2017 7 Amr 887

[2017] 7 AMR 887
1 Terminal Perintis Sdn Bhd

v
Tan Ngee Hong Construction Sdn Bhd (and Another
5 Originating Summons)
High Court, Kuala Lumpur – Originating Summons Nos. WA-24C-57-07/2016

10 and WA-24C-82-08/2016
Lee Swee Seng J
February 24, 2017
15 Contract – Adjudication and payment disputes – Setting aside of adjudication

decision – Application for – Jurisdiction of adjudicator – Whether payment claim
invalid for not complying with s 5(2) of the Construction Industry Payment and
Adjudication Act 2012 ("the CIPAA") – Whether within power and province of
20 adjudicator to decide on validity of payment claim served – Whether adjudicator
exceeded his jurisdiction in deciding on validity of respondent's determination of
claimant's employment – Whether s 35 of the CIPAA applies to clause 25.4(d) of PAM
Contract to make it conditional payment clause and hence void and
25 unenforceable – Whether breach of natural justice when adjudicator referred to case law
authorities not cited by parties – Whether requirements of s 16(1)(a) or (b) of the CIPAA
met for stay of adjudication decision – Construction Industry Payment and
Adjudication Act 2012, ss 5(2), 5(2)(b), 15, 16(1)(a), (1)(b), 35, 35(1)
30 Terminal Perintis Sdn Bhd as employer ("the respondent") had entered into a
contract with Tan Ngee Hong Construction Sdn Bhd as contractor ("the
claimant") for the construction and completion of a project. The respondent
subsequently had sent a notice of determination to the claimant, exercising its
35 right to determine the contractor's employment pursuant to clause 25.1 of the
contract. The respondent stated that the claimant must vacate and return the site
possession, pay another person to carry out and complete the works and make
good any defects pursuant to clause 25.4.
40
The claimant then served a payment claim on the respondent as regards
Interim Certificate No. 14 in the sum of RM2,103,364.69, Progress Claim No. 15 in
the sum of RM2,708,618.91, release of the retention sum in the sum of
RM4,577,933.70 and payment of value of variations carried out in the sum of
RM385,427.33. The respondent duly served its payment response. The claimant
proceeded to commence adjudication proceedings against the respondent. The
adjudicator had allowed the claimant's claim. The respondent in Originating
Summons No. WA-24C-57-07/2016 had applied to set aside or stay the
adjudication decision. The claimant on the other hand in Originating Summons
888 All Malaysia Reports [2017] 7 AMR
No. WA-24C-82-08/2016 had filed to enforce the same. Both applications were 1
heard together.
The respondent submitted that the adjudication proceedings and/or decision

is a nullity because the payment claim did not comply with the requirements 5
under s 5 of the Construction Industry Payment and Adjudication Act 2012
("the CIPAA") and the claimant had failed to invoke s 26(2) of the CIPAA. The
respondent also submitted that the validity of the respondent's determination of
the claimant's employment under the contract was not one which the adjudicator 10
has jurisdiction to decide as it was not a matter which was referred to
adjudication by the claimant in the payment claim or by the respondent in the
payment response. It was further submitted that the adjudicator, although
agreeing with the respondent's submissions that it has no jurisdiction to deal 15
with the issue of validity of the respondent's determination of the claimant's
employment, had in excess of its jurisdiction made a finding on the said issue to
the effect that the determination was unlawful/wrongful.
Issues 20
1. Whether the payment claim served herein is not a valid payment claim in
that it did not comply with the requirements under s 5(2) of the CIPAA.
25
2. Whether the issue of a valid payment claim served herein goes to the
jurisdiction of the adjudicator as in the validity of his appointment and his
competence to adjudicate.
3. Whether the adjudicator had exceeded his jurisdiction in deciding on the 30

validity of the respondent's determination of the claimant's employment
with respect to compliance with the notice period.
4. Whether s 35 of the CIPAA applies to clause 25.4(d) of the PAM Contract to 35

make it a conditional payment clause and hence void and unenforceable.
5. Whether there has been a breach of natural justice when the adjudicator
referred to case law authorities not cited by the parties. 40
6. Whether the requirements of s 16(1)(a) or (b) of the CIPAA are met for stay
of the adjudication decision.
Held, dismissing the application to set aside the adjudication decision and
allowing the application in to enforce the adjudication decision with a single
costs of RM20,000 and allocatur to be paid before order of costs is extracted;
application for stay of the adjudication decision, dismissed
1. (a) For this court to interfere with his finding on the validity of the payment
claim would be to descend into the merits of his findings, which is not
Terminal Perintis Sdn Bhd v
Tan Ngee Hong Construction Sdn Bhd
[2017] 7 AMR (and Another Originating Summons) 889
1 permitted by s 15 of the CIPAA in a setting aside application. [see p 905

para 50 - p 906 para 52]
(b) The respondent did not say in its payment response that the claimant's
5 payment claim is invalid or defective or that it is not in compliance with
a basic or essential requirement in failing to provide details as to its
cause of action. There was no objection raised that the payment claim
does not comply with the requirements of s 5(2)(b) of the CIPAA. [see
10 p 907 para 54 - p 908 para 55]
(c) One should not be unduly critical or technical to the point of exacting an
overly demanding treatment of a payment claim when it comes to
whether it has met the requirements of s 5(2)(b) of the CIPAA. Moreover
15 the payment claim is prepared by the claimant itself and not served
through solicitors. As a payment claim it has conformed with the form
and format prescribed under Form 1 of the KLRCA Adjudication Rules
and Procedure. [see p 909 paras 57-58]
20
(d) No doubt the expression of a "cause of action" is used in s 5(2)(b) of the
CIPAA but that is nothing more than saying that the claimant must set
out the basis of their claim in contract. [see p 909 para 59]
25
(e) The payment claim served herein is a valid payment claim in that prima
facie, it purports reasonably to have complied with the requirements of
s 5(2) of the CIPAA. [see p 910 para 62]
30 2. When a challenge is made to the payment claim filed as lacking in details in
that it does not disclose a valid cause of action, that is a challenge on merits
assuming that the payment claim has complied outwardly with the
requirements of s 5(2)(b) of the CIPAA. It has nothing to do with the
35 validity of the appointment of the adjudicator. It is well within the power
and province of the adjudicator to decide on the validity of the payment
claim served as in whether at the end of the day, there is a valid cause of
action shown, after hearing the evidence and considering the submissions
40 of counsel on the proper interpretation to be given to relevant provisions of
the PAM Contract. [see p 917 para 86 - p 918 para 86; p 920 para 96]
3. (a) A misapprehension of the law in a finding of fact is no justification for

setting aside the said finding of fact when there are evidence forming
the basis of the adjudicator's finding of fact. Here the finding of fact was
that the notice of determination was issued prematurely and not in
strict compliance with the period of 14 clear days to rectify the defaults
as required under clause 25.2. Further as pointed out by the claimant in
the adjudication reply, both the notice of default and the notice of
determination were marked "without prejudice", supporting their
contention that the parties were at the material time, still discussing the 1
possibility of an amicable resolution. [see p 928 paras 121-122]
(b) Nonetheless, findings of facts and findings of mixed facts and law are
matters within the sole province of the adjudicator and this court 5
would not be able to interfere in a s 15 of the CIPAA application for
breach of natural justice or excess of jurisdiction. In the context in which
the above findings were made, there is nothing that goes to jurisdiction
of the adjudicator as in the validity of his appointment. [see p 928 10
para 123]
(c) Therefore, the adjudicator did not decide beyond his jurisdiction in that
he did not decide on the merits of the determination as to whether the
grounds for determination were valid. He merely decided on the 15
peripheral and preliminary issue as to whether the notice of
determination had been issued in compliance with the strict time frame
requirement of clause 25.2 of the PAM Contract. That he is permitted to
do before he could decide on where the respondent/employer may 20
validly rely of clause 25.4(d) to validly withholding payment. [see p 928
para 124]
4. (a) Parliament had drafted by way of a clear declaration as a matter of 25

principle in s 35(1) of the CIPAA that "Any conditional payment
provision in a construction contract in relation to payment under the
construction contract is void." [see p 931 para 131]
30
(b) Based on the Explanatory Statement to the Bill, it is not every
conditional payment provision that will be prohibited. It is only those
which have the effect of inhibiting cash flow. Parliament has left it to the
courts to determine whether the condition in the conditional payment 35
provision has the effect of inhibiting cash flow and so thwarting the
purpose of the Act. [see p 932 para 133]
(c) Debates as to what is a conditional payment clause under s 35 of the

CIPAA and whether clause 25.4(d) PAM Contract is such a clause are 40
matters of interpreting the relevant clauses on why no payments need
to be made and that clearly does not go towards jurisdiction of the
adjudicator. It is a mix finding of fact and law and the instant court
would not interfere even if the adjudicator's interpretation is not one
that this court would agree. [see p 936 para 147]
5. (a) The CIPAA gives vast powers to an adjudicator with respect to how to
determine a dispute before him. These powers confer upon the
adjudicator the right to draw upon his own experience, knowledge,
initiative and industry to consider whatever legal propositions that
1 may be relevant as supported by the cases decided by the courts in our

jurisdiction or elsewhere. This is not a breach of natural justice. [see
p 937 paras 149-150]
5 (b) Even in an appeal, where the merits of a decision can be delved into, it
is doubtful one would be able to succeed on the ground the trial judge
had referred to cases not cited by the parties. That would be to
discourage further research and initiative by the judge. [see p 938
10 para 154 - p 939 para 154]
6. (a) It would not be right to say that in the instant case a stay would not
defeat the purpose of the CIPAA as the claimant has already been
terminated and therefore would not need to expend further monies on
15 the project. Such an argument glosses over what is due to the claimant
for work already done and the practical reality that the claimant has to
pay its workers, suppliers, sub-contractors and financiers. One does not
expect a contractor to have just one project on-going for his success, if
20 not survival. He would have other projects afoot which would require
cash flow as well. It is the construction industry as a whole that the
CIPAA is concerned with. [see p 940 para 161]
25 (b) The fact of previous payments for work already done is no justification
for withholding payments for work subsequently done. It matters not
that the claimant has been previously paid for the previous interim
certificates. It certainly cannot be a case where "if I have been generous
30 and a good paymaster in the past, you must extend some grace to me in
the present". [see p 942 para 168]
(c) There was no real justification to grant either unconditional stay or a

35 stay subject to terms of the adjudication decision bearing in mind the
overarching purpose of the CIPAA which is to facilitate cash flow in the
construction industry and to give effect to an adjudication decision
unless it is overtaken and superseded by an arbitral award or a
40 judgment of the court after litigation. [see p 942 para 170]
Cases referred to by the court
AM Associates (Singapore) Pte Ltd v Laguna National Golf and Country Club Ltd
[2009] SGHC 260, HC (Sing) (ref)
Andrew Lee Siew Ling v United Overseas Bank (Malaysia) Bhd [2013] 1 AMR 573;
[2013] 1 MLJ 449, FC (ref)
AWG Construction Services Ltd v Rockingham Motor Sppedway Ltd [2004] EWHC
888, QBD (TCC) (ref)
Balfour Beatty Construction Ltd v Lambeth London Borough Council [2002] EWHC
597, QBD (TCC) (ref)
Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd [2015] 4 AMR 565; 1
[2015] 1 LNS 305, HC (ref)
Brodyn Pty Ltd v Davenport & Anor [2004] NSWCA 394, CA (Aust) (ref)
Brookhollow Pty Ltd v R&R Consultants Pty Ltd & Anor [2006] NSWSC 1, SC (Aust)
(ref) 5
Cantillon Ltd v Urvasco Ltd (2008) 117 ConLR 1 (ref)
Chase Osyter Bar v Hamo Industries [2010] NSWCA 190, CA (Aust) (ref)
Chin Chov & Ors v Collector of Stamp Duties [1979] 1 MLJ 69, FC (ref)
Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & Construction Co 10
Ltd [2010] 1 SLR 658, HC (Sing ) (ref)
Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd (and Another Case) [2016] AMEJ
0983; [2016] 5 CLJ 882, HC (ref)
Hong Leong Bank Bhd v Khairulnizam b Jamaludin [2016] 4 AMR 246; [2016] 7 CLJ 15
335, FC (ref)
Kirk v IRC [2010] HCA 1, HC (Aust) (ref)
Lee Kam Chun v Syarikat Kukuh Maju Sdn Bhd [1988] 1 MLJ 444, HC (ref)
Lee Wee Lick Terrence (alias Li Weili Terence) v Chua Say Eng (formerly trading as Weng 20
Fatt Construction Engineering) (and Another Appeal) [2013] 1 SLR 401, CA (Sing)
(ref)
Macob Civil Engineering Ltd v Morrison Construction Ltd (1999) 64 ConLR 1 (ref)
Majlis Agama Islam Wilayah Persekutuan v Victoria Jayaseele Martin (and Another 25
Appeal) [2016] 2 AMR 715; [2016] MLJU 41, FC (ref)
Napean Engineering Pty Ltd v Total Process Services Pty Ltd (In Liquidation) [2005]
NSWCA 409, CA (Aust) (ref)
Pacific GNRL Securities v Soliman and Sons [2006] NSWSC 13, SC (Aust) (ref) 30
Parist Holdings Pty Ltd v Wt Partnership Australia Pty Ltd [2003] NSWSC 365, SC
(Aust) (ref)
Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28, HC (Aust) (ref)
Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248, FC (Aust) (ref) 35
Qimonda Malaysia Sdn Bhd (Dalam Likuidasi) (Dalam Jagaan Likuidator-Likuidator
Dato' Gan Ah Tee Dan Mok Chew Yin) v Sediabena Sdn Bhd & Anor [2011] 2
AMCR 784; [2012] 3 MLJ 422, CA (ref)
SA Shee & Co (Pte) Ltd v Kaki Bukit Industrial park Pte Ltd [2000] SGCA 7, CA (Sing) 40
(ref)
SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733, HC (Sing) (ref)
Selva Kumar a/l Murugiah v Thiagarajah a/l Retnasamy [1995] 2 AMR 1097; [1995] 1
MLJ 817, FC (ref)
Subang Skypark Sdn Bhd v Arcradius Sdn Bhd [2015] AMEJ 874; [2015] MLJU 286,
HC (ref)
Sungdo Engineering & Construction (S) Pte Ltd v Italcor Pte Ltd [2010] 3 SLR 459, HC
(Sing) (ref)
View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd (and 2 Other Appeals) [2015]
AMEJ 1568; [2015] MLJU 695, HC (ref)
1 View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2016] 6 MLJ 717, CA (ref)
Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086, QBD (TCC)
(ref)
Witney Town Counsel v Beam Construction (Cheltenham) Ltd (2011) 139 ConLR 1 (ref)
5 WRP Asia Pacific Sdn Bhd v NS Bluescope Lysaght Malaysia Sdn Bhd (formerly known
as Bluescope Lysaght (Malaysia) Sdn Bhd) (and Another Originating Summons)
[2016] 1 AMR 379; [2015] 1 LNS 1236, HC (ref)
10 Legislation referred to by the court

Australia
Building and Construction Industry Security of Payment Act 1999 (NSW), ss 13,
13(2)(a), 17(2)(a)
15 Building and Construction Industry Security of Payment Act 2002 (Vic), s 14
Malaysia
Construction Industry Payment and Adjudication Act 2012, ss 4, 5, 5(2), (2)(b), 6,
20 7, 8, 8(3), 13, 13(2), 15, 15(b), (d), 16, 16(1), (1)(a), (b), (2), 17, 18, 19, 19(2), 21(5),
22, 22(1), (3)(a), 23, 25, 26, 26(2), 27, 27(1), (2), 28, 35, 35(1), 2(a), (b)
Contracts Act 1950, s 75
New Zealand
25 Construction Contracts Act 2002, s 38
Singapore
Building Industry Security of Payment Act (Cap 30B), ss 9, 36
30 United Kingdom
Housing Grants, Construction & Regeneration Act 1996, s 113
Local Democracy, Economic Development and Construction Act 2009, s 142
35 Other references
Chow Kok Fong, Security of Payments and Construction Adjudication (2nd edn)
Ivan Loo and Lam Wai Loon, Construction Adjudication in Malaysia, CCH, p 74
Sundra Rajoo, Bill WSW Davidson and Ir Harbans Singh, "The PAM 2006 Standard
40 Form Building Contract", LexisNexis, 2010
Originating Summons No. WA-24C-57-07/2016

Ivan Loo, Shannon Rajan and Tatvaruban Subramaniam (Skrine) for
plaintiff/respondent
P Gananathan and Ng Yee Chien (Gananathan Loh) for defendant/claimant
Originating Summons No. WA-24C-82-08/2016

P Gananathan and Ng Yee Chien (Gananathan Loh) for plaintiff/claimant
Ivan Loo, Shannon Rajan and Tatvaruban Subramaniam (Skrine) for
defendant/respondent
Judgment received: March 6, 2017 1
Lee Swee Seng J
[1] Terminal Perintis Sdn Bhd ("Terminal Perintis") as employer had entered 5
into a contract with Tan Ngee Hong Construction Sdn Bhd as contractor for the
construction and completion of a project known as:
Cadangan Pembangunan Berstrata Komersial Bercampur, 1 Blok Apartment 10

