3 If the Contractor fails to comply with causes 44.1 and 44.2, he shall not be entitled to such claim and the Government shall be discharged from all liability in connection with the claim.”. [32] The Payment Claim alludes to the Council’s letter dated 14.10.2020 wherein PNB was informed that the loss and expense claims have been rejected on the ground of non-compliance with Clause 44.1 CoC i.e. PNB’s failure to serve the Notice of Intention to Claim within the stipulated time. [33] The facts leading to the loss and expense claims were elaborated in the Adjudication Claim with statements, among others, that the Council did not reply to PNB’s notices for more than one year and was content on not reviewing the claims. Pertinently, in para 11 of the Adjudication Claim, PNB attached its letter titled “Tuntutan Loss and Expense bagi S/N I5l2nqPnFUqFwxkI90d9Gw EOT No. 1 – EOT No. 5” dated 1.10.2019 addressed to the Council with copies of documents such as salary slips, debit notes, invoices, payment vouchers and receipts to support the loss and expense claim. The detailed items of claim and the respective amount in respect of each of the five EoT i.e. RM35,595.55, RM41,914.36, RM36,030.50, RM35,076.75 and RM121,108.19 were tabulated to show how the final figure of RM269,725.35 was computed (‘Adjudication Claim Tables’). [34] The Council began its submission in the Adjudication Response by stating in para 2 that: “In submitting its Adjudication Reply, the Claimant must not be allowed to introduce matters or documents which the Claimant should have introduced with its Adjudication Claim. Otherwise, there would be a breach of natural justice since the Respondent does not have a right of reply to matters which should have, but were not, introduced in the Adjudication Claim pursuant to WRP Asia Pacific Sdn Bhd S/N I5l2nqPnFUqFwxkI90d9Gw v. NS Bluescope Lysaght Malaysia Sdn Bhd & Other Case [2015] 1 LNS 1236.” (‘Reservation’). [35] The Council went on to submit that PNB has failed to comply with two pre-conditions as stipulated in Clause 44.1 CoC, namely –

to give notice in writing to the S.O. within 30 days of the occurrence of the events as specified under Clause 43.1(c), (d),

(e), (f) and (h) CoC; and

to provide, in the said notice, an estimate of the amount of such loss and/ or expense to be claimed. [36] PNB contested the Council’s responses by stating, in the Adjudication Reply, that the Council had raised technical non-compliance issues which were never raised before and are contrary to the Council’s earlier stance. Apart from addressing the purported technical non-compliance issues, PNB provided an alternative argument which is found in para 12 as follows: S/N I5l2nqPnFUqFwxkI90d9Gw “If the Respondent’s arguments on technical non-compliance were to be given any serious consideration by this Tribunal, the Claimant humbly submits in the alternative that it is still, in any event, entitled to claim for Loss & Expense under the Contract based on the principles enunciated in the recent High Court case of Sunnisa Sdn Bhd v Kerajaan Malaysia & Anor [2020] MLJU 283 … .” [37] The principles in Sunissa’s case were applied by PNB when it submitted that – “… the Claimant is still entitled to claim for loss & expense notwithstanding the alleged non-compliance of clause 44.1 of the Contract so long as such claims are within the contemplation of the Respondent. Based on the original contract duration of 294 days and 434 days for the EOT period, the Claimant submits that it is still entitled to the total S/N I5l2nqPnFUqFwxkI90d9Gw sum of RM124,738.07 based on the recurring items contained in the Contract Preliminaries …”, followed with a table setting out the recurring items, cost calculation and amount entitled totaling to RM124,738.07 (‘Adjudication Reply Table’). To PNB, “at the very least”, this is the amount that it is entitled to (see para 20, Adjudication Reply). [38] The Adjudicator, having adverted to the statements, submissions and arguments of the parties in extenso (see pp 3 - 6 and 17 - 80 of the AD), finally determined that –

“ … taking the literal meaning of Clause 44.3 into consideration, the Claimant has not fulfilled Clause 44.1 but fulfilled Clause 44.2 and as Clause 44.3 stated the non-fulfilment of Clause 44.1 and Clause 44.2 shall result in non-entitlement to such a claim, simply goes to show that the Claimant has technically fulfilled Clause 44.3 to be entitled to the claim for Loss and Expense. …” (see p 93 AD);

