LION PACIFIC SDN BHD v PESTECH TECHNOLOGY SDN BHD AND

ANOTHER CASE
CaseAnalysis
| [2020] MLJU 2308

Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd and another case
[2020] MLJU 2308
Malayan Law Journal Unreported

HIGH COURT (SHAH ALAM)

WONG KIAN KHEONG J
ORIGINATING SUMMONS NOS BA-24C-73-07 OF 2020 AND BA-24C-70-07 OF 2020
22 December 2020

Rodney Gomez (Aarthi a/p Jeyarajah with him) (Shearn Delamore & Co) for PT.
Dominic Ng Ken Ming (Nayagam & Partners) for LP.

Wong Kian Kheong J:

JUDGMENT

(2 Originating Summonses)
A. Introduction

[1] This case concerns the following two originating summonses (OS):
(1) OS no. BA-24C-73-02/2020 (LP’s OS) has been filed by Lion Pacific Sdn. Bhd. (LP)
against Pestech Technology Sdn. Bhd. (PT) for the following orders, among others -
(a) an order that an adjudication decision made on 30.10.2019 (AD) by an adjudicator,
Mr. Kuhendran A/L Thanapalasingam (Adjudicator), in favour of PT against LP be
set aside (LP’s Setting Aside Application); or
(b) if the AD is not set aside, an order to stay the enforcement of the AD (LP’s Stay
Application) until the disposal of an arbitration between LP and PT (Arbitration);
and

PT has filed OS no. BA-24C-70-02/2020 for leave of court to enforce the AD against LP
(PT’s OS).

B. Background

[2] By way of a “Letter of Acceptance” dated 22.1.2013 [LA (22.1.2013)], the Malaysian
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Government (Government) has accepted a tender submitted by “Konsortium Skypark Link Sdn.
Bhd.-Lion Pacific Sdn. Bhd.” (Consortium) for a construction project (Project). The
Government and Consortium then executed, among others, “Standard Form of Design and Build
Contract PWD Form DB (Rev. 1/2010)” (COC). The following clauses in COC are pertinent to
this case:
(1) clause 1.1(q) has defined the “Project Director” (PD) as the Secretary General of the
Ministry of Transport (MOT);
(2) clause 50 [Clause 50 (COC)] provides as follows -

“50.0 PROCEDURE FOR CLAIMS

50.1 Notwithstanding any other provision of the Contract, if the Contractor intends to claim any
additional payment pursuant to any clause of this Contract, the Contractor shall within sixty (60) days
of the occurrence of such event or circumstances or instructions give notice in writing to the PD of
his intention for such claim.

50.2 As soon as practicable but not later than ninety (90) days after practical completion of the
Works, the Contractor shall submit full particulars of the claims under clause 50.1 together with all
supporting documents, vouchers, explanations, calculations, records and receipts for payment made
which may be necessary to enable the claims to be ascertained by the PD. Upon expiry of the ninety
(90) days period, the PD shall proceed to ascertain the claims based on such documents submitted
by the Contractor. The amount of such claims ascertained by the PD shall be added to the Contract
Sum.

50.3 If the Contractor fails to comply with clause 50.1 and clause 50.2, he shall not be entitled to each
claim and the Government shall be discharged from all liability in connection with the claim.”

(emphasis added); and

the relevant part of clause 53 [Clause 53 (COC)] states as follows -

“53.0 INTERIM PAYMENTS

53.1 Interim payments shall be made by the Government based on the PD’s monthly valuation of
the Works done and properly executed …

(3) …

53.3 The PD shall within twenty-eight (28) days from the date of receipt of the application
for Interim Payments, inspect and verify the Works, and make a valuation of the same
and issue an Interim Payment Certificate stating the amount due to the Contractor from
the Government …

…”

(emphasis added).
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The LA (22.1.2013) and COC shall be referred collectively in this judgment as the “Main
Contract”.

[3] In a “Letter of Award” dated 7.10.2013, the Consortium appointed LP as a sub-contractor for
the “System Works Package” regarding the Project (Works).

[4] LP appointed PT as a sub-contractor for the Works by way of a sub-contract dated

24.11.2014 (Sub-Contract). The Sub-Contract provides as follows, among others:
(1) according to clause 3.1 Sub-Contract (Clause 3.1) -

“Unless expressly excluded or varied by the terms of this Sub-Contract, all terms and conditions of
the Main Contract shall be deemed incorporated into this Agreement and made a part hereon and
read as if [PT] were a party to the Main Contract in place of [LP] and [PT] shall be deemed to have full
knowledge of all the terms and provisions of the Main Contract … and [LP] shall provide [PT] with a
true copy of the Main Contract as far as applicable to the Works herein stated. All terms and
conditions including SON, Contract Conditions are based on back to back terms with main contract,
to the extent applicable for System Works.”

(emphasis added); and

(2) clause 4.1 Sub-Contract (Clause 4.1) states as follows -

“The Sub-Contract payable to [PT] by [LP] to be paid by [LP] to [PT] as payment milestones. This will be
exactly back to back with the terms of the Main Contract.

However the following schedules shall be tentatively followed.

Submission of Claim with all documents 07th of every month.

Verification and approval by ICC [Independent Checking Consultant]-MOT 15th-24th every month.

Payment to [PT] 40 days after certification by MOT.”

(emphasis added)

[5] PT claimed that a sum of RM24,902,980.45 was due from LP to PT regarding the Works
(PT’s Claim). LP disputed PT’s Claim in its entirety. Hence, PT’s Claim was referred to
adjudication before the learned Adjudicator (Adjudication).

