Malaysian High Court Dismisses Bid to Set Aside CIPAA Adjudication Decision in Architectural Services Dispute

Introduction

The High Court of Kuala Lumpur, presided over by Judicial Commissioner Aliza Sulaiman, has dismissed an originating summons by the plaintiff seeking to set aside an adjudication decision under the Construction Industry Payment and Adjudication Act 2012 (CIPAA). The decision, rendered in a dispute over unpaid architectural fees for a service apartment development project, reinforces the robustness of adjudication proceedings by upholding the adjudicator's findings despite claims of procedural unfairness and jurisdictional overreach. The plaintiff, the project employer, argued breaches under sections 15(b) and (d) of CIPAA, but the court found no material grounds to intervene. The defendant, the appointed architectural firm, successfully defended the adjudicated sum of RM345,732.15 plus interest and costs.

Case Background

The dispute arose from a Letter of Appointment (LoA) dated March 18, 2010, where the plaintiff engaged the defendant to provide architectural services for the "Proposed Service Apartment Development" on Lot 71202 in Johor Bahru. The professional fee was set at 1% of the construction cost, excluding GST, with payments tied to specific project stages outlined in the LoA.

The defendant claimed to have completed substantial works and issued Progress Claim No. 52 for RM474,426.75 after prior payments of RM2,118,000.00, alleging the balance remained outstanding. Following non-payment, the defendant initiated adjudication under CIPAA. On May 8, 2019, Adjudicator Sr. Che Zaki Che Mat awarded the defendant RM345,732.15 (adjusted quantum), 7.11% interest from December 7, 2018, and RM19,756.00 in costs, to be paid within 14 days.

The plaintiff failed to pay, prompting the defendant to file a winding-up petition on June 21, 2019. The plaintiff settled the adjudicated sum on August 19, 2019, under protest, leading to withdrawal of the petition. On July 5, 2019, the plaintiff filed the originating summons to set aside the adjudication decision, citing denial of natural justice and excess of jurisdiction. The court heard oral submissions from counsels Mr. Andrew Davis (plaintiff) and Ms. Melody Woon (defendant), along with affidavits, and dismissed the application with RM5,000 costs to the defendant.

The main legal questions were whether the adjudication decision should be set aside under section 15(b) CIPAA for denial of natural justice (e.g., failure to direct written submissions, baseless findings on service of claims) and under section 15(d) for the adjudicator exceeding jurisdiction (e.g., rewriting contract terms, premature claims, unauthorized adjustments).

Arguments Presented

The plaintiff contended that the adjudication was improperly obtained due to procedural flaws and jurisdictional errors. Specifically, they argued: (1) no proof of service of the progress claim, as the adjudicator relied solely on acknowledgement of reminder letters dated November 30, 2018, and January 3, 2019, without evidence of the underlying claim; (2) denial of natural justice when the adjudicator ignored their April 25, 2019, request for directions to file written submissions responding to the adjudication reply, potentially altering the outcome; (3) excess jurisdiction by rewriting the LoA's payment schedule, which tied payments to completion stages (e.g., 60% progressively during construction, 5% upon CCC or final accounts), by applying default CIPAA section 36 timelines, assuming a 5% retention releasable post-CCC, and adjusting work percentages without party consent or basis, especially since claims for construction and defect completion stages were premature without full CCC or final accounts. The plaintiff distinguished cases like Ideal City Development Sdn Bhd v PWC Bina Sdn Bhd to argue the claim was not yet due, and cited Guangxi Dev & Cap Sdn Bhd v Sycal Bhd for the natural justice breach's materiality.

The defendant countered that the adjudicator acted fairly within powers. They pointed to the plaintiff's acknowledgements of the reminder letters as sufficient service proof under CIPAA, attaching bills and completion evidence. On submissions, they argued the adjudicator considered the request via email on April 25, 2019, but deemed no further input necessary, complying with the 45-day timeline under section 12(2)(a) CIPAA. For jurisdiction, they defended the adjudicator's comparisons of Claim 52 with certified Claim 51, application of standard 5% retention practices (per section 25(d) expertise), progressive payments during construction, and section 36 defaults absent LoA timelines, all within the referred dispute. They relied on View Esteem Sdn Bhd v Bina Puri Holdings Bhd to limit "jurisdiction" to CIPAA scope, and Gazzriz Sdn Bhd v Hasrat Gemilang Sdn Bhd to affirm adjudicator discretion. The defendant also justified interest at 7.11% (BNM average) and costs per sections 25(o) and 18(1) CIPAA as consequential powers.

