Pc Geotechnic Sdn Bhd v Panzana Enterprise Sdn Bhd (WA-24C-128-06/2020)

This is an application for direct payment form the principal pursuant to s. 30 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”).

The Plaintiff is a private limited company involved in the bored piling foundation business.

The Defendant is also a private limited company involved in the construction business.

By a letter of award dated 20 January 2017, the Defendant appointed MKP Builders Sdn Bhd (“MKPB”) as its subcontractor to carry out and complete the piling works and substructure works (“Works”) for the construction and completion of mainline and other associated works from Ch 4983 to Ch 9307 - elevated structures and ramps for the project described as the "Projek Penswastaan Lebuhraya Bertingkat Damansara-Shah Alam (DASH)" (“Project”). The employer of the Project is Turnpike Synergy Sdn Bhd. 3

Also by a letter of award dated 21 May 2018 (“Contract”), MKPB appointed the Plaintiff as its sub-subcontractor to carry out the bored piling works which formed part of the Works.

There were payment disputes that arose between the Plaintiff and MKPB for work done under the Contract.

As the result, the Plaintiff pursued adjudication proceedings against MKPB under the CIPAA.

The Plaintiff succeeded in the adjudication proceedings and the adjudicator in his adjudication decision dated 12 December 2019 (“Decision”) directed MKPB to pay the following amounts by 9 January 2020:

RM7,966,928.59 being the adjudicated amount;

(ii) interest at the rate of 5% per annum on RM7,966,928.59 from the respective due dates stated in the adjudication claim dated 10 October 2019 until full and final settlement;

(iii) RM131,789.00 being the cost of the adjudication proceedings. [9] MKPB failed, refused and or neglected to pay the Plaintiff the amounts as directed in the Decision. 4 [10] Consequently, the Plaintiff filed its application to enforce the Decision via Shah Alam High Court Originating Summons no. BA-24C- 21-02/2020 and MKPB also filed its application to set aside the Decision via Shah Alam High Court Originating Summons no. BA-24C-6-01/2020. [11] The Shah Alam High court on 14 August 2020 allowed the Plaintiff’s application as well as dismissed MKPB’s application. [12] That notwithstanding and in the meantime, the Plaintiff has on 21 February 2020 served a direct payment notice dated 17 February 2020

Plaintiff’s affidavit in support affirmed by Woon Tien Yong dated 19 June 2020; 5

(ii) Defendant’s affidavit in reply affirmed Ahmad Arifin bin Kasah dated 8 September 2020;

(iii) Plaintiff’s affidavit in reply affirmed by Woon Tien Yong dated 22 September 2020; and

(iv) Defendant’s affidavit in reply affirmed by Ahmad Arifin bin Kasah dated 6 October 2020. [16] The Application was fixed for hearing before me on 1 December

After having read the written submissions filed by the parties and oral arguments of counsel, I allowed the Application subject to the amount of direct payment limited to RM5,737,403.95 with costs of RM8,000.00 subject to the standard allocator. [17] The Defendant is dissatisfied with my decision and has on 8 December 2020 filed its appeal to the Court of Appeal. [18] I therefore furnish below the grounds of my decision Contentions and Findings [19] The Plaintiff primarily contended this is straightforward and clear cut Application for direct payment under s. 30 of the CIPAA as all 6 prerequisites as set out in the case of Cabnet Systems (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor [2020] MLJU 311 are met. [20] In opposition thereto, the Defendant advanced several grounds viz:

MKPB has not been made a party in this Application;

(ii) the contract between the Defendant and MKPB had been terminated by the time the Plaintiff’s direct payment notice dated 17 February 2020 was served of the Defendant; hence the Defendant is not a principal within the definition of the CIPAA at the material time;

(iii) there is no payment due or payable by the Defendant to MKPB;

(iv) there is multiplicity of proceedings because the subject matter of the Application is related to the subject matter in Originating Summons no. WA-24C-42-02/2020; particularly the Plaintiff’s application in enclosure 75 therein;

there would be grave prejudice caused to the Defendant because MKPB would not be financially able to reimburse the Defendant if direct payment is made to the Plaintiff. [21] It is provided as follows in s. 30 of the CIPAA: “30. Direct payment from principal

