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Document: Ban Soon Aik Construction Sdn Bhd v Berjaya Land Development S…

Ban Soon Aik Construction Sdn Bhd v Berjaya Land Development


Sdn Bhd and another appeal [2019] MLJU 1232

Copy Citation

Malayan Law Journal Unreported

HIGH COURT (KUALA LUMPUR)


ALIZA SULAIMAN, JC
ORIGINATING SUMMONS NO.: WA-24C-17-01/2019 AND NO.: WA-24C-30-02/2019
16 October 2019

Wayne Siang Chin Fong (Kheng Hoe with him) Advocates & Solicitors (Kheng Hoe) OS No. WA-24C-
17-01/2019 for the plaintiff.
Ong Yu Shin (Soon Ley Theng with him) Advocates & Solicitors for the defendant.
Ong Yu Shin (Soon Ley Theng with him) Advocates & Solicitors OS No. WA-24C-30-02/2019 for the
plaintiff.
Wayne Siang Chin Fong (Kheng Hoe with him) Advocates & Solicitors (Kheng Hoe) for the defendant.

Aliza Sulaiman JC:


GROUNDS OF JUDGMENTIntroduction

[1] By Originating Summons (“OS”) No. WA-24C-17-01/2019 filed on 31.1.2019, Ban Soon Aik
Construction Sdn Bhd (“BSA”) has applied to enforce the Adjudication Decision made by the learned
Adjudicator dated 31.12.2018 (“Adjudication Decision”) under section 28 of the Construction Industry
Payment and Adjudication Act 2012 [Act 746] (“CIPAA”) read with O. 69A, rules 2 and 5, Rules of Court
2012 (“RoC 2012”) and/ or under the inherent powers of the Court.

[2] Approximately two months later, Berjaya Land Development Sdn Bhd (“BLDSB”) filed OS No. WA-
24C-30-02/2019 seeking orders for the entire Adjudication Decision to be set aside under section 15(b)
and/ or 15(d) CIPAA or alternatively, for an immediate stay of the same until, and subject to, the
decision in the arbitration proceeding between the parties, and for an interim stay of the whole
Adjudication Decision until the OS is determined and disposed by the Court.

[3] The parties agreed that both OS should be heard together. On the hearing date on 31.5.2019,
learned counsels representing both parties elected to rely on the written submissions filed.

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[4] Having given full consideration to the OS, Affidavits and written submissions filed, I had dismissed
BLDSB”s application to set aside or stay the Adjudication Decision with costs of RM8,000.00.
Concurrently, BSA”s application to enforce the Adjudication Decision under section 28 CIPAA was
allowed with costs of RM5,000.00. Both orders for costs are subject to the payment of the allocatur
fees.

[5] Being dissatisfied, BLDSB now appeals against my entire decision in respect of the applications in
both OS. My reasons for the decision are elaborated below.

The Cause Papers

[6] The related Affidavits in respect of BSA”s application in OS No. WA- 24C-17-01/2019 are as
follows:

(a) Affidavit In Support (“AIS”) affirmed by Ooi Guo Chean, BSA”s Director on 30.1.2019 (Enclosure 2);

(b) Affidavit In Reply (“AIR”) (1) affirmed by Pee Kang Seng @ Lim Kang Seng, BLDSB”s Director on
20.2.2019 (Enclosure 15);

(c) BSA”s AIR affirmed on 18.3.2019 (Enclosure 26); and

(d) BLDSB”s AIR (2) affirmed on 29.3.2019 (Enclosure 27).

[7] Meanwhile, the following are the relevant Affidavits pertaining to BLDSB”s application in OS No.
WA-24C-30-02/2019:

(a) AIS affirmed by the same Director of BLDSB on 20.2.2019 (Enclosure 2);

(b) AIR affirmed by the same Director of BSA on 18.3.2019 (Enclosure 32);

(c) BLDSB”s AIR (1) affirmed on 29.3.2019 (Enclosure 33); and

(d) BLDSB”s Additional Affidavit affirmed on 30.5.2019 (Enclosure 39).

Background Facts

[8] By a Letter of Award dated 10.12.2015 (“LoA”), BSA was appointed by BLDSB as its contractor for
the construction and completion of the project known as “Infrastructure Works For Parcel 1 For The
Proposed Development Di Atas Lot 28, Sebahagian Lot 403 Dan Sebahagian Lot 728, Jalan Batu
Gantung, Seksyen 2, Georgetown, Daerah Timur Laut, Pulau Pinang” (“said Project”) for a contract sum
of RM38,626,403.70.

[9] The LoA incorporated the Agreement and Conditions of PAM Contract 2006 (With Quantities)
(“PAM Contract”).

[10] Pursuant to Clause 30.1 PAM Contract, the Architect shall within 12 days from the date of receipt
of BSA”s application, issue an interim certificate to BLDSB with a copy to BSA and the period of
honouring the interim certificate shall be 30 days from the date of the Architect”s Certification.

[11] On 12.3.2018, BSA received an Engineer”s Instruction No. 2 dated 12.3.2018 to stop work
immediately due to a stop-work order by Majlis Bandaraya Pulau Pinang. On the same day, BSA issued
a notice of intention to claim for expenses and losses due to the suspension of works.

[12] The construction works remained suspended until the day BSA was terminated by BLDSB which
BSA avers was not in accordance with Clause 25 PAM Contract.

