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Document: Ceylon Builders Sdn Bhd v Ultimate Pursuit Sdn Bhd and another a…

Ceylon Builders Sdn Bhd v Ultimate Pursuit Sdn Bhd and another
appeal [2018] MLJU 1918

Copy Citation

Malayan Law Journal Unreported

HIGH COURT (KUALA LUMPUR)

LEE SWEE SENG J
ORIGINATING SUMMONS NOS WA-24C-159-08 OF 2018 AND WA-24C-178-08 OF 2018
27 December 2018

Serene Hiew (Harold & Lam Partnership) in OS No WA-24C-159-08 of 2018 for the plaintiff.
Revathi Kannan (Revathi & Partners) in OS No WA-24C-178-08 of 2018 for the plaintiff.
Revathi Kannan (Revathi & Partners) in OS No WA-24C-159-08 of 2018 for the defendant.
Serene Hiew (Harold & Lam Partnership) in OS No WA-24C-178-08 of 2018 for the defendant.

Lee Swee Seng J:

[1] Ceylon Builders Sdn Bhd (“Ceylon Builders”) had filed an Originating Summons dated 1.8.2018 to
enforce an Adjudication Decision dated 8.6.2018 and 3.7.2018 pursuant to Section 28 of the
Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) .

[2] On the other hand, Ultimate Pursuit Sdn Bhd (“Ultimate Pursuit”) filed an application for a stay of
the said Adjudication Decision pursuant to Section 16 (1)(b) of CIPAA on the ground that they had
commenced arbitration proceedings and that they had a counterclaim of approximately RM 2.5 million
for rectification cost.

[3] The Court had directed for both applications to be heard together on 26.9.2018 as the issues would
be similar and straddling each other.

[4] Ceylon Builder was the Claimant and Ultimate Pursuit the Respondent in the Adjudication and
parties shall be so referred to in this judgment.

Project

[5] The Claimant had been appointed as the Main Contractor by the Respondent with respect to
“Proposed Construction of 1 commercial development block of 20 floors of mixed commercial and office

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floors together with penthouse floors and car parks on a piece of land on Puchong, Mukim Petaling,
Kuala Lumpur” (the “Works”) subject to the Agreement and Conditions of PAM Contract 2006 (Without
Quantities) for the original contract sum of RM46,168,000.00.

Problem

[6] The Certificate of Practical Completion (“CPC”) for the Project in question was issued on 22.8.2016
and pursuant to the CPC, the Defects Liability Period (“DLP”) for the Project expired on 21.8.2017. The
Claimant stated that the Architect for the Project had failed to issue the Certificate of Making Good
Defects (“CMGD”) to the Claimant upon the expiry of the DLP. The Respondent contended that the
CMGD was not issued because the rectification works had not been completed by the Claimant.

[7] In addition to the retention monies retained by the Respondent from the payment certificates
issued during the currency of the Project, the Respondent on 20.1.2017 had also requested for an
additional sum of RM200,000.00 from the Claimant for any further defect works under the Project. As
the DLP had expired, the Claimant argued that the Respondent ought to have released the 2nd moiety of
the Retention Sum of RM1,154,200.00 and the additional Retention Sum of RM200,000.00 to the
Claimant but had failed to do so.

Proceedings in Adjudication

[8] The Claimant had commenced Adjudication under the CIPAA against the Respondent to recover the
outstanding sums of RM1,354,200.00 consisting of the release of the 2nd moiety of Retention Sums and
additional Retention Sums for defective works as follows:

(a) Release of 2nd Moeity of Retention RM1,154,200.00;

Sum
(b) Release of Additional Retention Sum RM 200,000.00
on Defects Work

[9] The Adjudicator had found in favour of the Claimant in his Adjudication Decision by ordering on
3.7.2018 the Respondent to pay the Claimant the sum of RM1,354,200.00 plus RM48,069.70 being the
costs of the Adjudication proceedings together with interest of RM185.50 per day from 18.10.2017 until
the date of full settlement and the payment to be made by 23.7.2018.

