Tri Pacific Engineering Sdn Bhd v Kl Eco City Sdn Bhd (W-02(C)(A)-1102-07/2024)

In the appeal before this Court, the Appellant, Tri Pacific Engineering Sdn Bhd (Plaintiff) had commenced in the High Court a section 30 Construction Industry Payment and Adjudication Act 2012 (CIPAA) proceedings against KL Eco City Sdn Bhd (Defendant) as principal for direct payment for the total Adjudicated Sum of RM1,191,624.42 to be paid to the Plaintiff pursuant to an Adjudication Decision dated 8.5.2023 (Adjudication Decision) in their favour.

We will refer the parties hereto as they were referred to in the High Court proceedings for the purposes of convenience.

The Plaintiff was appointed on 5.6.2015 by the Main Contractor, one Ireka Engineering & Construction Sdn Bhd (Ireka) as the Sub Contractor for the supply delivery, installation curtain walling, aluminium and glazing works in a Project (Sub Contract) known as parcel C, Office Tower 2, Lot 5,16,29,30,42 & 215 on Government Land on Lot 3345,39,237,160 & 238 and Government Land at lot 95A & 98 Kampung Haji Abdullah Hukum, Jalan Bangsar, Wilayah Persekutuan (Project) which was also known as the OT2 Contract.

The Plaintiff alleges that it had completed the Works under the Sub Contract but Ireka had failed to pay the payment due under the Sub Contract between the said parties

Subsequently the Plaintiff had initiated Adjudication Proceedings under CIPAA against Ireka but before the conclusion of the same, the Plaintiff had received the sum of RM532,940.70 from Ireka.

However, on 8.5.2023 the Adjudicator therein had pronounced the Adjudication Decision (Adjudication Decision), wherein Ireka was ordered to pay the Plaintiff the Adjudicated Sum (Adjudicated Sum) consisting of:

1 the adjudication amount of RM1,531,594.35 (Principal Sum)

2 interest at the rate of 6.4% per annum calculated from 22.5.2023 until the Principal Sum above was settled

3 adjudication proceedings costs of RM32,681.04; and

4 claim preparation and incidental charges cost of RM30,000.00

On 9.5.2023 (First Notice) and 23.5.2023 (Second Notice) the Plaintiff had instructed MAC Construction Consultant (MAC) to send a notice to apply for direct payment to the Defendant under s. 30 CIPAA (Direct Payment Demand) for the Adjudicated Sum.

On 25.5.2023 the Defendant then issued a letter under s. 30(2) CIPAA requesting Ireka to show proof within 10 working days of payment to the Plaintiff under the Adjudication Proceedings.

Just after this, the Final Certificate was issued on 10.6.2023 by the Project Architects, GDP Architects Sdn Bhd to the Defendant.

The Defendant via its letter dated 30.6.2023 then sought from the Plaintiff a period of 14 days in which to reply to the Direct Payment Demand on the ground that it was reviewing the claim.

On 30.6.2023 itself, the Plaintiff agreed to the 14 day period and reserved its rights to object to any deduction of the direct payment.

A final extension up to 31.7.2023 was sought by the Defendant to review the Plaintiff's claim and the Defendant had expressly stated therein that the direct payment should not include interest and adjudication costs. Only the final extension was agreed upon by the Plaintiff but the Defendant's request that the direct payment should not include interest and adjudication costs was rejected by them.

The Defendant then made direct payment of RM998,653.66 to the Plaintiff via a cheque dated 25.7.2023 and enclosed the said cheque by way of a letter dated 31.7.2023 to MAC, which letter inter alia stated that the direct payment under s. 30 CIPAA should not include late payment interest and adjudication costs and that the Plaintiff shall have no further claim against the Defendant upon the acceptance of the cheque by the Plaintiff.

The above conditions were protested to by the Plaintiff via MAC's letter dated 1.8.2023 and in the same letter the Plaintiff had also stated that the sum received was to be treated as part payment of the Adjudicated Sum and demanded for the balance adjudicated sum of RM192,970.76 (Balance Adjudicated Sum). Apart from this the Plaintiff had also protested the manner in which the Defendants letter of 31.7.2023 was issued.