“The above two (2) issues pertaining to the technical non-compliance as well as the Respondent’s responsibility to assess the Loss and Expense claim is purely academic as I had opined that the Claimant is entitled to their claim for Loss and Expense pursuant to Clauses 44.2 and 44.3 of the said Contract.” (see p 96 AD);

“Therefore, the entitlement for Loss and Expense by the Claimant in this adjudicated matter cannot be denied as it is clearly spelt out in the Contract … which was entered by the Parties on 31 May 2017. There is no mention that this aspect of the Contract can be contracted out via some form of mutual agreement and in this matter the claim that there was mutual agreement between the parties that the extension of time granted shall be granted minus any claim for Loss and Expense is non-conclusive and is therefore rejected.” (see p 104 AD); and

“As the Claimant had referred to the Contract Preliminaries and the extension of time have been well utilised to complete the S/N I5l2nqPnFUqFwxkI90d9Gw Works, I cannot but find that the Claimant is entitled to their claim for Loss and Expense at RM124,738.07 pursuant to Section 36(1) of CIPAA 2012. A claim for Loss and Expense falls within the ambit of CIPAA 2012 especially so where the construction contract specifically allows for it such as in the PAM and JKR/PWD standard form of contract. It is now trite law that all payments in regards to Loss and Expense claims due to delay in completion of works does fall within the Act and Section 4 of CIPAA 2012 regarding ‘payment’ means “a payment for work done or services rendered under the express terms of a construction contract” and Clause 44 of the PWD 203A Standard Forms of Contract is an express term under the said Contract. Therefore, the Claimant is entitled to their claim for Loss and Expense but at RM124,738.07.” (see p 107 AD). [39] Based on the AD, it is apparent that despite the Adjudicator’s finding that the issues raised by the Council on “technical non-compliance” as being academic, he nevertheless allowed PNB’s claim for RM124,738.07 according to the Adjudication Reply Table. S/N I5l2nqPnFUqFwxkI90d9Gw [40] In Balfour Beatty Construction Ltd v Lambeth London Borough Council [2002] EWHC 597 (TCC), the Court said: “In Interbulk Ltd v Aiden Shipping Co Ltd, The Vimeira (No 1) [1984] 2 Lloyd’s Rep 66 at 75 Robert Goff LJ said: ‘In truth, we are simply talking about fairness. It is not fair to decide a case against a party on an issue which has never been raised in the case without drawing the point to his attention so that he may have an opportunity of dealing with it, either by calling further evidence or by addressing argument on the facts or the law to the tribunal.’”. [41] In my considered view, the Adjudicator, in determining that PNB is entitled to the claim for loss and expense of RM124,738.07 based on the recurring items in the Contract Preliminaries, had breached the rules of natural justice by not giving the Council the opportunity to submit or comment on the New Claim which was raised for the first S/N I5l2nqPnFUqFwxkI90d9Gw time in the Adjudication Reply. Had the Adjudicator done so, the Council could have highlighted, as what it has done in the Setting Aside Application, that –

the claim regarding Contract Preliminaries has not been submitted to the S.O. to enable the amount of the claim to be assessed and included as the Contract Sum; and

