Wabina Constructions & Engineering Sdn Bhd v Fulloop Sdn Bhd (WA-24C-78-03/2022)

the application by Wabina Constructions & Engineering Sdn Bhd (‘Wabina’) pursuant to ss 15(b) and (d), 16(1) and 27 of the Construction Industry Payment and Adjudication Act 2012 [Act 746] (‘CIPAA’) read together with O. 7, O. 28, O. 69A and O. 92, r. 4 of the Rules of Court 2012 (‘RC 2012’) in Originating Summons No. WA-24C-42-02/2022 (‘O.S. No. 42’) to set aside the Adjudication Decision dated 27.1.2022 (‘AD’) by the learned Adjudicator, Mr. Lee Yih (‘Adjudicator’) and for an interim stay of the AD until the full disposal of the instant application (encl. 1; ‘Setting Aside Application’);

the application by Wabina pursuant to s 16(1)(b) of the CIPAA and the same provisions of the RC 2012 as above stated in O.S. No. WA-24C-78-03/2022 (‘O.S. No. 78’) to stay the execution and enforcement of the AD pending the hearing and full and final disposal of the arbitration proceedings between Wabina and the employer of the project, Seal Properties (KL) Sdn Bhd (‘Seal’) (encl. 1; ‘Stay Application’); and

the application by Fulloop Sdn Bhd (‘Fulloop’) pursuant to s 28 of the CIPAA and O. 7, O. 28 and O. 69A, rr. 1, 2, 5 and 7 and O. 92, r. 4 of the RC 2012 in O.S. No. WA-24C-67-03/2022 (‘O.S. No. 67’) to enforce the AD (encl. 1; ‘Enforcement Application’). [2] Prayer 3 in the Setting Aside Application for an interim stay of the AD until the full disposal of the Setting Aside Application was allowed by this Court on the date of hearing of all three applications on 1.7.2022. [3] After having considered the cause papers and both the oral and written submissions by the learned counsels who represented the parties, I had dismissed the Setting Aside Application and the Stay Application with costs of RM6,500.00 and RM3,500.00, respectively, to be paid by Wabina to Fulloop, subject to allocatur. With this pronouncement, it naturally followed that the Enforcement Application was allowed whereby Wabina was ordered to pay costs of RM3,000.00 to Fulloop, also subject to allocatur. [4] Wabina, being aggrieved with the aforesaid decision, has since appealed against the same. The detailed reasoning for the decision is set out in the succeeding part of this judgment. The Cause Papers [5] The cause papers except for encls. 1 in each application are as follows:

Wabina’s Affidavit In Support (‘AIS’) affirmed by its Managing Director, Ooi Gan @ Loh Gan on 9.2.2022 (encl. 2);

Fulloop’s Affidavit In Reply (‘AIR’) affirmed by its Executive Director, Yap Kim Hoon on 11.3.2022 (encl. 6);

Wabina’s AIR affirmed by the same deponent on 24.3.2022 (encl. 7);

Fulloop’s AIR affirmed by the same deponent on 1.8.2022 (encl. 22); and

Wabina’s AIR affirmed by the same deponent on 12.8.2022 (encl. 25).

Fulloop’s AIS affirmed by the same deponent on 11.3.2022 (encls. 2 - 4);

Wabina’s Notice of Intention to Use Affidavit (encl. 2 in O.S. No. 42) on 5.4.2022 (encl. 6); and

Fulloop’s AIR affirmed by the same deponent on 20.4.2022 (encl. 7).

Wabina’s AIS affirmed by the same deponent on 28.3.2022 (encl. 2);

Wabina’s Notice of Intention to use Affidavit (encl. 2 in O.S. No. 42) on 30.3.2022 (encl. 3);

Fulloop’s AIR affirmed by the same deponent on 27.4.2022 (encl. 5); and

Wabina’s AIR affirmed by the same deponent on 11.5.2022 (encl. 6). Background Facts [6] Wabina is a company incorporated in Malaysia under the Companies Act 1965 [Act 125] with its business address at No. 4, Jalan BPU 8, Bandar Puchong Utama, Batu 14, 47100 Puchong, Selangor Darul Ehsan. [7] Fulloop is similarly a company incorporated in Malaysia under Act 125 with its business address at No. 3, Lebuh Gelugor, 11600 Pulau Pinang. [8] Seal is the employer of the project known as: “Cadangan Membina Dan Menyiapkan Pembangunan Perdagangan Bercampur (Fasa 1) Yang Mengandungi: 1) Blok (D) Pejabat 6 Tingkat (33 Unit) 2) 3 Blok (E, F & G) Pejabat 8 Tingkat (480 Unit) Di Atas 1 Blok (Podium) - 3 Dan 4 Tingkat Kedai (170 Unit) - 3 Tingkat Tempat Letak Kereta Bertingkat - 1 Tingkat Tempat Letak Kereta Separa Bawah Tanah - 1 Tingkat Tempat Letak Kereta Bawah Tanah Di Atas Sebahagian Lot Pt 9149, Jalan Sri Permaisuri, Bandar Sri Permaisuri, Wilayah Persekutuan Kuala Lumpur Untuk Tetuan M/S Projek Penswastaan Datuk Bandar Kuala Lumpur Dengan Dwitasik Sdn Bhd” or also known as the “Queensville Sri Permaisuri Project” (‘Project’). [9] By the Letter of Acceptance dated 24.6.2016 (‘LoA’), Wabina as the main contractor of the Project, had appointed Fulloop as the Nominated Sub-Contractor (‘NSC’) for the “Supply, Delivery, Installation, Testing and Commissioning & Maintenance of the proposed Electrical, Telecommunication & Extra Low Voltage Services” (‘Works’) at a firm lump sum price of RM20,188,000.00. [10] On 11.7.2016, Wabina and Fulloop entered into formal sub-contract documents being the Articles of Agreement and the Conditions of Contract (‘CoC’) under the “Agreement And Conditions Of PAM Sub-Contract 2006 For Use Where the Sub-Contractor Is Nominated Under The PAM Contract 2006” (‘Sub-Contract’). [11] The consultants for the Project were Akitek Akiprima Sdn Bhd (‘Architect’), Unitech QS Consultancy (KL) Sdn Bhd (‘QS’) and D&O Konsultant Sdn Bhd (‘M&E Consultant’). [12] The original completion date for the Project was 30.8.2018. Wabina had made several applications to Seal for extension of time and the completion date was revised to 30.11.2018. [13] A dispute arose between the parties when Fulloop claimed that it had completed the Works for the sum of RM2,748,966.17 as certified in Payment Certificates No. 28B dated 22.3.2019, No. 29 dated 15.4.2019 and No. 30 dated 16.5.2019 and as claimed in Progress Claim No. 34 (Final) dated 25.8.2019. Wabina however, contended that throughout the duration of the Project, there was a direct payment agreement between Seal and Fulloop where all payments were made directly by cheques issued by Seal to Fulloop. [14] Meanwhile, Wabina was having a dispute of its own with Seal. Wabina had sent several demands and reminders for payment under Interim Payment Certificate (‘IPC’) Nos. 32, 33 and 34 to Seal. Eventually, Wabina issued the Notice of Pre-Termination and Notice of Termination to Seal on 17.7.2019 and 5.8.2019, respectively. According to Clause 25.2 of the CoC, if Wabina determines its own employment under Clause 26.0 of the Main Contract Conditions, then Fulloop’s employment under the Sub-Contract shall be forthwith automatically determined. [15] Fulloop issued the Payment Claim pursuant to s 5 CIPAA for the total claimed amount of RM2,748,966.17 on 31.5.2021. This was followed by the Payment Response on 6.7.2021, Notice of Adjudication on 22.7.2021, Adjudication Claim on 25.10.2021, Adjudication Response on 8.11.2021 and Adjudication Reply on 15.11.2021. [16] In para 176 of the AD, the Adjudicator had determined that Fulloop’s claim has succeeded and that – “… b) The Respondent shall pay the Claimant the sum of RM 1,497,280.47 … This is hereby recorded as the “Adjudication Sum”; c) The Adjudicated Sum shall be paid on or before 10 February 2022 and shall henceforth be called the Due Date for Payment of the Adjudicated Sum; d) The Respondent shall pay the Claimant interest at the rate of 5% per annum from 28 April 2019 for the amount of RM 200,487.76; from 31 May 2019 for the amount of RM 37,835.82; from 30 June 2019 for the amount of RM 120,244.25 and from 25 October 2019 for the amount of RM 1,138,712.64 until full payment of the Adjudicated Sum; e) The Respondent shall bear the full costs of the adjudication amounting to RM145,347.54 … which compromises of the Adjudicator’s Fees, Adjudicator expenses, AIAC’s Administrative Fees, Registration Fees, AIAC Appointment of Adjudicator Fees, Claimant’s preparation Fees for this Adjudication Proceeding and Claimant’s other incidental cost.”. I. The Setting Aside Application [17] Wabina’s application to set aside the AD is premised on limbs (b) and

