The recent Federal Court case of Anas Construction Sdn Bhd v JKP Sdn Bhd raises interesting perspectives on the efficiency of adjudication. Parties aspire for expeditious resolution of disputes; however, where a stringent and literal approach to the construction of contractual clauses may sometimes thwart the expeditious resolution of disputes.
Brief Facts
Anas Construction (“the Appellant”) was the main contractor for a 24-storey flat construction project appointed by JKP (“the Respondent”); a PWD standard form contract applied. Several disputes relating to professional fees arose. The Appellant terminated the contract on 15 May 2017. Adjudication ensued. Conflicting decisions by the High Court (“HC”) and the Court of Appeal (“CA”) in respect of the adjudication, were handed down.
Adjudication Process
The Appellant submitted a Payment Claim; it was denied by the Respondent, resulting in adjudication. The Adjudicator’s Decision favoured the Appellant, prompting applications from both parties — the Appellant sought enforcement; the Respondent applied to set aside the decision, citing a denial of natural justice and excess of jurisdiction.
Issues before the Federal Court
At the Federal Court, the court was posed with three questions of law that arose in relation to the Construction Industry Payment And Adjudication Act 2012 (“CIPAA 2012”):
- Do the strict rules of pleadings apply in adjudication proceedings under CIPAA 2012?
- Does the dicta in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 preclude an adjudicator from relying on a specific clause not referenced in the Payment Claim and Adjudication Claim?
- Does consideration of such a clause amount to a breach of natural justice or an act excess in jurisdiction, where parties are not invited to submit on the clause?
Federal Court’s Majority Judgment
The majority emphasised the limitations of the adjudicator’s powers under section 27 of CIPAA 2012. Under this provision, jurisdiction is limited to sections 5 and 6 of CIPAA 2012, which deal respectively with the Payment Claim and Payment Response.
The majority found that the adjudicator’s determination of the issue based on clause 36.6, which was not in the Payment Claim, was in excess of jurisdiction. Further the failure to invite submissions on clause 36.6 breached natural justice.
Minority Judgment Position
In contrast, the minority, led by Mary Lim FCJ, argued against strict pleading requirements in adjudication, asserting that the entire contract, including clause 36.6 was “pleaded”.
Her Ladyship also contended that the CA misconstrued the principle in View Esteem v Bina Puri, clarifying that an adjudicator’s jurisdiction extends beyond the subject matter of the claim.
The minority further rejected the claim that there was a breach of natural justice due to the sdjudicator’s decision on clause 36.6 without inviting submissions. Clause 36.6, the minority held was, technically speaking, already before the parties, resulting in no breach of natural justice.
Conclusion
The majority of the Federal Court took a strict and narrow approach towards the need to plead in an adjudication claim. This raises concerns about the efficiency of adjudication. The minority view, however, emphasises practical considerations, suggesting a more liberal and less technical approach to adjudication proceedings. The tension between timely dispute resolution and comprehensive consideration of contractual terms remains a challenge in adjudication proceedings.
This case reflects the tensions in applying CIPAA 2012 and raises pertinent questions for adjudicators as to the ambit of the reference to them. An expeditious adjudication 3 overturned by a lengthy court challenge detracts from an expeditious determination. This case underscores the ongoing need for clarity and consistency in adjudication processes within the construction industry.
For further information, please contact:
Hiral Sanghvi, Shearn Delamore & Co.
hiral.sanghvi@shearndelamore.com
