WINDING-UP BASED ON A CIPAA DECISION
by Wong Sheng Wei, Pupil-in-Chamber (sw.wong@ckh.law) & Chan Kheng Hoe, Head of Construction Law (kh.chan@ckh.law), Chong + Kheng Hoe.
Can a winding-up be commenced based on a decision pursuant to the Construction Industry Payment and Adjudication Act 2012 [CIPAA]?
2 different High Court decisions came to different conclusions on the same question. In both cases:
- The respective non-paying parties sought an injunction to restrain the unpaid parties from presenting a winding-up petition based on an adjudication decision;
- There were counterclaims which exceeded the adjudicated sum.
The table below highlights the differences of the two cases:
| Issue | ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd [2020] MLJU 282 | Maju Holdings Sdn Bhd v Spring Energy Sdn Bhd [2020] MLJU 1196 |
| Is an Adjudication Decision a disputed debt? | An Adjudication Decision is not final or in any sense equal to the finality of a judgement of Court. By s 13 CIPAA, such decision is only provisionally binding subject to final determination by arbitration or Court proceedings. | A judgement of Court pursuant to s 28 CIPAA is indisputable. Such an enforcement order has all the features of a judgement of Court unless set aside. Treating a s 28 CIPAA order as being disputable would adversely affect the enforceability of such judgement, against the objective of CIPAA. |
| Is winding up a form of enforcement following a s 28 CIPAA order? | Winding up is not a mode of enforcement. S 28 CIPAA is intended only to allow for modes of enforcement according to O 45 Rules of Court 2012 and not by way of a winding up petition. | Nothing in s 28 CIPAA precludes the judgement creditor’s right to exercise its statutory right under the Companies Act 2016 to present a winding up petition. The execution processes under the Rules of Court 2012 are not the only routes available for enforcement of a s 28 CIPAA order. |
| Can an Adjudication Decision be relied upon to support a winding up petition? | Fact that enforcement under s 28 CIPAA did not include the right to initiate winding up proceedings does not mean a winding up petition cannot be presented pursuant to an Adjudication Decision. However, such a right to present a winding up petition is not a specific statutory right under CIPAA and is therefore subject to the general principles relating to abuse of process of Court, and a Fortuna injunction may be obtained. | A order under s 28 CIPAA is made by the High Court and would be a valid and enforceable judgement, constituting an undisputed debt and capable of forming the basis for presentation of a winding up petition. There is no basis to distinguish between a High Court order under s 28 CIPAA with any other High Court orders. |
It must be emphasised that ASM Development does not in fact preclude the presentation of a winding up petition following an Adjudication decision. The main difference is that the judge in ASM Development held that the non-paying party can nevertheless apply for a Fortuna injunction which may be granted in appropriate cases.
However, the judge in Maju Holdings held that a s 28 CIPAA order is similar to all other High Court orders. For such High Court orders, there cannot be a Fortuna injunction granted unless the High Court order is first and foremost stayed.
Query: If one were permitted to argue for a Fortuna injunction despite there being a s 28 CIPAA High Court order, what is there to stop one from arguing for a Fortuna injunction in the face of any other High Court orders (for instance, orders granting summary judgement where there is still a counterclaim to be tried).
It would seem that an adjudicating party who had taken the trouble to apply for and obtain a s 28 CIPAA order ought not to be denied the fruits of his litigation.