of s 15 of the CIPAA which read as follows: “Improperly Procured Adjudication Decision

An aggrieved party may apply to the High Court to set aside an adjudication decision on one or more of the following grounds: …

there has been a denial of natural justice; …

the adjudicator has acted in excess of his jurisdiction.”. [18] The counsels had indicated at the hearing that they have no objections for reference to be made to the Letter of Award for the Main Building Works (Phase 1) dated 1.12.2015 (‘MBW’), the Agreement And Conditions of PAM Contract 2006 (With Quantities) and the Supplemental Agreement dated 30.5.2016 between Seal and Wabina, which were exhibited in encl. 3 of the Enforcement Application, for purposes of the Setting Aside Application. [19] In this judgment, Wabina’s contentions on the issue of excess of jurisdiction shall be addressed first. Section 15(d) CIPAA: Adjudicator has acted in excess of jurisdiction 1st Ground: Whether Wabina is a non-paying party - The Parties’ Contentions [20] It was strenuously contended by Wabina that it is not the “paying party” to Fulloop as it was agreed in the Sub-Contract and by the conduct of Seal, Wabina and Fulloop that payments to Fulloop were to be made by Seal via separate cheques and through the Architect. Throughout the construction of the Project, Seal had honored this agreement by making payments directly to Fulloop pursuant to the IPC issued by the Architect. [21] In the light of this arrangement between Seal and Fulloop, which was acknowledged by the Adjudicator in the AD, Wabina’s counsel argued that Wabina is not a “non-paying party” to Fulloop and as such, the entire adjudication proceedings and the AD are void for want of jurisdiction. [22] In forwarding its case of the existence of a direct payment arrangement between Seal and Fulloop, Wabina drew the attention of the Court to the following documents:

Clause 8 in the Architect’s letter to Wabina dated 2.6.2016 which states that “Progress payments will be made through us via separate cheques issued by the Employer.”;

Clause 8 in the Architect’s letter to Fulloop dated 2.6.2016 which is the same as the clause in subpara (a) above;

Clause 8 of the LoA which provides that “Progress payment shall be made through Consultant via separate cheques issued by the Employer.”. Based on Clause 6 of the CoC which states – “6.0

6.1 The Sub-Contract Documents are to be read as mutually explanatory of one another. In the event of any conflict or inconsistencies between any of the documents in the Sub-Contract Documents, the priority in the interpretation of such documents shall be in the following descending order:

6.1(a) the Letter of Appointment by the

6.1(b) the Articles of Agreement;

6.1(c) the Sub-Contract Conditions;

6.1(d) the Sub-Contract Drawings;

6.1(e) the Sub-Contract Bills; and

6.1(f) other documents incorporated in the Sub-Contract Documents, unless expressly stated to be excluded in any of the Sub-Contract Document. The Sub-Contractor shall supply As-built Drawings and/or operation and maintenance manuals specified in the Sub-Contract Documents in the manner and within the specified therein. Where these are not specified, the Sub-Contractor shall supply four (4) copies of the above items before the Main Contract Completion Date.”, the LoA is placed at the highest hierarchy in the priority in the interpretation of the documents;

Clause 7 in the Letter of Award for the MBW from the Architect, who was authorised by Seal to award the contract for the construction and completion of the MBW to Wabina, provides as follows: “7. Payment to Nominated Sub-contractors/ Nominated Suppliers As agreed, without prejudice to the Employer’s rights and remedies, payments to the Nominated Sub-Contractors / Nominated Suppliers will be made through you via separate cheques issued under the names of respective Nominated Sub-Contractors / Nominated Suppliers that prepared by the Employer. Upon receiving of any Certificate of Payment which include payments for Nominated Sub-Contractors / Nominated Suppliers, you shall issue an authorization letter to the Employer for such arrangement by tabulating the name of Nominated Sub-Contractors / Nominated Suppliers involved and the respective amount certified during your submission of tax invoice. In this respect, the exercise of this payment arrangement shall not create any privity of Contract between the Employer and Nominated Sub-Contractors / Nominated Suppliers, and this shall not in any way vitiate the Contract and you shall not be entitled to claim for any additional cost and time in connection herewith.”;

images of cheques issued by Seal to Fulloop on 28.12.2018,

22.1.2019, 25.2.2019, 21.3.2019 and 24.4.2019 for the total sum of RM4,375,443.91 as exhibited in the Adjudication Response. These were later supplemented by Fulloop in the AIR (encl. 22) together with the vouchers issued by Wabina acknowledging the payments made by way of Seal’s cheques (see “EKSHIBIT YAP- 1”); and

the letters sent to Fulloop or its solicitors –

by Wabina dated 22.7.2019 wherein Wabina conveyed that it has commenced proceedings against Seal pursuant to the CIPAA to claim all sums outstanding under the Interim Certificates and that Fulloop would be required to bear the legal costs and percentages, charges and fees imposed by the Asian International Arbitration Centre (‘AIAC’) and the adjudicator with Wabina and other NSC in proportionate manner, notwithstanding the fact that Fulloop has a direct payment arrangement with Seal, and Wabina is not responsible substantively for any of Seal’s payment or late payment due to Fulloop; and