[13] Consequently, BSA brought a claim by way of adjudication pursuant to CIPAA for the following
items:

Claim for Value of Works Done RM1,919,519.29 (including 6% GST)


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Claim for Loss and Expense RM1,336,540.00
Claim for release of retention sum following unlawful RM1,222,093.41
termination
TOTAL RM4,478,152.70

[14] On 8.8.2018, BLDSB served its Payment Response pursuant to section 6 CIPAA to BSA.

[15] This was followed with the issuance of the Notice of Adjudication to BLDSB and the Asian
International Arbitration Centre (“AIAC”) pursuant to section 8 CIPAA on 15.8.2018.

[16] Thereafter, the Director of AIAC appointed Mr. Ooi Huey Miin to act as the Adjudicator, and the
said Adjudicator accepted the appointment on 24.9.2018.

[17] A copy of the Adjudication Claim dated 8.10.2018 was then served on BLDSB and the Adjudicator.

[18] An Adjudication Response dated 17.10.2018 was subsequently served to BSA and the Adjudicator
on 19.10.2018.

[19] Thereafter, BSA replied and served an Adjudication Reply dated 25.10.2018 on BLDSB and the
Adjudicator on 26.10.2018.

[20] On 31.12.2018, the learned Adjudicator published his Adjudication Decision wherein he decided,
inter alia, that BLDSB shall pay to BSA-

(A) “ within 7 days from the date of this decision, the sum of RM721,612,23;

(B) within 7 days from the date of this decision, interest of 5% per annum on the sum of
RM721,612.23 from 26.3.2018 to the date of this decision amounting to
RM27,777.13;

(C) within 7 days from the date of this decision, the sum of RM445,562.79;

(D) within 7 days from the date of this decision, interest of 5% per annum on the sum of
RM445,562.79 from 6.5.2018 to the date of this decision amounting to
RM14,648.64;

(E) within 7 days from the date of this decision, the sum of RM35,000.00 being the
Claimant”s costs of the adjudication proceedings;

(F) within 7 days from the date of this decision, the sum of RM55,500.00 being the
adjudicator”s fees and expenses and the AIAC”s administrative fees that have been
deposited with AIAC by the Claimant;

(G) within 7 days from the date of this decision, the sum of RM689.00 being AIAC”s
administrative fees that have been paid to the AIAC by the Claimant;

(H) interest of 5% per annum on each of the sums payable by the Respondent to the
Claimant under (A), (C), (E), (F) and (G) above from the date of this decision to the
date of full settlement.”.

(A) OS No. WA-24C-30-02/2019: Application to set aside or alternatively, for a stay of the
Adjudication Decision

[21] In general, BLDSB submitted that the Adjudication Decision ought to be set aside on the basis
that there is patent non-compliance of fundamental requirements in sections 8, 21 and 38 CIPAA. Thus,
the CIPAA proceeding was wrongfully instituted ab initio and the Adjudicator had no core and competent
jurisdiction to hear and give the Adjudication Decision.

[22] In its AIS (Enclosure 2), BLDSB application to set aside the Adjudication Decision is premised
upon the provisions in section 15(b) and/or 15(d) CIPAA. However, in the Written Submission, reference

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was made only to section 15(d) CIPAA.

[23] I shall now deal with the specific questions which fall for determination in this matter.

(i) Is there valid service of the Notice of Adjudication dated 15.8.2018 on BLDSB?- The
submissions by the parties

[24] It is BLDSB”s contention that the Notice of Adjudication dated 15.8.2018 was served on the
parent holding company, Berjaya Land Berhad, and not BLDSB.

[25] BLDSB, being the respondent in the CIPAA proceeding, is a different and totally distinct entity
from Berjaya Land Berhad. Learned counsel cited the case of Pamol (Sabah) Ltd & Anor v. Joseph
Paulus Lantip & Ors [2012] 1 LNS 466 to support his submission on the trite proposition of law that a
subsidiary company and a holding company are separate legal entities and therefore, service on Berjaya
Land Berhad does not, and cannot, equate to service on BLDSB.

[26] It was further contended that BSA has failed to comply with subsection 8(2) CIPAA before
proceeding to submit its request to AIAC to appoint an adjudicator. Substantively, in a statutory
adjudicative procedure where timeline is fixed and sacrosanct, BSA”s failure to serve the Notice of
Adjudication on the correct party is said to amount to a fundamental error causing prejudice in BLDSB”s
preparation time as the respondent in the adjudication proceeding. Learned counsel for BLDSB stressed
that a Notice of Adjudication is intended to give a respondent the first formal notice of commencement
of CIPAA proceedings. In the instant case, by the time BLDSB knew of the said Notice, it would have
been deprived and prejudiced of critical preparation and getting-up time which cannot be compensated
by cost.

[27] Relying on the decision in the case of Skyworld Development Sdn Bhd v Zalam Corporation Sdn
Bhd and other appeals [2019] MLJU 162; [2019] 1 LNS 173, Mr. Ong Yu Shin argued that the statutory
requirements in CIPAA are strict and the failure to comply with the mandatory provisions therein would
have harsh consequences in that the ensuing appointment of Mr. Ooi Huey Miin as the Adjudicator was
wrong and resulted in the Adjudicator having no jurisdiction over the proceeding. The other authorities
submitted in the course of arguments are Anna Yap May May v. Tetuan Lim Aik Huck & Company [2017]
1 LNS 2104 and Ideal City Development Sdn Bhd v. PWC Bina Sdn Bhd & Other Appeals [2019] 2 CLJ
615.

