Samsung C&T Corporation UEM Construction JV Sdn Bhd v Eversendai Constructions (M) Sdn Bhd (WA-24C-174-09/2022)

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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR ORIGINATING SUMMONS NO. WA-24C-174-09/2022 BETWEEN SAMSUNG C & T CORPORATION UEM CONSTRUCTION JV SDN BHD PLAINTIFF AND EVERSENDAI CONSTRUCTIONS (M) SDN BHD DEFENDANT GROUNDS OF DECISION Introduction [1] This is an application for stay of an adjudication decision pending the disposal of the setting-aside application instituted under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”). [2] The Plaintiff is a joint venture private limited company of Samsung C & T Corporation of South Korea and UEM Construction Sdn Bhd of Malaysia and involved in the construction contracting business. [3] The Defendant is a private limited company involved in the civil engineering and general contracting business. Background Facts [4] The Plaintiff is the main contractor appointed by PNB Merdeka Ventures Sdn Bhd (“Employer”) for the construction and completion of the “Cadangan Membina 1 Blok Bangunan Perdagangan Bercampur 118 Tingkat, di Atas Lot 795, 796, 799, 800 & Sebahagian Lot 746 dan Besmen Letak Kereta di Atas Lot 354, 355, & 742 Mukim Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan” (“Project”). This Project is commonly known as the Warisan Merdeka Tower (KL118). [5] By a sub-contract dated 1 May 2016 (“Contract”), the Plaintiff appointed the Defendant to carry out and complete the design, supply and installation of structural steel and decks works portion of the Project (“Works”). [6] There were disputes and differences that arose between the parties in relation to the carrying out of the Works particularly on the Defendant’s non-receipt of payment and the Defendant on 7 April 2022 commenced adjudication proceedings against the Plaintiff under the CIPAA. [7] The adjudicator appointed by the Asian International Arbitration Centre on 18 August 2022 after having duly heard the parties made his decision in favour of the Defendant by ordering as follows:

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(1) the Respondent shall pay the Claimant the sum of RM25,457,990.03;

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(2) the Respondent shall pay the Claimant simple interest at a rate of 6.4% per annum on the sum of RM25,457,990.03 from 21.3.2022 until full payment by the Respondent;

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(3) the Respondent shall pay costs to the Claimant as follows:

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(ii) adjudicator’s fee of RM94,991.90; and

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(iii) AIAC administrative fee of RM18,998.38

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(4) all such payments in sub-paragraphs (1), (2), (3) above be made to the claimant by way of bank draft within thirty (30) days from the date of delivery of this adjudication decision on the Respondent;

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(5) all other reliefs and remedies claimed by the parties are dismissed. (“Decision”) [8] Hence, the Defendant by letter dated 24 August 2022 sought for direct payment from the Employer pursuant to s. 30 of the CIPAA and the Employer’s contract administrator has replied the Employer will pay directly to the Defendant and set off the same from any money due and payable to the Plaintiff. Additionally, the Defendant has also intimated that it will suspend or slow down any remaining Works to be carried out. [9] Furthermore, the Defendant on 25 August 2022, filed its application to enforce the Decision. [10] The Plaintiff then on 8 September 2022 filed its application to set aside the Decision (“Enclosure 1”) as well as this application for an interim stay pending the disposal of the setting aside application pursuant to s. 16(1)(a) of the CIPAA. [11] The affidavits which were filed for purposes of this Application are as follows:

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(ii) Plaintiff’s supplementary affidavit (1) affirmed by Roslan bin Ibrahim dated 13 September 2022;

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(iii) Defendant’s affidavit in reply affirmed by Nathan a/l Elumalay dated 13 September 2022;

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(iv) Plaintiff’s affidavit in reply affirmed by Datuk Wan Nor Azman bin Wan Salleh dated 23 September 2022; and

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(1) A party may apply to the High Court for a stay of an adjudication decision in the following circumstances:

