While the construction industries stakeholders are worried about payment, the legal fraternity is rather worried about the nuances of how to “stay” and how to seek “leave” of the Adjudication Decisions (‘AD’) in court.
A ‘stay’ for an Adjudication Decision (AD), is commonly known as a suspension for the AD to be enforced, under s.16 CIPAA, pending ‘setting aside’ by the court or final determination by the court or in arbitration. Whereas, ‘enforcement’ comes under s.28 CIPAA, the other end of the matrix. Thus the question, whether an AD, after having been enforced as an Order of the Court, can be stayed, and if so, would the Federal Court decision in View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd [2018][1] be overruled? Such is the “leave” questions to the Federal Court in ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd Anor [2023][2]. Follows up, in the series of cases[3], the court will inclined to dismiss the stay when there is no clear or unequivocal error in the AD; even if there is an ongoing arbitration or litigation; and when there is no real risks of the inability to repay the adjudicated sum. However, as in another situation[4], a conditional stay maybe granted if court finds there is real risks of the inability to repay the adjudicated sum. In summary, unless otherwise there is a gross injustice, the court tends to dismiss the stay when the AD has been upheld earlier. ------------------------------------------- [1] MLJ 22; [2019] 5 CLJ 479 [2] 4 MLJ 720 [3] Ahmad Zaki v Versalink Marketing [2023] CLJU 1193; AMD Construction and Engr v LDE Projects Anor [2023] CLJU 1651; Wabina Constructions v LDE Projects Anor [2023] CLJU 1651; BMG Global v Juang-Antara Bina [2023] CLJU 2407; Meridian Contracts v Baeur (Malaysia) Anor [2023] MLJU 3043; Classic Series v Ng Lung Yang [2023] CLJU 2066 and Land Success Engineering v Amindo Packaging Anor [2023] MLJU 3146: no arbitration commence. [4] Mudajaya Corporation Bhd v KWSL Builders Sdn Bhd & Anor [2023] 6 CLJ 770; Samsung C&T Corp UEM Construction JV Sdn Bhd v Eversendai Constructions (M) Sdn Bhd [2023] CLJU 2319
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AbstractThis article aims at investigating the inception; growth; and recent development of the role of adjudication in the Malaysian construction industry, from a perspective of an adjudicator. It commences with the issue, whether the creation of the Construction Court and Construction Industry Payment Adjudication Act 2012 (‘CIPAA’) resolved the construction industry’s conundrum? Looking at its inception phase, the industrial stakeholders with Construction Industry Development Board (‘CIDB’) as the forerunner since 2003, has championed the course, only to be ‘derailed’ by the Bar Council (‘BC’) with its ‘hypothetical doubts’ as to the viability of the CIBD’s version of CIPAA. Together with the AIAC, the BC lobbied the AC’s Chamber to implement the AIAC’s version of the CIPAA legislation, leaving a ‘bitter after-taste’ to the CIDB’s earlier efforts, now begging the question, how CIPAA fares in its growth stage? Next, pondering at the astronomical growth of CIPAA with 89% success rate, 4-years into implementation of CIPAA, it has since evolved into ‘mini trials’, ‘document only arbitration’ or even ‘fast track or expedited arbitration’. In a nutshell, the findings of View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd[1] hereinafter (‘View Esteem’), reverses a body of jurisprudence developed in those 4 years making CIPAA complicated, inefficient and lost its focus. This follow by the peeling into the current state of the CIPAA, to draw upon the correct definition of the problem such as complication; monopoly; and over legalistic, generating the ‘push effect’ for the construction stakeholders away from CIPAA. Notwithstanding the pro-adjudication approach taken by the court. Hoping for solutions that will almost surface within, in the turbulence of the ‘ocean of legal-entanglement’, stakeholders are forced to look back to the ‘star’ for guidance and to salvage the ‘compass’ that had been so conveniently casted away, to guide the CIPAA vessel to its next destination of glory if any, in the following area of structural, procedural and institutional reform, begging the question, what can really be done? ------------------------------------------------------------ [1] [2019] 5 CLJ 479; [2017] 1 LNS 1378. Introduction Abraham observed that backlog of construction dispute to be resolved by the Malaysian courts were staggering snail-paced and costly albeit the lacked of official statistic.[1] As reported by Balogun, over 300,000 construction disputes are pending in courts (2006-2008).[2] This alarming situation as argued by Varghese, is similar to India.[3] The World Bank went as far as to find a solution to mitigate this.[4] One way, as suggested by CIDB[5] is ‘to emulate TCC courts[6] of the UK’[7], by having Malaysian’s own Construction Courts and such was materialised in 2014, 2-years after CIPAA[8] was conceived to resolve construction dispute, in a rough justice manner.[9] However, does the creation of the Construction Court and CIPAA resolved the construction industry’s conundrum? The Inception In reality, NO. According to CIDB, before the conceived idea of statutory adjudication, as promoted by Lim, has been ‘pursued by the Asian International Arbitration Centre (‘AIAC’)’[10] in the form of CIPAA,[11] there were ‘fears’ casted upon by the Bar Council (‘BC’), as argued by Ali, inevitably forced CIDB to provide for solutions to these 19-questions[12] hereinafter, (‘hypothetical doubts’), pointing to BC, being not a party to the steering committee at that time[13], and such one may presume as to why such doubts had been casted. In attempt to pursue such undertakings by the CIDB, as early as 2003[14], Ali argued that such doubts, which were hypothetical, can be overcome as the positive effects of CIDB’s version of CIPAA to the construction industry, override these ‘hypothetical doubts’[15] that Lam finds them ‘unsuitable for a number of reasons’[16]. Lam further argued, the CIDB’s draft included ‘a definition of construction contract of a dispute which could have had the effect of having a hillside collapse like Highland Towers being referred to the Adjudicator for a decision in a matter of weeks’; also ‘subjecting the individual house owner to an adjudication process, ignoring that it is the house owner who generally complains’; and most importantly, ‘CIDB is in control of registering and appointing adjudicators’.[17] How true were these doubts? Critically, Lam pointed, under the aegis of the AG’s[18] chamber and together with the AIAC, the improved formulation of CIPAA was materialised in 2012, enforced in 2014[19] and the rest, were said to be history, leaving a ‘bitter after-taste’ to the CIDB’s earlier efforts since 2003.[20] At this juncture, in responding to Lam’s observation and many others in the BC, Ali and Sr. Lim Chong Fong [as he was known then, now a HC Judge] via the CIDB ‘took the bull by the horns’, by providing the solutions, condensed from the 19 to these, as the followings[21]: --------------------------------------------------------------------------------- [1] Zhen, ‘A specialised Construction Court, finally?’, (4 Mar 2013), <https://www.malaysianbar.org.my/article/news/legal-and-general-news/legal-news/a-specialised-construction-court-finally>, accessed 16 Feb 2022. [2] Balogun and others, ‘Adjudication and arbitration as a technique in resolving construction industry disputes: A literature review’, (2017), ACSEE. [3] Varghese, ‘Transforming India as a Centre for International Arbitration: Recommendation for Reforming the Arbitration Law of India’ (LLM, RGU, 2018), p11. [4] World Bank, ‘Malaysia: Court Backlog and Delay Reduction Program, A Progress Report’, (Aug 2011), <https://openknowledge.worldbank.org/bitstream/handle/10986/16791/632630Malaysia0Court0Backlog.pdf?sequence=1&isAllowed=y>, accessed 16 Feb 2022. [5] Construction Industry Development Board (‘CIDB’). [6] The Technology and Construction Court (“TCC”) is a specialist court, which deals principally with technology and construction disputes. [7] Technology and Construction Court, <https://www.gov.uk/courts-tribunals/technology-and-construction-court>, accessed 16 Feb 2022. [8] Construction Industry Payment and Adjudication Act 2012 (‘CIPAA’). [9] Edge Prop, ‘First two Construction Courts Launched’, (15 Apr 2014), <https://www.edgeprop.my/content/first-two-construction-courts-launched>, accessed 16 Feb 2022. [10] Balogun [n 4]: citing Ali, ‘CIPAA: Reducing Payment-Default and Increasing Dispute Resolution Efficiency in Construction’, (2006), CIDB-WG10. [11] Lim and others, ‘Adjudication of Construction Dispute in Malaysia’, (Lexis Nexis, 2014) [12] Ali and Lim, ‘A Report on the Proposal for A Malaysian Construction Industry Payment and Adjudication Act: CIPAA’ (Dec 2008), CIDB, p.14-23. [13] Ali [n14], p.12. [14] Ali [n14], p.4-5. [15] Ali, ‘A Construction Industry Payment and Adjudication Act: Reducing Payment-Default and Increasing Dispute Resolution Efficiency in Construction’ (2006) MBAM Journal, part 1 and 2, p.4-22. [16] Lam and Loo, ‘The Statutory Framework and Features of the CIPAA Act 2012’ (2018 Sweet and Maxwell), P.13, [1.036]. [17] Lam [n18], p.13. [18] Attorney General (‘AG’) [19] CIPAA 2012, s.1(2); Federal Government Gazette PU(B)124, 14 Apr 2014. [20] Lam [n18], p.13. [21] Ali [n17], p.4-22. Since 2014, there has been an astronomical increase in CIPAA adjudications related feedstock of cases in courts[1], as compare to the other forms of ADR[2], surpassing even arbitration. It now begs the question, how CIPAA fares in its growth stage?
The Growth AIAC (2016) statistic showed, CIPAA has since grown to be an extremely successful for Claimant to retrieve its unpaid sum with 89% success rate.[3] Such landmark success rate eventually turning the acronym ‘CIPAA’ into a verb such as, ‘I will CIPAA you’. It has come a point, as rightly observed by Chan, ‘one may even be discouraged upon receiving the Payment Claim’ to even serve its Response.[4] What if a party refuse to participate? What are the consequences of failing to participate in an adjudication?[5] Simple as these questions maybe, in Chan’s observation, it is potentially a ‘trap’ for setting aside under s.15 of CIPAA for a ‘novice adjudicator’.[6] Setting aside appears to be the norm lately, although within a narrow ambit. The early case law as in Wong Huat Construction v Ireka Engineering & Construction[7], it was held that ‘setting aside’ restores all parties to their original positions and parties are free to adjudicate, shortfall of foreseeing complication whether can a Decision be severed, as to only enforce the enforceable part? Naza Engineering v SSL Dev[8], held that court has no power to set aside a part of the Decision, relying on BM City v Merger Insight[9]. Finding in contrast in JEKS Engineering v PALI PTP[10], the court has power to severe any part of the Decision. What is taken to be settled are, one, court could not set aside Decision on grounds of mistake in facts and/or in law; the court will not re-evaluate the evidence; and any reasons, brief as they may be, is taken as the adjudicator’s justification. Revisiting Chan’s earlier assertion, these traps potentially evolved into ‘guerrilla tactics’[11] as in (1) application to extend time for submission citing not having to receive client’s instruction, failing which, counsel will resign; (2) adjudicator risks breaching natural justice by not allowing parties to ventilate the next course of action, by proceeding ex-parte; and (3) totally ignore CIPAA entirely, to deal later, claiming fraudulent, although such has been given the strictest proof.[12] After 4-years into its success story, the Federal Court’s (‘FC’) decision in View Esteem v Bina Puri Holdings[13] (‘View Esteem’) throw the ‘pendulum of success’ into ‘disarray’, allowing matters raised beyond the Payment Response to be adjudicated.[14] In Foo’s observation, such decision, ‘reverses a body of jurisprudence developed in those 4 years, as well as the general understanding and practice of the industry’.[15] Such findings accentuate, whether the procedures put in place suitable for complex claims, which could revolve around complex questions of fact and law, which is now a reality.[16] Similarly, adjudicators are forced to decide on ‘Final Account’, a subject aptly for litigation or arbitration.[17] In Martego v Arkitek Meor & Chew[18] (‘Martego’), CIPAA applies to matter pertaining to ‘final claims’ where the term ‘progress payment’, as interpreted by the courts, was wide enough to include the ‘final payment’, so long there are payment claims relating to construction contract. The same ought to be said, Payment Claim are revisable and it does not bound by the amount set out in the Payment Claim.[19] Apparently, courts would not have understood the concerns, ‘given the short time period within which to handle a claim, is the possibility of unjust, incorrect and aberrant decisions real?’[20] Both CIDB and the AIAC only contemplated, ‘interim payment issues’ not ‘final account’, but findings in Martego accentuated Lam’s concern, ‘the effect of having a hillside collapse like Highland Towers being referred to the Adjudicator for a decision in a matter of weeks’.[21] Also, ‘it has been suggested by PAM[22], but was not accepted that lawyers would not be allowed to act as adjudicators or represents parties to disputes referred to adjudication’.[23] As Harban observed, with involvement of lawyers, CIPAA has evolved into ‘something else’ being ‘complicated and overly legalistic’. Harban pointed out, ‘CIPAA was meant to assist lay persons so that they can be self-represented nevertheless, this has been complicated with the direct involvement of legal practitioners’[24], eventually led to various complications that in Foo argued, ‘reverses a body of jurisprudence developed in those 4 years, as well as the general understanding and practice of the industry’.[25] As apparent, these ‘legal charade’, dressed up as the questions of law, i.e. Retrospective versus prospective[26]; Non-certified payment[27]; Winding up conundrum[28]; Singular versus Multiple Contract[29] and of many more others[30]. Common procedural matter such as ‘notice deemed served’, became an unsettled affairs, i.e. proof of mailing is not the proof of receiving following Yap Ke Huat v Pembangunan Warisan Murni Sejahtera[31], notice cannot be deemed served with AR-Registered, also in Goh Teng Whoo v Ample Objectives[32], AR-Registered does not conclusively mean, the recipient has received the same. AR-Registered continues to be interpreted as service are ‘presumed’, until the contrary is proven.[33] These are legal complexities that baffled lay ‘technical adjudicator’. CIDB initially has a wider view to include ‘all disputes and not just restricted to disputes related to payment issues’[34]. Lam argued, by such, CIDB’s proposal will include ‘subjecting the individual house owner to an adjudication process, ignoring that it is the house owner who generally complains’.