[28] In response, learned counsel for BSA submitted that the averments and exhibits in the Affidavits
have established the following facts:

(a) BLDSB and Berjaya Land Berhad both share the same address;

(b) all documents, including the Notice of Adjudication, were properly served on BLDSB”s business
address, although each document was chopped received by Berjaya Land Berhad;

(c) the Payment Claim and Adjudication Claim, which required a response under CIPAA, were sent to
the same business address by BLDSB and acknowledged received by Berjaya Land Berhad, but
nonetheless were duly replied by BLDSB. This goes to show that any document sent to that business
address and acknowledged received by Berjaya Land Berhad is in fact properly served on BLDSB;
and

(d) in contrast, the Notice of Adjudication, which does not require a response under CIPAA, and was
sent to the same business address and acknowledged in the same way by Berjaya Land Berhad,
was disputed by BLDSB. This is a clear indication of BLDSB blowing hot and cold on this issue.

[29] Mr. Wayne Siang additionally highlighted that the only purpose of service is to ensure that the
documents come to the knowledge of the party being served. The law does not allow any party to rely
on technicalities to evade service as can be seen from the judgment in the case of Ann Joo Metal Sdn
Bhd v Pembenaan My Chahaya Sdn Bhd [2000] 5 MLJ 708.

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[30] Furthermore, the issue of alleged wrongful service of the Notice of Adjudication had been
ventilated in the adjudication itself.

- Findings by the Court

[31] The initiation of adjudication is governed by section 8 CIPAA in the following terms:

(1) “ A claimant may initiate adjudication proceedings by serving a written notice of


adjudication containing the nature and description of the dispute and the remedy
sought together with any supporting document on the respondent.

(2) Upon receipt by the respondent of the notice of adjudication, an adjudicator shall be
appointed in the manner described in section 21.

(3) A party to the adjudication proceedings may represent himself or be represented by


any representative appointed by the party.”.

[32] The requirements as to service of notices and documents under CIPAA are expressly provided in
section 38 under Part VII governing “Miscellaneous” matters and reads as follows:

“Service of a notice or any other document under this Act shall be effected on the party to
be served -

(a) by delivering the notice or document personally to the party;

(b) by leaving the notice or document at the usual place of business of the party during
the normal business hours of that party;

(c) by sending the notice or document to the usual or last-known place of business of the
party by registered post; or

(d) by any other means as agreed in writing by the parties.”.

[33] As mentioned by BSA”s counsel, the same points of arguments regarding service of the
Adjudication Notice had been ventilated before the learned Adjudicator. It began with BLDSB”s letter
dated 28.9.2018 to the learned Adjudicator alleging that it has not received and never seen the Notice
of Adjudication. This issue was then raised in paragraphs 1 to 7 of BLDSB”s Adjudication Response
dated 17.10.2018 as a jurisdictional challenge (see exhibit “F” in BSA”s AIS for the enforcement
application). BSA replied accordingly in paragraphs 9 to 18 of its Adjudication Reply dated 25.10.2018
(exhibit “G” in the same AIS).

[34] The learned Adjudicator considered the matter as can be seen in the following passages from the
Adjudication Decision (exhibit “J” in the same AIS), where after making reference to sections 8(1) and
(2), 38(b) and 21(b)(i) CIPAA, the learned Adjudicator states that -

“86. The Notice of Adjudication was addressed to “Level 12” (East Wing) Berjaya Times
Square, No. 1 Jalan Imbi, 55100 Kuala Lumpur”.

87. The Respondent”s complaint is not that; (1) the Notice of Adjudication was not hand
delivered to this address on 25.7.2018 during the Respondents normal business hours; or
(2) this address is not its usual place of business.

88. The Respondent”s only complaint is that the Notice of Adjudication was served on a
separate legal entity, its holding company “Berjaya Land Berhad” by virtue of the stamp
with which it was acknowledged received.

89. However, there is no requirement under CIPAA 2012 that a notice must be
acknowledged received with the stamp of the receiving party for it to have been effectively

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served.

90. SSM searches on both the Respondent and “Berjaya Land Berhad” produced by the
Claimant show that both these companies share the same business address.

91. I find the Notice of Adjudication was left at the usual place of business of the
Respondent during its normal business hours as prescribed by ss.8(1) and 38(b) of CIPAA
2012. The fact the “Notice of Adjudication” was acknowledged received with the stamp of
“Berjaya Land Berhad” which shares the same business address as the Respondent, if
anything, reinforces this finding.

92. I therefore find these adjudication proceedings have been properly initiated by the
Claimant and ss.8(2) and 21 of CIPAA 2012 have been complied with as regards my
appointment as Adjudicator.”.

[35] I have examined exhibit “A-3” in BLDSB”s AIS (Enclosure 2), which shows the corporate
information on BLDSB including its registered and business addresses, and exhibit “B” in BSA”s AIR
(Enclosure 32), which is the corporate information on Berjaya Land Berhad depicting the same business
address as BLDSB.

[36] Additionally, exhibit “A” in BSA”s AIR contains the letter dated 15.8.2018 from BSA”s solicitors
addressed to BLDSB”s business address enclosing a copy of the Notice of Adjudication of even date.
Berjaya Land Berhad”s chop, an initial and date of “15/8/18” can be seen in the acknowledgement of
receipt.