the Adjudicator ought to assess each item in the Adjudication Reply Table to determine whether it is a recurring item or otherwise and the relevancy of the item which is claimed for loss and expense (see para 51 of the AIS, encl. 2 and PNB’s averments is reply in paras 14, 15 and 35, AIR, encl. 5 which relate to the excess of jurisdiction point rather than on denial of natural justice). I have scrutinised the Adjudication Claim Tables and the Adjudication Reply Table and the Council has rightly submitted that Items 1, 7 and 8 in the latter for the purported Recurring S/N I5l2nqPnFUqFwxkI90d9Gw Items for Site Agent, Test Cubes and Temporary Roads etc. are not in the Adjudication Claim Tables. It is observed that the items for “Bayaran Gaji Site Agent & Assistant” and “For Site Agent – Mechanical & Electrical Services” do appear in the Adjudication Claim Tables, for e.g. at pp 219, 244, 259, 260, 311 and 342, encl. 2, but the amounts for these items differ from the purported amount entitled of RM19,190.48 for Site Agent in the Adjudication Reply Table. Further, the amount for Insurance of Works in Adjudication Reply Table is RM5,904.76 whereas the claim for “Insurans” in the Adjudication Claim Tables, specifically EoT No. 1 (RM892.05), EoT No. 2 (RM1,389.16) and EoT No. 5 (RM4,857.89), amounts to RM7,139.10. [42] The breach of natural justice in this case is a material breach and not merely peripheral (see Ranhill E & C Sdn Bhd v. Tioxide (M) Sdn Bhd & other cases [2015] 1 LNS 1435) because the Adjudicator ultimately directed that the Council pays PNB the sum of RM124,738.07 with S/N I5l2nqPnFUqFwxkI90d9Gw interest thereon at the rate of 5% from 1.11.2019 until the date of actual payment. [43] In the upshot, the Council has established, on a balance of probabilities, that the Adjudicator had considered and decided PNB’s claim based on the items for loss and expense as per the Contract Preliminaries in the Adjudication Reply Table, which is a completely different basis from what was put forth in the Payment Claim and subsequently in the Adjudication Claim. Although PNB had, in a manner of speaking, “changed the goal posts”, the Adjudicator failed to comply with the principles of natural justice as he was duty bound to do under s 24(c) CIPAA, by not giving the Council the opportunity to comment or clarify on the New Issue as a matter of fairness to the Council. This duty is not conditional on an application first being made by the Council to the Adjudicator for an oral hearing, further submissions and/ or clarifications. [44] On this ground alone, the Court is constrained to set aside the AD. S/N I5l2nqPnFUqFwxkI90d9Gw 2nd Issue: Whether the Adjudicator had acted in excess of jurisdiction when he considered and decided on the New Claim and the refund of the LAD - The Parties’ Submissions [45] The Council averred that the Adjudicator had decided on the New Claim which had gone beyond the jurisdiction conferred on him pursuant to ss 5 and 6 of the CIPAA, and on the refund of the LAD which, pursuant to s 4 CIPAA and the case of BM City Realty & Construction Sdn Bhd v Merger Insight (M) Sdn Bhd & Another Appeal [2016] MLRHU 914, the Adjudicator has no jurisdiction to determine as they are matters to be claimed by way of arbitration or court proceedings. [46] PNB submitted extensively that the Council’s case of excess of jurisdiction is devoid of merits for the following reasons:

the Council has waived its right to challenge the Adjudicator’s jurisdiction and has agreed to be bound by the same as it never S/N I5l2nqPnFUqFwxkI90d9Gw raised any issues or objections with regards to the alleged New Claim prior to the issuance of the AD. In support of this contention, PNB relied on the English cases of OSC Building Services Ltd v Interior Dimensions Contracts Ltd [2009] All ER

(D) 129 (Mar) and Aedifice Partnership Ltd V Shah [2010] EWHC 2106 (TCC);

the Council has overdramatized the term “alternative/ new claim” by taking an exceptionally narrow interpretation of ss 5 and 6 CIPAA. PNB’s loss and expense claims have been well pleaded in its Payment Claim as an issue to be determined by the Adjudicator. The submissions made by PNB in its Adjudication Reply were in rebuttal to the technical non-compliance raised by the Council in its Adjudication Response. Such issues are well within the Adjudicator’s jurisdiction to determine as they are of a consequential or ancillary nature necessary to complete the exercise of the jurisdiction conferred under ss 5 and 6 CIPAA;

the New Claim is in fact the utilisation of the Contract Preliminaries in accordance with the common law principles enunciated in Sunissa’s case that strict compliance with Clause 44.1 of the PWD Form of Contract is required for loss and expense claims which are only “beyond that reasonably contemplated”. Hence, for cases where there is non-compliance with the said Clause 44.1, the loss and expense claims would still be allowed but are restricted to claims for items in the Contract Preliminaries that are recurring whereby it can be said that the same are “reasonably contemplated”;

the Adjudicator has the necessary jurisdiction and power to deal with such issues as he saw fit within the purview of sub-s 27(1) CIPAA notwithstanding the same were not raised in the Payment

PNB did not claim for LAD but it had pleaded that the LAD had been unlawfully deducted from its Interim Certificate No.14 and the same should be paid back to PNB. It is well within the S/N I5l2nqPnFUqFwxkI90d9Gw Adjudicator’s powers to determine such issue, including to review any payment certificates as afforded under s 25(m) CIPAA. - Analysis and Findings of the Court [47] First and foremost, the jurisdiction of the adjudicator is set out in s 27 CIPAA as follows: “(1) 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 sections 5 and 6.