(ii) by Wabina’s solicitors dated 16.8.2019 and 30.4.2021 stating, among others, that Seal is the entity that is indebted to Fulloop pursuant to Fulloop’s direct payment arrangement with Seal which was followed and performed. Fulloop had replied to the latter vide the letter dated 18.5.2021 addressed to Wabina disagreeing with, inter alia, Wabina’s statements on the direct payment arrangement with Seal. [23] Ms. WY Lim relied on the cases of Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd [2020] MLJU 552 (see especially paras 11 to 16, 20 and 24 of the judgment of the High Court which was affirmed by the Court of Appeal on 8.11.2021) and two non-CIPAA cases of Desa Samudra Sdn Bhd v Bandar Teknik Sdn Bhd & Ors [2012] 1 CLJ 249 and Meda Property Services Sdn Bhd v Abric Cladding Sdn Bhd [2000] MLJU 310 to support Wabina’s propositions that the payment clause which was considered in Hong Xin’s case and in the instant case is similar; that Wabina is not a non-paying party because the obligation to pay Fulloop lies on Seal; the fact that there had been payments by Seal to Fulloop show that there is a legally binding relationship between Fulloop and Seal; and Fulloop is estopped from alleging that there is no privity of contract between itself and Seal. [24] On the other hand, Ms. K. Sheela referred to the decisions in Kepong Prospecting Ltd & Ors v Schmidt [1968] 1 MLJ 170, Badiaddin bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd [1998] 1 MLJ 393 and Suwiri Sdn Bhd v Government of the State of Sabah [2008] 1 MLJ 743 in submitting that there is no privity of contract between Seal and Fulloop as the LoA clearly states that the construction contract for the Project is between Wabina and Fulloop, and Seal is not a party to the LoA. [25] The learned counsel further referred to the judgment in Casmet Sdn Bhd v Otis Elevator Company (M) Sdn Bhd [2021] MLJU 560 (in particular paras 18 to 22 and 27 to 29 of the judgment of the High Court) wherein Wong Kian Kheong J gave reasons as to why His Lordship was unable to follow the decision in Hong Xin’s case. Ms. K. Sheela extrapolated that in Casmet’s case, both the payment clauses in the main contract and the sub-contract were consistent whereas in the present case, Clause 8 of the LoA and Clause 7 of the Letter of Award for the MBW are dissimilar. Paras 2, 4 and 16 in the decision by the same Judge in Otis Elevator Company (M) Sdn. Bhd. v. Castmet Sdn. Bhd. [2020] 1 LNS 2169 were also highlighted to this Court. [26] In sum, Fulloop maintained that Wabina was correctly named as the respondent in the adjudication proceedings. - Findings of the Court [27] The provision on the jurisdiction of the adjudicator is stipulated in s 27 of the CIPAA which reads: “Jurisdiction of Adjudicator

27.

Subject to subsection (2), the adjudicator’s jurisdiction in relation to any dispute is limited to the matter referred to adjudication by the parties pursuant to sections 5 and 6.

The parties to adjudication may at any time by agreement in writing extend the jurisdiction of the adjudicator to decide on any other matter not referred to the adjudicator pursuant to sections 5 and 6.

Notwithstanding a jurisdictional challenge, the adjudicator may in his discretion proceed and complete the adjudication proceedings without prejudice to the rights of any party to apply to set aside the adjudication decision under section 15 or to oppose the application to enforce the adjudication decision under subsection 28(1).”. [28] The Federal Court in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 said that: “[55] By s 27(1) of the CIPAA, the arbitrator’s jurisdiction ‘is limited to the matter referred to adjudication’ pursuant to ss 5 and 6 of the CIPAA. It refers to the ‘identification of the cause of action’ in relation to the construction contract as required under s 5(2)(b) of the CIPAA. In turn, the payment response under s 6 of the CIPAA is defined and limited by the claim under s 5 of the CIPAA. [56] In short, s 27(1) of the CIPAA refers to the subject matter of the claim under s 5 of the CIPAA, which is the ‘cause of action’ identified by the claimant by reference to the applicable clause of the construction contract. …”. [29] The three types of jurisdictions, namely, core jurisdiction, competency jurisdiction and contingent jurisdiction have been well accepted ever since the decision of the High Court in Terminal Perintis Sdn Bhd v Tan Ngee Hong Construction Sdn Bhd and another case [2017] MLJU 242 at paras 72 to 74. This categorisation was affirmed by the Federal Court in View Esteem (supra) at paras 16 and 17. [30] Wabina’s position is that it is not a “non-paying party” within the meaning of sub-s 5(1) CIPAA which states that: “Payment Claim

5.

An unpaid party may serve a payment claim on a non-paying party for payment pursuant to a construction contract.”. [31] The definitions in s 4 CIPAA which are relevant for purposes of analysing the issues at hand are set out below: “Interpretation

