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2024 MarsdenLR 2859
COURT OF APPEAL PUTRAJAYA
JDI BUILTECH (M) SDN BHD – Appellant
Versus
DANGA JED DEVELOPMENT MALAYSIA SDN BHD – Respondent
[Civil Appeal No: J-02(C)(A)-1066-06-2022]
The court held that under s 30 CIPAA, a subcontractor must prove that money is due from the principal to the main contractor to qualify for direct payment, emphasizing the burden of proof lies with the subcontractor.
Headnote:(A) Construction Industry Payment and Adjudication Act 2012 – Section 30 – Direct payment from principal to subcontractor – The court examined the conditions under which a principal is obligated to make direct payments to a subcontractor following an adjudication decision, emphasizing that money must be due from the principal to the main contractor at the time of the request for payment. (Paras 1, 11, 30, 134)
(B) Burden of Proof – The subcontractor bears the burden of proving that there is money due from the principal to the main contractor to invoke the direct payment remedy under s 30. (Paras 52, 66)
Facts of the case: The subcontractor sought direct payment from the principal under s 30 CIPAA, asserting that work done for the main contractor entitled it to payment. The principal denied owing any debt to the main contractor, citing contract breaches. (Paras 3-4)
Findings of Court: The court found that the subcontractor failed to prove that money was due from the principal to the main contractor, thus dismissing the application for direct payment. (Paras 134)
Issues: The main issue was whether the subcontractor could establish that money was due from the principal to the main contractor at the time of the direct payment request. (Paras 10, 134)
Ratio Decidendi: The court ruled that s 30(5) CIPAA is a pre-condition for direct payment, requiring proof of money due from the principal to the main contractor. (Paras 18, 134)
Result: Appeal dismissed with costs. (Paras 135)
Key Points: - (!) The question of when s 30 CIPAA applies is determined by s 30(5): money must be due or payable by the principal to the main contractor at the time of receipt of the request. - (!) The subcontractor bears the legal and evidential burden to prove that there is money due or payable from the principal to the main contractor; initial burden on the subcontractor, with potential shift to the principal for the third condition. - (!) s 30(5) is the overarching pre-condition for invoking any subsections of s 30; without money due or payable, direct payment cannot be ordered. - (!) Section 31 allows concurrent enforcement of remedies; remedies under ss 28-30 may be exercised concurrently or in combination. - (!) The Court dismissed the direct payment application because the subcontractor failed to discharge the burden of proving money due or payable by the principal to the main contractor at the material time.
What is required to invoke Section 30 CIPAA for Direct Payment from Principal to a Subcontractor?
What is the burden of proof to establish money due or payable from the Principal to the Main Contractor under CIPAA s 30(5) as a pre-condition to direct payment?
Can direct payment remedies under CIPAA be pursued concurrently with other remedies, and how does s 30(5) interact with other subsections?
JUDGMENT
[1] This Judgment will explore once again the operation of s 30 of the Construction Industry Payment and Adjudication Act 2012 ("CIPAA") with respect to direct payment from a principal employer to a subcontractor that had obtained an adjudication decision in its favour vis-a-vis its main contractor against whom an adjudication decision had been made. In particular we shall explore the relationship between s 30(5) and s 30(2) and (3) CIPAA and the overall legal and evidential burden of proof on the part of the principal employer and the subcontractor.
[2] Essentially s 30 may be activated by a successful party in an adjudication decision to call upon the principal of the losing party in the adjudication decision to make direct payment from the principal to the successful party in the adjudication decision. For ease of reference we shall refer to the plaintiff as the subcontractor and the defendant here in the s 30 CIPAA application as the principal and the losing party in the adjudication decision as the main contractor.
Before The High Court
[3] In brief the subcontractor in its Originating Summons for Direct Payment under s 30 CIPAA, had deposed in its affidavit its belief that there is a sum owing from the principal to the main contractor which it now wants the principal to pay direct to it. The basis for that belief stems from the fact that whatever work is done by the subcontractor for the main contractor is done for the ultimate benefit of the principal and as such there would be expected a sum owing from the principal to the main contractor for the same work done.
[4] Whilst the principal does not dispute the contractual relationship of principal and main contractor and correspondingly the main contractor and the subcontractor, the principal denied that there is any debt owing or payable to the main contractor as the principal had terminated its contract with the main contractor for various breaches of the contract including wrongful suspension of works, failure to proceed with the works regularly and diligently and failure to complete the works within time.
[5] When the contract between the principal and the main contractor was terminated by the principal on 20 October 2020, invariably the contract between the subcontractor and the main contractor was terminated also. The principal said that there is a sum to the tune of about RM41.4 million due and payable from the main contractor to it under the heads of an LAD claim until termination, further additional costs of employing a new main contractor to complete the works, late delivery claims from purchasers of the various units in the project, additional overhead expenses and costs up to the actual completion of the project. It had a contemporaneous Quantity Surveyor Report of 12 January 2021 to justify the amount.
[6] The subcontractor on the other hand stated that s 30 CIPAA created an independent obligation on the part of the principal to pay direct to the subcontractor the adjudication sum as stated in the adjudication decision with no liberty to apply any set-off by the principal as against its main contractor. It further argued that the whole scheme of CIPAA is to facilitate cash flow for the party that has done the work and that any sum paid by the principal direct to it can always be claimed by the principal against its main contractor as a debt.
[7] The principal also argued that the subcontractor cannot stand in a better position than the main contractor where payment from the principal to the main contractor is concerned. The fundamental precondition that must first be met is the requirement of s 30(5) in that there must be money due or payable by the principal to the party against whom the adjudication decision was made at the time of the receipt of the request for payment, in this case a request by the subcontractor calling on the principal to make to it a direct payment under s 30(1).
[8] The High Court alluded to the fact that there was
