R&F Development Sdn Bhd v Alpha Automation (Sel) Sdn Bhd (JA-24C-3-01/2022)

Content

Page 1 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w MALAYSIA IN THE HIGH COURT IN MALAYA AT JOHOR BAHRU IN THE STATE OF JOHOR DARUL TAKZIM 5 ORIGINATING SUMMONS NO.: JA-24C-3-01/2022 Dalam Perkara Keputusan Adjudikasi bertarikh 15-12-2021 di 10 bawah Nombor Rujukan Adjudikasi No. AIAC/D/ADJ-3709/2021 Dan 15 Dalam perkara mengenai Seksyen 15(b),

Lampiran

lampiran 1 ditolak dan JA-24C-6-03/2022 dibenarkan. Kos untuk kedua-dua Saman Pemula secara global adalah RM6,000.00 tertakluk kepada fi alokator.” 10 The plaintiff (R&F Development) being dissatisfied has filed an appeal to the Court of Appeal. [2] In the case JA-24C-3-01/2022 the plaintiff prayed for the following: 15 “i. Bahawa Keputusan Adjudikasi bertarikh 15-12-2021 di bawah Nombor Rujukan Adjudikasi no. AIAC/D/ADJ-3709/2021 (“Keputusan Adjudikasi tersebut”) adalah diketepikan; ii. Kos; dan 20 iii. Lain-lain perintah dan relif Mahkamah Yang Mulia ini anggapkan adil dan sesuai diberikan.” [3] Whereas in the case JA-24C-6-03/2022 Alpha Automation 25 (Selangor) Sdn Bhd prayed for the following: “1. Keputusan Adjudikasi bertarikh 15/12/2021 yang diawardkan oleh Adjudikator yang bijaksana, Tuan Ir. Balakrishnan Etty Gaunder dalam Prosiding Adjudikasi No. Rujukan AIAC/D/ADJ-3709-2021 antara 30 Plaintif dan Defendan hendaklah diiktiraf sebagai mengikat dan dikuatkuasakan melalui kemasukan sebagai Penghakiman atau Perintah Mahkamah Yang Mulia ini dengan terma-terma Keputusan Page 4 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w Adjudikasi bertarikh 15/12/2021 tersebut terhadap Defendan yang dinamakan di atas. 2. Defendan hendaklah membayar Plaintif jumlah RM2,520,063.45. Ini dengan ini, direkodkan sebagai Jumlah Adjudikasi. 5 3. Jumlah Adjudikasi hendaklah dibayar pada atau sebelum 31/1/2022 dan seterusnya, hendaklah dipanggil sebagai Tarikh Habis Tempoh bagi pembayaran Jumlah Adjudikasi. 10 4. Defendan hendaklah menanggung 100% Kos Adjudikasi. Defendan hendaklah membayar balik Plaintif jumlah RM36,053.60 termasuk bahagian Defendan yang telah dibayar oleh Plaintif. 5. Kos Adjudikasi hendaklah dibayar pada atau sebelum 31/1/2022 oleh 15 Defendan kepada Plaintif. 6. Kadar faedah sebanyak 5% setahun hendaklah dikenakan untuk pembayaran lewat melebihi Tarikh Habis Tempoh bagi Jumlah Adjudikasi dan Kos Adjudikasi. 20 7. Kos dan kos bersampingan permohonan dan juga Penghakiman atau Perintah untuk dimasukkan hendaklah dibayar oleh Defendan kepada Plaintif. 25 8. Peritah-perintah dan/atau relif-relif selanjutnya yang Mahkamah yang Mulia ini anggap sesuai dan adil.” [4] The facts of the case as can be gleaned from the submission of R&F’s solicitors is: 30 “The salient background facts Page 5 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w 12. The parties herein have entered into one Agreement dated 17-1-2017 and one Supplementary Agreement dated 10-11-2017 (“the said Agreements”). Pursuant to the said Agreements, R&F was the Purchaser and Alpha was the Supplier for the Project “To supply and install 33Kv HT system for R&F Princess Cove” (“the said Works”) at the 5 project site at Bukit Meldrum, Johor City, Johor Bahru, Malaysia (Plots of PTB23461 & PTB20365, Jalan Bukit Meldrum, 80300 Johor Bahru, Johor Darul Ta’zim, Malaysia. 13. The signed Agreement was based on the provisional contract sum of 10 RM12,087,840.00 (“the Contract Sum”). 14. It is not disputed that Alpha had only completed the said Works on 31- 12-2018 and the completion certificate was signed at that material time as a mere confirmation of the completion of Alpha’s scope of works but 15 in no way as a confirmation that Alpha had fully discharged its contractual obligations as the commercial aspect of the contract had yet to be finalised. 15. Further thereto, it is of pertinent importance to note that all contractual 20 works have to be completed on or before 31-7-2017 pursuant to Clause 2 (Appendix 1) of the said Agreement. 16. Alpha had then submitted Invoice No. 21904681 dated 28-5-2019 for the sum of RM1,220,000.00 and Invoice No. 22100346 dated 7-1-2021 for 25 the final sum of RM1,094,105-07 to R&F (“the said Invoices”). 17. R&F had at all material times never verified/confirmed/approved the claims therein the said Invoices as further documents were requested by R&F by way of telephone calls and/or emails from Alpha for verification 30 purposes but Alpha had never furnished R&F for the same. Without the further documents as requested, R&F was unable to approve such claims in the said Invoices as R&F was seriously disputing the same. Page 6 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w 18. Notwithstanding of the above, Alpha has commenced CIPAA proceedings against R&F without first settling the issue as abovementioned. 19. Alpha claimed against R&F in the payment claim relying on the said 5 Invoices for the sum of RM2,214,105.07. 