Prestij Mega Construction Sdn Bhd v Macly Equity Sdn Bhd (WA-24C-30-02/2023)

In Originating Summons No. WA-24C-47-03/2023 (OS 47), Macly Equity Sdn Bhd (“Macly”) has applied to this Court to set aside the Adjudication Decision dated 9.2.2023 (“AD”) delivered by Ir. Zafrul Mahmood in favour of Prestij Mega Construction Sdn Bhd (“Prestij”) under section 15 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) in enclosure 1 thereto and a section 16 CIPAA application in enclosure 5 to stay the AD pending the setting aside application in enclosure 1 thereto.

The grounds in support of OS 47 are as follows:-

2.1

2.2 Prestij failed, neglected and/or refused to complete the work within the Extended Date of Completion. Therefore, a Liquidated and Ascertained Damages (“LAD”) of RM7,410,000.00 was imposed against Prestij on 27.4.2017 due to its delay in completion of works;

2.3 Prestij commenced the adjudication proceeding against Macly;

2.4 The proceeding culminated in the AD which is now the subject matter of Prestij’s OS 30 and Macly’s OS 47;

2.5 The AD ought to be set aside on the following grounds: a. The Adjudicator lacks jurisdiction to preside the Adjudication as the dispute has been finally decided in the garnishee proceeding in the Kuala Lumpur Sessions Court, where by it was adjudged that no monies was due by Macly to Prestij; b. The Adjudicator has acted in excess of his jurisdiction by determining his own jurisdiction to act as the adjudicator of the proceeding; c. There has been a denial of natural justice to Macly due to the Adjudicator’s refusal to accord Macly opportunity for an oral hearing in the adjudication proceeding.

2.6 Macly has satisfied the relevant statutory requirements under CIPAA 2012 and the Rules of Court 2012 in the filing of OS

47.

Heard together with OS 47 was OS 30, which is Prestij’s application to enforce the AD pursuant to section 28 of CIPAA and the same was supported by the following grounds:-

3.1 After the disposal of OS 132 and OS 111 and on 3.8.2022, Prestij initiated adjudication proceedings pursuant to the Construction Industry Payment and Adjudication Act 2012 (“CIPAA 2012”) against Macly to claim for a sum of RM9,833,391.19 (“Adjudication Proceeding”).

3.2 On 9.2.2023, the learned Adjudicator delivered the Adjudication Decision in favour of Prestij.

3.3 Despite the Adjudication Decision having been delivered in favour of Prestij, Macly continued to fail, refuse and/or neglect to make any payment to Prestij, hence this Enforcement Application before this Honourable Court. And it is pertinent to note that the Setting Aside Application was filed after the Enforcement Application had been filed.

By way of a Letter of Award dated 14.5.2014 (“the Letter of Award”), Prestij was appointed as the main contractor by Gamal Arkitek Perunding (M) Sdn Bhd (“the Architect”) which acted as the agent of Macly for a project known and referred to as “The Construction and Completion of Basement and Ground Floor Slab for the Proposed Erection of a Mixed Development Comprising 1 Block Commercial/SOHO (723 Units) 56 Storey Tower & 4 Storey Basement (phase 1 and 2) on Lot 3370 Seksyen 41, Jalan Dewan Sultan Sulaiman, Mukim Kuala Lumpur for Macly Equity Sdn Bhd” (“the Project”). The Letter of Award further incorporated the amended PAM Standard Form of Contract 2006 (Without Quantities) (“the PAM Contract”) as forming the contract (“the Contract”) between Prestij and Macly.

Prestij had allegedly completed the original scope of works comprised in the Contract in the sum of RM53,750,000.000. However, the Architect had only certified a sum of RM53,365,875.11 in the Progress Certificate No. 28 dated 18.4.2017 and only a sum of RM 47,868,802.27 has been paid by Macly to Prestij. (See Exhibit LCY- 1, Prestij’s AIS).

