Anas Construction Sdn Bhd v JKP Sdn Bhd and another appeal [2024] MLJU 53

Federal Court (Putrajaya)

Construction Contract – Adjudication Decision – Jurisdiction – Construction Industry Payment and Adjudication Act (CIPAA) – Appeal

1. The Appellant, Anas Construction Sdn Bhd, was appointed by the Respondent, JKP Sdn Bhd, as the main contractor for a residential development project in Penang pursuant to a construction contract dated 9 April 2015. The contract was for the sum of RM67,994,500 and involved the construction of a 24-storey apartment block consisting of 392 units.
2. During the course of the works, JKP raised concerns over structural defects, particularly involving cracked beams. As a result, Anas engaged two independent consultants Perunding Kejuruteraan MSY and Perunding ZNA to carry out inspections and prepare safety reports. The consultants confirmed that the building was structurally sound. Anas incurred RM855,074.21 (inclusive of GST) in consultant fees.
3. When JKP refused to pay this amount, Anas initiated adjudication proceedings under the Construction Industry Payment and Adjudication Act 2012 (CIPAA). In the Payment Claim dated 6 March 2019, Anas relied on clauses 28, 55 and 56 of the construction contract. The claim was disputed by JKP in its Payment Response on 22 March 2019, arguing that the fees did not fall within the scope of a “construction contract” under CIPAA and noting that the fees had been removed from the Final Revised Claim issued by the quantity surveyor.
4. Anas maintained its position in the Adjudication Claim, again relying on the same clauses. However, the adjudicator, in his decision dated 12 September 2019, found clause 36.6 of the contract to be most applicable, although this clause was not pleaded by Anas in either the Payment Claim or Adjudication Claim. Clause 36.6 stipulated that if independent testing confirmed the works complied with contractual requirements, the cost would be borne by JKP. Relying on this clause, the adjudicator allowed Anas’ claim and ordered JKP to pay RM806,673.78 (excluding GST), plus interest and costs.
5. JKP applied to the High Court to set aside the adjudication decision, but the High Court dismissed the application and instead granted enforcement. JKP appealed to the Court of Appeal, which reversed the High Court’s ruling, finding that the adjudicator had exceeded his jurisdiction by deciding the case on an unpleaded clause and had also breached natural justice by failing to invite parties to address clause 36.6.
6. Aggrieved with the Court of Appeal decision, Anas then appealed to the Federal Court.

1. Whether the strict rules of pleadings, as applicable in civil claims before the Malaysian Courts, apply in adjudicating proceedings under the Construction Industry Payment and Adjudication Act 2012?
2. Whether the dicta in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 prohibit an adjudicator from referring to a clause not stated in the Payment Claim or Adjudication Claim?
3. Whether the adjudicator’s failure to invite parties to submit on the unpleaded clause amounts to a denial of natural justice.

(1)  Whether the strict rules of pleadings, as applicable in civil claims before the Malaysian Courts, apply in adjudicating proceedings under the Construction Industry Payment and Adjudication Act 2012?

(a) The Federal Court answered in the negative, stating that adjudication proceedings under CIPAA are not governed by the strict rules of civil pleadings. However, adjudicators are still bound by the statutory jurisdiction conferred under sections 5, 6 and subsection 27(1) of CIPAA.

(b) The Court held that while civil court rules do not apply, paragraph 5(2)(b) imposes a mandatory requirement on claimants to specify the clause of the contract relied upon in the Payment Claim. Failure to do so deprives the adjudicator of jurisdiction –

“Section 5(2)(b) specifically requires the claimant to state the provision in the construction contract to which the payment relates. The clause relied upon forms part of the claimant’s cause of action.” (para [26])

“The issue of strict rules of pleading in civil claims to be complied with does not arise and is misplaced as section 27(1) has underlined the limited jurisdiction of the Adjudicator…” (para [50])

(c)  Thus, while adjudication is meant to be simple and efficient, it still requires that any claim must be clearly based on a stated contractual clause under section 5, or else the adjudicator has no jurisdiction to decide on it.

(2)  Whether the dicta in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 prohibit an adjudicator from referring to a clause not stated in the Payment Claim or Adjudication Claim?

(a) The Federal Court answered in the negative. It clarified that the relevant authority for limiting the adjudicator’s jurisdiction is not View Esteem, but section 27(1) of CIPAA itself.

(b) The Court stated that View Esteem merely affirmed the statutory framework under CIPAA, and does not itself impose a binding prohibition. The adjudicator’s jurisdiction arises solely from the Payment Claim and Payment Response under sections 5 and 6 –

“The reliance on View Esteem was misplaced. The Court in that case emphasized the statutory structure under sections 5, 6 and 27(1). It did not lay down a legal prohibition.” (para [30])

“The principle applies to every statute. The CIPAA applies only to ‘construction contracts’ as defined, and the ‘payment dispute’ must arise under a clause cited in the Payment Claim.” (para [31])

(c)  In this case, clause 36.6 was never mentioned in the Payment Claim or Adjudication Claim. The Court held that reliance on it fell outside the adjudicator’s authority –

“The adjudicator in the present appeal derived his jurisdiction from the statutory structure… Clause 36.6 was not part of the pleadings or referred to in any of the documents under sections 5 and 6.” (para [38])

“The reliance by the Adjudicator on clause 36.6 was not part of the Payment Claim and Payment Response, and thus he had no jurisdiction to decide the payment dispute based on it.” (para [40])

(3)  Whether the adjudicator’s failure to invite parties to submit on the unpleaded clause amounts to a denial of natural justice?

(a) The Federal Court answered in the negative, only in the sense that it found it unnecessary to resolve the appeal on natural justice grounds, as it could be fully disposed of on the basis of jurisdictional overreach alone.

(b) However, the Court acknowledged that there was a breach of natural justice when the adjudicator failed to alert parties that clause 36.6 would be used as the legal basis of the award –

“I agree that there was a breach of natural justice when the Adjudicator failed to raise and invite parties to submit on clause 36.6 before rendering his decision based on it.” (para [49])

(c)  Nonetheless, the Court concluded that a finding of excess of jurisdiction under subsection 27(1) was sufficient and declined to make a definitive ruling on the natural justice issue –

“Based on the analysis and views mentioned above, I find it unnecessary to answer the questions posed by the appellant for me to decide on this.” (para [51] appeal)

1. The Federal Court dismissed both of Anas Construction’s appeals and affirmed the Court of Appeal’s decision to set aside the Adjudication Decision. The court ruled that the adjudicator had exceeded his jurisdiction and breached natural justice. Costs of RM60,000 were awarded to the respondent.

1. Adjudicators under CIPAA are bound by the cause of action and contractual clauses cited in the Payment Claim and Payment Response.
2. Failure to base a decision strictly within the bounds of section 5 and section 6 of CIPAA constitutes excess of jurisdiction.
3. Invoking an unpleaded clause without giving parties the chance to respond is a violation of natural justice.
4. CIPAA proceedings, though informal and speedy, still demand procedural integrity aligned with statutory limits.