Tan Eng Han Construction Sdn Bhd v Sistem Duta Sdn Bhd (WA-24C-170-10/2017)

It is set aside by the High Court on any of the grounds referred to in section 15;

The subject matter of the decision is settled by a written agreement between the parties; or 12

The dispute is finally decided by arbitration or the court.” [36] Flowing from and following the binding effect of an Adjudication Decision and the refusal of the Defendant as Respondent in the Adjudications to make payments as directed in the Adjudication Decisions, the Plaintiff had availed themselves of the provision of section 28(1) of the CIPAA to enforce the Adjudication Decisions as if they are the Judgments or Orders of the High Court. Section 28 of the CIPAA reads as follows: “28. Enforcement of adjudication decision as judgment

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.

The High Court may make an order in respect of the adjudication decision either wholly or partly and may make an order in respect of interest on the adjudicated amount payable.

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.” [37] The concept of Interim finality is what characterizes an Adjudication Decision in the scheme of Statutory Adjudication as practiced in many Commonwealth jurisdictions. In the UK where Statutory Adjudication was 13 first introduced, it was observed as follows in Carillion Construction Limited v Devonport Royal Dockyard Limited [2005] EWCA civ 1358, by the English Court of Appeal: “85. The objective which underlies the Act and the statutory scheme requires the Courts to respect and enforce the adjudicator’s decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should only be in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which (contrary to the DML’s outline submissions, to which we have referred in paragraph 66 of this judgment) may, indeed aptly be described as simply scrabbling around to find some argument, however tenuous, to resist payment.

It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator’s reasons and identify points upon which to present a challenge under the labels of ‘excess of jurisdiction’ or ‘breach of natural justice’. It must be kept in mind that the majority of the adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not 14 more likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case. Parliament may be taken to have recognized that, in the absence of an interim solution, the contractor (or sub-contractor) or his subcontractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting legitimate cash-flow requirements of contractors and their subcontractors. The need to have the ‘right’ answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions. Indeed, it may be open to doubt whether Parliament contemplated that disputes involving difficult questions of law would be referred to adjudication under the statutory scheme. We have every sympathy for an adjudicator faced with the need to reach a decision in a case like the present.

In short, in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator. If he does not accept the adjudicator’s decision as 15 correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position. To seek to challenge the adjudicator’s decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead to a substantial waste of time and expense as, we suspect, the costs incurred in the present case will demonstrate only too clearly.” (emphasis added) [38] In a case where there is no application to set aside an Adjudication Decision, the Court upon being asked to enforce the Adjudication Decision would ordinarily grant an order in terms of the application to enforce unless there is patent non-compliance with the requirements of the CIPAA such as the following:

That the dispute is not one within the core or original jurisdiction of the Adjudicator;

That the Decision is a void Decision under section 12(3) of the CIPAA being made outside the period specified in section 12(2);

That the Decision is not in writing and does not contain reasons for such Decision under section 12(4) of the CIPAA;

That the Decision has not determined the adjudicated amount and the time and manner the adjudicated amount is payable. [39] If a dispute referred to Adjudication is clearly one in which the Adjudicator would have no jurisdiction under the CIPAA, then the High Court in hearing the enforcement application would dismiss the application. [40] The Federal Court in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 alluded to the different sense in which the word “jurisdiction” may be used in the context of the CIPAA as follows: [16] The term “jurisdiction” under CIPAA is not used in the administrative or public law sense but in relation to matters within the scope of CIPAA. On this point, in Terminal Perintis Sdn. Bhd. v. Tan Ngee Hong Construction Sdn. Bhd. & Anor. [2017] MLJU 242, Lee Swee Seng J. observed as follows (at [70]): “In the application of our CIPAA, we are free from the shackles of the language of administrative law and judicial review. The word ‘jurisdiction’ is used in section 15(d) as in the Adjudicator having acted in ‘excess of his jurisdiction’ as a ground for setting aside an Adjudication Decision. It is also used in section 27(1) with respect to an Adjudicator’s jurisdiction being limited to the matters raised in the Payment Claim and the Payment Response. Then there is a reference to it in section 27(2) with 17 respect to extending his jurisdiction by way of agreement in writing to deal with matters not specifically raised in the Payment Claim and Payment Response. Finally there is the reference to a ‘jurisdictional’ challenge, which when raised, does not prevent the Adjudicator from proceeding and completing the Adjudication without prejudice to the rights of any party to set it aside under section 15 or to oppose its enforcement under section 28 … … Issues as to whether there is a valid cause of action, does not go towards jurisdiction but rather to the merits of the claim…” [17] The learned judge also made note of the various types of jurisdictional complaints within CIPAA which may be categorized as core jurisdiction, competence jurisdiction and contingent jurisdiction. The common feature in all of them is the presupposition that CIPAA applies to determine if the adjudicator had kept within his jurisdiction.” (emphasis added) [41] Even though this application is not being opposed this Court would still be concerned that the matter decided upon by the Adjudicator must be one ostensibly falling within the core or original jurisdiction of the CIPAA. 18 [42] The reason is obvious enough: if the Adjudicator has no jurisdiction over the dispute then the Decision given is null and void and unenforceable. [43] The Court’s chief concern when presented with an enforcement application would be to ask if the matter adjudicated upon is one falling within the core or original jurisdiction of the CIPAA. It is within the core jurisdiction of the CIPAA if it is a matter falling with the Application provision under section 2 and that it does not fall within the Non-application provision under section 3 and further that it is not falling within the exemption provision under section 40 of the CIPAA and the Exemption Order made thereunder. [44] Here the “Construction Contract” is in writing and is wholly carried out in Malaysia as required under section 2 of the CIPAA and it is with respect to “construction work” as defined in section 4 of the CIPAA being in this case the “Construction, Completion, Testing And Commissioning of Building Works” of some shop lots in Pahang. Under section 4 of the CIPAA “construction work” means the construction of (a) any building. [45] Moreover the construction work does not come within the exempted or non-application provision of section 3 of the CIPAA in that it is not a construction contract entered into by a natural person for any construction work in respect of any building which is less than four storey’s high and which is wholly intended for his occupation. 19 [46] Neither does it come within the exemption envisaged in section 40 of the CIPAA where the Minister may, upon considering the recommendation of the KLRCA, by order published in the Gazette, exempt— a) Any person or class of persons; or b) Any contract, matter or transaction or any class thereof, from all or any of the provisions of this Act, subject to such terms and conditions as may be prescribed. [47] Under the Construction Industry Payment and Adjudication (Exemption) Order 2014 a Government Construction Contract as specified in the First Schedule is exempt from the application of the CIPAA: FIRST SCHEDULE A contract for any construction works—

