Milsonland Development Sdn Bhd v Macro Resources Sdn Bhd (W-02(C)(A)-2266-12/2016)

4.8.2016 yang diperolehi oleh Macro Resources Sdn Bhd terhadap Milsonland Development Sdn Bhd di bawah Rujukan Adjudikasi No. KLRCA/D/ADJ-0244-2016 Dan Dalam perkara Seksyen 28 Akta Bayaran dan Adjudikasi Industri Pembinaan 2012 Dan Dalam perkara Aturan 5, 7, 28 dan Aturan 92 Kaedah 4, Kaedah-Kaedah Mahkamah 2012 Antara Macro Resources Sdn Bhd (No. Syarikat: 165826-X) …Plaintif Dan Milsonland Development Sdn Bhd (No. Syarikat: 890523-W) …Defendan CORAM DAVID WONG DAK WAH, CJSS HAMID SULTAN BIN ABU BACKER, JCA UMI KALTHUM BINTI ABDUL MAJID, JCA 4 JUDGMENT OF THE COURT Introduction:

Before us were two appeals and they were Civil Appeal No. W- 02(C)(A)-2265-12/2016 (Appeal 2265) and Civil Appeal No. W- 02(C)(A)-2266-12/2016 (Appeal 2266). In Appeal 2266, the Appellant (Milsonland Development Sdn Bhd) had taken out an originating summons in the High Court to set aside the decision of the learned adjudicator dated 4.8.2016 under section 15 of the Construction Industry Payment and Adjudication Act 2012 (CIPAA) while in Appeal 2265, the Respondent (Macro Resources Sdn Bhd) had taken an action to enforce the decision of the learned adjudicator.

The learned Judge in the High Court dismissed the Appellant’s originating summons to set aside the decision of the learned adjudicator and allowed the Respondent’s application to enforce the decision of the learned adjudicator. 5

The decisions of the learned High Court Judge led to these two appeals which we had heard and dismissed the same. We now give our reasons for our decisions. Background facts:

The Appellant had appointed the Respondent as the main contractor to carry out the contract for earthwork and RC retaining walls, building and infrastructure works on Lots 3527 and 3528, Jalan Bukit Serdang 3/1, Seri Kembangan, Mukim Petaling, District of Petaling, Selangor for a consideration of RM42,561,017.22.

During the course of its work, the Respondent had alleged that it had not been paid by the Appellant in accordance with what had been agreed in the letter of award. This resulted in a claim made under CIPPA.

The Respondent, being the unpaid party, served a Payment Claim dated 11.12.2015 on the Appellant claiming as follows: 6

Work done as certified vide Interim Certificate No. 29 dated 21.4.2014 by Zone Architect due for payment on 21.5.2014

Work done as certified vide Interim Certificate No. 30 dated 31.3.2015 by Zone Architect due for payment on 29.4.2015

Details of the Payment Claim are as follows: Certificate No. 29 = RM39,793,758.73 (Add) Certificate No.30 = RM 1,064,025.43 (Less) Retention Money = RM 2,128,050.86 (as per Clause 9 Letter of Award) (Less) Total amount previously paid = RM35,500,000.00 Total amount claimed =

As no Payment Response was served by the Appellant, the Respondent filed and served the adjudication notice on 19.1.2016 on the Appellant. 7

The Appellant then served its adjudication response dated 19.5.2016 raising the following points:

That the Claimant had failed to complete the Works by the completion date of 30.6.2012 (paragraph 6 adjudication response);

That the Works carried out by the Claimant had defects (paragraph 10 adjudication response);

That the Claimant's claim is not in accordance with Certificates of Payment No. 29 and 30, and that the Claimant has erroneously based its claim on the provisional contract sum of RM42,561,017.22 (paragraphs 13 and 14 adjudication response).

The learned adjudicator made his Decision on 4.8.2016 that the Respondent do pay the Claimant as follows: i. RM3,229,733.30; ii. Interest on RM3,229,733.30 at 5% per annum from 30 April 2015, amounting to RM205,023.64 at the date of the Decision and continuing at RM442.00 daily until the date of satisfaction; iii. RM108,285.30 being interest on RM2,165,707.87 at 5% per annum from 30 April 2014 to 30 April 2015; iv. RM50,000.00 in respect of party and party costs; v. RM23,745.15 being reimbursement of sums and paid to KLRCA by the Claimant. 8

The Appellant then took out an application in the form of an originating summons to set aside the decision of the learned adjudicator pursuant to section 15(b) and (d) of CIPAA premised on the ground that the learned adjudicator had acted in breach of natural justice and in excess of his jurisdiction. High Court:

The learned Judge dismissed the application of the Appellant to set aside the decision of the learned adjudicator and sustained the application of the Respondent to enforce the decision of the learned adjudicator.