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(2) The High Court may grant a stay of the adjudication decision or order the adjudicated amount or part of it to be deposited with the Director of the KLRCA or make any other order as it thinks fit. [16] The Plaintiff contended it has met the threshold requirement in making the Application by reason that Enclosure 1 to set aside the Decision is subsisting. This is not disputed by the Defendant. [17] Albeit most s. 16(1)(a) stay applications are mostly allowed by me by consent of the parties, the Defendant here opposed it because the Decision involved a substantial amount needed to meet the Defendant’s cash flow following Kayangan Kemas Sdn Bhd v TMT Solutions Sdn Bhd [2019] MLJU 1277. Simply put, the Defendant should not be deprived of the fruits of the adjudication. [18] The Plaintiff however contended that the Application must be allowed because the justice of the case warrants the grant of the stay in the circumstances here based on View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2019] 5 CLJ 479 FC. In this respect, the Plaintiff contended that the Defendant is presently of poor financial health because it made a loss of RM146.06 million in 2021 and RM29.124 million in the first quarter of 2022 and would hence not be able to repay the adjudicated sum paid over to the Defendant if the Plaintiff’s setting aside application is subsequently allowed. This is particularly so if and when the Employer pays directly to the Defendant pursuant to s. 30 of the CIPAA as sought. [19] Moreover, the Plaintiff has on 10 August 2022 demanded upon the performance bond furnished by the Defendant pursuant to the Contract by reason of the Defendant’s breaches committed thereunder but the Defendant has presently obtained an interlocutory injunction against the Plaintiff’s receipt of the performance bond money in KL Originating Summons Proceeding no. WA-24C-156-08/2022. There is hence prejudice suffered by the Plaintiff occasioned by the Defendant’s conduct. [20] Thus and also as a matter of law in that the CIPAA does not provide as a pre-requisite for mandatory payment of the adjudicated sums into court upon the filing of a setting-aside application unlike the equivalent statutes in the Singapore Building and Construction Industry Security of Payment Act 2004 as well as the New South Wales Building and Construction Industry Security of Payment 1999, the Plaintiff contended that an unconditional stay is justified to be ordered here. [21] From my reading of s.16(1)(a) and (2) of the CIPAA jointly, it is however plain that the grant of the stay is discretionary and may be subject to conditions as the court deems fit. It involves a balancing exercise of the parties’ competing commercial interest. [22] From the evidence adduced and contentions advanced by the parties, I find that the present circumstances as a whole militate the grant of an unconditional stay. I am guided here by the principles elucidated by Abdul Hamid Mohamad JCA (later CJ) in Ming Ann Holdings Sdn Bhd v Danaharta Urus Sdn Bhd [2002] 3 MLJ 49 CA: “It appears to me that it is a unanimous view that to grant or not to grant a stay of execution pending appeal is an exercise of discretion by the court. Of course some judges merely use the word 'discretion', some use the words 'unqualified discretion' and some use the words 'absolute and unfettered discretion'. To me that does not really matter. The point is that, it is an exercise of the discretion by the court on established principles. The approach taken by most judges appears to be that a successful litigant should not be deprived of the fruits of a judgment obtained in his favour, unless there are special circumstances (or special grounds) that justify a stay of execution to be granted. The weight of authorities appears to me to say that the special circumstances must be special, not ordinary, common or usual circumstances and that go to the execution of the judgment and not to the validity or correctness of the judgment (or merits of the appeal). Many judges considered the question whether the appeal, if successful, is rendered nugatory under the head of special circumstances. (Sometimes, the phrase used is whether the appellant, if successful, can be restored to its former position). The general view appears to be that that is the more, if not the most, important factor of all. Of course, no one ever attempts to define special circumstances, for good reasons. It is also a common view that it depends on the facts of a particular case. Thus, 'business realities' has been taken into consideration, I believe under this head. It is a common view that merits of the appeal (or correctness or validity of the judgment) is not special circumstances. Some judges do not use the term 'special circumstances'…” (emphasis added) In this regard, the Plaintiff has not satisfied me by demonstrating that there are special circumstances to justify an unconditional stay as so sought by the Plaintiff. [23] Nonetheless after weighing the rival contentions of the parties, I find that justice requires the ordering of a conditional stay that the principal adjudicated sum be parked with a stakeholder pending the disposal of Enclosure 1 because this is fair and will not prejudice either party. The Plaintiff has unequivocally intimated to me on its ability to pay the adjudicated sum as ordered in the Decision. Consequently and in view of the dominant statutory purpose of the CIPAA to promote and instil financial discipline in the Malaysian construction industry, the losing non-paying party to an adjudication proceedings who challenges the adjudication decision must hence “Put the money where its mouth is”! [24] That notwithstanding, I am further mindful of the Plaintiff’s grievances that the Defendant has been in breach of the Contract which justified the alleged set off of the Plaintiff to deny payment to the Defendant. However, these grievances have all been already adjudicated by the adjudicator and the adjudication decision is binding and must be given effect as provided in s. 13 of the CIPAA. I am also aware of the Plaintiff’s over-zealous conduct in making a call on the performance bond furnished by the Defendant substantially on the same pretext of the aforesaid grievances with the Defendant a week before the making of the adjudication decision. This smacks of lack of bona fides on the part of the Plaintiff to me. If the performance bond is paid out, the Defendant would further suffer a double-whammy particularly if and when the Plaintiff is granted unconditional stay as sought. [25] Nonetheless I am concerned too that if a stay is not granted at all to the Plaintiff, the Employer will pay directly to the Defendant the adjudicated sum ordered in the Decision pursuant to s.30 of the CIPAA in which the Plaintiff will have no recourse against the Employer for its recovery. Conclusion [26] It is for the foregoing reasons, that I made my decision as so ordered. Dated this 29 September 2022 t.t. LIM CHONG FONG JUDGE CONSTRUCTION COURT 1 HIGH COURT KUALA LUMPUR COUNSEL FOR THE PLAINTIFF: KUHENDRAN THANAPALASINGAM (JASMEET KAUR AND DANIEL LAU HSIEN YANG WITH HIM) SOLICITORS FOR THE PLAINTIFF: ZUL RAFIQUE & PARTNERS COUNSEL FOR THE DEFENDANT: JAMES MONTERO (VISHAL KUMAR AND QUEENY BAN WITH HIM) SOLICITORS OF THE DEFENDANT: JAMES MONTERO