[6] At the Adjudication -

(1) PT’s Claim was premised on the following matters -
(a) a claim for the Works totaling RM12,039,648.57 was made based on PT’s 9 invoices
(9 Invoices);
(b) loss and expenses incurred by PT arising out of extension of time (EOT) nos. 2 and 3
which amounted to RM11,773,296.94 [PT’s Loss (EOT’s)]; and
(c) variation works in a sum of RM1,017,064.54 [PT’s Claim (Variation Works)];
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(2) (2) LP disputed PT’s Claim on on the following grounds, among others -
(a) by reason of Clauses 3.1 and 4.1, payment for the Works (Payment) shall only
become due from LP to PT upon MOT’s certification of the Payment under the Main
Contract (MOT’s Certification); and
(b) PT’s Claim (Variation Works) could not be allowed in view of Clause 50 (COC) and
Clause 53 (COC); and
(3) the learned Adjudicator delivered the AD as follows, among others -
(a) the learned Adjudicator only allowed 7 out of 9 Invoices which totaled
RM12,001,692.71;
(b) PT’s Loss (EOT’s) was rejected;
(c) PT’s Claim (Variation Works) was partially allowed wherein PT could only recover a
sum of RM521,040.00 for PT’s Claim (Variation Works);
(d) LP shall pay to PT a total sum of RM12,522,732.71 (Adjudicated Amount) on or
before 15.1.2020;
(e) interest at the rate of 5% per annum on the Adjudicated Amount shall be paid by LP
to PT from 5.4.2019 [date of PT’s “Payment Claim” (PC)] until full settlement of the
Adjudicated Amount; and
(f) LP shall pay to PT costs of the Adjudication as well as all other costs and fees.

C. Court’s approach

[7] Both parties have consented to a joint hearing of the 2 OS. In deciding these 2 OS, I will
adopt the approach as explained in Otis Elevator Co (M) Sdn Bhd v Castmet Sdn Bhd , Shah
Alam High Court Originating Summons no. BA-24C-19-02/2020 and another case, at [7], as
follows:

“[7] ... Regarding the 2 OS, I will adopt the following approach:

(1) I will first decide Castmet’s Setting Aside Application. This is because if this court sets aside the AD, there is no
necessity to decide Castmet’s Stay Application and Otis’ OS must be dismissed;

(2) if Castmet’s Setting Aside Application is dismissed, I will decide Castmet’s Stay Application. Needless to say, if I
allow Castmet’s Setting Aside Application, as a corollary, Otis’ OS should be refused; and
(3) if this court dismisses Castmet’s Stay Application, I will then proceed to determine Otis’ OS.”

(emphasis added).

D. Issues

[8] The following questions arise in these 2 OS:

(1) regarding LP’s Setting Aside Application -
(a) whether the learned Adjudicator had jurisdiction to adjudicate PT’s Claim under the
Construction Industry Payment and Adjudication Act 2012 (CIPAA) when -
(i) the Sub-Contract had incorporated the Main Contract; and
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(ii) the Main Contract was entered into prior to 15.4.2014 (enforcement of CIPAA);
(b) if the learned Adjudicator had no jurisdiction to adjudicate PT’s Claim pursuant to
CIPAA, is LP estopped from raising such a lack of jurisdiction in LP’s Setting Aside
Application?;
(c) whether the learned Adjudicator had exceeded his jurisdiction under s 15(d) read with
s 27(1) CIPAA by deciding that Clause 4.1 was subject to s 35(1) CIPAA because
Clause 4.1 required Payment to be conditional upon MOT’s Certification. In this
regard -
(i) is the effect of s 35(1) CIPAA limited by the two circumstances stipulated in s
35(2)(a) and (b) CIPAA?; and
(ii) does s 113(1) of United Kingdom’s (UK) Housing Grants, Construction and
Regeneration Act 1996 (HGCR) apply in the construction of our s 35(1) CIPAA?;
and
(d) whether the learned Adjudicator had breached the second rule of natural justice (2nd
Rule) under ss 15(b) and 24(c) CIPAA when -
(i) he took an “erroneously restrictive view” of his jurisdiction with regard to Clause
4.1 and s 35(1) CIPAA;
(ii) he wrongly applied his power under s 25(n) CIPAA to allow PT’s Claim even
though there was no MOT’s Certification;
(iii) he should have exercised his power pursuant to s 25(f) CIPAA to call for a
meeting with the parties regarding the lack of MOT’s Certification for the Payment;
(iv) he made “manifest errors of law” in respect of the construction of Clauses 3.1, 4.1,
Clause 50 (COC) and Clause 53 (COC);
(v) he did not consider LP’s defence of set-off regarding PT’s failure to provide a
Performance Bond after 30.5.2019 and PT’s omission regarding the “Booster
Transformer” (LP’s Set-Off Defence); and
(vi) he did not provide “sufficient and/or comprehensible” reasons for the AD as
required by s 12(4) CIPAA;

in respect of LP’s Stay Application, should the court exercise its discretion pursuant to s
16(1)(b) CIPAA to stay the execution of AD pending the outcome of the Arbitration; and

with regard to PT’s OS, should the court grant leave under s 28(2) CIPAA for the AD to
be enforced against LP?

The issues raised in the above sub-paragraphs 1(a) to (c) are matters of first impression.
E. Whether Adjudicator had jurisdiction under CIPAA to adjudicate PT’s Claim

[9] An adjudicator has no jurisdiction to adjudicate any “payment claim” [as understood in s 5(1)
and (2)(a) to (d) CIPAA] which arises from a “construction contract” (defined in s 4 CIPAA) if the
construction contract is concluded prior to 15.4.2014 (enforcement date of CIPAA) - please refer
to the Federal Court’s judgment delivered by Idrus Harun FCJ in Jack-In Pile (M) Sdn Bhd v
Bauer (M) Sdn Bhd and another appeal [2020] 1 CLJ 299.
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[10] I have no hesitation to decide that the learned Adjudicator had jurisdiction to adjudicate
PT’s Claim pursuant to CIPAA because PT’s Claim was based on the Sub-Contract which was
concluded on 24.11.2014 (after the enforcement of CIPAA). All the rights and obligations of PT
and LP arose solely from the Sub-Contract (not the Main Contract). In other words, both PT and
LP could only enforce the Sub-Contract (not the Main Contract). The mere fact that Clause 3.1
had incorporated all the provisions of the Main Contract into the Sub-Contract, did not mean that
LP and PT had entered into the Main Contract.