Prayers

[10] As the Respondent had failed to make payment of the adjudicated amount, interest on the
adjudicated amount and costs of the adjudication proceedings to the Claimant, the Claimant filed this
application to enforce the Adjudication Decision as a Judgment of the High Court.

[11] The Respondent had not filed an application to set aside the Adjudication Decision but rather had
filed an application to stay the Adjudication Decision. The Respondent took the position that there are
serious disputes in respect of the alleged defective works in the Project which were not rectified by the
Claimant and such dispute ought to be decided in the arbitration proceedings.

[12] On the other hand the Claimant submitted that the Respondent’s application for a stay of the
Adjudication Decision ought to be dismissed as the Respondent had failed to show that there was a
manifest error in the Adjudication Decision and/or the Claimant would not be in a financial position to
refund the said sum in the event the Respondent is successful in the arbitration proceedings.

PrinciplesWhether the application by the Claimant to enforce the Adjudication Decision

should be allowed

[13] The Adjudicator delivered his Adjudication Decision on 8.6.2018 and a supplementary decision on
3.7.2018, as the former decision was only released to both parties on 3.7.2018 due to an issue of
payment of the Advance Security Deposit of the Adjudicator’s fees, expenses and the KLRCA’s
Administrative fees. It was the Respondent that failed to pay their portion.

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[14] The Adjudicator had made a finding in favour of the Claimant, whereby the Respondent was
ordered to make payment of RM1,354,200.00, interest amount at RM 185.50 per day from 18.10.2017
to date of full settlement and costs of the adjudication proceedings of RM48,069.70. The Respondent
was to make the payment of the adjudicated amount to the Claimant on or before 23.7.2018. However
the Respondent had failed to make payment of the adjudicated amount to the Claimant.

[15] The binding nature and effect of an Adjudication Decision is provided for in section 13 of the
CIPAA as follows:

“13. Effect of Adjudication Decision

The adjudication decision is binding unless—

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

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

(c) The dispute is finally decided by arbitration or the court.”

[16] Flowing from and following the binding effect of an Adjudication Decision and the refusal of the
Defendant as Respondent in the Adjudication to make payments as directed in the Adjudication
Decision, the Plaintiff had availed themselves of the provision of section 28(1) of the CIPAA to enforce
the Adjudication Decision as if they are the Judgments or Orders of the High Court. Section 28 of the
CIPAA reads as follows:

“28. Enforcement of adjudication decision as judgment

(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.”

[17] The Claimant submitted that the Adjudication Decision should be enforced by this Court for the
following reasons:

a. The Adjudicator had considered all submissions, documents and authorities served on him by both
parties;

b. The Decision was delivered within 45 working days from the date of the service of the Adjudication
Reply, pursuant to section 12(a) of the CIPAA;

c. The Decision was made in writing, reasoned and had set out the adjudicated amount awarded, the
manner of payment and time for payment as required by sections 12(3) and 12(4) of the CIPAA;

d. The Decision is valid and the Adjudicator did not contravene any of the provisions set out in Section
15(a) - 15(d) of the CIPAA.

[18] The concept of interim finality is what characterizes an Adjudication Decision in the scheme of
Statutory Adjudication as practised in many Commonwealth jurisdictions. In the UK where Statutory
Adjudication was first introduced, it was observed as follows in Carillion Construction Limited v
Devonport Royal Dockyard Limited [2005] EWHC 778, by the English Court of Appeal:

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“85. The objective which underlies the Act and the statutory scheme requires the
Courts to respect and enforce the adjudicator’s decision unless it is plain that the
question which he has decided was not the question referred to him or the manner in
which he has gone about his task is obviously unfair. It should only be in rare
circumstances that the courts will interfere with the decision of an adjudicator.
The courts should give no encouragement to the approach adopted by DML in the present
case; which (contrary to the DML’s outline submissions, to which we have referred in
paragraph 66 of this judgment) may, indeed aptly be described as simply scrabbling
around to find some argument, however tenuous, to resist payment.