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 7 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 under subsection (1).” [22] In CT Indah Construction Sdn Bhd v BHL Gemilang Sdn Bhd [2018] 1 LNS 380, Lee Swee Seng J (now JCA) held as follows: “[1] The primary question for determination in this application is whether the principal of a contractor against whom an Adjudication Decision has been made, is required to make payments direct to the Claimant under the direct payment remedy provision under the Construction Industry Payment and Adjudication Act 2012 ("CIPAA") for a debt which the principal owes its contractor. ... [23] He further argued that this speedy mechanism will be defeated if the principal is permitted to stay silent and refuse disclosure of the sums payable by the principal to the respondent or the party against whom the Adjudication Decision is made, particularly where both the principal and the delinquent non-paying party against whom the Adjudication Decision is made are related companies controlled by the same people, as in the present case. [24] Insofar as section 30(5) of the CIPAA is concerned, the Defendant has not denied that there are sums due from the Defendant (as the principal) to BHL Builders. (See also Ng Hee Thoong & Anor v Public Bank Bhd [1995] 1 CLJ 609; [1995] 1 MLJ 281, at p. 286). I would further agree with the Plaintiff that having remained silent, it is clearly 8 an afterthought to then subsequently say in their affidavit filed out of time, that there is no sums owing from them to BHL Builders. [25] I would agree with the Plaintiff that this is not a case where the Defendant can seriously dispute the amount to be paid over to the Plaintiff especially in the absence of a mandatory notice to BHL Builders under section 30(2) and further in the absence of a rebuttal of the allegation of the Adjudicated Amount to be paid by the Defendant to the Plaintiff when the Defendant had the first opportunity to do so.” (emphasis added) I am nonetheless mindful that an appeal was brought and subsequently allowed by the Court of Appeal as seen in CT Indah Construction Sdn Bhd v BHL Gemilang Sdn Bhd [2019] 7 AMR 551 but the above emphasized point is however not disturbed. [23] Moreover in HMN Nadhir Sdn Bhd v Jabatan Kerja Raya Malaysia & Ors [2018] 1 LNS 1938, Lee Swee Seng J (now JCA) also held as follows: “[21] It is abundantly clear that "may" when used in section 30(1) denotes a discretion conferred on the successful Claimant with respect to making a request for payment from the Principal. The successful Claimant is not legally obliged to take this route for the Respondent might pay on their own accord or that there are other modes of execution which are quite effective against the Respondent. [22] Contrast that with the use of the word "shall" in both sections 30(2) and (3). [23] It can only denote a mandatory meaning in that the Principal is legally required to follow up with the action prescribed. There are no two ways about it. [24] In Construction Adjudication in Malaysia, 2nd edition 2018 Sweet & Maxwell by Lam Wai Loon and Ivan Y.F. Loo, the learned authors in further explaining the application of section 30 of the CIPAA commented as follows at page 479: "...The word 'shall' imposes upon the principal a statutory obligation to make payment of the adjudicated amount. It is considered that the result of this obligation to pay 9 creates a cause of action whereupon the winning party may sue the principal for the payment should the principal fail to comply with the obligation to pay." (emphasis added) [25] In the present case, the Defendant did not issue to the Respondent any notice pursuant to Section 30(2) of the CIPAA. As the mandatory 'shall' is used in section 30(2), the Defendant's failure or refusal to issue the written notice is a breach of section 30(2) of the CIPAA. The Defendant's deliberate breach of section 30(2) shall not obstruct the continuation of the direct payment mechanism under section 30(3) of the CIPAA where it provides that 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. I agree that the Plaintiff's contention is supported by the legal maxim Commodum Ex injuria Sua Nemo Habere Debet, in which a wrongdoer should not be enabled by law to take any advantage from his actions. [26] There can be no proof of payment as the Defendant had failed or refused to issue the notice pursuant to section 30(2) of the CIPAA. I agree with the Plaintiff that the Defendant cannot rely on its breach of section 30(2) to avoid its mandatory obligation to make direct payment under section 30(3) of the CIPAA.” (emphasis added); see also PCOM Pacific Sdn Bhd v Apex Communications Sdn Bhd & Anor [2020] 1 LNS 130. [24] Subsequently in Cabnet Systems (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor (supra), Wong Kian Kheong J succinctly summarized the prerequisites as follows: “[29] I am of the following view regarding the application of s. 30 CIPAA:

a party (X) who has obtained an adjudication decision against another party (Y), may claim for the adjudicated amount from Y's principal (Z) if the following four conditions are satisfied (4 Conditions ) - 10

