Puncak Tasnim Sdn Bhd v Kt Advance Construction Sdn Bhd (AA-24NCC(ARB)-1-07/2024)

High Court of Malaysia7 Mar 2025

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Refers toAdjudication ActExternal
“*Note : Serial number will be used to verify the originality of this document via eFILING portal 12 Headnotes Contract — Construction contract — Adjudication under Construction Industry Payment and Adjudication Act 2012 (CIPAA) — Adjudicator found in favour of subcontractor — Main contractor applied to set aside and st”
Refers toARBITRATION ACT 1952Legislation
“ce Act, but because his **Note : Serial number will be used to verify the originality of this document via eFILING portal 8 act or omission amounts to ‘misconduct’ within the meaning of s 30 of the Arbitration Act 1940.”” [19] The plaintiff further relied on View Esteem (supra) and Pilon Ltd v 190 Breyer Group plc [201”
Refers toEvidence ActExternal
“7 January 2024, which allegedly contained an admission of delay. The adjudicator’s refusal to consider the letter was contended to be in breach of Section 12(9) of CIPAA 2012, which provides that the Evidence Act 1950 does not apply in adjudication proceedings. In 170 Jeuro Development Sdn Bhd v Teo Teck Huat (M) Sdn B”
Cites[2010] EWHC 837External
“tal 8 act or omission amounts to ‘misconduct’ within the meaning of s 30 of the Arbitration Act 1940.”” [19] The plaintiff further relied on View Esteem (supra) and Pilon Ltd v 190 Breyer Group plc [2010] EWHC 837 (TCC), arguing that failure to consider a defence constitutes a breach of natural justice. However, in ACF”
Cites[2015] MLJU 941External
“endant did not perform the works 75 and failed to submit claims with verification as per Clause 16 of the LOA. [11] In Bina Puri Construction Sdn Bhd v. Hing Nyit Enterprise Sdn Bhd [2015] 8 CLJ 728; [2015] MLJU 941, the court stated that the absence of a certified progress or interim claim does not prevent a 80 party”

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Cites[2016] MLJU 1776External
“Dissatisfaction with outcomes or procedural decisions does not suffice. The Court of Appeal in ACFM 125 Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd & Another Appeal[2016] 1 CLJU 1522; [2016] MLJU 1776; [2016] MLRAU 499 stressed that the court cannot revisit the merits or factual findings of the adjudicat”
Cites[2016] MLRAU 499External
“th outcomes or procedural decisions does not suffice. The Court of Appeal in ACFM 125 Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd & Another Appeal[2016] 1 CLJU 1522; [2016] MLJU 1776; [2016] MLRAU 499 stressed that the court cannot revisit the merits or factual findings of the adjudicator. It can only in”
Cites[2018] MLJ 22External
“hat a fair-minded observer would conclude bias. This test has been adopted by Malaysian courts in adjudication contexts, as reflected in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2019] 5 CLJ 479; [2018] MLJ 22; [2018] 1 MLRA 460, where the Federal Court held 120 that failure to consider a legitimate defence amounts”
Cites[2018] MLJU 1711External
“f this document via eFILING portal 7 strayed outside statutory powers. In Ideal City Development Sdn Bhd v PWC Bina Sdn Bhd & Other Appeals [2019] 2 CLJ 615; 160 [2019] 1 MLRA 275; [2018] 8 AMR 641; [2018] MLJU 1711, the Court of Appeal held that adjudicating on a claim before the cause of action accrued was a jurisdic”