Throughout the Project, there were also allegedly variation orders instructed by Macly and/or the Architect and/or the Project’s Engineer, and a total of RM3,952,193.46 worth of variation works completed by Prestij failed to be certified by the Architect and/or were rejected by the Architect without reasonable grounds. In addition, Macly has also failed to release the retention sum of RM1,442,554.84 that was allagedly due to Prestij by 16.2.2019.

It was alleged that Macly unilaterally imposed on Prestij Liquidated and Ascertained Damages (“LAD”) of RM7,410,000.00 based on a purported Certificate of Non-Completion issued by the Architect on 18.1.2016 (“CNC 1”).

The imposition of the LAD of RM7,410,000.00 is at all times opposed by Prestij due to the following:- a. During the completion of the Works, there were several Relevant Events which had arisen under Clause 23.8 of the PAM Contract which entitled Prestij to make applications for extension of time (“EOT”) under Clause 23.1. (see Exhibit LCY-1, Prestij’s AIR). b. Prestij had applied for a total of 320 days of EOT from the Architect, the first application of which was made as early as 7.9.2015. However, out of 320 days of EOT applications by Prestij, only 14 days of EOT were granted by the Architect and the date of completion of the Works had been revised from 14.1.2016 to 28.1.2016 (see Exhibit A-3, Macly’s Affidavit (1)). c. Notwithstanding that, applications for EOT No. 8, 9, 10, 12, 14 and 15 were either pending assessment or not replied to by the Architect. The Architect had rejected applications for EOT No 2, 3, 4, 5 and 11 which were disputed by Prestij without further replies from the Architect (see Exhibit LCY-1, Prestij’s AIR). d. However, on 18.1.2016, the Architect issued CNC 1 to Prestij. It is submitted that CNC 1 was void and had no legal effect as the Architect had issued CNC 1 when there were EOT Applications that were still pending assessment or not responded to by the Architect, and the CNC 1 was also void for not complying with the provisions of the PAM Contract. e. In addition, on 23.2.2016, more than a month after the CNC 1 was issued by the Architect, the Architect had then granted 11 days of EOT to the Prestij’s application for EOT and the date of completion of the Works was extended from 17.1.2016 to 28.1.2016 (“EOT No. 2”). The Architect’s issuance of the Certificate of EOT No. 2 had in effect revoked CNC 1 pursuant to clause 22.3 of the PAM Contract and therefore CNC 1 became void thereafter. f. Therefore, it was submitted that without a valid CNC, or in the absence of any CNC after CNC 1 had been subsequently revoked and which had become void by the Architect’s issuance of EOT No. 2, Macly could not deduct or set-off as LAD from any amounts which were due and payable to Prestij.

The previous proceedings between the parties in relation to the Project prior to the commencement of the CIPAA 2012 adjudication proceeding are summarized in the table below which explained the procedural history in relation to the Project and the Contract which were also prior to OS 30, the Enforcement Application, and OS 47, the Setting Aside Application, which are now before this Court:-

06.08.2019 Keller Sdn Bhd (“Keller”), the sub-contractor appointed by Prestij for part of the works in the Contract filed a Notice of Application against Macly (as Garnishee) to execute Keller’s JID against Prestij (“Keller’s Garnishee Proceeding”) and Macly was ordered to show cause in Keller’s Garnishee Proceeding 17.10.2019 The Learned Sessions Court Judge was satisfied that Macly had shown sufficient cause and Keller’s garnishee application was dismissed.

13.05.2020 Prestij issued a Payment Claim pursuant to CIPAA 2012 to claim from Macly a sum of RM5,063,128.33 (inclusive of interest) based on the Progress Certificate No. 28 issued by Macly.

19.06.2020 Macly filed an application in Kuala Lumpur High Court seeking a declaration that Keller’s Garnishee Proceeding had finally decided the dispute between the parties and injunction against Prestij from initiating adjudication or arbitration proceedings (“OS 132”).

17.02.2021 While pending the decision of the High Court for OS 132, Macly had prematurely issued a Statutory Demand to demand from Prestij a sum of RM7,410,000.00 LAD based on the Learned Sessions Court Judge’s decision in Keller’s Garnishee Proceeding.