Y has failed to pay the adjudicated amount to X [please see s. 30(1) and (3) CIPAA] (1st Condition );

X has made a written request for Z to pay the adjudicated amount directly to X (X's Written Request ) [please refer to s. 30(1) CIPAA] (2nd Condition );

there is a sum of money due from Z to Y at the time of Z's receipt of X's Written Request [please see s. 30(5) CIPAA] (3rd Condition ); and

Z did not comply with X's Written Request and did not pay the adjudicated amount directly to X (4th Condition ); and

if Z pays the adjudicated amount directly to X, by reason of s. 30(4) CIPAA, Z may recover the adjudicated amount from Y as a debt or set-off.” [25] First and foremost, I will deal with the Defendant’s threshold challenges that the Defendant is not the principal as well as that MKPB was not enjoined as a party in the Application. [26] In respect of the former, the definition of the principal is provided in s. 4 of the CIPAA as follows: “4. Interpretation In this Act, unless the context otherwise requires- … "principal" means a party who has contracted with and is liable to make payment to another party where that other party has in turn contracted with and is liable to make payment to a further person in a chain of construction contracts; …” 11 [27] From my literal reading of the definition in s. 4 of the CIPAA as well as the provision on direct payment in s. 30 of the CIPAA, there is no prohibition whatsoever that the principal ceases to be one when the construction contract between the principal and the party whom the principal contracted has been terminated. In the Federal Court case of Dr Koay Cheng Boon v Majlis Perubatan Malaysia [2012] 4 CLJ 445, Mohd Ghazali Yusoff FCJ held as follows with emphasis added by me on statutory interpretation: “A statute is the written will of the legislature and it is the fundamental rule of interpretation of a statute that it should be expounded according to the intent of Parliament. The courts must use the literal rule where a clear meaning of a statute will allow it, ie, interpret the statute literally, according to its ordinary plain meaning.” [28] It is not in dispute here that the Defendant contracted with MKPB which in turn sub-contracted with the Plaintiff. Consequently, I hold that the Defendant is the principal and remains so at all material times irrespective whether the contract between the Defendant and MKPB subsists or was already completed or terminated. [29] As to the latter, I have reviewed the provisions in the CIPAA and more particularly Order 69A of the Rules of Court on adjudication proceedings but I find there is no specific requirement that MKPB must be added as a party in the Application contrary to that as contended by the Defendant. It is therefore immaterial if MKPB has not been made a co-defendant in the Application. 12 [30] It is apt that I next deal with the Defendant’s contention on multiplicity of proceeding. This arose from my earlier decision in the stay application between MKPB and the Defendant in respect of the adjudication decision obtained in favour of MKPB as reported in [2020] 5 AMR 72. In that application, I have decided and ordered as follows (“Order”): “(i) the sum of RM6,840,610.01 owing by the defendant to B Cor Geotechnics Sdn Bhd and RM170,738.49 owing by the defendant to Hong Jing Services Sdn Bhd shall be paid by the plaintiff to the defendant on or before April 13, 2020 and the defendant shall pay the said sums forthwith to B Cor Geotechnics Sdn Bhd and Hong Jing Services Sdn Bhd respectively;

(ii) the balance adjudicated sum of RM11,474,801.90 shall be paid by two equal instalments on or before June 11, 2020 and September 1, 2020 respectively into an interest-bearing stakeholder's account jointly held by the plaintiff's solicitors and the defendant's solicitors;

(iii) liberty to apply is given in the event PC Geotechnics Sdn Bhd makes a s 30 CIPAA application against the plaintiff;