The parties to adjudication may at any time by agreement in writing extend the jurisdiction of the adjudicator to decide on any other matter not referred to the adjudicator pursuant to sections 5 and 6. S/N I5l2nqPnFUqFwxkI90d9Gw

Notwithstanding a jurisdictional challenge, the adjudicator may in his discretion proceed and complete the adjudication proceedings without prejudice to the rights of any party to apply to set aside the adjudication decision under section 15 or to oppose the application to enforce the adjudication decision under subsection 28(1).” (emphasis added). [48] Sections 5 and 6 of the CIPAA provides for the payment claim and the payment response, respectively. Sub-s 5(1) CIPAA reads: “5. (1) An unpaid party may serve a payment claim on a non-paying party for payment pursuant to a construction contract.”. S/N I5l2nqPnFUqFwxkI90d9Gw [49] The word “payment” is defined in s 4 CIPAA as “a payment for work done or services rendered under the express terms of a construction contract”. [50] In Antah Schindler Sdn Bhd v. Golden Base Construction Sdn Bhd & Another Case [2020] MLRHU 891, this Court said: “[13] As regards s 15(d) CIPAA, the Federal Court in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 held that s 15 is predicated on CIPAA applying to the case and to an adjudication decision made under CIPAA. It was further held that the term “jurisdiction” is used in relation to matters within the scope of CIPAA i.e. as in the adjudicator 10 having acted in excess of his jurisdiction as a ground for setting aside an adjudication decision (see too, s 27 CIPAA).”. [51] By way of extension, the Federal Court in View Esteem (supra, at p 34) held that: S/N I5l2nqPnFUqFwxkI90d9Gw “[16] The term ‘jurisdiction’ under the CIPAA is not used in the administrative or public law sense but in relation to matters within the scope of the CIPAA. On this point, in Terminal Perintis Sdn Bhd v. Tan Ngee Hong Construction Sdn Bhd and another case [2017] MLRHU 144; [2017] 7 AMR 887 Lee Swee Seng J observed as follows (at para [70]): In the application of our CIPAA, we are free from the shackles of the language of administrative law and judicial review. The word ‘jurisdiction’ is used in s 15(d) as in the adjudicator having acted in ‘excess of his jurisdiction’ as a ground for setting aside an adjudication decision. It is also used in s 27(1) with respect to an adjudicator's jurisdiction being limited to the matters raised in the payment claim and the payment response. Then there is a reference to it in s 27(2) with respect to extending his jurisdiction by way of agreement in writing to deal with matters not specifically raised in the payment claim and payment response. Finally there is the reference to a ‘jurisdictional’ challenge, which when raised, does not prevent the adjudicator from proceeding and completing the S/N I5l2nqPnFUqFwxkI90d9Gw adjudication without prejudice to the rights of any party to set it aside under s 15 or to oppose its enforcement under s 28 ... [17] The learned judge also made note of the various types of jurisdictional complaints within the CIPAA which may be categorised as core jurisdiction, competence jurisdiction and contingent jurisdiction. The common feature in all of them is the presupposition that the CIPAA applies to determine if the adjudicator had kept within his jurisdiction.”. [52] In Mei He Development Sdn Bhd v. Eosh Industries Sdn Bhd & Another Case [2021] MLRHU 2554, this Court remarked that: “[59] Even though MHD made no submission as to the type of jurisdiction which is triggered in the instant application, based on the evidence that is adduced, it can safely be said that contingent jurisdiction applies in this case. This is where the existence of valid jurisdiction is dependent on further compliance with the requirements of the CIPAA in that the S/N I5l2nqPnFUqFwxkI90d9Gw dispute must be one falling within the matter raised in the payment claim and payment response as provided for in sub-s 27(1) of the CIPAA unless the parties agree in writing to extend the jurisdiction of the adjudicator to deal with these matters pursuant to sub-s 27(2) (see Terminal Perintis (supra) and Construction Adjudication in Malaysia, Second Edition, Sweet & Maxwell, 2018 by Lam Wai Loon and Ivan YF Loo at p 426).” (see too, para 37 in the judgment of this Court in MRCB Builders Sdn Bhd v. SMM Resources Sdn Bhd & Another Case [2021] MLRHU 1414). [53] Similarly in this case, the type of jurisdictional complaint in question is contingent jurisdiction. The applicability of sub-s 27(2) CIPAA can straightaway be dispelled as there is no evidence to suggest that the parties had made any written agreement to extend the jurisdiction of the Adjudicator. S/N I5l2nqPnFUqFwxkI90d9Gw [54] As alluded to previously, the Council had recorded the Reservation in para 2 of the Adjudication Response that PNB must not be allowed, in the Adjudication Reply, to introduce matters or documents which PNB should have introduced in its Adjudication Claim. However, this is exactly what PNB had done. As submitted by the Council, the issue of waiver in not having raised a jurisdictional objection simply does not arise in this case because of the Reservation and the Council only discovered that the Adjudicator had decided the matter on PNB’s New Claim when it was served with the AD. In such situation, the grounds for objection on a