20. Subsequently, the parties have filed the following documents in the CIPAA proceedings: 10 (a) Form 7, Alpha’s Adjudication Claim; (b) Form 8, R&F’s Adjudication Response; and (c) Form 11 (a wrong form), allegedly Aplha’s Adjudication Reply. 21. R&F had via its letter dated 19-10-2021 written to the Adjudicator, after 15 receipt of the Adjudication Reply, highlighting inter alia that exhibits 36, 39 & 40 were incomplete and invalid without R&F’s endorsement. However, the Adjudicator via his letter dated 31-10-2021 replied to R&F that the contents therein the said letter dated 19-10-2021 would not be considered in the CIPAA proceedings. 20 22. Adjudication Decision was made against R&F on 15-12-2021.” The Law 25 [5] The Construction Industry Payment and Adjudication Act 2012 in section 15 states: “15. Improperly procured adjudication decision An aggrieved party may apply to the High Court to set aside an 30 adjudication decision on one or more of the following grounds: Page 7 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w (a) the adjudication decision was improperly procured through fraud or bribery; (b) there has been a denial of natural justice; (c) the adjudicator has not acted independently or impartially; or 5 (d) the adjudicator has acted in excess of his jurisdiction.” [6] In the book Construction Adjudication in Malaysia Second Edition by Lam Wai Loon & Ivan YF Loo it says: 10 “There is no provision in the CIPA Act 2012 which allows for an appeal from an adjudication decision. However, the Federal Court in View Esteem Sdn Bhd v Bina Puri Holdings Berhad held that in a case where the adjudicator has no jurisdiction at all, in the sense that the CIPA Act 15 2012 does not apply to the dispute referred to him, then section 15 would not apply. In that instance, the objector may have to seek from the High Court a declaratory order that the adjudicator has no jurisdiction (if the adjudication is still ongoing), or for an order that the adjudication decision (if the decision has been made) be declared as null and void and hence 20 unenforceable, or that the decision be set aside. The courts will not review the adjudication decisions on their merits. Per Wong Dak Wah JCA in the case of ACFM Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd and another appeal, “[i] In the context 25 of section 15 of the [Act], 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.” Similarly in Sherwood & Casson Ltd v MacKenzie, HHJ Thornton QC held that an adjudicator’s decision whose validity is challenged as to its factual or 30 legal conclusions or as to procedural error remains a decision that is both enforceable and should be enforced. Even if such error is disclosed Page 8 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w by the reasons in the decision, it will still not ordinarily be capable of being challenged and should, ordinarily, still be enforced. Thus, in VVO Construction Sdn Bhd v Bina MYK Sdn Bhd and another case, the learned judge held that an application seeking an appeal 5 against the adjudication decision made under Order 55 of the Rules of Court 2012 was flawed. However, given that the applicant did refer to section 15 of the CIPA Act 2012 in its intitulement to the Originating Summons filed and that the application raised an issue of grave importance on the question of whether the learned adjudicator may 10 proceed to hear and make a decision in an adjudication brought primarily by a bankrupt under the shell of a company, the Court, with the consent of the parties, proceeded to hear the Originating Summons filed as if it is an application under section 15 of the CIPA Act 2012 to set aside the adjudication decision. 15 WHO IS AN AGGRIEVED PARTY Any party who is aggrieved by the decision of an adjudicator may apply to the High Court to set aside the decision on any of the stipulated 20 grounds. The High Court in the case of Syarikat Bina Darul Aman Berhad & Anor v Government of Malaysia, held that an unpaid party or non-paying party can be an aggrieved party in the context of section 15 of the CIPA Act 2012, albeit generally it is the non-paying party who is required under an adjudication decision to make a payment to the unpaid 25 party, who would move an application to set aside the adjudication decision. In coming to this conclusion, Lee Swee Seng J held that the expression “aggrieved party” must be given its plain and ordinary meaning, that is to say a party who is aggrieved so long as the party has been adversely affected or wrongfully deprived of its right to have its 30 entitlement validly and justly decided pursuant to the CIPA Act 2012. Page 9 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w BURDEN OF PROOF An applicant seeking to set aside an adjudication decision under any of the grounds specified in section 15 of the Act is required to establish his case on a balance of probabilities. In Vinod Kumar Ramgopal Didwania 5 v Hauslab Design & Build Pte Ltd, the Singapore Chief Justice, Sundaresh Menon CJ, rejected the appellant’s argument that the applicant in a setting aside application would be