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Case Update: Navigating an Adjudicator’s authority when dealing with claims under CIPAA

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31 January 2024

CONSTRUCTION LAW
Construction Contract – Adjudication Decision – Jurisdiction – Construction Industry Payment and Adjudication Act (CIPAA) – Appeal

Anas Construction Sdn Bhd v JKP Sdn Bhd
Civil Appeal No. 02(f)-3-01/2023(P) | Federal Court
- see the grounds of judgment here

Facts Anas Construction Sdn Bhd (the ‘Appellant’) was contracted by JKP Sdn Bhd (the ‘Respondent’) for a construction project. Dispute arose when the Respondent refused to pay fees to an independent consultant engaged by the Appellant for reports on cracked beams and safety. The Appellant, relying on clauses 28, 55, and 56 of the Construction Contract, filed an Adjudication Claim under the Construction Industry Payment and Adjudication Act (CIPAA). The Respondent, however, contended that the relevant clause in relation to the Appellant’s claim would be clause 36.5 of the Contract which was not relied upon by the Appellant. The Adjudicator, contrary to submissions from both parties, based the decision on clause 36.6 as he found that the clause was most applicable to the Appellant’s claim. The High Court initially enforced the decision, but the Court of Appeal set it aside, citing the Adjudicator's exceeding jurisdiction. Further, the omission to invite submissions on clause 36.6 was deemed a denial of natural justice. Aggrieved with the Court of Appeal decision, the Appellant appealed against the decisions. Hence, this appeal.

Issues 1. Do the strict rules of pleadings, as applicable in civil claims before the Malaysian Courts, apply in adjudicating proceedings under the Construction Industry Payment and Adjudication Act 2012?
2. Whether the dicta in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 prohibit an adjudicator from referring to a specific clause in a construction contract when allowing the claim when the said clause was not specifically stated in the Payment Claim and Adjudicating Claim by the claiming party?
3. In a CIPAA Award, does the adjudicator’s consideration of a specific clause in the construction contract, not specifically stated in the Payment Claim or Adjudication Claim, without inviting parties to further submit on the said clause, amount to a breach of natural justice or an act excess in the jurisdiction, such that the said Award ought to be set aside?

Held In a majority decision, the Federal Court dismissed the appeal with YA Dato’ Nordin Bin Hassan, Federal Court Judge delivering the judgement in which the Federal Court emphasised the limited jurisdiction of the Adjudicator under s. 27(1) of CIPAA whereby the Adjudicator's authority is confined to matters referred to in s. 5 and 6 of CIPAA, which involve the Payment Claim and Payment Response. In this particular dispute, the Adjudicator has exceeded his jurisdiction by relying on a clause that was not part of the original dispute. An adjudication beyond the matters referred to needs written consent from the parties as required under s. 27(2) of the same Act which was clearly absent in this dispute. Further, in respect to the allegation of a denial of natural justice, the Federal Court held that the non-giving of the opportunity by the Adjudicator for the parties to submit or canvass the issue of cause of action under clause 36.6 before making the decision, is a denial of natural justice. The Federal Court also held that the issue of strict rules of pleading in civil claims to be complied with does not arise and is misplaced as section 27(1) has already underlined the limited jurisdiction of the Adjudicator. Hence, the appeal was dismissed.

Zul Rafique & Partners
{31 January 2024}

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