02.03.2021 OS 132 was dismissed wherein Macly was ordered to pay the costs of RM20,000.00 (subject to allocator fees) to Prestij.

10.03.2021 Prestij had to file an application for Fortuna Injunction against Macly to prevent Macly from presenting winding up petition against Prestij based on the alleged RM7,410,000.00 LAD (“OS 111”).

09.07.2021 OS 111 was allowed by the learned Judicial Commissioner with costs RM12,000.00 (subject to allocator fees).

15.10.2021 The Court of Appeal dismissed Macly’s appeal for OS 132 and Macly is ordered to pay Prestij costs of RM10,000.00 (subject to allocator fees).

28.04.2022 The Court of Appeal dismissed Macly’s appeal for OS 111 and Macly is ordered to pay Prestij costs of RM15,000.00 (subject to allocator fees).

Despite a letter of demand having being issued by Prestij's solicitors on 14.2.2023, Macly has failed to pay Prestij the awarded costs and allocator fees totalling RM 59,280.00 for the above proceedings.

After the disposal of OS 132 and OS 111 and on 3.8.2022, Prestij initiated adjudication proceedings pursuant to the Construction Industry Payment and Adjudication Act 2012 (“CIPAA 2012”) against Macly to claim for a sum of RM9,833,391.19 (“Adjudication Proceeding”).

On 9.2.2023, the learned Adjudicator delivered the Adjudication Decision in favour of Prestij.

Despite the Adjudication Decision having been delivered in favour of Prestij, Macly continued to fail, refuse and/or neglect to make any payment to Prestij, hence OS 30 was filed before this Court. And it is pertinent to note that OS 47, the Setting Aside Application was filed after OS 30, the Enforcement Application had been filed.

Macly claims that the issue of any debt owing by Macly to Prestij had been finally decided in the Session’s court vide Sessions court no. Permohonan Perlaksanaan WA-52C-9-03/2018 where the Sessions Court had previously ordered that Macly was not indebted to Prestij vis avis a garnishee application filed there in which involved one Keller Sdn Bhd (“Keller”) a sub contractor appointed by Prestij wherein Keller who had obtained judgment against Prestij in the Session’s Court had proceeded to execute the Judgment via a garnishee application against Macly (Garnishee Application) who was ordered to show cause in the said Garnishee Application.

In the said Garnishee Application, the Session’s Court had dismissed the Garnishee Application Show Cause against Macly on allegedly the ground that cause had been shown by Macly via the Sessions Court Order dated 17.10.2019 (17.10.2019 Sessions Order).

I have perused exhibit A-10 in enclosure 2 of OS 47 with regards the 17.10.2019 Sessions Order and the reasonings of the learned Sessions Judge in his Grounds thereto dated 2.1.2020 and find that the merits of the matter between Macly and Prestij was not considered but the learned Sessions Judge had made his decision based purely on the evidence before him.

Prestij’s learned counsel had argued that the issue of res judicata had been raised by Macly on 2 separate occasions before the High Court i.e Originating Summons No. WA-24C-132-06/2020 (OS 132) and Originating Summons No. WA-24NCC-111-03/2021 (OS 111) where the respective High Courts had dismissed the same on both occasions and the Court of Appeal had affirmed the said decisions of the High Courts on 15.10.2021 and 28.4.2022 in the respective appeals.

For the record OS 132 was, as can be seen in exhibit A 13 of enclosure 2 of OS 47, an application filed by Macly to declare that the Garnishee Application had finally decided the disputes between the parties as well as praying for an injunction to prohibit Prestij from initiating any further adjudication and/or arbitration proceedings.