required to merely show an arguable case for any of the recognised grounds for setting aside. In coming to this decision, Menon CJ distinguished the position in the 10 United Kingdom from the setting aside scheme in the Singapore adjudication regime. In the United Kingdom, an adjudication decision is enforced by way of a Writ Action, and is usually followed by a summary judgment application, in which case the applicant is merely required to show an arguable case of the ground advanced to defeat the summary 15 judgment application, and if it is successful, that issue would then go to trial. However, in the context of an adjudication regime which provides for a setting aside procedure, say for instance, in an application for setting aside which is made on the ground that the adjudicator had acted in excess of his jurisdiction, if the answer is that the adjudicator 20 exceeded his jurisdiction, the matter ends there unless a fresh application can be brought. As such, in an application for setting aside, the applicant would be required to prove his case on a balance of probabilities. Menon CJ said that: 25 [I] If adjudication determinations are liable to be set aside more easily because the threshold is lower than proof on a balance of probabilities, the purpose of the Act may be severely undermined, since contractors will often be left to await till the very end, after the dispute is finally 30 determined at trial, adjudication, or some other dispute resolution proceeding … before receiving payment. Page 10 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w STATUS OF AN ADJUDICATION DECISION An adjudication decision is a decision of the rights of the parties in an adjudication reference, which is binding and enforceable pending the final determination of the said rights by arbitration or litigation, or unless 5 settled by agreement. Nevertheless, the adjudication decision or any findings made by the adjudicator in the adjudication proceedings is not binding upon the arbitral tribunal or the court which ultimately and finally determines the dispute between the parties. 10 In Sherwood & Casson Ltd v MacKenzie, HHJ Thornton QC summarised as follows the principles on the appropriate approach to be taken by the courts with regard to an adjudication decision in the United Kingdom, which generally have also been accepted and adopted by the courts in Malaysia: 15 (a) A decision of an adjudicator whose validity is challenged as to its factual or legal conclusions or as to procedural error remains a decision that is both enforceable and should be enforced: see Tidalmarine 20 Engineering Sdn Bhd v Conlay Construction Sdn Bhd and another appeal. In Tidalmarine Engineering, the respondent argued that the adjudicator’s failure to order for submission of case authorities and written submissions in respect of a jurisdictional point amounted to a breach of 25 nature justice. In rejecting the argument, Lee Swee Seng J held that since the adjudicator has the power to “establish the procedures in conducting the adjudication proceedings including limiting the submission of documents by the parties”, there was no breach of the 30 principles of natural justice when the adjudicator exercised the power in declining to allow the filing of written submissions and bundle of authorities as requested by the respondent. Page 11 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w (b) A decision that is erroneous, even if the error is disclosed by the reasons, will still not ordinarily be capable of being challenged and should, ordinarily, still be enforced. However, it has to be noted that in View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd, the Federal Court 5 held that the court may exercise its discretion under section 16 to stay the adjudication decision pending the determination of the subject matter of the claim by arbitration or court, if it is shown that there are clear errors in the adjudication decision. 10 (c) A decision may be challenged on the ground that the adjudicator was not empowered by the Act to make the decision because there was no underlying construction contract between the parties or because he had gone 15 outside his terms of reference: see View Esteem Sdn Bhd v Bina Puri Holdings Berhad. (d) The adjudication is intended to be a speedy process in which mistakes will inevitably occur. Thus, the 20 court should guard against characterising a mistaken answer to an issue, which is within an adjudicator’s jurisdiction, as being an excess of jurisdiction. Furthermore, the court should give a fair, natural and sensible interpretation to the decision in the light of the 25 disputes that are the subject of the reference: see SQA Builders Sdn Bhd v Luxor YRM Sdn Bhd and another case. (e) An issue as to whether a construction contract ever came into existence, which is one challenging the 30 jurisdiction of the adjudicator, so long as it is reasonably and clearly raised, must be determined by the court on the balance of probabilities: see for instance, VVO