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

87. In short, in the overwhelming majority of cases, the proper course for the party who is
unsuccessful in an adjudication under the scheme must be to pay the amount that he has
been ordered to pay by the adjudicator. If he does not accept the adjudicator’s
decision as correct (whether on the facts or in law), he can take legal or
arbitration proceedings in order to establish the true position. To seek to
challenge the adjudicator’s decision on the ground that he has exceeded his
jurisdiction or breached the rules of natural justice (save in the plainest cases) is
likely to lead to a substantial waste of time and expense as, we suspect, the costs
incurred in the present case will demonstrate only too clearly.” (emphasis added)

[19] In Tan Eng Han Construction Sdn Bhd v Sistem Duta Sdn Bhd [2018] 12 MLJ 395 the Court
observed as follows:

“[38] In a case where there is no application to set aside an Adjudication Decision, the
Court upon being asked to enforce the Adjudication Decision would ordinarily grant an
order in terms of the application to enforce unless there is patent non-compliance with the
requirements of the CIPAA such as the following:

(a) that the dispute is not one within the core or original jurisdiction of the Adjudicator;

(b) that the Decision is not a void Decision under section 12(3) of the CIPAA being made
outside the period specified in section 12(2);

(c) that the Decision is in writing and contain reasons for such Decision under section
12(4) of the CIPAA;

(d) that the Decision has determined the adjudicated amount and the time and manner

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the adjudicated amount is payable.”

[20] There is no doubt that all the above have been complied with and that this is certainly a
construction contract that the Adjudicator would have jurisdiction to adjudicate with respect to the
Payment Claim. The Adjudication Decision was made in writing, setting out the reasons for the Decision
and very importantly, made within time. The Adjudication Decision had also stated the adjudicated
amount and the time and manner of payment.

[21] Learned counsel for the Claimant further submitted that in enforcing an adjudication decision, the
Court should not dwell or delve into whether the Adjudicator had indeed achieved the right answer but
merely whether the Adjudicator had answered the right questions referred to him.

See:

i) Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358;

ii) ACFM Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd [2016] MLJU 1776;

iii) Bouygues (UK) Limited v Dahl-Jensen (UK) Limited [2000] BLR 522;

iv) View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd [2015] MLJU 695.

[22] In opposing the enforcement application the Respondent in its Affidavit in Reply (for Enforcement
proceedings) had averred amongst others that the Adjudication Decision ought not to be enforced
against the Respondent for the following reasons as summarized by learned counsel for the Claimant:

a) The Claimant’s action in enforcing the Adjudication Decision is invalid and prejudicial to the
Respondent as the Adjudicator had failed to take into account the Respondent’s Defence and cross-
claim in delivering the Adjudication Decision;

b) Further, the Respondent had also raised issue that the Adjudication Decision is unfair and that there
had been a denial of natural justice as the Adjudicator had failed to take into account the
Respondent’s valid Defence and cross-claim in determining the dispute at hand;

c) The Adjudicator had failed to give fair observation in respect of the documents, particularly the new
quotation for rectification works which was submitted by the Respondent in their Adjudication
Response.

[23] I agree with learned counsel for the Claimant that the Respondent’s grounds for resisting the
enforcement is centered on the merits of the dispute and findings by the Adjudicator which ought not to
be dealt with by this Court in an enforcement application as long as the Adjudicator had acted within the
jurisdiction conferred on him pursuant to section 27 of the CIPAA. This is not the appropriate forum for
the Respondent to vent their complaint against the validity the Adjudication Decision when the issue has
nothing to do with the jurisdiction of the Adjudicator to hear the dispute arising as it is under a
construction contract.

[24] The Respondent had contended that had the Adjudicator properly considered the documents
before him he would not have come to the Decision that he did. That is not a case of denial of natural
justice but a mere dissatisfaction with the Adjudication Decision which has to be taken up in the
arbitration if the Respondent is serious in pursuing and prosecuting their cross-claim.

