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Case Update: No provisions in CIPAA for a stay of adjudication decision after an enforcement order is given

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15 April 2024

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

Econpile (M) Sdn Bhd v ASM Development (KL) Sdn Bhd
Civil Appeal No. 02(f)-2-01/2023(W) | Federal Court
- see the grounds of judgment here

Facts Econpile (M) Sdn Bhd (the ‘Appellant’) was engaged by ASM Development (KL) 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 Respondent’s architect retrospectively issued a certificate of non-completion entitling the Respondent to deduct or recover liquidated and ascertained damages for late completion of the works from the Appellant. Since the commencement of the works, the Appellant submitted 27 progress payment claims. However, the Respondent’s superintending officer only issued 15 interim payment certificates. The certification of the rest of the progress payment claims was withheld. The Appellant then separately commenced adjudication proceedings against the Respondent 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 Appellant. Since the Respondent did not honour the adjudication decision, the Appellant instituted a claim to enforce the adjudication decision while the Respondent, dissatisfied with the adjudication decision, instituted a separate claim to set aside the adjudication. At the same time, the Respondent 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. The Court of Appeal allowed the appeal, thus setting aside the Adjudication Decision even after an enforcement order under s. 28 of the Construction Industry Payment and Adjudication Act 2012 (CIPAA) had been granted. 

Issue 1. Whether a stay can be granted under s. 16(1)(b) CIPAA  after the adjudication decision is enforced under s. 28 CIPAA as an Order of the Court.

Held In allowing the appeal, Justice Dato’ Sri Hasnah binti Dato’ Mohammed Hashim in delivering the judgement of the Federal Court held that there were merits in the issue raised by the Appellant. The Federal Court examined the intent and object of CIPAA and held that the piece of legislation was crafted to address issues common in the construction industry and that the Act was designed to assist the parties in construction dispute to be paid expeditiously for the work which they had carried out. The Federal Court emphasised that 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. Further, the Federal Court held that the only defence to enforceability was if the findings offended the principle of natural justice or if the adjudicator lacked jurisdiction. Therefore, there is no provisions in CIPAA for a stay of adjudication decision after an enforcement order is given, and 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. Hence the decision of the Court of Appeal was set aside and the Federal Court restored the decision of the High Court.

Zul Rafique & Partners
{15 April 2024}

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