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2024 MarsdenLR 145
HIGH COURT MALAYA SHAH ALAM
TCS CONSTRUCTION SDN BHD – Appellant
Versus
KTCC MALL SDN BHD & ANOTHER CASE – Respondent
[Originating Summons No: BA-24C-65-10/2022 & BA-24C-7-01/2023]
The court affirmed that under s 30 CIPAA 2012, a principal contractor has an independent obligation to pay the adjudicated amount directly to a subcontractor, regardless of the main contractor's insolvency.
Headnote:(A) Construction Industry Payment Adjudication Act 2012 – Section 30 – Adjudication decision in favor of subcontractor for unpaid adjudication amount – Principal contractor's obligation to pay adjudicated amount directly to subcontractor despite main contractor's winding-up – Court found no contravention of pari passu principle or undue preference. (Paras 24-34)
(B) Adjudication Amount – Includes interest and costs as per statutory interpretation to protect subcontractors' rights. (Paras 63)
(C) Letter of Undertaking – Unconditional obligation to pay adjudicated sum, irrespective of contract terms. (Paras 66-67)
Facts of the case: TCS Construction Sdn Bhd obtained an adjudication decision against MPM Project Management Sdn Bhd for RM6,141,557.77, which was not paid. TCS sought direct payment from KTCC Mall Sdn Bhd under s 30 CIPAA 2012. KTCC contested the claim based on MPM's winding-up and alleged non-payment.
Findings of Court: TCS established its right to payment under s 30 CIPAA 2012, and KTCC's objections were dismissed.
Issues: Whether TCS's claim contravenes insolvency principles, whether the notice under s 30 CIPAA was defective, and whether KTCC must honor the Letter of Undertaking.
Ratio Decidendi: The court ruled that s 30 CIPAA 2012 creates an independent obligation for the principal to pay the adjudicated amount, irrespective of the main contractor's financial status.
Result: Suit 65 allowed; Suit 7 dismissed with costs.
JUDGMENT
A. Introduction
[1] These are actions which had originated from an Adjudication Decision dated 13 September 2022 (AD) made by the appointed adjudicator, Ms Karen Ng Gek Suan. The AD was in favour of the TCS Construction Sdn Bhd (TCS) being the sub-contractor against the main sub-contractor, MPM Project Management Sdn Bhd (MPM). Since MPM did not pay the adjudication amount to TCS in accordance to the AD, TCS made a written request to KTCC Mall Sdn Bhd (KTCC) on 21 September 2022 for the Adjudication Amount to be paid pursuant to s 30 of Construction Industry Payment Adjudication Act 2012 (s 30 CIPAA 2012).
[2] As a consequence to the AD, both TCS and KTCC had filed their respective Originating Summons:
i. TCS has filed OS No BA-24C-65-10/2022 (Suit 65) against KTCC pursuant to s 30 of CIPAA 2012 for direct payment of the Adjudication Sum as per the AD; and
ii. KTCC on the other hand had filed OS No BA-24C-7-01/2023 (Suit 7) against TCS for declarations that KTCC has no obligation to pay the Adjudicated Sum pursuant to s 30 CIPAA 2012, based on a letter of undertaking dated 19 September 2018 and that the notice dated 21 September 2022 issued by TCS pursuant to s 30 CIPAA is defective.
[3] Both parties had filed their respective affidavits and submissions for both the OSs. By an Order dated 11 January 2023, Suit 7 was transferred from Kuala Terengganu to Shah Alam and has been ordered to be heard together with Suit 65 which had been filed by TCS at the Shah Alam High Court. Since the grounds for both applications overlap one another it was agreed for both the suits to be heard and decided together. In this respect, I decided on Suit 65 and then followed by Suit 7.
B. Brief Background
[4] KTCC appointed MPM as the main contractor for the construction of a construction project known as "Cadangan Pembangunan Komersil Bercampur Di atas Lot Pt 4191, Kawasan KTCC, Muara Selatan Bandar Kuala Terengganu, Daerah Kuala Lumpur Yang Terdiri Daripada: 1 Blok Podium Pusat Membeli Belah Di Tingkat Basemen 1, 2, 3 & 4 Berserta Tempat Letak Kereta Di Tingkat Basemen Dan Tingkat 4, 5, 6 & 7" (the Project) for an original contract sum of RM101,000,000.00.
[5] MPM had appointed TCS by way of a Letter of Acceptance dated 19 September 2018 as one of its subcontractors for superstructure works (from ground floor and above excluding prestressing work) and some architect works at the Project.
[6] Due to non-payment of the outstanding sums for works done under the contract to TCS by MPM, TCS had commenced and succeeded at an Adjudication Proceeding where TCS was awarded via the AD among others a sum of RM6,141,557.77 and interests of 5% per annum calculated from the date due of payment of TCS's revised Progress Claim No 17 i.e on 4 July 2020 until the date of full payment.
[7] MPM has failed to comply with the AD and as such, TCS had exercised its right under CIPAA 2012 by making a written request to KTCC being the principal to MPM pursuant to s 30(1) CIPAA 2012 in order to recover the adjudication sum as per the AD.
[8] In the s 30(1) notice, TCS also relied on a Letter of Undertaking dated 19 September 2018 issued by KTCC to TCS in relation to the Project (the said LU) which reads:
"Please be informed the above-mentioned sub-contract works that were awarded by MPM, we KTCC Mall Sdn Bhd, the Owner of the above mentioned project, hereby undertake to settle on behalf of MPM the outstanding amount in the event MPM defaults in settling the outstanding amount due to you (sic) within 14 days from the date of receiving of your payment request."
[9] KTCC had by way of a reply letter dated 5 October 2022 to the request letter made by TCS intimated that there are no monies due or payable to MPM as all payments have been made to MPM. KTCC had also served a written notice to MPM pursuant to s 30(2) CIPAA 2012.
[10] MPM was wound-up by the Court on 28 February 2022 and as such, it is KTCC's stand that due to the winding-up of MPM, submitting to TCS's c