The Defendant however was unwilling to pay the Balance Adjudicated Sum and on 11.9.2023, the Plaintiff instructed its lawyers, Messrs Nga Chambers (Plaintiff's Lawyers) to once again send a direct payment notice under s. 30 CIPAA on 11.9.2023 demanding from the Defendant the Balance Adjudicated Sum.

The Defendant than issued a notice to Ireka to show proof of payment dated 21.9.2023 of the Balance Adjudicated Sum to the Plaintiff failing which the Defendant would make direct payment of the sum of RM87,916.92 after the expiry of 10 working days pursuant to s. 30(2) CIPAA.

The Plaintiff's lawyer's via its letter dated 22.9.2023 responded that as the Defendant had previously issued a notice under s. 30(2) CIPAA on 25.5.2023, there was no requirement under s. 30 CIPAA for the Defendant to issue a fresh notice. The said Plaintiff's lawyer's letter also requested that the Defendant disclose all payment records relating to Ireka (the Main Contractor) with regards the alleged payment of RM87,916.92.

Thereafter by the Defendant's solicitors letter of 22.9.2023, the Defendant had stated that at the time the Direct Payment Demand was made, only the retention sum of RM998,653.66 was due and payable to the Main Contractor and that in view of the position taken in the Plaintiff's lawyers letter dated 22.9.2023, there is no further sum due or payable by the Defendant to Ireka pursuant to the Second Notice.

Subsequently, the Plaintiff then filed an Originating Summons in the High Court on 30.1.2024 (OS) and claimed from the Defendant as principal under s 30 CIPPA for amongst others: a. the Balance Adjudicated Sum of RM192,970.76 ; and b. an order that in the event any payment was made by the Defendant to the Main Contractor after the Plaintiff's Direct Payment Demand, the Defendant should make the same payment again to the Plaintiff.

In the OS, the Defendant had filed an Affidavit In Reply dated 1.3.2024 (AIR) and referenced a Settlement Agreement which was duly stamped on 27.2.2023 between the Defendant and Ireka, the Main Contractor (Settlement Agreement).

At this juncture, it would be convenient for this Court to refer to s. 30 of CIPAA which provides: "(1) If a party against whom an adjudication decision was made fails to make payment of the adjudicated amount, the party who obtained the adjudication decision in his favour may make a written request for payment of the adjudicated amount direct from the principal of the party against whom the adjudication decision is made.

Upon receipt of the written request under subsection (1), the principal shall serve a notice in writing on the party against whom the adjudication decision was made to show proof of payment and to state that direct payment would be made after the expiry of ten working days of the service of the notice.

in the absence of proof of payment requested under subsection (2), the principal shall pay the adjudicated amount to the party who obtained the adjudication decision in his favour.

The principal may recover the amount paid under subsection (3) as a debt or set off the same from any money due or payable by the principal to the party against whom the adjudication decision was made.

This section shall only be invoked if money is due or payable by the principal to the party against whom the adjudication decision was made at the time of the receipt of the request under subsection (1)."

It has been widely accepted that the case of Cabnet Systems (M) Sdn Bhd v Dekad Kaliber Sdn Bhd & Anor [2020] MLJU 311 has laid down the conditions which must be fulfilled for an application under sec 30 CIPAA to be satisfied. In that case Wong Kian Kheong J (now JCA) had held, [29] I am of the following view regarding the application of s 30 CIPAA:

a party (X) who has obtained an adjudication decision against another party (Y), may claim for the adjudicated amount from Y's principal (Z) if the following four conditions are satisfied (4 Conditions) -

Y has failed to pay the adjudicated amount to X [please see s 30(1) and (3)CIPAA] （ $ 1^{st} $ Condition);

X has made a written request for Z to pay the adjudicated amount directly to X (X's Written Request) [please refer to s 30(1) CIPAA] ( $ 2^{n d} $ Condition);

there is a sum of money due from Z to Y at the time of Z's receipt of X's Written Request [please see s 30(5) CIPAA] （ $ ^{3 rd} $ Condition); and

Z did not comply with X's Written Request and did not pay the adjudicated amount directly to X (4th Condition); and

if Z pays the adjudicated amount directly to X, by reason of s 30(4) CIPAA, Z may recover the adjudicated amount from Y as a debt or set-off."