In this Act, unless the context otherwise requires – … “non-paying party” means a party against whom a payment claim is made pursuant to a construction contract; “payment” means a payment for work done or services rendered under the express terms of a construction contract; … “unpaid party” means a party who claims payment of a sum which has not been paid in whole or in part under a construction contract; …”. [32] It bears mention that Ms. WY Lim’s arguments on behalf of Wabina regarding the direct payment arrangement between Seal and Fulloop and that Wabina is not a “non-paying party” within the meaning of sub-s 5(1) CIPAA essentially concern the allegation that the Adjudicator has no jurisdiction at all to adjudicate the dispute rather than that the Adjudicator has jurisdiction to adjudicate the matter but has exceeded his jurisdiction under s 15(d) CIPAA [see paras 12, 15 and 18 of the judgment in View Esteem and paras 12 and 13 of the judgment in Otis Elevator (supra)]. [33] The issue of the “Direct Payment Agreement” was first raised by Wabina in paras 7 to 22 of the Adjudication Response and was accordingly responded to by Fulloop in paras 5 to 16 of the Adjudication Reply. [34] The Adjudicator dealt with the “Issue of the non-paying party shall be the employer not the Respondent” in paras 76 to 101 of the AD. Although the Adjudicator found that there is “solid proof” of direct payment from Seal to Fulloop and that he agreed with the cases cited by Wabina i.e. Desa Samudra (supra), Ching Yew Chye & Ors v Pavitar Singh a/l Manjeet Singh & Anor [2018] 10 MLJ 612 and Dr Che Wan Fadhil bin Che Wan Putra dan lain lain (menuntut bagi pihak mereka sendiri dan bagi pihak 127 orang yang lain) lwn Universiti Teknologi Malaysia [2010] 9 MLJ 736 that Fulloop may seek the outstanding payment from Seal, he nevertheless concurred with the part of the judgment in Otis Elevator where it was opined that the direct payment provision may allow non-paying parties to circumvent the CIPAA by merely inserting a provision in the construction contract to the effect that third parties are obliged to pay for the works. It is for this reason that the Adjudicator decided he shall continue to ascertain who is the correct party to make the outstanding payment to Fulloop. [35] In his analysis, the Adjudicator considered Wabina’s letter to Fulloop dated 22.7.2019, Wabina’s solicitor’s letter to Fulloop dated 16.8.2019 and that the outstanding sums under Payment Certificate Nos. 28B, 29 and 30 are part of the adjudicated sum under the adjudication decision dated 24.2.2020 before dismissing Wabina’s contentions on this issue. The Adjudicator’s decision is, of course, not binding or conclusive on this Court which is duty bound to consider and pronounce its findings and conclusions on this matter as Wabina’s current challenge against the AD is premised on the Adjudicator’s purported absolute lack of jurisdiction (see paras 48 and 49 in the judgment of this Court in Tecnicas Reunidas Malaysia Sdn Bhd v Petrovietnam Engineering Consultancy JSC (PVE) & Anor and other cases [2021] MLJU 2633). [36] In my opinion, the answer to the conundrum as to whether a party in an adjudication proceeding is a “non-paying party” within the meaning of sub-s 5(1) CIPAA when the employer has made direct payments to the sub-contractor in the course of the construction works requires a close examination of the express contractual provisions and a determination on the interpretation of the clauses in each case. [37] The relevant clauses which were considered in Hong Xin, Otis Elevator, Castmet and CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd (a case which was decided by this Court on 15.4.2022 where one of the grounds put forth by CR Sea in its application to set aside the adjudication decision in O.S. No. WA-24C-26-01/2022 was that payment was made by the employer and hence, CR Sea is not a non-paying party; just like Wabina, CR Sea relied heavily on the decision in Hong Xin’s case and ultimately, the Court allowed Zedelta’s application to enforce the adjudication decision in O.S. No. WA-24C- 217-12/2021 with cost of RM3,000.00 and dismissed CR Sea’s application to set aside the adjudication decision with cost of RM5,000.00; CR Sea did not appeal against the decision) are tabulated below for ease of reference: Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop Main Contract Parties: Employer and Hong Xin Parties: Employer and Castmet Parties: Employer and CR Sea Parties: Seal (Employer) and Wabina Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop Clause 12(x): “Payment to Nominated Sub-Contractors shall be made via separate payment advice to the respective Nominated Sub-Contractors. The payment advice in the form of cheques will Clause 3: “PAYMENT TO NOMINATED SUB-CONTRACTORS NOMINATED SUPPLIERS Notwithstanding the Conditions of Contract, payments certified for work executed by all Nominated Sub-Contractors and goods supplied by all Nominated Suppliers shall be issued in separate cheques made payable to the Clause 12: “Terms of Payment and Honouring of Certificate … The Employer hereby agrees to release payment directly to all Nominated Sub-Contractor (NSC) and Nominated Supplier (NS) upon receiving of the payment certificate duly certified by the Architect and Clause 7: “Payment To Nominated Sub-Contractors/ Nominated Suppliers As agreed, without prejudice to the Employer’s rights and remedies, payments to the Nominated Sub-Contractors/ Nominated Suppliers will be made through Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop forwarded to you for distribution.” respective Nominated Sub-Contractors and Nominated Suppliers. The said cheques shall be issued to the Contractor [Castmet] for distribution to the respective Nominated Sub-Contractors and Nominated Suppliers. For all purposes and intent of this [Main Contract], all relevant clauses in the Conditions of subject to the Employer’s approval on your request that the payments are to be paid directly by the Employer to the NSC or NS. In consideration of the Employer agreeing to the arrangement of payment as set out above, you hereby agreed: - … iv) That the above is merely a you via separate cheques issued under the names of respective Nominated Sub-Contractors/ Nominated Suppliers that prepared by the Employer. Upon receiving of any of Certificate of Payment which include payments for Nominated Sub-Contractors/ Nominated Suppliers, you Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop Contract pertaining to payment to Nominated Sub-Contractors and Nominated Suppliers shall be deemed to have been amended to allow for the payments to be issued to the Nominated Sub-Contractors and Nominated Suppliers in the manner described above.” modification of payment agreement without affecting the contractual rights and liabilities of all parties. …” shall issue an authorization letter to the Employer for such arrangement by tabulating the name of Nominated Sub-Contractors/ Nominated Suppliers involved and the respective amount certified during your submission of tax invoice. Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop In this respect, the exercise of this payment arrangement shall not create any privity of Contract between Employer and Nominated Sub-Contractors/ Nominated Suppliers, and this shall not in any way vitiate the Contract and you shall not be entitled to claim for any additional Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop cost and time in connection herewith.” Sub-Contract Parties: Hong Xin and Tewara Clause 8.2: “Payments due and payable to you as the Nominated Sub-Contractor shall be issued by the Employer and forwarded to us the Main Building Parties: Castmet and Otis Clause 5: “Notwithstanding the Conditions of Contract, payments certified for work executed by all [NSC] shall be issued in separate cheques made Parties: CR Sea and Zedelta Clause 9.5: “Payment shall be made by cheque payable to Zedelta Sdn Bhd by the Employer. The cheque will be distributed by CR Sea (Malaysia) Sdn Bhd within Seven Parties: Wabina and Fulloop Clause 8: “Progress payment shall be made through Consultant via separate cheque issued by Employer.” Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop Contractor for release to you. Such payment shall be released to you within seven (7) days from the date of receipt of payment from the Employer.” payable to the respective [NSC]. The said cheques shall be issued to [Castmet] for distribution to the respective [NSC] within seven

days from [Castmet’s] Period of Honouring Certificate.”