[37] Significantly, the letter dated 25.7.2018 from BSA”s solicitors to BLDSB enclosing the Payment
Claim (exhibit “A-1” in BLDSB”s AIS), and the letter dated 8.10.2018 from BSA”s solicitors to the
Adjudicator and copied to BLDSB enclosing the Adjudication Claim (exhibit “E” in BSA”s AIS for the
enforcement application), were both sent to the same business address as the Notice of Adjudication
and acknowledged in the same way i.e. with Berjaya Land Berhad”s chop, an initial and the date of
receipt. And yet, BLDSB reacted by serving a Payment Response dated 8.8.2018 (exhibit “A-2” in
BLDSB”s AIS) to BSA”s solicitors and an Adjudication Response dated 17.10.2018 (exhibit “F” in BSA”s
AIS for the enforcement application) to BSA and its solicitors. Under these circumstances, it is rather
astounding that BLDSB claims that it did not receive the Notice of Adjudication, coincidentally the one
document that does not require a reply by a respondent under the CIPAA provisions.

[38] In this respect, I agree with BSA”s submissions that when different companies share the same
business address, BSA has no control over the arrangement among these companies on the matter
concerning acknowledgement of receipt of letters and documents.

[39] Based on the aforesaid, I have no doubt whatsoever that BSA has served the written Notice of
Adjudication containing the nature and description of the dispute and the remedy sought together with
the supporting documents such as the Payment Claim, Payment Response, LoA, PAM Contract, Progress
Claims No. 20 - 22 and Payment Certificate on BLDSB by leaving the said Notice at the usual place of
business of BLDSB during its normal business hours in accordance with the requirements as stipulated
in subsection 8(1) and section 38(b) CIPAA.

[40] In the upshot, the contention by BLDSB that the Notice of Adjudication was not served on, and
received by, it and the non- compliance with CIPAA renders the Adjudicator lacking the core and
competent jurisdiction to adjudicate and give the Adjudication Decision is absolutely baseless.

(ii) Is there a valid request to the Director of AIAC to appoint the Adjudicator?- The
submissions by the parties

[41] The next challenge mounted against the Adjudication Decision is an extension of the first
argument related to the service of the Adjudication Notice.

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[42] BLDSB takes the position that since it did not receive the impugned Notice of Adjudication and
was not accorded the opportunity to agree, disagree or propose a candidate of its choice, BSA”s Request
to the Director of AIAC to appoint an adjudicator under section 21(b) CIPAA is thus premature, defective
and wrongful. The non-compliance of section 21 CIPAA thus resulted in the learned Adjudicator lacking
the core and competent jurisdiction to give the Adjudication Decision.

[43] BLDSB”s AIS also raised the issue of non-compliance with Clause 34.2 PAM Contract governing
“Notice to refer to adjudication” wherein 21 days from the date of the written notice to concur on the
appointment of the adjudicator must have lapsed before the party initiating the adjudication can apply
to the President of Pertubuhan Akitek Malaysia to appoint an adjudicator. However, it is noted that this
point was not mentioned in either the Written Submission or Reply Submission by BLDSB”s counsel.

[44] BSA”s counter argument is as averred in paragraphs 12 - 14 of its AIR (Enclosure 32) where the
issue of the appointment of the learned Adjudicator as being contrary to Clause 34.2 PAM Contract had
been raised in the Adjudication Response and replied accordingly in the Adjudication Reply (see
paragraphs 8 - 12 of the former and paragraphs 20 - 24 of the latter in exhibits “A-4” and “A-5”
BLDSB”s AIS, respectively). In the Adjudication Decision, the learned Adjudicator opined that -

“93. I also find that Clause 34.2 of the COC does not apply to adjudications brought under
CIPAA 2012. I agree with the Claimant that:

93.1 this adjudication was commenced pursuant to CIPAA 2012, the procedures of CIPAA
2012, apply and not Clause 34.2 of the COC (which was not invoked);

93.2 Clause 34.2 cannot be utilized to curtail the Claimant”s statutory right to pursue an
adjudication claim under CIPAA 2012.

94. I therefore find there is no basis for me to set aside the adjudication proceedings or
otherwise dismiss the Claimant”s claim on the basis of the jurisdictional challenge raised
by the Respondent.”.

[45] Mr. Wayne Siang submitted that the distinction between a statutory adjudication under CIPAA and
a contractual adjudication under the PAM Contract has been made clear in KaSugi Prima Sdn Bhd v
Cobrain Holdings Sdn Bhd [2017] 1 LNS 1830 and therefore, the appointment of the learned Adjudicator
is in accordance with CIPAA and not the PAM Adjudication Rules.

- Findings by the Court

[46] The manner in which an adjudicator may be appointed is set forth in section 21 CIPAA which
states:

“An adjudicator may be appointed in the following manner:

(a) by agreement of the parties in dispute within ten working days from the service of the
notice of adjudication by the claimant; or

(b) sby the Director of KLRCA -

(i) upon the request of either party in dispute if there is no agreement of the parties
under paragraph (a); or

(ii) upon the request of the parties in dispute.”.

[47] The passage from the judgment of Lee Swee Seng J. (as His Lordship then was) in KaSugi Prima
reads as follows:

“[24] However the adjudication referred to is not Statutory Adjudication under the CIPAA
but instead, contractual adjudication under the PAM Standard Contract 2006.