[35] This subsequently, led to the dilemma for PAM, as contained within its Standard Form of Building Contract (‘SFBC’), a provision for ‘contractual adjudication’[36] which initially a multi-tier arbitration clause which Rajoo pointed, is a misnomer against statutory mandated adjudication, CIPAA.[37] Such conundrum potentially left a lacuna, as in s.3 of CIPAA: Non-Application, whether such cl.36 of PAM SFBC 2018 will also be construed as ‘contracting out’ of CIPAA, based on the doctrine of ‘free to contract’? In Ranhill E&C Sdn Bhd v Tioxide (Malaysia) Sdn Bhd[38], it was held that the terms of CIPAA as a legislation prohibits the parties from contracting out of its application, notwithstanding that there is no express term within the Act. Any forms of contractual arrangement for dispute resolution would not exclude the application of CIPAA. Thus, the issues in relation with s.3 of CIPAA: Non-Application, has no other avenue for recourse, beside arbitration and litigation. The current state of CIPAA being compulsory, in essence, deviated from the original intend of CIDB when it attempts to address, ‘if parties decide not to opt to exercise their rights to adjudication, they may opt for other dispute resolution’, to include adjudication by contract.[39] Further, non-application of CIPAA, eventually led to ‘split-hair’ arguments as to whether, ‘lost and expense’ (‘L&E’); ‘liquidated damages’ (‘LD’); and ‘extension of time’ (‘EOT’), fall within the jurisdiction of CIPAA? These issues are not entirely payment issues, per se. In Syarikat Bina Darul Aman v Government of Malaysia[40], it was held that adjudicator must decide on L&E claims as such claims came within the ambit of CIPAA. These claims were due to the delay in completion of works and therefore payable as part of the amount claimable for the additional costs incurred for work. However, not all L&E claims are within the purview of CIPAA, i.e. claim for special damages. Then again, this matter is truly unsettled, if the L&E is not a provision of the contract, it cannot be awarded by the Adjudicator.[41] In another case, the High Court (‘HC’) held L&E is not a ‘payment’, thus not allowable in s.4, CIPAA[42]. In yet, another case, notice requirement is only apply to loss that is ‘beyond reasonably contemplated’.[43] Despite these hypothetical doubts, 4-years into implementation of CIPAA, Harban argued, ‘CIPAA being complicated with the direct involvement of legal practitioners, now lengthened because the decision is subjected to appeal all the way to the FC. Due to the complexity and lengthy processes, smaller industry players are no longer benefiting from the adjudication process; these players are intimidated by the complicated process; making adjudication having little difference compared to litigation or arbitration’.[44] In a nutshell, CIPAA is complicated, inefficient and lost its focus.[45] It has since evolved into ‘mini trials’, ‘document only arbitration’ or even ‘fast track arbitration’, for instance, holding to the principle in View Esteem, Respondent has the right to ‘throw in the kitchen sink’[46] at any point in time during the progress of CIPAA, eventually leading to submission of voluminous ‘expert reports’ and seek for hearings to be held, which in MRCB Builders v Wazam Ventures[47], such was not allowed but in Guang Xi Development v Sycal[48], failure to allow for a hearing in adjudication is contravening natural justice. Beside these ‘legal confusions’, CIPAA in its inception, as identified by CIDB is to ‘apply to all parties in the construction works, consultancy services and construction supplies in both government and private sectors’.[49] It is not only benefitting the contractors as ‘CIPAA can lead to better practices, greater integrity and efficiency’.[50] In reality, the unfolding events as prescribed by Harban as CIPAA is complicated, inefficient and lost its focus[51], brought with it ‘adverse consequences to the contractor and consultant’.[52] Now, CIPAA remains as seen as ‘toothless tiger’ or ‘winning on paper’ under such consideration. Foremost, as Chan asserted, not many aware that CIPAA is a 2-stage approach to successfully mount a claim, where (1) a favourable decision must be obtained; and (2) such decision is enforced in the HC.[53] Such 2-stage effects are not only ‘unaffordable’ it goes against the fundamental principle of CIPAA for ‘cheap rough justice’. BC’s hypothetical doubts of what are the remedies provided in CIPAA in the event of payment disputes’[54], is irrelevant, as ‘application to the courts, to obtain the writs of seizure and sale; garnishing proceedings and so on’ are expensive endeavours and rightly, CIDB pointed out that ‘lawyers are far from being out of work’ in the attempt to contemplate is ‘CIPAA will lead to a reduction in arbitrations and litigations and corresponding work for the lawyers’.[55] Whether with CIPAA, ‘will payment-default no longer be an issue’? The textbook answer, ‘no one can guarantee payment defaults will no longer be an issue’ remains relevant.[56] Thus, the next rationale question is why? Perhaps, revisiting Lam’s contention, as to how relevant are these hypothetical doubts against the unfolding events post 2014, which is no longer hypothetical? The Recent Development CIPAA is a going concerns and it is going to stay for another decade or so. Holding to Harban’s assertion, CIPAA is complicated, inefficient and lost its focus[57], it is no longer a ‘affordable’, ‘fast and furious’ access to ‘rough justice’. These ‘rough justice’ of ‘pay first, argue later’, as Justice Lee Swee Seng pointed out, is now, ‘fine justice’ of ‘argue, argue more and pay much, much later’.[58] J. Lee quick to make reference to Steve Jobs’s, quote, ‘if you define the problem correctly, you almost have the solution’ as a way forward for CIPAA. So, what the problem is? (1) Complication: In appointing adjudicator, as in Zana Bina v Cosmic Master Development[59], it was held that party who participated fully in an adjudication proceeding without raising any objection as to the validity of the adjudicator’s appointment during the proceeding was estopped from raising the objection subsequently in its setting aside application. Yet, the dust is not yet settled, as the issue arises whether the parties must first attempt to agree on an adjudicator before a request for nomination from the Director of AIAC? Short answer, no.[60] In suing the consultant architect, arising from a recoupment of a failed CIPAA adjudication in Leap Modulation v PCP Construction[61], the losing party commence another proceeding suing the architect in L3 Architects v PCP Construction[62], citing the classic common law case of Sutcliffe v Thackrah[63]. This set in motion the precedent that consultants are ‘immune’ from being sued by contractors as unlike in Sutcliffe, there is no privity of contract between the contractor and the architect, and thus there is no proximity as to the architect to render its duty of care. In understanding technical term, such as ‘storey’ to also include basement, as in Tan Sri Dato' Yap Suan Chee v CLT Contract[64] the meaning of storey was referred to the Uniform Building By-laws 1984 to also include basement, thus not necessarily floor above ground. Similarly, the term ‘occupation’ must be given the widest interpretation to include residential or commercial as in Liew Piang Voon v WLT Project Management[65]. (2) Monopoly: On the absent of the Director to appoint adjudicator, there has been a vacuum in the Directorship of the AIAC[66] when the former AIAC-Director was charged for alleged Criminal Breach of Trust (‘CBT[DYTW1] ’), leading to his resignation.[67] In this case of Sundra Rajoo v Minister of Foreign Affairs[68], Rajoo has since been acquitted due to his immunity[69] having being defended by AALCO on the basis of ‘exterritorial’[70], ‘functional necessities’[71] and ‘representative’[72].[73] However Rajoo’s case[74] demonstrated the conundrum faced by the Malaysian government, as argued by Thomas, such an immunity has placed the former AIAC-Director, above the law even above the Ruler.[75] But such impasse has left a dent in AIAC, being the sole appointing body for CIPAA adjudication, thus as Lam’s concerned, ‘CIDB is in control of registering and appointing adjudicators’[76], is in actual fact has no implication whatsoever, as it is irrational to actually vested upon a single appointing body for such a noble task. On the AIAC’s locus standi, as more cases move up to the court, as in Leap Modulation v PCP Construction[77], the court has gone as far as to interject the manner and efficacy of CIPAA in dispensing ‘rough justice’ and to the nature of AIAC being a ‘foreign entity’ with very little or no ‘check and balance’ self-regulation, had a monopoly grip on the dispensation of justice in Malaysia, no matter how ‘rough’ it is.[78] The AIAC has since taken the same matter to the Federal Court to have this portion of the judgement expunged.[79] The fate of CIPAA, while having put ‘off tangent’ from its initial purposes with more and more inconsistent and unpredictable judgements from the court, was plagued by alleged corruptions resulted in the former Director of the AIAC being replaced, based on the detailed insider content of just a ‘poison-penned’ letter.[80] On the Director’s locus standi, in Mega Sasa v Kinta Bakti[81], the plaintiff seeks to set aside the adjudication decision on ground that the adjudicator’s appointment was not valid for the reason that the appointing director of the AIAC has no locus standi in view that his position as the Director of AIAC is not legitimate in accordance to the Asian African Legal Consultative Organisation (‘AALCO’) Host Country Agreement. However, the HC held that CIPAA does not violate Article 8(1) Federal Constitution. It also rejected the challenge, that CIPAA is a ‘usurpation of the judicial power of the court’ in violation of Article 121 Federal Constitution, reason being CIPAA is a judicial function and not a replacement of the courts' judicial power. It further affirmed that the acting director had the power and duty to appoint the adjudicator, regardless if his position as the ‘director’ has yet to be finalized. (3) Over Legalistic: On answering the right question wrongly and the other way around. Courts are not concerned with merits or correctness of the decision.[82] This include, erroneous assessment of documentary evidence.[83] Therefore, Adjudicators are not bound by the disputes referred to them in the exact way as pleaded by the parties, especially with regard to the remedies sought.[84] However, the recent JKP v Anas Construction[85] holds that adjudicator must only and narrowly look at the actual contractual provision pleaded by the parties and not stray away with its own finding, even if in his opinion there are other contractual provisions that are more aptly relevant to the claim, as provided as evidence, failing which contravening natural justice. Similarly, the adjudicator must not in his own effort, investigate onto the validity of the evidence presented although CIPAA allows for inquisitorial proceeding as demonstrated in Cescon Engineers v Pesat Bumi[86]. The sum of these account for answering the wrong question rightly, thus where is the ‘fine line’? Similarly, there were risks where ‘expert construction adjudicator’ not schooled in law, ‘make new contract provision’ for the parties, without even realising it[87], thus how to draw the line of committing a ‘mistake in law’ and yet not fatal? On being the ‘legal playground’, CIPAA originally intended to be ‘fast and furious’ dispensation of justice by construction expert to construction stakeholders, but it has since morph into a ‘legal arena’ as ‘mini arbitration’, ‘mini trail’, ‘document only arbitration’ or even ‘fast track arbitration’, as J. Lee implied, it is ‘fine justice’ now. AIAC (2021) latest statistic shows, CIPAA from its humble beginning of 29 cases (2014), peaked to 816 cases (2019) and then dropped to 530 (2021), indicated the downhill movement of CIPAA, as Harban observed to be unaffordable, complex and ineffective[88], where majority of the parties’ representatives are law firms.[89] There may be truth, as Ali argued, ‘lawyers (experience) can be helpful in addressing issues in construction arbitrations or mediations while some may be unhelpful as insinuated by PAM and the NSW Act’.[90] Ali suggested that ‘training for robust adjudicator with high standard is needed’, yet the question is can such be outsourced instead of being monopoly by a single authority? More aptly, unhelpful lawyers are promoting robust ‘guerrilla tactics’ in taking a ‘second bite of the cherry’, post adjudication response, by seeking for a hearing to present the ‘questions of law’ previously not canvass, citing View Esteem and ‘hold ransom’ of the adjudicator citing Guang Xi Development v Sycal[91], failure to allow for a hearing in adjudication is contravening natural justice. In another adjudication case[92], a party representative represented by a law firm, requesting the adjudicator to ascertain the quantum of work done without even providing the site progress report or reliable consultant’s certification and attempt to set aside the Decision, citing the adjudicator failed to prompt the party as to what documents required.[93] This, again a classic example of lawyers, not technically trained, baffled by the technical construction requirements and norms. On being a robust defender, another kind of ‘guerrilla tactics’ employed as robust defence is the systematic use of Statutory Declaration (‘SD’) in lieu of ‘real concrete evidence’, as Premaraj observed, ‘to be the weakest form of evidence’[94] mirrored one being observed in Cempaka Majumas v Ecoprasinos Engineering[95], where the court finds, the adjudicator has the power not to take into consideration of the SD. Such tactics has through time, evolved to even launching a ‘police report’ citing the possibility of fraud, to compel the adjudicator that he has no jurisdiction to preside over the matter involving criminality, which is again, unfounded as the ‘presumption of innocent’ is the underlying doctrine of natural justice.[96] On being territoriality, in the case of Tekun Cemerlang v Vinci Construction Grands Projects[97], West Malaysia lawyers are prohibited to represent disputants in CIPAA Adjudication where the seats are in Borneo.[98] The repercussions spark suggestion that unlike arbitration, statutory adjudication has no seat.[99] Such opinion rely on the provision of CIPAA[100]. It would have been ‘less complicated’ if lawyers are not involved, as rightly demonstrated in Cempaka Majumas[101] where the court held the position of a ‘Claim Consultant’ as party representative did not contravene s.8 of the Sarawak Advocates Ordinance. On over complying with timeline, sheer confusion as to the meaning of ‘Working Day’ previously construed as where the site is located, instead the HC held that the ‘Working Day’ for the delivery of the Adjudicator’s Decision must be construed as the ‘working day’ of where the Adjudicator’s office is located.[102] This area of law is unsettled. As to the definition of “Date” in s.5(2)CIPAA must necessarily mean “a calendar date or a statement by which the due (calendar) date for payment is capable of being identified” and not simply, “immediate” for “instantly”, “promptly”, “forthwith”, “at once” or “straight away”.