working days after the receipt of payments from the Employer.” PAM Sub-Contract 2006 Clause 26.5: “Employer may make direct The same Clause 26.5. Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop payment to Sub-Contractor The Contractor shall provide the Architect within fourteen (14) Days of the Architect’s request, reasonable proof that all amounts stated as due and included in the previous payment certificates to the Sub-Contractor have been discharged. Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop Where the Contractor fails to discharge his payment obligations and where requested by the Sub-Contractor, the Architect may in accordance with Clause 27.6 of the Main Contract Condition issue a certificate stating the amount in respect of which the Contractor has failed to provide Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop such proof. Where the Architect has so certified, the Employer may (but not obliged to) pay such amounts directly to the Sub-Contractor and deduct the same from any sums due or to become due to the Contractor. Any direct payment made under Clause 27.6 of the Main Contract Conditions shall not create a privity Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop of contract between the Employer and Sub-Contractor.” Held Clause 8.2 in the sub-contract means that payment is to be made by the Employer; payment will be forwarded to Hong Xin; and Hong Xin will release all payments received to Tewara. The direct payment contractual provisions, the previous direct payments, s 42 of the Contracts Act 1950 and/ or the definitions in the CIPAA do not create any privity of contract between the Employer and Otis. None of these four matters constitute an exception to the Clause 9.5 in the sub-contract does not impose any obligation on the Employer to pay for work done under the NSC because the Employer is not a party to the Letter of Acceptance and any obligation on the Employer would be by virtue of Clause 12 of the See the analysis below. Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop The express terms of the construction contract between the parties in the form of Clause 8.2 of the sub-contract has made it clear that payment is from the Employer who forwards to Hong Xin who in turn releases it to Tewara. It is not a manner of payment but an obligation imposed on the Employer to pay the NSC, Tewara. doctrine of privity of contract. Otis had completed the works and was entitled to have its claim adjudicated under the The direct payment arrangement cannot be allowed to defeat the object of the CIPAA and circumvent its application. The Adjudicator had jurisdiction to adjudicate Otis’s main contract whereby the Employer’s agreement to pay the NSC directly is subject to the Employer’s approval on request for such direct payment by CR Sea. Furthermore, para

(iv) under Clause 12 provides that the direct payment arrangement shall not affect the contractual rights Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop Clause 12(x) of the main contract is transposed into the sub-contract. Tewara had contractually accepted a promise of payment from the Employer through the sub-contract and Tewara ought not to resile from it. Hong Xin is not a non-paying party because the obligation to pay claim under the and liabilities of the parties. Unlike in Hong Xin’s case, Clause 12 in the main contract was not transposed into the sub-contract. CR Sea is a non-paying party and the Adjudicator has jurisdiction to adjudicate the dispute under the Hong Xin Construction Sdn Bhd v Tewara Sdn Bhd Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd Castmet Sdn Bhd V Otis Elevator Company (M) Sdn Bhd CR Sea (Malaysia) Sdn Bhd v Zedelta Sdn Bhd 217-12/2021 & 26-01/2022 Wabina v Fulloop lies on the Employer. Hong Xin’s application for a declaration to that effect was allowed. [38] Based on the above tabulation, it can be surmised that –

the court in Hong Xin’s case, and as affirmed by the appellate court, found that Clause 8.2 of the sub-contract viz. “Payments due and payable to you as the Nominated Sub-Contractor shall be issued by the Employer and forwarded to us the Main Building Contractor for release to you. …” amounts to an obligation imposed on the Employer to pay Tewara and that Clause 12(x) of the main contract was transposed into the sub-contract; and

this Court found that Clause 12 in the main contract in CR Sea’s case is merely a modification of the payment agreement between the Employer and CR Sea without affecting the contractual rights and liabilities of all parties. The said Clause 12 was not transposed into the sub-contract between CR Sea and Zedelta. [39] Turning to the instant case, the Court is of the considered view that Clause 7 of the main contract in no uncertain terms states that the exercise of the payment arrangement to the NSC shall not create any privity of contract between Seal and the NSC, which includes Fulloop. This part of Clause 7 shows the clear intention of Seal and Wabina that there shall be no privity of contract between Seal and Fulloop just because the cheques for payment to Fulloop are issued by Seal. Hence, Fulloop’s claims for payment for work done under Payment Certificate Nos. 28B, 29 and 30 and Progress Claim No. 34 (Final) as per the Payment Claim were correctly addressed to Wabina. [40] This conclusion is fortified by Seal’s letter to Fulloop dated 5.5.2021 (see the last page of “EKSHIBIT YAP-1” in Fulloop’s AIR, encl. 22) regarding the purported outstanding balance payment of RM358,567.83 wherein Seal said that: “… As you are well aware, there is no contractual relationship between us as the Employer in the abovementioned project and you as the Nominated Sub Contractor. Therefore, pursuant to fundamental contract principles, you shall refer your claims to Wabina Construction & Engineering Sdn. Bhd, the Main Contractor of the project herein. Further, we wish to place on record that we had made full payments to Wabina Construction & Engineering Sdn. Bhd pursuant to Interim Certificates 32, 33, 34, 35 and 36. …”. [41] In Wabina’s AIR (encl. 25), Wabina took issue with the documents in “EKSHIBIT YAP-1” because these documents were in existence and in Fulloop’s possession before the commencement of the adjudication proceedings, but Fulloop chose not to reveal the same during the adjudication. Specifically, in relation to the correspondences between Seal and Fulloop, Wabina averred that these were not raised at the adjudication and are self-serving statements by Seal. It was contended that it would be contrary to the principles of natural justice if the Court was to consider and accept the correspondences. [42] Whilst it is true that Fulloop had filed the AIR in encl. 22 after the date of hearing and the date of clarification on its own accord, the Court had considered Wabina’s objections to the AIR and Fulloop’s response to the objections as conveyed in the counsels’ letters dated 4.8.2022 and 8.8.2022 (encls. 23 and 24). The Court accepted Fulloop’s explanation that the purpose of filing the AIR was to place all relevant and crucial facts and to exhibit the documents pertaining to the process of payment for the attention of the Court following the clarification session on 28.7.2022. [43] Wabina’s objections were thus dismissed. However, it was given the opportunity of filing an AIR, which it did vide encl. 25. As such, the issue of breach of the right to be heard does not arise. [44] In any event, even if the Court gives no weight at all to Seal’s letter dated 5.5.2021, it is obvious from a plain reading of the express words in Clause 7 of the main contract that it was never the intention of Seal and Wabina that Seal’s conduct in making direct payments to Fulloop shall create a privity of contract between Seal and Fulloop. [45] In the upshot, this Court was inclined to agree with Fulloop's submission that Wabina is a “non-paying party” within the meaning of sub-s 5(1) CIPAA and that the Adjudicator was clothed with jurisdiction to hear and decide the payment dispute between Fulloop and Wabina. 2nd Ground: Whether the Adjudicator acted in excess of jurisdiction by relying on the Statement of Sub-Contractor's Final Account in allowing Fulloop's claim [46] Wabina asserted that the Adjudicator acted in excess of jurisdiction by relying, and allowing Fulloop’s claim, based on the Statement of Sub-Contractor’s Final Account dated 20.4.2021 (‘SFA’) which was not raised in the Payment Claim. The SFA was first brought up in the Adjudication Claim whereupon Fulloop had altered its claim from RM2,390,398.34, premised on Progress Claim No. 34 (Final) dated 25.8.2019 to RM1,138,712.64, premised on the SFA. [47] Ms. WY Lim argued that, having elected to not rely on the SFA which was received prior to the issuance of the Payment Claim, Fulloop cannot raise the SFA in the Adjudication Claim and the Adjudicator does not have jurisdiction to consider Fulloop’s claim based on the SFA. It was further argued that, while the Adjudicator noted that Wabina disputed Fulloop’s reliance on the SFA, the Adjudicator had mistaken this dispute as a “jurisdictional challenge” when it relates to the core jurisdiction of the Adjudicator. [48] As there is no written agreement and consent by Wabina to extend the jurisdiction of the Adjudicator to decide on the SFA pursuant to sub-s 27(2) CIPAA, the learned counsel submitted that the Adjudicator had answered the wrong question before he decided to proceed to determine Fulloop’s claim based on the SFA. Hence, the Adjudicator is said to have acted in excess of jurisdiction, warranting the setting aside of the AD. [49] Having scrutinised the adjudication documents and the AD, I find that –