Construction Sdn Bhd v Bina MYK Sdn Bhd and another Page 12 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w case, where the High Court set aside the adjudication decision on the ground that the decision was given in excess of jurisdiction. In this case, the learned High Court judge, found that the assignment under which the claimant claimed to have been conferred the right to sue the debtor 5 under a construction contract did not satisfy the strict requirements of a valid absolute assignment under section 4(3) of the Civil Law Act 1956 because the assignment was not in writing and no notice of such assignment had been given to the debtor. It was held that therefore, there 10 was no written construction contract between the alleged assignee and the debtor and that the Payment Claim served by the said assignee was invalid.” Enforcement of adjudication decision 15 [7] In the above mentioned book it is stated further that: “The winner in an adjudication who is not paid the whole or any part of the adjudicated amount may exercise one or all of the remedies provided 20 in Part IV of the CIPA Act 2012, whether concurrently or one after another. He may enforce the adjudication decision by applying to the High Court for an order to enforce the adjudication decision as if it is a judgment or order of the High Court pursuant to section 28 of the CIPA Act 2012. Once the order is made, it may be executed in accordance 25 with the rules on execution of orders or judgments of the High Court. Further, under section 29, the winner may also suspend performance or reduce the rate of progress of the construction work or construction consultancy services under a construction contract if the adjudicated amount has not been paid fully or partly after the adjudication decision 30 is served on the losing party, and after the expiry of 14 working days from the date of service of a notice informing the losing party of his intention to suspend the performance or reduce the rate of progress of Page 13 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w performance of the work. In addition, under section 30, the winner may seek direct payment from the principal by serving on the principal a written request for payment of the adjudicated amount. Unless the principal can show that the adjudication amount has already been paid by the loser to the winner, or that there is actually no money due or 5 payable by him to the loser at the time of receipt of such request for payment, the principal will be obliged to pay the adjudicated amount to the winner.” [8] As to the enforcement of an adjudication decision section 28 of 10 the Construction Industry Payment and Adjudication Act 2012 states as follows: “28. Enforcement of adjudication decision as judgment 15 (1) A party may enforce an adjudication decision by applying to the High Court for an order to enforce the adjudication decision as if it is a judgment or order of the High Court. (2) The High Court may make an order in respect of the adjudication 20 decision either wholly or partly and may make an order in respect of interest on the adjudicated amount payable. (3) The order made under subsection (2) may be executed in accordance with the rules on execution of the orders or judgment of the High Court.” 25 [9] Again, in the above mentioned book it is stated that: “Section 28(1) of the CIPA Act 2012 permits the winner in an adjudication to apply to the High Court for an order to enforce the adjudication 30 decision as if it is a judgment or order of the High Court. There is no provision stipulating the time period within which an application to Page 14 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w enforce the adjudication decision is to be made, nor the procedure for making such an application. According to the decision in Jim Ennis Construction Ltd v Premier Asphalt Ltd, the obligation to comply with the adjudicator’s decision effectually gives rise to a new cause of action. It therefore follows that the statutory limitation period for the enforcement 5 of an adjudication decision is to run from the date of the adjudication decision.” [10] Based on what has been adumbrated above I dismissed R&F’s application for setting aside the adjudication decision and allowed Alpha’s 10 application to enforce the same. [11] Ergo cadit quaestio. Dated 23rd February 2023 15 -Signed- ………………………….. (ASLAM B ZAINUDDIN) Judge 20 High Court in Malaya Johor Bahru 25 30 Note: Grounds of judgment is subject to correction of typographical errors, grammatical mistakes and editorial formatting, if any. 35 Page 15 of 15 MTJB-JA-24C-6-03-2022/aa/r&f/az/r/s150223/3288-w COUNSEL For the Plaintiff: Ee Kah Fuk 5 (Marcus Chong Chao Shern with him) Messrs. K.F. Ee & Co Advocates & Solicitors N-1-2, Pusat Perdagangan Kuchai Jalan 1/27 Off Jalan Kuchai Lama 10 58200 Kuala Lumpur For the Defendant: 15 Wong Yen Chnan Messrs Han & Partners Advocates & Solicitors 10-13 Austin 18 Jalan Austin Perdana 3 20 Taman Austin Perdana 81100 Johor Bahru 25