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1 IN THE HIGH COURT IN MALAYA AT IPOH 5 IN THE STATE OF PERAK DARUL RIDZUAN ORIGINATING SUMMONS NO.: AA-24NCC(ARB)-1-07/2024 BETWEEN 10 PUNCAK TASNIM SDN. BHD. (COMPANY NO.: 965653-H) … PLAINTIFF AND KT ADVANCE CONSTRUCTION SDN. BHD. 15 (COMPANY NO.: 614194-X) …DEFENDANT GROUNDS OF JUDGMENT Introduction [1] These are cross-applications relating to the adjudication award made pursuant to the Construction Industry Payment & Adjudication 20 Act 2012 ("CIPAA 2012") relating to the parties’ dispute in the adjudication proceeding. The cross-applications before the Court are: a) the plaintiff’s Originating Summons to set aside and stay the adjudication decision under CIPAA (AA-24NCC(ARB)-1- 25 07/2024); and b) the defendant’s Originating Summons to enforce the adjudication decision as if it were a High Court judgment (AA- 24C-2-10/2024) 30 [2] The plaintiff in Originating Summons No. AA-24NCC(ARB)-1- 07/2024 is Puncak Tasnim Sdn Bhd ("plaintiff"), a property development company, whereas the Defendant, KT Advance Construction Sdn Bhd ("defendant"), is a subcontractor appointed by the plaintiff for a construction project involving the development 35 of 26 residential units in Perak. [3] The dispute arose following the termination of the Letter of Award ("LOA") issued to the defendant on 31 October 2023, wherein the defendant sought adjudication under CIPAA for outstanding 40 payments and was successful. The plaintiff subsequently commenced this action wherein they sought a stay and setting aside of the adjudication decision. [4] One of the central issues raised by the plaintiff in its application to set aside the Adjudication Decision is that the adjudicator failed to 45 act impartially and exhibited biases in favour of the defendant. The plaintiff contends that the adjudicator did not take into account crucial evidence, specifically the letter of admission of delay dated 15.1.2024, and that the adjudicator’s refusal to consider this document demonstrates an inherent lack of independence and 50 fairness. However, after carefully analysing the legal principles governing bias, the evidence presented, and the adjudicator’s conduct in the proceedings, this Court finds that the plaintiff has not met the required threshold to prove that the adjudicator acted with bias. 55 Background Facts and Preliminary Issues [5] The plaintiff awarded the defendant a subcontract for a total sum of RM6.7 million with an agreed completion date of 30 April 2025. However, due to alleged delays, the plaintiff terminated the LOA on 21 January 2024. 60 [6] The defendant initiated adjudication proceedings (AIAC/D/ADJ/5303/2024) on 23 May 2024, claiming RM548,822.78 for works done, a refund of RM100,000.00, and other costs. [7] The Adjudicator, delivered his adjudication decision on 12 July 2024 in favour of the defendant, ordering the plaintiff to pay 65 RM399,994.79, interest, and costs. [8] The plaintiff applied for a stay and to set aside the decision on several grounds, including that the Adjudicator was partial, that the defendant carried out no actual work, and that the defendant failed to comply with contractual requirements. 70 [9] On 15 October 2024, this court allowed the plaintiff’s application pending disposal of the setting aside application. Findings of the Court on Setting Aside Application Issue 1: Whether the defendant carried out the works as claimed [10] The plaintiff contends that the defendant did not perform the works 75 and failed to submit claims with verification as per Clause 16 of the LOA. [11] In Bina Puri Construction Sdn Bhd v. Hing Nyit Enterprise Sdn Bhd [2015] 8 CLJ 728; [2015] MLJU 941, the court stated that the absence of a certified progress or interim claim does not prevent a 80 party from initiating adjudication under CIPAA. Section 5 allows payment claims without certification, while Sections 25(m) and 25(n) empower the adjudicator to decide matters even without certificates and to review or revise any certificates issued. Contractual requirements for certification cannot override the 85 statutory right to adjudicate. At held no. 4, it states:

