CP – Econpile (M) Sdn Bhd v ASM Development (KL) Sdn Bhd [2024] CLJU 609 (Federal Court) Facts

Econpile (M) Sdn Bhd v ASM Development (KL) Sdn Bhd [2024] CLJU 609 (Federal Court)

 

Facts

  1. By a Letter of Award dated 26.9.2016, ASM (the Plaintiff in the High Court) appointed Econpile as its main contractor to carry out Work for a Project for contract sum of RM280 million.
  2. Econpile commenced works and submitted 27 progress claims to ASM in respect of the works done. The progress claims were duly valued by the Project Quantity Surveyor, and endorsed by the Architect.
  3. ASM contended that Econpile failed to perform their work diligently according to the terms of the contract which resulted in delays and the completion of the Project even with the extended completion date of 7.4.2018.
  4. The Architect issued a Certificate of Non-Completion (CNC) dated 7.4.2018 to Econpile notifying of the imposition of the liquidated damages. Dispute arose between the parties resulting in Econpile commencing adjudication proceedings against the ASM claiming for the uncertified interim valuations No. 16 to 24 and alleged under-certification of interim valuation No. 15. Partial payment was made for Interim Payment Certificate No. 15, and no certificates were issued for progress claims No. 16 to 24. Econpile then initiated adjudication under the CIPAA to claim the sums under progress claims No. 16 to 24, as well as the under-certified sum under Interim Payment Certificate No. 15. ASM made a cross-claim.
  5. Econpile simultaneously commenced arbitration proceedings by way of a Notice of Arbitration dated 18.3.2019. ASM disputed the sums claimed in the said Notice and subsequently issued its Notice of Arbitration dated 17.5.2019.
  6. By the Adjudication Decision dated 21.6.2019 and a Supplementary Adjudication Decision dated 7.8.2019 (First Adjudication Decision), the Adjudicator decided that ASM was to pay Econpile RM59,767,269.32 (the adjudicated sum). Unfortunately, ASM failed to pay the said adjudicated sum which subsequently led to Econpile issuing a statutory demand pursuant to Section 466(1) Companies Act 2016 on 25.6.2019.
  7. ASM then applied for a Fortuna injunction on 9.7.2019 to restrain Econpile from presenting a winding-up petition. The High Court granted the Fortuna injunction on 9.1.2020. Econpile appealed to the Court of Appeal but the appeal was subsequently withdrawn on 18.5.2022.
  8. Econpile filed a Notice of Application (Originating Summons No. WA-24C-113-07/2019) (OS 113) to enforce the First Adjudication Decision pursuant to Section 28 of the CIPAA (First Enforcement Application).
  9. ASM responded by filing 2 applications as follows:
  • In O.S. No. WA-24C-118-07/2019 (OS 118), an application to set aside the said Adjudication Decision under Sections 15 (b) and (d) CIPAA on the basis that there has been a denial of natural justice and that the adjudicator has acted in excess of his jurisdiction (First Setting Aside Application); and
  • In O.S. No. WA-24C-173-09/2019 (OS 173), an application to stay the Adjudication Decision pending the conclusion of the arbitration on the basis that there were clear and unequivocal errors in the Adjudication Decision as the parties have referred the disputes to Arbitration. ASM contended that there is a genuine and valid set-off in their counterclaim of RM276,581,893.96 against Econpile in the Arbitration proceeding, which exceeds the adjudicated amount of RM59,767,269.32 (First Stay Application).
  1. The High Court allowed the First Enforcement Application by Econpile on 29.11.2019 and ordered ASM to pay Econpile the Adjudicated Sum of RM59,767,269.32, legal fees of RM150,000.00 and adjudication cost amounting to RM203,924.40 (First Enforcement Order). At the same time, the High Court dismissed ASM’s First Setting Aside Application and First Stay Application. Aggrieved with the decision of the High Court, ASM then appealed to the Court of Appeal.
  2. On 26.4.2022 the Court of Appeal dismissed the appeal against the First Enforcement Order and the Setting Aside Application. However, on the same date the Court of Appeal granted ASM the First Stay Application. ASM did not seek leave to appeal against the Court of Appeal’s decisions in respect of the First Enforcement Order and the First Setting Aside Application. On 3.1.2022, Econpile was granted leave to appeal against the decision of the Court of Appeal in the First Stay Application.
  3. Econpile initiated a further adjudication proceeding in respect of progress claims No. 25 to 27. On 17.9.2019, the Adjudicator decided that ASM pay Econpile the sum of RM5,959,024.99 (Second Adjudication Decision). However, ASM failed to make payment of the said adjudicated sum to Econpile.
  4. Econpile applied to enforce the Second Adjudication Decision pursuant to Section 28 of CIPAA which was allowed by the High Court on 28.10.2020 (Second Enforcement Order). ASM had filed an application to set aside the Second Adjudication Decision (Second Setting Aside Application) which was dismissed by the High Court on the same date. On 4.2.2021, ASM’s application to stay the Second Adjudication Decision was dismissed by the High Court (Second Stay Application). ASM then appealed to the Court of Appeal against both decisions of the High Court dated 28.10.2020 and 4.2.2021. On 28.10.2022, the Court of Appeal dismissed ASM’s appeal against the Second Enforcement Order and the Second Setting Aside Application. ASM did not seek leave to appeal against these Court of Appeal’s decisions. However, on 25.11.2022 a different panel of the Court of Appeal dismissed ASM’s appeal against the Second Stay Application.