Servis Dan 1 Blok Hotel 27 Tingkat Yang Mengandungi: 1 Blok Apartment
Servis – Blok A, 2 Tingkat (265 Unit); 1 Blok Hotel – Blok B, 22 Tingkat (303 Unit);
Podium 5 Tingkat Yang Melibatkan: Ruang Tempat Letak Kereta Bertingkat,
Termasuk 2 Tingkat Aras Bawah Tanah, Berserta Aras Kemudahan 1 Tingkat
(Aras Tingkat 3); 19 Lot Ruang Perniagaan Pejabat Pengurusan, Pusat 15
Pengumpulan Sampah Dan 1 Unit Stesen Suis Utama (SSU) Aras Tanah; 1 Unit
Rumah Pengawal Di Atas PTD 166944, Mukim Pulai, Daerah JohorBahru, Johor
Darul Takzim – Pinetree Marina Resort ("Contract" or "Project").
20
[2] The commencement date of the contract was April 1, 2014 and the completion
date was July 31, 2016, for a total construction duration of 28 months. A formal
contract was executed by the parties on December 23, 2014 following the PAM
2006 standard conditions of contract with amendments.
25
[3] Arising out of what the architect perceived to be the contractor's falling
behind time in the schedule of completion, the architect had by letter dated
August 4, 2015 to the contractor ("notice of default") under clause 25 of the
contract, specified the contractor's defaults, namely: 30
i. without reasonable cause, the contractor wholly/substantially

suspended carrying out works at site before completion;
35
ii. the contractor failed to proceed regularly and diligently with the works
at site;
iii. the contractor persistently refused or neglected to comply with

architect's instructions ("AI"); and 40
iv. the contractor failed to comply with assignment and sub-contracting.
[4] The contractor responded to the said notice of default by their letter dated
August 10, 2015 to the architect, disagreeing that it was in default. It further
stated that it would try its "best endeavour to resolve matters and to prevent any
causes to the delay in the progress of works". It further referred to its proposed
mitigation plan dated June 10, 2015 (which included employing additional
manpower and working overtime, purchasing equipment and early awarding of
(and Another Originating Summons)
[2017] 7 AMR Lee Swee Seng J 895
1 subcontractors) and said that all these plans "demonstrate our effort and
commitment toward the completion of project on time ...".
[5] The employer subsequently by a letter dated August 18, 2015 to the
5 contractor ("notice of determination"), exercised its right to determine the
contractor's employment pursuant to clause 25.1 of the contract. The employer
further stated that the contractor must vacate and return the site possession and
it shall pay other person to carry out and complete the works and make any good
10 defects pursuant to clause 25.4. The employer also drew the contractor's
attention to clause 25, which sets out the latter's duties and obligations upon
determination of the contract, and to comply with the provisions.
Problem
15
[6] The contractor as claimant commenced adjudication proceedings
against the employer as respondent ("adjudication proceedings") under the
Construction Industry Payment and Adjudication Act 2012 ("the CIPAA"). On
20 November 11, 2015 the contractor as the unpaid party, served a payment claim on
the employer, as the non-paying party, pursuant to s 5 of the CIPAA. On
November 30, 2015, the employer served its payment response pursuant to s 6 of
the CIPAA.
25 [7] The contractor, in its payment claim, claimed for:
i. Payment for value of works done as certified in interim certificate No. 14

dated July 15, 2015 in the sum of RM2,103,364.69 ("interim certificate
30 No. 14");
ii. Payment for value of works done under progress claim No. 15 submitted
on August 3, 2015 in the sum of RM2,708,618.91 ("progress claim No. 15")
35 iii. The release of the retention sum constituting a percentage of value of
works done in the sum of RM4,577,933.70 ("retention sum"); and
iv. Payment of value of variations carried out constituting works done in the
40 sum of RM385,427.33 ("variation orders").
[8] The employer in its payment response claimed for:
i. Defective works by the contractor in the sum of RM9,562,751.50;
ii. Increase of costs for firefighting subcontract in the sum of RM520,822.01;

and
iii. Extended preliminaries incurred due to the extension of the period of

insurance to account for the contractor's delay in the sum of
RM162,214.84;
iv. The employer also contended that pursuant to clause 25.4(d) of the 1
contract, it was not obliged to make any further payments to the
contractor.
[9] Meanwhile the claimant also commenced arbitration proceedings by serving 5

a notice of arbitration on the respondent on November 11, 2015 ("arbitration
proceedings"). The hearing dates for the arbitration proceedings were on
January 4 to 6, 9 to 13, 16 to 17, 2017. The parties had mutually agreed to adopt the
KLRCA Arbitration Rules, which specifically provides that the arbitral tribunal
10
shall render its final award within three months from the date of the closing of the
final oral or written submissions.
[10] The adjudicator decided as follows in his adjudication decision:

15
i. The employer shall pay the contractor the principal sum of
RM8,227,073.40 ("adjudicated amount");
ii. The employer shall pay the adjudicated amount within four weeks from
the date of the decision in a form of secured financial instruments; 20
iii. The contractor is entitled to impose a further simple interest at 5% per

annum for the amount of the adjudicated amount remaining unpaid after
four weeks from the date of the decision until payment; 25
iv. The employer's set-off claims are dismissed;
v. The employer shall pay the contractor RM91,712.81 as the party and
party costs within four weeks from the date of the decision failing which 30
the contractor is entitled to impose a simple interest of 5% per annum
until payment; and
vi. The employer shall bear in full the cost of the adjudication decision that is 35
RM116,574.38 that is to be taxed according to the parties' pre-agreed
adjudicator fee schedule. The contractor shall be entitled to recover the
sum RM52,287.19, which was paid to the KLRCA during the adjudication
proceedings. 40
[11] In brief, the adjudicator allowed all of the claimant's claims subject to
certain deductions.
Prayers
[12] Terminal Perintis as the respondent in the adjudication had applied in OS

No. WA-24C-57-07/2016 to set-aside or stay the adjudication decision dated June
13, 2016 ("adjudication decision") pursuant to ss 15(b) and (d) and 16(1) and (2) of
the CIPAA respectively.
1 [13] Learned counsel for the respondent had confined his submissions to the
following:
a. the adjudication decision ought to be set-aside because the adjudicator

had acted in excess of jurisdiction; or alternatively;
5
b. the adjudication decision ought to be stayed or the adjudicated amount
ought to be deposited with the Director of the KLRCA.
10 [14] Meanwhile the claimant had applied in OS No. WA-24C-82-08/2016 to

enforce the adjudication decision as a judgment of the court under s 28 of the
CIPAA.
[15] By consent and for good reasons both the originating summonses were
15 heard together as parties agreed that if the adjudication decision is set aside and
there is no stay of the adjudication decision, then the claimant shall be entitled to
enforce the adjudication decision as if it is a judgment of the court.
20 [16] Parties shall be referred to Terminal Perintis and TNH contractors and by
their designation in the adjudication as respondent and claimant or as employer
and contractor respectively.
Principles
25
[17] Learned counsel for the respondent, Mr Ivan Loo, submitted that the
adjudication decision ought to be set-aside because the adjudicator had acted in
excess of his jurisdiction based on the following circumstances:
30
a. The adjudication proceedings and/or decision is a nullity because the
payment claim did not comply with the requirements under s 5 of the
CIPAA and the claimant failed to invoke s 26(2) of the CIPAA ("first
ground");
35
b. The validity of the respondent's determination of the claimant's
employment under the contract was not one which the adjudicator has
jurisdiction to decide as it was not a matter which was referred to
40 adjudication by the claimant in the payment claim or by the respondent
in the payment response ("second ground"); and
c. The adjudicator, after in effect agreeing with the respondent's

submissions that it has no jurisdiction to deal with the issue of validity of
the respondent's determination of the claimant's employment, had in
excess of its jurisdiction made a finding on the said issue to the effect that
the determination was unlawful/wrongful ("third ground").
[18] Section 27(1) of the CIPAA provides:

Subject to subsection (2), the adjudicator's jurisdiction in relation to any dispute is 1

limited to the matter referred to adjudication by the parties pursuant to ss 5 and 6.
[19] The only instance where the adjudicator would have the jurisdiction over a
matter not contained in the payment claim or payment response is if the parties
5
to the adjudication by agreement in writing extend the jurisdiction of the
adjudicator to decide that matter pursuant to s 27(2) of the CIPAA, which is not
the case here. This section provides:
The parties to the adjudication may at any time by agreement in writing extend 10
the jurisdiction of the adjudicator to decide on any other matter not referred to the
adjudicator pursuant to ss 5 and 6.
[20] The core purpose and intent behind the enactment of the CIPAA was to
provide a speedy dispute resolution mechanism for parties to resolve payment 15
disputes in the construction industry. This is also why Parliament saw it fit to
limit the jurisdiction of the adjudicator purely to matters raised in the payment
claim and payment response. In View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd
(and 2 Other Appeals) [2015] AMEJ 1568; [2015] MLJU 695, Dato' Mary Lim J (now 20
JCA) examined s 27 of the CIPAA and held as follows:
[60] Subsection 27(1) limits the adjudicator's jurisdiction to the matters referred to
adjudication pursuant to ss 5 and 6; namely the claims in the payment claim and the 25
responses or defences in the payment response. This limitation is subject to subsection
27(2) which allows the parties to the adjudication to extend that jurisdiction by
written agreement to matters beyond or outside ss 5 and 6. In the absence of such
agreement, the adjudicator's jurisdiction does not extend to or include matters in
the adjudication claim and the adjudication response or even adjudication reply 30
found in ss 9, 10 and 11. It is obvious from subsections 27(1) and (2) that where the
parties feel that the adjudicator's jurisdiction is insufficient to deal with their
particular dispute; the parties can sit down and agree on extending that
jurisdictional cover. In the present case, the parties could have dealt with this 35
through a written agreement amongst themselves. There was no such effort; and
the court is not required to look into the reasons for the lack of such an effort. View
Esteem could easily have brought up these three additional defences, responses or
matters in its payment response; but it chose not, for whatever reason it may have.
40
Having exercised that option, it is not open to View Esteem to now complain.
...
[63] Again, it is easy to appreciate why Parliament has seen it fit to limit the adjudicator's
jurisdiction to only the matter(s) referred to adjudication pursuant to ss 5 and 6 when
determining the dispute. Adjudication under the CIPAA 2012 is both specific and special.
It is specific in that it is intended only for payment disputes under construction contracts.
It is special in that it offers a speedy provisionally binding resolution to that dispute. A
payment dispute exists the moment a claim for payment for work or services
rendered under a construction contract is not paid by the other party, or there is no
response to that claim. In either event, the payment dispute comes into being or it
1 "crystallises". The whole adjudication process that takes place after that, from the
appointment of the adjudicator to the filing of the adjudication claim, the
adjudication response and the adjudication reply are substantially formal
manifestations of the dispute containing greater details of the claim, response or
5 reply, as the case may be of that first payment claim and payment response.
[64] Because adjudication is intended to provide a speedy resolution of that

payment dispute (within the time lines found in s 12, where an adjudication
decision rendered outside the prescribed time lines is void unless extended by the
10 written consent of the parties), the adjudicator cannot be expected to deal with
issues, legal and/or factual, which may still be "evolving" or in the making as the
adjudicator sits down to determine the dispute. Unrestricted arguments may
unnecessarily prolong or even protract adjudication proceedings rendering the
15 whole process impractical, inefficient or unwieldy. There should be certainty in the
issues or matters that any party is expected to face in the adjudication proceedings so that
the rules of fair play can be readily met. That cannot possibly be achieved if issues or
matters are still or yet to be identified."
20 (Emphasis added.)
[21] Justice Dr Hamid Sultan JCA in the Court of Appeal in View Esteem Sdn Bhd
v Bina Puri Holdings Bhd [2016] 6 MLJ 717, also adopts a similar view of s 27 of the
CIPAA. His Lordship stated as follows:
25
[16] Arriving at the CIPAA 2012 adjudication award is a two stage process. Parties
at this stage may settle the matter and if the matter is not settled. The dispute as
borne out in the payment claim and response can only be referred to the adjudicator. This
30 is statutorily a strict requirement (subject only to s 26) as set out in s 27, thereby
making the first stage as important stage in the adjudication process. (Emphasis
added.)
[22] Learned counsel for the claimant, Mr P Gananathan, had no quarrel with the
35 propositions of the law as gleaned from the cases cited above except to highlight
that the facts in the present case are patently different for in the View Esteem case,
the respondent there did not to raise specific issues in its payment response and
then later sought to introduce various new issues and disputes in the
40 adjudication response.
Whether the payment claim served herein is not a valid payment claim in that
it did not comply with the requirements under s 5(2) of the CIPAA
[23] I agree with learned counsel for the claimant that the main thrust of the
respondent's argument is that the payment claim is dependent on the fact of
wrongful determination of the employment of the claimant, which was never
raised in the payment claim. As such, it was argued by the respondent that the
payment claim is not a valid payment claim and the adjudicator had exceeded its
jurisdiction in deciding on the amounts owing under the payment claims.
[24] In particular, learned counsel for the respondent argued that with respect to 1
the claims for progress claim No. 15, the retention sum and variation orders, the
claimant has not set out a valid cause of action as required under s 5(2)(b) of the
CIPAA in that there were insufficient details to identify the cause of action
including the provision in the construction contract to which the payment 5
relates. The claimant, it was argued, should have pleaded the fact of unlawful
termination, before they could found their action in claiming for (i) progress
claim No. 15, (ii) retention sum and (iii) variation orders. It was further argued by
the respondent's counsel that the termination having been effected, under clause 10
25.4(d) there is no obligation for the respondent as employer, to pay until the final
accounts are prepared after the completion of the project.
[25] He further argued that such non-compliance is of a material provision of the

CIPAA such that without a valid payment claim, the appointment of the 15
adjudicator is invalid and that the whole adjudication proceedings and decision
is null and void.
[26] The claims raised by the claimant in the payment claim are: 20
a) non-payment for value of work done as certified under interim certificate
No. 14, relying on clauses 30.1 and 30.2 of PAM 2006;
b) non-payment for value of work done under progress claim No. 15, relying 25
on clauses 30.1 and 30.2 of PAM 2006;
c) non release of retention sum constituting a percentage of the value of work

done, relying on clauses 30.2, 30.5 and 30.6(a) of PAM 2006; and
30
d) non-payment for value of variation carried out constituting work done,
relying on clauses 11.2, 11.5,11.6 and 11.9.
See payment claim dated November 11, 2015 – encl 2 at exh OYN3, pp 63-68.
35
[27] I agree that the starting point in determining what falls within the
jurisdiction of the adjudicator is to first consider what is raised in the payment
claim in the context of s 5 of the CIPAA, which is reproduced herein:
40
5. Payment claim
1) An unpaid party may serve a payment claim on a non-paying party for

payment pursuant to a construction contract.
2) The payment claim shall be in writing and shall include –
a) The amount claimed and due date for payment of the amount
claimed;
b) Details to identify the cause of action including the provision in the

construction contract to which the payment relates;
1 c) Description of the work or services to which the payment relates; and
d) A statement that it is made under this Act.
[28] Whilst it is true that the CIPAA does not define a "payment claim", its
5 meaning is implicit in s 4 of the CIPAA which does provide what "payment"
means, which is essentially a claim for payment for work done or services
rendered under the express terms of a construction contract. I agree that the
entitlement to be paid on the wording of the CIPAA on standard form contract is
10 an entitlement that accrues on the date when an interim certificate is due for
payment or on the date where the certifier should have issued the relevant
certificate pursuant to the timeline prescribed in the terms of these specific
contracts.
15 [29] The question is whether each and every one of the four (4) claims are claims
that qualify under the CIPAA as payment due for work carried out under the
express terms of the construction contract.
20 [30] The next step would be to consider whether the payment claim satisfies the
requirement under s 5(2) of the CIPAA. Each of the four (4) claims shall now be
examined separately to see whether it has complied with s 5(2) of the CIPAA.
Work done as certified in interim certificate No. 14