[25] Learned counsel for the Claimant further referred to the cases below in support for the above
proposition of law:

i) Gazzriz Sdn Bhd v Hasrat Gemilang Sdn Bhd [2016] MLJU 1054 where it was held that:

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“[35] ….The Respondent’s dissatisfaction with the weight of evidence given by the
Adjudicator in the absence of documents to the contrary submitted by the Respondent is
not a matter that this Court can intervene and much less interfere since it has nothing to
do with natural justice and certainly not a ground countenanced under section 15
CIPAA; this being not an appeal.

…..

[45] It cannot be overstated that the unsuccessful party in an Adjudication must not
simply raise the ground of breach of natural justice in setting aside an Adjudication
Award just because that party now disagrees with the interpretation of law or finding of
facts based on the evidence or both. The ground of breach of natural justice should not
be used as a backdoor way to set aside of an Adjudication Decision made after both
parties have been given the opportunity to submit their Payment Claim and Payment
Response and followed by Adjudication Claim and Adjudication Response and if need be
an Adjudication Reply after that…”

ii) PCP Construction Sdn Bhd v Leap Modulation Sdn Bhd and other suits [2017] MLJU 905 it was
observed that:

“[23] I agree with the Claimant that an adjudication decision cannot be set aside on the
grounds that

(i) The parties disagree with the adjudicator’s decision be it on the merits or on the
assessment of the case of finding of facts or law by the adjudicator; and

(ii) The fact that this Court may have made a different finding on the issues of law or
facts.”

[26] I agree with the Claimant that the Adjudicator had set out in detail the issues and his reasons for
deciding that the retention sums ought to be released to the Claimant. The Adjudicator was careful to
ensure he considered all the evidence before him and he even issued two List of Queries to the Parties
for further clarification. The parties responded to the 1st List of Query.

[27] In the 2nd List of Query the Adjudicator wanted to know why in the minutes of meeting on
8.2.2018 it was recorded that “CB confirm 95% of defects completed….CB presented a list of
outstanding defects yet to be done….” when at other places in the Adjudication Claim at paragraph 8
and Adjudication Reply also at paragraph 8 the Claimant had stated that all the defective works had
been rectified. See paragraph 45c. of the Decision.

[28] The Claimant had replied to say that a suggestion was made on a goodwill basis that a set of the
alleged defects to be taken over by the Respondent and a proposal was made that a sum of
RM87,500.00 be deducted from the retention monies held by the Respondent. As this was already pass
the contractual DLP the Claimant had suggested the set-off in hope of having the entire matter
resolved. Unfortunately the Respondent continued to withhold the payment. The Respondent, for reason
best known to them, has chosen not to provide any response to the Query as recorded by the
Adjudicator at paragraph 45e. of the Decision.

[29] I am in agreement with the Claimant that the Adjudicator had also summarised his findings at
paragraph 46 (b) to (f) of the Adjudication Decision. The Adjudicator’s thought process is clear from his
Decision and it cannot be said that the Adjudicator had failed to take into consideration the defences
and cross-claim raised by the Respondent. Paragraphs 46(a) and (c) of the Adjudication Decision are set
out below in for an appreciation of the reasons and reasoning of the Adjudicator:

“46. The Retained Amount of RM1,354,200.00

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a. Having given the above analysis and findings, the next question before me is whether th
retained amount of RM1,354,200.00 can be released to the Claimant.

b. I have held the following in:

i. Paragraph 39(c) that only the Architect is empowered to issue schedules of defects
for the purpose of clause 15.4 of the PAM Contract;

ii. Paragraph 40 (d) that the final list of defects, i.e. the “Schedule of Defects dated
28.09.2017” is contractually invalid because it was issued beyond the time frame of
within 14 days after the end of the DLP. In addition, I find in paragraph 40(q) that
the “List of Defects and Outstanding Works dated 10.01.2017” is a valid schedule of
defects issued by the Architect under the Contract;

iii. Paragraph 41(g)(iv) that the statement of the Respondent that there are
outstanding major defects in the Project, is not a true statement of fact;

iv. Paragraph 42(e) that I do not accept the “181 pages long list” is accurate records of
the outstanding defects;

v. Paragraph 43(d) that the new contractor’s quotation cannot be accepted as the true
costs for making good the outstanding defects of the Claimant; and

vi. Paragraph 44(m) that the final list of defects (i.e the “Schedule of Defects dated
28.09.2017”) is not an agreed schedule of defects of the parties.