 

Decision

  1. The main focus for determination is whether the existence of a valid enforcement order made pursuant to Section 28 CIPAA precluded the making of an order pursuant to Section 16(1) of the same Act.
  2. The Court of Appeal in Appeal 2365 (ASM’s appeal against the dismissal of ASM’s First Stay Application to stay the First Adjudication Decision pursuant to Section 16 CIPAA 2012) opined that since there is no express provision in CIPAA prohibiting the granting of stay after the enforcement order has been granted, an application for stay can be considered and granted. The reasons of the Court of Appeal are seriously flawed.
  3. CIPAA is a legislation crafted to address issues common in the construction industry in particular relating to cash flow problems for the unpaid party and only as temporary finality to the payment claims. It is not the end of the end. The Act was designed with the ultimate aim to assist the parties in construction dispute to be paid expeditiously for the work which they had carried out and for adjudication proceedings for payment claims that are due and payable before the determination of the contract.
  4. Therefore, under the statutory framework of CIPAA, an adjudication decision can only be set aside in very rare circumstances to give effect to the provisional resolution of payment disputes in construction contracts. In the appeals before Federal Court, both the Adjudication Decisions were not set aside and remain intact. Thus, in the absence of any error by the adjudicator the High Court had correctly granted an Enforcement order.
  5. Therefore, the correct approach under CIPAA is to uphold an adjudicator’s decision unless there are issues relating to jurisdiction or there has been a serious breach of natural justice. The adjudicators’ decisions are binding on the parties until reversed by a court. Thus, the only defence to enforceability is if the findings offended the principle of natural justice or if the adjudicator lacked jurisdiction and, on that basis, the decision is set aside.
  6. In respect to the provisions under CIPAA to set aside an adjudication decision and to enforce the adjudication decision, the Federal Court finds no ambiguity. There is no provision for a stay of adjudication decision after an enforcement order is given. Applying the principles of interpretation of statutes as stated above, in the absence of a specific provision the court is not statutorily empowered to grant a stay if the adjudication decision is not set aside. To do so would be incongruent to the intent and purpose of CIPAA.
  7. Guided by the rules of statutory construction, and analysis of previous courts’ decisions the Federal Court is of the opinion that by interpreting CIPAA in the manner it had done, the Court of Appeal in Appeal No. 02(f)-2-01/2023(W) had acted in excess of its jurisdiction under the Act by granting the stay when the Adjudication Decision remained intact and not set aside. The parties to the adjudication have no option but to comply with the orders of the adjudication decision unless and only unless it has been set aside under Section 16 CIPAA. Any other construction and interpretation would defeat the purpose, object and intent of CIPAA.
  8. Having carefully considered the submissions of all parties the Federal Court agreed with the decision of the High Courts.
  9. It must be reiterated that the principles enunciated by Federal Court in View Esteem must be followed in an application for a stay of an adjudication decision pursuant to Section 16 CIPAA if an application to set aside the adjudication decision under Section 15 of the same Act has been made or the subject matter of the adjudication decision is pending final determination by arbitration or the court. In a construction dispute under CIPAA, the Court must at all times consider all factors and issues subject to the provisions of CIPAA.
  10. For Appeal No. 02(f)-2-01/2023(W), the Federal Court set aside the decision of the Court of Appeal and restored the decision of the High Court.

 

 

 

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