25
[31] I agree that the amount claimed and the due date for payment are stipulated
in the payment claim. The cause of action relates to provisions in the contract and
it becomes apparent that the respondent did not honour the certified sum within
30 the due date for payment of August 15, 2015. The description of the works to
which the payment relates and the fact that the claim is made under the CIPAA
is stipulated in the payment claim. I further agree with the claimant that this
claim is not dependent on wrongful determination of the employment of the
35 claimant.
Work done as claimed under progress claim No. 15
[32] Here too, the amount claimed and the due date for payment are stipulated
40 in the payment claim. The cause of action relates to provisions in the contract and
it becomes apparent that the claim (if certified) would have been due for
payment on September 23, 2015. The description of the works to which the
payment relates and the fact that the claim is made under the CIPAA is stipulated
in the payment claim. This claim is not dependent on wrongful determination of
the employment of the claimant.
Non-release of retention sum
[33] I agree with the claimant that the retention sum is the value of work done
under the construction contract, save that a percentage of the total value of work
was retained under the express provisions of the contract. The fact that the
employer may retain these amounts does not change the character of what is 1
being claimed, i.e. the value of work done as certified under the certification
provision. Refer Lee Kam Chun v Syarikat Kukuh Maju Sdn Bhd [1988] 1 MLJ 444 at
448D-E.
5
[34] The claimant had taken the position that the amount in the retention sum is
due by reference to the due date of payment of August 18, 2015, which is the date
on which the claimant ceased to be under the employment of the
respondent/employer. The claimant/contractor seeks release of the retention
sum, it being trust monies, which can no longer be held by the employer. I agree 10
that this claim is not dependent on wrongful determination of the employment of
the claimant. Refer Qimonda Malaysia Sdn Bhd (Dalam Likuidasi) (Dalam Jagaan
Likuidator-Likuidator Dato' Gan Ah Tee Dan Mok Chew Yin) v Sediabena Sdn Bhd &
Anor [2011] 2 AMCR 784 at 792; [2012] 3 MLJ 422 at 432 (paragraph 19). 15
Value of variations carried out
[35] I agree that the amount claimed is stipulated in the payment claim, as is the
20
due date for payment. The cause of action relates to provisions in the contract and
it becomes apparent that the claim (if submitted and certified) would have been
due for payment. The claimant did not have an opportunity to make the claim or
have it certified and therefore, relies on the due date for payment of August 18,
2015, which is the date on which the claimant ceased to be under the employment 25
of the respondent/employer. The description of the works to which the payment
relates and the fact that the claim is made under the CIPAA are stipulated in the
payment claim. This claim is not dependent on wrongful determination of the
employment of the claimant. 30
[36] For all the four claims, the claimant when making the claim, took the
position that the claim is due and no dispute arises until the claim is rejected or
not admitted by the respondent/employer by issuance of a payment response 35
under s 6 of the CIPAA.
[37] The claimant need not rely on any other provision in the contract to come
under what is a valid payment claim for which it contends that payment is due
under the contract. Neither is the claimant required to anticipate the kind of 40
defence that the respondent would raise in the payment response.
[38] If one were to look from the perspective of the payment claim being the
pleadings, the requirements of s 5 have been met. In a litigation on a contractual
claim, the plaintiff only needs to state the material fact of what work was done or
services rendered, what payment is due and when it is due and the fact of the
breach. If indeed no cause of action has arisen, the court before whom the claim
is brought, would dismiss the claim. It is certainly not a case where the court has
no jurisdiction to hear the matter.
1 [39] Transposing this back to the adjudication scenario, the adjudicator has the
jurisdiction to determine whether the payment claim is a valid payment claim,
where prima facie, it has all the elements of a payment claim in that it has stated
what amount is due and when it was due, the cause of action and the provisions
5 of the contract to which the payment relates, the nature of the work done and the
fact that the claim is made under the CIPAA. It is a finding of mixed question of
fact and law. So long as the right question of law is asked, this court would not
interfere in a setting aside application that the wrong answer was given. As
10 stated many a time, this is not an appeal where the court would be permitted to
assess the merits of the claim.
[40] The respondent is left with options under s 6 of the CIPAA, namely to either
admit the payment claim or to dispute wholly or partly the payment claim and to
15 "serve a payment response in writing on the unpaid party stating the amount
disputed and the reason for the dispute". If the plaintiff fails to respond to the
payment claim, it is deemed to have disputed the entire payment claim.
20 [41] The question then is whether the decision on whether there is a valid
payment claim is a question that goes towards jurisdiction in that it questions the
very validity of the appointment of the adjudicator or whether it is for the
adjudicator to decide as a matter of fact whether there was a valid cause of action
and that at best would go to the validity of the adjudication decision only.
25
[42] Courts in Australia and Singapore have wrestled with the issue as can be
seen from the cases discussed below.
30 [43] Learned counsel for the respondent referred to the case of In Brodyn Pty Ltd
v Davenport & Anor [2004] NSWCA 394, which involves a subcontract for
concreting work for 12 townhouses based on the standard form AS4303-1995
General Conditions of Subcontract. Eight months into the subcontract, the main
contractor served a notice on the subcontractor alleging that the latter had
35
repudiated the contract and purporting to accept the same. On June 27, 2003, the
subcontractor served a payment claim under the NSW Building and
Construction Industry Security of Payment Act 1999 ("the NSW SOP Act") and
the main contractor responded by serving a payment schedule. On August 28,
40 2003 and September 28, 2003, the subcontractor served further documents stated
to be payment claims under the NSW SOP Act. On September 29, 2003, the main
contractor served a further payment schedule. On October 2, 2003, the
subcontractor made an adjudication application under the NSW SOP Act. On
October 16, 2003, the adjudicator made his determination. The main contractor
contended that the payment claim was not a valid payment claim under the NSW
SOP Act. The trial judge noted that if the assertion was correct, then the
adjudicator mistakenly exercised a power which he did not have but refused the
relief.
[44] On appeal, Hodgson JA opined that before a document purporting to an

adjudicator's determination can be enforced, it must satisfy certain essential
conditions laid down by the said Act, which defines the validity of the 1
determination. Non-compliance with these conditions will render the purported
adjudicator's determination void. The judge identified the basic and essential
requirements as follows:
5
a. the existence of a construction contract between the claimant and the
respondent, to which the Act applies (ss 7 and 8);
b. the service by the claimant on the respondent of a payment claim (s 13);

10
c. the making of an adjudication application by the claimant to an
authorised nominating authority (s 17);
d. the reference of the application to an eligible adjudicator, who accepts the

15
application (ss 18 and 19); and
e. the determination by the adjudicator of this application (ss 19(2) and

21(5)), by determining the amount of the progress payment, the date on
which it becomes or became due and the rate of interest payable (s 22(1)) 20
and the issue of a determination in writing (s 22(3)(a)).
Hodgson JA went on to qualify this proposition by stating that the list may not be
exhaustive. 25
[45] The relevant sections contain more detailed requirements, for example:
s 13(2) as to the content of payment claims; s 17 as to the time when an
adjudication application can be made and as to its contents; s 21 as to the time
when an adjudication application may be determined; and s 22 as to the matters 30
to be considered by the adjudicator and the provision of reasons. A question
arises whether any non-compliance with any of these detailed requirements has
the effect that a purported adjudicator's determination is void. Hodgson JA
thought that it was preferable to ask whether a requirement being considered 35
was intended by the legislature to be an essential pre-condition for the existence
of an adjudicator's determination.
[46] The judge opined that what was intended to be essential was compliance 40
with the basic requirements, a bona fide attempt by the adjudicator to exercise
the relevant power relating to the subject matter of the legislation and no
substantial denial of the measure of natural justice. If the basic requirements are
not complied with, or if a purported determination by the adjudicator is not such
a bona fide attempt, or if there is a substantial denial of this measure of natural
justice, then a purported determination by the adjudicator will be void because
there will then not be satisfaction of requirements that the legislature has
indicated as essential to the existence of a determination.
1 [47] The court therefore held that once the basic and essential requirements were
satisfied, the question as to whether the document complies in all respects with
the requirements of the NSW SOP Act are generally for the adjudicator to decide.
[48] I do not think the position under our the CIPAA is materially different.
5
Looking at the grounds for setting aside an adjudication decision, one can say
that a court of law would uphold the decision unless it can be shown that it was
procured through fraud or bribery, or that there was a breach of natural justice or
that the adjudicator was not independent or impartial or that the adjudicator had
10 acted in excess of jurisdiction or that the decision was not in compliance with the
provisions of the CIPAA.
[49] Learned counsel for the respondent then referred to the case of Napean
15 Engineering Pty Ltd v Total Process Services Pty Ltd (In Liquidation) [2005] NSWCA
409, where the subcontractor (Total) was engaged as a subcontractor to the
contractor (Napean) for the supply and installation of pipes for a large
construction project. When a dispute arose, Total served on Napean a document
20 purporting to be a payment claim under the SOP Act. No payment schedule was
served by Napean. During the course of the adjudication proceedings, Napean
claimed that the document served by Total was not a payment claim within the
meaning of the SOP Act as it failed to identify the construction work to which the
progress payment related. Hodgson JA in the Court of Appeal, after having
25
considered some cases post Brodyn said as follows:
That is, I do not think a payment claim can be treated as a nullity for failure to
comply with s 13(2)(a) of the Act, unless the failure is patent on its face; and this
30 will not be the case if the claim purports in a reasonably way to identify the
particular work in respect of which the claim is made.
[50] Learned counsel for the respondent then submitted that, the corollary of this
proposition is that a payment claim can be treated as a nullity if it does not on its
35 face reasonably purport to comply with s 13(2)(a) of the NSW SOP Act. I can
agree with that proposition. Simply put, if the payment claim on the face of it,
complies with the requirements of our s 5(2)(a) to (d) of the CIPAA, this court
would not interfere with the decision of adjudicator on ground that he should
40 have decided that there was no valid payment claim on the merits or on the
interpretation of the law.
[51] The following analysis in Pacific GNRL Securities v Soliman and Sons [2006]
NSWSC 13 is helpful. The New South Wales Supreme Court had to decide on
whether non-compliance with some provisions of their Act with respect to the
payment claim makes the adjudication determination void. It was observed as
follows:
Is the determination void for insufficient specificity in the payment claim?

[44] The owners submit that there was non-compliance with a basic and essential 1
requirement prescribed in the Act for there to be a valid determination, in that the
payment claim did not sufficiently specify the construction work in respect of
which it was made.
[45] Although precision and particularity is required to a degree sufficient to apprise the 5
parties of the real issues in dispute, regard may be had to the familiarity which the parties
will have with construction industry practices and the formality and particularity of a
pleading is not expected (Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC
1140 at paragraph [76]). A payment claim is not a nullity for non-compliance with 10
s 13(2)(a), at least unless the non-compliance is patent on the face of the claim (Napean
Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) [2005] NSWCA 409 at
paragraphs [34]-[39] (Hodgson JA), [46]-[48] (Santow JA)). Moreover, compliance with
s 13(2) is not a basic requirement fundamental to the validity of an adjudication, but one 15
of the "more detailed requirements", exact compliance with which is not essential to a valid
determination (Brodyn, [54]-[55]).
[46] In fact, it is plain that the "period" referred to in the payment claim is the
period since the last progress claim (of June 2004), and the claim is apportioned 20
across several heads showing the percentage complete under each. Mr Dixon
conceded in cross-examination that he understood precisely what was being
claimed.
[47] It follows that the determination is not void for insufficient specificity in the 25
payment claim, since it sufficiently specified the construction work in respect of
which it was made, and even if it did not, the sufficiency of a payment claim is not
a basic and essential requirement non-compliance with which results in invalidity, but a
matter within the jurisdiction of the adjudicator to determine, rightly or wrongly. 30
(Emphasis added.)
[52] In other words, if the complaint is about the contents of the payment claim
as in whether it shows a cause of action and the provisions of the contract relating 35
to the claim, that is a matter that the adjudicator has jurisdiction to decide, rightly
or wrongly. For this court to interfere with his finding on the validity of the
payment claim from that perspective would be to descend into the merits of his
findings, which is not permitted by s 15 of the CIPAA in a setting aside 40
application. This is not a case where the complaint of the validity of the payment
claim affects the validity of his appointment as adjudicator such as in a case
where the payment claim was not served at all.
[53] The position on the kind of objection to a payment claim that goes to a
jurisdiction of an adjudicator was further clarified and crystallised in Brookhollow
Pty Ltd v R&R Consultants Pty Ltd & Anor [2006] NSWSC 1, where Palmer J stated
that the judgment in Napean had changed somewhat the law as stated in Brodyn.
In paragraph 41 of his judgment, the learned judge said as follows:
1 The law as to compliance with s 13(2) of the Act as it emerges from Brodyn and
Napean, may be summarised thus:
(i) a payment claim which is never served on the respondent under s 13(1) of
the Act cannot set in motion the machinery of Pt 3 so that any purported
5
adjudication of that payment and any other enforcement procedures in Pt 3
founded upon that payment claim must be a nullity;
(ii) there are some non-compliances with the requirements of s 13(2) of the Act
10 which will result in a nullity of a payment claim for all purposes under the
Act; there are other non-compliances which will not produce that result;
(iii) a payment claim which does not, on its face, purport in a reasonable way to:
15 – identify the construction work to which the claim relates; or
– indicate the amount claimed; or
– state that it is made under the Act,

20
fails to comply with an essential and mandatory requirement of s 13(2) so
that it is a nullity for the purposes of the Act;
(iv) a payment claim which, on its face, purports reasonably to comply with the
25 requirements of s 13(2) will not be a nullity for the purposes of engaging the
adjudication and enforcement procedures of Pt 3 of the Act;
(v) in the case of a payment claim which purports reasonably on its face to
comply with s 13(2):
30
– if the respondent wishes to object that it does not in fact comply so that it is
a nullity for the purposes of the Act, the respondent must serve a payment
schedule under s 14(4) and an adjudication response under s 20, in which
35 that objection is taken;
– if the respondent does not serve a payment schedule within the time
limited under the Act and the claimant ultimately seeks the entry of
judgment under s 15(4), the respondent may not resist summary
40 judgment on the ground that the payment claim was not a valid
payment claim by reason of non-compliance with the requirements
of s 13: the respondent has only one chance to take that objection,
namely in a timeously served payment schedule;
(vi) in the case of a payment claim which was never served on the respondent or
which does not purport reasonably on its face to comply with the
requirements of s 13(2):
– the payment claim is a nullity for the purposes of the Act;
– an adjudication founded upon that payment claim is a nullity,
regardless of whether the objection to the validity of the payment
claim was taken in a timeously served payment schedule;
– an application under s 15(4) for judgment for the statutory debt 1

created by s 14(4) may be defeated on the ground that there was no
payment claim in existence for the purposes of s 15(1)(b).
(Emphasis added.)
5
[54] In the present case, the respondent did not say in its payment response that
the claimant's payment claim is invalid or defective or that it is not in compliance
with a basic or essential requirement in failing to provide details as to its cause of
action. In fact the respondent was able to set out five pages of payment response 10
consisting of 23 paragraphs. In paragraph 8 of the payment response, the
respondent/employer stated as follows:
As a result of the Terminal Perintis' determination of TNHC's employment

pursuant to clause 25.1, Terminal Perintis contends that pursuant to clause 15
25.4(d), it is not bound by the (sic) any contractual provision to make further
payment to the TNHC including payments, which have been certified but not yet
paid when the TNHC's employment was determined. TNHC is therefore not
obliged to make any payment for all the claims in the payment claim. 20
[55] That was the basis of the respondent/employer disputing the whole of the
claimant's payment claim. There was no objection raised that the payment claim
does not comply with the requirements of s 5(2)(b) of the CIPAA.
25
[56] In Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248, Finkelstein J in the
Federal Court of Australia said in relation to s 14 of the Building and
Construction Industry Security of Payment Act 2002 (Vic), which is equivalent to
s 13 of the New South Wales legislation, as follows: 30
[10] It is necessary to decide whether the invoice meets the requirements of s 14.
The test is an objective one; that is, it must be clear from the terms of the document
that it contains the required information: Walter Construction Group Ltd v CPL
(Surry Hills) Pty Ltd [2003] NSWSC 266 at paragraph [82]. But the terms must be 35
read in context. Payment claims are usually given and received by parties
experienced in the building industry who are familiar with the particular
construction contract, the history of the project and any issues which may have
arisen between them regarding payment. Those matters are part of the context: 40
Multiplex Constructions [2003] NSWSC 1140 at paragraph [76].
[11] The manner in which compliance with s 14 is tested is not overly demanding: Leighton
Contractors Pty Ltd v Campbelltown Catholic Club Ltd [2003] NSWSC 1103 at
paragraph [54] citing Hawkins Construction (Aust) Pty Ltd v Mac's Industrial
Pipework Pty Ltd [2002] NSWCA 136 at paragraph [20] ("[T]he requirements for a
payment claim] should not be approached in an unduly technical manner ... As the words
are used in relation to events occurring in the construction industry, they should be applied
in a common sense practical manner"); Multiplex Constructions [2003] NSWSC 1140 at
paragraph [76] ("[A] payment claim and a payment schedule must be produced
1 quickly; much that is contained therein in an abbreviated form which would be

meaningless to the uninformed reader will be understood readily by the parties
themselves"); Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA Pty
Ltd) [2007] QSC 333 at paragraph [20] ("The Act emphasises speed and
5 informality. Accordingly one should not approach the question whether a document
satisfies the description of a payment schedule (or payment claim for that matter) from an
unduly critical viewpoint").
[12] Nonetheless a payment claim must be sufficiently detailed to enable the

