THE UPDATE SCOOP (#2/2024)
“Unpleaded Cause of Action Fatal to Claim under CIPAA” | Construction Law
By TAY & HELEN WONG – Feb 15, 2024
It is important that the cause for a claim filed under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) must be pleaded properly to clothe the adjudicator with the requisite jurisdiction in adjudicating the claim under CIPAA. In Anas Construction Sdn Bhd v JKP Sdn Bhd & Another[i], the respondent (“R”) had appointed the Appellant (“A”) as the main contractor for a certain project under a construction contract (“the Contract”). There was a dispute on the fees claimed by A resulting in the matter brought to an adjudicator for adjudication under CIPAA after A had terminated the Contract.
In both the Payment Claim and the Adjudication Claim, A had pleaded clauses 28, 55 and 56 of the Contract to ground its causes of action whilst R in the Adjudication Response contended that clause 36.5 of the Contract was the relevant clause. However, in arriving at the Adjudicator’s Decision in favour of A, the Adjudicator relied on clause 36.6 of the Contract which was not submitted by either party. At the High Court, A’s application to enforce the Adjudication Decision was allowed. On appeal to the Court of Appeal (“COA”), the High Court’s decision was set aside on the ground that the Adjudicator had acted in excess of his jurisdiction when deciding on the clause of the Contract which was not relied upon by A in its Payment Claim and Adjudication Claim to support A’s cause of action.
On final appeal to the Federal Court, the COA’s decision was affirmed, by majority of 2 to 1. The majority relied on its earlier decision in View Esteem Sdn Bhd v Bina Puri Holdings Bhd[ii], that it is mandatory to identify the applicable clause of the construction contract which relates to the cause of action as the Adjudicator’s jurisdiction and power to adjudicate (pursuant to s.27(1) of CIPAA) is limited to matters referred to him pursuant to ss 5 and 6 of CIPAA. Section 27 of CIPAA reads:
“27. Jurisdiction of Adjudicator
1) Subject to subsection (2), the adjudicator’s jurisdiction in relation to any dispute is limited to the matter referred to adjudication by the parties pursuant to ss 5 and 6.
2) The parties to adjudication may at any time by agreement in writing extend the jurisdiction of the adjudicator to decide on any other matter not referred to the adjudicator pursuant to ss 5 and 6.”
The relevant sections 5 and 6 read:
“5. Payment Claim
…
2) The payment claim shall be in writing and shall include:
…
b) Details to identify the cause of action including the provision in the construction contract to which the payment relates;
“6. Payment Response
…
2) A non-paying party who disputes the amount claimed in the payment claim, either wholly or partly, shall serve a payment response in writing on the unpaid party stating the amount disputed and the reason for the dispute. … ”
In the present case, the Adjudicator had held clause 36.6 of the Contract as the most applicable provision for A’s claim against R; and allowed the claim based on the said clause. However, such clause was not relied upon by A in its Payment Claim filed under s.5 of the CIPAA nor mentioned by R in the Payment Response filed under s.6. In addition, nowhere in the Adjudication Decision had the Adjudicator relied on clauses 28, 55 and 56 of the Contract which, as stated above, were the provisions pleaded and relied upon by A in its Payment Claim to establish its causes of action. As the Adjudicator’s jurisdiction by virtue of s. 27(1) of CIPAA was limited to matters referred to the Adjudicator under ss 5 and 6 of CIPAA whilst the cause of action based on clause 36.6 of the Contract was not relied upon in the Payment Claim, the Adjudicator had exceeded his jurisdiction in deciding the dispute based on the said clause 36.6.
Further, parties had not been given the opportunity to submit on the cause of action under clause 36.6 of the Contract before the Adjudication Decision was handed down. The principle of natural justice included allowing parties to present their case effectively. The Adjudicator’s failure to let parties submit in that respect was therefore a denial of natural justice.
A’s appeal was, by majority, dismissed with costs; the COA’s decision was affirmed. R succeeded in setting aside the Adjudication Decision.
[i] [2018] 1 MLRA 460 [ii] [2024] 2 MLRA, FC
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Tags: [construction law] [Construction Industry Payment and Adjudication Act 2012, ss 5, 6 and 27] [CIPAA] [cause of action in adjudication]