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[25] This is clear from a reading of Clause 34.2 which reads:

“Where a party requires a dispute or difference under Clause 34.1 to be referred to


adjudication, such disputes or differences shall be referred to an adjudicator to be agreed
between the parties. If after the expiration of twenty one (21) Days from the date of the
written notice to concur on the appointment of the adjudicator, there is a failure to agree
on the appointment, the party initiating the adjudication shall apply to the President of
Pertubuhan Akitek Malaysia to appoint an adjudicator, and such adjudicator so appointed
shall be deemed to be appointed with the agreement and consent of the parties to the
Contract.”

[26] The fact that the adjudication referred to is contractual adjudication under the PAM
Standard Contract 2006 and not Statutory Adjudication under the CIPAA is further borne
out by Clause 34.3 which reads:

“Upon appointment, the adjudicator shall initiate the adjudication in


accordance with the current edition of the PAM Adjudication Rules or any
modification or revision to such rules.”

[27] In any event Statutory Adjudication had not come into being when the PAM
Standard Contract 2006 was in force until 15.4.2014, when the CIPAA came into force.

[28] To allow a party to contractually bypass Statutory Adjudication would be to allow the
purpose of the CIPAA to be thwarted and the CIPAA itself to be a toothless tiger with no
bite but only a growl. Parliament does not act in vain and a statutory right conferred by
law cannot be taken away by contract. All Employers would only be too keen to contract
out of it whether wholly or partially. In Martego Sdn Bhd v. Arkitek Meor & Chew Sdn Bhd
& Another Case [2017] 1 CLJ 101, this Court observes at paragraph 93, 94 and 95 at page
122 and 123 as follows:

“[93] In all this debate we must not forget Parliament”s intention in enacting
CIPAA is to provide a mechanism for speedy dispute resolution through
adjudication, to provide remedies for the recovery of payment in the
construction industry and to provide for connected and incidental matters.
The objective and purpose of CIPAA are to provide a solution to payment
problems that stifles cash flow in the construction industry.

[94] Martego”s claim that CIPAA has no application to the dispute as the
parties had made specific contractual arrangements for dispute resolution
under cl. 7 of the contract is totally misplaced. It would lead down the
dangerous road of giving tacit consent to the parties contracting out of CIPAA
which can only have the effect of thwarting the purpose of CIPAA altogether.

[95] Martego is still at liberty to pursue with arbitration to correct what it


deems to be a wrong decision arrived at by the adjudicator.”.

[48] BSA”s reliance on the above mentioned judgment to rebut BLDSB”s argument based on Clause
34.2 PAM Contract is certainly apt and I have no valid reason to take a different view from that
propounded by Lee Swee Seng J (now JCA).

[49] In the same vein, the alleged non-compliance of section 21 CIPAA in that no Notice of
Adjudication was served prior to the issuance of the request to the Director of AIAC to appoint an
adjudicator is a non- starter in light of my findings in respect of the issue of service of the said Notice.

(iii) Should an order to stay the enforcement of the Adjudication Decision be granted?- The
submissions by the parties

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[50] BLDSB put forth a prayer in the alternative, namely that a stay of the Adjudication Decision ought
to be allowed in view of the special circumstance that 26 suits were filed and 21 judgments were
obtained by other creditors against BSA. The total judgment sum is RM3,214,143.12 which is far in
excess of the sum awarded in the Adjudication Decision of RM1,300,789.79.

[51] Based on these figures and the decisions in Kosma Palm Oil Mill Sdn Bhd & Ors v. Koperasi
Serbausaha Makmur Bhd [2003] 4 CLJ 1 and Ireka Engineering And Construction Sdn Bhd v. PWC
Corporation Sdn Bhd & Another Appeal [2019] 1 LNS 51, BLDSB submitted that there is real danger
that BSA would be unable to pay BLDSB in the event that BLDSB is successful in the arbitration against
BSA.

[52] The above is said to be compounded by the fact that -

(a) BSA has failed to submit its Financial Statement to the Companies Commission of Malaysia (“CCM”)
which supports BSA”s precarious financial standing; and

(b) BSA”s issued capital of RM3 million is insufficient to meet its judgment liabilities of RM3,214,143.12
nor BLDSB”s claim of RM6,831,658.07 in the arbitration proceeding against BSA in the event that
BLDSB proves successful. The effect of the Adjudication Decision is clearly stipulated in section
13(c) CIPAA as being binding unless, among others, the dispute is finally decided by arbitration or
the court.

[53] In answer to the allegation of impecuniosity, BSA averred that it found itself placed in the
unenviable position of facing a temporary cash- flow crunch all due to BLDSB”s failure to pay the
outstanding sums when due. As a result, it had to defend itself against multiple lawsuits where in some
cases, judgements were entered against it. Therefore, based on the legal principles as laid down in
Wimbledon Construction Co 2000 Ltd v Vago [2005] EWHC 1086 (TCC) and referred to in Subang
Skypark Sdn Bhd v Arcradius Sdn Bhd [2015] 11 MLJ 818, BLDSB cannot rely on BSA”s impecuniosity
as a factor to boost its application for a stay since the cause for the financial predicament is BLDSB”s
own non-payment.

[54] Learned counsel representing BSA argued that BLDSB may justify the application for stay on
grounds of impecuniosity provided that it can establish that -

(a) BSA is presently impecunious;

(b) BSA”s impecuniosity is not due to BLDSB”s non-payment;

(c) BSA”s paid-up capital had been reduced from the time when BSA was awarded the contract; and

(d) BSA used to file its financial statements but now have failed to do so.

[55] BLDSB is said to have failed to show any of the above. In any event, despite not being paid by
BLDSB, BSA is no longer impecunious because BSA has resolved all the outstanding lawsuits with
Maybank while the other suits have either been fully settled and/or discontinued.

