Case Updates

Case Update: Appeal Court Confirms Right to Cross-Claim in Construction Payment Dispute

Share:

Print
30 September 2024

CONSTRUCTION LAW
Construction Industry Payment and Adjudication Act 2012 - Adjudication proceedings - Cross-claim - Breach of contract - Enforcement of adjudication

Tera VA Sdn. Bhd. v Ayam Bintang Istimewa Sdn. Bhd.
Civil Appeal No. B-02(C)(A)-1948-11/2023| Court of Appeal
- see the grounds of judgment here

Facts Tera VA Sdn. Bhd. (the ‘Appellant’) contracted with Ayam Bintang Istimewa Sdn. Bhd. (the ‘Respondent’) to install a Solar Photovoltaic Solution (SPS) at the Respondent’s factory in Kuantan, Pahang, for a total contract value of RM613,000, divided into two phases. The Appellant claimed that it completed Phase 1 but received only RM98,250 out of the RM294,750 due, accusing the Respondent of breaching the contract by failing to make full payment. The Respondent, however, countered that the Appellant’s installation work caused damage to the factory roof and filed a cross-claim for RM695,580, which included the costs of roof repairs. The Appellant initiated adjudication proceedings under the Construction Industry Payment and Adjudication Act 2012 (CIPAA) to recover the outstanding payment, while the Respondent responded with a counterclaim for the repair costs. At the adjudication, it was held that the Appellant had failed to succeed in their overall claim. Unsatisfied, the Appellant filed an application to set aside the adjudication award, while the Respondent filed its application to enforce. The learned High Court Judge held that the Appellant had failed to establish the allegations that the Respondent had misrepresented facts or that the Appellant was denied the right to be heard during the adjudication process. The High Court granted the Respondent’s application to enforce the adjudication decision. Hence, this appeal.

Issues 1. Whether the Respondent could file a cross-claim in response to the Appellant’s adjudication claim?
2. Whether that cross-claim could exceed the Appellant’s original claim, effectively making the Respondent the substantive claimant?
3. Whether the Adjudication Decision was improperly procured through Fraud or Denial of Natural Justice?

Held In dismissing the appeal, YA Datuk See Mee Chun, held that the Respondent had the right to file a cross-claim in response to the Appellant’s adjudication claim under the CIPAA 2012. The Appellate Court emphasized that a Respondent can raise a cross-claim as long as it is within the adjudicator’s jurisdiction. However, the Court of Appeal noted that the Respondent’s cross-claim could not exceed the Appellant’s claim. Further, The Court of Appeal agreed with the High Court’s finding that there was no sufficient evidence to prove that the adjudication decision was procured through fraud. The Court of Appeal also found that there was no breach of natural justice as the Appellant had the opportunity to present its case during the adjudication proceedings and had not provided critical information, such as whether its cost estimates included insulation or not. While the Court of Appeal acknowledged that the adjudicator may have acted in excess of jurisdiction by awarding an amount where the cross-claim exceeded the Appellant’s claim, it noted that the Appellant had not raised this as a ground in its setting-aside application. Therefore, the Court of Appeal did not set aside the adjudication decision on this ground. Hence, the appeal was ultimately dismissed.

Zul Rafique & Partners
{30 September 2024}

Please email your details to [email protected] if you would like to subscribe to our Knowledge Centre.

Let's Connect!
➭ LINKEDIN: Zul Rafique & Partners
➭ INSTAGRAM: @zrplaw