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2020 MarsdenLR 2483
HIGH COURT (SHAH ALAM)
WONG KIAN KHEONG, J
Cabnet Systems (M) Sdn Bhd – Plaintiff
Versus
Dekad Kaliber Sdn Bhd & Anor – Defendant
ORIGINATING SUMMONS NO BA-24C-5-01/2019
Maximilian Tai Kim Sen (Krishanthini Dewi a/p Jeeva Kumar with him) (Moideen & Max) for the plaintiff.
Nadzarin bin Wok Nordin (Azhar bin Arman Ali and Rachel Loi Guong-Li with him) (Nadzarin Kuok Puthucheary & Tan) for the first defendant.
Avinder Singh Gill (AS Gill & Agnes) for the second defendant.
The second defendant is liable for the adjudicated amount as a principal under CIPAA, and payment does not constitute an undue preference, establishing that statutory obligations supersede potential claims of preferential treatment amid liquidation.
Headnote:(A) Construction Industry Payment and Adjudication Act 2012 - Sections 30 and 4 - Contracts Act 1950 - Section 63 - Appeal regarding adjudicated amounts - Court found that the second defendant is liable as a principal for the payment of the adjudicated sums - Payment does not constitute an undue preference under the Companies Act 2016, s 528(1) - No need for leave of the Winding Up Court to commence the originating summons against the defendants. (Paras 1, 12, 39, 41)
(B) Legal Principle - The enforcement of direct payment obligations under CIPAA creates statutory duties distinct from contractual obligations; hence, principal is liable for payment despite the contractor's liquidation and cannot set off payments to the contractor as undue preference. (Paras 20, 41)
Facts of the case:
Plaintiff supplied equipment to the sub-contractor involved in a construction project; despite receiving some payment, a sum remained due, leading to adjudication under CIPAA. Following a winding-up order against the sub-contractor, the plaintiff sought payment from the second defendant as a principal. (Paras 5, 7, 8)
Findings of Court:
Court allowed the originating summons and determined that the second defendant is responsible for paying the total adjudicated sum, reiterating the statutory obligations established under CIPAA. (Paras 41)
Issues: Whether the second defendant is a principal under CIPAA, if payment would qualify as undue preference under CA, and if leave from the Winding Up Court was necessary before commencing action. (Paras 1, 13)
Ratio Decidendi: Principal obligations under CIPAA exist independently of the contractor's prior debts and the subsequent winding-up order; statutory obligations take precedence over potential claims of preferential treatment. (Paras 20, 41)
Result: Originating summons allowed; second defendant ordered to pay the total adjudicated sum, interest, and costs. (Paras 41)
Wong Kian Kheong J:
JUDGMENT
(Court enclosure no. 1)
A. Background
[1]The first defendant company (1st Defendant) was the main contractor of a construction project called “ICQS” at Bukit Kayu Hitam, Kedah Darul Aman (Project).
[2]For the Project, the 1st Defendant had appointed Synergycentric Sdn. Bhd. (SSB) as a sub-contractor for “ICT and Security Works Package” (Sub-Contract).
[3]On 18.7.2017, the plaintiff company (Plaintiff) entered into a “Sale and Purchase Agreement” (SPA) with SSB whereby for the purpose of the Project, the Plaintiff had agreed to sell to SSB, deliver, install, test and commission “CCTV” (Closed-Circuit Television), “ACS” (Access Control System) and “PA” (Public-Address System) (collectively referred to as the “Equipment”).
[4]Pursuant to the SPA, the Plaintiff had supplied, delivered, tested and commissioned the Equipment for the Project.
[5]According to the Plaintiff, SSB had only paid RM3,449,302.48 to the Plaintiff for the Equipment and there was an outstanding sum of RM1,120,718.96 (Plaintiff’s Claim).
[6]The Plaintiff’s Claim was referred to adjudication under the Construction Industry Payment and Adjudication Act 2012 (CIPAA) and the adjudicator, Mr. Loo Chun Kok, made an adjudication decision on 10.11.2018 (AD). The AD provided as follows, among others:
(1)SSB shall pay RM1,077,326.36 (Adjudicated Sum) to the Plaintiff;
(2)a sum of RM34,546.84 as late payment interest on the Adjudicated Sum (up to 11.7.2018) shall be paid by SSB to the Plaintiff (Pre-AD Interest);
(3)interest at the rate of 5% per annum on the Adjudicated Sum shall be paid by SSB to the Plaintiff from 12.7.2018 until full payment of the Adjudicated Sum (Post-AD Interest); and
(4)SSB shall pay a total sum of RM44,000.90 to the Plaintiff for the fees and expenses of the Adjudicator and Asian International Arbitration Centre (Adjudication Costs).
[7]On 21.8.2019, the Kuala Lumpur High Court (Winding Up Court) wound up SSB (Winding Up Order). The Winding Up Order has appointed the Official Receiver (OR) as an interim liquidator for SSB.
[8]Pursuant to s 30CIPAAst Defendant [Plaintiff’s Demand (1st Defendant)] to pay the total sum awarded in the AD (Total Adjudicated Sum) within 14 days from the date of the Plaintiff’s Demand (1st Defendant).
[9]The 1st Defendant replied to the Plaintiff’s Demand (1st Defendant) by a letter dated 10.12.2018 [1st Defendant’s Letter (10.12.2018)]. According to the 1st Defendant’s Letter (10.12.2018), among others -
(1)the 1st Defendant, SSB and the second defendant (2nd Defendant) had entered into a novation regarding the Sub-Contract (Novation); and
(2)the Plaintiff was “advised” to write directly to the 2nd Defendant regarding the Plaintiff’s claim for the Total Adjudicated Sum.
[10]The Plaintiff’s solicitors had requested for a copy of the Novation from the 1st Defendant by way of two letters dated 18.12.2018 and 10.1.2019 (Plaintiff’s 2 Requests) but to no avail.
[11]The Plaintiff’s solicitors sent a demand dated 18.12.2018 to the 2nd Defendant [Plaintiff’s Demand (2nd Defendant)] for the 2nd Defendant to pay the Total Adjudicated Sum within 14 days from the date of the Plaintiff’s Demand (2nd Defendant). The 2nd Defendant did not accede to the Plaintiff’s Demand (2nd Defendant).
B. This originating summons (OS)
[12]The Plaintiff filed this OS for the following orders against the 1st and 2nd Defendants (collectively referred to as the “Defendants”), among others:
(1)a declaration that the 1st Defendant and/or the 2nd Defendant is liable as the “principal” of SSB to pay to the Plaintiff the Total Adjudicated Sum under the AD; and
(2)an order that the 1st Defendant and/or the 2nd Defendant as SSB’s “principal” shall pay to the Plaintiff the Total Adjudicated Sum under the AD.
C. Issues
[13]This OS raises the following questions:
(1)based on the Novation and s 63Contracts Act 1950CA (1950)], is the 2nd Defendant a “principal” of SSB within the meaning of the definition of “principal” in s 4s 30CIPAA
(2)if the 2nd Defendant is