Lack of certification of progress or interim claim is not a bar to the adjudication process. Section 5 of the CIPAA does not require the existence of certified progress or interim claim before a payment claim could be issued. In fact, s. 25(n) of 90 the CIPAA states that the adjudicator has power to 'decide or declare on any matter notwithstanding no certificate has been issued in respect of the matter'. Under s. 25(m) of the CIPAA, the adjudicator is also empowered to 'review and revise any certificate issued or to be issued'. Thus, even if 95 the contractual agreement between the parties provides for issuance of a certified interim or progress claim, the absence of certification could not deprive the unpaid party from availing the adjudication process”. 100 (underline is emphasised) [12] However, the defendant provided contemporaneous documentation, including Monthly Progress Reports No. 1 and No. 105 2, which were prepared and acknowledged by the plaintiff. These reports substantiate the work done, and they remain unchallenged. [13] The adjudication process does not require absolute proof but relies on a balance of probabilities. Given that the plaintiff’s project documentation contradicts their claim of non-performance, this 110 ground lacks merit. Issue 2: Whether the Adjudicator acted in excess of jurisdiction or was partial [14] The threshold to establish bias or partiality under Malaysian adjudication law mirrors the test laid down in Porter v Magill [2002] 115 2 AC 357, requiring a “real danger” or “real possibility” that a fair-minded observer would conclude bias. This test has been adopted by Malaysian courts in adjudication contexts, as reflected in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2019] 5 CLJ 479; [2018] MLJ 22; [2018] 1 MLRA 460, where the Federal Court held 120 that failure to consider a legitimate defence amounts to a denial of natural justice and a breach of impartiality obligations. [15] A challenge based on bias or excess of jurisdiction must be specific and substantiated. Dissatisfaction with outcomes or procedural decisions does not suffice. The Court of Appeal in ACFM 125 Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd & Another Appeal[2016] 1 CLJU 1522; [2016] MLJU 1776; [2016] MLRAU 499 stressed that the court cannot revisit the merits or factual findings of the adjudicator. It can only intervene when the adjudicator denies procedural fairness or commits an error of law 130 during the process. Justice David Wong Dak Wah said this: “[21] ….. If we were to consider the complaints of the Appellant, we would be looking into the merits of the decision of the adjudicator. In the context of section 15 of CIPPA 2012, 135 it cannot be the function of the Court to look into or review the merits of the case or to decide the facts of the case. The facts are for the adjudicator to assess and decide on. The Court's function is simply to look at the manner in which the adjudicator conducted the hearing and whether he had 140 committed an error of law during that process. Such error of law relates to whether he had accorded procedural fairness to the Appellant. In the context of this case, the complaints of the Appellant were nothing but complaints of factual findings of the adjudicator which in our view cannot be entertained by 145 us. (underline is emphasised) [16] Under Section 15(c) of CIPAA 2012, an adjudication decision can only be set aside if the adjudicator has not acted independently or 150 impartially. The mere fact that the adjudicator ruled in favour of one party does not automatically indicate bias. The adjudicator must be shown to have acted unfairly, deliberately disregarded material evidence without justification, or conducted the adjudication in a manner that deviates from procedural fairness. 155 [17] In assessing excess of jurisdiction under Section 15(d) of CIPAA, the courts require proof that the adjudicator decided on matters not referred to adjudication, failed to deal with referred issues, or strayed outside statutory powers. In Ideal City Development Sdn Bhd v PWC Bina Sdn Bhd & Other Appeals [2019] 2 CLJ 615; 160 [2019] 1 MLRA 275; [2018] 8 AMR 641; [2018] MLJU 1711, the Court of Appeal held that adjudicating on a claim before the cause of action accrued was a jurisdictional error and rendered the decision void. [18] A pivotal argument raised by the plaintiff concerns the adjudicator’s 165 rejection of the plaintiff’s “without prejudice” letter dated 17 January 2024, which allegedly contained an admission of delay. The adjudicator’s refusal to consider the letter was contended to be in breach of Section 12(9) of CIPAA 2012, which provides that the Evidence Act 1950 does not apply in adjudication proceedings. In 170 Jeuro Development Sdn Bhd v Teo Teck Huat (M) Sdn Bhd [1998] 6 MLJ 545; [1998] 4 AMR 3245; [1998] 3 CLJ Supp 366; [1998] 1 MLRH 487, the High Court ruled that ignoring rules of evidence per se does not amount to misconduct unless it violates natural justice. His Lordship Augustine Paul J in Jeuro 175 Development (supra) said in these words: “A departure from the rules of the Evidence Act 1950 does not per se amount to misconduct, unless the rule of evidence violated is one which is based on natural justice and an infringement of it is, therefore, repugnant[1998] 6 MLJ 545 at 180 553 to one's sense of justice and fairness. Having said this, Monir says in his book entitled Law of Evidence (10th Ed) at p 12: “In such a case, therefore, if