[103] On another matter, commencement of adjudication is upon appointment of adjudicator as compared to serving of the notice of adjudication.[104] The issue is made murkier when it is textbook provision that CIPAA has a strict timeline compliance, i.e. in Skyworld Development v Zalam Corporation[105] a day late ultimately rendered the Decision void, but in another case, adjudicator must not act fast to quickly dismiss the adjudication response if it is served even a day late, citing View Esteem. Whereas in Utama Motor Workshop v Besicon Engineering Works[106], the ‘hair splitting’ argument of term “make” is distinguishable from the word to “deliver” and to “release”, as the court held that when an adjudicator “makes” an adjudication decision is a question of fact and very much depends on the date stated on the first and last pages of the adjudication decision.[107] This applied to some instances where the site in question is ‘outstation’ and via AR-Registered Post, no one from the other side has attempted to receive the Hard-copy Decision, yet the manner of serving notices hold. Yet another case, in Itramas Technology v Savelite Engineering[108], the court held that there was actual bias by the Adjudicator for failing to give effect to the MCO[109], thus the question whether it is important to stick to the strict timeline of CIPAA or to allow for ‘reasonable’ flexibility? On being ‘flip-flopped’, in MIR Valve v TH Heavy Engineering[110], it is held that ‘ship building’ contract is excluded from CIPAA within the meaning of “construction work”. The similar judgment is held for YTK Engineering Services Sdn Bhd v Towards Green Sdn Bhd [2017], where a shipping contract or a mining contract does not fall within the meaning of “construction work” under s.4, CIPAA. But, in a platform-anchored into the land, is adjudicate-able[111], where interestingly J. Lim Chong Fong, then held, as observed by Sandrasegaran and another, ‘he was (1) not bound by his own prior views [inclusive of the quoted passage in Mir Valve which he was referred to]; and (2) capable of adjudging the case impartially despite the aforesaid’.[112] The issues and concerns raise here as the recent developments, are not exhaustive, as CIPAA has enter into its ‘volatile zone’, plagued with multitude of problems that at any one time, the construction stakeholders including the legal fraternity will dispose-off CIPAA for litigation and or arbitration, not discounting the birth of ‘expert determination’ on the Malaysian soil, where it is currently at its infancy, as cited by Rajoo, is ‘without any legal-baggage’, straight forward without a need for ‘reasoned decision’, even more ‘faster and more furious’ and legally binding.[113] The trend of CIPAA, as observed by COA J. Lee Swee Seng, at the KL HC seeking to be set aside and or enforced, under s.28, CIPAA, as of 30 Sep 2022, allowed (58%), disallowed (11%) and discontinuation (22%); while seeking to be set aside and or enforced, under s.15, CIPAA, as of 30 Sep 2022, are allowed (11%), disallowed (50%) and discontinuation (32%); and set aside and or enforced, under s.16, CIPAA, as of 30 Sep 2022, are allowed (4%), disallowed (35%) and discontinuation (38%),showing a pro-adjudication approach taken by the court.[114] Perhaps it is also timely to revisit CIDB’s Initial Proposal, for a solution in structural, procedural and institutional reform of CIPAA. Conclusion This discourse starts by asking, does the creation of the Construction Court and CIPAA resolved the construction industry’s conundrum? The discussion thus commence with looking at the ‘roller coaster’ of long hauled ‘gestation’ since 2003 to make CIPAA a reality in 2014, where the implemented version was not as envisioned by the construction stakeholders but by the legal fraternity with the AIAC, all that came about from the ‘hypothetical doubts’. Further discussion pointed to the growth stage that witnessed the ‘disjointed’ comprehension of this piece of jurisprudence as ‘design intended’ by the AIAC with that of another version as interpreted by the upper courts, notably precedent set in View Esteem, changing the course of CIPAA into ‘disarray’. This follow by peeling into the current state of the CIPAA ‘affairs’ coupled with ‘incidental events within AIAC’ and the effects of the pandemic, to draw upon the ‘correct definition of the problem and with hope, the solution will almost surface within’ as predicted by Steve Job. So, what the problem is, but of (1) Complication; (2) Monopoly; and (3) Over Legalistic, generating the ‘push effect’ of the construction stakeholders away from CIPAA notwithstanding the pro-adjudication approach taken by the court. With the amount of stockpile of cases in court, as compared to the other forms of ADR, it is testimony of the amount of curial intervention invested into CIPAA. So, does the creation of the Construction Court and CIPAA resolved the construction industry’s conundrum? Obviously, NOT. Now, in the turbulence of the waves in the ocean of law, we are forced to look back to the ‘star’ for guidance and seek the ‘compass’ that we had so conveniently cast away, to guide the CIPAA vessel to its next destination of glory in the following area of structural, procedural and institutional reform, asking the question, what can be done? Not exhaustive as this may be, the followings are the area we could improve on: (1) Structural Reform On triangulated relationship[115], among curial intervention, the disputing party and the adjudicator, it is important for the court to wholly submerged into the core objectives of CIPAA, identified as the 4 key features in the CIDB’s version[116], where the interpretation of the Act takes into the perspective of ‘rough justice’ and not ‘fine justice’, in the hope that the decision as in the View Esteem be reversed. Having considered that, the issue on res-judicata[117], as in ‘procedural res-judicata’ must be eliminated as CIPAA is only temporary finality, but in Samsung C & T Corporation v Bauer[118], the doctrine applies to where the portion of the claims that had been adjudicated must not be re-adjudicate.[119] Similarly so, this doctrine apply to presentation of documents, previously not presented.[120] Similarly, technical issues best resolved by technical people, excluding lawyers if the other party is not represented by lawyer[121] and adjudicators are technical professionals that need to be legally trained.[122] In that manner, over legalistic issues as mounted in Integral Acres v BCEG International[123] would not have surfaced in the first instance. Coupled with this, there should be decentralisation of training and appointing of adjudicator via the various institution of the construction stakeholders[124], also to include publishing of the sanitised version of the Decision, to add to the feedstock of knowledge in adjudication[125]. (2) Procedural Reform On streamlining and shortening of the procedure and time of delivery of Decision, mirrored the draft SOPL (Hong Kong)[126], both the Payment Claim or Response, are considered the Adjudication Claim and Response as there is only Claim, Response and Reply with no further ad hoc mechanism required.[127] The current curial discouragement of hearings[128] and rejoinders[129] coupled with a simple yet ‘bullet proof’ approach to making the decision[130] in CIPAA must be maintained, i.e. suffice to say, ‘[incline] to agree/disagree or persuaded/not persuaded’ as reasons, as court held finding of facts cannot be challenged[131]. On putting a limit for adjudication. CIPAA must not be a ‘forum convenience’ to contemplate complex issues such as ‘final account’[132] and should well deal with all matters interim in nature[133], bar from adjudication upon issuance of certificate of substantive completion or practical completion, leaving the rest for arbitration or litigation. There should also be a cap value of dispute as Harban argued, the current adjudicator’s fee enshrined in Act are downright discouraging[134] and only a dispute reaching a certain threshold can be adjudicated and such also include properties owned by a single individual or for its own dwelling at any storey[135]. Similarly so, the Act should allow the creation of an stakeholder’s account where the disputed sum must be mandatory deposited prior to adjudication[136], as this will once and for all encouraged ‘pay first argue later’[137], hopefully achieving the objective that payment default is a matter of the past[138]. Learning from the pandemic, email communication must be mandated and any timeline, be best taken to be flexible within the 100-days framework[139]. Where permitted, contractual adjudication must be allowed as in the construct of the DRS/DRA[140], in line with the other ADR mechanism and in other word, this Act can be contracted out provided party has pre-agreed to any forms of contractual adjudication[141]. (3) Institutional Reform On institutional intervention, AIAC could maintained its role, instead of overseeing the training, appointing and administering CIPAA adjudication, to making policy and monitoring the other allied institutions that have contracted out with such role of the training, appointing and administering CIPAA adjudication, while constantly provide a seamless platform with the judiciary to iron out any ‘wrinkles’ in the interpretation of the Act, while collecting annual prescription from the outsourced institutions. The inclusion policies will mutually benefitted construction stakeholder institutions and not looked upon as a ‘legal playground’ befitting only the legal fraternity. Such is glaring when the AIAC has stopped providing information pertaining to the professional background of adjudicators empanelled with the AIAC, in 2016 indicated lawyer (177); Engineer (59); Architect (11); QS (51); and Others (65), indicating an imbalance participation of technical people in adjudication.[142] These arguments and proposals, as put forward, are not exhaustive as all kinds of issues are now, pushed back to the court for decisions, aptly taken as the ‘knowledge gap’ or limitation for this critical observation; also not limited to the fact and caveat that this is not a legal advice and the views made in this articles are of the personal view of the author, made for academic purposes without commercial value, based on published materials. ----------------------------------------------------------------------------- [1] Lam, ‘Latest Development in CIPAA and Adjudication Law’, (20 Nov 2021), L2-series: reported 2018-2021, +200 cases reported and 2020 alone, +100 cases reported, far exceeded arbitration case report; AIAC Annual Report 2019-2020: Oct 2021, 200 reported cases in the HC; 2020, 100 reported cases in the HC; 537 cases registered with the AIAC. [2] Alternative Dispute Resolution (‘ADR’). [3] Cheang, ‘A Study of the Effectiveness of the Malaysian CIPA Act vis-à-vis the Impact of Oversea Construction Payment Legislation on their Respective Construction Industries’ (BSc.QS, 2017, UTAR), p.36: citing KLRCA Annual Report (2016). [4] Chan, ‘CIPAA update – A case of creeping complexities?’, (3 Jul 2019), <https://www.cipaamalaysia.com/blog/cipaa-update-a-case-of-creeping-complexities>, accessed 1 Nov 2022. [5] Ali [n17], p.4-22. [6] Chan, ‘Test for Bias Against an Adjudicator’, (9 Aug 2021), <https://www.cipaamalaysia.com/blog/test-for-bias-against-an-adjudicator>, accessed 1 Nov 2022. [7] [2018] 1 CLJ 536. [8] [2020] 9 MLJ 499 [9] [2016] MLJU 1567. [10] [2021] 9 MLJ [11] ADJ-4341-2022; ADJ-4374-2022 [12] Rosha Dynamic Sdn Bhd v Mohd Salehhodin bin Sabiyee & Ors and other cases [2021] MLJU 1222 [13] [2017] 1 LNS 1378. [14] Foo, ‘CIPAA Adjudication: What has Changed since View Esteem Sdn Bhd v Bina Puri Holdings Bhd’ (27 Sep 2018), <https://www.ganlaw.my/embrace-the-storms-of-the-movement-control-order-mco-2/>, accessed 1 Nov 2022. [15] Ibid. [16] Ali [n14], p.20: Question 13. [17] Ali [n14], p.17: Question 9. [18] [2017] 1 CLJ 101: The Federal Court in its grounds of judgment dated 1 August 2019 in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd decided on important points of law on adjudication and final payments under a construction contract. https://themalaysianlawyer.com/2019/08/13/case-update-federal-court-decides-on-final-payments-adjudication/ [19] Integral Acres Sdn Bhd v BCEG International (M) Sdn Bhd and other cases [2021] MLJU 1889 [20] Ali [n14], p.20: Question 13. [21] Lam [n18], p.13. [22] Pertubuhan Arkitek Malaysia [Malaysia Institute of Architects] (‘PAM’). [23] Ali [n14], p.21: Question 16. [24] The Malaysian Lawyer, ‘CIPAA: Adjudication Leading the Way?’, <https://themalaysianlawyer.com/2018/09/05/cipaa-adjudication-leading-the-way/>, accessed 1 Nov 2022: cited the Malaysian Law Conference 2018. [25] Foo [n 39]. [26] Jack-In Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2020] 1 CLJ 299: FC puts an end to this long-haul debate, by holding that CIPAA to be applied ‘Prospectively’. [27] Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd. [2015] 8 CLJ 728: In the absence of certification, the non-paying party cannot deprive the unpaid party from availing the adjudication process. [28] Likas Bay Precinct Sdn Bhd v Bina Puri Sdn Bhd [2019] MLJU 49: it was held by the Court of Appeal, that a successful claimant in adjudication need not have the adjudication decision registered before issuing a statutory notice of ‘winding up’; finding in contras, ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd (Case No. WA-24NCC-363-07/2019): High Court granted an injunction restraining ‘winding up’. [29] Ireka Engineering & Construction Sdn Bhd v PWC Corporation Sdn Bhd [2020] 1 MLJ 311: the term contract in CIPAA refers to ‘singular’ contract and not ‘contracts’; finding in contrast, Punj Lloyd Sdn Bhd v Ramo Industries Sdn Bhd & Anor and another case [2019] 11 MLJ 574: contract by reference is a singular contract. [30] Yek, ‘My SOPL: Security of Payment Legislation in the Malaysian Construction Industry, My Observation’, (15 Aug 2019), <http://www.davidyek.com/adr/my-sopl-security-of-payment-legislation-in-the-malaysian-construction-industry-my-observation>, accessed 1 Nov 2022. [31] [2008]4CLJ175. [32] Civil Appeal:02(i)-35-04/2019(W). [33] Interpretation Acts 1948 and 1967,s.12; see also <http://www.davidyek.com/adr/serving-of-notice-and-documents-in-cipaa-adjudication-where-is-the-norm-now>, accessed 1 Nov 2022. [34] Ali [n14], p.16: Question 8. [35] Lam [n18], p.13. [36] PAM Form 2018, cl.36: Adjudication. [37] Rajoo and others, ‘The PAM 2006 Standard Form of Building Contract’, (LexisNexis,2010), p.828:citing Dean v Prince (1954) 1Ch409. [38] [2015] 1 LNS 1435. [39] Ali [n14], p.17: Question 9. [40] [2017] MLJU 2381 [41] Kuasatek (M) Sdn Bhd v HCM Engineering Sdn. Bhd and other appeals [2018] MLJU 1919 [42] Integral Acres Sdn Bhd v BCEG International (M) Sdn Bhd and other cases [2021] MLJU 1889 [43] Sunissa Sdn Bhd v Kerajaan Malaysia & Anor [2020] MLJU 283 [44] The Malaysian Lawyer [n 49]. [45] The Malaysian Lawyer [n 49]. [46] Try everything you can in order to do something or to solve a