On the other had OS 111 was in relation to a a Fortuna Injunction application filed by Prestij, which was allowed by the said court therein, to prevent Macly from presenting a winding up petition based on the alleged sum of RM7,410,000 due to the Sessions court’s decision on the Garnishee Application. in that said OS 111 the learned Judicial commissioner, Justice Mohd Amin (as he then was), had ruled amongst others that Kellers claim ‘could not be raised or properly and reasonably raised in Kellers Garnsihee Proceeding as it was not a point or matter which properly belonged to the subject of litigation..” and that “…res judicata and issue estoppel does not apply to this Originating Summons…”

It is to be noted that garnishee Order 49 rule 5 of the Rules of Court 2012 is the provision governing an application to determine the liability of a garnishee and which order reads: “Where on the further consideration of the matter the garnishee disputes liability to pay the debt due or claimed to be due from him to the judgment debtor, the court may summarily determine the question at issue or order in Form 100 that any question necessary for determining the liability of the garnishee be tried in any manner in which any question or issue in an action may be tried, without, if it orders trial before the Registrar, the need for any consent by the parties.”

The provision as per Order 49 rule 5 of the Rules of Court 2012 expressly provides that determination of a garnishee show cause is to be done summarily. I find with respect, that there were no definitive findings made in the Garnishee Application and in particular in coming to the 17.10.2019 Sessions Order, as the hearing of the Garnishee Application was done summarily by way of affidavits and without witnesses being called. I hold that such findings of the Learned Sessions Judge is not the appropriate forum to determine the finality of whether there is such a debt owed to Prestij by Macly. To this I rely on the authority of Tesco Stores (M) Sdn Bhd v Ananda Kumar a/l Krishnan [2018] 6 MLJ 261 where the Court of Appeal had held as follows: “ [7] What is significant of O 49 is that it gives a wide discretion to the court to determine summarily or by way of hearing, attaching less significance to the Evidence Act 1950 or full trial procedure. What the court is required to make is orders which it thinks is just. That is to say, O 49 r 1 does not impose the garnishor or garnishee to establish the case on the balance of probabilities. O 49 r 1 gives the court the discretion to decide the matter. O 49 is a rule relating to discretionary power of the court….”

My above findings is further fortified by the fact that there is an arbitration agreement in the PAM Contract between the parties herein wherein such disputes must be referred to an arbitration tribunal and not the Courts.

As it is my decision that there is no conclusive findings on the dispute between Macly and Prestij, I am therefore holding that such assertion by Macly of res judicata and the said dispute had been decided by a court of competent jurisdiction does not apply in the matter before me.

In the circumstances I further hold that the Adjudicator does not lack jurisdiction to hear and preside over the adjudication proceedings which is the subject matter of the case before me.

This Court will now address the issue of the Adjudicator’s purported excess of jurisdiction by making a determination on his own jurisdiction.

I hold that the Adjudicator may decide on his own jurisdiction even though it is not binding or conclusive in an adjudication under the CIPAA regime.

Section 27(3) of CIPAA states:

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).

My reading of the said section 27(3) of CIAPAA is that the said section is not prohibitive of any attempt by the Adjudicator to rule on his jurisdiction as there is no express words in the section which states as such. In my view the said section only goes on to state that the Adjudicator can in his discretion proceed and complete the adjudication proceedings despite there being a jurisdictional challenge. The case of VVO Construction Sdn Bhd v Bina MYK Sdn Bhd and another case [2017] MLJU 79 decided by Justice Lee Swee Seng (as he then was) had put the same reasoning but in a different way when His Lordship held: “[54] When a jurisdictional issue is raised, an Adjudicator may choose the path of least resistance and continue with the decision without deciding the issue of jurisdiction. This does not mean that the learned Adjudicator cannot decide on an issue that goes to jurisdiction of the adjudicator but that the Adjudicator is not obliged to. Section 27(3) CIPAA provides as follows: “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).”

In Tecnicas Reunidas Malaysia Sdn Bhd v Petrovietnam Engineering Consultancy JSC (PVE) & Anor and other cases [2021] MLJU 2633, Justice Aliza sulaiman JC (as she then was) had stated: “[51] It is trite that when a jurisdictional challenge is raised, an 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 s 15 CIPAA or to oppose the application to enforce the adjudication decision under sub-s 28(1) CIPAA (see sub-s 27(3) CIPAA). If the adjudicator makes a determination on his own jurisdiction, that decision is never binding or conclusive in an adjudication under the CIPAA regime as the adjudicator is not “statutorily clothed with the power to decide on his own jurisdiction” (see Giatreka Sdn Bhd v. SGW Engineering Construction Sdn Bhd And Another Appeal [2019] MLRHU 1379 at para 27).”