10 principal to understand the basis of the claim. If a reasonable principal is unable to
ascertain with sufficient certainty the work to which the claim relates, he will not
be able to provide a meaningful payment schedule. That is to say, a payment claim
must put the principal in a position where he is able to decide whether to accept or reject the
15 claim and, if the principal opts for the latter, to respond appropriately in a payment
schedule: Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) (2005) 64
NSWLR 462 at 477; John Holland Pty Ltd v Cardno MBK (NSW) Pty Ltd [2004]
NSWSC 258 at paragraphs [18]-[21]. That is not an unreasonable price to pay to
obtain the benefits of the statute.
20
[57] It cannot be gainsaid that in the present case, the respondent had no
problem responding to the claimant's payment claim, giving reasons why it is
disputing the whole of the claim. The respondent, had been able through their
25 solicitors, to respond astutely and appropriately. The court should not exact a
stricter requirement of pleadings on adjudication than if it were a court
proceeding. One should not be unduly critical or technical to the point of
exacting an overly demanding treatment of a payment claim when it comes to
30 whether it has met the requirements of s 5(2)(b) of the CIPAA.
[58] Moreover the payment claim is prepared by the claimant itself and not
served through solicitors. Section 8(3) further allows a party in the adjudication
proceedings to represent himself or by appointing his representative. The intent
35 is to save costs and not to make it unduly technical or convoluted. As a payment
claim it has conformed with the form and format prescribed under Form 1 of the
KLRCA Adjudication Rules and Procedure.
40 [59] No doubt the expression of a "cause of action" is used in s 5(2)(b) of the

CIPAA but that is nothing more than saying that the claimant must set out the
basis of their claim in contract.
[60] In fact learned counsel for the respondent/employer, Mr Ivan Loo, in his
book Construction Adjudication in Malaysia, CCH a Wolters Kluwer Business, with
his co-author Lam Wai Loon at p 74 have taken this approach to making a
payment claim necessary for triggering an adjudication process:
the amount claimed and due date for payment of the amount claimed
4.26 The unpaid party is required to state in his payment claim the amount
claimed and the due date for payment of the amount claimed. These requirements
necessarily imply that every construction contract should provide an adequate 1

mechanism for determining what, when and how payments are due under the
construction contract. In the absence of such terms, or if the contract does not
provide an adequate mechanism for determining what, when and how payments
are due under the construction contract, the default provisions on the terms of 5
payment provided by section 36(1) of the CIPA Act 2012 would be imported into
the construction contract.
4.27 The unpaid party is only required to state in the payment claim the amount claimed
to be due. It does not matter whether the amount claimed may not in law be due. The right 10
of an unpaid party to serve a valid payment claim is predicated on an amount being
claimed, and not on there being an actual entitlement to the amount so claimed.
Therefore, the fact that a payment claim also includes amounts which the claimant
is not entitled to claim under the construction contract does not affect the validity 15
of the payment claim. The unpaid party's entitlement will be adjudicated upon
and determined by the adjudicator in the adjudication proceedings. The 'due date'
for payment of the amount claimed refers to the date by which payment should be
made. Thus, if the construction contract provides that payment of a progress
payment certificate should be made within 30 days from the date of the 20
certification, then the due date for payment of a progress payment certificate is the
30th day from the date of the certification of the progress payment certificate.
However, the fact that a payment claim also includes amounts which the unpaid
party is not entitled to claim does not affect the validity of the payment claim. 25
(Emphasis added.)
[61] If the payment claim were to be a statement of claim, I do not think that the
claimant would be able to strike out the claim on the ground that there is no valid 30
cause of action pleaded. In fact the test would be that the court assumes the
pleadings of facts to be true and based on such a plea, would there be a cause of
action. I do not think we should exact a stiffer requirement of adjudicators when
it comes to determining whether there was a valid payment claim for the 35
adjudicator to assume jurisdiction. Beyond that, it becomes a question of
evidence and finding of fact or a mixed question of fact and law which this court
has no business to interfere unless the grounds for setting aside are made out
under s 15 of the CIPAA. Whether or not the claim could succeed would be for 40
trial in a case of litigation in as much as in an adjudication, it would be for the
adjudicator to decide.
[62] I would hold that the payment claim served herein is a valid payment claim
in that prima facie, it purports reasonably to have complied with the
requirements of s 5(2) of the CIPAA.
1 Whether the issue of a valid payment claim served herein goes to jurisdiction
of the adjudicator as in the validity of his appointment and his competence to
adjudicate
5 [63] Learned counsel for the respondent pointed out that, in Chase Osyter Bar v
Hamo Industries [2010] NSWCA 190, the Court of Appeal sounded a general
retreat from its own decision in Brodyn. I agree that the basis for this retreat was
a reconsideration of the distinction between jurisdictional and non- jurisdictional
error by the Australian High Court in Kirk v IRC [2010] HCA 1. The majority of the
10
High Court considered that there were three categories of jurisdictional error:
a. the mistaken denial or assertion of jurisdiction, or misapprehension or

disregard of the nature of or limits on functions and powers;
15
b. making a decision of a kind that lies, wholly or partly, outside the limits
on functions and powers as provided in the relevant statutory context;
and
20 c. proceeding in the absence of a jurisdictional fact; disregarding something
that the relevant statute requires to be considered as a condition of
jurisdiction, or considering something required to be ignored; and
misconstruction of the statute leading to misconception of functions.
25
[64] It was submitted that the distinction between jurisdictional and
non-jurisdictional error is considered to be at odds with the line of reasoning in
Brodyn, particularly that part of the judgment where the narrower formulation of
30 "basic and essential conditions" was preferred over the more general threshold of
"jurisdictional error". There is a sense in which on our jurisdiction, we need to
read this distinction with caution, as in those jurisdictions in Australia, setting
aside is by way of judicial review.
35 [65] In Chase Oyster, the parties entered into a contract for fit-out work. The
contractor served a payment claim under the NSW SOP Act. The owner did not
provide a payment schedule in response. The contractor did not serve notice of
adjudication until after the expiry of the 20-day period prescribed under
40 s 17(2)(a) of the NSW SOP Act but nonetheless proceeded to make an
adjudication application. The adjudicator decided that the contractor had served
the notice within the prescribed period. The owner argued that the adjudicator's
jurisdiction was founded on compliance with s 17(2)(a) and as it had not been
complied, it amounted to a jurisdictional error. The NSW Court of Appeal held
that the adjudicator had incorrectly concluded that the notice was served in
compliance with s 17(2)(a) and that the determination should be quashed for
jurisdictional error.
[66] Spigelman CJ in analysing Brodyn held that Hodgson JA's comments in

rejecting the applicability of the distinction between "jurisdictional" and
"non-jurisdictional" error, on the basis that it "cast the net too widely" should be
re-considered following the Kirk's decision, which represented the centre piece of 1
Australian administrative law.
[67] Spigelman CJ held that it was not possible to point to "a single test or theory
or logical process by which the distinction between jurisdictional or
5
non-jurisdictional error can be determined". The judge however agreed with the
statement of principle in the case of Project Blue Sky v Australian Broadcasting
Authority [1998] HCA 28, that:
A better test for determining the issue of validity is to ask whether it was a 10
purpose of the legislation that an act done in breach of the provision should be
invalid. This has been preferred approach of courts in this country in recent years,
particularly in NSW. In determining the question of purpose, regard must be had to
"language of the relevant provision and the scope and object of the whole statute". 15
(Emphasis added.)
[68] Spigelman CJ in Chase Oyster further observed as follows with respect to the
objectives of the NSW SOP Act and the need to comply with the strict statutory
provision with respect to activating the adjudication process: 20
[207] The Security of Payment Act operates to alter, in a fundamental way, the
incidence of the risk of insolvency during the life of a construction contract. As
Keane JA said, of the not dissimilar Queensland statute, the Building and
25
Construction Industry Payments Act 2004 (Qld), in RJ Neller Building Pty Ltd v
Ainsworth [2009] 1 Qd R 390; [2008] QCA 397 at paragraph [40], the statute "seeks
to preserve the cash flow to a builder notwithstanding the risk that the builder
might ultimately be required to refund the cash in circumstances where the
builder's … inability to repay could be expected to eventuate". It followed, his 30
Honour said, that the risk of inability to repay, in the event of successful action by
the other party, must be regarded as one that the legislature has assigned to that
other party. The same is true of the regime established by the Security of Payment
Act. 35
[208] Further, the Security of Payment Act operates in a way that has been
described as "rough and ready" or, less kindly, as "Draconian". It imposes a
mandatory regime regardless of the parties' contract: s 34. It provides extremely
abbreviated time frames for the exchange of payment claims, payment schedules, 40
adjudication applications and adjudication responses. It provides a very limited
time for adjudicators to make their decisions on what, experience shows, are often
extremely complex claims involving very substantial volumes of documents: see,
for example, my decision in Laing O'Rourke Australia Construction v H&M
Engineering and Construction [2010] NSWSC 818 at paragraph [8].
[209] The Security of Payment Act gives very valuable, and commercially
important, advantages to builders and subcontractors. At each stage of the regime
for enforcement of the statutory right to progress payments, the Security of
Payment Act lays down clear specifications of time and other requirements to be
observed. It is not difficult to understand that the availability of those rights should
1 depend on strict observance of the statutory requirements that are involved in their
creation.
…
5 [211] The language of s 17(2) is clear. Where there has been no payment schedule
and no payment, an adjudication application "cannot be made unless" the
requisite notice is given within the specified time. The words "cannot be made"
suggest strongly that, in the absence of notice, there is no right to make an
10 application.
[69] It can be appreciated that statutory adjudication, being a creature of statute,

there must be strict compliance with respect to activating the adjudication
proceedings. However, not every non-compliance goes towards jurisdiction and
15 one must look at the legislative intent.
[70] In the application of our CIPAA, we are free from the shackles of the
language of administrative law and judicial review. The word "jurisdiction" is
20 used in s 15(d) as in the adjudicator having acted in "excess of his jurisdiction" as
a ground for setting aside an adjudication decision. It is also used in s 27(1) with
respect to an adjudicator's jurisdiction being limited to the matters raised in the
payment claim and the payment response. Then there is a reference to it in s 27(2)
with respect to extending his jurisdiction by way of agreement in writing to deal
25
with matters not specifically raised in the payment claim and payment response.
Finally there is the reference to a "jurisdictional" challenge, which when raised,
does not prevent the adjudicator from proceeding and completing the
adjudication without prejudice to the rights of any party to set it aside under s 15
30 or to oppose its enforcement under s 28.
[71] There are many senses in which the word "jurisdiction" may be understood.
We need only to differentiate between core jurisdiction, competence jurisdiction
35 and contingent jurisdiction.
[72] Core jurisdiction would be the question of whether the subject matter of the
dispute is one which the Act has conferred on the adjudicator. Thus if a contract
is not a construction contract, but a shipping or mining contract or a contract for
40
legal fees with respect to advice given in construction contract, or that the
contract is with respect to construction of a dwelling house for a natural person,
then this court will interfere if the adjudicator got it wrong. It is a case where the
adjudicator has no jurisdiction to begin with. So too if the construction contract is
carried out wholly outside Malaysia.
[73] If it is a question of the competence of the adjudicator as in he has not been

properly appointed in that what purported to be a payment claim, is not on the
face of it a payment claim or that the payment claim was not served or that it was
not expressly stated as a claim made under the CIPAA, then this court would be
at liberty to set aside the adjudication decision on ground of excess of
jurisdiction. This is not only because the adjudicator cannot decide on his own
competence or capacity to adjudicate when the very validity of his appointment 1

is questioned but also that it is part of the legislative intent that if there is
non-compliance with a basic and essential requirement of the CIPAA with
respect to a payment claim under s 5, then the adjudication proceedings and the
decision made would be a nullity. 5
[74] In a case of contingent jurisdiction, it would be a case where for there to be
jurisdiction, there must be further compliance with the requirements of the Act as
in that the dispute must be one falling within the matters raised in the payment
claim and the payment response as provided for under s 27(1) of the CIPAA. In 10
that example the word "jurisdiction" is used in the sense of the scope of the
dispute that is before the adjudicator for decision. So for example an adjudicator
may not be able to decide on the defence of set-off arising out of costs of rectifying
defective works if this has not been raised in the payment response. If he so 15
decides, then this court may set it aside as been made in excess of jurisdiction.
[75] Issues as to whether there is a valid cause of action, does not go towards
jurisdiction but rather to the merits of the claim which in our system of statutory 20
adjudication, is not a matter for the court to interfere unless the grounds under
s 15 of the CIPAA apply. So long as the cause of action disclosed in the payment
claim complies with the outward requirement, it is then for the adjudicator to
descend into the merits of the claim and to decide whether there is a complete
25
cause of action or for some reasons, the cause of action has been postponed until
for example there is a final account prepared after the completion of the project.
[76] The question of the lack of a proper cause of action has nothing to do with
the validity of the adjudicator's appointment as in his competence to hear the 30
dispute but at most, it has to do with the exercise of his jurisdiction with respect
to the validity of his decision.
[77] The Singapore Court of Appeal in Lee Wee Lick Terrence (alias Li Weili Terence)
35
v Chua Say Eng (formerly trading as Weng Fatt Construction Engineering) (and
Another Appeal) [2013] 1 SLR 401, sought to reconcile the seeming contradiction
between the position taken in Chip Hup Hup Kee Construction Pte Ltd v Ssangyong
Engineering & Construction Co Ltd [2010] 1 SLR 658, SEF Construction Pte Ltd v Skoy
Connected Pte Ltd [2010] 1 SLR 733 and AM Associates (Singapore) Pte Ltd v Laguna 40
National Golf and Country Club Ltd [2009] SGHC 260, all decided by Judith Prakash
J on the one hand and that of Sungdo Engineering & Construction (S) Pte Ltd v Italcor
Pte Ltd [2010] 3 SLR 459, by Lee Seiu Kin J on the other.
[78] In Chip Hup Hup Kee's case, the respondent argued that the right to
adjudication under the Singapore Building Industry Security of Payment Act
(Cap 30B) ("the SSOP Act") would only arise when a claimant serves a proper
payment claim on the respondent. It was further argued that there must be strict
compliance with the SSOP Act with respect to the time of service of the payment
claim as well as the form and contents of the payment claim. Judith Prakash J (as
she then was) disagreed and considered that the adjudicator's jurisdiction "could
1 not depend on such adventitious elements" as to whether the claimant had followed
the requirements of the SSOP Act in connection with the form and content of the
payment claim and the time at which it had to be served or not. Judith Prakash J
ruled as follows:
5
[T]he adjudicator's jurisdiction arose from his appointment by an authorised
nominating body under s 14(1) of the SOP Act and from his acceptance of such
appointment. Whether the payment claim was in proper order or not would not
have an impact on the adjudicator's jurisdiction, though of course if it was not in
10 order, the adjudicator would be able to throw out the claim on that basis. Once an
appointment had been made and confirmed to the parties by the authorised
nominating body under s 14(3), jurisdiction would have been conferred on the
adjudicator in relation to that particular adjudication application.
15
[79] The position is no different from our ss 22 and 23 of our CIPAA with respect
to the appointment of an adjudicator by agreement of the parties and that by
KLRCA and the adjudicators's acceptance of his appointment. The adjudicator
has jurisdiction to hear the dispute as in he is competent and has the capacity to
20 hear the dispute. The scope of his jurisdiction is to decide on matters specifically
referred to him as provided for in s 27(1) under the payment claim and the
payment response.
25 [80] The judge further agreed with the views expressed by Nicholas J in Parist
Holdings Pty Ltd v Wt Partnership Australia Pty Ltd [2003] NSWSC 365 on the
operation of the NSW SOP Act:
[56] Similarly, under our legislation, the jurisdiction of an adjudicator stems from his
30 appointment. It does not stem from a properly completed and served payment claim. The
powers and functions of the adjudicator come from s 16 of the SOP Act and not
from any action on the part of the claimant. The respondent's argument in respect
of the adjudicator's jurisdiction was analogous to an argument that the High
35 Court's jurisdiction to hear any particular dispute depends on whether the writ of
summons or other originating process is in proper form when in fact the court's
jurisdiction comes from the provisions of the SCJA or other relevant legislation,
depending on the nature of the proceedings.
40 [81] A different approach appears to be taken in the case of Sungdo Engineering &
Construction (S) Pte Ltd v Italcor Pte Ltd [2010] 3 SLR 459 where Lee Seiu Kin J held
that a court may review an adjudicator's decision on whether a document
properly constitutes a payment claim under the Act or whether a payment claim
was proper. Lee Seiu Kin J decided that the one-page claim letter was not a
payment claim under the SSOP Act even though (a) the document contained all
the particulars required by the relevant provisions of the SSOP Act and the SOP
Regulations and (b) it was accompanied by all the required enclosures. He held
that for any document to amount to a payment claim, it must comply with the
requirements for a payment claim as prescribed under the SSOP Act.
[82] Clearly Justice Lee Seiu Kin was referring to a payment claim that on the 1
face of it, does not comply with the requirements of a payment claim in that it was
not expressed to be made under the CIPAA or that it was not served at all. In such
a case, the appointment of the adjudicator would be invalid. It is a case where
there has been a failure to comply with the strict requirement of the Act with 5
respect to activating the adjudication proceedings.
[83] The Court of Appeal in Lee Wee Lick Terence (supra) reconciled it this way:
[30] ... If there is no payment claim or if a payment claim is not served on the 10
respondent, then the power of the [authorised nominating body] to nominate an
adjudicator would not have arisen, and an appointment made in such
circumstances would not be valid. The power of nomination under s 14 (1) of the
Act is predicated on the existence of a payment claim and the service thereof on 15
the respondent. An acceptance of an invalid nomination would not clothe
acceptor with the office of adjudicator. It is in this sense that an adjudicator
appointed in such circumstances is said to have no jurisdiction in the matter
because he has not been validly appointed under the Act. Any issue arising in
relation to the validity of the appointment of the adjudicator is a jurisdictional 20
issue which must be reviewable by the court. This was the kind of issue that Lee J
was concerned with in Sungdo.
[31] However, we do not think that this was the same kind of jurisdictional issue 25
that Prakash J had in mind when she held in Chip Hup Hup Kee ([14] supra) that
whether the payment claim was in proper order or not would not have an impact
on the adjudicator's jurisdiction, as she also held that the court's power of review
should be restricted to supervising the appointment of adjudicators, i.e., the
validity or otherwise of an appointment was subject to review by the court. What 30
she had in mind was the case of a payment claim that was intended as a payment
claim but which did not comply with all the requirements of the Act: it would still
be a payment claim, but the adjudicator could "throw [it] out" for non-compliance
(see [20] above). The distinction between Lee J's proposition in Sungdo and that of 35
Prakash J in Chip Hup Hup Kee is that the former proposition was made in relation
to a payment claim which was in form a payment claim but not intended to be
such, and therefore did not have the effect of a payment claim, and the latter
proposition was made in relation to a payment claim which was in form a 40
payment claim and was intended to be such, but which did not satisfy all the
requirements of the Act. In the first situation, a payment claim has not come into
operation as a payment claim. In the second situation, a payment claim operates as a
payment claim but it is defective for non-compliance with the requirements of the Act. The
first situation goes to the validity of the appointment of the adjudicator. The second
situation goes to the validity of the adjudication determination.
(Emphasis added.)
[84] The Court of Appeal in that case gave the following advice with respect to
the role of the adjudicator and the court when a so-called jurisdictional issue is
raised with respect to a payment claim:
1 The role of the adjudicator
[64] We are of the opinion that the only functions of an adjudicator are to:
(a) decide whether the adjudication application in question is made in accordance
with s 13(3)(a), (b) and (c) of the Act (see s 16(2)(a)); and (b) to determine the
5 adjudication application (see s 17(2)). If the adjudication application complies
with s 13(3) (a), (b) and (c), the adjudicator should proceed with the adjudication.
He is not competent to decide whether he was validly appointed to adjudicate the
matter (see [36] above). Thus, in this case, the adjudicator need not and should not
10 have decided issues (a) to (d) (at [10] above).
[65] If the respondent wishes to argue that the adjudicator was not validly
appointed or that the adjudicator has not exercised his power to determine the
adjudication application properly (for example, because the adjudicator has not
15 complied with s 16(3) the Act), such argument should be made to the court. The
respondent may apply to court to set aside the adjudication determination on this
basis. If the respondent's objection is that there is no valid payment claim, this
should be raised as soon as possible in the payment response so as not to delay the
20 adjudication process.
The role of the court in a setting-aside action
[66] Turning now to the court's role in a setting-aside action, we agree with the
25 holding in SEF Construction ([14] supra) that the court should not review the
merits of an adjudicator's decision. The court does, however, have the power to
decide whether the adjudicator was validly appointed. If there is no payment
claim or service of a payment claim, the appointment of an adjudicator will be
30 invalid, and the resulting adjudication determination would be null and void.
[67] Even if there is a payment claim and service of that payment claim, the court may still
set aside the adjudication determination on the ground that the claimant, in the course of
making an adjudication application, has not complied with one (or more) of the provisions
35 under the Act which is so important that it is the legislative purpose that an act done in
breach of the provision should be invalid, whether it is labelled as an essential condition or
a mandatory condition. A breach of such a provision would result in the adjudication
determination being invalid.
40
(Emphasis added.)
[85] The learned author Chow Kok Fong in Security of Payments and Construction
Adjudication (2nd edn) summarised the trilogy of cases by Judith Prakash J at
paragraph [13.62] as follows:
a. The jurisdiction of the adjudicator in the sense of his power to hear a