vii. Paragraph 45 (vi) that I find on the balance of probabilities (sic), the Claimant has
probably completed the making good of the initial defects.

c. In summary, I find that the “Schedule of Defects dated 28.09.2017”, which was issued
after the due date of 09.04.2017, it is not a schedule of defects issued for the purpose
(sic) of clause 15.4 of the PAM Contract, therefore technically it is contractually invalid.
In the premises, the Claimant is not contractually bound to accept the said schedule.”

[30] The Adjudicator is entitled to arrive at the conclusion which he did based on an issue of mixed law
and fact. He had found as a matter of fact that the defects in the schedules are minor defects in
paragraph 41g.ii and in paragraph 41g.iii he had found that in item 2.01 of the minutes of meeting
dated 8.2.2018 it was recorded by the Architect that 95% of the defects had been completed. See also
paragraph 45g.iii. He then arrived at the conclusion at paragraph 41g.iv as follows:

“Accordingly, I find that the statement of the Respondent that there are outstanding major
defects in the Project, is not a true statement of fact. It is inaccurate and misleading.”

[31] Based on the evidence before the Adjudicator, he had made a finding of fact that the Claimant
had on the balance of probabilities completed the making good of the defects. See paragraph 46d. of
the Decision. Therefore the Respondent was contractually bound to release the retained amounts in
accordance with clause 30.6(d) of the PAM Contract.

[32] As has often been said, an error of fact or law will not invalidate an Adjudicator’s Decision. If the
Adjudicator has answered the right question in the wrong way, his decision will nevertheless be binding.
It is only if he has answered the wrong question that his decision will be a nullity: see the Court of
Appeal decisions in Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2001] 1 All ER (Comm) 1041,; 73
ConLR 135,; [2000] BLR 522 and C & B Scene Concept Design Ltd v Isobars Ltd [2002] EWCA Civ 46,;
82 ConLR 154,; [2002] BLR 93.

[33] Any correction that he might have interpreted the provisions of the PAM Contract wrongly must
be done at another forum i.e. in Arbitration but the Respondent had not proceeded to Arbitration so far
other than issuing a Notice to Arbitrate without taking the matter any further.

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[34] I have no good reason not to enforce the Adjudication Decision and so I would allow an order in
terms of the application for enforcement with costs of RM5,000.00 to the Claimant.

Whether the Respondent should be granted a stay of the Adjudication Decision

[35] The Respondent is applying under and activating section 16(1)(b) of the CIPAA to stay the
Adjudication Decision pending the full and final determination of the disputes and/or differences
between both parties in an arbitration proceeding.

[36] Section 16 of the CIPAA reads as follows:

“16. Stay of Adjudication Decision

(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.” (emphasis added)

[37] Learned counsel for the Claimant highlighted to the Court that the said Notice of Arbitration was
dated 9.4.2018 and issued and served by the Respondent on the Claimant several days before the
service of the Respondent’s Adjudication Response.

[38] Since then the Respondent has not proceeded with Arbitration or even made the necessary
payments to PAM for the registration and appointment of an arbitrator. If the Respondent has a valid
claim against the Claimant in the arbitration, they do not seem to be motivated to pursue vigorously
their claim.

[39] As set out by Justice Mary Lim J (now JCA) in the case of Subang Skypark Sdn Bhd v Arcradius
Sdn Bhd [2015] 11 MLJ 818, the reference of a dispute to arbitration does not make the granting of a
stay automatic. It is not as of right or as a matter of course. Being in arbitration merely puts the
Respondent’s case as one within Section 16 of the CIPAA for consideration or one which had met the
threshold. The existence of concurrent proceedings merely prequalified the Respondent’s application.
See also Sazean Engineering & Construction Sdn Bhd v Bumi Resources Sdn Bhd [2016] MLJU 1371,
and Teguh Wiramas Sdn Bhd v Thien Seng Chan Sdn Bhd and another application [2017] MLJU 633.