problem, <https://languagecaster.com/football-cliche-throw-the-kitchen-sink>, accessed 1 Nov 2022. [47] [2020] 1 LNS 145 [48] [2018] MLJU 1542 [49] Ali [n14], p.14: Question 2. [50] Ali [n14], p.14: Question 3. [51] The Malaysian Lawyer [n 49]. [52] Ali [n14], p.16: Question 7; p.15: Question 6. [53] Chan [n 29]. [54] Ali [n14], p.18: Question 10. [55] Ali [n14], p.22: Question 18. [56] Ali [n14], p.23: Question 19. [57] The Malaysian Lawyer [n 49]. [58] COA J. Lee Swee Seng’s opening remark on ‘CIPAA conference in Asia ADR Week 2022’, AIAC Kuala Lumpur; see also <https://www.linkedin.com/posts/asian-international-arbitration-centre_asiaadrweek2022-aadrweek2022-aiaccompassus-activity-6984378475428159489-jjZi/>, accessed 1 Nov 2022. [59] [2017] MLJU 146 [60] KLIA Associates Sdn Bhd v Mudajaya Corporation Berhad [2020] 1 LNS 1253 [61] [2018] MLJU 772. [62] [2020] MLJU 972 [63] [1974] AC 727 [64] [2021] MLJU 1964 [65] [2020] 1 LNS 1105 [66] Borneo Post,‘Urgent need to appoint AIAC director–SLS’, (7 Jul 2020) <https://www.theborneopost.com/2020/07/07/urgent-need-to-appoint-aiac-director-sls/>,accessed 15 Dec 2021. [67] Edge,’AIAC director resigns over MACC investigation’, (22 Nov 2018), <https://www.theedgemarkets.com/article/aiac-director-resigns-over-macc-investigation>, accessed 20Dec2021. [68] [2021]Civil Appeal: 01(f)-38-12-2020(W), at 112. [69] Rajoo [n 93]. [70] Temporary premises of a sovereign in a foreign jurisdiction were perceived to be an extension of the territory of the sending State. [71] Immunities as being necessary for the mission to perform its functions. [72] Mission personifies the sending State. [73] AALCO, ‘Immunity of State Officials From Foreign Criminal Jurisdiction’, (10 Apr 2012), IMLE <https://www.aalco.int/Background%20Paper%20ILC%2010%20April%202012.pdf>, accessed 27 Dec 2021. [74] Rajoo [n 93]. [75] Malaysiakini,‘Thomas: Legal immunity puts ex-AIAC director above rulers’,(6Nov2021) <https://www.malaysiakini.com/news/598081>,accessed 27Dec2021;Thomas,‘My Story:Justice in the Wilderness’(GerakBudaya,2021)pp391-399. [76] Lam [n18], p.13. [77] [2018] MLJU 772 [78] <https://www.malaysiakini.com/news/465089>, accessed 1 Nov 2022. [79] Ibid. [80] “AIAC director resigns over MACC investigation”, Edge Markets, <https://www.theedgemarkets.com/article/aiac-director-resigns-over-macc-investigation>, accessed 1 Nov 2022. [81] [2020] 4 CLJ 201; also see Prestij Mega Construction v Estate of Vinayak Pradhan BA-24C-13-02/2020 and BA-24C-25-03/2020 [82] Maju Holdings Sdn Bhd v Spring Energy Sdn Bhd [2021] 8 MLJ 275; Acoustic & Lighting System v Les Engineering [83] Ong Teik Beng (t/a MJV Construction) v Wow Hotel Sdn Bhd [2022] 8 MLJ 10 [84] First Commerce v Titan Vista [2021] MLJU 376. [85] [2022] MLJU 2124 [86] [2022] 9 MLJ 79 [87] Perbadanan Perwira Harta Malaysia v Kuntum Melor Sdn Bhd and another case [2021] MLJU 1593 [88] The Malaysian Lawyer [n 49]. [89] AIAC Annual Report 2021-2022. [90] Ali [n17], p.17: cited Geoff Bayley’s experience in New Zealand adjudication. [91] [2018] MLJU 1542 [92] AIAC/D/ADJ-4341-2022 [93] HST Engineers v PauYuan Sdn Bhd [2022], unreported. [94] Premaraj, ‘CIPAA Webinar series on Practical Tips and Must-Have Records for Employers to Succeed in CIPAA’ (16 Jun 2022), <https://www.linkedin.com/posts/belden-advocates-%26-solicitors_welcome-you-are-invited-to-join-a-webinar-activity-6933256995030351872-yBrg?>, accessed 1 Nov 2022. [95] [2019] (BTU-24C-2-7-2018). [96] ADJ-4210-2022 [97] [2021] 11 MLJ 50 [98] s.15, Advocates Ordinance (“AO”). The finding of the HC is in contrast with the provision of CIPAA (Section 8(3) of the CIPAA provides that parties to an adjudication proceeding “may represent himself or be represented by any representative appointed by the party”. [99] Chaw G, “Statutory Adjudication in Malaysia and ‘Sabah Proceeding’: A Paradox”, [2021], 3 MLJ, p.10: the concept of a ‘seat’, which is part of the legal framework of arbitration law, does not exist in the law and practice of adjudication. [100] ss 13, 15 and 16 CIPAA 2012 [101] [2019] (BTU-24C-2-7-2018). [102] Encorp Iskandar Development Sdn Bhd v. Konsortium Ipmines Merz Sdn Bhd [2020] 1 LNS 1129 [103] Perbadanan Perwira Harta Malaysia v Kuntum Melor Sdn Bhd and another case [2021] MLJU 1593 [104] Granstep Development Sdn Bhd v Tan Chong Heng & Ors [2020] MLJU 2364 [105] [2019] 1 LNS 173 [106] [2022] 7 CLJ 313 [107] Celtex Supreme Sdn Bhd v Mega Bina Garisan Sdn Bhd [2021] 1 LNS 630 [108] [2021] MLJU 1382 [109] Movement Control Order (‘MCO’): measures taken under the Prevention and Control of Infectious Diseases Regulations 2020 [PU(A)91/2020] [110] [2017] AMEJ 0538 [111] E.A Technique v Malaysia Marine and Heavy Engineering [2020] WA-24C-96-06/2019 [112] Sandrasegaran and other, ‘E.A Technique (M) Berhad (“EAT”) v. Malaysia Marine and Heavy Engineering Sdn Bhd (“MMHE”)’, (18 Jul 2020), <https://mohanadass.com/publications/articles/ea-technique-m-berhad-eat-v-malaysia-marine-and-heavy-engineering-sdn-bhd-mmhe.html>, accessed 1 Nov 2022. [113] Rajoo and others,‘Standard Form of Building Contract Compared’(LexisNexis,2022),p456: cited FIDIC RB2017, sub cl.3.7.5, prescribed the Officer’s decision, in form is ‘expert determination’, similarly to PWD203A. [114] Lee [n 83]. [115] Mirrored the findings of Pryles, ‘Limits to Party Autonomy in Arbitral Procedure,’ (2007), 24 AJA, pp.327–339. [116] Ali [n14], p.7-10. [117] Macly Equity Sdn Bhd v Prestij Mega. Construction Sdn Bhd [2021] MLJU 537 [118] [2019] MLJU 1690 [119] PJ Midtown Development Sdn Bhd v Pembinaan Mitrajaya Sdn Bhd and another summons [2020] MLJU 1432 [120] Puncak Niaga Construction Sdn Bhd v Mersing Construction &. Engineering Sdn Bhd and other cases [2021] MLJU 1824 [121] Ali [n14], p.21: Question 16. [122] Ali [n14], p.21: Question 15. [123] [2021] MLJU 1889 [124] Ali [n14], p.21: Answer15. [125] Ali [n14], p.21: Answer17. [126] Yang, ‘Hong Kong's Contractual Security of Payment (SOP) Regime for Public Works Contracts‘, (2021), <https://www.lexology.com/library/detail.aspx?g=e948ad6b-fa58-4fcb-a8fe-4ae811406024>, accessed 1 Nov 2022. [127] Ali [n14], p.21 Question 14. [128] MRCB [n 72]. [129] Ireka Engineering & Construction Sdn Bhd v. Tri Pacific Engineering Sdn Bhd and another [2020] MLJU 548 [130] Dekinjaya Builder Sdn Bhd v Chong Lek Engineering Works Sdn Bhd and another case [2020] MLJU 2455 [131] Mei He Development Sdn Bhd v Eosh Industries Sdn Bhd [2021] MLJU 519 [132] Ali [n14], p.20 Question 13. [133] Ali [n14], p.18 Question 10; p.17-18 Answer 9. [134] Harban, ‘CIPAA conference in Asia ADR Week 2022’, AIAC Kuala Lumpur. [135] Ali [n14], p.16 Question 8. [136] Ali [n14], p.21 Answer 14. [137] Ali [n14], p.14 Answer 3; p.15 Answer 5; p.16 Answer 7. [138] Ali [n14], p.23 Answer 19. [139] Ali [n14], p.19 Answer 12. [140] Dispute Resolution Board (DRB)/ Dispute Resolution Advisor (DRA) [141] Ali [n14], p.19 Answer 11; p.22 Answer 18. [142] Cheah, ‘Adjudication’, (1 Aug 2019), Joint Courses on Alternative Dispute Resolution for Practitioners by IEM + MIArb + RISM + PAM, p.24. SERVING OF NOTICE AND DOCUMENTS IN CIPAA ADJUDICATION – WHERE IS THE NORM NOW? UPDATE: On 4 Apr 2022, the AIAC has issued circular 11, prescribing manner of serving notices, adopted for CIPAA 2012. Apparently, s.38(a)-(d),CIPAA 2012, wasn’t that definitive when comes to the recent findings of the courts as in Skyworld Development Sdn Bhd v Zalam Corp Sdn Bhd[1], where delivery of AR-Registered is presumably delivered unless rebutted. Here, the definition of ‘delivery at its ordinary course’ does not imply the ‘date of posting’. Such, sender has to provide ‘sufficient period of time’ for delivery, as in regard to s.38(c), CIPAA 2012: Service by Registered Post. Applying such to serving of Payment Claim, Notice of Adjudication and other Notices including the Decision, the ‘actual receipt’ of such notices is indicated. It is manifested that the AIAC attempted to provide clarity, but it dropped short of specifying what does it mean by ‘sufficient period of time’? Compounded by the absent of clarity as to what it meant by ‘indicate’ and ‘acceptance’ in the Interpretations Act 1948, the burden now, rests squarely on the shoulders of the Adjudicator. ----------------------------------------------------- [1] [2019] MLJU 162 Assuming that Claimant had filed a Request to Appoint an Adjudicator and the Adjudicator had proposed his terms of appointment, with only the acceptance by the Claimant agreeing that communication is via email. Respondent has not responded at all. The Adjudicator then emailed and couriered his Notice of Acceptance via Form-6 on the last working day i.e. day-10. The parties would not have possibly receive the physical Form-6 by then.
The questions were whether failure of the parties receiving the physical Form 6 within the 10 working days constitute a breach of s.23(2) CIPAA? If so, what constitute the manner of serving of notices? The law holds: S.23(2) CIPAA states, “The adjudicator shall propose and negotiate his terms […] within ten working days from the date he was notified of his appointment, […]” S.38 CIPAA states, “Service of a notice or any other document under this Act shall be […] a) By delivering the notice or document personally […] b) By leaving the notice or document […] during the normal business hours of that party; c) By sending the notice or document […] by registered post; or d) By any other means as agreed in writing […]” The evidence shows: One, there is no mutual acceptance by the parties of the Adjudicator’s terms and communication via email. Thus, method of serving notice or document as prescribed under S.38 CIPAA prevailed. Two, parties would not have possibly received the physical Form 6 within then. So, whether such failure to receive the physical Form 6 constitute a breach of s.23(2) CIPAA? To answer this, can courier services be construed as hand delivery? If so, what constitute hand delivery? Ordinary meaning of courier, is a person or company that takes messages, letters or parcels from one person or place to another.[1] Whereas, hand delivery is to take something to someone yourself or send it by courier.[2] Therefore, a courier service can be construed as by hand. Thus some insisted that an affidavit be taken by the courier serviceman to affirm that the documents had been served. Implying such, it must be a recorded delivery. Three, parties may have received the document past the ‘normal business hours’. This condition is not warranted with regard to s.38(a). We are not clear who would have been there to receive it past the ‘normal business hours’? S.38(b) holds that document is deemed served ‘by leaving it at the usual place of business’, ‘during normal business hours’. This provision is in contrasts to the HC decision that a ‘day’ as in a ‘working day’ covers 24-hours.[3] Thus, if the documents were couriered within the same working day, duly recorded by statutory affirmation or recorded delivery, it is deemed to have been delivered. Concluding: Whether failure of the parties to receive the physical Form 6 within the 10 working days period constitute a breach of s.23(2) CIPAA, the short answer is depends on the merits. It is in breach, if the courier is of an unrecorded delivery or with no statutory affirmation, delivered outside the last ‘working day’. It is not a breach if the conditions and merits would had unfold otherwise. What constitute the manner of serving of notices? It is as prescribed by S.38 CIPAA either by hand delivery; leaving at the office during ‘business hour’; or via registered post; or by any other means agreed. Having considered that, assuming the Adjudicator sent the notice by registered post instead of courier, would the ‘postal rule’ applied? What is in the postal rule? The ‘postal rule’[4] and communication via email[5] are commonly applied in contractual transaction. In postal rule, communication deemed to have occurred once the letter has been posted (registered). However, email is not governed by this postal rule.[6] Malaysia has similarly adopted this postal rule via application of the s.4(2)(b) Contract Law 1950.[7] However, can this postal rule also applied in Adjudication? Two contrasting approaches, with regards to ‘postal rule’. As applied observed in the serving of writ of summons via AR-Registered Post, on one hand, there is no provision of law that Plaintiff must prove that the named person had received the writ of summons and statement of claim, being sent by AR-Registered Post, unless rebutted by Defendant.[8] On the other, affidavit of service must prove ‘due service’ of writ of summons and that the lacuna of the Rules of Court 2012 (“ROC”)[9] must be interpreted in favour of the Defendant.[10] This unsettled law was revisited by the courts recently, contemplating whether the acknowledgement of AR-Registered Post receipt card is conclusive proof? The HC and Court of Appeal hold that it was conclusive prove. The FC disagree and went on to say, AR-Registered Post receipt card is not conclusive if the affidavit does not exhibit the receipt card does not contain an endorsement of receipt by the Defendant or nominee.[11] Adjudication mirrors the conduct of the court. Can the Adjudicator simply drop the notice off at the post office and call it a day? In reflection of Goh Teng Whoo case[12] the short answer is ‘No’. Service by way of AR-Registered Post does not conclusively mean that the recipient has received the same as the AR-Registered Post, continues to be interpreted as ‘service and time’ of service are ‘presumed’ and ‘until the contrary is proven’.[13] We have yet to see this judgement be applied to an Adjudication case. --------------------------------------------------------------------------- [1] Cambridge Dictionary <https://dictionary.cambridge.org/dictionary/english/courier> accessed 3 Nov 2021 [2] Cambridge Dictionary <https://dictionary.cambridge.org/dictionary/english/hand-deliver> accessed 3 Nov 2021 [3] Skyworld Development Sdn Bhd v. Zalam Corporation Sdn Bhd & Other Cases. [2019] 1 LNS 173 [4] Adams v Lindsell [1818] 1B&Ald.681 [5] S.7.Electronic Communications Act 2000; Neocleous v Rees[2019]EWHC2462(Ch) [6] Thomas v BPE Solicitors [2010] EWHC306(Ch); Greenclose v National Westminster Bank [2014] EWHC1156(Ch) [7] Ignatius v Bell (1913) 2 FMSLR 115 [8] Yap Ke Huat & Ors v Pembangunan Warisan Murni Sejahtera Sdn Bhd & Anor [2008] 4 CLJ 175 [9] Order 10 Rule 1(1) ROC [10] Chung Wai Meng v Perbadanan Nasional Berhad [2017] 1 LNS 892 [11] Goh Teng Whoo & Anor v Ample Objectives Sdn Bhd (Civil Appeal No: 02(i)-35-04/2019(W) [12] [2021] MLJU 300 [13] S.12 of the Interpretation Acts 1948 and 1967 ADJUDICATION WITH THE SPANNER IN THE GEARBOX CIPAA Adjudication is no longer a dispensation of ‘rough-justice’ in a ‘fast-and-furious’ way. The true intention of CIPAA to expedite dispute-resolution as to enable contractor’s its life-source, which is payment, is off-tangent, into a ‘mini-trial’ or ‘mini-arbitration’, where counsels can actually test its evidence and arguments before going for a ‘final-resolution’, without giving ample ‘arsenals’ for the adjudicator to work on its own ‘competenze-competenze’; for a fee, far below of that of arbitration or the counsel’s own retainer, especially when ‘hearing’ is accorded.
