The principal's obligation to pay directly to subcontractors under Section 30 of the CIPAA is not negated by the absence of written consent for subcontracting, provided there are funds due or payable.

Lee Swee Seng JCA:

JUDGMENT OF THE COURT

[1]This is an appeal from a decision of the High Court that had dismissed a s 30Construction Industry Payment and Adjudication Act 2012

[2]The issues raised in this appeal were whether retention sum retained by the principal from certified amounts due to the main contractor was money “due or payable” to the main contractor from the principal and whether on the balance of probabilities the subcontractor had proved that there was money “due or payable” from the principal to the main contractor when the request for payment was served on the principal under s 30(1)CIPAA

[3]It was also argued by the principal who is the Government of Malaysia (“GOM”) and more particularly Jabatan Kerja Raya (“JKR”) that since it did not recognise nor consent to the main contractor appointing the subcontractor, it was not bound to make any payments under s 30CIPAA

In the High Court below

[4]The subcontractor KSB was the plaintiff in the High Court below and the appellant here. The GOM/JKR was the defendant below and the respondent here.

[5]The High Court held that the liability of the principal to pay if there is a debt due or payable from it to the main contractor is irrespective of whether the subcontractor is recognised or approved by the principal as this is not a requirement under s 30CIPAA

[6]The High Court was satisfied that there was no money “due or payable” from the principal to the main contractor, the losing party in the adjudication as the last Interim Payment Certificate (‘IPC”) in IPC No. 84 showed a negative sum of RM1,788,581.24 as the recommended amount for payment by the GOM to NSB, the main contractor.

[7]The High Court had further held that there was an issue as to whether there was a debt due or payable from the principal to the main contractor in that there was a dispute as to whether the percentage of works completed at the point of termination of the contract by the principal of the main contractor was physical or financial completion. The High Court held that such a dispute was essentially to be resolved between JKR and its main contractor NSB.

[8]The High Court had thus dismissed the plaintiff’s/subcontractor’s application under s 30CIPAA

Before the Court of Appeal

[9]The plaintiff appealed to the Court of Appeal on the ground that the plaintiff had proved on the balance of probabilities that there was money “due or payable” from JKR to the main contractor NSB which money was more than enough to satisfy the adjudicated amount that the plaintiff had obtained and enforced against the main contractor.

[10]The plaintiff argued that the High Court had erred when it failed to consider that the Performance Guarantee sum carved out from the IPCs due from JKR to its main contractor to the sum of 5% of contract sum of the Project was money “payable” within the meaning of s 30(5)CIPAA

[11]The plaintiff further contended that the difference between the progress of the works under the last IPC which was IPC No. 84 dated 24.6.2022 and that stated as 99.86% in the Notice of Termination dated 14.7.2022, represented money due or payable from JKR to the main contractor and that this was not a matter that could only be resolved in a dispute between JKR and NSB but rather it was to be resolved based on the evidence adduced under a s 30CIPAA

Whether the Principal may refuse payment under a s 30 CIPAA application on ground that it had not given its