Legal Analysis

The court applied established principles from CIPAA case law to evaluate the setting-aside grounds under sections 15(b) and (d). For natural justice under section 15(b), it referenced Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC), emphasizing that breaches must be material, not peripheral, and involve decisive issues without party opportunity to respond. The court found no such breach: service was reasonably inferred from acknowledgements and attachments, distinguishing Ideal City Development where claims were pre-due date. On submissions, absent specifics on what the plaintiff wished to address or its potential impact, and given the adjudicator's broad discretion under section 25(j) to manage proceedings fairly within timelines ( Tidalmarine Engineering Sdn Bhd v Conlay Constructions Sdn Bhd ), no procedural unfairness occurred. The court noted the adjudicator considered all pleadings, fulfilling fairness duties.

For excess jurisdiction under section 15(d), the Federal Court in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 269 clarified "jurisdiction" as staying within CIPAA's scope (sections 5-6 referral), not merits review, categorizing issues as core, competence, or contingent. The court held the adjudicator remained within bounds: the dispute was the unpaid Claim 52 quantum and due date, addressed via section 27(1) limits. Adjustments using Claim 51 comparisons, interim certificates, and standard practices (e.g., 5% retention, 77.78% for Phase 2 Block E) were factual findings under section 25(n) (deciding sans certificates) and 25(d) (expertise), not rewriting the LoA, which allowed progressive payments. Section 36 applied as LoA lacked payment periods. Precedents like Ireka Engineering And Construction Sdn Bhd v PWC Corporation Sdn Bhd barred merits probing, while Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd affirmed interest/costs as consequential ( Milsonland Development Sdn Bhd v Macro Resources Sdn Bhd ). On additional points, interest via BNM rates and costs per AIAC scales were proper under sections 25(o) and 18(1).

The analysis distinguished natural justice as "fair play in action" ( Anandan Krishnan’s Words, Phrases & Maxims ), flexible per context, and jurisdiction as CIPAA-bound, not administrative law overreach ( Terminal Perintis Sdn Bhd v Tan Ngee Hong Construction Sdn Bhd ).

Key Observations

• On service: "In my opinion, with the Plaintiff’s acknowledgement of receipt of the letters dated 30.11.2018 and 3.1.2019... it cannot be said that the Adjudicator’s conclusion that the claim was served on the Defendant on 6.12.2018 is completely baseless."
• On natural justice and submissions: "There is no doubt that, viewed in its entirety, s 25 CIPAA bestows wide powers on an adjudicator... to establish the procedures and limiting the submission of documents by the parties."
• On jurisdiction and adjustments: "The Adjudicator is duty bound to make a finding... and if... the finding tilts towards the Defendant, the Adjudicator has to additionally determine the quantum of the claim that is to be allowed."
• On costs and interest: "Under Section 25 (o) of CIPAA, the award of interest shall be set based on BNM guideline. I shall apply the average of BLR for this purpose which is 7.11% per annum."
• Conclusion on application: "The Plaintiff has failed to meet the requirements for setting aside of the Adjudication Decision under s 15(b) and/ or (d) CIPAA."

Court's Decision

The High Court dismissed the plaintiff's originating summons with costs of RM5,000 to the defendant, upholding the adjudication decision in full. The ruling affirms that courts will not intervene in adjudication outcomes absent material natural justice breaches or clear jurisdictional excess, preserving CIPAA's aim of swift, enforceable payments in construction disputes.

Practically, this protects unpaid consultants like architects by validating progressive claims based on evidence like interim certificates, even pre-final CCC, and adjudicator expertise in standard practices. It discourages setting-aside challenges on thin grounds, potentially reducing litigation post-adjudication. Future cases may see stricter scrutiny of "materiality" in procedural complaints and wider acceptance of section 36 defaults where contracts lack timelines, streamlining enforcement under section 28 CIPAA while emphasizing timely certifications by paying parties.