matter stems from his appointment by the authorised nominating body
("ANB"). Once the appointment has been made under s 14(3) of the SSOP
Act, jurisdiction would have been conferred on the adjudicator. The
adjudicator's jurisdiction does not depend, therefore, on the form and
contents of the subject payment claim and the time at which it had to be 1
served.
b. The court's role is limited to determining that the basic requirements (or
essential condition) as set out in Brodyn are present. This includes
5
whether "prior to making an adjudication application the claimant had
served a purported payment claim: and whether the appointment and
conduct of the adjudicator complied with the relevant statutory
provisions".
10
c. It is not for the courts to undertake an investigation into the merits of the
dispute in order to ascertain whether the adjudicator has reached the
same decision as a court would have done.
15
[86] I agree with the above analysis, it being in accord with our scheme of
statutory adjudication under the CIPAA. When a challenge is made to the
payment claim filed as lacking in details in that it does not disclose a valid cause
of action, that is a challenge on merits assuming that the payment claim has 20
complied outwardly with the requirements of s 5(2)(b) of the CIPAA. It has
nothing to do with the validity of the appointment of the adjudicator. The
adjudicator appointed would then have to consider the merits of whether there
exists a valid cause of action with respect to the matters raised in the payment 25
claim and the payment response.
[87] Section 25 of the CIPAA sets out the powers of an adjudicator and s 26
provides that the powers of adjudicator shall not be affected by some
non-compliance with the Act. Section 26 deals with the jurisdiction of an 30
adjudicator.
[88] It goes without saying that the powers of an adjudicator are to be exercised
only in cases where he has jurisdiction. If he has no jurisdiction with respect to 35
deciding a dispute before him, then it does not make sense to talk of his
exercising his powers, be it to cure a non-compliance with any provision of the
Act or to extend his jurisdiction which he does not have to begin with.
[89] Section 26 of the CIPAA reads as follows: 40
(1) Subject to subsection (2), the non-compliance by the parties with the
provisions of this Act whether in respect of time limit, form or content or in
any other respect shall be treated as an irregularity and shall not invalidate
the power of the adjudicator to adjudicate the dispute nor nullify the
adjudication proceedings or adjudication decision.
(2) The adjudicator may on the ground that there has been non-compliance in
respect of the adjudication proceedings or document produced in the
adjudication proceedings –
(a) Set aside either wholly or partly the adjudication proceedings;

1 (b) Make any order dealing with the adjudication proceedings as the
adjudicator deems fit; or
(c) Allow amendment to be made to the document produced in the

adjudication proceedings.
5
[90] The powers is with respect to matters of "non-compliance in respect of the
adjudication proceedings or document produced in the adjudication
proceedings" as stated in s 26(2).
10 Under s 8 the CIPAA on "Initiation of adjudication", an adjudication proceeding
is initiated with the service of a written notice of adjudication. Section 8 reads:
(1) A claimant may initiate adjudication proceedings by serving a written

15 notice of adjudication containing the nature and description of the dispute
and the remedy sought together with any supporting document on the
respondent.
[91] The supporting judgment in View Esteem Sdn Bhd v Bina Puri Holdings Bhd
20 [2016] MLJU 662 at 662, Prasad Sandosham Abraham JCA (now FCJ) examined
the operation of s 26 of the CIPAA and noted that the said provision is peculiar to
the Malaysian context only as it does not appear in similar legislation of
comparable jurisdiction. The judge further held as follows:
25
[6] The intention of Parliament is clear in that any irregularity in wide terms will
not render the adjudication proceedings a nullity in consonance with the spirit of
the act i.e. "to facilitate regular and timely payment, to provide a mechanism for
speedy dispute resolution through adjudication.
30
[7] To come within the purview of s 26(1), a party must invoke the provisions of s 26(2) of
the CIPA relying on the subsection most suitable to the facts of the dispute before
the adjudicator.
35
[8] The appellant should have moved the adjudicator formally to allow matters not
raised under the payment response pursuant to s 26(2)(b), (c) of the said section.
The adjudicator would have had to deal with that question and rule accordingly and such
a ruling would not in my view be reviewable. If the adjudicator had refused to entertain the
40 application on a point of jurisdiction, then the same would be subject to review.
(Emphasis added.)
[92] It would appear that s 26 of the CIPAA is only applicable to

non-compliances which the adjudicator has jurisdiction to decide and which
would not be reviewable by the court. I would agree with the respondent that s 26
does not apply to non-compliances which affects the adjudicator's very own
jurisdiction or capacity to hear and decide the matter with respect to competence
and "capacity to hear" jurisdiction. In such a challenge, it is the court and not the
adjudicator who will decide on such non-compliances. The distinction is
important. In Chip Hup Hup Kee, Judith Prakash J at p 675:
[44] Thus, it seemed that what was being alleged was an absolute lack of 1
jurisdiction on the part of a particular tribunal or court to hear a particular
dispute, "jurisdiction" being used in the strict sense of capacity to hear, then if the
tribunal concerned does not have the jurisdiction, any party to the dispute may
assert the lack of jurisdiction at any stage and can never be held to be estopped 5
from doing so or to have waived its right to protest. On the contrary, when it is a
question of irregularity of procedure or contingent jurisdiction or non-compliance
with a statutory condition precedent to the validity of a step in the litigation, such
irregularity or non-compliance can be waived because the effect of the waiver
would not be to create or confer any jurisdiction that did not previously exist. 10
[45] It therefore appeared to me that I could not answer the preliminary question
of whether the respondent was entitled to raise its challenges to jurisdiction until
I determined whether or not such related to competence to hear or only to the 15
exercise of the jurisdiction. I therefore had to consider the substantive question in
order to determine the preliminary point.
[93] This passage was referred to and quoted by the Court of Appeal in the case
of View Esteem where Prasad Sandosham Abraham JCA said: 20
[12] The issue of jurisdiction encompassed in s 26 of the CIPAA concerns

jurisdiction on the question of irregularity of procedure or of a defect in a
contingent jurisdiction or non-compliance with statutory conditions precedent to
25
the validity in the step in the proceedings.
[94] I have no problem accepting the proposition of learned counsel for the
respondent that with respect to the competence or capacity of the adjudicator to
hear itself, we can, to be consistent with other jurisdictions such as Singapore and 30
Australia, apply the test of whether the provision(s) of the CIPAA which had not
been complied with was so important that it is the legislative purpose that an act
done in breach of that provision should be invalid (whether it is labelled as a
basic and essential requirement or condition or mandatory condition) and result 35
in the adjudication decision being invalid.
[95] Having held that the payment claim filed in the instant case is a valid
payment claim in that it has complied with the material requirements of s 15(2) of
the CIPAA, there is no necessity then to go under s 26(2) for the curing of any 40
irregularity.
[96] It is well within the power and province of the adjudicator to decide on the
validity of the payment claim served as in whether at the end of the day, there is
a valid cause of action shown, after hearing the evidence and considering the
submissions of counsel on the proper interpretation to be given to relevant
provisions of the PAM contract.
[97] That would involve going into the merits of the case and this court would
not generally interfere with such a finding of mixed law and fact unless the
circumstances under s 15 of the CIPAA have been shown.
1 Whether the adjudicator exceeded his jurisdiction in deciding on the validity

of the respondent's determination of the claimant's employment with respect
to compliance with the notice period
5 [98] I agree with learned counsel for the claimant that once the respondent in its
payment response raises the defence of the applicability of clause 25.4(d) of the
PAM contract in that once there is an act of determination of the employment of
the claimant/contractor, no further payment will be due until a final account is
prepared, then the adjudicator must of necessity decide whether clause 25.4(d)
10
has been properly activated, invoked or applied.
[99] It becomes a matter for the adjudicator to decide without delving into the
merits of the grounds of determination of the employment, as in whether the
15 facts justify the grounds relied on for the determination of the employment. The
adjudicator was consciously confining himself to this narrow point on whether
clause 25.4(d) can be relied on by the respondent/employer as in being properly
invoked, stating further that the merits or otherwise of the termination on the
20 grounds stated is for the arbitral tribunal to decide.
[100] The CIPAA only allows a payment claim and a payment response to be
filed and there is no payment reply allowed for the claimant. Thus the matters for
the adjudicator to decide are conferred as well as circumscribed by the matters
25 raised in the payment claim and payment response.
[101] Section 6(2) requires of the non-paying party to state its reasons for
disputing the claim and certainly once that is done, it would be remiss of the
30 adjudicator not to decide whether the reasons given are valid reasons. I agree
with the learned counsel for the claimant that by relying on the determination of
the claimant's employment pursuant to clause 25.1, the respondent has in a very
real sense submitted the issue of determination as forming part of its defence and
35 consequently clothed the adjudicator with the requisite jurisdiction to decide the
matter. The issue was very much a live issue and at play during the adjudication
and parties submitted fully on it.
The adjudicator confirmed the respondent's jurisdictional challenge in this

40 adjudication decision as follows:
Jurisdiction challenge
5) The Claimant raises in its Reply of 29.6.2016 a jurisdiction challenge on the

Respondent entitlement for set-off claim for liquidated and ascertained damages
(LAD). Likewise, the Respondent in its further submission of 7.4.2016 questioned the
Adjudicator's jurisdiction to deal with the validity of the Notice of Determination. The
respective challenges are:
…
c. This adjudication tribunal has no jurisdiction to deal with the validity or otherwise 1
of the notice of determination as it was never pleaded by the Claimant in S5
Payment Claim.
(Emphasis added.)
5
[102] The adjudicator was careful to correctly state that he was not delving into
the merits of the grounds for determination of the contract as in whether those
grounds are supported by facts justifying determination of the claimant's
employment. 10
[103] The adjudicator, in dealing with the jurisdictional challenge, decided as
follows:
19) ... But in this instant dispute, reading S5 and S6 more broadly to deal with 15
grounds surrounding the termination of the Claimant's contract may take this
proceeding into an uncharted territory. This Tribunal should not attempt to deal with
the issue surrounding the proper termination of the Claimant's contract when the
circumstances of the termination under Clause 25.1 were not even adduced. It is my 20
respectful view that the lawfulness of the termination of the contract should be more
fully and properly dealt with in the ongoing arbitration proceeding. The Claimant only
sought this Tribunal to declare the notice of determination invalid or defective.
20) Since the correctness of the Respondent's activation of Clause 25.4(d) is central 25
to this action, I am of the opinion this tribunal should confine its decision to
whether the Respondent had correctly activated the operation of Clause 25.2(d)
(Emphasis added.)
30
[104] Section 27(1) of the CIPAA provides that the adjudicator's jurisdiction in
relation to any dispute is limited to the "matter" referred to adjudication by the
parties in the payment claim and the payment response (unless otherwise
extended by agreement in writing by the parties). 35
[105] In WRP Asia Pacific Sdn Bhd v NS Bluescope Lysaght Malaysia Sdn Bhd
(formerly known as Bluescope Lysaght (Malaysia) Sdn Bhd) (and Another Originating
Summons) [2016] 1 AMR 379; [2015] 1 LNS 1236, Justice Mary Lim J (now JCA)
40
said as follows:
[27] Subsection 27(1) restricts the jurisdiction of the adjudicator to the matters
found in ss 5 and 6. In short, the adjudicator takes jurisdiction from the payment
claim and the payment response; not from the adjudication claim, adjudication
response or even the adjudication reply. This is materially significant and
important as this brings to bear the whole scheme of the CIPAA 2012; that the
adjudication proceedings is to deal with or resolve a payment dispute. ... The
adjudicator's sole task is to resolve that dispute for the reasons already made known
between the parties; and nothing else. Any change to those rules of engagement
requires a written consent between the parties and that is clear from subsection
27(2). Were it otherwise, there would be no fair play and ultimately, no confidence
1 in the mechanism that has been so elaborately set up by Parliament... (Emphasis