the award is set aside, it is not because the arbitrator has not complied with 185 the provisions of the Evidence Act, but because his act or omission amounts to ‘misconduct’ within the meaning of s 30 of the Arbitration Act 1940.”” [19] The plaintiff further relied on View Esteem (supra) and Pilon Ltd v 190 Breyer Group plc [2010] EWHC 837 (TCC), arguing that failure to consider a defence constitutes a breach of natural justice. However, in ACFM Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd (supra), the Court of Appeal confirms that courts are not to review the merits of an adjudicator’s decision under Section 15 of 195 CIPAA unless there is a denial of natural justice or jurisdictional error. [20] The assertion of bias is unfounded, as the adjudicator did not award the full claim sum of RM548,822.78 but instead allowed RM399,994.79 for completed work while rejecting the RM100,000 200 claim on the ground that it was a loan and not a payment under a construction contract, making it inapplicable under CIPAA. If the adjudicator was indeed biased, he would have granted the entire claim without scrutiny. The fact that he carefully assessed the evidence and selectively allowed claims demonstrates impartiality 205 and adherence to legal and factual analysis. [21] This Court accepts that an adjudicator is entitled to reject inadmissible or irrelevant material, including letters marked “without prejudice,” unless an exception under Section 23 of the Evidence Act 1950, such as waiver or settlement, clearly applies. The mere 210 rejection of such a letter does not constitute procedural unfairness, provided the adjudicator properly considered the substantive issues within the scope of his jurisdiction. [22] Therefore, applying the legal principles set forth in View Esteem (supra), Ideal City Development (supra), and ACFM Engineering 215 (supra), the plaintiff has not established sufficient grounds under Sections 15(c) or 15(d) of CIPAA. The adjudicator neither exceeded his jurisdiction nor acted with partiality in the adjudication. I am, therefore, of the view that the plaintiff has not met the threshold for establishing bias or excess of jurisdiction and accordingly fails in 220 its application to set aside the adjudication award. Enforcement [23] The Court of Appeal in Inai Kiara Sdn Bhd v. Puteri Nusantara Sdn Bhd [2019] 2 CLJ 229; [2018] 8 AMR 655; [2019] 2 MLJ 362; [2019] 1 MLRA 207, as per Mary Lim Thiam Suan JCA (as she then 225 was), said these: “ [25] ….. 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 230 adjudication decision, and that there is no prohibition to the grant of the order that is sought. [26] By this, we mean that the adjudication decision has not been set aside or stayed, that there is no written settlement of the subject matter between the parties, or that there is no 235 final decision rendered on the payment claim, whether made in arbitration or by a court of law. Once these matters are established as matters of fact, the order to enforce ought to be granted. When making the order, the High Court may also make appropriate orders in respect of the whole or part of the 240 adjudicated sum including make orders on interest — see sub-s 28(2).” [24] Which effectively means that an adjudication decision can be enforced under Section 28(1) and (2) of CIPAA if three conditions 245 are met: a) the decision favours the applicant, b) the opposing party has failed to pay the adjudicated amount by the specified date and c) there is no legal prohibition on enforcement. 250 [25] As the setting aside application is dismissed and the interim stay order terminates as a result of the setting aside, the requirements for enforcement are met. Enforcement is granted with no orders as to costs. 255 Conclusion [26] For the following reasons: a) The plaintiff’s application is to set aside the adjudication decision is dismissed with costs of RM5,000.00, subject to a 4% allocator. 260 b) The defendant’s application in Encl 1 para (a) and (b) of OS No: AA-24C-2-10/2024 to enforce the adjudication decision is allowed with costs of RM2,000.00, subject to a 4% allocator. Date: 28 April 2025 265 Moses Susayan MOSES SUSAYAN Judicial Commissioner High Court in Malaya 270 at Ipoh, Perak Counsel: For the Plaintiff/Applicant Domnic Selvam 275 (together with Sukhvinder Singh Sidhu) Advocates and Solicitors [Messrs Rajandran Domnic & Co] Ipoh, Perak 280 For the defendant Hoo Yee Huan Advocates and Solicitors [Messrs Shook Lin & Bok] Kuala Lumpur 285 (Notice: This Grounds of Decision is subject to official editorial revision) 290 Headnotes Contract — Construction contract — Adjudication under Construction Industry Payment and Adjudication Act 2012 (CIPAA) — Adjudicator found in favour of subcontractor — Main contractor applied to set aside and stay adjudication decision — Whether adjudicator exceeded 295 jurisdiction under s 15(d) CIPAA — Whether adjudicator acted with bias or failed to act impartially under s 15(c) — Whether failure to consider “without prejudice” admission letter breached natural justice — Whether adjudicator obliged to consider all defences raised in adjudication response — Whether failure to consider uncertified claims invalidates 300 adjudication — Whether decision should be set aside — Whether enforcement allowed where award remains without being stayed or set aside, or superseded — Whether condition under s 28(1) & (2) CIPAA satisfied for enforcement of adjudication decision. 305