[11] PT’s learned counsel has contended that LP is estopped in LP’s Setting Aside Application
from disputing the jurisdiction of the learned Adjudicator to adjudicate PT’s Claim under CIPAA
because LP did not raise such a matter at the Adjudication. I am not able to accede to this
submission because the equitable doctrine of estoppel as laid down by case law, is subject to
written law, namely CIPAA. It is decided in Syarikat Faiza Sdn Bhd & Anor v Faiz Rice Sdn Bhd
& Anor [2019] 7 MLJ 175, at [104(3) and (4)], as follows:

“[104] …

(3) s 3 of the Civil Law Act 1956 (CLA) provides as follows:

“Application of U.K. common law, rules of equity and certain statutes

s 3(1) Save so far as other provision has been made or may hereafter be made by any written law in force in
Malaysia, the Court shall -

(a) in Peninsular Malaysia or any part thereof, apply the common law of England and the rules of equity as
administered in England on the 7 April 1956; …

(emphasis added).

It is clear from the opening words in s 3(1) CLA that any application of English rules of Equity is subject to Malaysian written
law - please see the Federal Court’s judgment delivered by Augustine Paul JCA (as he then was) in Danaharta Urus Sdn
Bhd v Kekatong Sdn Bhd (Bar Council Malaysia, Intervener) [2004] 2 MLJ 257, at 265-266. Accordingly, the Defendants
cannot resort to the equitable estoppel doctrine in the face of express provisions of Malaysian written law in s
40(1)(a) to (f) and (2) TMA;

(4) there is an equitable doctrine that Equity follows the law (the application of Equity shall be subject to the operation of
statutes) - please see Chang Min Tat J’s (as he then was) decision in the High Court case of Wong Kim Fatt v Leong & Co
Sdn Bhd & Anor [1976] 1 MLJ 140, at 142. As such, the Defendants cannot rely on equitable estoppel in view of
express provisions of s 40(1)(a) to (f) and (2) TMA; …”

(emphasis added).

The above decision in Syarikat Faiza has been affirmed on appeal to the Court of Appeal. As
explained above, the equitable estoppel doctrine cannot be invoked to confer jurisdiction on an
adjudicator to adjudicate a matter when the adjudicator has no such jurisdiction under CIPAA.
F. Relevant CIPAA provisions

[12] Sections 12(1), (4), 13(a), (c), 15(b), (d), 24(c), 25(f), (n), 27(1), (2) and 35 CIPAA provide
as follows:
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“12(1) The adjudicator shall conduct the adjudication in the manner as the adjudicator considers appropriate
within the powers provided under section 25.

(4) The adjudication decision shall be made in writing and shall contain reasons for such decision unless the
requirement for reasons is dispensed with by the parties.

Effect of adjudication decision

[13] The adjudication decision is binding unless -

(a) it is set aside by the High Court on any of the grounds referred to in section 15;

(c) the dispute is finally decided by arbitration or the court.

Improperly procured adjudication decision

15 An aggrieved party may apply to the High Court to set aside an adjudication decision on one or more of the
following grounds:

(b) there has been a denial of natural justice;

(d) the adjudicator has acted in excess of his jurisdiction.

Duties and obligations of the adjudicator

[24] The adjudicator shall at the time of the acceptance of appointment as an adjudicator make a declaration in
writing that -

(c) he shall comply with the principles of natural justice;

Powers of the adjudicator

[25] The adjudicator shall have the powers to -

(f) call for meetings with the parties;

…
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(n) decide or declare on any matter notwithstanding no certificate has been issued in respect of the matter;

Jurisdiction of adjudicator

27(1) Subject to subsection (2), the adjudicator’s jurisdiction in relation to any dispute is limited to the matter
referred to adjudication by the parties pursuant to sections 5 and 6.

(2) The parties to adjudication may at any time by agreement in writing extend the jurisdiction of the adjudicator to
decide on any other matter not referred to the adjudicator pursuant to sections 5 and 6.

Prohibition of conditional payment

35(1) Any conditional payment provision in a construction contract in relation to payment under the construction
contract is void.

(2) For the purposes of this section, it is a conditional payment provision when -

(a) the obligation of one party to make payment is conditional upon that party having received payment from
a third party; or

(b) the obligation of one party to make payment is conditional upon the availability of funds or drawdown of
financing facilities of that party.”

(emphasis added).