At the High Court, the learned Judge was faced with three contentions and they were:

(i) whether the learned adjudicator had ventured outside the payment claim and thus acted in excess of his jurisdiction?

In respect of issue (i), the learned Judge held that the learned adjudicator was fully correct when he only dealt with the claim of the Respondent when there was no payment response. CIPAA did not allow the adjudicator to venture outside the purview of the claim and hence he had not overstepped his jurisdiction.

In regard to issue (ii), the learned Judge referred to the judgement of Ravinthran Paramagaru J. in the case of Bina Puri Construction Sdn Bhd v. Hing Nyit Enterprise Sdn Bhd [2015] MJLU 94 and quoted him as follows: “However, in the instant case, it is common ground that the parties did not execute an agreement pursuant to the above provision to extend the jurisdiction of the Adjudicator to enable him to decide the counterclaim of the applicant. In the premises, the Adjudicator cannot be faulted for holding that he 10 had no jurisdiction to decide the counterclaim of the applicant that was raised belatedly in the Adjudication Response. Counsel for applicant also submitted that he had no opportunity to argue the said point as it was not raised in the submissions and there it resulted in a breach of natural justice. The limits of jurisdiction of the Adjudicator is a matter that is governed by law, ie section 27 of CIPAA. Therefore, there can be no breach of natural justice if the Adjudication had referred to the correct law to properly direct himself as to what he can or cannot do. In any event, although the Adjudicator declined to decide the counterclaim of the applicant that was only raised in the Adjudication Response, he considered the overpayment defence which is related to the counterclaim of the applicant. I shall consider it below." (emphasis added) Based on the above quotation, the learned judge concluded that there was no breach of natural justice when the learned adjudicator was constrained by the clear provisions of section 27

(i) CIPAA to not consider the issues of delay and defective works raised for the first time in the Respondent’s adjudication response.

In regard to issue (iii), the learned Judge found as follows: “[56] I agree with learned counsel for the Claimant that the Adjudicator had acted well within his powers pursuant to section 25 (o) CIPAA wherein the Adjudicator shall have the 11 power to award financing costs and interest. It is more an argument of law when it comes to a claim under a construction contract as to whether a contractor should be entitled to interest for being kept out of the monies due to him for work already done for which he had expanded labour, material and financing costs. In fact it is so axiomatic that it is hardly argued against.” Our grounds of decision:

We agreed with learned counsel for the Respondent in saying that we were in this Appeal 2266 only dealing with two questions, namely:

(i) whether there was a jurisdictional error on the part of the learned adjudicator when he awarded the sum of RM3,229,733.30?

The Appellant’s position was succinctly set out in this part of submission of learned counsel and it reads as follows: “55. In a nutshell, both of the Adjudicator’s decision and the Learned Judge’s determination has departed and beyond the Respondent’s claim in the PC where:- 12 a) Both determinations failed to confine themselves to the four corners of PC by the Respondent; b) Both determinations were from own subjective and deemed to be right view which is not how an AD should be determined; c) Both determinations did not uphold the real intention of Section 5, and Section 27 of CIPAA; d) Both determinations are tantamount to violation of Section 27(1) of CIPAA.

It is our humble submission that section 27(1) of CIPPA has to be adhered to, failing which the present situation will be rampant as all the adjudicators may come from different background and having different experiences will then decide subjective on each claim.

The current situation, if is not being rectified, would create a very dangerous precedent for the industries when all the adjudicator and/or the supervising court would decide based on their subjective view as to what ought to be allowed or dismissed, as the case may be.

Hence, as the Judge has erred in law to confine and to direct his mind to the legal intention and purpose of the enactment of Section 27(1) CIPAA by the Parliament, his Judgment must be set aside.”

From the payment claim of the Respondent, it appeared to us quite clear what the claim was all about. It had relied on two (2) 13 certificates, namely Certificate of Payment (CP) No. 29 and 30. The amount certified in CP29 was RM39,793,758.73, an amount not disputed by the Appellant itself as can be seen in the adjudication response. As for CP30, again there was no dispute that the 1st moiety of the retention sum was RM1,064,025.43 and as pointed out by learned counsel for the Respondent the aforesaid amount formed part of the works done by the Respondent. Hence, to us the amount of works done by the Respondent was not a matter of dispute. What was only in dispute was how much had been paid by the Appellant to the Respondent.

