The appellant (View Esteem Sdn Bhd) was the developer of a block of condominiums and had appointed the respondent (Bina Puri Holdings Bhd) as the contractor.
Pursuant to the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”), the respondent had issued a Payment Claim against the appellant and the appellant had issued a Payment Response to dispute the Payment Claim.
The appellant had subsequently in its Adjudication Response, raised 3 new defences which were not raised in its Payment Response. Due to this, the Adjudicator had refused to consider them. The respondent’s claim allowed.
Dissatisfied, the appellant applied to the High Court to set aside the Adjudication Decision under Section 15 of CIPAA on the ground, inter alia, of breach of natural justice as the Adjudicator did not consider the 3 new defences. The High Court dismissed the appellant’s application and this was later affirmed by the Court of Appeal. The matter then went to the Federal Court.
Questions of Law
They are 8 questions of law and they can be categorised into three categories: jurisdictional challenge, the adjudicator’s right to exclude defences and stay issues. In gist, there are 3 main questions of law answered in this case.
(1) Whether a jurisdictional challenge as to the application of the Construction Industry Payment and Adjudication Act 2012 ("CIPAA") can be made any time by way of application or it can only be made upon the application to set aside an Adjudication Award under section 15 of the CIPAA?
(2) Whether a responding party is allowed to raise matters not raised in Payment Response during the filing of the Adjudication Response and whether the exclusion of such a defence by the adjudicator amounts to a denial of natural justice under section 15 of the CIPAA?
(3) Whether an application for a stay under section 16 of the CIPAA can be made concurrently with an application to set aside an award under section 15 of the CIPAA ?
Decision
(1) In respect of the first issue, the Federal Court ruled that a jurisdictional challenge as to the application of the CIPAA can be made any time by way of application. Section 15 relates specifically to a complaint that the adjudicator had "acted in excess of his jurisdiction" presupposing the existence of the adjudicator's jurisdiction under CIPAA in the first place and not to a complaint that of absolute lack of jurisdiction.
(2) For the 2nd issue, it is ruled that an adjudicator is not excluded from considering all the defences raised by a respondent in the adjudication response whether found in the first response under s. 6 of CIPAA or not. In the circumstances of this case, the adjudicator had acted in breach of natural justice in excluding and refusing to consider certain defences raised by the appellant, and his decision cannot stand for that reason. The decision is made based on, inter alia, the following grounds:-(i) The Federal Court labelled the Adjudication Claim, Adjudication Response and Adjudication Reply as “adjudication pleadings”. If the Adjudication proceedings were to be limited only to the Payment Claim and Payment Response, it would question the necessity for adjudication pleadings.
(ii) The HC’s and COA’s decisions that the Adjudication Response is limited to the Payment Response would be inconsistent with Section 6(4) of CIPAA which stipulates Payment Response is not mandatory to dispute the Payment Claim.
(iii) Unlike Singapore and Australia, there is no prohibitory clause in CIPAA which prohibits the adjudicator from considering “new defences”. The Respondent is entitled to raise in its Adjudication Response any matters related to the cause of action raised in the Payment Claim.
(iv) There would be no compromise to the expediency to the Adjudication proceedings and there would be no prejudice to Claimant whom is entitled to reply the new defences in its Adjudication Reply (being the final document to be lodged before Adjudication Decision).
(3) As regards to an application for stay under section 16, the Federal Court ruled that it is wholly appropriate that an application for stay under s. 16 of CIPAA be filed together with an application to set aside an award under s. 15 of CIPAA as a matter of practical utility for the High Court to make the appropriate order in a joint consideration of both. In interpreting s.16, the Federal Court also opined that a more liberal reading of s. 16 of CIPAA would allow some degree of flexibility to the courts to stay the award where there are clear errors, or to meet the justice of the individual case.
It is opined that the Federal Court’s decision in View Esteem has given bold and wide interpretations to the jurisdictional issues of an Adjudicator under CIPAA. While the decision has been applauded to have balanced the workings of CIPAA which was previously viewed to be over-tilted in favour of the Claimant, there is another school of thought which is of the view that the Federal Court has gone too far in doing so and has turned the tide in favour of Respondents in CIPAA cases.