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2020 MarsdenLR 3161
HIGH COURT MALAYA SHAH ALAM
UZMA ENGINEERING SDN BHD – Appellant
Versus
KHAN CO LTD & OTHER CASES – Respondent
[Originating Summons No: BA-24C-118-11/2019 BA-24C-119-11/2019 & BA-24C-125-12/2019]
The adjudicator exceeded jurisdiction by adjudicating a claim not related to construction work, thus the decision was set aside.
Headnote:(A) Construction Industry Payment and Adjudication Act 2012 – Section 2, 3, 4, 15, 27 – Jurisdiction of adjudicator – The adjudicator exceeded jurisdiction relating to a claim not based on a construction contract – Setting aside application allowed due to lack of jurisdiction – The adjudication decision set aside, stay application struck out, and enforcement application dismissed. (Paras 25, 37, 46)
(B) Natural justice – The court observed that no denial of the second rule of natural justice was found as all defenses were considered – Adjudicator acted within discretion. (Paras 35, 40)
Facts of the case: Uzma Engineering Sdn Bhd sought to set aside an adjudication decision pertaining to outstanding payments under a subcontract for a gas development project, alleging jurisdictional challenges due to the nature of the contract. (Paras 1, 20)
Findings of Court: The court concluded the adjudicator lacked jurisdiction to entertain the claim and ruled the adjudication decision was void. (Paras 25, 47)
Issues: The court examined jurisdictional challenges regarding whether the contracts were construction contracts under CIPAA and appropriate action for stay of adjudication. (Paras 20)
Ratio Decidendi: The court emphasized that the adjudicator overstepped her authority by adjudicating a claim not related to construction work defined under CIPAA – This violation warranted setting aside of the adjudication. (Paras 25, 37)
Result: Setting aside application allowed; stay application struck out; enforcement application dismissed.
(3 Originating Summonses)
A. Introduction
[1] By consent of the parties, the following three originating summonses (OS) are heard together:
(1) OS No: BA-24C-118-11/2019 (Stay OS) has been filed by Uzma Engineering Sdn Bhd (Uzma) against Khan Ltd (Khan) for a court order to set aside of an adjudication decision made on 18 November 2019 (AD) by an adjudicator, Ms Wong Heu Fun (Adjudicator), pending the disposal of a suit filed by Uzma against, among others, Khan in the Kuala Lumpur High court Civil Suit No: WA-22C-93-10/2019 (Suit);
(2) Uzma has also filed OS No: BA-24C-119-11/2019 to set aside the AD (Setting Aside OS); and
(3) OS No: BA-24C-125-12/2019 has been filed by Khan for leave of court to enforce the AD against Uzma (Enforcement OS).
B. Background
[2] On 15 May 2014 Petronas Carigali Sdn Bhd (Petronas) appointed THHE Fabricators Sdn Bhd (THHE) as a main contractor for a gas development project (Project).
[3] Khan is a South Korean company which collaborated with Uzma to bid for sub-contractor's work regarding the Project from THHE.
[4] By a letter of award dated 25 May 2016, THHE appointed Uzma as a sub-contractor regarding the Project.
[5] Khan caused the incorporation of a Malaysian company, Kong Offshore Malaysia Sdn Bhd (Kong). Kong is Khan's operating arm in Malaysia.
[6] THHE issued an invoice dated 29 June 2016 to Khan for a sum of US$2,497,085.28 regarding the purchase of various materials for the Project [THHE's Invoice (29 June 2016)].
[7] Regarding THHE's Invoice (29 June 2016), on 1 Juy 2016 Khan paid US$2,497,085.28 to THHE (Khan's Payment To THHE). Khan's Payment To THHE was confirmed by THHE's email dated 11 Juy 2016 [THHE's Email (11 Juy 2016)].
[8] Khan sent an email dated 24 August 2016 to Uzma [Khan's Email (24 August 2016)] which stated, among others, as follows:
"1. Please give us your confirmation.
- Issuing an invoice within this month for US$2,497,085.25 plus 5% mark-up for novation materials.
2. We will create the invoice with receipt of remittance and sub-contract agreement as supporting documents."
[Emphasis Added]
[9] Uzma sent an email dated 24 August 2016 to Khan [Uzma's Email (24 August 2016)] which stated, among others, as follows:
"Please scan us your draft invoice for confirmation before issuance together with full pages of agreement."
[Emphasis Added]
[10] By a letter of award dated 24 August 2016, Uzma awarded to Khan a sub-contract regarding the Project [LA (Uzma & Khan)]. Uzma and Khan had also signed an undated "Sub-Contract Agreement" (Sub-Contract).
[11] Khan sent an email dated 25 August 2016 to Uzma which forwarded a Pro Forma Invoice for a total sum of US$2,621,939.54 (Khan's Pro Forma Invoice) consisting of the following amounts:
(1) a sum of US$2,497,085.28 [the subject matter of THHE's Invoice (29 June 2016)]; and
(2) US$124,854.26 which was a mark-up of 5% of the sum of US$2,497,085.28.
[12] Uzma approved Khan's Pro Forma Invoice by way of an email dated 30 August 2016 from Uzma to Khan. Consequently, Khan sent an email dated 30 August 2016 to Uzma which forwarded Khan's invoice for a sum of US$2,621,939.54 (Khan's Invoice).
[13] Regarding Khan's Invoice:-
(1) Uzma made three part payments to Khan totaling US$1,531,721.53; and
(2) a balance sum of US$1,090,218.01 remained outstanding from Uzma to Khan (Outstanding Sum).
[14] On 24 October 2016, Petronas, Uzma and THHE entered into a novation agreement whereby Uzma took over THHE's incomplete works under the Project.
[15] Khan commenced adjudication proceedings against Uzma regarding the Outstanding Sum (Adjudication Proceedings).
[16] In the Adjudication Proceedings:-
(1) Uzma had raised a jurisdictional challenge (Jurisdictional Challenge) on the ground that Khan's claim was not based on a "construction contract" as defined in s 4 of the Construction Industry Payment and Adjudication Act 2012 (CIPAA);
(2) the Adjudicator did not decide on the Jurisdictional Challenge and proceeded to complete the Adjudication Proceedings purs