As far as the issues before the High Court, we observe that only 2 issues were agreed to be determined by the said Court, namely

1 whether the sum due or payable to Ireka by the Defendant on the date of receipt of the Plaintiff's notice of demand made under s.30 CIPAA is more than RM998,653.65;

2 whether the Defendant is liable under s. 30 CIPAA to pay the Balance Adjudicated Amount of RM192,970.76 to the Plaintiff.

We will, as did the learned High Court Judge (HCJ) deal with both issues together. These issues are also the predominant grounds for the appeal before us.

In dealing with the effect of section 30(5) CIPAA with the words "due or payable", the Plaintiff had submitted that the words "due" means a debt exists whilst "payable" means there is an obligation to pay, and that the debt is payable so long as the obligation to pay arises when properly claimed.

In HSL Ground Engineering Sdn Bhd v Civil Tech Resources Sdn Bhd & anor case [2020] CLJU 526, Lim Chong Fong J (as he then was) had held: [29] It is plainly provided in s. 30(5) of the CIPAA that the Defendant is only obliged to make direct payment if there is money due or payable to CTSB. It is not due and payable. In the English Court of Appeal case of Videocon Global Limited and Another v. Goldman Sachs International [2016] EWCA Civ. 130, it was held that there is a distinction between due and payable in that a debt accrues when it is due whilst an obligation to pay arises when it is payable. They are thus not synonymous and it seems that the former is stricter when compared to the latter. In the English building contract case of Dunlop & Ranken Limited v. Hendell Steel Structures Ltd, Pitchers Ltd (Garnishees) [1957] 1 W.L.R. 1102 on garnishment, it was held that money under a building contract based on the RIBA form is not due for attachment until a certificate by the architect has been issued for that sum of money. It is plain that for purposes of garnishment under the then Rules of the Supreme Court of England, only debt due or accruing debt could be garnished. Thus, in my view, if it is just payable instead of due and payable, it suffices so long there is an obligation or liability to pay upon it being properly claimed."

We respectfully adopt and reiterate the position taken by Lim Chong Fong J (now JCA) in HSL Ground Engineering Sdn Bhd (supra) that so long as there is an obligation or liability to pay upon it being properly claimed, the Defendant is obliged to make direct payment if there is money due or payable under s. 30(5) of CIPAA.

In the Court below, the HCJ had found that the valid Notice of Request for the purpose of s. 30 CIPAA in this matter is the Second Notice i.e. 23.5.2024 as the date when the First Notice was issued by MAC, the time frame for Ireka to pay the Adjudicated Sum to the Plaintiff based on the Adjudication Decision had not expired.

The HCJ had thereafter considered the question of whether there is any money due or payable by the Defendant to Ireka at the time of receipt of the Second Notice and concluded on a balance of probabilities that as at the time of the Second Notice, only the balance retention sum in respect of the Plaintiff's portion of works amounting to RM998,653.66 was due by the Defendant to Ireka (Main Contractor).

In coming to the HCJ's findings she had also referred to the Defendant's Affidavit In Reply and the chronology of events laid down therein and where the Defendant had laid out the payments due and payable under the RT1 and OT2 Contracts which are as follows: RT1OT2Total Outstanding AmountRM5,275,472.29 (refer to the Second Schedule of the Settlement Agreement)RM5,363,389.21 (refer to the breakdown of amount payable to Ireka)RT1-OT2RM97,916.92

Accordingly, it was held by the HCJ that there were insufficient funds to satisfy the Plaintiff's claims under s. 30 CIPAA.

The right to direct payment from the principal arises when there is money due or payable by the principal to the successful party in the Adjudication Proceedings at the time of the receipt of the Direct Payment Demand i.e. at the time of the receipt of the request as per s. 30(5) CIPAA which expressly provides that the "section shall only be invoked if money is due or payable by the principal to the party against whom the adjudication decision was made at the time of the receipt of the request under subsection (1)".

The Plaintiff asserts that the Defendant as principal cannot under the CIPAA regime deduct any payments to the other nominated subcontractors in coming to the amounts due to the Plaintiff under the said section 30 as this will defeat the Plaintiff's statutory right to the said payment awarded under the Adjudication Proceedings.