G. Did Adjudicator exceed his jurisdiction in this case?

[13] I am of the following view:

(1) according to s 27(1) CIPAA, an adjudicator’s jurisdiction is “limited to the matter referred
to adjudication by the parties” in -
(a) the PC as understood in s 5(1) and (2)(a) to (d) CIPAA; and
(b) the “Payment Response” (PR) within the meaning of s 6(1) or (2) CIPAA;

(2) by reason of s 27(2) CIPAA, an adjudicator’s jurisdiction may extend to a matter

beyond the PC and PR (Extension of Adjudicator’s Jurisdiction) if there is a written
agreement by the parties to the Extension of Adjudicator’s Jurisdiction [Parties’
Agreement (Extension of Adjudicator’s Jurisdiction)];

(3) if -
(a) there is no Parties’ Agreement (Extension of Adjudicator’s Jurisdiction); and
(b) an adjudicator has decided on a matter outside the scope of the PC and PR

- the court may set aside an adjudication decision under s 15(d) read with s 27(1) CIPAA
on the ground that the adjudicator has exceeded his or her jurisdiction to decide only on
matters raised in PC and PR; and
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(4) if an adjudicator has committed an error or omission regarding any matter raised in
the PC or PR (Error/Omission), the adjudicator has not exceeded his or her jurisdiction
under s 15(d) read with ss 5, 6 and 27(1) CIPAA. This is because the Error/Omission
concerns a matter raised in the PC or PR which is within the adjudicator’s jurisdiction
pursuant to ss 5 and 6 read with s 27(1) CIPAA.

[14] In this case, LP had relied on Clause 4.1 in the PR (filed by Messrs R Thayalan, LP’s then
solicitors). As such, by virtue of s 6(2) read with s 27(1) CIPAA, the learned Adjudicator had
jurisdiction to decide on -
(1) the validity of Clause 4.1 vis-à-vis s 35(1) CIPAA; and
(2) the interpretation of Clause 4.1.

[15] In view of the reasons explained in the above paragraphs 13 and 14, even if it is assumed
that the learned Adjudicator had erred with respect to Clause 4.1, he had not exceeded his
jurisdiction under s 15(d) read with ss 6(2) and 27(1) CIPAA. Nor had the learned Adjudicator
gone on a frolic of his own with regard to his construction of Clause 4.1.
H. Effect of Clause 4.1 and s 35(1) CIPAA

[16] With regard to Clause 4.1, LP’s learned counsel has submitted that Clause 4.1 is not
invalidated by s 35(1) CIPAA. Reliance has been placed by LP’s learned counsel on the
following:
(1) the view expressed by Mr. Lam Wai Loon and Mr. Ivan YF Loo in “Construction
Adjudication in Malaysia”, Second Edition (2018), at [19.010], as follows -

“[19.010] However, it is to be noted that section 35 [CIPAA] does not cover pay-when-certified
provisions, and therefore, such provisions are not prohibited by [CIPAA]. …”

(emphasis added);
(2) s 113 HGCR; and
(3) a judgment of Edwards-Stuart J in UK’s High Court in R&C Electrical Engineers v
Shaylor Construction [2012] EWHC 1254.

[17] The first issue that arises regarding s 35 CIPAA is whether the effect of s 35(1) CIPAA is
confined to the two circumstances stipulated in s 35(2)(a) and (b) CIPAA.

[18] In the High Court case of UDA Holdings Bhd v Bisraya Construction Sdn Bhd & Anor and
another case [2015] 11 MLJ 499, Mary Lim Thiam Suan J (as she then was) has expressed the
view that the effect of s 35(1) CIPAA is limited by s 35(2)(a) and (b) CIPAA (1st View). The 1st
View is explained in UDA Holdings, at [86], as follows:

“[86] Next, is s 35. That section prohibits any conditional payment provisions in construction contracts. Such provisions are
void. ‘Conditional payment’ has a limited meaning. Subsection 35(2) provides:

…”

(emphasis added).
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The main issue that arises in UDA Holdings, at [32], concerns whether CIPAA has prospective
or retrospective effect. As such, the 1st View expressed in UDA Holdings is merely obiter.

[19] The following cases have decided that the effect of s 35(1) CIPAA is not confined by s
35(2)(a) and (b) CIPAA (2nd View):
(1) the judgments of Lee Swee Seng J (as he then was) in the following three cases -
(a) Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd & another case [2016] 5 CLJ 882,
at [78] to [83];
(b) BM City Realty & Construction Sdn Bhd v Merger Insight (M) Sdn Bhd [2016] 1 LNS
1096, at [34], [36] and [37]; and
(c) Terminal Perintis Sdn Bhd v Tan Ngee Hong Construction Sdn Bhd [2017] MLJU
242, at [132] to [135]; and

(2) in Ireka Engineering & Construction Sdn Bhd v TRI Pacific Engineering Sdn Bhd
[2020] MLJU 548, at [19] to [21], I have followed the 2nd View as expounded by Lee Swee
Seng J (as he then was).

[20] I am in favour of the 2nd View for the following reasons:

(1) there is nothing in s 35(1) CIPAA which limits its effect to the two circumstances specified
in s 35(2)(a) and (b) CIPAA. On the contrary, Parliament has employed a wide term “any”
in s 35(1) CIPAA. The broad meaning of the word “any” has been explained by the
following judgment of the Federal Court delivered by Augustine Paul FCJ in Metramac
Corp Sdn Bhd (formerly known as Syarikat Teratati KG Sdn Bhd) v Fawziah Holdings
Sdn Bhd [2006] 4 MLJ 113, at [41] and [42] -

“[41] … Bindra’s Interpretation of Statutes (9th Ed) in commenting on the word ‘any’ says at p 1469:

‘Any’ is a word which excludes limitation or qualification. It connotes wide generality.

42. In Aerlinte Eireann Teoranta v Canada (Minister of Transport) (1990) 68 DLR (4th) 220, Heald JA said
at p 225:

In summary, then, the appellants’ initial submission is to the effect that airlines can only be charged
for airport facilities and services which they actually use. I am unable to agree with this submission.
The trial judge carefully examined the language used in s 5 and concluded that the word
‘any’ as used in s 5 should be interpreted to mean ‘all’, ‘each and every’ or ‘whichever’. He
added (AB vol 19, p 3409): ‘Thus ‘at any airport’ in s 5 includes among others the meaning ‘at
each and every, or whichever, airport’ at which the Minister provides every and all, or
whichever, facilities and services.’ I agree with the conclusion of the trial judge.”