At this juncture, we must mention that there was no payment response and this failure carried with it baggage so to speak for the Appellant. CIPAA is quite clear in that where there is no payment response, the Appellant is prohibited from raising any defense by way of set – off or counterclaim with adjudication response. That much is clear in section 6 (4) and section 27(1) of CIPAA. As was alluded to earlier, the learned adjudicator cannot have jurisdiction on matters not raised in the payment response 14 but raised in the adjudication response. In this case, it simply meant the matter before the learned adjudicator was the sum of RM3,229,733.30. To read those sections in any other way would, with respect, be doing damage to the language used by Parliament and also be running foul of the rationale of CIPAA where it specifically states that any decision arising from an adjudication has only a “temporary finality” nature as it could be set aside by arbitration or by a Court of law. This “temporary finality” nature serves only the purpose of keeping the cash flow going for the contractors so that they would not be held to ransom by recalcitrant employers. In any event, the adjudicator here had only relied on View Esteem Sdn Bhd v. Bina Puri Holdings Sdn Bhd [2015] MLJU 695 which was the law then.

The other complaint by the Appellant against the learned adjudicator was the manner in which he had used in calculating the amount owed by the Appellant. Here the learned adjudicator directed the parties to lodge statutory declarations as to the amounts paid to the Respondent by 18.7.2016 and after examining the respective statutory declarations, the learned 15 adjudicator found that the one filed by the Appellant to be evasive and accepted that of the Respondent. CIPAA has made it clear that the adjudication process is one of “inquisitorial” and not one of “adversarial” in nature. Inquisitorial system allows the adjudicator to adopt whatever method to come to his finding. The adjudicator as an inquisitor is unlike a Judge of the Court where the latter takes no active part in the proceeding. That part is left to the respective advocates. Hence in a CIPAA adjudication, Courts have on many instances held, and rightly so, that adjudicators need not conduct hearings to hear evidence or submissions. Any mandatory requirement for that would spell disaster to the whole concept of “quick and rough” justice under the regime of CIPAA. There is also a simple reason for that and that is CIPAA places a time limit for the adjudicator to finish the adjudication process.

We also found that the learned adjudicator’s reasoning to be one of finding of facts and as such the Court had no power to intervene in such circumstance as a Court under CIPAA only has limited powers. For clarity this was how the learned adjudicator reasoned his conclusion: 16 "21. In the absence of any explanation from the Respondent as to why sums considerably in excess of the Contract sum have been certified as due, I accept the Claimant's explanation. I am further strengthened in this conclusion by the fact that the Respondent in the Adjudication Response has stated as follows at Paragraph 14 "The Respondent states that the value of the Works certified is RM39,793,758.73... " This is inconsistent with the certified sum in the spreadsheet, and the failure to explain this inconsistency leads me to conclude that the Claimant's version of events is to be preferred. I also note that if the Respondent had in fact paid the Claimant the sum of RM39,330,000.00 in respect of the works done under the contract, it would have paid all but RM463,758.73 (RM39,793,758.73 - RM39,330,000.00) of the amount certified to the Claimant, thereby in effect releasing the second moiety of Retention Sum. I can see no documents evidencing such release, and further fortifies me in my decision to accept the

Claimant's evidence." Premised on the above, we found that there was no merit whatsoever in the Appellant’s contention on the jurisdictional issue. 17

AWARDING OF INTEREST ON THE SUM OF RM3,229,733.30 On this issue, we found no difficulty in agreeing with the learned Judge’s view that the learned adjudicator was fully entitled to award interest. The rationale is a simple one. The power to award interest is attached to the power to award the claim in that it is a consequential power. Such principle is premised on the concept of fairness as in all monetary claim, the winning party had been wrongly kept away from the use of the money claimed and it ought to be compensated for it. Not to be compensated, the winning party would be deprived of full justice. Incomplete justice in the circumstance before us would simply be grossly unfair and encourages recalcitrant paymaster to remain delinquent. Conclusion:

This was simply a case where one party failed to file a payment response, and in this case, it is the Appellant here who had suffered the full force of the rationale of CIPAA 2012 in that it could not raise any positive defenses, in terms of set off or counterclaim, in its adjudication response. The learned adjudicator had only followed the law and made finding of facts 18 which the Courts could not intervene.

Accordingly, we dismissed both appeals 2265 and 2266 with costs of RM20,000 for both appeals subject to payment of allocatur fees. We also ordered that the deposits be refunded to the Appellant. Dated: 3rd December 2018 -sgd- (DAVID WONG DAK WAH) Chief Judge Sabah and Sarawak For the Appellant : Ben KF Lee & Shafihani Md. Ali Messrs. Gan & Zul For the Respondent : P. Gananathan together with Ng Yee Chien Messrs. Gananathan Loh Notice: This copy of the Court's Reasons for Judgment is subject to formal revision