It was further submitted by the Plaintiff's that the said figure was in fact only in relation to the Plaintiff's portion of works as a Nominated Sub Contractor and was not in relation to the total amount due and payable to the Main Contractor, and this can be gleamed from the Final Certificate dated 10.6.2023 (Architects Final Certificate) issued by the Defendant's architect certifying the amount due and payable by the Defendant to the Main Contractor as RM5,461,068.36 at that material time.

We are unable to agree with the Plaintiff's aforesaid contention as after reviewing the said Final Certificate dated 10.6.2023, we find that the same shows the total amounts due to 12 NSC's of which one is the Plaintiff itself is RM4,345,109.04. We further find that the said document shows that from that figure, only the sum of RM998,653.66 was due to the Plaintiff.

We further find from the facts before us that the Defendant had made a direct payment to the Plaintiff in the sum of RM998,653.66 on 27.5.2023.

We consequently agree with the HCJ on her finding that only the balance retention sum of RM998,653.66 was due and payable by the Defendant to Ireka and that pursuant to the Final Certificate the amount due or payable by the Defendant to Ireka is RM87,916.92 after taking into account the set off or deductions made in accordance with the Settlement Agreement, of which we will deal with in detail later in our grounds.

It is our judgment that the sum of RM87,916.92 would only become due when the Final Certificate was issued on 10.6.2023 i.e. the liability for payment only accrues after the issuance of the Final Payment Certificate, and since the Plaintiff took the position that there was no fresh demand under s. 30 CIPAA after the Second Notice, there was no amount due or payable by the Defendant to Ireka as at May 2023.

The learned author Lim Chong Fong (now JCA) in his text "Law And Practice Of Construction Law In Malaysia", has stated that "A final certificate is a document which certifies the final amount due from the employer to the contractor or from the contractor to the employer in respect of a project. It also certifies that the works were completed in accordance with the requirements of the contract." Further the learned author has also made known that "A final certificate is conclusive with respect to the actual value of works carried out by a contractor in the project as it has been independently valued, quantified and or certified by the consultants."

We also concur with what was stated by the learned Judge Lim Chong Fong in MKP Builders Sdn bhd v Turnpike Synergy Sdn Bhd [2021] MLJU 1502 when His Lordship held, [27] For the avoidance of confusion and in expansion of what was stated in the case of HSL Ground Engineering, I wish to clarify that there must be accrual of the debt cause of action before money pursuant thereto is either payable or due. In other words, the accrual crystallizes the obligation or liability to pay. Thus for purposes of illustration on its applicability to s. 30 of the CIPAA, the interim and final payment debt pursuant to a typical construction contract accrues when the interim and final certificate are issued (otherwise on the expiry of the prescribed time for certification stipulated in the construction contract if the certificate has been withheld) but if there is no certification mechanism stipulated in the construction contract, then it accrues on the receipt of the invoice pursuant to the default provision set out in s. 36(3) of the CIPAA. Upon such accrual, the money is payable. However, the money is only due after the expiry of the date of payment on the certificate stipulated in the construction contract but if there is no certification mechanism stipulated in the construction contract, then only after 30 days from the receipt of the invoice as provided in s. 36(3) of the CIPAA."

For the sake of completeness, we thus state that we do not agree with the Plaintiff's contention that the said Architects Final Certificate demonstrates that at the material time, there were funds due and payable to the Main Contractor.

Following from all of the above, we hold that as the sum of RM998,653.66 had been paid by the Defendant to the Plaintiff by way of direct payment, there is therefore no money due and payable by the Defendant to Ireka at the time of receipt of the Second Notice. This is also the finding of the HCJ in the Court below.