[56] As regards BSA”s paid-up capital, Mr. Wayne Siang submitted that the amount has always been
the same i.e. RM3 million and that did not stop BLDSB from issuing a contract to BSA. Hence, it cannot
now be used as a reason to stop BLDSB from paying the adjudicated amount.

[57] The complaint that BSA did not file its financial report to CCM is similarly contended to be
baseless because BSA is a private exempt company. Section 267 Companies Act 2016 [Act 777] (“CA
2016”) requires all companies to file their financial reports except private exempt companies.

- Findings by the Court

[58] Section 16 CIPAA governs the circumstances in which an application for stay of an adjudication
decision may be made and it reads as follows:
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(1) “ A party may apply to the High Court for a stay of an adjudication decision in the
following circumstances:

(a) An application to set aside the adjudication decision under section 15 has been
made; or

(b) The subject matter of the adjudication decision is pending final determination by
arbitration or the court.

(2) The High Court may grant a stay of the adjudication decision or order the adjudicated
amount or part of it to be deposited with the Director of the KLRCA or make any other
order as it thinks fit.”.

[59] An inquiry into whether a stay may be justified in the factual context of a case would be
incomplete if no mention is made of the leading authority governing the requirements of section 16
CIPAA, namely View Esteem Sdn Bhd v. Bina Puri Holdings Berhad [2018] 2 MLJ 22; ; [2019] 5 CLJ
479. Zulkefli PCA in delivering the judgment of the apex court held that -

“[76] The High Court in the present case held that an application under s 16 of CIPAA can
only be allowed in exceptional circumstances. These exceptional circumstances were then
described as necessarily relating “to the financial aspects of payment or repayment; as it is
the whole concept behind adjudication and payment disputes.”

[78] The Court of Appeal in the present case adopted a similar approach. It said that
unless there was “overwhelming evidence” that the contractor would be unable to meet its
contractual obligations as well as meet its financial obligations to the employer, a stay
ought not to be granted.

[79] We are of the view that such a stringent test is not justified under CIPAA because s.
16 of CIPAA itself contains no such limiting requirement or intent. Section 16 of CIPAA
should be treated as one of the safeguards to a likely wrongful adjudication decision and
which empowers the court to find a suitable middle ground in cases where there has been
clear and unequivocal errors.

[82] We are in agreement with the contention of the appellant that a more liberal reading
of s. 16 of CIPAA would allow some degree of flexibility to the courts to stay the award
where there are clear errors, or to meet the justice of the individual case. It is accepted
that a stay of the award ought not be given readily and caution must be exercised when
doing so. However to restrict the application of s 16 of CIPAA in the manner proposed by
the High Court, and the Court of Appeal, would be to strip it of any utility.

[84] The High Court and the Court of Appeal in the present case took the view that no
stay was available unless the appellant could show that the respondent was unable to
repay the adjudication sum. With respect we are of the view that the correct approach for
the High Court under s 16 of CIPAA would be to evaluate each case on its merits without
the fetter of a pre- determined test not found in the section itself namely the financial
capacity of the contractor to repay. It could be a factor but not the only factor.”.

[60] The legal principles as expounded by the Federal Court are discussed by Lam Wai Loon and Ivan
YF Loo, the learned authors of Construction Adjudication in Malaysia, Second Edition, Sweet & Maxwell,
2018 at pp 460 - 461:

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“[16.008] The Federal Court held that section 16 of the CIPA Act 2012 allows some
degree of flexibility to the courts to stay an adjudication decision “where there are clear
errors, or to meet the justice of the individual case”. The financial capacity of the winner to
repay is one, but not the only factor which the courts will consider in deciding whether or
not a stay ought to be granted.

[16.009] The Federal Court treated section 16 of the CIPA Act 2012 as “one of the
safeguards to a likely wrongful adjudication decision and which empowers the court to find
a suitable middle ground in cases where there has been clear and unequivocal errors”.
However, although a more liberal approach has been adopted, it is important to note that
the Federal Court also accepted that “a stay of the [adjudication decision] ought not be
given readily and caution must be exercised when doing so.” It is therefore submitted that
not every error in an adjudication decision would justify a stay. The error must be one that
is clear and unequivocal, and which substantially affects the outcome of the decision, and
is not peripheral or minor in nature, as in the case of View Esteem. In View Esteem, the
adjudicator had completely failed or refused to consider the three additional defences
raised by the non-paying party in the adjudication response, thereby depriving the non-
paying party of his right to his defences. In doing so, the adjudicator had wrongly
construed the scope of his jurisdiction under section 27(1) of the CIPA Act 2012 and had
therefore made a jurisdictional error in failing or refusing to consider all the defences
raised by the non-paying party in the adjudication response. Additionally, it is submitted
that only in such clear cases of jurisdictional errors like the one in View Esteem would a
stay be justified as otherwise, the fundamental essence and indeed reasons for the
introduction of the CIPA Act 2012 will be seriously undermined. In the circumstances, it is
suggested that it would not be sufficient for a stay to be granted even if it can be shown
that the applicant may on balance succeed in the pending arbitration or court proceedings,
or that the adjudicator had adopted a wrong interpretation of the law or contractual
provision or had wrongly construed the facts, or that the adjudicator was wrong in
preferring the winning party”s expert evidence or submission over that of the losing
party”s, or that the losing party has cross-claims amount against the winning party which
is more than the adjudicated amount.”.

