Top 5 Construction Cases in Malaysia for 2020

Our guest author, Kevin Wong, writes on the top 5 construction cases in Malaysia for 2020. The areas covered include when does time run for the calculation of liquidated damages, the Controller of Housing, and cases on the Construction Industry Payment and Adjudication Act 2012 (CIPAA).

#1: Sri Damansara – Court of Appeal Answers When Does LAD Start to Run?

(Sri Damansara Sdn Bhd v Voon Kuan Chien & Anor [2020] 4 MLJ 265; [2020] 5 CLJ 619, COA with the grounds of judgment dated 5 March 2020)

Judges: Hasnah Mohammed Hashim JCA, Kamaludin Md Said JCA, and Lee Swee Seng JCA (delivering the judgment of the court)

Why is this case important?

This case concerns homebuyers as to whether the calculation of liquidated and ascertained damages (LAD) on late delivery of vacant possession should be calculated from the date of payment of booking fee or the date of the sale and purchase agreement (SPA).

In this case, the Tribunal for Homebuyer Claims (Tribunal) originally decided in favour of the homebuyer. LAD was calculated from the date of payment of the booking fee to the date of delivery of vacant possession. The developer had argued that the calculation should have been from the date of the SPA.

Dissatisfied, the developer applied for judicial review against the Tribunal’s decision. The High Court also agreed with the homebuyer’s basis of calculation from the date of booking fee. The developer then appealed to the Court of Appeal.

In this case, the Court of Appeal departed from two previous Court of Appeal decisions finding calculation was to run from the date of the SPA:

GJH Avenue Sdn Bhd v Tribunal Tuntutan Pembeli Rumah, Kementerian Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Ors [2019] MLJU 861 and PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Ors [2019] MLJU 2067.

Instead, the Court of Appeal affirmed the High Court’s decision that the calculation was to run from the booking fee. The Court of Appeal held that the Housing Development (Control and Licensing) Act 1966 (HDA) is a social piece of legislation designed to protect the homebuyers who are in a more vulnerable position because of the inequality of bargaining power.

Further, the Court of Appeal did not appear to apply a consistent approach. In this case, the Court stated that the collection of any booking fee is strictly prohibited under the HDA. On the other hand, the Court allowed the date of the booking fee to be used for the computation of LAD. A decision from the Federal Court would be welcomed to put to rest the conflicting Court of Appeal decisions and the issues concerning the booking fee and the HDA.

#2: Alvin Leong Wai Kuan – High Court Decides that There is Retrospective Effect of Ang Ming Lee Decision

(Alvin Leong Wai Kuan & Ors v Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Ors And Other Applications [2020] 10 MLJ 689; [2020] 6 CLJ 55, HC with the grounds of judgment dated 20 March 2020)

Judge: Wong Kian Kheong J

Why is the case important?

This case addressed to issue whether the Federal Court’s recent decision of Ang Ming Lee & Ors v. Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Anor And Other Appeals [2020] 1 MLJ 281; [2020] 1 CLJ 162 (Ang Ming Lee) has retrospective effect.

In Ang Ming Lee, the Federal Court essentially decided that the Controller of Housing has no powers to grant any extension to a developer to complete the development.

In this case, the Controller of Housing granted the developer an extension of delivery of vacant possession to 54 months. The developer appealed to the Minister of Housing and Local Government (Minister). The Minister extended the period to 59 months (Decision).

Aggrieved by the Decision of the Minister, the purchasers filed judicial review applications to quash the Decision. Riding on Ang Ming Lee, the High Court allowed the purchasers’ judicial review applications.

The High Court made four points:

First, Regulation 12 of Housing Development (Control and Licensing) Regulations 1989 provides that the Minister’s decision “shall be final and shall not be questioned in any court”. This part of the regulation is invalid as it ousted the Court’s judicial power.

Second, even though these applications were filed before Ang Ming Lee, the judgment in Ang Ming Lee has retrospective effect and applies to the current applications. It is also in the interest of homebuyers for the judgment in Ang Ming Lee to be given retrospective effect.

Third, the Controller and the Minister cannot extend the time beyond the 36 months prescribed in Schedule H of the Housing Development (Control and Licensing) Act 1966.

Fourth, the homebuyers are entitled to claim for liquidated and ascertained damages based on the 36 months.

This case cements the rights of homebuyers to claim liquidated and ascertained damages for delivery beyond the statutory limit 24 or 36 months and potentially open the floodgates for more homebuyers to challenge to the Controller and Minister’s decisions to extend the time beyond the statutory limit.