(emphasis added);

(2) if I have accepted the 1st View, this will render redundant the wide term “any” in s 35(1)
CIPAA. It is a canon of statutory interpretation that the legislature does not legislate in
vain - please refer to the judgment of Augustine Paul FCJ in the Federal Court case of All
Malaysia Estates Staff Union v Rajasegaran & Ors [2006] 5 AMR 585, at 600-601;
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(3) the opening words “For the purposes of this section” in s 35(2) CIPAA clearly show that
Parliament is merely giving two instances of a “conditional payment provision” in s
35(2)(a) and (b) CIPAA. These two instances of a conditional payment provision in s
35(2)(a) and (b) CIPAA cannot limit the wide effect of the term “any” in s 35(1) CIPAA;
(4) the adoption of the 2nd View is in harmony with an adjudicator’s wide power under s 12(1)
read with s 25(n) CIPAA to “decide or declare on any matter notwithstanding no
certificate has been issued in respect of the matter” [Adjudicator’s Section 25(n)
Power]. In the Federal Court case of Majlis Perbandaran Seremban v Tenaga Nasional
Bhd [2020] 12 MLJ 1, at [32], Zaleha Yusof FCJ has applied the rule of harmonious
construction of statutory provisions as follows -

“[32] … As such, the court must not only consider one section but all sections in Act 171, including the
relation of one section to the other sections, the relation of a section to the general object intended to be
secured by the Act. This is in consonance with the doctrine of harmonious construction as explained by this
court in Pihak Berkuasa Tatatertib Majlis Perbandaran Seberang Perai & Anor v Muziadi bin Mukhtar [2020]
1 MLJ 141; ;; [2020] 1 CLJ 1, where this court held:

[78] In this regard, it would be convenient for us to discuss the doctrine of harmonious construction.
To put it simply, the doctrine of harmonious construction means a statute should be read as a whole
and one provision of the Act should be construed with reference to other provisions in the same Act
so as to make a consistent enactment of the whole statute. Such an interpretation is beneficial in
avoiding any inconsistency or repugnancy either within a section or between a section and other
parts of the statute. The five main principles of this doctrine/rule are as follows:

(a) the court must avoid a head on clash of seemingly contradictory provisions and they must construe
the contradictory provisions so as to harmonise them (see Commissioner of Income Tax v Hindustan
Bulk Carriers [2002] 3 SCC 57, p 74);
(b) the provision of one section cannot be used to defeat the provision contained in another unless the
court, despite all its efforts, is unable to find a way to reconcile their differences;

(c) when it is impossible to completely reconcile the differences in contradictory provisions, the courts
must interpret them in such a way that effect is given to both provisions as much as possible (see
Sultana Begum v Prem Chand Jain , AIR 1997 SC 1006)
(d) courts must also keep in mind that interpretation that reduces one provision to useless or dead
lumber is not harmonious construction (see Commissioner of Income Tax v Hindustan Bulk Carriers
[2002] 3 SCC 57, p 74); and
(e) to harmonise is not to destroy any statutory provision or to render it fruitless.

[79] In a nutshell, the doctrine requires that the legislation be construed in a way which would achieve a
harmonious result, and that construction should favour coherence in the law.”

(emphasis added).

If I have accepted the 1st View and s 35(1) CIPAA does not invalidate a contractual provision
which stipulates that payment for “construction work” (as defined in s 4 CIPAA) is conditional
upon certification (“Pay-If-Certified” Provision), a “non-paying party” (as understood in s 4
CIPAA) can resist a lawful claim for payment for construction work merely on a “Pay-If-Certified”
Provision. In such an event, the application of the 1st View will not be in harmony with s 12(1)
read with s 25(n) CIPAA but instead will render nugatory the Adjudicator’s Section 25(n) Power;
and
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(5) it is not disputed that the object of CIPAA [Object (CIPAA)] is to ensure that parties who
perform construction work are not deprived of cash flow (the life-blood of the construction
industry) - please see the Long Title to CIPAA (CIPAA is to “facilitate regular and timely
payment, to provide a mechanism for speedy dispute resolution through adjudication, to provide
for remedies for the recovery of payment in the construction industry”) and the judgment of the
Federal Court delivered by Mohd. Zawawi Salleh FCJ in Martego Sdn Bhd v Arkitek Meor &
Chew Sdn Bhd and another appeal [2019] 5 AMR 516, at [51].

The 1st View is contrary to the Object (CIPAA) because the 1st View allows a “non-paying party”
(as understood in s 4 CIPAA) to circumvent CIPAA by inserting a conditional payment provision
which is beyond s 35(2)(a) and (b) CIPAA, such as a “Pay-If-Certified” Provision. If s 35(1)
CIPAA does not nullify a “Pay-If-Certified” Provision, an “unpaid party” within the meaning of s 4
CIPAA will be deprived of payment for construction work when there is no certification in
question. In such an event, the Object (CIPAA) is clearly defeated.

[21] I am of the following opinion regarding Clause 4.1:

(1) the Sub-Contract is a commercial contract which should be construed in a commercially
sensible manner - please see the Federal Court’s judgment delivered by Gopal Sri Ram
FCJ in Berjaya Times Squares Sdn Bhd (formerly known as Berjaya Ditan Sdn Bhd) v M
Concept Sdn Bhd [2010] 1 MLJ 597, at [10];
(2) on a commercially sensible construction of Clause 4.1, it is clear that Clause 4.1 is a
“Pay-If-Certified” Provision; and
(3) applying the 2nd View (as explained in the above paragraphs 19 and 20), Clause 4.1 is
invalidated by s 35(1) CIPAA. As such, the learned Adjudicator did not err in his
construction of Clause 4.1.

