Recommencing CIPAA Proceeding after the Adjudication Decision is being Set Aside?

The enactment of Construction Industry Payment and Adjudication Act 2012 allows the Contractor to recover payment from Employer speedily.

In exceptional case, a CIPAA Adjudication Decision could be set aside under Section 15 of CIPAA 2012 where the Adjudicator had committed the following error:

Section 15 of CIPAA 2012: Improperly procured adjudication decision

An aggrieved party may apply to the High Court to set aside an adjudication decision on one or more of the following grounds:

(a) the adjudication decision was improperly procured through fraud or bribery;

(b) there has been a denial of natural justice;

(c) the adjudicator has not acted independently or impartially; or

(d) the adjudicator has acted in excess of his jurisdiction.

In the circumstance where the Adjudication Decision had been set aside by the Court, could the party proceed to recommence / initiate 2nd CIPAA proceeding against the Employer or the party has to initiate a court and/or arbitration proceeding?

In the case of case Wong Huat Construction Co v Ireka Engineering & Construction Sdn Bhd, the High Court clarified that upon the success setting aside of adjudication decision application, the parties are restored to their original position as though the Adjudication had never taken place. As such, the parties are at liberty to commence a fresh adjudication proceeding without being caught as a “repeated claim”.

Wong Huat Construction Co v Ireka Engineering & Construction Sdn Bhd [2018] 7 MLJ 659

Background Facts

1. Ireka Engineering & Construction Sdn Bhd (“Defendant“) appointed Wong Huat Construction Co (“Plaintiff“) as the subcontractor for the supply and application of painting works for a proposed office and hotel development in Kuala Lumpur for RM1,019,570.40.
2. The Plaintiff alleged that there had been variation of works and the Plaintiff had performed additional works of RM169,349.17.
3. A payment dispute subsequent arose where the Plaintiff alleged that the Defendant had only made payment of RM906,376.58 and RM23,066.59 as retention sum.
4. Subsequently, the Plaintiff commenced a CIPAA Payment Claim against the Defendant for the outstanding sum of RM231,277.17.
5. In the Adjudication Response, the Defendant sought to introduce the revised payment certificate and Final Certificate. The Defendant conceded that the final contract sum payable to the plaintiff is only RM936,167.81 which consists of RM770,022.78 for the works and RM166,145.03 for the additional works. Therefore, according to the Defendant only RM29,791.73 is due and payable to the Plaintiff.
6. The Plaintiff contended the unilateral remeasurement and objected against the inclusion of the 2 payment certificates.
7. Subsequently, the Adjudicator decided in favour of the Plaintiff a sum of RM29,791.73 out of the claimed sum of RM231,277.10
8. Dissatisfied with the Adjudicator’s decision, the Plaintiff sought to set aside the Adjudication Decision pursuant to Section 15 of CIPAA.

Whether a successful claimant for a lower sum is an “Aggrieved Person” pursuant to Section 15 of CIPAA 2012?

Firstly, the High Court has to consider whether a successful claimant, having received a much smaller sum than what it claimed is an ” aggrieved person” within the meaning of Section 15 of CIPAA 2012.

Having considered a plethora of authorities in foreign jurisdiction and the ordinary dictionary meaning of the words, the High Court held that a successful claimant, having received a much smaller sum than what it claimed, fit within the meaning of an “aggrieved person” within the meaning of Section 15 of CIPAA 2012:-

[24]  One can say quite confidently that ‘an aggrieved person’ is not confined to a person against whom an adjudication decision is made. It may well include a person who has received an adjudication decision in his favour but who is aggrieved as in he should have received more if for instance there has not been a denial of natural justice. Here we are not talking about the merits of applying to set aside but merely the locus to set aside an adjudication decision. It would also apply to a person whose whole payment claim has been dismissed by the adjudicator.

[43]  One can also surmise that ‘an aggrieved party’ should not be confined to the party in whose favor an adjudication decision is given when one considers that the rationale of s 15 of the CIPAA was to address any procedural breaches which might has caused injustice to any party. Surely it cannot be the intention of Parliament that an adjudication decision is immune from judicial scrutiny as long as the adjudicator awards some amount, be it nominal or otherwise, to the unpaid party.

See also: Setting Aside of CIPAA 2012 Adjudication Decision by the Claimant / Unpaid Party

Recommencing CIPAA Adjudication Proceeding after Adjudication Decision is being set aside pursuant to Section 15

More importantly, the High Court remarked that if an Adjudication Decision obtained pursuant to Construction Industry Payment and Adjudication Act 2012 (CIPAA) is successfully set aside pursuant to Section 15 of CIPAA, all parties will be restored to their original positions as though the earlier Adjudication did not take place.

As a result, the Unpaid Party / Claimant is entitled to re-commence and initiate a fresh CIPAA Proceeding instead of having to arbitrate / litigate the matter in court.

[46]  What would be the effect of a successful setting aside of an adjudication decision? All parties will be restored to their original positions as though the earlier adjudication did not take place. This would entitle the unpaid party to commence fresh adjudication proceedings on the payment claim which decision has been set aside. I agree with learned counsel for the claimant that there is no basis to hold that once an adjudication decision is set aside on any of the grounds under s 15 of the CIPAA, a party is barred from subsequently initiating a fresh adjudication proceeding and that the only recourse would be to arbitrate or litigate the dispute. See the case of Westwood Structural Services Ltd v Blyth Wood Park Management Company Ltd [2008] EWHC 3138 (TCC) where several adjudication proceedings were brought by the claimant in respect of the same subject matter.

Lee Swee Seng J (as his Lordship then was) in Wong Huat Construction Co v Ireka Engineering & Construction Sdn Bhd [2018] 7 MLJ 659