Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2015 MarsdenLR 1926

HIGH COURT MALAYA KUALA LUMPUR
WRP ASIA PACIFIC SDN BHD – Appellant
Versus
NS BLUESCOPE LYSAGHT MALAYSIA SDN BHD – Respondent
[Originating Summon Nos: 24C-17-05/2015 & 24C-8-04/2015]

Petitioner Advocates:Raymond Mah Mun Kitt,Hannah Patrick Patrick Thiagaraja ,Respondent Advocate: Muhammad Faisal Moideen,Maximilian Tai Kim Sen,Aloysius Cornelius Susek

An adjudication decision may be set aside if the Adjudicator commits a breach of natural justice, including unilateral communications with one party without informing the other, or exceeds jurisdiction.

Headnote:(A) Construction Industry Payment and Adjudication Act 2012 - Sections 15, 25, and 32 - Validation of an Adjudicator's decision - A party may apply to set aside an adjudication decision if it is shown that there has been a denial of natural justice or that the adjudicator acted in excess of jurisdiction - The Respondent WRP alleged improper communication and challenged the competency of the Adjudicator appointed - The court found that the Adjudicator breached the rules of natural justice by engaging in unilateral communication with one party without informing the other - The adjudication decision is set aside. (Paras 17, 99, 118, 124)

(B) Natural Justice - Fair opportunity to respond - An Adjudicator must offer both parties an equal opportunity to present their cases to avoid a breach of natural justice. (Para 101)

Facts of the case:
The Claimants are Bluescope, who sought to enforce an adjudication decision in their favor while the Respondent, WRP, aimed to set aside that decision, citing lack of competency of the Adjudicator and unilateral communication breaches.

Findings of Court:
The court ruled in favor of WRP, finding procedural breaches on the Adjudicator's part which warranted setting aside the adjudication decision.

Issues: Whether the adjudication decision should be set aside due to breaches of natural justice and excess of jurisdiction by the Adjudicator.

Ratio Decidendi: The court held that adjudicators must adhere to the principles of natural justice by ensuring both parties have the opportunity to respond fully to communications regarding their case.

Result: The adjudication decision was set aside.

Judgement Key Points

Key Points: - The adjudication decision can be set aside for denial of natural justice, excess of jurisdiction, improper procurement through fraud or bribery, or lack of independence/impartiality. (!) (!) (!) (!) - The court found that the adjudicator breached natural justice by engaging in unilateral/ex parte communications with one party without informing the other, and the adjudication decision was set aside for this reason. (!) (!) (!) (!) - The adjudicator’s competency was challenged under CIPAA 2012 and CIPAA Regulations 2014; the court reviewed the regulatory standards requiring at least seven years of working experience in the building/construction industry (in Malaysia or recognized fields) and other criteria (certificate in adjudication, not being undischarged bankrupt, no criminal convictions). The court ultimately accepted that the adjudicator met the competency standards as recognized by KLRCA, despite arguments to the contrary. (!) (!) (!) (!) (!) (!) (!) (!) - The court held that because of the bilateral nature of the adjudication process and the severity of procedural breaches, the decision could not be saved despite the adjudicator’s competency finding, and the decision was set aside for natural justice breaches. (!) (!) (!)

What is the grounds on which an adjudication decision may be set aside under CIPAA 2012?

What is the court's stance on unilateral ex parte communications by an adjudicator and its impact on natural justice?

What is the court's conclusion regarding the adjudicator's competency and the resulting effect on the adjudication decision?

Table of Content
1. case background and parties' involvement (Para 1 , 2 , 5 , 6)
2. grounds for setting aside adjudication decision (Para 15 , 19 , 24 , 50)
3. importance of natural justice in adjudication (Para 21 , 22 , 102 , 118 , 122)
4. competency criteria for adjudicators (Para 41 , 42 , 43 , 58 , 70)
5. court's decision on the enforcement application (Para 120 , 123)

Mary Lim Thiam Suan J:

A. Introduction

[1] These two cases which are heard together, relate to the same adjudication decision issued on 9 March 2015. NS Bluescope Lysaght Malaysia Sdn Bhd and Bluescope Lysaght (Malaysia) Sdn Bhd [Bluescope] were the Claimants in the adjudication claim while WRP Asia Pacific Sdn Bhd [WRP] was the Respondent. The adjudication decision was in Bluescopes favour. In Originating Summons No 24C-8-04/2015, Bluescope seeks to enforce the adjudication decision under s 28 of the Construction Industry Payment and Adjudication Act 2012 [CIPAA] whereas WRP seeks to set aside that same decision under s 15(a) and (d) of CIPAA under Originating Summons No 24C-17-05/2015.

[2] The parties have agreed that the enforcement of the adjudication decision will depend on the outcome of the application to set aside. Hence, the application to set aside was heard first.

[3] A total of 12 affidavits were filed by both parties:

[4] In its Amended Originating Summons, the orders sought by WRP include the following:

a. that the Adjudication Decision of Mr Noorfajri bin Ismail dated 9 March 2015 be stayed pending the final determination of this application;

b. a declaration that the Adjudication Decision is null and void because the Adjudicator did not meet the competency standard and criteria of an Adjudicator set by the Kuala Lumpur Regional Centre for Arbitration pursuant to s 32 of Construction Industry Payment and Adjudication Act 2012 and Regulation 4 of Construction Industry Payment & Adjudication Regulations 2014;

c. an order that the Adjudication Decision be set aside on the ground that it was given in excess of the Adjudicators jurisdiction and/or in breach of the rules of natural justice during the adjudication proceedings and/or in connection with the making of the Adjudication Decision.

B. The Construction Contract

[5] WRP engaged Bluescope to design, fabricate, deliver and install structural steel frames, steel roofing and walling etc at two factories, ie WRP Asia Pacific Sdn Bhd (F3 Project) and Grand Ten Holdings Sdn Bhd (G10 Project) in a project named "Cadangan Mendirikan Sebuah Kilang Sarung Tangan Getah 1½ Tingkat yang Mengandungi (i) Tingkat Bawah - Tempat Pengeluaran Pembungkusan (ii) Tingkat Mezzanine - Tempat Simpangan Di Atas PT 5759, HS(D) 7755, Jalan 3, Kawasan Perusahaan Bandar Baru Salak Tinggi" for RM6.58 million through a purchase order No 11135511000 DN dated 15 Jun 2012 [the construction contract].

[6] Differences arose between the parties over revisions to the roof design at the F3 project. Bluescope did not want to proceed with the revisions taking the position that the integrity of the steel structure would be affected. At the same time, WRP had not paid Bluescope on its Progress Claim No 7, the final progress claim. All this culminated with Bluescope suspending work and issuing several letters of demand. Despite this, WRP did not pay.

C. The Payment Dispute

[7] On 23 October 2014, Bluescope issued a payment claim under s 5 of CIPAA for the sum of RM5,241,731.02. This is the Payment Claim:

[8] WRP did not file any payment response. Under subs 6(4) of CIPAA, WRP is deemed to have disputed the payment claim.

[9] On or about 5 December 2014, Bluescope served a Notice of Adjudication together with supporting documents on WRP pursuant to subs 8(1). At the same time, Bluescope proposed a name as the Adjudicator. It was rejected by WRP.

[10] Consequently, the Director of KLRCA appointed Mr Noorfajri Bin Ismail as the Adjudicator under subs 9(2) on 23 December 2014. Both parties used consultants to represent them in the adjudication proceedings. WR

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