CIPAA was once known to be of 88%-success rate for the Claimant, usually contractor, not until the first ‘spanner was thrown into the gearbox’, that Respondent has the right to raise defence at any point in time during the progress of CIPAA.[1] Claimant has 5-days to put in its Reply, taking advantage of this, the tactical- maneuvering of an ambush with documents in the Response, during prolonged ‘holiday-seasons’, left very little time for Claimant to Reply. Does the matter stop at Reply? The answer is ‘no’… for most adjudicator may find that the entire Response is dedicated to a ‘single-objective’, to ‘remove’ the adjudicator for the lack of jurisdiction to preside over the adjudication. Thus, request for further submission i.e. rejoinder, sur-rejoinder, rebuttal and sur-rebuttal are requested. Will a rational adjudicator obliged to allow such, fearing ‘lack of natural justice’ disposition? Usually the adjudicator will give-in, eating into his 45-days to serve its Decision. The story doesn’t ends there yet. There were attempt by counsel, usually Respondent, to seek for Hearing and Written-Submission.[2] Such call was turned down by the HC, keeping faithfully to the spirit of CIPAA, which is dispensation of ‘rough-justice’ in a ‘fast-and-furious’ way. Having said that, some Respondent will put in ‘Expert-Report’ as evidence, some by the cartons of A4-boxes, mirrored such as in arbitration or litigation, holding faithfully to View-Esteem’s ruling, in Response, Rejoinder and maybe Rebuttal. Should the adjudicator allowed for hearing to review these ‘Expert-Report’ evidence? That is like walking tip-toe at the tight-rope, requiring a fine-balancing act, fearing a breach of natural-justice. Alas, the Appeal-Court has then, opens a flood-gate, rendering breach of natural-justice if the adjudicator does not allow Hearing and Written-Submission, on the basis of insufficient time.[3] The second spanner was thrown into the gearbox, swinging the pendulum to the Respondent, as with Hearing and Written-Submission, the chances voiding the entire CIPAA processes are very high. There is yet, procedural aspect of Hearing and Written-Submission in a conduct of adjudication available in the adjudicator’s tool-boxes, especially so when the notion of competenze-competenze is absent. The stroke of genius on tactical-maneuvering for a ‘weak-case’ is vested upon the conduct of Hearing and Written-Submission, to prolong the processes and along the way, to nail the adjudicator for prejudice. Will the story ends here? Not likely. By this time, after serving the Claim, the adjudicator will more likely to call for a preliminary meeting, set the agenda for exchange of documents, fixing hearing dates and those procedural-rules that is common in arbitration, in place for adjudication which is a lacuna for a moment, for AIAC to pluck out the spanner from the gearbox. Wonder, is there additional adjudicator fee for hearing and such? ---------------------------------------------------------------------------- [1] View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2017] 1 LNS 1378: <https://themalaysianlawyer.com/2018/09/05/cipaa-adjudication-leading-the-way> [2] MRCB Builders Sdn Bhd v. Wazam Ventures Sdn Bhd & Another Case [2020] 1 LNS 145 [3] GuangXi Dev & Cap Sdn Bhd vSycal Bhd [2018] MLJU 1542 THE SETTLE OF THE ‘UNSETTLED-LAW’ IN CIPAA AS AT 2020CIPAA apply prospectively[1] with “conditional-payment” enforceable for contract prior 15th April 2014[2]; not to be “contracted-out”[3]; rarely granted “stay of adjudication” unless for specific “narrow-reasons”[4] i.e. res-judicata[5] or pre-qualify for stay requires commencement of arbitration/proceeding[6]; zerorising Respondent’s claim[7]; “non-certified”[8] claims allowed; exempting government as disputing-party[9] but exclude item not of “national-security”[10]; consultancy-contract can be adjudicated[11] including final-account[12]; setting-aside under s.15[13] includes in-existence of an arbitration-award/judgement[14]; allow new defences post payment-response[15]; must accorded “hearing”, failing which “breach of natural-justice”[16]; no-appeal on “ground of law”[17], even there is an “error of law”[18]; exclude shipping[19] and mining[20] contract, but a platform-anchored into the land, is adjudicate-able[21]; estoppel of party participated fully to raise any-objection on adjudicator’s-appointment[22]; constitutionality of CIPAA upheld[23]; rights to limit extension-of-time for submission[24], including adjudicating-EOT as “contingent jurisdiction”[25], and L&E[26]; allowing claims of “pre-award” interest[27], only if such is claimed[28]; non-mandatory for decision to be registered prior serving ‘winding-up’[29], but cautionary apply to company on “disputed-debts”[30] owing to its “temporary-finality”[31]; non-interference of court to “vary adjudication-decision”[32], awarding-costs[33] nor “supplanting” adjudicator’s-order[34]; and mandatory for principal to pay[35].
---------------------------------------------------- [1] Jack-In Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2020] 1 CLJ 299 [2] Jack-In Pile [2020] [3] Ranhill E&C Sdn Bhd v Tioxide [2015] 1 LNS 1435 [4] Subang Skypark Sdn Bhd v Arcradius Sdn Bhd [2015] 11 MLJ 818 [5] Samsung C & T Corporation & Anor v Bauer (Malaysia) Sdn Bhd [2019] MLJU 1690 [6] Foster Wheeler E & C (Malaysia) Sdn Bhd v Arkema Thiochemicals Sdn Bhd Anor [2015] 1 LNS 632; Punj Lloyd Sdn Bhd v Ramo Industries Sdn Bhd & Anor and another case [2019] 11 MLJ 574 [7] Tenaga Poly Sdn Bhd vs Crest Builder Sdn Bhd (unreported) [8] Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd [2015] 8 CLJ 728 [9] Mudajaya Corporation Bhd v Leighton Contractors (M) Sdn Bhd [2015] 5 CLJ 848 [10] ENRA Engineering and Fabrication Sdn Bhd v Gemula Sdn Bhd & Another Case [2019] 10 CLJ 333 [11] Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd & Another Case [ 2017] 1 CLJ 101 [12] Martego [ 2017] [13] Wong Huat Construction Co v Ireka Engineering & Construction [2018] 1 CLJ 536 [14] Prestij Mega Construction Sdn Bhd v Keller (M) Sdn Bhd & Other Cases [2019] 1 LNS 1612 [15] View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2017] 8 AMR 167 [16] Guangxi Dev & Cap Sdn Bhd v Sycal Bhd & Anor Appeal [2019] 1 CLJ 592 [17] VVO Construction Sdn Bhd v Bina MYK Sdn Bhd Anor [2017] 2 AMR 502 [18] SKS Pavillion Sdn Bhd v Tasoon Injection Pile Sdn Bhd [2019] MLJU 1051 [19] MIR Valve Sdn Bhd v TH Heavy Engineering Berhad & Other Cases [2017] 8 CLJ 208 [20] YTK Engineering Services Sdn Bhd v Towards Green Sdn Bhd [2017] 5. AMR 76 [21] E.A Technique v Malaysia Marine and Heavy Engineering [2020] WA-24C-96-06/2019 [22] Zana Bina Sdn Bhd v Cosmic Master Development Sdn Bhd [2017] MLJU 146 [23] Amerin Residence Sdn Bhd v Asian International Arbitration Centre ([2019] 1 LNS 904; Mega Sasa Sdn Bhd v Kinta Bakti Sdn Bhd & Ors [2019] MLJU 1043; [2019] 1 LNS 1366 [24] Binastra Ablebuild Sdn Bhd v JPS Holdings Sdn Bhd and another case [2017] MLJU 1260 [25] SKS Pavillion Sdn Bhd v Tasoon Injection Pile Sdn Bhd [2019] 2 CLJ 704 [26] Syarikat Bina Darul Aman Bhd & Anor v Government of Malaysia [2017] MLJU 2381 [27] Milsonland Development Sdn Bhd v Macro Resources Sdn Bhd [2017] MLJU 169 [28] Naza Engineering & Construction v SSL Dev [2019] [29] Bina Puri Sdn Bhd v Likas Bay Precinct Sdn Bhd [2018] MLJU 864 [30] Maju Holdings Sdn Bhd v Spring Energy Sdn Bhd [2020] MLJU 1196 [31] ASM Development v Econpile [2019] WA-24NCC-363-07/2019 [32] Naza Engineering & Construction v SSL Dev [2019] [33] TRT Engineering (M) Sdn Bhd v Hansol KNM Greentech Sdn. Bhd [2020] 1 LNS 8 [34] Multazam Development Sdn Bhd v Felda Global Ventures Plantations (M) Sdn Bhd [2020] 11 MLJU 606 [35] CT Indah Construction Sdn Bhd v BHL Gemilang Sdn Bhd [2020] 1 CLJ 75 MY SOPL – SECURITY OF PAYMENT LEGISLATION IN THE MALAYSIAN CONSTRUCTION INDUSTRY, MY OBSERVATION…8/15/2019 [UPDATE - 02]: It was reported by the AIAC that CIPAA has overtaken arbitration in the feedstock of cases in the construction law.[1] Notwithstanding its popularity, the nature of CIPAA has invited many criticism for the obvious lacked of ‘refined-justice’, warrants for a much delayed reform.[2] Such ‘conundrum’ pushed the boundary of CIPAA adjudication, even season adjudicators are confused as to the application of the law in adjudication, thus this paper attempt to address the ‘latest development’ as per 2021, in the application of the law in adjudication. -------------------------------------------- [1] AIAC Annual Report 2019-2020: Oct 2021, 200 reported cases in the HC; 2020, 100 reported cases in the HC; 537 cases registered with the AIAC. [2] <https://www.aiac.world/events/398/PUBLIC-FORUM:-REFORMS-TO-THE-CONSTRUCTION-INDUSTRY-PAYMENT-AND-ADJUDICATION-ACT-2012>, accessed 22 Mar 2022 Following the birth of a statutory adjudication scheme in the UK under the Housing Grants, Construction and Regeneration Act 1996[i] (the “1996 UK Act”), on 1 June 2015, many countries within the commonwealth had taken the similar bold steps to enact the similar Security of Payment Legislation SOPL within their own legislation. Fundamentally SOPL, as its name suggested, is a piece of legislation to ensure that payment to the contractors are secured as payment is a fundamental ‘life-line’ to any business of construction, without it the entire machinery of construction will collapse and such will create detrimental ripple effects to both the downstream and upstream of the economy. In a nutshell, the theory behind SOPL is to ‘pay first, argue later’ based on ‘rough justice’ with legally binding decision that has no ‘finality’ thus providing only temporal relief.