Our decision is consonant with this Court's decision in JDI Builtech (M) Sdn Bhd v Danga Jed Development Malaysia Sdn Bhd (previously known as Greenland Danga Bay Sdn Bhd) [2024] 4 MLJ 29 where Lee Swee Seng JCA (now FCJ) in delivering the unanimous judgment of the Court of Appeal held, [18] The immediate question to ask is when s 30 of the CIPAA would be applicable and the answer stares at us in the face in that s 30(5) provides that 'This section shall only be invoked if money is due or payable by the principal to the party against whom the adjudication decision was made at the time of the receipt of the request under subsection (1)'. (Emphasis added.) It is thus the over-arching precondition before any of the subsections of s 30 may be utilised. By 'This section' in the opening words of s 30(5) is meant the whole of s 30. Thus s 30(5) is the foundation and base for the deployment of the other subsections in s 30. [19] The meaning of 'This section shall only be invoked ...' can be better understood by stating the opposite, which is that 'This section shall not be invoked unless there is money due or payable by the principal to the party against whom the adjudication decision was made at the time of the receipt of [2024] 4 MLJ 29 at 41the request under subsection (1)'. In other words, the section shall not be invoked if there is no such money due or payable."

As to the purported Settlement Agreement dated 27.2.2023, we have examined the same and find that:

1 It refers to a settlement entered into and executed between the Defendant and Ireka for a full and final settlement of (i) sums due and payable by the Defendant to Ireka under the OT2 Contract and (ii) the sums due and payable by Ireka to the Defendant under the RT1 Contract, which is a different package of work.

2 Under clause 1.4(d) any amount due and payable under the OT2 Contract is to be utilized to settle and/or pay the outstanding amount under the RT1 Contract

3 Under the Second Schedule, the amount specified therein shall be subject to the confirmation of the Statement of Final Account

We have also observed that the OT2 Contract is the Project we have referred to above and that the RT1 Contract is the mixed development known as Parcel A on the same piece of land.

We have after considering the Plaintiff's issues with the Settlement agreement amongst of which are that the first page was undated, it was never disclosed to the Plaintiff prior to the Direct Payment Application and that it was only stamped on 25.5.2023, however found that the Settlement Agreement is a valid agreement between the Defendant and Ireka and that the same was duly stamped.

We do note that the subject of the Settlement Agreement which forms Ground 3 in the Appeal before us i.e. inter alia whether the Defendant can rely on the Settlement Agreement and whether the Defendant is allowed to enter into the same to extinguish the Plaintiff's right, was not canvassed in the Court below as the Plaintiff/ Appellant here had informed the Court that it would not pursue the said issue and this point was expressly noted by the HCJ in her written grounds and she had made no findings in respect of the same.

In the circumstances, as this issue was dropped before the High Court, we are exercising our discretion not to allow or hear the issues to be argued here in this Appeal before us. We rely on the Federal Court authority of Hoong Chin Wah v Cheah Kum Swee & Anor [1967] 1 MLJ 163 where the Apex Court held: "It is abundantly clear from the cases cited above by both counsel that the question as to whether an appellate court should allow a new point or a point abandoned in the court below to be argued before it is a matter of discretion. Though the rule would appear to be that the court should only allow such new point or abandoned point to be argued in exceptional circumstances. In my own view, no such exceptional circumstances exist in this case. I would therefore allow the objection urged on behalf of the respondents and dismiss the appeal with costs."

There has been no reason, what more exceptional circumstances, given to us in this appeal why this ground, after being abandoned at the High Court, should now be considered and heard by us. Accordingly, we reiterate that this third ground of appeal will not be considered by us.

As to whether section 30 CIPAA is to include the principal sum interest and adjudication costs under the Adjudicated Amount, this Court of Appeal in Pali PTP Sdn Bhd v Bond M&E Sdn Bhd and anor appeal [2023] 6 MLJ 176 had held that the adjudicated amount includes interest and costs awarded in the Adjudication Decision.

Be that as it may this issue is hereby academic in light of our decision today.

To summarise, we hold that the reasons given by the Defendant to deny the Plaintiff the Balance Adjudicated Sum of RM192,970.76 is from our findings correct.

The decision of the HCJ is therefore in our view legally and factually correct and we have found that there are no appealable errors in her judgement.

For all of our above reasons we hereby dismiss the appeal with costs of RM30,000.00 subject to allocator. Dated the $ 3^{\mathrm{rd}} $ day of March 2026 NADZARIN WOK NORDIN JUDGE COURT OF APPEAL MALAYSIA COUNSEL FOR THE APPELLANT: Reno Nga Chee Leang (Messrs. Nga Chambers) COUNSEL FOR THE RESPONDENT: Hor Shirley, Marc Adrian Emuang (Messrs. Raja, Darryl & Loh)