Malaysia - The Doctrine Of res Judicata Applies To Statutory Adjudication Under The Construction Industry Payment And Adjudication Act 2012

Legal News & Analysis - Asia Pacific - Malaysia - Dispute Resolution

5 April, 2019

 

A. PWC Corporation Sdn Bhd v Ireka Engineering & Construction Sdn Bhd [2018] 1 LNS 164 (High Court)

Brief facts

PWC Corporation Sdn Bhd (“PWC”) commenced adjudication proceedings pursuant to the Construction Industry Payment and Adjudication Act 2012(“CIPAA”) against Ireka Engineering & Construction Sdn Bhd (“Ireka”) for the balance sum for works done under a construction contract.
 
It was not in dispute that the balance sum remained due under the contract. However, it was Ireka’s position that it had no obligation to pay the balance sum to PWC as it is extinguished by Ireka’s claims for set off, cross claim and/or counterclaim in two other separate contracts. The adjudicator delivered a decision in favour of PWC and dismissed Ireka’s set off, cross claim and/or counterclaim.
 
Ireka then applied to the High Court to set aside the adjudication decision under section 15 of CIPAA on the grounds that, amongst others, the adjudicator had acted in breach of natural justice by wrongly declining jurisdiction to consider the contractual set off it raised with respect to the two separate contracts in other projects.
 
The issue to be determined by the High Court was whether there was a breach of natural justice when the adjudicator declined to consider the contractual set offs raised with respect to other contracts which are the subject of other adjudications.
 
It was not in dispute that the construction contract in the present case contained a set off clause providing for set offs from other construction contracts between the parties. However, the Court held that adjudication under CIPAA is for a matter arising under a construction contract. If it is sought to be heard together with two or more adjudications in respect of the same subject matter under the same construction contract in one adjudication, then the parties must expressly consent to it. 
 
The Court held that the adjudicator had not acted in excess of her jurisdiction in declining to consider Ireka’s set off, cross claims and/or counterclaims. The same set off or issues raised by Ireka were also raised in separate adjudications involving those contracts. The Court held that there would be a clear duplicity of proceeding if the adjudicator was to decide on the same subject matter.
 
It would also avoid the embarrassment of two separate adjudicators coming up with two different and conflicting findings as to whether the set offs should be allowed and, if so, the quantum. Once decided, the defence of res judicatawould be available to the claimant as in one adjudication vis-a-vis another adjudication, though not so with the arbitrator or the judge hearing the matter de novo in a concurrent or separate proceeding.
 
Further, there would also be a danger that the same subject matter which is being raised in separate adjudications may result in a double payment or excessive awards where they overlap.
 
Ireka’s appeal to the Court of Appeal was dismissed and the Court of Appeal affirmed the decision of the High Court (see Ireka Engineering & Construction Sdn Bhd [2019] MLJU 35).
 
B. Kining Exeton Sdn Bhd v Majlis Perbandaran Kuantan [2017] 1 LNS 1905

Brief facts
 
Kining Exeton Sdn Bhd (“Kining Exeton”) commenced an adjudication proceeding against Majlis Perbandaran Kuantan (“MBK”) for costs of variation works arising out of a construction contract. An adjudication decision was delivered in favour of Kining Exeton (“CIPAA 1”)
 
Kining Exeton brought another claim vide adjudication against MBK for costs of variation works. An adjudication decision was also delivered in favour of Kining Exeton (“CIPAA 2”).
 
MBK, being dissatisfied with both the adjudication decisions delivered in CIPAA 1 and CIPAA 2, filed originating summons to set aside the decisions on the grounds that the adjudicator had acted in excess of his jurisdiction under section 15 of CIPAA.
 
It was MBK’s contention that, amongst others, one of the claims by Kining Exeton in CIPAA 2 had been decided by the adjudicator in CIPAA 1. Hence, the adjudicator has no jurisdiction to decide on the same claim in CIPAA 2 and that the doctrine of res judicata applies to bar the claim from being re-adjudicated.
 
Decision 

The Court held that in deciding whether the doctrine of res judicata applies to bar a claim from being re-adjudicated would depend on whether the dispute in the two adjudication proceedings is substantially the same. This is a question of fact and degree to be determined by the adjudicator. Hence, it is pertinent to consider what had actually and finally been decided in CIPAA 1.

In the adjudication decision for CIPAA 1, the adjudicator dismissed Kining Exeton’s claim on the ground that he had no jurisdiction to decide on the claim as it did not form part of the payment claim. Following that, Kining Exeton’s claim was not decided on its merit in CIPAA 1.

As such, the High Court held that an adjudicator has jurisdiction to decide on a claim which was not decided on its merits, albeit raised in an earlier adjudication proceedings. The defence of res judicata is not applicable to MBK and the adjudicator in allowing the Kining Exeton’s claim in CIPAA 2 had not acted in excess of his jurisdiction.

Conclusion
 
These two cases suggest that the principle of res judicata would apply to adjudication proceedings commenced under CIPAA. This is consistent with the approach adopted in other jurisdictions such as the United Kingdom, Singapore and Australia.

 

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For further information, please contact:

 

Marinah Rahmat , Shearn Delamore & Co​

marinah.rahmat@shearndelamore.com