CONSTRUCTION LAW

Anas Construction Sdn Bhd v. JKP Sdn Bhd & Another Appeal [2024] 2 CLJ 665 [Federal Court]

Brief facts

The appellant, Anas Construction was appointed as the main contractor by the respondent, JKP for the construction and completion of a project (‘contract’). In carrying out the project, JKP engaged independent professional consultants to provide a safety report. JKP failed, neglected or refused to pay the consultants’ fees incurred by Anas Construction resulting in the matter being brought to the adjudicator for adjudication under the Construction Industry Payment and Adjudication Act 2012 (‘CIPAA’). In the payment claim, Anas Construction pleaded cls. 28, 55 and 56 of the contract to establish its cause of action against JKP. JKP contended that the relevant clause in relation to the Anas Construction’s claim would be cl. 36.5 of the contract which was not relied upon by Anas Construction. The adjudicator allowed Anas Construction’s claim and ordered JKP to pay the outstanding amount as sought in the payment claim. In coming to the adjudication decision, the adjudicator had relied on cl. 36.6 of the contract rather than cls. 28, 55 and 56 of the contract as cl. 36.6 was the most applicable to the Anas Construction’s claim. Anas Construction filed an application to enforce the adjudication decision whereas JKP dissatisfied with the adjudication decision and filed an application to set aside the decision.

High Court’s Decision

Anas Construction’s application to enforce the adjudication decision was allowed and JKP’s application to set aside the decision was dismissed.

Court of Appeal’s Decision

The High Court’s decision was set aside on the ground that the adjudicator had acted in excess of his jurisdiction when deciding the adjudication on the clause of the contract that was not relied upon by Anas Construction in its payment claim and adjudication claim to support its cause of action. Further, the adjudicator omitted to invite the parties to submit on cl. 36.6 of the contract relied upon by the adjudicator to support his decision was a denial of justice.

Federal Court’s Decision

Anas Construction aggrieved by the Court of Appeal’s decision appealed to the Federal Court. Leave to appeal was granted on the following questions of law, namely:

(i) whether the strict rules of pleadings, as applicable in civil claims before the Malaysian courts, apply in adjudicating proceedings under the CIPAA (‘Question 1’);

(ii) whether the dicta in View Esteem Sdn Bhd v. Bina Puri Holdings Bhd prohibited 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 (‘Question 2’); and

(iii) in a CIPAA award, whether 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, amounted to a breach of natural justice or an act of excess of its jurisdiction, such that the said award ought to be set aside.

(‘Question 3’).

The Federal Court by a majority of 2-1 dismissed the appeal and affirmed the Court of Appeal’s decision.

Majority Judgment:

Excess of Jurisdiction

The adjudicator had relied on cl. 36.6 of the contract in allowing Anas Construction’s claim. This clause was not relied upon by Anas Construction in the payment claim nor mentioned by JKP in the payment response. The adjudicator had exceeded his jurisdiction in deciding the dispute based on cl. 36.6 of the contract.

Both parties had not given written consent to extend the adjudicator’s jurisdiction to adjudicate the matters relying on the cause of action established in cl. 36.6 of the contract. If the adjudicator found that the cause of action was established under a different clause of the contract, as in the present case, the matter should be brought to the attention of the parties and if agreed, written consent be issued to clothe the adjudicator with the jurisdiction to adjudicate the matters based on the cause of action under cl. 36.6. On this ground of want of jurisdiction alone, the adjudication decision could not stand. The adjudicator had acted in excess of his jurisdiction.

Denial of Natural Justice

It is undisputed that parties were not given the opportunity to submit the cause of action under cl. 36.6 before making the adjudication decision was a denial of natural justice.

Dissenting Judgment by (retired) Federal Court Judge Mary Lim Thiam Suan (‘FCJ’),

Question 1:

The FCJ was of the view that the strict rules of pleadings do not apply in adjudication since it was the dispute that arose from the payment claim and not the payment claim itself per se that was referred to adjudication. It would be erroneous and misleading to describe or characterize the payment claim and the payment response as pleadings. Even the adjudication claim and adjudication response were not pleadings as one understood pleadings to be under the rules of civil procedure. Thus, the answer for Question 1 must be in negative.

Non-citing or even the citing of a wrong clause or provision of a construction contract does not and cannot render the adjudicator bereft of jurisdiction. Clause 36.6 was already cited in the payment claim and adjudication claim. Had these documents been properly examined, the Court of Appeal would clearly not have come to the decision that it did.

A fuller picture of the dispute and the concerns raised emerges when one examines the correspondence exchanged, especially the letters sent by the appellant. These letters were part of the payment claim and adjudication claim and due and proper regard must be given to them. Thus, cl. 36.6 was actually “pleaded” before the adjudicator and the adjudicator has not gone on a frolic of his own thus acting without jurisdiction and committed a material breach of natural justice.

Question 2:

The FCJ was of the view that the Court of Appeal had conflated subject matter jurisdiction and its conclusion is erroneous as the dicta in View Esteem has been mis-appreciated by the Court of Appeal. The effect of this court’s decision in View Esteem in respect of s. 27 of the CIPAA is simply this – that the adjudicator’s jurisdiction in relation to any dispute is limited to the matter of the claim which was referred to adjudication under ss. 5 and 6 of the CIPAA. The subject of the claim (payment claim and payment response) is the limiting factor. The FCJ did not find Anas Construction’s failure to refer to cl. 36.6 of the contract was fatal to its case as the subject of the claim. The FCJ understood “grounds of the claim” to be the supporting basis for the claim and the insufficiency of details of the claim in the present appeals did not deprive the adjudicator of jurisdiction.

Question 3:

Any alleged breach of natural justice must be examined critically for materiality and significance to the decision actually made by the adjudicator. Clause 36.6 which was part of cl. 36 and the adjudicator was entitled to look at the whole cl. 36 and the rest of the construction contract. Such an examination was entirely permitted under the remit of View Esteem. The adjudicator was therefore not in breach of any rule of procedural fairness when he did not invite the parties, especially JKP, to comment on cl. 36.6.

Conclusion

The adjudicator had exceeded his jurisdiction in deciding to rely on the clause that was not specifically referred by the parties in the payment claim or the payment response.

Both parties must give written consent to extend the adjudicator’s jurisdiction to adjudicate the matters when relying on the cause of action which was not specifically referred by the parties.

Parties were not given the opportunity to submit the cause of action which was not specifically referred by the parties in the payment claim or the payment response but relied upon by the adjudicator before making the adjudication decision was a denial of natural justice.

INTISARI MULIA ENGINEERING SDN BHD v. TUV SUD (MALAYSIA) SDN BHD & ANOTHER APPEAL [2025] 5 CLJ 46 (Court of Appeal)

Case Digest:

“Construction contract made in writing” under s. 2 of the Construction Industry Payment and Adjudication Act 2012 should be construed widely and to include written correspondences between parties in relation to construction contract. By combining the meaning of the words that form the said phrase, it simply means that a construction contract created either in typewriting (or even handwritten), printing, lithography, photography, electronic storage or transmission or any other method or recording information or fixing information in a form capable of being preserved. As it involved a construction contract which was an agreement between two parties that created an obligation to perform the construction work, it had to be communicated to the other party made by hand or electronically, resulting in a permanent record or in a form that could be seen and provided proof of receipt and formally communicated through mediums, either physically sent or by other means such as mail, email or electronic procurement systems where verification of the receipt is provided.

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