#3: Maju Holdings Sdn Bhd – High Court Decides Whether an Adjudication Decision Can be a Disputed Debt

(Maju Holdings Sdn Bhd v Spring Energy Sdn Bhd [2020] MLJU 1196, HC with the grounds of judgment dated 21 August 2020)

Judge: Ong Chee Kwan JC

Why is this case important?

Prior to this decision, the High Court in ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd [2020] MLJU 282 (ASM) held that an enforced adjudication decision can still be treated as a disputed debt. This is because an adjudication decision is only of temporary finality. The present case departed from ASM.

In this case, the Defendant commenced adjudication proceedings against the Plaintiff and was successful. Thereafter, the Defendant successfully applied to enforce the adjudication decision. The Defendant then issued a statutory notice of demand. The Plaintiff applied to restrain the Defendant from presenting a winding up petition.

First, the High Court allowed the Plaintiff’s application on the basis that the court was satisfied that the cross-claims by the Defendant is more than the statutory demand amount. Second, the High Court also held that an enforced adjudication decision is an undisputed debt. This decision is directly in conflict with ASM.

ASM is currently on appeal. A decision from the appellate courts is warranted to solidify the nature of an enforced adjudication decision registered pursuant to section 28 of CIPAA.

#4: Multazam Development Sdn Bhd – High Court Decision on the Nature of an Adjudication Order

(Multazam Development Sdn Bhd v Felda Global Ventures Plantations (M) Sdn Bhd [2020] 11 MLJU 606, HC with the grounds of judgment dated 15 May 2020)

Judge: Lim Chong Fong J

Why is the case important?

This is the first decision to determine the nature of an order (not decision) made by an adjudicator in relation to costs awarded from the withdrawal of adjudication proceedings under CIPAA.

In this case, Multazam (Plaintiff) withdrew its adjudication proceedings against Felda (Defendant) when the proceedings were in progress. The parties could not agree on the quantum of the cost of withdrawal. The adjudicator determined the amount to be borne by the Plaintiff. Dissatisfied, the Plaintiff made an application to the High Court to, among others, set aside the order made by the adjudicator.

After hearing the application, the High Court remitted the issue on legal cost back to the adjudicator for reconsideration. Upon reconsideration, the adjudicator reaffirmed his previous order. The Plaintiff made another application to the High Court to set aside the revised order leading to the present case.

First, the High Court held that there is no provision in the CIPAA which permits an appeal or even the setting aside of a cost order made by an adjudicator.

Second, the High Court highlighted that the Plaintiff’s complaint was in substance an appeal against the adjudication order.

Third, the High Court could not entertain the Plaintiff’s complaint as the High Court has not been statutorily clothed with the jurisdiction power to do so.

This decision seals the finality of an order made by an adjudicator. Also, it serves as a timely reminder for a party who intends to initiate adjudication proceedings to bear in mind that an adjudication order (akin to a direction from the court) is not appealable and cannot be set aside.

#5: Spring Energy Sdn Bhd – Sessions Court Decides on Alternative Speedy Resolution for Contractors

(Spring Energy Sdn Bhd v Maju Holdings Sdn Bhd [2020] MLJU 902, SESSC with the grounds of judgment dated 1 July 2020)

Judges: Zulqarnain Bin Hassan

Why is the case important?

Since coming into effect in April 2014, CIPAA has been a salvation for the construction industry to resolve payment-related disputes. However, the adjudication lifeline came to a halt from March 2020 to November 2020. During that period, there was no director of the Asian International Arbitration Centre (AIAC) to appoint adjudicators. This decision is useful in setting out an alternative to CIPAA as it has the effect of resolving payment disputes in the construction industry speedily.

In this case, Spring Energy (Plaintiff) commenced an action against Maju Holdings (Defendant) for sums due and owing pursuant to Payment Certificates No. 22 and No. 23. The Plaintiff successfully obtained a summary judgment. The Sessions Court held that, among others, the Plaintiff had proved a clear-cut case against the Defendant as the payment certificates issued contained the elements of clarity, finality and incontrovertibility. The issuance of payment certificates amounted to an admission by the Defendant and that the Plaintiff was entitled to the payments.

The adjudication process is back on track with the appointment the director of the AIAC on 1 December 2020. However, this decision opens up more options for contractors (where an arbitration clause does not govern their contracts) to resolve their payment disputes swiftly.

 

Kevin Wong is the partner in the Construction and Energy practice of Khong Partnership. He has experience in the entire range of dispute resolution processes including adjudication, litigation and arbitration.

 

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