Setting-Aside Adjudication Decision: a myth or reality?
Advocates & Solicitors
Messrs Malek, Paulian & Gan
Engineering Protocol Sdn Bhd v Saga Fire Engineering Sdn Bhd [Shah Alam High Court OS No.: BA-24C-85-09/2018]
We acted for abovenamed Plaintiff and successfully applied to the High Court at Shah Alam and set-aside the adjudication decision pursuant to sections 15 (b) & (c) of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA 2012”). Consequently, the Defendant’s application to enforce the adjudication decision pursuant to section 28 of the CIPAA was dismissed.
The Plaintiff was the Main Contractor for certain works more particularly described as “MRT Project Package V3 for the Construction and Completion of Viaduct Guideway” and other associated works (the “Project”). The Plaintiff appointed the Defendant as a Sub-contractor for the construction and completion of external works to the stations for the water works sub-contract (the “Sub-Contract”).
Disputes arose between the parties due to the alleged non-payment by the Plaintiff of the sum RM890,069.07, consisting of certified and uncertified sums purportedly due and owing to the Defendant, under the Sub-Contract.
The dispute on payment culminated in adjudication proceeding initiated by the Defendant against the Plaintiff. The Plaintiff had a counterclaim by way of back-charges as a result of the Defendant’s failure to carry out the Sub-Contract works diligently.
The adjudication proceeded with the usual exchange of adjudication claim and response. However, one (1) day after the delivery of the Adjudication Reply, the Plaintiff submitted further documents, to clarify the Defendant’s total denial of the Plaintiff’s back-charges in the Adjudication Reply.
Without having heard the parties, the Adjudicator determined that the further documents submitted by the Plaintiff were inadmissible as there was no application before her and in any event, the Plaintiff could have addressed all matters in the Adjudication Response. The Adjudicator also appeared to misconstrue section 25 of the CIPAA, on the wide powers conferred upon an adjudicator in conducting the adjudication with fairness, impartiality and due observance of the rules of natural justice.
By an Adjudication Decision dated 31.7.2018 (the “Adjudication Decision”), the Adjudicator allowed the Defendant’s claims in the total sum of RM976,974.95, with interest and costs.
Grounds for Setting Aside.
The Plaintiff challenged the Adjudication Decision at the High Court principally on two (2) grounds namely, that there has been a denial of natural justice and the adjudicator had not acted independently or impartially.
The Plaintiff raised the following arguments on the conduct of the Adjudicator in refusing to admit the further documents: –
- the Adjudicator has gone on a frolic of her own and made assumptions to the detriment of the Plaintiff without seeking further clarification, when she was unsure of the relevant documents before her, in arriving at the Adjudication Decision;
- the Adjudicator erred in her finding that the Plaintiff did not deny the Defendant’s claim when the entire claim was disputed by the Plaintiff, by virtue of section 6 (4) of the CIPAA. The Plaintiff was deprived of providing an explanation on the contents of its own documents;
- the Adjudicator had not appreciated the defences and the documents advanced by the Plaintiff in arriving at her decision, thereby causing a grave injustice to the Plaintiff. The failure by the Adjudicator to invite for further submission resulted in the Plaintiff being denied its right to submit on an issue which is central to the Adjudication Decision and its defence;
- the Adjudicator has also failed in her competency criteria to the Parties in ensuring that she was up to-date with latest developments in this area of law, in particular the decision of the Federal Court in View Esteem;
The Plaintiff also relied on the recent Court of Appeal case of Guangxi Dev & Cap Sdn Bhd  MLJU 1542 where it was held that a request for an oral hearing cannot be denied purely on the ground that time is limited especially in a case where the application to do so had been made at the earliest opportunity. If all applications for an oral hearing are rejected on the timeline argument, then the power to order oral hearings under section 25 (g) of CIPAA would be rendered illusory.
The Plaintiff drew an analogy in this case that the further documents were submitted at the earliest opportunity to address the Defendant’s bare denial of the Plaintiff’s defence of back-charges in the Adjudication Reply. Section 25 of the CIPAA obliged the adjudicator to inquisitorially take the initiative to ascertain the facts and the law required for the decision. Since there was ample time, the Adjudicator ought to have clarified with parties on matters which she was unsure of prior to delivering the Adjudication Decision.
Having heard arguments of the parties, the High Court at Shah Alam allowed the Plaintiff’s application and set-aside the Adjudication Decision resulting from the Adjudicator’s failure in conducting the adjudication with fairness, impartiality and due observance of the rules of natural justice.
There appears to be a change in trend with the acceptability of our High Court in allowing setting aside applications based on instances where the adjudicator was found to have breached the principles of natural justice or where he has acted beyond his jurisdiction. The appellate courts have contributed to this trend since the Federal Court’s decision in View Esteem and the Court of Appeal’s decision in Guangxi Development.
The principle of ‘pay now, argue later’ may no longer be the mainstay of adjudication proceedings due to tougher opponents who are well informed of their legal remedies. Adjudication proceedings end up in long fought legal battles at court depriving the successful claimant of its money. The problem is also compounded due to submission of ill-advised claims, such as pre-mature claims or even final accounts which are incomplete etc. Therefore, parties intending to commence adjudication under the CIPAA regime in the present day should seek proper legal advice prior to submitting its payment claim to avoid such situations.
For further enquires Nadesh is contactable via email [email protected] or via telephone at 03-27250958.
 Nadesh heads the Building & Construction Dispute Resolution, Litigation and Arbitration Department at Messrs Malek, Paulian & Gan. Nadesh is a Certified Adjudicator registered with the Asian International Arbitration Centre (‘AIAC’). Nadesh also appears as Counsel representing parties at all levels of the court system on various construction related dispute.
 Ms. Wong is a Legal Associate with the Building & Construction Dispute Resolution, Litigation and Arbitration Department at Messrs Malek, Paulian & Gan
Disclaimer: Image taken from Wikipedia.