jurisdictional basis were not known or not capable of being discovered by the Council until it received the AD. [55] Moreover, it is trite that issues on the Adjudicator’s jurisdiction, whether the absolute lack thereof or an excess of jurisdiction, may be raised before or after the adjudication decision is made. The fact that the Council did not raise any jurisdictional objection during the adjudication proceedings or before the AD was delivered is immaterial as even if this was done, and the Adjudicator had decided on the same, his findings on his own jurisdiction is not conclusive (see sub-s 27(3) S/N I5l2nqPnFUqFwxkI90d9Gw CIPAA, Ritma Hebat Sdn Bhd v Kayangan Kemas Sdn Bhd and another suit [2017] MLRHU 1493, Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd and another case [2020] MLJU 2308 and Broadway Power Sdn Bhd v Eden Construction (M) Sdn Bhd [2020] MLRHU 900). [56] With regards to PNB’s argument that whatever submissions made in the Adjudication Reply are consequential or ancillary in nature and necessary to complete the exercise of the jurisdiction conferred under ss 5 and 6 CIPAA, whilst it is true that PNB’s claim remained as one for loss and expense, however, as discussed in the preceding part on s 15(b) CIPAA, there was a shift of the basis for the loss and expense claim. This was recognised by the Adjudicator himself at p 70 of the AD when he stated “However, in their Adjudication Reply on 19.04.2021 they had altered their stand and they should at the very least be entitled to RM124,738.07 for Loss and Expense incurred.”. [57] In PJ Midtown Development Sdn Bhd v Pembinaan Mitrajaya Sdn Bhd and another summons [2020] MLJU 1432, Lim Chong Fong J had to S/N I5l2nqPnFUqFwxkI90d9Gw also deal with the contention that the Adjudicator acted in excess of jurisdiction in the narrow sense by having decided on issues which were not pleaded in Mitrajaya’s payment claim and adjudication claim. His Lordship held, among others, that: “[43] Generally, the scope of an adjudicator’s contingent jurisdiction has to be discerned and ascertained from the causes of action and defences pursued by the parties as set forth in the payment claim and payment response which may be amplified in the adjudication claim, adjudication response and adjudication reply. This is distilled from the later Federal Court case of View Esteem Sdn Bhd v Bina Puri Holdings Berhad (supra) and applied in the case SKS Pavillion Sdn Bhd v Tasoon Injection Pile Sdn Bhd (supra). Jurisdiction is therefore not confined to matters raised by the claimant in the payment claim and adjudication claim only. … S/N I5l2nqPnFUqFwxkI90d9Gw [45] On the facts here, the new issues raised by Mitrajaya in its adjudication reply are similarly made in rebuttal to the imposition of liquidated and ascertained damages raised by PJ Midtown in its adjudication response. In the premises, I find that the Adjudicator has been amply clothed and armed with jurisdiction and powers to deal with them as he saw fit within the purview of s. 27(1) of the CIPAA notwithstanding that they have not been raised in Mitrajaya’s payment claim and adjudication claim respectively. ...”. [58] In my opinion, the above case can be distinguished with the facts in the case before this Court as the new issues in the adjudication reply in PJ Midtown Development still revolved around the same claim whereas in the instant case, PNB not only responded to the Council’s defences in the Adjudication Response, but it went further by submitting an alternative basis for the claim for loss and expense i.e. on common law principles as opposed to its contractual rights, being the alleged recurring items in the Contract Preliminaries. This is tantamount to a new claim altogether. S/N I5l2nqPnFUqFwxkI90d9Gw [59] By considering and allowing the New Claim based on Contract Preliminaries in the sum of RM124,738.07, I agree with the Council’s submission that the Adjudicator had acted in excess of his jurisdiction. [60] Proceeding next to the Adjudicator’s decision on LAD, his analysis can be seen at pp 73 - 74 of the AD when he articulated that: “57. The crux of the valid deduction of the Liquidated Ascertained Damages (LAD) lies upon the proper issuance and delivery of the Certificate of Non-Completion (CNC) which is a prerequisite for imposing LAD as per the Contract as clearly stated in Clause 40.1. If this prerequisite is safely fulfilled than the calculation for LAD is from the date of issuance of the CNC to the date of the CPC as per Clause 40.2. of the Contract. The Respondent claims that they had issued the CNC on 31.05.2019 and stated that this is confirmed by DZJ’s letter dated 8.02.2021 that the CNC had been issued to the Claimant and a copy of the CNC had also S/N I5l2nqPnFUqFwxkI90d9Gw been sent to DZJ via email. It does seem that both the Respondent and DZJ are trying to justify the CNC was successfully issued to the Claimant but via email. However, as discussed earlier all formal correspondence or Notices as per Clause 67.2 of the Contract has to be delivered via courier, registered post, or hand delivered and no email or facsimile is mentioned. Even if it was supposedly delivered via email, there is no evidence adduced to support this claim. The final extension of time given in EOT No. 5 was 31.05.2019 and there is no dispute by the parties that the CPC was issued on 9.07.2019 is accurate. Therefore, there is clearly a delay of thirty-nine (39) days and the Claimant obviously could not meet the deadline to complete the Works on 31.05.2019. However, due to the absence of confirmation that the CNC was actually delivered, the Respondent has failed to fulfil the precondition in Clause 40.1 of the Contract and thus should not be allowed to impose LAD on the S/N I5l2nqPnFUqFwxkI90d9Gw Claimant although there is clear delay in completion of the Works. Therefore, I concur with the Claimant that the LAD deducted by the Respondent as per the Interim Certificate No. 14 on 2.08.2019 was unlawful.”