the SFA with the final sub-contract sum of RM17,886,314.30 was signed by Fulloop on 20.4.2021. The Payment Claim which is dated 31.5.2021 makes no mention of the SFA;

in para 24 of the Adjudication Claim, Fulloop states that it had, on 25.8.2019, submitted its Progress Claim No. 34 (Final) to Wabina and the total work done is RM19,138,000.00. In para 26, Fulloop then said that around April 2021, the M&E Consultant had issued the SFA and Fulloop’s total work done is valued to be RM17,886,314.30. A copy of the SFA is attached to the

in para 18 of the Payment Claim, the amount claimed was tabulated as follows:

Cert. 28B

04.2019 200,487.76 Cert. 29 22.05.2019 37,835.82 Cert. 30 22.06.2019 120,244.25

Progress claim no. 34 (Final)

10.2019 2,390,398.34 Total Amount Claimed 2,748,966.17 whilst in para 29 of the Adjudication Claim, Fulloop had calculated the outstanding amount under Progress Claim No. 34 (Final) based on the final sub-contract sum in the SFA as shown below: Description Amount (RM) Work Done 17,886,314.30 Less: Payment received 16,389,033.83 Cert 28B 200,487.76 Cert 29 37,835.82 Cert 30 120,244.25 Outstanding sum 1,138,712.64 In para 30 of the Adjudication Claim, Fulloop submitted that it was entitled to be paid the claimed sum of RM1,497,280.47 made up of the following items: Item Amount (RM) Due Date Cert 28B 200,487.76 28.04.2019 Cert 29 37,835.82 22.05.2019 Cert 30 120,244.25 22.06.2019 Progress Claim No. 34 (Final) 1,138,712.64 22.10.2019 Total Amount Claimed 1,497,280.47

Wabina had contended that the “matter” referred to the Adjudicator was the alleged outstanding amount pursuant to Progress Claim No. 34 (Final) and the SFA is not such a “matter” (see paras 23 to 32 of the Adjudication Response under Part C “Purported Progress Claim No. 34 (Final) – Jurisdictional

Fulloop responded that the SFA is only evidence relied upon for purposes of the adjudication to justify the value of work done and claimed under Progress Claim No. 34 (Final) and to assist the Adjudicator in arriving at a decision. Fulloop emphasised, among others, that the SFA is not, by itself, a cause of action or a head of claim in the adjudication (see paras 20, 23, 27, 40, 41 and 44 of the Adjudication Reply);

the Adjudicator had addressed Wabina’s “Jurisdictional challenge” as per its Adjudication Response in paras 31 to 36 of the AD by relying on sub-s 27(3) CIPAA and deciding to proceed and complete the adjudication proceedings without prejudice to the rights of any party to set aside the AD under s 15 CIPAA or to oppose the application to enforce the AD under sub-s 28(1)

the Adjudicator had also dealt with the claimed amount of RM1,138,712.64 for Progress Claim No. 34 (Final) and the issue of the said Progress Claim having not been verified and approved by the QS and the Architect in paras 54 to 75 of the AD. The Adjudicator had evidently perused the documents produced by the parties in the adjudication proceedings as he had highlighted one of the documents which is Seal’s letter dated 17.4.2020. The Adjudicator was of the opinion that the said letter and its attachment show that the valuation of the Works done by Fulloop for the Project has yet to be finalised at that point of time in April

