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2025 MarsdenLR 5785
HIGH COURT (SHAH ALAM)
WONG KIAN KHEONG, J
Otis Elevator Company (M) Sdn Bhd – Plaintiff
Versus
Castmet Sdn Bhd and another – Defendant
ORIGINATING SUMMONS NOS BA-24C-19-02 OF 2020 AND BA-24C-59-06 OF 2020
Deepak s/o Mahadevan (Lye Ca-Ryn with him) (Azmi Fadzly Maha & Sim) for Otis.
Andrew Chan Kah Jun (Queenie Hoh Li Chian with him) (The Chambers of Queenie Hoh Li Chian) for Casmet.
The court affirmed that the adjudicator had jurisdiction to award payment to Otis, despite Castmet's claims regarding direct payment obligations and forgery, reflecting adherence to statutory frameworks in construction contracts.
Headnote:(A) Contracts Act 1950 - Section 74(1) - Construction Industry Payment and Adjudication Act 2012 - Sections 4, 5(1), 15(d), 27(1) and 28(2) - Adjudication decision - Jurisdiction of adjudicator - Court upheld adjudicator's decision to award RM529,500 to Otis Elevator Company for construction work - Court rejected Castmet's arguments regarding direct payment from employer and forgery allegations. (Paras 8-34)
(B) Jurisdiction - The doctrine of privity of contract does not apply in this instance, granting Otis a statutory right against Castmet for non-payment under the Sub-Contract. (Paras 9-10, 16-18)
(C) Natural Justice - The court found that there was no breach of the second rule of natural justice during the adjudication process. (Paras 24-26)
Facts of the case:
Otis Elevator filed for enforcement of an adjudication decision that required Castmet to pay RM529,500 for electric lift works after Castmet argued that payments should come directly from the employer due to contract clauses. (Paras 1-6)
Findings of Court:
The adjudicator had jurisdiction and did not exceed it, thus affording Otis the right to enforce the adjudicism. The arguments presented by Castmet regarding payment arrangements were flawed based on statutory interpretations. (Paras 16-18)
Issues: Courts assessed the jurisdiction of the adjudicator, the relevance of contract terms in deciding payment obligations, and allegations of forgery against the basis of Otis’ payment claim. (Paras 7-8)
Ratio Decidendi: The court concluded the adjudicator had jurisdiction under CIPAA to decide the case, maintaining that the statutory framework mandates timely payment to contractors and does not allow arbitrary contractual workarounds to escape obligations. (Paras 8, 16-18)
Result: Castmet's application to set aside the adjudication decision was dismissed; Otis' application to enforce the decision was granted.
Wong Kian Kheong J:
AMENDED JUDGMENT
(2 Originating Summonses)
A. Introduction
[1]This is a judgment regarding the following two originating summonses (OS):
(1)Otis Elevator Company Sdn. Bhd. (Otis) has filed OS no. BA-24C-19-02/2020 (Otis’ OS) against Castmet Sdn. Bhd. (Castmet) for leave of court to enforce an adjudication decision made on 31.12.2019 (AD) by an adjudicator, Mr. Saravanan A/L Subramaniam (Adjudicator), in favour of Otis against Castmet; and
(2)OS no. BA-24C-78-08/2020 has been filed by Castmet against Otis (Castmet’s OS) for the following orders, among others -
(a)an order that the AD shall be set aside (Castmet’s Setting Aside Application); or
(b)if the AD is not set aside, an order to stay the enforcement of the AD until the disposal of Shah Alam High Court Civil Suit no. BA-24C-19-02/2020 (Castmet’s Suit) filed by Casmet against Otis (Castmet’s Stay Application).
B. Background
[2]By a “Letter of Award” dated 15.7.2015 (Main Contract), Tujuan Gemilang Sdn. Bhd. (Employer) appointed Castmet as the main contractor for a development project (Project). The Main Contract provided in clause 3 [Clause 3 (Main Contract)] as follows:
“3. PAYMENT TO NOMINATED SUB-CONTRACTORS AND NOMINATED SUPPLIERS
Notwithstanding the Conditions of Contract, payments certified for work executed by all Nominated Sub-Contractors and goods supplied by all Nominated Suppliers shall be issued in separate cheques made payable to the respective Nominated Sub-Contractors and Nominated Suppliers. The said cheques shall be issued to the Contractor [Castmet] for distribution to the respective Nominated Sub-Contractors and Nominated Suppliers. For all purposes and intent of this [Main Contract], all relevant clauses in the Conditions of Contract pertaining to payment to Nominated Sub-Contractors and Nominated Suppliers shall be deemed to have been amended to allow for the payments to be issued to the Nominated Sub-Contractors and Nominated Suppliers in the manner described above.”
(emphasis added).
[3]The Project’s architect had nominated Otis as the “Nominated Sub-Contractor” (NSC) for certain construction works regarding electric lifts for the Project (Works). Consequently, by way of a letter dated 1.9.2015, Castmet appointed Otis as a NSC for the Works (Sub-Contract).
[4]Clause 5 of the Sub-Contract [Clause 5 (Sub-Contract)] stated as follows:
“5. Payment to [NSC]
Notwithstanding the Conditions of Contract, payments certified for work executed by all [NSC] shall be issued in separate cheques made payable to the respective [NSC].
The said cheques shall be issued to [Castmet] for distribution to the respective [NSC] within seven (7) days from [Castmet’s] Period of Honouring Certificate.”
(emphasis added).
[5]Otis claimed that Castmet did not pay a sum of RM529,500.00 for Works performed by Otis (Otis’ Claim). Otis’ Claim was referred to adjudication before the Adjudicator (Adjudication).
[6]At the Adjudication -
(1)Castmet denied Otis’ Claim on the following grounds -
(a)Otis should be paid by the Employer (not Castmet) according to Clause 3 (Main Contract) and Clause 5 (Sub-Contract);
(b)on 30.4.2019, the Employer had unlawfully terminated the Main Contract. Hence, Castmet had filed a suit against the Employer;
(c)Otis’ Claim was based on, among others, a “Payment Certificate No. 3” dated 30.8.2018 purportedly issued by Castmet for a sum of RM172,500.00 (PC No. 3). Castmet alleged that PC No. 3 was invalid because PC No. 3 had been forged [Castmet’s Forgery Allegation (PC No. 3)]; and
(d)after the termination of the Main Contract, the Employer continued with the Project and re-appointed Otis for the Works. As such, Otis should have claimed from the Employer regarding the subject matter of Otis’ Claim; and
(2)the Adjudicator delivered the AD as follows, among others -
(a)Castmet shall pay to Otis a sum of RM529,500.00 (Adjudicated Amount) on or before 15.1.2020;
(b)Castment shall pay to Otis simple interest on the Adjudicated Amount at 7.7% per annum from 1.6.2018 until fu