. [61] Lee Swee Seng J (now JCA) had considered the definitions of “payment” and “payment claim” under the CIPAA in BM City Realty (supra) in the context of a claim for LAD and His Lordship concluded that: “[86] … this Court would highlight that the LAD claim must first qualify to be a payment claim within the meaning of “payment” under s 4 of CIPAA and within the meaning of a “payment claim” under s 5 CIPAA. … [89] Clearly an LAD claim is a damages claim which would not fit into the definition of a “payment claim” that is S/N I5l2nqPnFUqFwxkI90d9Gw susceptible to adjudication under CIPAA. It is undeniably and indisputably a claim for damages for breach of contract in failure of the contractor to complete on time by the completion date and it has to be pursued by way of arbitration or litigation and not an adjudication under CIPAA.”. [62] It is common for employers in adjudication proceedings to raise claims for LAD for delays caused by contractors as a defence to a payment claim which acts as a set-off and/ or counterclaim. However, what the Adjudicator decided here was to reimburse PNB for the sum of the LAD which was deducted by the Council. This is clearly outside the ambit of the definition of “payment” in s 4 CIPAA and runs foul of sub-s 27(1) CIPAA. Therefore, the Adjudicator had acted in excess of his jurisdiction as well with regards to the LAD claim. [63] The above findings are sufficient grounds to set aside the AD pursuant to limbs (b) and (d) of s 15 CIPAA. S/N I5l2nqPnFUqFwxkI90d9Gw II. O.S No. 129: Enforcement Application [64] In the light of the above-mentioned findings in respect of the Setting Aside Application, it is a foregone conclusion that PNB’s application to enforce the AD as if it is a judgment or order of the High Court pursuant to sub-s 28(1) CIPAA must be dismissed. Pronouncement [65] Based on the foregoing reasons, the Council’s Setting Aside Application was allowed and PNB’s Enforcement Application was dismissed. [66] Datuk Anandan prayed for RM30,000.00 costs for both applications which is equivalent to the amount of cost awarded by the Adjudicator. Mr. Suren countered with an offer of RM5,000.00 costs for each application, to which this Court agreed. PNB was accordingly ordered S/N I5l2nqPnFUqFwxkI90d9Gw to pay costs of RM5,000.00 to the Council for each application, subject to allocatur. Dated: 30 November 2022 (ALIZA SULAIMAN) Judge Construction Court 2 High Court Kuala Lumpur Counsels/ Solicitors: For the Plaintiff in O.S. No. WA-24C-129-08/2021 and the Defendant in O.S. No. WA-24C-138-08/2021: Suren Anandan Rajah a/l Ganeshanandan Messrs. Rajah Chambers Advocates & Solicitors Unit B-3-3A, Gateway Kiaramas No. 1, Jalan Desa Kiara Mont Kiara 50480 Kuala Lumpur S/N I5l2nqPnFUqFwxkI90d9Gw For the Plaintiff in O.S. No. WA-24C-138-08/2021 and the Defendant in O.S. No. WA-24C-129-08/2021: Datuk Anandan P. Thatchanamoorthy (Nur Fatin Farzana Binti Mohd Redzuan with him) Messrs. Nazrin Nasir T. Anand & Co. Advocates & Solicitors Tingkat 2S, Kompleks Perhentian Bas 44000 Kuala Kubu Bharu Selangor Darul Ehsan Cases, legislation and other sources referred to in the submissions by learned counsels and in the Grounds of Judgment: Cases: ACFM Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd and another appeal [2016] MLJU 1776 Aedifice Partnership Ltd v Shah [2010] EWHC 2106 (TCC) Antah Schindler Sdn Bhd v. Golden Base Construction Sdn Bhd & Another Case [2020] MLRHU 891 Ardmore Construction Ltd v Taylor Woodrow Construction Ltd [2006] CSOH 3 S/N I5l2nqPnFUqFwxkI90d9Gw BAL (1996) Ltd v Taylor Woodrow Construction Ltd [2004] All ER (D) 218 (Feb) Balfour Beatty Construction Ltd v Lambeth London Borough Council [2002] EWHC 597 (TCC) BM City Realty & Construction Sdn Bhd v. Merger Insight (M) Sdn Bhd & Another Appeal [2016] MLRHU 914 Broadway Power Sdn Bhd v Eden Construction (M) Sdn Bhd [2020] MLRHU 900 Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC) Encorp Iskandar Development Sdn. Bhd. v Konsortium Ipmines Merz Sdn. Bhd. and another summons [2020] MLJU 1503 Enra Engineering and Fabrication Sdn Bhd v Gemula Sdn Bhd and another case [2020] 7 MLJ 482 Integral Acres Sdn Bhd v BCEG International (M) Sdn Bhd and other cases [2021] MLJU 1889 Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd and another case [2020] MLJU 2308 S/N I5l2nqPnFUqFwxkI90d9Gw London and Amsterdam Properties Ltd v Waterman Partnership Ltd [2003] EWHC 3059 (TCC) McAlpine PPS Pipeline Systems Joint Venture v Transco Plc [2004] EWHC 2030 (QB) Mecright Ltd v T.A. Morris Developments Ltd [2001] Adj.L.R. 06/22 Mei He Development Sdn Bhd v. Eosh Industries Sdn Bhd & Another Case [2021] MLRHU 2554 MRCB Builders Sdn Bhd v. SMM Resources Sdn Bhd & Another Case [2021] MLRHU 1414 OSC Building Services Ltd v Interior Dimensions Contracts Ltd [2009] All ER