The Adjudicator then opined in para 71 of the AD that “… the SFA is the best document presented to me as the valuation of total work done of the Claimant in the project which is valuated at RM17,886,314.30. Because this SFA is issued in year 2021 which is subsequent to the Employer’s letter dated 17 April 2020.” (emphasis added). The Adjudicator went further to say this: “73) I am in the opinion that there is nothing wrong for the Consultant to prepare the SFA after two (2) years from Respondent had terminated the main contract with the Employer on 5 August 2019. It is an industrial norm to conclude a construction final account by taking such a period. 74) I am also in the opinion that it would be only fair that I shall considered the SFA even though it is not brought up by the Claimant prior to the Notice of Adjudication. The validity of the SFA is more important for me to make my Adjudication Decision, which I have dealt with it. 75) Base on the above findings, I disallow and dismiss the Respondent contention pursuant to this issue and I am satisfied that the Claimant has proved its value of work done of RM17,886,314.30 base on the SFA. As such, I am agreeing with the Claimant that the total outstanding sum under the Progress Claim No. 34 (Final) is RM 1,138,712.64 as per the calculation in Paragraph 29 of Adjudication Claim.”. [50] I have considered the arguments of the parties and I am inclined to accept Fulloop’s contention that the SFA is not a cause of action or a claim by itself. With reference to sub-s 27(1) CIPAA, the matter referred to adjudication by Fulloop and Wabina pursuant to ss 5 and 6 CIPAA, respectively, was, among others and as Wabina itself had submitted, for the amount which Fulloop alleged was due and outstanding since 22.10.2019 for Progress Claim No. 34 (Final). [51] One of the items of Fulloop’s claim in the Payment Claim is Progress Claim No. 34 (Final) and this item remained throughout the adjudication proceedings. Fulloop is entitled to adjust the claimed sum based on the evidence and the SFA is one of the documents which was adduced by Fulloop to support the amount for Progress Claim No. 34 (Final). Sub-section 9(1) CIPAA provides that supporting documents may be served on the respondent together with an adjudication claim. Moreover, Wabina is not prejudiced in any way because, by taking into account the Final Sub-Contract Sum as per the SFA, the amount claimed for Progress Claim No. 34 (Final) is lesser than the amount which was initially claimed by Fulloop in the Payment Claim. [52] Among the vast powers accorded to the Adjudicator under s 25 CIPAA is the power to decide or declare on any matter notwithstanding no certificate has been issued in respect of the matter [see para (n) and the cases which have discussed this provision such as Bina Puri Construction Sdn Bhd v. Hing Nyit Enterprise Sdn Bhd [2015] 8 CLJ 728, Wong Huat Construction Co v Ireka Engineering & Construction Sdn Bhd [2017] MLJU 739, Antah Schindler Sdn Bhd v. Golden Base Construction Sdn Bhd [2020] 1 LNS 1189 (the appeal by Golden Base Construction Sdn Bhd against the decision of this Court was dismissed by the Court of Appeal on 25.5.2021) and Puncak Niaga Construction Sdn Bhd v Mersing Construction & Engineering Sdn Bhd and other cases [2021] MLJU 1824 (the appeal by Puncak Niaga Construction Sdn Bhd against the decision of this Court in the setting aside and enforcement applications was dismissed by the Court of Appeal on 8.8.2022)]. In this case, it is well within the jurisdiction of the Adjudicator to determine the value of Works completed and the amount which is due and payable by Wabina to Fulloop for Progress Claim No. 34 (Final) based on the statements in the adjudication documents and the supporting documents appended thereto. [53] With regards to Wabina’s submission that the Adjudicator had asked the wrong question and had not determined if he has core jurisdiction to consider Fulloop’s claim, these are, with respect, entirely unfounded. Cases are aplenty and it is settled law that under the CIPAA, an adjudicator generally does not have the jurisdiction or the power to make a binding decision on his own jurisdiction [see SQA Builders Sdn Bhd v Luxor Holdings Sdn Bhd and another suit [2017] MLJU 833, PCP Construction Sdn Bhd v Leap Modulation Sdn Bhd and other suits [2017] MLJU 905, Granstep Development Sdn Bhd v. Tan Chong Heng Construction Sdn Bhd [2022] 5 MLRH 444 and Tecnicas Reunidas (supra)]. Therefore, it follows that there is no obligation on the part of the adjudicator to make a decision on his own jurisdiction whenever a jurisdictional challenge is raised before he can proceed with the adjudication proceedings (see paras 11.009 and 11.019 at pp 286, 287, 291 and 292 in Construction Adjudication In Malaysia, Third Edition, Sweet & Maxwell, 2022 by Lam Wai Loon and Ivan YF Loo). Sub-s 27(3) CIPAA expressly confers the discretion on the adjudicator to proceed with, and complete, an adjudication proceeding despite a jurisdictional objection being raised. Even though Wabina has raised the issue of core jurisdiction, which is essentially a jurisdictional challenge, the Adjudicator had decided to exercise the discretion in the manner as stated in subpara 49(f) above. [54] In the premises, the Court is of the view that the Adjudicator did not act in excess of jurisdiction because, to the Adjudicator, the SFA is the best evidence or document for him as proof of the value of works done for Progress Claim No. 34 (Final). Ultimately, the Adjudicator determined that the total outstanding sum under Progress Claim No. 34 (Final) is RM1,138,712.64, this Progress Claim being one of the four claims as set out in the Payment Claim, albeit for a higher sum. Section 15(b) CIPAA: Denial of natural justice [55] At the time of the acceptance of appointment as an adjudicator, the Adjudicator has made a written declaration that he shall, among others, comply with the principles of natural justice (see s 24 CIPAA). These principles consist of the two well-recognised pillars that the Adjudicator must be unbiased and that the parties must be given sufficient opportunity to be heard. [56] In Meridian Contracts Sdn Bhd v Bauer (Malaysia) Sdn Bhd and another summon [2020] MLJU 1405, this Court said: “[44] …

In the context of s. 15(b) CIPAA, the function of the Court is to look at the manner in which the learned Adjudicator had conducted the hearing and whether he had accorded procedural fairness to Bauer: see, among others, Ireka Engineering And Construction Sdn Bhd v. PWC Corporation Sdn Bhd & Another Appeal [2019] 1 LNS 51 and the cases which were referred to by the Court of Appeal namely, Bauer (Malaysia) Sdn Bhd v. Jack-In Pile (M) Sdn Bhd & Another Appeal [2018] 10 CLJ 293 and ACFM Engineering & Construction Sdn Bhd (supra). …

… The Adjudicator’s findings of facts are not amenable to review by this Court, which does not sit in an appellate capacity: see Bina Puri Construction (supra); ACFM Engineering & Construction Sdn Bhd (supra); Ireka Engineering (supra); Guangxi Dev & Cap Sdn Bhd v. Sycal Bhd & Another Appeal [2019] 1 CLJ 592; Samado Sdn Bhd v. Kerajaan Malaysia & Another Case [2020] 5 MLRH 165; and Naza Engineering & Construction Sdn Bhd v SSL Dev Sdn Bhd [2020] 4 AMR 65. …” (see too, the useful guidelines in Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC), Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] EWHC 2218 (TCC) and Alpha Galaxy Sdn Bhd v Euro Destar (M) Sdn Bhd and another case [2021] MLJU 767 which have been applied in numerous cases involving applications under the CIPAA decided by the local courts to date). 1st Ground: Whether the Adjudicator acted in breach of natural justice by reversing the burden of proof on Wabina to adduce documentary evidence to dispute the valuation of work done in the SFA [57] Ms. WY Lim submitted for Wabina that, in relying on the SFA, the Adjudicator acted in breach of natural justice when he reversed the burden of proof on Wabina to prove and adduce evidence to dispute the valuation in the SFA although the SFA –

was not sent to Wabina prior to the filing of the Adjudication

consists of a summary of the purported works done without any details or supporting documents; and