[22] Section 113(1) HGCR provides as follows:

“Prohibition of conditional payment provisions.

[113] (1) A provision making payment under a construction contract conditional on the payer receiving payment
from a third person is ineffective, unless that third person, or any other person payment by whom is under the
contract (directly or indirectly) a condition of payment by that third person, is insolvent.”

(emphasis added).

Section 113(1) HGCR only applies to a “provision making payment under a construction contract
conditional on the payer receiving payment from a third person”. It is clear that our s 35(1)
CIPAA is wider than s 113(1) HGCR. Consequently, UK cases on s 113(1) HGCR cannot apply
to limit the effect of our s 35(1) CIPAA.

[23] Even if I have adopted the 1st View and if it is assumed that the learned Adjudicator has
erred in his interpretation of Clause 4.1 [Adjudicator’s Error (Clause 4.1)], the Adjudicator’s
Error (Clause 4.1) in itself cannot be a ground for the court to set aside the AD pursuant to s 15
CIPAA. I have decided as follows in NAZA Engineering & Construction Sdn Bhd v SSL Dev Sdn
Bhd [2020] 9 MLJ 499, at [14], regarding the court’s power under s 15 CIPAA:

“[14] My understanding of the court’s power to set aside an AD is as follows:

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(1) CIPAA does not provide a right to any party to an AD to appeal against the AD;

(2) an AD is provisional under s 13(a) to (c) CIPAA and may be set aside by the High Court pursuant to any of the
paragraphs in s 15(a) to (d) CIPAA (Setting Aside Application). A Setting Aside Application is not an appeal to the
High Court against the AD. Nor is a Setting Aside Application a judicial review of the AD. Hence, the High Court
cannot review the merits of an AD in a Setting Aside Application - please see the Court of Appeal’s judgment
delivered by David Wong Dak Wah JCA (as he then was) in ACFM Engineering & Construction Sdn Bhd v Esstar Vision
Sdn Bhd & another appeal [2016] MLJU 1776, at [21];

…;

(4) the court cannot set aside an AD merely because -

(a) an error of law has been committed by an adjudicator unless the adjudicator has answered a “wrong”
question of law (which does not arise from the dispute to be adjudicated upon) - please see the judgment
of Lee Swee Seng J (as he then was) in the High Court in Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd &
another case [2016] 5 CLJ 882, at [71];
(b) an adjudicator has interpreted erroneously a provision in the construction contract - Econpile, at [67];

(c) relevant evidence has been excluded wrongly by an adjudicator;

(d) an adjudicator has admitted improperly irrelevant evidence;

(e) an adjudicator has failed to attach weight to relevant evidence, oral or documentary;

(f) undue weight has been given by an adjudicator to any piece of evidence;

(g) an adjudicator has assessed erroneously the evidence presented to the adjudicator;

(h) documentary evidence has been misconstrued by an adjudicator;

(i) a plain error regarding a finding of fact has been made by an adjudicator;

(j) an adjudicator has omitted to make a finding of fact which can be adequately supported by evidence;

(k) an erroneous finding of mixed fact and law has been arrived at by an adjudicator - please see Lee Swee
Seng J’s decision in the High Court in Syarikat Bina Darul Aman Bhd & Anor v Government of Malaysia [2017]
4 AMR 477, at [60];
(l) an adjudicator has drawn a wrong inference from the evidence; and

(m) an adjudicator has omitted to make the right inference from the evidence.

The above errors and omission by an adjudicator may be rectified by an arbitration or litigation regarding the
dispute in question [as provided in s 13(c) CIPAA] - Econpile, at [67]; …”

(emphasis added).

Based on NAZA Engineering & Construction, the Adjudicator’s Error (Clause 4.1) per se
cannot warrant this court to set aside the AD unless there is existence of circumstances as
provided in any one of the paragraphs in s 15(a) to (d) CIPAA. Furthermore, the Adjudicator’s
Error (Clause 4.1) can be remedied in the Arbitration because the AD is only “temporarily final”
as stated in s 13(c) CIPAA.
I. Whether Adjudicator had breached 2nd Rule

[24] I am not persuaded that the learned Adjudicator had breached the 2nd Rule in this case
because -
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(1) it is clear from the AD that the learned Adjudicator had considered all the defences raised
by LP at the Adjudication - please refer to the judgment of the Federal Court delivered by
Zulkefli PCA in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2019] 5 CLJ 479, at
[65], [66] and [74]. In fact, the learned Adjudicator had accepted some of the defences
raised by LP which led to the following decisions in the AD -
(a) he had rejected PT’s Loss (EOT’s);
(b) he had only allowed PT to claim for 7 out of 9 Invoices; and
(c) he had only partially allowed PT’s Claim (Variation Works); and

(2) before delivering the AD, the learned Adjudicator had not deprived LP of its right to
adduce evidence and to submit on all the questions which arose in the Adjudication -
please see the decision of David Wong Dak Wah JCA (as he then was) in the Court of
Appeal case of ACFM Engineering & Construction Sdn Bhd v Esstar Vision Sdn Bhd &
another appeal [2016] MLJU 1776, at [20].

I(1). Should court set aside AD under s 15(b) CIPAA?

[25] Even if it is assumed that the learned Adjudicator had breached the 2nd Rule [Alleged
Breach (2nd Rule)] -
(1) there is no evidence adduced in this case by LP to show that the Alleged Breach (2nd
Rule) is “decisive” or “material” to the AD which warrants the court to set aside the AD
pursuant to ss 15(b) and 24(c) CIPAA - please see the judgment of Mary Lim Thiam
Suan J (as she then was) in the High Court in Ranhill E & C Sdn Bhd v Tioxide (M) Sdn
Bhd [2015] 1 LNS 1435, at [82]; and
(2) there is no “real possibility” that without the Alleged Breach (2nd Rule), the learned
Adjudicator would have reached a different decision - please refer to the judgment of the
Court of Appeal delivered by Harmindar Singh JCA (as he then was) in Guangxi Dev &
Cap Sdn Bhd v Sycal Bhd and another appeal [2019] 1 CLJ 592, at [32].