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Case metadata

Court: High Court of Malaysia
Decision date: 7 Mar 2025
Case number: AA-24NCC(ARB)-1-07/2024
Coram: YA Tuan Moses Susayan
Practice area: Contract — Construction contract — Adjudication under Construction Industry Payment and Adjudication Act 2012 (CIPAA) — Adjudicator found in favour of subcontractor — Main contractor applied to set aside and stay adjudication decision — Whether adjudicator exceeded jurisdiction under s 15(d) CIPAA — Whether adjudicator acted with bias or failed to act impartially under s 15(c) — Whether failure to consider “without prejudice” admission letter breached natural justice — Whether adjudicator obliged to consider all defences raised in adjudication response — Whether failure to consider uncertified claims invalidates adjudication — Whether decision should be set aside — Whether enforcement allowed where award remains without being stayed or set aside, or superseded — Whether condition under s 28(1) & (2) CIPAA satisfied for enforcement of adjudication decision
Version: Alasan Penghakiman 1
Published: 28 Apr 2025
Source ID: 60d58edc-fa29-4001-88f9-d88c15e64b0f

Catchwords

Contract — Construction contract — Adjudication under Construction Industry Payment and Adjudication Act 2012 (CIPAA) — Adjudicator found in favour of subcontractor — Main contractor applied to set aside and stay adjudication decision — Whether adjudicator exceeded jurisdiction under s 15(d) CIPAA — Whether adjudicator acted with bias or failed to act impartially under s 15(c) — Whether failure to consider “without prejudice” admission letter breached natural justice — Whether adjudicator obliged to consider all defences raised in adjudication response — Whether failure to consider uncertified claims invalidates adjudication — Whether decision should be set aside — Whether enforcement allowed where award remains without being stayed or set aside, or superseded — Whether condition under s 28(1) & (2) CIPAA satisfied for enforcement of adjudication decision

Parties

PUNCAK TASNIM SDN BHD - applicant - ejudgment_parties
KT ADVANCE CONSTRUCTION SDN BHD - respondent - ejudgment_parties

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