added.)
[106] The dispute referred to adjudication was the refusal of the non-paying
party in the respondent/employer to pay for the reason given in the payment
5
response in that clause 25.4(d) applies. That essentially is the reason for not
paying the entire of the claims made in the payment claim. No matter how one
looks at the dispute that has arisen, one cannot run away from deciding on the
applicability of clause 25.4(d) at least in the limited sense of whether it could be
10 properly applied.
[107] It was argued that the claimant only raised for the first time the issue of the
wrongful determination in its adjudication claim. The respondent then raised a
15 jurisdictional challenge in the course of the adjudication proceedings that the
adjudicator had no jurisdiction to deal with this issue of the validity of the
determination of the claimant's employment as it was not a matter which had
been referred to adjudication by the claimant in the payment claim or by the
20 respondent in the payment response.
[108] The claimant however contended that it was entitled to raise the issue of
wrongful determination because in the payment response, the respondent
contended that none of the claimant's claims were payable by virtue of the
25 operation of clause 25.4(d) "As a result of Terminal Perintis' determination of
TNHC's employment pursuant to clause 25.1".
[109] I do not think that the respondent/employer can validly argue that they
30 were stating as a matter of undisputed fact that the claimant's employment was
determined pursuant to clause 25.1. It cannot be denied that the reason for the
respondent/employer to state that is to support the argument that under that
clause 25.4(d) no payment is due to the claimant.
35 [110] It is then open to the claimant to show the adjudicator why the said
clause 25.4(d) cannot be applied in the circumstances of the case by reference to
the non-compliance with the notice period for the notice of determination. I
cannot follow the respondent's submission that the claimant can only confirm
40 itself to the argument that its employment was not determined or that there was
no determination. That would be to split hairs! The claimant is surely at liberty to
argue why clause 25.4(d) cannot be applied in the way the respondent wanted it
to.
[111] I agree with the claimant that once the respondent raises the defence of
reliance of clause 25.4(d) then the claimant cannot be precluded from defending
its claim by contending that the procedural requirement under clause 25 were not
met. The ramifications of the defence raised in the payment response must be
considered by the adjudicator. As was held in Cantillon Ltd v Urvasco Ltd [2008]
117 ConLR 1:
[67] ... As the authorities established that the responding party can put forward 1
any arguable defence in adjudication, ... it must follow that the adjudicator can
rule not only on that defence but also upon the ramifications of the defence to the extent
that it is successful in so far as it impacts upon the fundamental dispute. (Emphasis
added.) 5
[112] I agree with the claimant that it would be a defeating exercise to
over-analyse what the dispute constitutes in an adjudication under the CIPAA.
Many adjudicator's are not lawyers by training. Their expertise is drawn from
engineering, architecture, quantity surveying and the like. They do not sit as 10
judges or arbitrators. However most would appreciate what a dispute is when
they see one as evidence from the payment claim and the payment response.
They have to decide within a tight time frame and their decision might not be on
spot but they serve a purpose under the CIPAA, which is to allow the claimant to 15
be paid for work done or services rendered. It is a very rough kind of justice and
the refined part of it would have to be pursued at arbitration or litigation. His
decision is provisional in nature and of temporary finality.
20
[113] The important thing is that the parties are fully aware of what they have to
answer arising from the payment claim and the payment response. Hence the
need to avoid being pedantic or overly technical or legalistic where the
determination of the issues of the dispute is concerned.
25
[114] Akinhead J in Witney Town Counsel v Beam Construction (Cheltenham) Ltd
(2011) 139 ConLR 1 at 18 (paragraph 38), provides guidance in this respect:
[38] …
30
(iv) What a dispute in any given case is will be a question of fact albeit that the
facts may require to be interpreted. Courts should not adopt an over-legalistic
analysis on what the dispute between the parties is, bearing in mind that every
construction contract is a commercial transaction and parties cannot broadly have 35
contemplated that every issue between the parties would necessarily have to
attract a separate reference to adjudication.
[115] The entire rationale of the pleadings submitted by way of the payment
claim and payment response is that the plaintiff is not to be caught by surprise. 40
One must not miss the wood for the trees. Judge Toulmin CMG QC in AWG
Construction Services Ltd v Rockingham Motor Sppedway Ltd [2004] EWHC 888
(TCC) at paragraph 141 said:
[141] In my view, each case must depend on the circumstances and the context in
which a referral is made. In some cases the issues referred are very specific. In
other cases it is clear that the issues are more general and have been so treated by
the parties, and that there is significantly more room for the case to be developed.
The test in each case is first what dispute did the parties agree to refer to the
adjudicator? And, secondly, on what basis? If the basis which is argued in the
adjudication is wholly different to that which a defendant has had an opportunity
1 to respond in advance of the adjudication, this may constitute a different dispute

not referred to the adjudicator or, put another way, in so far as adjudicator reaches
a decision on the new issues, it is not responsive to the issues referred to him.
[116] Simply put, the claimant's claim was for works carried out in respect of all
5 four (4) claims. It was entitled to make a claim under s 5 of the CIPAA. This
became an issue when the respondent claimed that the claimant was precluded
from receiving payment under clause 25.4(d). The parties therefore agreed to
refer this issue or dispute to the adjudicator. The adjudicator cannot be
10 hamstrung from deciding a matter of a consequential and ancillary nature
necessary to exercise or complete the exercise of his jurisdiction conferred by the
payment claim and the payment response. It would be skirting the issue for the
adjudicator not to decide on whether the reason given for non-payment being the
15 event of determination of the contract is a valid reason and for that to decide on
the limited ground of whether the notice period for issuing the notice of
determination has been complied with. It was not a different dispute that was
referred to the adjudicator. In this regard the New Zealand Construction
20 Contracts Act 2002 is instructive where its s 38 is concerned:
38. Jurisdiction of adjudicators
(1) An adjudicator's jurisdiction in relation to any dispute that has been

25 referred to adjudication is limited to determining –
(a) the matters referred to in ss 48, 49(1)(c), and 50(1)(c); and
(b) any other matters that are of a consequential or ancillary nature necessary to
30 exercise or complete the exercise of the jurisdiction conferred by paragraph
(a).
(2) However, the parties to an adjudication may, at any time, by written

agreement, extend the jurisdiction of an adjudicator to determine any
35 matters in addition to those mentioned in subsection (1).
(Emphasis added.)
[117] The respondent's submission is that although the adjudicator re-framed

40 the question to whether the claimant had correctly activated the operation of
clause 25.4(d), however, the adjudicator nevertheless approached and answered
this question by examining and deciding the issue of the validity of the
respondent's determination of the claimant's employment. The adjudicator's
decision dealing specifically with the issue of the validity of the determination is
set out in below:
[49] We all know untimely termination of a contractual relationship brings to the

fore whole hosts of questions relating to the proper way to handle the aftermath of
this broken relationship. Amongst others, one of the most contentious is the
operation of clause 25.4(d). As a result of the far reaching effects a terminated
contractual relation has on the obligations of the parties, the Malaysian court has
taken a specific stance on the acceptable way to end this relationship. The 1
emphasis of the court is the party whose contract is being terminated must be
accorded fair treatment prior to the termination. In particular, the court in Fajar
Menyensing Sdn Bhd v Angsana Sdn Bhd [1998] 2 AMR 1530; [1998] 6 MLJ 80
expressed the view that in interpreting the operation of a termination clause in a 5
contract, the court (and also the tribunal) ought to adopt a strict approach. Nik
Hashim J (as he then was) explained what it meant by taking a strict approach. He
said:
"It is obvious by its provision and the marginal note that clause 25.(1) is a 10
determination clause and as such, it must be construed strictly. Its provision is
mandatory in nature. Therefore, any formal or procedural requirement
stipulated in the determination clause must be complied with exactly and
meticulously. Hudson's Building and Engineering Contracts (11th edn, 1995),
Vol 2, p 1244 said:
15
'... exact and meticulous compliance by the determining party with any
formal or procedural requirements laid down in the termination clause, for
example, as to notices or time limits, will usually be required if a 20
contractual termination is to be successful ...'
[50] The claimant insisted that clause 25.2 requires the respondent as the
determining party to give the claimant as the contractor a notice of default stating
precisely the defaults the contractor had incurred. This notice shall be either 25
delivered by hand or by way of a registered post. Thereafter, the contractor shall
be given 14 clear days to either rectify the defaults sufficiently to persuade the
employer not to proceed with the determination or if the contractor allows the
defaults to continue, then the employer has the option after the 14 days' notice
30
period to give the notice of determination within 10 days thereafter. It the
employer chooses to issue the notice of determination, it shall not be given
unreasonably or vexatious.
[51] An equally important duty of the determining party is to comply exactly and 35
meticulously the manner the notice determination ought to be issued.According to
the stance of the Malaysian courts for contract under PAM standard conditions of
contract, the determining party should only issue the notice of determination after
the expiry of the 14 clear days of the notice period stated in clause 25.2.
40
Unfortunately in this case, the respondent went ahead to issue the notice of
determination on August 18, 2015 which mathematically is one day too early. The
one premature notice would under ordinary circumstances have been deemed as
de minimis and the error overlooked. Therefore, the validity of the notice should
not be affected. But the approach of the court in Fajar Menyensing, with good
reasons, thinks otherwise. Faja Menyensing's approach was subsequently adopted
in Pembinaan LCL Sdn Bhd v SK Styfoam (M) Sdn Bhd [2007] 3 AMR 124; [2007] 4 MLJ
113 and more recently by Dato' Mary Lim J (as she then was) in DC Contractor Sdn
Bhd v Universiti Pertahanan Nasional Malaysia [2014] AMEJ 0764; [2014] 11 MLJ 653.
The claimant now sought this tribunal's ruling that as a result of the respondent's
mis-step in issuing the notice of determination it has breached clause 25.2 and that
the notice of determination should be deemed invalid. Therefore, clause 25.4(d)
1 had not been correctly activated. Hence, it is not entitled to invoke clause 25.4(d)
defence.
[52] However, the respondent's contention in the light of the above arguments that
the claimant had in accepting the Notice of determination agreed to the content of
5 the said notice served one day early on August 18, 2015, thereby waived its right
to the object. The respondent further argues that the doctrine of estoppel should
operate to deny the claimant's CEO changed in position in his written statement
that he only acknowledged receipt of the notice not the truth of its content. The
10 respondent contends, even if this Tribunal finds that the notice of determination
was issued one day too early, this agreement by the claimant's conduct should
override the apparent mis-step by the respondent.
[53] Whilst not diluting the force of such arguments in other form, I am reminded
15 by the statement of the learned judge Dato' Mary Lim that the doctrine of estoppel
would generally not apply in the CIPAA 2012 unless the occasions or conduct or some
special circumstances presents are so convincing or valid that suggest the doctrine of
estoppel ought to apply. Even if such occasion arose, her ladyship believes it should
20 be an exception. The occasions relied on by the respondent; (1) in the partial
handover, (2) post determination reference by the claimant to official
determination and (3) the signed notice of determination, would not be sufficient
in my humble view be considered as an exception to allow the operation of
25 estoppel. In my opinion the doctrine cannot make right the wrong of the determining
party in the breach of clause 25.2. To do so tantamounts to allowing the respondent
to benefit from its own wrong doing. The principle was enunciated by Gopal Sri
Ram JCA (as he then was) in Pentabdiran Tanah Daerah Petaling v Swee Lin Sdn Bhd
where the learned judge said:
30
"But as I have said, the principle is of universal application. In the present case,
that principle produces the following results. A landowner who has erected a
building on his land contrary to law ought not to receive any benefit from it
from an acquiring authority under the Act."
35
I am convinced the ratio decidendi in the aforesaid case equally applies in this case where
the respondent had breached the clause 25.2 notice period but sought to benefit from this
mis-step by citing the operation of the doctrine of estoppel.
40
[54] The claimant averred the respondent's reliance on clause 25.4(d) defence is
misconceived and wrongful. I am persuaded that the respondent breach of 25.2 is
fatal to its right to activate clause 25.4(d).
(Emphasis added.)
[118] I would say that the adjudicator has carefully couched and crafted his
decision to make it clear that he was dealing with whether the said clause 25.4(d)
can be validly relied on from the limited perspective of its proper activation with
respect to the relevant notice period. The adjudicator was clear in that he is not
venturing to decide on the validity of the grounds of determination to answer the
question of whether the determination of the contract was lawful from that 1
perspective.
[119] Whilst the adjudicator might have misunderstood the dicta of Justice
Mary Lim J (now JCA) with respect to the context in which estoppel does not
5
apply to adjudication, I do not think that in any way materially affect the finding
of fact of the adjudicator that the claimant in acknowledging receipt of the notice
of determination dated August 18, 2015, did not agree to the contents of the
notice of determination. The evidence given was that the director of the claimant,
Mr Tan Ze Guan, had specifically written the words "acknowledge received" in 10
the column provided though the respondent's printed words said "We have read,
understood and agreed to the contents of the above letter." See exh TZG7 encl 6 of
the claimant's affidavit to oppose the setting aside of the adjudication decision.
There was also the claimant's letter to the respondent dated September 23, 2015 in 15
exh TZG 8 stating that the termination was wrongful for non-compliance with
the 14-day period after the notice of default was issued.
[120] The adjudicator nevertheless was entitled on the facts as found by him that 20
the claimant was not estopped from raising the issue of premature determination
of the claimant's employment by the respondent/employer and that the claimant
had not accepted the factual allegations in the grounds of termination.
[121] At any rate a misapprehension of the law in a finding of fact is no 25

justification for setting aside the said finding of fact when there are evidence
forming the basis of the adjudicator's finding of fact. Here the finding of fact was
that the notice of determination was issued prematurely and not in strict
compliance with the period of 14 clear days to rectify the defaults as required 30
under clause 25.2.
[122] Further as pointed out by learned counsel for the claimant in the
adjudication seply, both the notice of default and the notice of determination
35
were marked "without prejudice", supporting their contention that the parties
were at the material time, still discussing the possibility of an amicable
resolution.
[123] All said, findings of facts and findings of mixed facts and law are matters 40
within the sole province of the adjudicator and this court would not be able to
interfere in a s 15 of the CIPAA application for breach of natural justice or excess
of jurisdiction. In the context in which the above findings were made, there is
nothing that goes to jurisdiction of the adjudicator as in the validity of his
appointment. Even if the adjudicator had come to a wrong finding of fact
premised on his wrong understanding of the law, this court would not generally
interfere unless that finding of fact and interpretation of the law go to jurisdiction
or that the other grounds for setting aside in s 15(a) or (c) of the CIPAA apply.
[124] I am satisfied that the adjudicator did not decide beyond his jurisdiction in
that he did not decide on the merits of the determination as to whether the
1 grounds for determination were valid. He merely decided on the peripheral and
preliminary issue as to whether the notice of determination had been issued in
compliance with the strict time frame requirement of clause 25.2 of the PAM
contract. That he is permitted to do before he could decide on where the
5 respondent/employer may validly rely of clause 25.4(d) to validly withholding
payment.
Whether s 35 of the CIPAA applies to clause 25.4(d) of the PAM contract to

make it a conditional payment clause and hence void and unenforceable
10
[125] Learned counsel for the claimant submitted that the claimant is not entitled
to payment for all the sums claimed under the payment claim because pursuant
to clause 25.4(d) of the contract, the respondent as employer is not bound by any
15 contractual provision to make any further payment to the claimant as contractor,
including payments which have been certified but not yet paid when he
contractor's employment was determined. This, it was argued, is a complete
defence against the whole of the claimant's claims. Clause 25.4(d) provides as
20 follows:
25.4 In the event that the employment of the contractor is determined under
clause 25.1 or 25.3, the following shall be the respective rights and duties of the
employer and the contractor:
25
"25.4(d) the contractor shall allow or pay to the employer all cost incurred to
complete the Works including all loss and/or expenses suffered by the
employer. Until after completion of the Works under clause 25.4(a), the
employer shall not be bound by any provision in the contract to make any
30 further payment to the contractor, including payments which have been
certified but not yet paid when the employment of the contractor was
determined."
35 [126] The claimant however argued that following the case of Econpile (M) Sdn
Bhd v IRDK Ventures Sdn Bhd (and Another Case) [2016] AMEJ 0983; [2016] 5 CLJ
882 ("Econpile"), clause 24.5(d) of the contract is void and unenforceable as it is a
conditional payment provision prohibited under s 35 of the CIPAA. As such it
cannot be relied on as a reason for not paying the four claims in the payment
40
claim.
[127] Learned counsel for the respondent advanced the following arguments in
support of his position:
a. In Sundra Rajoo, Dato' Bill WSW Davidson and Ir Harbans Singh in "The
PAM 2006 Standard Form Building Contract" LexisNexis, 2010, the learned
authors commented on Clause 25.4(d):
Clause 25.4 deals essentially with the specific procedures, rights and duties
of the parties following the determination of the contract's employment
under the contract by the employer due to performance defaults under
Clause 25.1 or should automatic determination occur pursuant to 1