(iv) RM5,000.00 costs subject to 4% allocator; and

if there is default in either paragraph (i) or (ii) above, the stay is automatically revoked.” [31] Consequently the Plaintiff has on 25 June 2020, pursuant to the liberty to apply provision in paragraph (iii) of the Order, made an application for an order that the Defendant pays the Plaintiff directly the adjudicated amount ordered in the Decision. This has to be from the monies payable pursuant to the instalment payments paid or payable by the Defendant to MKPB pursuant to my Order. To date, the Defendant has yet to pay the final instalment payment as set out in the Order. Be 13 that as it may, the Plaintiff’s aforementioned application has also yet to be heard by me. [32] In my view, the Plaintiff has the option to pursue either or both courses of action based on the Application and/or its application dated 25 June 2020 provided there is no double recovery. Since this Application has been filed earlier on 19 June 2020, I see it fit to have it determined first as requested by the Plaintiff. There is hence no multiplicity of proceedings contrary to that as contended by the Defendant. No case authority has been adduced by the Defendant to support its proposition as well. [33] The main thrust of the Defendant’s defence against the Plaintiff’s Application is that there is no money due or payable to MKPB; thus the provision in s. 30(5) of the CIPAA is unmet. [34] In HSL Ground Engineering Sdn Bhd v Civil Tech Resources Sdn Bhd (and Another Originating Summons) [2020] 5 AMR 757, I have held as follows in relation to s.30 CIPAA application: “[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 Limited & Anor 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 Limited v Hendell Steel Structures Ltd (Pitchers Ltd — Garnishees) [1957] 1 WLR 1102 on garnishment, it was held that money under a 14 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. [30] It has been held by Lee Swee Seng J (now JCA) in HMN Nadhir Sdn Bhd v Jabatan Kerja Raya Malaysia & 2 Ors (supra) as follows in the interpretation of s 30 of the CIPAA: [101] We must be careful not to read words into the section which words are not there to make the section read what we want to impose on it ... [103] The days of a master wielding absolute powers of interpretation are long gone and in its place are canons of statutory interpretation that all who respect the law and live by it would have to abide by. That gives certainty and guards against capriciousness. [104] The primary rule of interpretation, the literal rule, should be adopted to interpret the application of s 30 of CIPAA.” [35] Unlike many other cases on s. 30 of the CIPAA where it is arguable as to whether there is money due or payable by the principal to the non-paying party, it is however plain and obvious from my Order that there is the sum of RM5,737,403.95 overdue and payable here from the Defendant to MKPB. This is fatal to the Defendant’s defence. I am nonetheless aware that this amount of RM5,737,403.95 is lesser than the adjudicated amount ordered in the Decision but there is presently no concrete evidence of any further sum due or payable by the Defendant to MKPB disclosed in the affidavits filed for purposes of this Application. [36] Finally as to the Defendant’s contention that it would be gravely prejudiced by reason that it may not be able to recover the amount paid to the Plaintiff from MKPB pursuant to s. 30(4) of the CIPAA, I find and hold that this concern is an irrelevant consideration because it is the 15 business risk assumed by all developers and contractors undertaking construction work. Furthermore, the object of the CIPAA in providing for security for payment and cash flow would otherwise be thwarted. I echo the views of See Mee Chun J in Murni Environmental Engineering Sdn Bhd v Eminent Ventures Sdn Bhd & Anor & Another Case [2016] 1 LNS 805: “18. As recognized in Subang Skypark Sdn Bhd v. Arcradius Sdn Bhd [2015] 10 CLJ 801 the purpose of CIPAA is to ensure that successful claimants are paid promptly. This Court adds too that payment ought to be made promptly either by D1 or where D1 fails and/or neglects to pay, by D2 as the principal where section 30 of CIPAA is the enabling section.” [37] In the circumstances, I am therefore satisfied that the Plaintiff has made out a meritorious application. 16 Conclusion [38] It is for the foregoing reasons that I made my decision as so ordered. Dated this 17 December 2020 t.t. LIM CHONG FONG JUDGE CONSTRUCTION COURT HIGH COURT KUALA LUMPUR COUNSEL FOR THE PLAINTIFF: JASON NG KAU (BELL WONG CHIA PEI WITH HIM) SOLICITORS FOR THE PLAINTIFF: JASON NG & PARTNERS COUNSEL FOR THE DEFENDANT: GANESH MAGENTHIRAN (WAN NURUL AMALINA WITH HIM) SOLICITORS FOR THE DEFENDANT: HAKEM ARABI & ASSOCIATES