Thus, based on the aforesaid cases, I reiterate my decision that the Adjudicator may decide on his own jurisdiction although the same is not binding or conclusive in an adjudication under the CIPAA regime.

In any event from the AD, I find that the Adjudicator in coming to his decision that he had the required jurisdiction to proceed with the Adjudication, analysed the pleadings and the respective submissions filed including the issues on both OS 132 and OS 111 and the issues of competency jurisdiction and contingent jurisdiction whilst finding there was no issue of res judicata and that the parties were free to set aside the AD under section 15 of CIPAA before finally concluding that he had the required jurisdiction to proceed with the adjudication.

It was also contended by Macly that the Adjudicator had deprived them of the opportunity to submit orally on the validity of the second Certificate of Non completion (“CNC 2”) and the extension of time thereto granted by the Architect which impacted the imposition of the LAD and which was part of Macly’s defence.

I find from the facts presented before this court that the Adjudicator had given the opportunity to the parties to submit on the necessity of holding a limited hearing before making a decision on the same not to allow the oral hearing on the basis of “…no oral hearing will be held as matters referred would not be prejudicial to the outcome of the case”

In any event, after perusing the Adjudication Claim, the Adjudication Response and the Adjudication Reply, I find that there was no specific request for an oral hearing and I agree with learned counsel for Prestij that any such references therein by them were only in relation to their reservation of rights.

In this respect the evidence shows that Macly’s request for an oral hearing was made via its solicitors email on 22.12.2022 which was after the Adjudication Reply was served on them on 30.11.2022 and that CIPAA does not provide for any reply after the Adjudication Reply. The evidence before me also shows that Macly was given an extension of 4 working days to file their Adjudication Response which was over and above the time periods specified under CIPAA for the same and that this additional time would be sufficient for Macly to address any issue it had with regards the CMC 2.

The requirement for an oral hearing is not a requirement of natural justice, see SQA Builders Sdn Bhd v Luxor Holdings Sdn Bhd and another suit [2017] MLJU 833.

This Court will not review the merits of holding an oral hearing as this is matter for and within the discretion of the Adjudicator to decide in accordance with his wide powers under section 25 CIPAA. I therefore hold that there has been no breach of natural justice on this issue of not holding an oral hearing.

I only need to quote Inai Kiara Sdn Bhd v Puteri Nusantara Sdn Bhd [2019] 2 MLJ 362 where Mary Lim JCA (as she then was) in delivering the judgment of the Court of Appeal held: “[25] From a reading of the CIPAA 2012, in particular, ss 13, 15, 16, 27 and 31, it is plain that though s 28 vests the High Court with discretionary power, it does not extend to requiring the applicant to show that there are no grounds for setting aside the adjudication decision under s 15. All that the applicant needs to do is to satisfy the High Court that there is an adjudication decision that has been rendered in the applicant’s favour, that there has been non-payment of the adjudicated sum by the date specified in the adjudication decision, and that there is no prohibition to the grant of the order that is sought.”

I therefore hold that the requirements as stated in the above case has been fulfilled by Prestij.

This Court will accordingly based on my reasons above, dismiss OS 47 with costs and as such enclosure 5 therein is now academic will also be dismissed with costs.

I hereby allow Order In Terms for prayers 1 (a) to (d) and prayer 2 for costs. Dated: 28th day of July 2023 sgd. NADZARIN WOK NORDIN HIGH COURT JUDGE CONSTRUCTION COURT 1 COUNSEL FOR THE PLAINTIFF: Kamraj Nayagam and Fang Kai Loon (Messrs Mah-Kamariyah & Philip Koh] COUNSEL FOR THE DEFENDANT: Ong Chee Kheng and Khoon Chin Ern (Messrs CK Oon & Co.]