by MH Law | April 25, 2024 | Legal Updates | Case Spotlight
Overview
The Federal Court in Econpile (M) Sdn Bhd v ASM Development (KL) Sdn Bhd and another appeal [2024] 3 MLJ 157 held that an adjudication decision enforced pursuant to section 28 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) cannot be stayed under section 16(1)(b) of the same Act.
Brief Facts
Parties and Context
ASM Development (KL) Sdn Bhd (“ASM”) appointed Econpile (M) Sdn Bhd (“Econpile”) as the main contractor for a construction project.
Delays led to disputes over under-certification of interim certificates and non-certification of progress claims.
First Adjudication Proceedings
Econpile claimed RM59,767,269.32 for progress claims and under-certified interim certificates.
The adjudicator decided in Econpile’s favor (“First Adjudication Decision”).
ASM failed to pay, prompting Econpile to enforce the decision under section 28 of CIPAA and ASM to seek to set aside and stay the decision. Arbitration proceedings also commenced.
The High Court granted enforcement and dismissed ASM’s applications to set aside and stay the decision. It found no special circumstances warranting a stay.
ASM’s appeal to the Court of Appeal was partially allowed, granting a stay (“Stay Order”).
Second Adjudication Proceedings
Econpile pursued further adjudication for different progress claims and was awarded RM5,959,024.99 (“Second Adjudication Decision”).
ASM’s applications to set aside and stay this decision were dismissed.
The Court of Appeal dismissed ASM’s appeals, citing Econpile’s financial stability and the absence of clear adjudicator errors.
Federal Court
Key Issues:
Whether an adjudication decision enforced under section 28 can be stayed under section 16(1)(b) of CIPAA.
Whether the Court of Appeal’s Stay Order contravened the Federal Court decision in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22.
Criteria for granting a stay under CIPAA, including financial capacity and justice of the case.
Federal Court Findings:
The Court emphasized the legislative intent of CIPAA, referencing parliamentary debates highlighting its purpose: providing an expedited, cost-effective dispute resolution mechanism to address cashflow issues in the construction industry.
The Court referred to section 17A of the Interpretation Acts 1948 and 1967, which prioritizes interpretations aligning with legislative purpose.
Adjudication decisions are binding unless reversed by a court. A stay is permissible only if an adjudication decision is set aside or pending determination by arbitration or court.
Analysis of View Esteem Principles:
The Federal Court reiterated the flexible approach to stay applications. Courts must consider whether there are errors or circumstances warranting a stay to meet the justice of the case.
Enforcement Orders and Stay:
Once enforced under section 28, an adjudication decision cannot be stayed unless it is set aside.
The Federal Court criticized the Court of Appeal for overstepping its jurisdiction in granting a stay in the First Adjudication Proceedings.
The Federal Court highlighted the importance of compliance with adjudication decisions to uphold CIPAA’s objectives.
Key Takeaways
This decision clarifies that an adjudication decision, once enforced, cannot be stayed unless set aside. It reinforces CIPAA’s purpose of ensuring timely resolution of payment disputes to maintain cashflow in the construction industry. The Federal Court’s approach underscores the importance of adhering to adjudication decisions while maintaining flexibility in stay applications to achieve justice where appropriate.
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