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Case Update: Challenging an Adjudication Decision: Unveiling the Quest for a Stay

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30 June 2023

CONSTRUCTION LAW
Construction Dispute – Adjudication Process – Payment Disputes – Stay of Adjudication – Construction Industry Payment and Adjudication Act 2012 (CIPAA)

ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd
Civil Appeal No. W-02(C)(A)-1801-11/2020|Court of Appeal
- see the grounds of judgment here

Facts ASM Development (KL) Sdn Bhd (the ‘Appellant’) had engaged Econpile (M) Sdn Bhd (the ‘Respondent’), for a construction project. Works were supposed to be completed by January 2018 however, the date of completion was extended to April 2018. Nevertheless, the works were not completed by the extended completion date and parties were not able to achieve an agreement on a further completion date. As a result, the Appellant’s architect retrospectively issued a certificate of non-completion entitling the Appellant to deduct or recover liquidated and ascertained damages for late completion of the works from the Respondent. Since the commencement of the works, the Respondent submitted 27 progress payment claims. However, the Appellant’s superintending officer only issued 15 interim payment certificates. The certification of the rest of the progress payment claims was withheld. The respondent then separately commenced adjudication proceedings against the Appellant for its progress payment claims no. 16 to 24 and progress payment claims no. 25 and 26. The adjudicator issued her adjudication decision in favour of the Respondent. Since the Appellant did not honour the adjudication decision, the Respondent instituted a claim to enforce the adjudication decision while the Appellant, dissatisfied with the adjudication decision, instituted a separate claim to set aside the adjudication. At the same time, the Appellant filed an originating summon to stay the adjudication decision pending Arbitration – which is the subject of this appeal. The Learned Judge in upholding the adjudication decision at the same time dismissed the application to stay of the adjudication decision pending arbitration on the grounds that, amongst others, there were no clear errors in the adjudication decision that would warrant a stay, leading to the present appeal before the Court of Appeal.

Issue Whether the Appellant was entitled to a stay of the adjudication decision pending arbitration?

Held In dismissing the appeal, Learned Judge of the Court of Appeal, YA Dato’ Abu Bakar Bin Jais held that the adjudicator in this present case did not make any clear errors in the adjudication decision and therefore the justice of the case does not warrant staying the decision. The Court of Appeal held that case law authorities[1] in Malaysia have proven that an adjudication decision will not be simply stayed without cogent reasons. Further, the Court of Appeal held that the fact that the arbitration proceeding had been initiated alone, does not necessarily mean that a stay of the adjudication decision pending arbitration must be granted. In coming to its decision, the Court of Appeal considered the intent of the Construction Industry Payment and Adjudication Act 2012 (‘CIPAA’) which is meant for a speedy resolution to the dispute of contractors so as to ensure cash flow. The Court of Appeal emphasised that in respect of the stay of the adjudication decision as requested by the Appellant, there are only two grounds that will merit such application and it must be strictly applied so as not to defeat the intention of introducing CIPAA. First, there is clear error on the part of the adjudicator in respect of the adjudication decision that was pronounced. Second, the justice of the case demands that the adjudication decision be stayed in any event. Since the Court of Appeal could not say the adjudicator had made clear errors in his adjudication decision and they did not think the justice of the case merits the adjudication decision to be stayed, hence the appeal was unanimously dismissed.

Zul Rafique & Partners
{30 June 2023}
[1] Subang Skypark Sdn Bhd v Arcradius Sdn Bhd [2015] 11 MLJ 818

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