Prior to the eventful year of 2012, the Pertubuhan Arkitek Malaysia (PAM) has taken the initial steps to initiate a version of the SOPL for the Malaysian construction industry owing to the fact that via its collaborations with various stakeholders, especially with the Construction Industry Development Board (CIDB), various issues pertaining to non-payments to the contractors had been raised. A joint working committee has been deployed to draft the framework for this SOPL. As the matter at hand, was largely attributed to the issues faced by contractors, it was naturally befitting CIDB to take the lead[ii]. This effort has since, taken a setback when the Kuala Lumpur Regional Centre for Arbitration (KLRCA) as it was known then before it was rebranded as the Asian International Arbitration Centre (AIAC), has taken the ‘idea’ and forged ahead to be passed and enacted in the Parliament as the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012), enforced in 2014, adopting the New Zealand’s Security of Payment Legislation model (NZ Act)[iii] with modification to suit ‘document only’, ‘fast track’ and ‘chess time’ procedural. Unlike other commonwealth jurisdictions, the CIPAA 2012 has the term ‘Adjudication’ included as the only statutory means to dispense ‘rough justice’ in recouping any unpaid claims in the construction industry, virtually monopolize by the AIAC as the sole appointing body[iv]. In the beginning, any claims put forth by the claimant, in CIPAA, will stand an 80% chances of winning due to its ‘rough justice stance’ with no ‘finality’. ‘I will CIPAA you’, became the common phrase in town. The ‘fast and furious’ approach in dispensing rough justice via CIPAA has received various challenges in the Courts of law, notably with regards to the following issues: - 1) PROSPECTIVE OR RETROSPECTIVE? Question, can CIPAA applies retrospectively or prospectively? Came 2015, as in UDA Holdings Bhd vs Bisraya Construction Sdn Bhd, CIPAA applies retrospectively[v] and take precedents over any contractual provisions that state otherwise nullified any substantive rights under the pre-existing contract agreements. However, this High Court’s decisions were later in 2018, overturned by the Court of Appeal as in the Bauer (Malaysia) Sdn Bhd vs Jack-In Pile (M) Sdn Bhd that held, the CIPAA applies prospectively and not retrospectively[vi]. What this judgment meant was, any applicable construction contracts that were entered into prior to 15th April 2014 would not be subjected to the operation of CIPAA. This matter has yet to be challenged in the Federal Court. [Updated]: In 2019 the Federal Court, as per the ‘Jack-In Pile’ appeal, had ruled that CIPAA could only apply prospectively, i.e. it applies only to construction contracts executed after 15th April 2014, based on the following reasoning that unless expressly stated otherwise, the absence of an express provision, which can only be enacted by Parliament, CIPAA cannot operate to a construction contract entered into before such date. As a result the AIAC will no longer register payment disputes arising from construction contracts executed before 15th April 2014. [Updated-02]: The FC puts an end to this long-haul debate, by holding that CIPAA to be applied ‘Prospectively’.[1] Prospectively means CIPAA applies only to construction contracts executed after 15th April 2014 and not before. The ratio is that if Parliament intended such to be applied retrospectively, it has to be expressly state so. The ruling in Jack-In Pile is taken even further, where even though the main contract was entered upon before 15 Apr 2014, but the sub-contract entered after this date is subject to the application of CIPAA.[2] The prospective application is brought even further, to apply if there were material changes to the contract past the effective date of 15 Apr 2014.[3] Such also include the application of ‘agreement to novate’.[4] ----------------------------------------------- [1] Jack-In Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2020] 1 CLJ 299 [2] Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd And Another Case [2020] MLJU 2308 [3] Naim Engineering v WCP Engineering [2020] MLJU 2059 [4] Encorp Iskandar Development Sdn Bhd v. Konsortium Ipmines Merz Sdn Bhd [2020] 1 LNS 1129 2) CONTRACTING OUT OF CIPAA? Question, can parties contracting out (opt-out) of CIPAA based on the doctrine of ‘free-to contract’? In Ranhill E&C Sdn Bhd vs Tioxide (Malaysia) Sdn Bhd [2015] and it was held that the terms of CIPAA as a legislation prohibits the parties from contracting out of its application, notwithstanding that there is no express-term within the Act. Any forms of contractual arrangement for dispute resolution would not exclude the application of CIPAA. 3) STAY OF ADJUDICATION DECISION? Question, can parties apply for the stay of an adjudication decision? In Subang Skypark Sdn Bhd vs Arcradius Sdn Bhd [2015], it was held that a party seeking to stay a CIPAA decision under section 16 must show credible evidence that the financial impecuniosity on the part of the other party, being the sole “exceptional circumstances” that the probable inability of repayment of the adjudicated sum that may follow from concurrent court or arbitration proceedings. The merits of the case before the arbitration or the court and the chances of success in setting aside the adjudication decision are not relevant considerations. The Court retains the discretion as to whether or not to grant a stay. 4) PRE-QUALIFICATION FOR STAY Question, can parties pre-qualify for the stay of an adjudication decision? In Foster Wheeler E & C (Malaysia) Sdn Bhd vs Arkema Thiochemicals Sdn Bhd & Another Case [2015], the Claimant sought to enforce the CIPAA decision while the Respondent wanted to apply for a stay but cannot fulfil the condition for a stay of an adjudication decision due to the elaborate multi-tiered dispute resolutions. It was held that the expression of ‘pending final determination by arbitration or the court’, which is a condition for a stay of an adjudication decision under section 16(1)(b) of CIPAA, requires the parties to have commenced arbitration or court proceedings. For such, arbitration cases in PAM has been increased by leaps and folds, to pre-qualify for the stay of an adjudication decision. 5) CONDITIONAL PAYMENT Question, can a party imposed a payment condition to another party as a reason of non-payment? A very common pay when paid, pay if paid or any form of back to back payment, probably known as conditional payment clause that is found in most construction contract, notably with regard to clause 25.4(d) of the PAM 2006 Form. Section 35(1) of CIPAA prohibits conditional payment terms and provides that a conditional payment provision in a construction contract is void. In BM City Realty & Construction Sdn Bhd vs Merger Insight (M) Sdn Bhd [2016], the plaintiff in its application to set aside an adjudication decision, argued that it was not bound to make any further payment to the defendant until a final account is determined as the contract had been determined. Relying on Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd [2016], it was held that Section 35(1) of CIPAA prohibits conditional payment terms and construed such to be void. However, the BM City appeal is presently pending in the Court of Appeal. The High Court decision in Jack-In Pile has recently been overturned in 2018 by the Court of Appeal which held that a conditional payment clause prior to the commencement of CIPAA remains valid and is not affected by section 35. It is believed that an application is being made to the Federal Court for leave to appeal against the Court of Appeal’s decision. [Updated]: Having held by the Federal Court, as per the ‘Jack-In Pile’ appeal in 2019, CIPAA could only apply prospectively thus a ‘conditional payment clause’ could effectively be enforceable for any construction contract came before 15th April 2014. [Updated-02]: It is settled law that conditional payment is not allowed in CIPAA, prospectively.[1] However, is this prohibition applied to all contract? In short, No, citing if Parliament wanted a prohibition to be generic, it would have amended the Contract Act 1950 and not CIPAA.[2] Yet, in another case, it was held, prohibition on conditional payment would also apply in court proceeding, not just CIPAA.[3] Similarly, prohibition in conditional payment is not limited to “pay when paid” clauses only but “Pay if certified” clauses will also be void.[4] ------------------------------------------ [1] Jack-in-Pile[n3] [2] Bond M&E (KL) Sdn Bhd v Isyoda (M) Sdn Bhd (Brampton Holdings Sdn Bhd) [2017] MLJU 376 [3] Khairi Consult v GJ Runding [2021] MLJU 694 [4] Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd And Another Case [2020] MLJU 2308 6) ZERORISING A PARTY’S CLAIM Question, can the adjudicator awards the winning party Liquidated Damages LD? In Tenaga Poly Sdn Bhd vs Crest Builder Sdn Bhd (unreported), it was held that LD is not a ‘payment claim’ within the meaning of sections 4 and 5 of CIPAA, therefore party cannot initiate adjudication proceedings under CIPAA to recover LD. Any successful defence based on LD by a non-paying party will ‘zero-rise’ an unpaid party’s claim and no payment is to be made to the non-paying party. 7) NON CERTIFIED CLAIM Question, can a party claim for payment based on progress of work that is not certified? In Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd [2015], the applicant sought to set aside the adjudication decision based on the argument that the payment claim was premature as the interim claims by the respondent were not certified. It was held that the adjudicator’s jurisdiction under sections 25 of CIPAA entitled him to decide or declare on any matter notwithstanding no certificate has been issued and to review and revise any certificate issued or to be issued. In the absence of certification, the non-paying party cannot deprive the unpaid party from availing the adjudication process. 8) EXEMPTION ORDER Question, whether the expression encompasses construction contracts entered by statutory bodies and government-linked companies or is it to be limited to contracts entered into by the ‘Government’? In Mudajaya Corporation Bhd v Leighton Contractors (M) Sdn Bhd [2015], it was held that for it to fall within the meaning of a ‘Government construction contract’, it must be one where the government, be it the Federal or State, is a party to it. [Updated-02]: Besides that of ‘statutory body’, much clarity or sometimes, ‘confusion’ has been accorded for ‘storey’ now included ‘basement’.[1] Occupancy has been given the widest interpretation to include residential or commercial.[2] ---------------------------- [1] Tan Sri Dato' Yap Suan Chee v CLT Contract Sdn Bhd [2021] MLJU 1964 [2] Liew Piang Voon v WLT Project Management Sdn Bhd [2020] 1 LNS 1105 9) CONSULTANCY CONTRACT Question, can a consultancy contract be claimed under CIPAA? In Martego Sdn Bhd vs Arkitek Meor & Chew Sdn Bhd [ 2017], it was held that architect rendering architectural services may claim his outstanding fees under CIPAA, notwithstanding the provision in the Architect’s Act. CIPAA applies to consultancy contracts which provide purely consultancy services. This judgement was re-affirmed by the Federal Court on 1st August 2019. 10) INTERIM OR FINAL? Question, can the adjudicator determine on Final Account Claims in view of the ‘rough justice’ nature of CIPAA without ‘finality’? In Martego Sdn Bhd vs Arkitek Meor & Chew Sdn Bhd [ 2017], it was held that CIPAA is applicable to disputes pertaining to interim claims and to disputes relating to final claims[vii]. The Federal Court, on 1st August 2019, referred to several Singapore Court decisions where the term of progress payment was wide enough to include the final payment. As long as there are payment claims relating to a construction contract, CIPAA would apply. 11) SETTING ASIDE Question, under what grounds could the CIPAA decision be set aside? Section 15 of CIPAA provides limited grounds on which an adjudication decision may be set aside, namely: (a) The adjudication decision was improperly procured through fraud or bribery; (b) There has been a denial of natural justice[viii]; (c) The adjudicator has not acted independently or impartially; or (d) The adjudicator has acted in excess of his jurisdiction[ix]. The effect of setting aside as in Wong Huat Construction Co v Ireka Engineering & Construction Sdn Bhd [2018], it was held that the setting aside of an adjudication decision will restore all parties to their original positions and parties are free to adjudicate. [Updated-02]: Fraudulently obtained adjudication decision has been given the strictest and narrow interpretation.[1] This is applied to another case where evidence had been deliberately altered.[2] Enforcement application under s.28CIPAA and payment by principal under s.30CIPAA can be applied simultaneously.[3] Estoppel is not sufficient in and of itself, adjudicator must consider the merits of defence on the ground of estoppel, not entirely rely on estoppel to dismiss a defence.[4] Adjudicator, in going into his own definition of ‘loss and expense’ as a Construction Professional, had failed to consider the contractual pre-requisites for a claim in loss and expense, had essentially re-written the contract instead of interpreting the terms therein.[5] ----------------- [1] Rosha Dynamic Sdn Bhd v Mohd Salehhodin bin Sabiyee & Ors and other cases [2021] MLJU 1222 [2] KPF Niaga Sdn Bhd v Vigour Builders Sdn Bhd and another case [2021] MLJU 229 [3] Dekinjaya Builder Sdn Bhd v Chong Lek Engineering Works Sdn Bhd and another case [2020] MLJU 2455 [4] Perbadanan Perwira Harta[n25] [5] Perbadanan Perwira Harta[n25] 12) JURISDICTIONAL LIMIT Adjudicator’s jurisdictions are limited to matters referred to in the payment claim and payment response, as prescribed in section 27(1) of CIPAA. However, the Court of Appeal in View Esteem Sdn Bhd vs Bina Puri Holdings Sdn Bhd [2016] held that the adjudicator must now, also consider matters referred in an adjudication response even if such defences were not included in the payment response. In other words, respondent can raise new claims or defences post the payment response, allowing a possible ambush in view that the claimant has only 5 days to reply. Adjudicator who fails to consider the defences raised in the adjudication response could have acted in breach of natural justice and risked decision being set aside under section 15 of CIPAA. [UPDATED-02]: It is settled that the adjudicator’s jurisdiction under s.25,CIPAA entitled him to decide or declare on any matter notwithstanding no certificate has been issued and to review and revise any certificate issued or to be issued.[1] View Esteem has allowed issues not pleaded in the Payment Response to be adjudicated.[2] Similarly, the same ought to be said that Payment Claim ought to be revisable and it does not bound by the amount set out in the Payment Claim.[3] Errors in progress claims can be corrected in Payment Claim, including additional supporting document after submission of Payment Claim.[4] Therefore, Adjudicator’s power under s.25CIPAA are discretionary.[5] That also include discretion on quantum of costs.[6] With finality on costs and fees, interest.[7] ------------------------------------------- [1] Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd. [2015] 8 CLJ 728 [2] View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2017] 1 LNS 1378 [3] Integral[n13] [4] Puncak Niaga Construction v Mersing Construction & Engineering [2021] [5] Seal Properties v Wabina Constructions & Engineering; P&A Management v WSH Development; Itramas Technology v Savelite Engineering; Pembinaan Melima v ATM Development [6] MRCB Sentral Properties v GSIB [7] Aston Star v Zumo Engineering 13) DOCUMENT ONLY ADJUDICATION? Question, can either party request for hearing? In Permintex JSK Resources Sdn Bhd vs Follitile (M) Sdn Bhd [2018], respondent applied to set aside the adjudicator’s decision on ground that there had been a breach of natural justice as the adjudicator had failed to conduct a hearing. The court held that it is within the jurisdiction of the adjudicator to conduct a documents-only adjudication. [Updated-02]: Adjudicator has the right not to allow hearing.[1] However, this was overturned in another case, where Adjudicator must allow for hearing and cannot refuse hearing purely on the ground that time is limited.[2] Latest finding conclude that Adjudicator did not contravene natural justice after considering the written submission of the parties, concluded that hearing is not required.[3] --------------------------------------------- [1] Permintex JSK Resources Sdn Bhd v Follitile (M) Sdn Bhd (and Another Originating Summons) [2018] 1 AMR 693 [2] Guangxi Dev & Cap Sdn Bhd v Sycal Bhd and another case [2017] MLJU 878 [3] Mei He Development Sdn Bhd v Eosh Industries Sdn Bhd [2021] MLJU 519 14) APPEAL ON ADJUDICATION DECISION ALLOWED? Question, can party appeal on the adjudication decision on the ground of law? VVO Construction Sdn Bhd v Bina MYK Sdn Bhd [2017], respondent appealed against the adjudication decision under Order 55A rule 1 of the Rules of Court 2012 and it was held that under CIPAA, there is no provision for appeal. If parties are allowed to appeal, it will contravene the purpose of CIPAA in disposing rough justice. In other word, you cannot adjudicate the same matter twice. [Updated-02]: Parties are not allowed to raise new sets of defence, not contemplated in the adjudication, for setting aside application.[1] However, in another case, parties are allowed to adduce new evidence in setting aside application.[2] --------------------------------------------- [1] Hiform (M) Sdn Bhd v Tsr Bina Sdn Bhd and another summons [2020] MLJU. 808; Punj Lloyd Sdn Bhd v Ramo Industries Sdn Bhd & Anor and another case [2019] 11 MLJ 574; Gazzriz Sdn Bhd v Hasrat Gemilang Sdn Bhd [2017] AMEJ 1630 [2] Bluedream City Development sdn bhd v Pembinaan Bina Bumi Sdn Bhd and another [2020] MLJU 2531 15) SHIPPING AND MINING CONTRACT In MIR Valve Sdn Bhd v TH Heavy Engineering Berhad [2017], it is held that ‘ship building’ contract is excluded from CIPAA within the meaning of “construction work”. The similar judgment is held for YTK Engineering Services Sdn Bhd v Towards Green Sdn Bhd [2017], where a shipping contract or a mining contract does not fall within the meaning of “construction work” under section 4. 16) OBJECTION OF ADJUDICATOR APPOINTMENT In Zana Bina Sdn Bhd v Cosmic Master Development Sdn Bhd [2017], it was held that party who participated fully in an adjudication proceeding without raising any objection as to the validity of the adjudicator’s appointment during the proceeding was estopped from raising the objection subsequently in its setting aside application. However, in a recent case of 2019, Mega Sasa Sdn Bhd vs Kinta Bakti Sdn Bhd and Others [2019], the plaintiff seek to set aside the adjudication decision on ground that the adjudicator’s appointment was not valid for the reason that the appointing director of the AIAC has no locus standi in view that his position as the Director of AIAC is not legitimate in accordance to the Asian African Legal Consultative Organisation AALCO Host Country Agreement. The court has yet to make a judgement on this. [Updated]: The High Court held that CIPAA does not violate Article 8(1) Federal Constitution. It also rejected the challenge, that CIPAA is a ‘usurpation of the judicial power of the court’ in violation of Article 121 Federal Constitution, reason being CIPAA is a judicial function and not a replacement of the courts' judicial power. It further affirmed that the acting director had the power and duty to appoint the adjudicator, regardless if his position as the ‘director’ has yet to be finalized. [Updated-02]: Whether the parties must first attempt to agree on an adjudicator before a request for nomination from the Director of AIAC? Short answer, No.[1] Similarly, court holds the validity of appointment by ‘acting’ Director of the AIAC, albeit impasse with its recognition from AALCO.[2] ----------------- [1] KLIA Associates Sdn Bhd v Mudajaya Corporation Berhad [2020] 1 LNS 1253 [2] Prestij Mega Construction v Estate of Vinayak Pradhan BA-24C-13-02/2020 and BA-24C-25-03/2020 17) EXTENSION OF TIME FOR RESPONSE/REPLY Question, whether there was a breach of natural justice when an adjudicator refused to allow the respondent’s application for extension of time to submit a payment response? In Binastra Ablebuild Sdn Bhd v JPS Holdings Sdn Bhd [2018], it was held that it is not a breach of natural justice merely because an adjudicator, after hearing both sides, refused to allow the respondent’s application for extension of time. However, an adjudicator has the power under section 25(p) of CIPAA to extend any time limit. 18) CONSIDERING EXTENSION OF TIME (EOT) CLAIM BY ADJUDICATOR Question, can the adjudicator jurisdiction extended to adjudicate extension of time EOT? Such matter arises when there is a jurisdictional challenge, as to what is the jurisdiction of the adjudicator under CIPAA?