Clause 25.3 ...
Clause 25.4(d) : Procedures regulating accounts between parties ...
Upon the occurrence of the determination event, the question that 5

frequently arises is whether the employer is obliged to make any payment
to the original contractor. Clause 25.4(d) answers the said question by
stipulating in the second sentences that "until after the completion of the
Works under Clause 25.4(a), the Employer shall not be bound by any
provision in the Contract to make any further payment to the Contractor, 10
including payment that have been certified but not yet paid when the
employment of the contract was determined". Hence, the employer is
relieved expressly from his contractual obligation to make any further
payments to the contractor for money due to the latter as at the date of 15
determination which would include payments certified but not paid,
payments outstanding for work done but not certified, retention Fund (if
applicable), etc. Such an approach is a prudent one as the sums retained
may be used to eventually off-set the employer's claim against the
contractor in the Final Account. The PAM Contract 2006 has expressly 20
expanded the restricted on the employer's scope of payment to include
"payment which have been certified but not yet paid when the
employment of the Contractor was determined", although it would have
been advantageous to also list out the other categories of the said 25
restriction. Nonetheless, this is an improvement over the previous
provision. (Emphasis added.)
There is no mention that this clause amounts to a conditional payment

clause or a "pay-when-paid" or "pay-if-paid" clause which is/was not an 30
uncommon construction industry practice. The sums retained by an
employer pursuant to Clause 25.4(d) may be used to off-set the cost
incurred by the employer to complete the works and all loss and/or
expenses suffered by the employer. In this regard, Clause 25.4(d) does not
have the effect of postponing payment due until the happening of a later 35
event (in this case until after the final accounts are concluded and works
completed) because in all likelihood there would be less or even no
payment due to the contractor when that event occurs. This is unlike
Section 35(2) when full payment would still be due to the contractor if and 40
when the event occurs.
b. Clause 25.4(d) is not peculiar to standard form contracts under PAM but
similar variations of the clause are also found in other major standard
from contracts such as clause 44.3 of the CIDB Standard Form of Contract
for Building Works (2000 edn), clause 61.4 of IEM CE 2011 and IEM ME
2012 and clause 56.0 of the PWD Form 203A (Rev 1/2010). These clauses
have never been classified or treated as a conditional payment clause or
"pay-when-paid" or "pay-if-paid" type clause.
1 c. In addition, the courts in other jurisdictions, which have similar

prohibitions to conditional payment clauses in their equivalent to the
CIPAA legislation have not found that the equivalent to clause 25.4(d) of
their standard form building/construction contracts are in law
5 conditional payment provisions and therefore void. These jurisdictions
include the UK, Australia, New Zealand and Singapore.
d. The purpose and object of the CIPAA can be derived from the following:
10 i. The long title of Act, which provides that the CIPAA is "to
facilitate regular and timely payment, to provide a mechanism
for speedy dispute resolution through adjudication, to provide
remedies for the recovery of payment in the construction
15 industry and to provide for connected and incidental matters";
ii. The explanatory statement of the CIPAA Bill, which provides

that "The Construction Industry Payment and Adjudication Act
20 2011 ("the proposed Act") seeks to facilitate regular and timely
payment in respect of construction contracts and to provide for
speedy dispute resolution through adjudication. The purpose of
the proposed Act is to alleviate payment problems that presently
prevails pervasively and which stifles cash flow in the
25
construction industry. The proposed Act further provides
default payment terms in the absence of provisions to that effect
and prohibits conditional payment terms that inhibit cash flow. The
Act also seeks to provide remedies for the recovery of payment
30 upon the conclusion of adjudication. (Emphasis added.)
[128] With respect to the above arguments, it must not be forgotten the context in
which the learned authors had opined their views of clause 25.4(d). It was at a
35 time when the CIPAA has not come into being yet and certainly has not come into
force yet. The question as to whether that clause could be caught by the
prohibition in s 35 of the CIPAA was thus not addressed.
[129] While there are other major standard form contracts that have a similar
40 clause, the question is whether they fall foul s 35 of the CIPAA and not so much
as to how many of such similar clauses would be affected if the decision in
Econpile were to be upheld. Likewise, though uniformity with other jurisdictions
where statutory adjudication is concerned would be a good thing, one would
readily admit that while the core concept is the same in many jurisdictions, yet
when it comes to the scope of the contracts that comes under the respective Acts
and the manner of setting aside the adjudication decision and enforcing it is
different in different jurisdictions.
[130] At the end of the day, our CIPAA is sui generis and that the courts when
confronted with strong opposing arguments as here, with respect to whether a
clause is a conditional payment clause, would have to interpret it, giving
meaning to the words used in the relevant sections and not forgetting the 1
over-arching purpose of the Act.
[131] It is conspicuously clear that our particular provision on what is a

conditional payment clause is worded differently from that of other jurisdictions.
5
If our Parliament had wanted to follow other jurisdictions, it could have
followed the same definition of a conditional payment clause. In a very real sense
there is no need to reinvent the wheel. Instead it had drafted it by way of a clear
declaration as a matter of principle in s 35(1) of the CIPAA that "any conditional
payment provision in a construction contract in relation to payment under the 10
construction contract is void".
[132] My reasoning for embarking on a more expansive approach to

determining whether a provision in a contract is a conditional payment 15
provision in Econpile is reproduced below for ease of reference:
[80] We are aware that when if the subsection had use the words "(2) For the
purpose of this section, "conditional payment" means –", then we are left in no
doubt that the two examples are exhaustive and permits of no other additional 20
instances of conditional payment terms. If that subsection had used the word
"includes" instead of "means" we would also be quite clear and confident that the
examples given are by no means exhaustive.
25
[81] However seeing that Parliament had chosen to state a general principle first
in s 35(1) and has couched it to be all – encompassing as in the use of the
expression "Any conditional payment provision..." I would prefer a more
expansive interpretation that would accord with the purpose of the Act.
Parliament could have used the expression in s 35(1) as "A conditional payment 30
provision within the meaning of subsection (2) ... is void". It could be safely
concluded that Parliament had left it to the court to determine on a case by case
basis as to whether a conditional payment term would be defeating the purpose of
the Act. 35
[82] For instance if a conditional payment term is merely that the unpaid party as
contractor must show proof of payment to his subcontractors before the employer
needs to pay the contractor, such a condition might not be unreasonable and
might be good in enhancing corporate governance and efficiency in contracts 40
management. There might well be a myriad of conditions not all of which would
be defeating the purpose of the Act. In fact the explanatory statement to the bill
reads: "The proposed Act further provides default payment terms in the absence
of provisions to that effect and prohibits conditional payment terms that inhibit cash
flow". (Emphasis added.)
[83] On the contrary, a condition like clause 25.4(d) has the effect, upon the
termination of the contract, of postponing payment due until the final accounts
are concluded and the works completed and that would be defeating the purpose
of the Act. Therefore such a clause is void and unenforceable and the adjudicator
may disregard it altogether.
1 [133] As can be seen from the explanatory statement to the bill, it is not every
conditional payment provision that will be prohibited; it is only those which has
the effect of inhibiting cash flow. Parliament has left it to the courts to determine
whether the condition in the conditional payment provision has the effect of
5 inhibiting cash flow and so thwarting the purpose of the Act.
[134] I fully endorse the proposition of law that where the language of an Act of
Parliament is clear and explicit, effect must be given to it:
10 a. Hong Leong Bank Bhd v Khairulnizam b Jamaludin [2016] 4 AMR 246; [2016]
7 CLJ 335, FC;
b. Majlis Agama Islam Wilayah Persekutuan v Victoria Jayaseele Martin (and

15 Another Appeal) [2016] 2 AMR 715; [2016] MLJU 41, FC; and
c. Andrew Lee Siew Ling v United Overseas Bank (Malaysia) Bhd [2013] 1 AMR
573; [2013] 1 MLJ 449, FC.
20 [135] Further where the language used in legislation is clear and unambiguous,
effect should be given to it (Chin Chov & Ors v Collector of Stamp Duties [1979] 1
MLJ 69 at 70, FC).
[136] It was submitted by the respondent/employer that our Parliament

25
intended conditional payment provisions to be confined to the instances
expressed under subsection 2(a) and (b) of s 35. It was further argued that any
expansion of the definition of conditional payment can be done through
Parliament, as was the case in UK. I would venture to say that whilst this is one
30 approach, being a relative latecomer to adjudicator, we have the experience of
hindsight of other jurisdictions and instead of leaving it to Parliament or the
Minister (as in Singapore) in charged to make clear other provisional payment
terms that may have the effect of inhibiting cashflow and so is inimical to the
35 object of the CIPAA, our Parliament has left it to our courts to so determine as and
when the clauses are so challenged and so to develop the law further from case to
case.
40 [137] In fact as pointed out by learned counsel for the respondent, the experience
in the UK that started off with confining a conditional payment provision to a
"pay when paid" clause and defining what that means, has now moved to a more
expansive approach and to broaden the ambit of such a clause. The UK
Parliament later supplemented the s 113 of the Housing Grants, Construction &
Regeneration Act 1996 ("the HGCRA") by introducing s 142 of the Local
Democracy, Economic Development and Construction Act 2009 that provides as
follows:
(1) In the Housing Grants, Construction and Regeneration Act 1996, section 110
(dates for payment) is amended as follows.
(2) After subsection (1) insert – 1

(1A)The requirement in subsection (1)(a) to provide an adequate
mechanism for determining what payments become due under the
contract, or when, is not satisfied where a construction contract makes
payment conditional on— 5
a. the performance of obligations under another contract, or
b. a decision by any person as to whether obligations under another contract

have been performed. 10
(Emphasis added.)
[138] For instance, if a contract has a clause to state that before a certified
payment is released to the contractor, the contractor shall show proof of 15
payments to its sub-contractors, one would say that such a condition promotes
good corporate governance and contract management for if subcontractors are
not paid, there is every likelihood of not meeting work schedule. Likewise if
retention sum shall be released upon the procurement of a bond in favour of the 20
employer for the amount released; one would see that as a reasonable condition
for release of the retention sum being a security to ensure that defects are being
rectified by the contractor. There may well be a myriad of conditions and
certainly not all have the effect of inhibiting cash flow. 25
[139] Singapore thus preserved a measure of latitude with respect to what a "pay
when paid" provision is and so left open possible expansion of conditional
payment provision in their definition in s 9 of the SSOPA Act as follows:
30
"pay when paid provision" , in relation to a contract, means a provision of the
contract by whatever name called –
(a) that makes the liability of one party (referred to in this definition as the first
35
party) to pay money owing to another party (referred to in this definition as
the second party) contingent or conditional on payment to the first party by
a further party (referred to in this definition as the third party) of the whole
or any part of that money;
40
(b) that makes the due date for payment of money owing by the first party to
the second party contingent or conditional on the date on which payment of
the whole or any part of that money is made to the first party by the third
party;
(c) that otherwise makes the liability to pay money owing, or the due date for payment
of money owing, contingent or conditional on the operation of any other contract or
agreement; or
(d) that is of such kind as may be prescribed.
(Emphasis added.)
1 [140] Further in Singapore there is an express provision of no contracting out of

the Act and with that any clause which has the effect of restricting or prejudicing
the operation of their Act may be struck down. Its s 36 reads as follows:
36. No contracting out

5
(1) The provisions of this Act shall have effect notwithstanding any provision
to the contrary in any contract or agreement.
(2) The following provisions in any contract or agreement (whether in writing or not)
10
shall be void:
a) a provision under which the operation of this Act or any part thereof
is, or is purported to be, excluded, modified, restricted or in any way
15 prejudiced, or that has the effect of excluding, modifying, restricting or
prejudicing the operation of this Act or any part thereof;
b) a provision that may reasonably be construed as an attempt to deter

a person from taking action under this Act.
20
(3) The Minister may, for the purpose of subsection (2) (a), prescribe the type of
provisions in any contract or agreement, or any class thereof, which are
deemed to have the effect of excluding, modifying, restricting or prejudicing the
operation of this Act or any part thereof.
25
(4) Nothing in this Act shall, except as provided in subsection (1), limit or
otherwise affect the operation of any other law in relation to any right, title,
interest, privilege, obligation or liability of a person arising under or by
30 virtue of a contract or an agreement.
(Emphasis added.)
[141] One may say that the Singapore SOPA has the in-built mechanism to
35 preserve on the one hand the freedom of contract and on the other hand the object
of their SOPA in facilitating payments for construction work done.
[142] It cannot be denied that the party most affected when there is no regular
and timely payments would be the contractors and subcontractors. It is not the
40
employer for it only needs to pay upon certification whereas the contractor
would have to expend time and costs both in labour and material to build to any
stages for the purpose of submitting a progress claim to be certified. Though it
can be argued that the CIPAA is designed for the overall benefit of the
construction industry, it is undeniably to help contractors who are most painfully
affected when they are not paid for work done or services rendered. They are the
more vulnerable ones in the chain of construction and Parliament recognises that
they need protection under the CIPAA. Generally it is the contractors who would
be in a position to make a payment claim and not the employer and that is
because the employer claim against a contractor would be more in the nature of
a damages claim whether under LAD claim, rectification costs or additional costs
incurred in engaging a new contractor. These are not payment claims under the 1
CIPAA but they may be set up as valid defences of set-off against a claimant's
claim.
[143] It is no comfort to say to a contractor that he no longer has cash flow

5
problems because he does not have to incur more costs in doing further works.
The point is that he is already out of pocket for work done. He has to pay his
workers, suppliers and bankers. Whilst much may be said about freedom of
contract, it is precisely because of the anomalies and aberrations that have arisen
that Parliament has intervened to address this undesirable state of affairs. 10
[144] There is nothing preventing an unscrupulous employer from terminating a

contract just to skirt payments of amounts due for work done by the contractor.
Rightly or wrongly, the contractor would have to vacate the site. Though it is true 15
that the employer would be exposed to a claim for damages for wrongful
termination, the question is whether the contractor has the financial endurance
and resilience to pursue the claim which may not be due until final accounts is
completed with the completion of the project. If the project is abandoned, the 20
contractor might have to wait a long while to sue and in the meanwhile it might
not be able to pay its subcontractors who have done the work and if they cannot
wait to be paid, they might well wind up the contractor. Being in liquidation
brings in its wake many disabilities with respect to suing and recovering
25
amounts due to it by debtors.
This is certainly the kind of domino-effect that the CIPAA was designed to avoid.
[145] I can appreciate that an employer too would have its claim when the 30
determination of the contractor's employment is validly done. However, many a
time such a claim would not have crystallised yet at point of determination and
is still subject to proof even in a case of an employer's LAD claim because of s 75
of the Contracts Act 1950 as enunciated in the case of Selva Kumar a/l Murugiah v 35
Thiagarajah a/l Retnasamy [1995] 2 AMR 1097; [1995] 1 MLJ 817. One does not
know how long the contractor would have to wait if he can only claim after final
accounts have been issued. The next contractor that is engaged to take over might
also default and so the first contractor would have to wait longer still. While the
40
employer can wait for arbitration to resolve its claim, the contractor has no
luxury of time and might well have to languish further inspite of the over-aching
principle of the legislature in facilitating cash flow which for the moment, does
not seem to be flowing to him.
[146] By no means am I suggesting that Malaysian employers have a propensity

to determine the employment of contractors to avoid the provision of the CIPAA.
However clearly Parliament is at liberty to take into consideration past
experiences of wrongful termination by employers and to tailor the Act to meet
the problems often suffered by contractors at the receiving end of a wrongful
determination of termination of the construction contract.
1 [147] One thing must not be forgotten: that at the end of the day in all these
debates into what is a conditional payment clause under s 35 of the CIPAA and
whether clause 25.4(d) of the PAM contract is such a clause, it is a matter of
interpreting the relevant clauses on why no payments need to be made and that
5 clearly does not go towards jurisdiction of the adjudicator. It is a mix finding of
fact and law and this court would not interfere even if the adjudicator's
interpretation is not one that this court would agree.
Whether there has been a breach of natural justice when the adjudicator
10 referred to case law authorities not cited by the parties
[148] The respondent complained that there has been a breach of natural justice
as the adjudicator had cited cases and made reliance on these decided cases of the
15 courts not cited by either parties and more importantly, they had no opportunity
to submit on. It was also contended that these case authorities related to material
aspects of the adjudication decision in respect of the claim and set-off raised in
the adjudication.
20
[149] I agree with learned counsel for the claimant that the CIPAA gives vast
powers to an adjudicator with respect to how to determine a dispute before him.
It provides under s 25 for the following:
25 25. The adjudicator shall have the powers to –
...
(d) Draw on his own knowledge and expertise;