(D) 129 (Mar) PJ Midtown Development Sdn Bhd v Pembinaan Mitrajaya Sdn Bhd and another summons [2020] MLJU 1432 Ranhill E & C Sdn Bhd v. Tioxide (M) Sdn Bhd & other cases [2015] 1 LNS 1435 Ritma Hebat Sdn Bhd v Kayangan Kemas Sdn Bhd and another suit [2017] MLJU 2034; [2017] MLRHU 1493 S/N I5l2nqPnFUqFwxkI90d9Gw Sunissa Sdn Bhd v Kerajaan Malaysia & Anor [2020] MLJU 283; [2020] 4 MLRH 429 Syarikat Bina Darul Aman Berhad & Anor v Government of Malaysia [2017] MLJU 673 Terminal Perintis Sdn Bhd v Tan Ngee Hong Construction Sdn Bhd and another case [2017] MLJU 242; [2017] MLRHU 144 WRP Asia Pacific Sdn Bhd v. NS Bluescope Lysaght Malaysia Sdn Bhd & Other Case [2015] 1 LNS 1236 Legislation: Asian International Arbitration Centre Adjudication Rules & Procedure, rr 7, 8 & 10 Civil Law Act 1956, s 3 Construction Industry Payment and Adjudication Act 2012, ss 4 to 13, 15, 24, 25, 27 and 28 Rules of Court 2012, O. 7, r. 2, O. 28, O. 69A, r. 3 and O. 92, r.