19) LOSS AND EXPENSE CLAIMS (Read in Tandem with ZERORISING A PARTY’S CLAIM) In Syarikat Bina Darul Aman Berhad & Anor vs Government of Malaysia [2017], it was held that an adjudicator who decided that he had no jurisdiction to decide on loss and expense claims was in breach of natural justice as such claims came within the ambit of CIPAA as these claims were due to the delay in completion of works and therefore payable as part of the amount claimable for the additional costs incurred for work. Not all loss and expense claims are within the purview of CIPAA, ie. Claim for special damages. The test is:
[UPDATED-02]: This matter is truly unsettled. Previously, Syarikat Bina Darul Aman allowed Loss and Expense claim (LnE) in CIPAA.[1] However, if the LnE is not a provision of the contract, it cannot be awarded by the Adjudicator.[2] This argument went further that HC held LnE is not a ‘payment’, thus not allowable in s.4,CIPAA.[3] ------------------------------ [1] [2017] MLJU 2381 | [2017] MLJU 673 | [2017] 1 LNS 559 [2] Kuasatek (M) Sdn Bhd v HCM Engineering Sdn. Bhd and other appeals [2018] MLJU 1919 [3] Integral Acres Sdn Bhd v BCEG International (M) Sdn Bhd and other cases [2021] MLJU 1889 20) PRE-AWARD INTEREST In Milsonland Development Sdn Bhd v Macro Resources Sdn Bhd [2017], it was held that an adjudicator has the power to grant pre-award interest pursuant to section 25(o) of CIPAA. [Updated]: In Naza Engineering & Construction v SSL Dev [2019], the High Court held that the adjudicator has exceeded his jurisdiction under s.27(1) read with s.5(1)CIPAA by awarding the 4th Pre-Award Interest Sum, of which it was not claimed in the Adjudication Claim. Also read Court’s Power to vary the Adjudication Decision. 21) WINDING UP BEFORE REGISTERING ADJUDICATION DECISION In Likas Bay Precinct Sdn Bhd v Bina Puri Sdn Bhd [2019] , it was held by the Court of Appeal, that a successful claimant in adjudication need not have the adjudication decision registered before issuing a statutory notice of ‘winding up’ under section 465 of CA 2016[x]. [Updated]: In ASM Development v Econpile [2019], the High Court granted an injunction restraining ‘winding up’ and held that the adjudication decision, which formed the basis of the ‘statutory demand’, had been disputed in an arbitration proceeding with cross-claims exceeding the amount in the adjudication decision on grounds that:
22) [UPADTED]: COURT’S POWER TO VARY THE ADJUDICATION DECISION [Updated]: JEKS Engineering Sdn Bhd v PALI PTP Sdn Bhd [2021] 9 MLJ held in contrasts the decision of Naza Engineering & Construction v SSL Dev [2019] that the court now has the power to severe any part of the AD as these were compelling and sensible on the grounds of in excess of jurisdiction by the Adjudicator. Such is against the earlier judgement of the HC, that Justice Wong KK held, ‘the court has no power to set aside a part of the AD under s.15CIPAA relying on BM City v Merger Insight [2016]. If the Parliament intended the court to have power under s.15 to vary the AD, Parliament would have to expressly provided for such analogues s.28(2)’. So, that is ‘unsettled’ as at the moment. What is taken to be settled are one, court could not set aside AD on grounds of mistake in facts and/or in law; the court will not re-evaluate the evidence; and any reasons, brief as they may be, is taken as the adjudicator’s justification [a topic for another day] In Naza Engineering & Construction v SSL Dev [2019], the High Court contemplated whether it has the jurisdiction to vary the adjudication decision to only allow enforcement of the ‘enforceable portion’ of the decision or to set aside the adjudication decision entirely. Justice Wong KK in his judgement relied on:
23) [UPDATED-02] CONSTRUCTION CONTRACT – refers to ‘singular’ contract and not ‘contracts’.[1] Unsigned quotation qualifies as a contract in writing for purposes of CIPAA.[2] --------------------------------- [1] Ireka Engineering & Construction Sdn Bhd v PWC Corporation Sdn Bhd [2020] 1 MLJ 311 [2] Ong Teik Beng (t/a MJV Construction) v Wow Hotel Sdn Bhd [2022] 8 MLJ 10 24) [UPDATED-02]: REJOINDER – Mirrored arbitration, CIPAA Adjudicator has no jurisdiction to allow for Rejoinder.[1] ----------------------- [1] Ireka Engineering & Construction Sdn Bhd v. Tri Pacific Engineering Sdn Bhd and another [2020] MLJU 548 [UPDATED-02]: 25) TIMELINE – ‘Working Day’ is generally construed as the ‘working day’ of where the site is located. However, the HC held that the ‘Working Day’ for the delivery of the Adjudicator’s Decision must be construed as the ‘working day’ of where the Adjudicator’s office is located.[1] This law is, however unsettled, pending appeal. As to the definition of “Date” in s.5(2)CIPAA must necessarily mean “a calendar date or a statement by which the due (calendar) date for payment is capable of being identified” and not simply, “immediate” for “instantly”, “promptly”, “forthwith”, “at once” or “straight away”.[2] On another matter, commencement of adjudication is upon appointment of adjudicator as compared to serving of the notice of adjudication.[3] -------------------------------- [1] Encorp[n6] [2] Perbadanan Perwira Harta Malaysia v Kuntum Melor Sdn Bhd and another case [2021] MLJU 1593 [3] Granstep Development Sdn Bhd v Tan Chong Heng & Ors [2020] MLJU 2364 26) BREACH OF CONTRACT – CIPAA is not the avenue for claims of damages from a breach of contract, notwithstanding one would be allowed to raise such claims as a cross-claim of defence or set-off against a Claimant’s claim.[1] 27) ANSWER RIGHT QUESTION, WRONGLY – Courts are not concerned with merits or correctness of the decision.[2] This include, erroneous assessment of documentary evidence.[3] Therefore, Adjudicators are not bound by the disputes referred to them in the exact way as pleaded by the parties, especially with regard to the remedies sought.[4] 28) NATURAL JUSTICE – The 1st rule of natural justice “overlaps with” but is “distinct from the Duty to be Impartial” envisaged by s.15(c)CIPAA, borne out in fact; and in the objective perception of a “fair-minded and informed observer”[5], i.e. there must be a “reasonable suspicion” or a “real possibility” that the adjudicator would be biased, either in fact or in perception; which also include ex-parte communication with the adjudicator.[6] ------------------------------------------------------ [1] Hiform (M) Sdn Bhd v Pembinaan Bukit Timah Sdn Bhd and another case [2020] MLJU 2452 [2] Maju Holdings v Spring Energy; Acoustic & Lighting System v Les Engineering [3] Ong Teik Beng[n10] [4] First Commerce v Titan Vista [2021] MLJU 376. [5] Halliburton v Chubb [2020] 3 WLR 1474 [6] Rosha Dynamic Sdn Bhd v Mohd Salehhodin bin Sabiyee & Ors and other cases [2021] MLJU 1222 As to date, CIPAA has been plagued with crippling complexities with more and more cases brought up in court for a finality in judgement that appears to be inconsistent and unpredictable in many areas beyond the true intention of CIPAA that is in dispensing justice based on the notion of to ‘pay first, argue later’ dispensing ‘rough justice’ with legally binding decision that has no ‘finality’ thus providing only temporal relief. The initial pro-claimant outcomes had thus swing to the other side of being pro-respondent post 2017. As more cases move up to the court, as in Leap Modulation Sdn Bhd v PCP Construction Sdn Bhd [2018], the court has gone as far as to interject the manner and efficacy of CIPAA in dispensing ‘rough justice’ and to the nature of AIAC being a ‘foreign entity’ with very little or no ‘check and balance’ self-regulation, had a monopoly grip on the dispensation of justice in Malaysia, no matter how ‘rough’ it is[xi]. The AIAC has since taken the same matter to the Federal Court to have this portion of the judgement expunged[xii]. The fate of CIPAA, while having put ‘off tangent’ from its initial purposes with more and more inconsistent and unpredictable judgements from the court, was plagued by alleged corruptions resulted in the former Director of the AIAC being replaced, based on the detailed insider content of just a ‘poison-penned’ letter[xiii]. However, in a recent case of 2019, Mega Sasa Sdn Bhd vs Kinta Bakti Sdn Bhd and Others [2019], the plaintiff seek to set aside the adjudication decision on ground that the adjudicator’s appointment was not valid for the reason that the appointing director of the AIAC has no locus standi in view that his position as the Director of AIAC is not legitimate in accordance to the Asian African Legal Consultative Organisation AALCO Host Country Agreement. The court has yet to make a judgement on this. CIPAA in itself is a two-tier processes. Winning the first-tier as in obtaining a favorable adjudication decision is not going anywhere with regards to recouping your unpaid payment claim. Subsequent enforcement of the decision as in the second-tier, is where the challenges begin as in setting aside and stay by the court. That is going to complicate matters, while many in the legal fraternity has been advocating, forget CIPAA, let’s see you in court! --------------------------------------------------- [i] Craig J Enderbury, “Changes to the Construction Act: Payment certainty…uncertain terms”, Chartered Institute of Building CIOB (UK), reference from https://www.ciob.org/sites/default/files/Hill%20Intl%20CIOB%20slides.pdf [ii] A survey was conducted to coincide with the Construction Industry Development Board’s plan to incorporate the survey’s outcomes in the Cabinet Paper which includes the Construction Industry Payment and Adjudication Bill 2006 which is targeted for submission to the Ministry of Works of Malaysia in March 2006, see M.S. Mohd Danuri , M.E. Che Munaaim , H. Abdul Rahman , M.Hanid, “LATE AND NON-PAYMENT ISSUES IN THE MALAYSIAN CONSTRUCTION INDUSTRY – CONTRACTORS’ PERSPECTIVE”, Center for Project and Facilities Management, Faculty of the Built Environment, University of Malaya. Reference from https://www.irbnet.de/daten/iconda/CIB4392.pdf [iii] Philip Davenport, “SECURITY OF PAYMENT IN NEWZEALAND” reference from http://www.austlii.edu.au/au/journals/AUConstrLawNlr/2002/79.pdf [iv] The seed of discontent has been raise as to the nature of the AIAC as the sole appointing body for adjudication under CIPAA is well reflected in the judgment of Leap Modulation Sdn Bhd vs PCP Construction Sdn Bhd, see “AIAC: Judge Hamid Sultan diverged from case facts in judgment”, Malaysiakini reference from https://www.malaysiakini.com/news/465089 [v] In attempts to challenge the jurisdiction of the adjudicator appointed by KLRCA under CIPAA 2012, the respondents in at least two adjudications have taken issue with the retrospective application of CIPAA 2012 to construction contracts entered into before 15 April 2014. UDA Holdings Berhad v Bisraya Construction Sdn Bhd & MRCB Engineering Sdn Bhd (Originating Summons No: 24C-6-09/2014) (“UDA v Bisraya”) was heard together with Capital Avenue Development Sdn Bhd v Bauer (Malaysia) Sdn Bhd (Originating Summons No: 24C-5-09/2014) (“CAD v Bauer”). The applications were heard in the Construction Court of the Kuala Lumpur High Court and were decided by Mary Lim J on 31 October 2014. The grounds of judgment is reported as UDA Holdings Berhad v Bisraya Construction Sdn Bhd & MRCB Engineering Sdn Bhd & Another Case [2014] 1 LNS 1584., “Construction Adjudication: Prospective, Retrospective or Somewhere in-between?” reference from https://mahwengkwai.com/construction-adjudication-prospective-retrospective-or-somewhere-in-between/ [vi] Read “Bauer (Malaysia) Sdn Bhd v Jack-In Pile (M) Sdn Bhd – CIPAA 2012 applies prospectively not retrospectively”, reference from https://www.zicolaw.com/resources/alerts/bauer-malaysia-sdn-bhd-v-jack-in-pile-m-sdn-bhd-cipaa-2012-applies-prospectively-not-retrospectively/” [vii] The Federal Court in its grounds of judgment dated 1 August 2019 in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd decided on important points of law on adjudication and final payments under a construction contract. https://themalaysianlawyer.com/2019/08/13/case-update-federal-court-decides-on-final-payments-adjudication/ [viii] See WRP Asia Pacific Sdn Bhd v NS Bluescope Lysaght Malaysia Sdn Bhd [2016], the unilateral communication of the adjudicator was found to be a material breach of natural justice. [ix] See Skyworld Development Sdn Bhd v Zalam Corporation Sdn Bhd, the Adjudicator had issued his Adjudication Decision one day out of time and this rendered the decision void. [x] Reference from https://www.zainmegatmurad.com/2019/02/20/cipaa-adjudication-466-statutory-notice-winding-up/ [xi] Reference from http://judgments.my/ca/leap-modulation-sdn-bhd-v-pcp-construction-sdn-bhd-and-another-appeal/10309 and https://www.malaysiakini.com/news/465089 [xii] Read “AIAC: Judge Hamid Sultan diverged from case facts in judgment”, Malaysiakini, reference from https://www.malaysiakini.com/news/465089 [xiii] Read “AIAC director resigns over MACC investigation”, Edge Markets, reference from https://www.theedgemarkets.com/article/aiac-director-resigns-over-macc-investigation Many professionals, especially from the legal fraternity, had written about this matter but more importantly, what is the sentiment of an architect with regards to this matter? As mentioned, it is call the ‘battle[i]’ of the standard forms of building contract[ii] and as to why it is indeed, a battle, has a long stories date back to the late sixties.