30
...
(i) Inquisitorially take the initiative to ascertain the facts and the law required for the
decision ...
35
(Emphasis added.)
[150] These powers confer upon the adjudicator the right to draw upon his own
experience, knowledge, initiative and industry to consider whatever legal
40
propositions that may be relevant as supported by the cases decided by the
courts in our jurisdiction or elsewhere. I do not see this as a breach of natural
justice as the breach contemplated by s 15 of the CIPAA is a material one where
the notion of fair play and right to be heard has been blatantly disregarded
resulting in patent prejudice to the parties producing a perverse decision.
[151] The salutary words of Dyson J in Macob Civil Engineering Ltd v Morrison
Construction Ltd (1999) 64 ConLR 1 are worthy of repetition lest we get entangled
and ensnared in unnecessary technicalities that have come to characterise many
a litigation and arbitration:
[14] It will be seen at once that, if this argument is correct, it substantially 1

undermines the effectiveness of the scheme for adjudication. The intention of
Parliament in enacting the Act was plain. It was to introduce a speedy mechanism
for settling disputes in construction contracts on a provisional interim basis, and
requiring the decisions of adjudicators to be enforced pending the final 5
determination of disputes by arbitration, litigation or agreement: see s 108(3) of
the Act and paragraph 23(2) of Part 1 of the Scheme. The timetable for
adjudication's is very tight (see s 108 of the Act). Many would say unreasonably
tight, and likely to result in injustice. Parliament must be taken to have been aware
of this. So far as procedure is concerned, the adjudicator is given a fairly free hand. It is 10
true (but hardly surprising) that he is required to act impartially (s 108(2)(e) of the
Act and paragraph 12 (a) of Part 1 of the Scheme). He is, however, permitted to take
the initiative in ascertaining the facts and the law (s 108(2)(f) of the Act and paragraph
13 of Part 1 of the Scheme). He may, therefore, conduct an entirely inquisitorial process, 15
or he may, as in the present case, invite representations from the parties. It is clear that
Parliament intended that the adjudication should be conducted in a manner
which those familiar with the grinding detail of the traditional approach to the
resolution of construction disputes apparently find difficult to accept. But
20
Parliament has not abolished arbitration and litigation of construction disputes. It
has merely introduced an intervening provisional stage in the dispute resolution
process. Crucially, it has made it clear that decisions of adjudicators are binding
and are to be complied with until the dispute is finally resolved. (Emphasis
added.) 25
[152] Likewise in Balfour Beatty Construction Ltd v Lambeth London Borough

Council [2002] EHWC 597 (TCC), it was clarified that the standard applicable to
adjudicator's on the issue of fairness and impartiality and for that matter, natural 30
justice is not the same degree as that required in arbitration or litigation:
[29] Nevertheless, in my judgment, that which is applicable in arbitration is

basically applicable to adjudication but, in determining whether a party has been
treated fairly or in determining whether an adjudicator has acted impartially, it is 35
very necessary to bear in mind that the point or issue which is to be brought to the
attention of the parties must be one of which is either decisive or of considerable potential
importance to the outcome and not peripheral or irrelevant. It is now clear that the
construction industry regards adjudication not simply as a staging post towards 40
the final resolution of the dispute in arbitration or litigation but as having in itself
considerable weight and impact that in practice goes beyond the legal
requirement that the decision has for the time being to be observed. Lack of
impartiality or of fairness in adjudication must be considered in that light. It has become
all the more necessary that, within the rough nature of the process, decisions are
still made in a basically fair manner so that the system itself continues to enjoy the
confidence it now has apparently earned. The provisional nature of the decision
also justifies ignoring non-material breaches. Such errors, if apparent (as they
usually are), will be rectified in any negotiation and settlement based upon the
decision. The consequence of material issues and points is that the dispute
referred to adjudication will not have been resolved satisfactorily by any
1 fundamental standard and the chances of it providing the basis for a settlement
are much less and the chances of it proceeding to arbitration or litigation are much
greater. However the time limits, the nature of the process and the ultimately non-
binding nature of the decision, all mean that the standard required in practice is not
5 that which is expected of an arbitrator. adjudication is closer to arbitration than an
expert determination but it is not the same. (Emphasis added.)
[153] Looking at the cases cited which the respondent's counsel said he had no
opportunity to submit on and distinguish, I am more than satisfied that they do
10 no more than set out basic propositions of law that the adjudicator was relying
on. They do not material affect the outcome of the decision. It would be as good
as the cases have not been referred to at all.
15 [154] I doubt even in an appeal, where the merits of a decision can be delved into,
one would be able to succeed on the ground the trial judge had referred to cases
not cited by the parties. That would be to discourage further research and
initiative by the judge especially when in some cases, research by counsel or the
lack of it is so telling that the trial judge could not wrote a proper speaking
20
judgment of substance and coherence with substantiating it with court decided
cases, always of course within the disputes as set out in the pleadings.
[155] This ground of breach of natural justice is therefore dismissed as being

25 unmeritorious.
Whether the requirements of s 16(1)(a) or (b) of the CIPAA are met for stay of
the adjudication decision
30 [156] The respondent had applied for stay of the adjudication decision under
s 16(1)(a) or (b) of the CIPAA. Alternatively, the respondent shall deposit the
adjudicated sum with the Director of KLRCA pursuant to s 16(2) of the CIPAA.
35 [157] Section 16(1)(b) of the CIPAA provides that "A party may apply to the High
Court for a stay of an adjudication decision in the following circumstances: b) the
subject matter of the adjudication decision is pending final determination by
arbitration or court."
40 [158] It was submitted by the respondent that this requirement was met when
the claimant commenced arbitration proceedings by serving a notice of
arbitration on the respondent on November 11, 2015.
[159] However the condition that there is a pending arbitration is only a

threshold condition for the court to consider stay. In Subang Skypark Sdn Bhd v
Arcradius Sdn Bhd [2015] AMEJ 874; [2015] MLJU 286, Justice Mary Lim J (now
JCA) in deciding on whether to grant a stay of the adjudication decision under
the CIPAA, examined the cases in other jurisdictions namely; England,
Singapore, New South Wales, Australia and found that the Malaysian context of
the CIPAA is no different. The judge further held:
[27] Since the defendant has itself issued a notice of arbitration in which it has 1
raised the very same matters that it had raised in the adjudication, subsection
16(2) operates. That is not to say that simply because the dispute or subject matter
of the adjudication decision is now in the arbitration mode regime, the grant of
stay is automatic. It is not, let alone as of right or as a matter of course. Being in 5
arbitration merely puts the plaintiff's case as one within s 16 for consideration; or one
which has crossed the threshold. The existence of concurrent proceedings merely
prequalifies the plaintiff for this application.
[28] At all times, the court retains the discretion as to whether or not to grant a stay 10
and that is obvious from the language and terms of s 16. In fact, subsection 16(2)
vests the court with discretion whether to grant the stay sought; whether to order
the adjudicated amount or part of it to be deposited with the Director of KLRCA;
or make any other order as the court thinks fit. Upon overcoming the threshold set in 15
subsection 16(1), the plaintiff still has to show how the discretion is to be exercised in its
favour.
...
20
[56] ...The purpose of the (the CIPAA) Act is to ensure that successful claimants are
paid and paid promptly even though the adjudication decisions are provisional in
nature. The defendant must pay the adjudicated sum failing which it is available
to the successful claimant to consider the next appropriate course of action.
Notwithstanding these provisions, the court retains the power to grant stay of the 25
enforcement of the adjudication decision. It does so in order to secure the ends of
justice.
[57] Therefore, to allow stay to be explored in any other circumstances may be 30

argued to stymie the efforts of Parliament where payment disputes in
construction contracts are concerned. It may even render the laudable benefits
which the Act is intended to bring, illusory and unachievable.
[58] Here, the court finds that the plaintiff has simply not offered any reason, 35
cogent or worthy of examination, to warrant a stay. As amply shown in case law
from other jurisdictions, reasons must be offered. Each of those reasons will be
examined. If those reasons pertain to the financial status of the defendant as one of
doubtful solvency or near insolvency, the court still needs to examine why that may be the 40
case. In our present case, the plaintiff has not even offered those reasons for the
court's consideration. Instead, it has offered evidence of its own financial status;
that it is in the position to pay up.
(Emphasis added.)
[160] Likewise in Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd
[2015] 4 AMR 565; [2015] 1 LNS 305, Ravinthiran Paramaraguru J observed inter
alia that "an application for stay of an adjudication decision under s 16 of the
CIPAA is sui generis. It must be considered against the scheme and purpose of
the CIPAA. The discretion under s 16 must not be exercised in the same manner
1 as ordinary applications for stay of execution or stay of proceedings as it may

defeat the objective of Parliament in promulgating the CIPAA in the first place".
[161] It would not be right to say that in the present case that a stay would not
defeat the purpose of the CIPAA as the claimant has already been terminated and
5
therefore would not need to expend further monies on the project. Such an
argument glosses over what is due to the claimant for work already done and the
practical reality that the claimant has to pay its workers, suppliers,
subcontractors and financiers to name a few. Practically too one does not expect
10 a contractor worth its salt to have just one project on-going for his success, if not
survival; he would have other projects afoot which would require cash flow as
well. It is the construction industry as a whole that the CIPAA is concerned with.
15 [162] Learned counsel for the respondent marshaled a vast array of reasons to
show that it has a meritorious case on appeal. That I must say is not relevant for
the purpose of a stay application for the obvious reason that if one's appeal is not
meritorious, one should not even have contemplated and pursued an appeal. I
20 can do no better than to draw from the wisdom of Justice Mary Lim J (now JCA)
in Subang Skypark when she observed as follows:
[31] This court is of the view that the defendant should not be deprived of the very
benefit of why it resorted to adjudication in the first place; save if satisfactory
25 reasons are present for a stay of that adjudication decision.
[32] It is my further view that stay should only be granted in exceptional

circumstances; and such circumstances must necessarily refer to the financial status of the
other party. The merits of the case before the arbitration or the court; or even the chances of
30
success in setting aside the adjudication decision are not relevant considerations. The
grant of any stay must always weigh in the primary object of the CIPAA 2012; that
it is to ensure a speedy resolution of a payment dispute; that it is to inject much
needed cashflow into the contractual arrangements between parties that saw
35 progressive payments of claims as the recognised and accepted way of doing
business in construction contracts. It would be futile to encourage parties to resort
to adjudication and then deprive a successful claimant of its claim by staying the
access to the cash simply because there is another proceeding of the nature
40 described in subsection 16(1) which is pending. The whole concept of temporary
finality would be lost and the object of the Act defeated if such was the
consideration.
(Emphasis added.)
[163] Nothing has been shown by the respondent with respect to doubting the
solvency of the claimant or for being anxious of a near insolvency situation.
Aspersions were cast on the claimant's financial viability by the respondent's
reliance on a hearsay evidence of one Mr Goh Kok Kheng, an architect practising
in Johor Bahru, who could vouch for the fact that the claimant has difficulty
paying its subcontractors and suppliers on time. That is speculative and
"clutching at straws". Surely more cogent and convincing proofs are necessary to 1
further deprive of the adjudicated sum until the disposal of the arbitration.
[164] Who would not have such a problem, assuming that it be true, when kept
out of a sum of RM8.2 million (adjudicated amount) since 2015? As was observed
5
by Coulson J in Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC
1086 (TCC) at paragraph 26:
(f) Even if the evidence of the claimant's present financial position suggested that
it is probable that it would be unable to repay the judgment sum when it fell due, 10
that would not usually justify the grant of a stay if:
(i) the claimant's financial position is the same or similar to its financial
position at the time that the relevant contract was made (see Herschell
15
Engineering Limited v Breen Property Limited); or
(ii) the claimant's financial position is due, either wholly, or in significant part,
to the defendant's failure to pay those sums which were awarded by the
adjudicator (see Absolute Rentals v Glencor Enterprises Limited, unreported, 20
January 16, 2000).
[165] I am satisfied that the contemporaneous documents before the court

demonstrated that the claimant is in a reasonably healthy financial position
25
inspite of being deprived of payments under the payment claims. Its audited
account of 2015 showed a net asset of RM37 million. See exh TZG 3 encl 6 in the
claimant's affidavit to oppose the setting aside.
[166] The respondent has also relied for its stay application, on the Singapore 30
Court of Appeal decision in SA Shee & Co (Pte) Ltd v Kaki Bukit Industrial park Pte
Ltd [2000] SGCA 7 where the court held in paragraph 36 that:
Furthermore, the rationale for giving temporary finality to an interim certificate

35
could no longer hold good when the contract had come to an end. The contractor
would not be carrying out any more work. So the need to minimise "cash flow
problems" for the project no longer existed.
[167] The above case does not deal with the issue of a stay but rather with 40
whether a summary judgment is not appropriate under circumstances where the
party treating the contract as repudiated is entitled to withhold payment on
interim certificate. I agree with learned counsel for the claimant, Mr Gananathan,
that it provides little assistance as a guide to the exercise of discretion under s 16
of the CIPAA.
[168] The respondent highlighted that this is not a case of the impecunious
construction contractor who has not been paid at all by the employer. On the
contrary, the respondent has already paid to the claimant a substantial amount of
monies amounting to RM33,139,605.55 for certificate Nos. 1 to 13. It needs only be
said that the fact of previous payments for work already done is no justification
1 for withholding payments for work subsequently done. It matters not that the
claimant has been previously paid for the previous interim certificates. It
certainly cannot be a case where "if I have been generous and a good paymaster
in the past, you must extend some grace to me in the present".
5
[169] The fact that the respondent/employer is financially capable to pay and
secure the adjudicated sum, if required by this court, is no justification for not
paying the claimant the adjudicated sum.
10 [170] I find no real justification to grant either unconditional stay or a stay
subject to terms of the adjudication decision bearing in mind the overarching
purpose of the CIPAA which is to facilitate cash flow in the construction industry
and to give effect to an adjudication decision unless it is overtaken and
15 superseded by an arbitral award or a judgment of the court after litigation.
Pronouncement
[171] In the upshot I would dismiss the application to set aside the adjudication
20 decision and the other prayers in the said OS and allow the application in the OS
to enforce the adjudication decision with a single costs of RM20,000 and allocator
to be paid before order of costs is extracted. The payment of the judgment sum is
to be made before the expiry of 14 days from today.
25
[172] The respondent/employer's application for stay of the adjudication
decision under s 16(1)(b) of the CIPAA is also dismissed as there is no valid
ground to grant stay. It has not been shown that the respondent can reasonably
conclude that they would not be able to get the payment back in the event they
30
should succeed in arbitration.
35
40

2017 7 Amr 887

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2017 7 Amr 887

Uploaded by

Copyright:

Available Formats

[2017] 7 AMR 887

1 Terminal Perintis Sdn Bhd

High Court, Kuala Lumpur – Originating Summons Nos. WA-24C-57-07/2016

February 24, 2017

15 Contract – Adjudication and payment disputes – Setting aside of adjudication

The respondent submitted that the adjudication proceedings and/or decision

3. Whether the adjudicator had exceeded his jurisdiction in deciding on the 30

4. Whether s 35 of the CIPAA applies to clause 25.4(d) of the PAM Contract to 35

1 permitted by s 15 of the CIPAA in a setting aside application. [see p 905

3. (a) A misapprehension of the law in a finding of fact is no justification for

4. (a) Parliament had drafted by way of a clear declaration as a matter of 25

(c) Debates as to what is a conditional payment clause under s 35 of the

1 may be relevant as supported by the cases decided by the courts in our

(c) There was no real justification to grant either unconditional stay or a

Cases referred to by the court

10 Legislation referred to by the court

Originating Summons No. WA-24C-57-07/2016

Originating Summons No. WA-24C-82-08/2016

Judgment received: March 6, 2017 1

Lee Swee Seng J

Cadangan Pembangunan Berstrata Komersial Bercampur, 1 Blok Apartment 10

i. without reasonable cause, the contractor wholly/substantially

iii. the contractor persistently refused or neglected to comply with

iv. the contractor failed to comply with assignment and sub-contracting.

i. Payment for value of works done as certified in interim certificate No. 14

[8] The employer in its payment response claimed for:

i. Defective works by the contractor in the sum of RM9,562,751.50;

ii. Increase of costs for firefighting subcontract in the sum of RM520,822.01;

iii. Extended preliminaries incurred due to the extension of the period of

[9] Meanwhile the claimant also commenced arbitration proceedings by serving 5

[10] The adjudicator decided as follows in his adjudication decision:

iii. The contractor is entitled to impose a further simple interest at 5% per

iv. The employer's set-off claims are dismissed;

[12] Terminal Perintis as the respondent in the adjudication had applied in OS

a. the adjudication decision ought to be set-aside because the adjudicator

10 [14] Meanwhile the claimant had applied in OS No. WA-24C-82-08/2016 to

c. The adjudicator, after in effect agreeing with the respondent's

[18] Section 27(1) of the CIPAA provides:

Subject to subsection (2), the adjudicator's jurisdiction in relation to any dispute is 1

[64] Because adjudication is intended to provide a speedy resolution of that

[25] He further argued that such non-compliance is of a material provision of the

c) non release of retention sum constituting a percentage of the value of work

1) An unpaid party may serve a payment claim on a non-paying party for

2) The payment claim shall be in writing and shall include –

b) Details to identify the cause of action including the provision in the

1 c) Description of the work or services to which the payment relates; and

d) A statement that it is made under this Act.

Work done as certified in interim certificate No. 14

Non-release of retention sum

Value of variations carried out

[44] On appeal, Hodgson JA opined that before a document purporting to an

b. the service by the claimant on the respondent of a payment claim (s 13);

d. the reference of the application to an eligible adjudicator, who accepts the

e. the determination by the adjudicator of this application (ss 19(2) and

Is the determination void for insufficient specificity in the payment claim?

– indicate the amount claimed; or

– state that it is made under the Act,

– an application under s 15(4) for judgment for the statutory debt 1

As a result of the Terminal Perintis' determination of TNHC's employment

1 quickly; much that is contained therein in an abbreviated form which would be

[12] Nonetheless a payment claim must be sufficiently detailed to enable the

40 [59] No doubt the expression of a "cause of action" is used in s 5(2)(b) of the