was not endorsed, agreed or approved by Seal, the Architect and the QS. [58] The learned counsel argued that the Adjudicator did not ask himself the correct question as to the fact that the SFA was not sent to Wabina, Seal and the Architect for review, assessment and valuation, rendering it not possible for Wabina to obtain any document or to conduct any valuation on the SFA. The Adjudicator nevertheless accepted the entire SFA by simply claiming there was no evidence adduced by Wabina to show the valuation of Fulloop’s works. [59] This ground of challenge is, in my opinion, totally devoid of merit. As alluded to earlier, Fulloop had produced the SFA as evidence to support its calculation of the outstanding sum under Progress Claim No. 34 (Final). Apart from paras 70, 71 and 73 to 75 of the AD which were previously quoted, the Adjudicator said: “72) I am agreeing with the statement of Respondent that the SFA is only endorsed by M&E consultant as I only found the signature and company stamp of the M&E consultant in the SFA but not the Employer nor the Architect. However, the Respondent have not presenting to me any other document to show the valuation of the Claimant’s work done (Except the statement in Employer’s letter dated 17 April 2020, which is ‘draft’ in nature). And it is also my considered view that the M&E Consultant is the right party to carry out the valuation of the Claimant’s work done, which he had endorsed in the SFA. The M&E Consultant is the default party in PAM Contract to do the valuation of M&E work and to advise the amount of work done to the Architect for the Architect to incorporate the M&E Consultant’s valuation into Architect Valuation Certificate.”. [60] What the above excerpt shows is that, from the Adjudicator’s viewpoint, since Fulloop has produced the SFA with the Final Sub- Contract Sum of RM17,886,314.30 and if Wabina disputes this figure, then it is for Wabina to submit any other document with a different valuation of the works completed for purposes of Progress Claim No. 34 (Final). However, Wabina did not do so. In these circumstances, the Adjudicator was satisfied that Fulloop had proven the value of works done and from this sum, the amount to be paid by Wabina for Progress Claim No. 34 (Final) was derived. [61] The issue of the Adjudicator asking the wrong question and reversing the burden of proof simply do not arise. If at all, Wabina’s real complaint is that the Adjudicator had given undue weight to, or had wrongly assessed, a piece of evidence viz. the SFA. It may also well be that the Adjudicator had misconstrued this documentary evidence, had erroneously concluded on the validity of the SFA or had erred in his finding of fact and/ or law on this matter. However, all of these grievances are remediable in an arbitration or court proceeding between Wabina and Fulloop as the effect of s 13(c) CIPAA is that the AD is binding unless the dispute is finally decided by arbitration or the court. These grounds are not valid reasons to set aside the AD for denial of natural justice. 2nd Ground: Whether the Adjudicator acted in breach of natural justice by not considering Wabina's submission on the issue of cost [62] Wabina accepts sub-s 18(1) CIPAA which stipulates that the adjudicator shall order the costs of the adjudication proceedings to follow the event. Fulloop’s counsel had additionally referred to s 19 CIPAA which governs the Adjudicator’s fees and expenses and s 25(o) CIPAA whereby the Adjudicator is conferred powers to award financing costs and interest. [63] Nonetheless, to Wabina, the Adjudicator was partial when he awarded excessive and unreasonable costs as prayed by Fulloop for the preparation of the adjudication proceedings in the sum of RM97,000.00 and other incidental cost of RM2,000.00 without considering –

regulation 7 of the Construction Industry Payment and Adjudication Regulations 2014 [P.U.(A) 103/2014] (‘CIPAA Regulations’) which provides as follows: “Costs of adjudication proceedings

For the purpose of subsection 18(1) of the Act, the quantum of costs in the adjudication proceedings to be paid by any party to a dispute shall be determined by an adjudicator in accordance with all relevant circumstances including –

the complexity of the claim or matter arises from the claim and the difficulty or novelty of the issues relating to the claim;

specialized skill, knowledge and responsibility of, and time and labour expended by, any party to the dispute, its consultant, expert or representatives;

the preparation of documents in the adjudication proceedings; and

the amount or value of the adjudication claim.”; and

the dispute raised by Wabina as to Fulloop’s initially higher amount of claim premised on the Payment Claim and Notice of Adjudication, which was subsequently altered to a reduced amount premised on the SFA when Fulloop had knowledge of the SFA prior to the issuance of the Payment Claim and Notice of Adjudication. Wabina’s unhappiness centers on the fact that the total costs of RM145,347.54 as awarded by the Adjudicator includes the Adjudicator’s fees and the AIAC administrative fees which were computed based on the higher amount claimed by Fulloop in the Notice of Adjudication. [64] In this regard, I had directed for further submissions to be made after the hearing date on the assumption that the Court rejects all other grounds raised by Wabina to set aside the AD and this 2nd Ground is all that is left for consideration. In addition, Ms. K. Sheela was directed to confirm Fulloop’s argument that it is accepted practice for the original amount as claimed in the Payment Claim to be considered when determining the amount of costs to be awarded to the successful party in the adjudication. [65] In its Supplemental Submission dated 19.8.2022 (encl. 26), Wabina took pains to prepare a comparative table showing the effect of the different amounts claimed by Fulloop in the Notice of Adjudication and the Adjudication Claim on the Adjudicator’s Fees and the AIAC Administrative Fees including the 6% Sales and Service Tax (‘SST’). The said table is re-produced below: RM2,748,966.17 in Notice of Adjudication RM1,138,712.64 in

Adjudicator’s Fees (RM) 2,300,001 – 2,800,000 = 35,400 + 0.5% of excess over 2,300,000 Calculation 35,400 + 0.5% x 448,966.17 (2,748,966.17 – 2,300,000.00) = RM37,644.83 Adjudicator’s Fees (RM) 800,001 – 1,300,000 = 20,150 + 1.25% of excess of 800,000 Calculation 20,150 + 1.25% x 338,712.64 (1,138,712.64 – 800,000) = RM24,383.91

AIAC Administrative fees (RM) 20% on Adjudicator fee Administrative fees (RM) 20% on Adjudicator fee Calculation 20% x RM37,644.83 = RM7,528.97 Calculation 20% x RM24,383.91 = RM4,876.78

6% SST on Administrative fee Calculation 6% x RM7,528.97 = RM451.74 6% SST on AIAC Administrative fee Calculation 6% x RM4,876.78 = RM292.61 Total (a) + (b) + (c) = RM45,625.54 Total (a) + (b) + (c) = RM29,533.30 [66] In furtherance of its case, Wabina referred to the following documents:

the Adjudicator’s letter dated 28.9.2021 to Fulloop and Wabina’s solicitors regarding the “Proposed Terms Of Appointment & Fees” wherein pursuant to sub-s 23(2) CIPAA, the Adjudicator proposed that the terms of appointment shall be the AIAC Standard Terms of Appointment as per Schedule II of the AIAC Adjudication Rules & Procedure. The Adjudicator further stated that his fees shall be that as recommended by the AIAC in the “CIPAA Circular 02: Circular On KLRCA’s Recommended