It is widely thought that a ‘loss and expense’ claim arises out of the employer’s delay is not claimable under CIPAA as a “loss and expense” claim is often regarded as special damages and not a payment for work done or services rendered claimable under CIPAA.
In this case, the Kuala Lumpur High Court of Malaya clarified that an Unpaid Party / Claimant may claim for loss and expense arising from delays beyond its control in a CIPAA Adjudication Proceeding.
Syarikat Bina Darul Aman Berhad & Anor vs Government of Malaysia [2017] MLJU 2381 | [2017] MLJU 673 | [2017] 1 LNS 559
Background Facts
The background facts of this case is as follow:
- The Government of Malaysia (“Employer“) had appointed Syarikat Bina Darul Aman Bhd (“Contractor“) as the contractor for the construction and completion of Trans Eastern Kedah Interland Highway based on PWD 203A Standard Form of Contract (Rev 10/83).
- During the progression of work, the Employer had granted 5 certificates of extension of time (EOT) to the Contractor.
- Upon the completion of the works, the Contractor submitted its final claim of RM22,188,726.00 but the Employer only allowed the claims of RM137,512.95.
- Dissatisfied with the Employer’s decision, the Contractor commenced a claim pursuant to CIPAA 2012 against the Employer for the amount of RM24,061,739.29 as a Claimant whereby RM8,323,135.18 is the Contractor’s claim of “loss & expense”.
- Unordinarily, the Adjudicator dismissed the Claimant’s claims in toto and reasoned that the “Loss and Expense” claim arising out of extension of time fall outside the purview of CIPAA 2012 and the Adjudicator does not have the jurisdiction to adjudicate the claim;
- Dissatisfied with the Adjudicator’s findings and the Adjudication Decision, the Claimant sought to set aside the Adjudication Decision under Section 15 of CIPAA 2012 and a declaration that the Claimant is entitled to recommence CIPAA Adjudication Proceeding against the Respondent.
High Court Decision
The High Court held that the “loss and expense” claim comes within the ambit of CIPAA 2012 in the instances where the construction contract specifically allows the claim, e.g. the PAM and JKR / PWD standard form of contract.
On this basis, the High Court set aside the Adjudication Decision on ‘loss and expense’ as the Adjudicator had wrongly refused to assume jurisdiction and there has been a breach of natural justice in not hearing the Claimant’s loss and expense claim:-
[70] A refusal to assume jurisdiction and decide on the matter submitted to it on the erroneous understanding of his lack of jurisdiction would be equally a breach of natural justice in that the claimant’s claim, in this case, under claim no. 4 for “loss and expense claim“ was not heard at all when it has been properly submitted for adjudication.
[76] I appreciate that whilst a “loss and expense claim” may in some instances be a claim for special damages arising out of breach by the principal, there are cases where contractually such a claim is allowed to be “added to the contract sum“ or as in some cases like the present PWD 203A standard form of contract it is to be claimed under a final account and hence payable as part of the amount claimable for the additional costs incurred for work done.
[78] Clause 44 to the PWD 203A Standard Form of Contract signed by the parties provides as follows:
44. Loss and Expense Caused by Delays
If the regular progress of the Works or any part thereof has been materially affected by reason as stated under Clause 43 (c), (f) or (i) hereof (and no other), and the Contractor has incurred direct loss and/or expense for which he would not be reimbursed by a payment made under any other provision in this Contract, then the Contractor shall within one (1) month of the occurrence of such event of circumstance give notice in writing to the S.O. of his intention to claim for such direct loss or expense together with an estimate of the amount of such loss and/or expense, subject always to Clause 48 hereof. (emphasis added)
[84] I have no problem associating with and adopting the views expressed by the two seminal books on adjudication in Malaysia. Based on the principles enunciated above, there is no good reason why payments pertaining to “loss and expense claims” due to the delay in completion of works cannot come within the ambit of CIPAA. Indeed, “payment” under s. 4CIPAA means “a payment for work done or services rendered under the express terms of a construction contract.“Clauses 44 and 48(a) of the PWD 203A Standard Forms of Contract are the express terms under which the payment claim was made.
[87] As this is a case where the adjudicator had erroneously held that he had no jurisdiction under CIPAA to hear the payment claim, this court is at liberty to interfere with the decision made as it is a decision that goes towards jurisdiction. Not to hear a dispute submitted for his adjudication is equally a breach of natural justice for the adjudicator did not hear the parties at all.
Premised on the foregoing, the High Court ordered the Claimant shall be entitled to re-commence adjudication proceedings on the “loss and expense” claim with a new adjudicator to be appointed by the Director of AIAC.