that is carried out urgently and without delay due to natural disaster, flood, landslide, ground subsidence, fire and other emergency and unforeseen circumstances;

that relates to national security or security related facilities which includes the construction of military and police facilities, military bases and camps, prison and detention camps, power plant and water treatment plant. [48] I am more than satisfied that the disputes and matters decided by the 2 Adjudicators fall within the core jurisdiction of the Adjudicators as provided for under the CIPAA. 20 [49] Generally for matters involving the competence jurisdiction of the Adjudicator, it would be for the party challenging the Decision to raise it for the Adjudicator would have complied with section 24 of the CIPAA by making a declaration as to the matters provided therein as follows that:

There is no conflict of interest in respect of his appointment;

He shall act independently, impartially and in a timely manner and avoid incurring unnecessary expense;

He shall comply with the principles of natural justice; and

There are no circumstances likely to give rise to justifiable doubts as to the adjudicator’s impartiality and independence. [50] Likewise, where contingent jurisdiction is concerned as in the Adjudicator would have jurisdiction if for example the procedure in the CIPAA is first complied with as in the service of the Payment Claim on the Non-Paying Party, these are matters which would normally be raised at the instance of the party challenging the Adjudication Decision. [51] With respect to the time frame for making decision, I am more than satisfied that the time period under section 12(2) of the CIPAA has been complied with as follows:

Subject to subsection 19(5), the adjudicator shall decide the dispute and deliver the adjudication decision within— 21

Forty-five working days from the service of the adjudication response or reply to the adjudication response, whichever is later;

Forty-five working days from the expiry of the period prescribed for the service of the adjudication response if no adjudication response is received; or

Such further time as agreed to by the parties. [52] I am further satisfied that the Adjudication Decisions of both the Adjudicators are in writing and that they both contain reasons for the Decisions arrived at as required under section 12(4) of the CIPAA. [53] Section 12(5) of the CIPAA has also been complied with as the adjudicated amount had been clearly stated and the time and manner the adjudicated amount is payable. [54] This is not a case where the Court should enforce less than the amount adjudicated in the 2 Adjudication Decisions under section 28(2) of the CIPAA. That discretion is exercised only when there is clear, obvious and unequivocal error in the Adjudication Decision and generally if a stay is allowed for part of the sum adjudicated and awarded then correspondingly the enforcement of the Adjudicated Decision would be for the part not stayed. Likewise if there have been payments made after the Adjudication Decision was made. However these are not borne out by the factual matrix of these 2 Adjudication Decisions. 22 Pronouncement [55] Therefore in the absence of a challenge or objection to the application for enforcement of the 2 Adjudication Decisions and having satisfied myself that the Adjudicators ostensibly have jurisdiction to determine the disputes that had arisen, I had allowed the enforcement of the 2 Adjudication Decisions with costs of RM1,000.00. Dated: 29 March 2018. - signed - Y.A. LEE SWEE SENG Judge Construction Court Kuala Lumpur For the Plaintiff : Siti Azlina (Messrs Chamber of Nur Hamizah Hamzah) Date of Decision: 20 November 2017.