[26] As explained in the above paragraph 21, I have found that the learned Adjudicator did not
err in his interpretation of Clause 4.1 vis-à-vis s 35(1) CIPAA. Hence, the learned Adjudicator did
not take an “erroneously restrictive view” of his jurisdiction regarding Clause 4.1 and s 35(1)
CIPAA.

[27] Even if it is assumed that the Adjudicator’s Error (Clause 4.1) had been committed, the
commission of the Adjudicator’s Error (Clause 4.1) is not tantamount to a breach of the 2nd Rule
- please refer to NAZA Engineering & Construction and the reasons expressed in the above
paragraph 23.
I(2). Adjudicator’s powers under s 25 CIPAA

[28] I am not able to accept the submission by LP’s learned counsel that the learned
Adjudicator -
(1) had wrongly applied his power under s 25(n) CIPAA to allow PT’s Claim even though
there was no MOT’s Certification; and
(2) should have exercised his power pursuant to s 25(f) CIPAA to call for a meeting with the
parties regarding the lack of MOT’s Certification for the Payment.
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The reasons for the above decision have been explained in Encorp Iskandar Development Sdn
Bhd v Konsortium Ipmines Merz Sdn Bhd [2020] AMEJ 1435, at [29], as follows:

“[29] It is clear that an adjudicator has a discretion under s 12(1) read with s 25(a) to (p) CIPAA. Such a discretion is
clear from the words in s 12(1) CIPAA. I am of the view that if an adjudicator -

(1) does not exercise his or her discretion in an adjudication pursuant to s 12(1) read with s 25(a) to (p)
CIPAA; and

(2) declines to exercise his or her discretion under s 12(1) read with s 25(a) to (p) CIPAA upon the application
by any party

- the adjudicator does not breach the 2nd Rule. This is because the 2nd Rule concerns procedural fairness - please
see ACFM Engineering & Construction, at [19]. If an adjudicator does not exercise his or her discretion in the
circumstances elaborated in the above sub-paragraphs (1) and (2), it cannot be said that the adjudicator has been
procedurally unfair to all parties and the 2nd Rule has thereby being contravened. I have decided as follows in
MRCB Builders Sdn Bhd v Wazam Ventures Sdn Bhd [2020] 5 MLRH 138, at [20] -

“[20] I should add that when an adjudicator complies with s 12(2)(a) CIPAA and exercises his or her discretion
under s 25(a) and (j) CIPAA to refuse an application by a respondent in an adjudication to file a Rejoinder, this
does not in itself amounts to a breach of the 2nd Rule within the meaning of s 15(b) and 24(c) CIPAA.” “

(emphasis added).

[29] Even if the learned Adjudicator -

(1) had wrongly exercised his discretion pursuant to s 25(n) CIPAA by allowing PT’s Claim
despite the fact that there was no MOT’s Certification; and
(2) should have exercised his power under s 25(f) CIPAA to call for a meeting with the
parties regarding the lack of MOT’s Certification for the Payment

- this court cannot set aside the AD premised on the above error and omission - please refer to
NAZA Engineering & Construction and the reasons explained in the above paragraph 23. In
any event, such an error and omission can be remedied in the Arbitration.
I(3). Alleged errors in AD

[30] LP’s learned counsel has contended that there were “manifest errors” and omission in the
AD (Adjudicator’s Errors/Omission) as follows:
(1) the learned Adjudicator had made “manifest errors of law” with regard to the
interpretation of Clause 3.1, Clause 50 (COC) and Clause 53 (COC); and
(2) LP’s Set-Off Defence was not considered by the learned Adjudicator.

[31] Firstly, the Adjudicator’s Errors/Omission do not mean that the learned Adjudicator had
contravened the 2nd Rule. Furthermore, as explained in NAZA Engineering & Construction
and the above paragraph 23, the Adjudicator’s Errors/Omission cannot constitute a ground for
the court to set aside the AD under s 15 CIPAA. Lastly, the Adjudicator’s Errors/Omission can
be rectified in the Arbitration.
I(4). Whether Adjudicator had failed to give “sufficient reasons” in AD

[32] According to LP’s learned counsel, the learned Adjudicator has failed to provide “sufficient
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and/or comprehensible” reasons for the AD as required by s 12(4) CIPAA. Hence, LP’s learned
counsel has contended that there is a breach of the 2nd Rule by the learned Adjudicator.

[33] It is decided in MRCB Builders Sdn Bhd v Wazam Ventures Sdn Bhd [2020] 5 MLRH 138,
at [23] to [25], as follows:

“[23] Firstly, I should point out that by virtue of paragraph 22 of Part 1 of [the Scheme for Construction Contracts
(England and Wales) Regulations 1998], an adjudicator in UK is not obliged to give reasons for an adjudication
decision unless requested by one of the parties to the dispute. This position in UK is different from our s 12(4)
CIPAA.

[24] Secondly, it is decided by Mary Lim Thiam Suan J (as she then was) in Ranhill E & C, at [70], as follows:

“[70] Subsection 12(4) further requires the decision to be in writing. It must also contain “reasons for such
decision unless the requirement for reasons is dispensed with by the parties”. I would not construe the
requirement of “reasons” here to be one that must be full as one would generally see in judgments of the
Court or even arbitration awards. What would be required is at the very least, a statement of the adjudicator’s
reasons for coming to the decision reached. Brevity is not a reason for complaint. The reasons may be
succinct, enough or sufficient to show that the adjudicator has dealt with the very issues remitted to him and
what his conclusions are on those issues. The reasons may be wrong on the facts or even the law but I do not
believe that is enough cause to interfere. The Courts must exercise considerable restraint when invited to set
aside an adjudication decision reached in very exacting circumstances and conditions. So much so that it will
only be in rare and extreme circumstances that the reasons, brief or otherwise, are found wanting.”