[61] With those principles in mind, and upon scrutiny of the documentary evidence, I find that BLDSB
has exhibited the CTOS Report as exhibit “A-11” in its AIS at pages 2891 - 2905 Enclosure 29. From
the section on the Summary of Legal Cases at page 2895, the plaintiff in 22 summons is MBB while
Kawalan Perwira (M) Sdn Bhd and Lieu Sin Chu are each the plaintiff in two other suits. The status for
the action by BMW Credit (Malaysia) Sdn Bhd is stated as “Discontinued” and the debt in respect of the
plaintiff Syn Tai Hung Trading Sdn Bhd has been fully settled.

[62] Exhibit “A-12” in BLDSB”s AIS at pages 3122 - 3143 Enclosure 29 consist of 13 judgment in
default of appearance all dated 5.6.2018 entered by MBB against BSA in the Sessions Court in
Georgetown; 7 judgment in default of appearance all dated 30.5.2018 entered by MBB against BSA in
the Magistrates Court in Georgetown and 1 Consent Judgment dated 19.9.2018 for the sum of
RM20,000.00 between Kawalan Perwira (M) Sdn Bhd as the plaintiff and BSA as the defendant.

[63] The aforesaid exhibits are not disputed by BSA and may, on their own, afford sufficient reason to
constitute the special circumstance that warrants a stay of the Adjudication Decision.

[64] However, exhibit “E” in BSA”s AIR (Enclosure 32) is a letter dated 28.2.2019 signed by Shaik
Mohmamed Nasir Bin Mohamed Ismet Bashah, Head, Regional Asset Quality Management PKP,
Community Distribution, Community Financial Services for Malayan Banking Berhad (“MBB”) Northern
Region based in Penang with reference to 22 account numbers in respect of the hire purchase facility
where BSA is the hirer. The attached list of account numbers and registration numbers reflect that BSA
has paid different sums of money into each account on 28.2.2019 for the installments due in February
2019. The gist of the letter states:

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“… This letters serves as a notification that the above account currently has a satisfactory
conducted. As at todate the account is PROMPT (0 month in arrears) and legal
proceeding is up to Judgment Status. All legal action has been KIV pending further
development on the account.

...”.

[65] To my mind, the words “(0 month in arrears)” are crystal clear in conveying the meaning that as
at 28.2.2019, BSA has settled all amounts due and owing in the hire purchase accounts standing with
MBB.

[66] Moreover, I would agree with BSA”s submission that BLDSB ought not to be allowed to rely on the
suits by MBB to allege impecuniosity when BLDSB”s failure to pay BSA for the value of works done
caused the impecuniosity in the first instance. In paragraph 25 of the AIR (Enclosure 26), BSA”s
Director had averred that all the lawsuits by MBB involved hire-purchase agreements for machineries
whereby more than half were utilised for use in the said Project. In addition, a table setting out the
chronology of events was included and it can be seen that during the months of March to May 2018,
BSA faced a cashflow crunch following non-payment by BLDSB in respect of Payment Certificate No. 20
and the non-issuance of the certification for Progress Claims No. 21 and No. 22. Notably, Payment
Certificate No. 20 and Valuation No. 21 were issued by BLDSB”s own Engineer and Quantity Surveyor,
respectively.

[67] BSA”s Director additionally affirmed that one of three machineries under hire-purchase with BMW
Credit (Malaysia) Sdn Bhd was used for the said Project and Syn Tai Hung Trading Sdn Bhd supplied the
materials for the same.

[68] In light of these facts, accepting BLDSB”s contentions would tantamount to allowing BLDSB to
benefit from its own wrongdoing. In this regard, Lim Chong Fong J in Mecomb Malaysia Sdn Bhd v. VST
M&E Sdn Bhd [2018] 8 CLJ 380 at p 391 had referred to the judgment of Lee Swee Seng J (now JCA) in
Econpile (M) Sdn Bhd v. IRDK Ventures Sdn Bhd (No 2) [2016] 1 LNS 581 (see too, Mary Lim J (as her
Ladyship then was) in Subang Skypark Sdn Bhd v Arcradius Sdn Bhd, supra) where the following
guidelines propounded by Justice Peter Coulson QC in Wimbledon Construction Co 2000 Ltd v Vago
(supra) were quoted:

“[26] ... it does seem to me that there are a number of clear principles which should
always govern the exercise of the court”s discretion when it is considering a stay of
execution in adjudication enforcement proceedings. Those principles can be set out as
follows:

(a) Adjudication ... is designed to be a quick and inexpensive method of arriving at a


temporary result in a construction dispute.

(b) In consequence, adjudicators” decisions are intended to be enforced summarily and


the claimant (being the successful party in the adjudication) should not generally be
kept out of its money.

(c) In an application to stay the execution of summary judgment arising out of an


Adjudicator”s decision, the Court must exercise its discretion ... with considerations (a)
and (b) firmly in mind…

Even if the evidence of the claimant”s present financial position suggested that it is
probable that it would be unable to repay the judgment sum when it fell due, that would
not usually justify the grant of a stay if:

(i) the claimant”s financial position is the same or similar to its financial position at the

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time that the relevant contract was made (see Herschell); or

(ii) the claimant”s financial position is due, either wholly, or in significant part, to the
defendant”s failure to pay those sums which were awarded by the adjudicator (see
Absolute Rentals).”.

