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2018 MarsdenLR 2811
COURT OF APPEAL (PUTRAJAYA)
DAVID WONG, J, HAMID SULTAN, J, RHODZARIAH BUJANG, JJCA
Leap Modulation Sdn Bhd – Plaintiff
Versus
Pop Construction Sdn Bhd – Defendant
CIVIL APPEAL NOS W-02(C)(A)-505–03 OF 2017 AND W-02(C)(A)-506–03 OF 2017
Alan Wong (Andrew Heng and Roger Leong with him) (Zain Megat & Murad) for the appellant.
Phang Soon Mun (Chew Chun Wei with him) (Han & Partners) for the respondent.
An adjudicator must consider all defenses raised in the Adjudication Response, regardless of their initial pleading in the Payment Response, to ensure compliance with the principles of natural justice.
Headnote:(A) Construction Industry Payment and Adjudication Act 2012 - Sections 5, 6, 10, 15, 27(1) - Appeals against the High Court's dismissal of an application to set aside an adjudicator’s award of RM1,579,334.75 - Jurisdiction of the adjudicator limited to claims raised in the Payment Claim and Response - The court found a breach of natural justice as the adjudicator refused to consider defenses raised in the Adjudication Response - The Federal Court's precedent in View Esteem mandates that adjudicators must consider all defenses, irrespective of their pleading stage. (Paras 17-32)
Facts of the case:
Two appeals concerning the adjudicator’s denial of jurisdiction to hear the appellant's counterclaims against a payment claim. The respondent was the main contractor unpaid for a project. The adjudicator's award was for payment based on interim certificates. The appellant's defenses included set-offs that were not favorable to the respondent.
Findings of Court:
The High Court upheld the adjudicator's decision except for one of the set-off claims which was allowed. The Federal Court precedent compelled the court to find the adjudicator acted beyond her jurisdiction.
Issues: The determinations were whether the adjudicator had jurisdiction to hear set-offs and whether the omission to hear such claims constituted a breach of natural justice.
Ratio Decidendi: The court ruled that an adjudicator's refusal to consider defenses from the Adjudication Response is a breach of natural justice, reaffirming the necessity for complete consideration and the applicability of the View Esteem ruling.
Result: Appeals allowed and orders of the High Court and Adjudicator set aside.
David Wong JCA:
JUDGMENT OF THE COURT
Introduction:
[1]There are two appeals before us. Appeal W-02(C)(A)-505- 03/2017 (Appeal 505) relates to the decision of the High Court where the learned Judge dismissed the Appellant’s/Plaintiff’s application to set aside the learned Adjudicator’s decision where a sum of RM1,579,334.75 was awarded to the Respondent.
[2]The learned Judge also allowed the enforcement application of the learned Adjudicator’s award of RM1,579,334.75 and Appeal W-02(A)-506-03/2017 (Appeal 506) concerns the aforesaid decision.
[3]We heard the appeals together and had reserved our decision. We have since further considered submissions from respective counsel and now give our decision and grounds.
Background facts:
[4]The Respondent was appointed by the Appellant as the main contractor for a contract sum of RM65 million in respect of a project known as “Proposed Construction of 1 Commercial Block of 29 storeys consisting of: (i) 22 floors of office units (473) and 1 floor of facilities, (ii) 5 podium floors of car parks, (iii) 2 floors of basement car parks, (iv) 1 floor for mechanical on Lot 41096, Jalan Aman Damai, Mukim Petaling, Kuala Lumpur.
[5]The Respondent, being the unpaid party, made a claim under the CIPPA 2012 for payment under interim certificate No 17R and No 18 for the sum of RM1,821,680.60. As required by CIPPA 2012, the Respondent served on the Appellant, being the non-paying party, a Payment Claim on 22.1.2016.
[6]In response, the Appellant filed its Payment Response which in the words of the learned Judge is a document “not drafted elegantly in legal language” but in substance denied the claim of the Respondent on the ground that it was entitled to compensation from the Respondent’s default in executing the construction contract in that works were not properly done resulting in remedial works to complete the same. No details of the amount incurred for the remedial works by the Appellant were set out in the Payment Response.
[7]Notice of adjudication was served by the Respondent on the Appellant on 13.6.2016 seeking payment under interim certificate No 17R and 18 amounting to RM1,930,981.43 (inclusive of GST). The learned Adjudicator was then appointed on 29.8.2016.
[8]The Respondent on 26.9.2016 served the Adjudication Claim with supporting documents, details of which are set out in the learned Adjudicator’s grounds (refer to pages 8 -11 of Common Core Bundle).
[9]In response, the Appellant filed its Adjudication Response with supporting documents, details of which are also set out in the learned Adjudicator’s grounds (refer to page 11 – 20 Common Core Bundle). From the Adjudication Response, one can distil that there are basically two grounds of defence and they are:
1.The Appellant is entitled to set off the amount claimed by the Respondent with the following amounts:
(a)Outstanding amount of RM351,646.68 certified under interim Certificate No 19.
(b)Structural defects investigation and audit cost of RM161,839.50.
(c)Additional costs of completion of RM6,860,842.45.
(d)Associated costs amounting to RM1,624,841.11.
2.Premised on clause 25.4(iv) of the contract documents, as the Appellant had terminated the contract no payment is due until the completion of works and until the completion and verification of the accounts within a reasonable time by the Architect certifying that there are outstanding amount to the claimant (in this case the Respondent) after taking into account the costs of completing the remaining works.
[10]Before the learned Adjudicator, she had to resolve the issue of whether she had the jurisdiction to deal with the claims of set off by the Appellant as set out in the adjudication response when these set off were not specifically pleaded in the payment response. This was how she dealt with it as can be seen in the following paragraphs in her grounds:
(a)paragraph 42:
“At the outset, I am mindful that my jurisdiction as an adjudicator under CIPAA as provided in section 27(1) CIPAA is limited to t