(emphasis added).

[25] I am of the following view regarding s 12(4) CIPAA:

(1) the use of the mandatory term “shall” in s 12(4) CIPAA clearly shows that this provision is intended by
the legislature to be mandatory. Having said that, as explained in Ranhill E & C, an adjudicator complies
with s 12(4) CIPAA if he or she provides at least one reason, however brief, for the adjudication decision;
(2) if an adjudicator does not give any reason for an adjudication decision, this is a breach of s 12(4) CIPAA
which may support a contention that the adjudicator has breached the 2nd Rule by his or her failure to
consider a possible defence (as required by View Esteem and Guangxi Dev & Cap); and
(3) if an adjudicator has given at least one reason for an adjudication decision, the court cannot review the
legality, correctness and adequacy of the reason. It is decided in [Naza Engineering & Construction] …”

(emphasis added).

[34] I have perused the AD. To the credit of the learned Adjudicator, he had given cogent
reasons for the AD. There was thus no breach of s 12(4) CIPAA in this case. Nor was there a
breach of the 2nd Rule, especially when the learned Adjudicator had accepted certain
contentions of LP as elaborated in the above sub-paragraphs 24(1)(a) to (c).
J. Outcome of LP’s Setting Aside Application

[35] Due to the reasons explained in the above Parts E to I(4), I am constrained to dismiss LP’s
Setting Aside Application.
K. LP’s Stay Application

[36] Section 16 CIPAA states as follows:

“Stay of adjudication decision

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[16] (1) A party may apply to the High Court for a stay of an adjudication decision in the following circumstances:

(a) an application to set aside the adjudication decision under section 15 has been made; or

(b) the subject matter of the adjudication decision is pending final determination by arbitration or the court.

(2) The High Court may grant a stay of the adjudication decision or order the adjudicated amount or part of it to be
deposited with the Director of the KLRCA or make any other order as it thinks fit.”

(emphasis added).

[37] In View Esteem, at [79] and [82], the Federal Court has decided that the court may
exercise its discretion under s 16(1)(b) CIPAA to grant a stay of the enforcement of an
adjudication decision when -
(1) there is a clear and unequivocal error in the adjudication decision [1st Ground (View
Esteem)]; or
(2) it is just for the court to grant a stay of the execution of the adjudication decision [2nd
Ground (View Esteem)].

[38] Firstly, for the reasons expressed in the above Parts E to I(4), the learned Adjudicator had
not made any clear and unequivocal error in the AD. There is therefore no reason for this court
to apply the 1st Ground (View Esteem) to allow LP’s Stay Application.

[39] Secondly, I am of the view that LP cannot rely on the 2nd Ground (View Esteem) in this
case. My reasons are as follows:
(1) there is no evidence in this case to show that PT is commercially insolvent in the sense
that PT is unable to pay its debts when these debts fall due for payment. It is clear that
PT is still an on-going business concern;
(2) no winding up petition has been presented against PT;
(3) no suit has been filed against PT by its bankers, creditors, suppliers or customers for any
debt due from PT to them; and
(4) there is no evidence to persuade this court that -
(a) if LP pays the Adjudicated Amount to PT; and
(b) if LP is successful in the Arbitration

- there is a likelihood or real risk that PT is unable to repay the Adjudicated Amount to LP.

[40] In any event, LP bears the burden to persuade the court to exercise its discretion under s
16(1)(b) CIPAA to allow LP’s Stay Application - please refer to Kurniaan Maju Sdn Bhd v HAS
Setiamurni Sdn Bhd [2020] 9 MLJ 103, at [14]. Premised on all the evidence adduced in this
case, I find that LP has not succeeded to discharge such an onus

[41] Based on the above reasons, LP’s Stay Application cannot be allowed.
L. PT’s OS

[42] Section 28(1) and (2) CIPAA provide as follows:

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“Enforcement of adjudication decision as judgment

[28] (1) A party may enforce an adjudication decision by applying to the High Court for an order to enforce the
adjudication decision as if it is a judgment or order of the High Court.

(2) The High Court may make an order in respect of the adjudication decision either wholly or partly and may make
an order in respect of interest on the adjudicated amount payable.”

(emphasis added).

[43] In Inai Kiara Sdn Bhd v Puteri Nusantara Sdn Bhd [2019] 2 CLJ 229, at [24] to [26], Mary
Lim Thiam Suan JCA (as she then was) has explained in the Court of Appeal that the court may
exercise its discretion to grant leave under s 28(1) and (2) CIPAA to enforce an adjudication
decision if the following three conditions are fulfilled:
(1) the adjudication decision has been made in favour of the party applying for leave;
(2) the party against whom an adjudication decision has been made, has failed to pay the
adjudicated amount on the date specified in the adjudication decision; and
(3) there is no prohibition on the court’s discretionary power to grant leave to enforce the
adjudication decision

[3 Conditions (Enforcement)].

[44] It is clear in this case that the 3 Conditions (Enforcement) have been satisfied.
Consequently, I have no hesitation to allow PT’s OS.
M. Court’s decision

[45] In conclusion -
(1) LP’s OS is dismissed;
(2) PT’s OS is allowed; and
(3) subject to an allocatur fee, one set of costs shall be paid by LP to PT as both the OS are
heard together.

End of Document