[69] I have also scrutinised the other exhibits in assessing the status of the other civil suits involving
BSA as a defendant, namely -

(a) exhibit “F” in BSA”s AIR (Enclosure 32) which is a letter dated 24.12.2018 from Messrs. Annual &
Foong, Penang to Messrs. Jeeva Partnership, Penang pertaining to Georgetown Magistrate Court
Civil Suit No. PA-A72NCVC-147-04/2018 where reference is made to the Consent Judgment dated
19.9.2018 and a cheque of RM5,000.00 made payable to the plaintiff, Kawalan Perwira (M) Sdn
Bhd, was enclosed; and

(b) exhibit “G” in BSA”s AIR (Enclosure 32) being a letter dated 8.11.2018 from Messrs. See, Ramsun &
Tan, Penang to Messrs. Annual & Foong in respect of Georgetown Sessions Court Civil Suit No. PA-
A52-13-05/2018 where Syn Tai Hung Trading Sdn Bhd is the plaintiff and BSA is one of four
defendants, and stating as follows:

“We refer to your letter dated 31 October 2018.

Please be informed that our client did not blacklist your client”s name with CTOS.

However, our client has informed CTOS that your clients have fully settled their claim
with our client vide their letter dated 7 November 2018, a copy thereof is whereof is
enclosed for your attention.”.

[70] Exhibit “A-11” in BLDSB”s AIS as mentioned earlier confirms that the suit by BMW Credit
(Malaysia) Sdn Bhd has been discontinued.

[71] The cumulative effect of the above mentioned documentary exhibits supports BSA”s contention
that it is no longer impecunious as it has resolved all outstanding civil suits expect for the one instituted
by Lieu Sin Chu which is for a disputed sum of RM56,619.63. I am inclined to agree with BSA that this is
an insignificant amount compared to the Adjudicated Sum. In the premises, BLDSB has not established
that there is a real danger or risk that BSA would not be able to pay BLDSB in the event that the latter
is successful in the arbitration proceeding.

[72] Exhibit “A-11” in the AIS at pages 2906-2912 (Enclosure 29), which shows the Corporate
Information on BSA in CCM”s records, including the total value of its shares and Summary of Financial
Information, was also relied upon by BDSB to support its contention that -

(a) BSA”s paid-up capital of RM3 million is insufficient to meet its judgment liabilities of
RM3,214,143.12; to repay the Adjudicated Sum; and to fulfil BLDSB”s claim of RM6,831,658.07 in
the arbitration proceeding against BSA in the event that BLDSB is successful; and

(b) the certificate relating to exempt private company was lodged only for the year 2016 and no
Certificate of Exemption were produced for 2017 and 2018 despite the requirements in sections 259
and 260 CA 2016 that Financial Statements and any Certificate of Exemption must be lodged for
each financial year.

[73] I have already addressed BSA”s position vis-à-vis the judgment liabilities which, as it turns out, is
a non-issue. In so far as the matters raised in relation to BSA”s paid-up capital and non-filing of the
Financial Statements for 2017 and 2018, BSA has rightfully referred to that part of the principle in
Wimbledon Construction Co 2000 Ltd as quoted earlier which states that a party cannot complain about
its opponent”s financial position if the opponent was in the same position when the contract was

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awarded. At the point of time when BLDSB appointed BSA, BSA was known to BLDSB as a private
exempt company which does not need to file its Financial Statements, and being well aware of BSA”s
paid-up capital, BLDSB cannot now use these reasons to boost its case of “special circumstances” to
justify the grant of a stay.

(B) OS No. WA-24C-17-01/2019: Application to enforce the Adjudication Decision

[74] BSA”s application is made pursuant to section 28 CIPAA which reads:

“Enforcement of adjudication decision as judgment

28. (1) A party may enforce an adjudication decision by applying to the High Court for an
order to enforce the adjudication decision as if it is a judgment or order of the High Court.

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

(3) The order made under subsection (2) may be executed in accordance with the rules on
execution of the orders or judgment of the High Court.”.

[75] By virtue of section 13(a) CIPAA, the Adjudication Decision is binding unless it is set aside by the
High Court on any grounds referred to in section 15 CIPAA.

[76] The thrust of BLDSB”s opposition to BSA”s application is that BLDSB has applied to set aside the
Adjudication Decision vide OS No. WA- 24C-30-02/2019. It thus necessarily follows from the analysis
and conclusion in respect of the issues pertaining to the said OS that BSA”s application to enforce the
Adjudication Decision ought to be allowed (see Bertam Development Sdn Bhd v R&C Cergas Teguh Sdn
Bhd [2017] 1 LNS 2228 and paragraph 36 in the judgment of Vazeer Alam Mydin Meera J (now JCA) in
Mammoth Empire Construction Sdn Bhd v. Stam Engineering Sdn Bhd & Another Case [2019] 3 CLJ 718
at p 728).

Conclusion

[77] Based on the facts as evidenced by the averments in the Affidavits and documentary exhibits,
and applying the established legal principles to the facts, BLDSB has clearly failed to establish any
ground which merits an order for setting aside of the Adjudication Decision since the Notice of
Adjudication and the subsequent appointment of the learned Adjudicator are proven to be valid. BLDSB
has further failed to establish a case befitting of the order sought for a stay of the Adjudication Decision.

[78] Therefore, BSA”s application in OS No. WA-24C-17-01/2019 was allowed and BLDSB”s application
in OS No. WA-24C-30-02/2019 was dismissed, accordingly.

 
 

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