As a former colonized country of the colonial British Empire, we had adopted many of the common law jurisdictions and our construction law is built upon such as its core foundation. In UK, “under the sanction of the RIBA and in agreement with the Institute of Builders and the National Federation of Building Trades Employers of Great Britain and Northern Ireland”, in the 1903 the standard form of building contract was produced[iii]. In the late 60s, the Pertubuhan Arkitek Malaysia (PAM) came together with the Institution of Surveyor (ISM) formalized the first standard forms of building contract, called PAM-ISM Form 69 closely modeled on the UK Joint Contract Tribunal (JCT) Form 63 edition. It has its fair share of backlash from the industries due to its ‘farrago of obscurities’ legal draftsmanship[iv], tested in court and throughout the years for the next 30 years withstand the storms and set many precedents in the construction law of the country. It was so widely used in the private construction sectors[v], almost everyone knows this ‘devil’, practically inside out. As being an architect, administering this ‘devil’ has been our daily jobs and without fail, one must admit, this ‘devil’ has given the architect enormous power via its archaic ‘farrago of obscurities’ terminologies, one being the personal favorite, ‘to the satisfaction of the architect’. Honestly, nobody appreciate this phrase better than the architect and if you were to rephrase it, ‘how to satisfy the architect?’ such question opens a floodgate of legal entanglements that the current legal maxim such as ejusdem-generis could not well explained such! While the government or the public sector adopted the Public Work Department (PWD) or commonly also known as the Jabatan Kerja Raya (JKR) 203A Form. Architects who has worked in the public sector projects would have known well the intricacies of this JKR 203A Form. The construction of this form was largely contributed from the RIBA form of Building Contract 1931 Edition. By the same token, the Institution of Engineers (IEM) standard forms of contract called the IEM Form are mainly used for engineering matters. In all purpose, most of the IEM standard forms modified from the International Federation of Consulting Engineers (FIDIC) contract[vi]. At this time, various forms were tailor suit for their purposes and failure to adopt or to advise the correct use of these standard forms will ultimately result in costly, if not ‘painful’ legal disputes. Bombarded with the onslaughts of mounting pressures from the contractors, developers, the legal fraternities, end users and notably the government, PAM for the very first time, after 30 years, decided to make revision to its PAM 69 Form just to make it ‘relevant’ in view of its popularity among the industry players. In hope that the ‘devil’ becomes much of a lesser ‘evil’, the PAM council at that time, commissioned[vii] its own sole council member at his own personal capacity, to redraft the PAM Form. As a result, the PAM 98 Form was born. In substance, the PAM 98 Form was an improvement to the PAM 69 Form with less ‘farrago of obscurities’ in legal draftsmanship, however, it was view as a unilateral revision (drafted by one person) without participation from the stakeholders of the construction industries and to a larger degree, ‘pro-employers’[viii]. In forms, the first issuance of the PAM 98 Form was ‘technically challenged’ and a re-launch was made in 1998. The PAM 98 Form being a relatively new form, was yet to be tested in court, but like the saying goes, is better to be with ‘the devil you know than the devil you don’t know[ix]’, through time the industry took it stock load and barrel. The Construction Industry Development Board (CIDB) took the opportunity to make its presence felt. Collaborated with the other stakeholders (for all-inclusive policy, it was a strange sight to notice that PAM was not represented in the drafting committee) in the industry and through their newly minted Procurement Policy Committee, they came out with their very own version of standard forms called CIDB 2000 Form[x]. Differ from PAM 98 Form, any of the allied professionals such as engineers or quantity surveyors could be the named contract administrator or commonly known as the Superintendent Officer (SO). The most peculiar point of this form is the risk allocation that has been shifted to the employer, meaning, it is ‘extremely pro-contractors’. CIDB 2000 Form, conceived as the ‘knight in shiny armors’ was rarely employed in the private sector. To many of the allied professionals, especially the architects, it has since faded into oblivion[xi]. The PAM 98 Form has since continued to be the ‘preferred choice’ among the industrial players. As approaching 2006, the PAM 98 Form has since been tested in court, deliberated at length and constructively criticized by the stakeholders of the construction industries. It has come to a point that PAM needs to re-look into the PAM form again, to make it ‘watertight’. Instead of a sole member’s commissioned work, a committee was set up to undertake the revision. The new PAM 2006 Form was born with a more ‘regimented’ approach where ‘time is of the essence’ is given to almost every specific performance, failing to comply may amount to a breach. Gone were the days of archaic ‘farrago of obscurities’, such as ‘to the satisfaction of the architect’. More documentation work and liabilities were placed onto the shoulders of the architect as contract administrator. Legal implication with regards to ‘conditions precedents’ and ‘specific performance’ were introduced, almost making the architect’s ‘freedom to administer’, almost non-existence. The so called ‘devil’ was beyond recognition, making contract administration a ‘full time and painful job’ fit for a ‘keyboard administrator’ architect. Very pitiful with regards to its remuneration against the quantum of liabilities vested upon it[xii]. Strangely, recognizing the fact that failure to adopt or to advise the correct use of these standard forms will ultimately result in costly, if not ‘painful’ legal disputes, the act of omission was now, transferred to someone else probably liked the ‘poor’ architect as there was an exclusion clause finely printed in the PAM 2006 Form that read, ‘all parties must rely upon their own skill and judgement … when using this document and PAM assumes no liability to any user … in connection with such use’[xiii], classic indeed. Came 2012, the year of reckoning with the Construction Industry Payment and Adjudication Act 2012 (CIPAA), spearheaded by the Asian International Arbitration Centre (AIAC), the construction industries were thrown to its tipping point, welcomed by the contractors, sub-contractors and to a far degree, consultants too[xiv] and shunned by some employers notably developers, any claims put forth by the claimant, in CIPAA, will stand an 80% chances of winning due to its ‘rough justice stance’ with no ‘finality’. ‘I will CIPAA you[xv]’, became the common phrase in town. No doubt that the pendulum of wining, has since shifted to the respondents post the ‘View Esteem Case[xvi]’, adjudication decisions had been making rounds in the court of law without consistent and predictable outcomes. In the matter of the PAM 2006 Form, the ‘commercial agreement to any conditional payment’ has been made void as in the ‘Econpile Case[xvii]’. Now, the newly minted, PAM 2006 Form, with regard to its clause 25.4(d) on conditional payment upon determination, has been made completely unenforceable. In 2018, the PAM Committee that has since went into overdrive while waiting for the Federal Court’s decision on ‘Econpile Case’ did not see any light at the end of the tunnel, proceeded to account for such a decision, came with a minor revision, with complicated rewording of its clause 25.4(d) and called it the PAM 2018 Form. The content of the PAM 2006 Form, no doubt, were intact and fortified with numeral annotation rearrangement, however, more documentation work and liabilities were placed onto the shoulders of the architect as contract administrator such as having the architect to certify such breach so to allow the employer to cash the performance bond as in clause 39.5 and having the architect spelt out what were the outstanding works while issuing its CNC, almost suggesting to the contractor that ‘they don’t even know what is their work, and has to be reminded by the architect’. As the architect, one feels it is liken to use a ‘sledgehammer to nail a nail’. The story didn’t quite end here. In the same year 2018, the Asian International Arbitration Centre (AIAC) took the PAM 2006 Form, almost word by word and adopted the same as their AIAC 2018 Form of building contract. Needless to say ‘dispute’ arise on matter of copyright and subsequently a revise AIAC 2019 Form[xviii] of building contract with a total revamp has been introduced. In this AIAC 2019 Form anyone can be the contract administrator including anyone from the legal fraternity. Without prejudice, what would you think when anyone from the legal fraternity without technically trained, administer the contract? Often one may asked, how would anyone from the legal fraternity acquire his 7 years’ experience in the construction industry? Doing litigation works on behalf of the contractors or employers accounts for such including reading up construction case laws? When someone[xix] pointed that in 2016, as published by the AIAC (there was no such breakdown analysis anymore), there were 363 CIPAA adjudicators and out of these, 177 were lawyers, 59 were Engineers while QS made up 51 and others accounted for 65. Architects, only 11! Does it means to say that architects were so incompetent to even pass the adjudication examination let alone competent enough to administer a construction contract? I overheard someone is telling that majority of the arbitration awards that were thrown out of court were written by ‘non-legal trained’ arbitrators. Frankly, as an architect, one cannot, not ask, as to these 177 lawyers seating as CIPAA adjudicators, where do they obtain their 7 years’ experiences in the construction industries as a fundamental prerequisite to be a CIPAA adjudicator? As an architect, one may view that having the AIAC 2019 Form, it is an avenue for the legal fraternity to acquire their 7 years’ experience in the construction industries as a fundamental prerequisite to be a CIPAA adjudicator. Not long thereafter, there could also be many from the legal fraternity, claiming to be expert in architecture, construction, engineering and so forth. In 2017, other forms of contract such as the New Engineering Contract (NEC-4)[xx] were also making its round in the market, just a ‘keyboard button’ away that may set you back RM4,000.00[xxi] poorer. In essence NEC-4 fundamental principles of risk and costs collaborations[xxii] between the contractor and the employer was only popular in HongKong Government’s Public Funded Projects. While penning this personal reflection of an architect’s sentiment on the forms of the building contract (now, they fashionably called it suite) the construction industries are in disarray with regards to the less predictability of the Court’s decision on CIPAA, damages such as LD and the multitudes of pitfalls contractors and employers come to face maneuvering the intricate nexus of the conditions of contract that may not necessarily reflects the parties true intentions. Contract administrators such as the architects now having to perform multiple roles that they themselves were not familiar with including the ‘devil’s advocate’ just to make sure that the building is built according to his design and intention. Why so difficult? [i] ‘Battles of the Forms’ is a legal term for the common situation in which one business firm makes an offer in the form of a pre-printed form contract and the offeree responds with its own form contract, see www.fenwickelliott.com/research-insight/annual-review/2011/battle-forms. At common law, any discrepancy between the forms would prevent the offeree's response from operating as an acceptance. However, for the purpose of this article, it takes the literal meaning of the standard forms of building contract one ‘outdoing’ one another to garner a larger acceptance in the building industry. [ii] Standard Form Contracts are agreements that employ standardised, non-negotiated provisions, usually in pre-printed forms; retrieved from www.designingbuildings.co.uk/wiki/Standard_form_of_contract [iii] History of the JCT, retrieve from www.corporate.jctltd.co.uk/about-us/our-history [iv] Powell-Smith, Vincent, “The Malaysian standard form of building contract (PAM/ ISM 69)”, Malayan Law Journal, (1990). [v] It is estimated that 90 per cent of the building contracts in the private sector are based on the PAM form (Sundra, 2010), Zarabizan bin Zakaria, Syuhaida binti Ismail and Aminah binti Md Yusof ; “An Overview of Comparison between Construction Contracts in Malaysia: The Roles and Responsibilities of Contract Administrator in Achieving Final Account Closing Success”, Proceedings of the 2013 International Conference on Education and Educational Technologies (2013), retrieved from http://www.inase.org/library/2013/rhodes/bypaper/EET/EET-02.pdf [vi] Oon CheeKeng, “Standard Construction Contracts in Malaysia Issues and Challenges”, retrieve from www.academia.edu/5722671/STANDARD_CONSTRUCTION_CONTRACTS_IN_MALAYSIA_Issues_and_Challenges_CK_OON_and_CO._Advocates_and_Solicitors_STANDARD_CONSTRUCTION_CONTRACTS_IN_MALAYSIA_Issues_and_Challenges_BY [vii] P Kasi reported that Sundra Rajoo has offered his services in his personal capacity to complete the task of revising the PAM Formof Contract from where the late KC Cheang had left off… Council accepted Sundra Rajoo’s offer to complete the revision … for a fee of RM 30,000.00; disclosed by Ezumi, PAM Council Minute of Meeting. [viii] … aspiration to produce a fair and balanced form of contract that would satisfy the role and to respond positively to the feedback from the industries…extract from the Background, “PAM Contract Drafting Committee, Handbook for PAM Contract 2006”, Pertubuhan Arkitek Malaysia, KL (2010). [ix] used to say that it is better to deal with a difficult person or situation one knows than with a new person or situation that could be worse, retrieved from www.merriam-webster.com/dictionary/better%20the%20devil%20you%20know%20than%20the%20devil%20you%20don't [x] Ong SeeLian and team; “Guide on the CIDB Standard Form of Contract for Building Work”, CIDB (2000). Retrieved from cidb.gov.my/images/content/pdf/p2p/guide-on-cidb-standard-form-of-contract-for-building-work.pdf [xi] Although it appears that CIDB’s intention is to make the use of their forms commonplace, the question as to whether these CIDB Standard Forms will ultimately replace the existing JKR Standard Forms for the moment at least begets no precise answer, Sundra Rajoo, “Standard Forms of Contract – The Malaysian Position”, IBA Tokyo (2014). Retrieved from www.aiac.world/news/82/IBA-Tokyo-:-Standard-Forms-of-Contract-–-The-Malaysian-Position-by-Datuk-Professor-Sundra-Rajoo [xii] The fees do not commensurate with the work done, response taken from an interview between the Edgeprop and Zulhamlee (former PAM President), “Why Malaysian architecture doesn't have to suffer from the Gucci syndrome”, EdgeProperty Lifestyle Edition (2015), retrieved from www.edgeprop.my/content/why-malaysian-architecture-doesnt-have-suffer-gucci-syndrome [xiii] Sundra Rajoo, WSW Davidson and Harban Singh, “The PAM 2006 Standard Form of Building Contract”, Lexis Nexis Malaysia Sdn Bhd (2010). [xiv] Consultants can claim for unpaid fees via CIPAA with reference to the judgement in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd [2016] MLJU 1827 [xv] Sounded liked ‘I will slap you’ in the Malay language – ‘sepak’ means slap. [xvi] View Esteem Sdn Bhd v Bina Puri Holdings Berhad, read www.lh-ag.com/wp-content/uploads/2017/11/DR-e-Alert-LHAG-update-20171113.pdf [xvii] Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd and anor [2017] 7 MLJ 732, also read christopherleeong.com/media/3011/clo_201804_cipaa.pdf [xviii] Read www.lexology.com/library/detail.aspx?g=98bd7c4b-8587-406b-8506-20ad2207a981 [xix] As pointed out by David Cheah in the Joint IEM MIArb RISM and PAM’s ADR course for Practitioners held in IEM on 1st Aug 2019. [xx] See www.designingbuildings.co.uk/wiki/NEC4#Confidentiality [xxi] Exchange rate to Ringgit Malaysia from Pound Stirling of 812.00 see https://www.neccontract.com/NEC4-Products/NEC4-Contracts/NEC4-June-2017-Edition-including-Alliance-Contract [xxii] Read www.fenwickelliott.com/research-insight/newsletters/insight/75 |
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