[40] The Federal Court in View Esteem Sdn Bhd v Bina Puri Holdings Berhad [2018] 2 MLJ 22 had
favored a more flexible approach to granting stay in a case “where there has been clear and
unequivocal errors” in the Adjudication Decision to use the expression at paragraph [79] of the
Federal Court’s Decision. Be that as it may be “a stay of the [adjudication decision] ought not be
given readily and caution must be exercised when doing so.” as observed at paragraph [82] of
the said Federal Court’s Decision.

[41] The Court retains a discretion as to whether or not to grant a stay, whether unconditionally or
conditionally, and the Respondent still bears the burden to show how and why the discretion ought to be
exercised in its favour. Whether or not the Claimant could reasonably be expected to be able to repay
back the Adjudicated Amount would be a factor to be considered as is the factor that the Adjudicator
might have made an obvious, clear and unequivocal error.

[42] Learned counsel for the Claimant had rightly pointed out that the Respondent in its Affidavit in
Support for Stay had merely raised its contention that a stay ought to be granted as there are serious

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defective works issues which ought to be decided in the arbitration proceeding. This is a matter which is
subject to proof and the Respondent is entitled to raise this in the arbitration.

[43] However, this does not prevent the Claimant from proceeding with the enforcement of the
Adjudication Decision. Regardless of the merits of a party’s case in the litigation or arbitration, in the
event there is an adjudication decision delivered against the said party, monies ought to be paid out
first and the rest of the issues can then be ironed out at the litigation or arbitration proceedings.

[44] This is the essence and rationale of the CIPAA. By allowing the Respondent to obtain a stay
merely on the fact that there are serious defects that ought to be decided by the arbitrator in due
course would render the entire purpose of this Act futile and Statutory Adjudication would completely
ineffective to ensure cashflow in the construction industry.

[45] If stay should be granted the moment there is a pending arbitration or litigation, then a losing
party in an Adjudication would be tempted just to commence these proceedings with the sure and
certain expectation that a stay would invariably be granted by the Court of the Adjudication Decision.
That would be stultifying and suffocating the application of the CIPAA designed to facilitate cash flow in
the construction industry such that a party that is already out of pocket for the work done is not put to
further delay in getting paid.

[46] I agree with the Claimant that the issue of major defective works which require rectification and
the quotation given by the third party contractor had already been dealt with by the Adjudicator at
paragraphs 41, 42 and 43 of the Adjudication Decision. The Adjudicator had held that the “181 pages
long list of defects” to be contractually invalid as it was not issued by the Architect for the purpose of
clause 15.4 of the PAM Contract which states as follows:

“Any defects in the Works which appear within the Defects Liability Period shall be
specified by the Architect in a schedule of defects which he shall deliver to the
Contractor not later than fourteen (14) Days after the expiry of the Defects
Liability Period…”

[47] The Respondent had not provided any evidence in their affidavit that there are clear errors in the
said Adjudication Decision which warrants a stay to be granted. The Adjudicator had given his reasons
for rejecting the Respondent’s purported costs of RM2,647,201.20 for making good the defects obtained
from a third party contractor. He had found that the quotation was priced based on the “181 pages long
list” which he had found not only to be contractually invalid, but also inaccurate and misleading in terms
of factual records. See paragraph 43c.i. of the Decision.

[48] The quotation was found to be inaccurate and misleading as it had included items not listed in
even the Architect’s latest schedule of defects dated 28.9.2017 as defects items. See paragraph 43.c.ii.
of the Decision.

[49] The Adjudicator continued to give his reasons for rejecting the Respondent’s cross-claim for the
so-called proposed remedial works of RM2,647,201.20 at paragraph 43c.iii and iv of the Adjudication
Decision as follows:

“iii. The quotation is obtained by the Respondent on the 10.04.2018, which is during the
proceedings of the adjudication. There is no evidence to show that the quotation was
obtained through a transparent procurement process; and

iv. As there is only one quotation, there is no evidence to show that the quotation is
commercially sensible and competitive.”

