LEAP MODULATION SDN BHD v POP CONSTRUCTION SDN BHD [2018] MLJU 773

 

LEAP MODULATION SDN BHD v POP CONSTRUCTION SDN BHD [2018] MLJU 773

Court of Appeal (Putrajaya)

Uplifting concept of stare decisis

Facts

1.    The Appellant named the Respondent as the main contractor for a project dubbed “Proposed Construction of 1 Commercial Block of 29 Storeys consisting of-

(i)            twenty-two (22) floors of office units and one (1) floor of facilities;

(ii)           five (5) podium floors of car parks,

(iii)          two (2) floors of basement car park;

(iv)         one (1) floor for mechanical,

on Lot 41096, Jalan Aman Damai, Mukim Petaling, Kuala Lumpur.

2.    As the party who had not been paid, the Respondent filed a claim under the Construction Industry Payment and Adjudication Act 2012 (“CIPPA”) for the amount of RM1,821,680.60 under interim certificates No. 17R and No. 18. Subsequently, the Respondent served a Payment Claim on the Appellant.

3.    In response, the Appellant asserted that the Appellant was entitled to compensation for the Respondent’s default in carrying out the construction contract, which resulted in remedial work to complete the same.

4.    The Payment Response did not include any information about the cost expended by the Appellant for the repair works.

5.    On 13.6.2016, the Respondent gave the Appellant notice of adjudication, requesting payment under interim certificates 17R and 18, totaling RM1,930,981.43 (including GST).

6.    On August 29, 2016, the learned Adjudicator was subsequently appointed.

7.    The learned Adjudicator had to decide whether she had the authority to handle the set-off claims made by the Appellant and detailed in the adjudication answer even though they were not expressly pleaded in the payment response.

8.    However, the learned Adjudicator recognised the injustice that would result if she ignored the certified 19 to set-off the sum of RM351,646.68.

9.    She then adopted the “for the sake of completeness approach” by asserting that she would have permitted the aforementioned set off if she had been given the opportunity to do so.

10.   However, the learned Judge disagreed with the Adjudicator in relation to the claim of RM351,646.68 from the interim certificate no. 19 against payment of Payment Certificate nos. 17R and 18.

11.  It is undeniable, that the Interim Certificate 19 was issued on January 19, 2016, prior to the Respondent serving the Payment Claim on 2 February 2016.

12.  Therefore, the learned Judge subsequently divided that portion of the learned Adjudicator’s award and permitted the set-off of RM351,646.68 from the amount of RM1,930,981.43 that had been adjudicated, resulting in a reduced amount of RM1,579,334.75.

Issue

Whether the Court of Appeal are bound by the decision of the Federal Court.

Ratios

1.    Following the learned Judge’s ruling, the Federal Court issued its first judgement under CIPAA on 6 November 2017, in View Esteem Sdn Bhd v. Bina Puri Holdings Berhad (2017) 1 LNS 1378 (“View Esteem Case“), where the following legal issues were taken into account:

“(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 whether such an application can only be made upon the application to set aside an Adjudication Award under section 15 of the CIPAA;

(2) Whether section 41 of the CIPAA operates to exclude any proceedings from the operation of the CIPAA if the whole or any part of such a claim has been brought to court or Arbitration prior to the coming into force of the CIPAA;

(3) Whether section 6(4) of the CIPAA allows a responding party to raise matters not raised in Payment Response under section 6(2) of the CIPAA during the filing of the Adjudication Response under section 10(1) of the CIPAA;

(4) If the answer to question (3) above is in the affirmative, whether the exclusion of a defence that has not been raised in the Payment Response under section 6(4) but raised under section 10(1) of the CIPAA amounts to a denial of natural justice under section 15 of the CIPAA;

(5) Whether the adjudicator has the power under section 26 of the CIPAA to remedy any non-compliance with section 6(2) of the CIPAA;

(6) If the answer to question (5) is in the affirmative, whether the exclusion of a defence that has not been raised in the Payment Response under section 6(4) but raised under section 10(1) of the CIPAA amounts to a denial of natural justice under section 15 of the CIPAA;

(7) Whether an application for stay or partial stay on terms under section 16 of the CIPAA can be granted to remedy an injustice caused by a breach of natural justice or errors arising in an adjudication award; and

(8) 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 or whether an application for a stay under section 16 of the CIPAA can only be made after an application to set aside an award under section 15 of the CIPAA is made.”

2.    The Federal Court’s decision on whether an Adjudicator was prohibited from considering defences raised in the adjudication response rather than the payment response under Section 10 CIPAA is relevant herein, as it is a matter of whether by doing so would violate natural justice.

3.    The Appellant’s counsel claimed that the Federal Court’s ruling in View Esteem Case applies in the current appeal.

4.    To summarise, the learned Adjudicator had used Section 27(1) of CIPAA to remove the four facts from consideration, according to the factual matrix.

5.    The learned Adjudicator carried out the same action in the View Esteem Case as well.

6.    The Court acknowledge the decision in the View Esteem Case and their justifications were appropriate and correct given that the legislation at the time was to apply the plain interpretation of the language in Section 27(1) of CIPAA.

7.    Then the learned Adjudicator declined to hear the three disputed set-off items as she was undoubtedly following the law as it was at that time.

8.    The Court found some merit in the position taken by the Respondent that the Appellant had not suffered material and permanent prejudice by the learned Adjudicator’s refusal to examine the three items of set off because the same could have been resolved in litigation as well as in arbitration as permitted by Section 37 of CIPPA.

9.    This is because adjudication awards are of a “temporary finality” in nature and as for that, the principle of stare decisis is applicable.

10.  The implication of the Federal Court’s ruling in View Esteem Case is that an adjudicator violated natural justice when he or she ignores the defences that were raised in the adjudication response rather than the payment response.

11.  The principle of stare decisis is applicable since the factual matrix in both cases is identical and cannot be separated in any way.

Decision 1.    The Federal Court allowed the appeals and set aside the orders of the High Court as well as the Adjudicator with no order as to cost.
Key Take Away

1.    The Latin phrase stare decisis means “to hold fast to what has been decided.”  It is a principle applied in all legal disputes and court cases.  A doctrine is only an idea or a directive; it is not an unbreakable law.

2.    In Malaysia, Edgar Joseph Jr. FCJ stated in Co-operative Central Bank Ltd. v. Feyen Development Sdn Bhd [1977] 2 MLJ 829 6 that the doctrine is “a cornerstone of our system of jurisprudence”.   Also, the Court of Appeal is not permitted to overturn a decision by the Federal Court on the ground that such decision was rendered as pre incuriam; a judgement of a court without any relevant reference made to an earlier judgement/precedent by the court of the same hierarchy pertaining to the same subject matter.

 

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