[50] It had become obvious that the Respondent had not incurred any rectification costs yet if indeed
they had to rectify the remedial works not done by the Claimant, though the Adjudicator had found as a
matter of fact that the rectification works had been completed. It is then for the Respondent to prove

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this in the arbitration when the complete evidence would be presented by the Respondent for by then
they would have completed the so-called rectification works.

[51] The Respondent insisted that as the CMGD had not been issued by the Architect the release of the
retention sums was clearly wrong. However this did not prevent the Adjudicator from allowing the
retention sums to be released based on the authority of Bina Puri Construction Sdn Bhd v Hing Nyit
Enterprise Sdn Bhd [2015] MLJU 941 where Justice Ravinthran Paramaguru J held that “the absence of
certification cannot deprive the unpaid party from availing itself of the Adjudication process.” See
paragraph 46g. of the Decision.

[52] For the moment, the Adjudication Decision has the element and effect of temporary finality under
section 13 of the CIPAA and the Respondent is free to challenge it in the arbitration that they had
wanted to proceed after issuing the Notice to Arbitrate. Meanwhile the Adjudication Decision must be
respected and the adjudicated amount paid out.

[53] The Claimant had exhibited their financial statements and it showed that they are financially
healthy and in a position to repay the adjudicated amount if the Respondent is successful in the
arbitration proceedings. The said financial statements is exhibited in Exhibit “TCY-1” in the Claimant’s
Affidavit in Reply for Stay. For the year end 31.12.2017 it showed that the Claimant had a total assets
of RM6,407,191.00 and a total liability of RM5,365,910.00.

[54] The Respondent on the other hand had not exhibited any of their financial statements and had
not paid the deposit towards the fees for the appointment of the Arbitrator though the Notice to
Arbitrate had been issued on 9.4.2018. The conduct of the Respondent in the Adjudication proceedings
especially in ignoring the reminders of the Adjudicator to pay their portion of the Advance Security
Deposit had not escaped the notice of this Court.

[55] The Adjudicator had noted at paragraph 48 of his Decision that the Respondent had not paid their
portion of the Advance Security Deposit to the Adjudicator’s fees, expenses and the KLRCA’s
Administrative Support Fees despite his instruction and reminders. He had therefore instructed the
Claimant to make the payment for the Respondent’s share of the Advance Security Deposit. The
Claimant duly complied with it by making payment on 7.6.2018 to AIAC as stated in paragraph 49 of
the Adjudication Decision.

[56] In fact that was the reason why the issuance of the Adjudication Decision dated 8.6.2018 was
delayed though ready and when the Claimant had made the payment, a Supplementary Adjudication
Decision was released extending the payment of the Adjudicated Amount from 9.7.2018 to 23.7.2018.

[57] Under section 19(3),(4) and (5) of the CIPAA it is provided what the Adjudicator may do in the
event one party is recalcitrant in paying their share of the Adjudicator’s fees and expenses as follows:

“(3) The parties to the adjudication are jointly and severally liable to pay the
adjudicator’s fees and expenses and the adjudicator may recover the fees and
expenses due as a debt.

(4) The parties shall contribute and deposit with the Director of the KLRCA a reasonable
proportion of the fees in equal share as directed by the adjudicator in advance as
security.

(5) Before releasing the adjudication decision to the parties, the adjudicator may
require full payment of the fees and expenses to be deposited with the Director of
the KLRCA.”(emphasis added)

[58] Needless to say the conduct of the Respondent in their failure to pay their portion of the Advance
Security Deposit does not engender confidence when they are said to have a cross-claim of
RM2,547,201.20 against the Claimant. There is really no special circumstance to justify a stay of the
Adjudication Decision based on the test set by the Federal Court in View Esteem (supra).

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Pronouncement

[59] For all the reasons given above I had allowed the enforcement application with costs of
RM5,000.00 to the Claimant and I had also dismissed the stay application with costs of RM5,000.00 to
the Claimant.

 
 

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