The Federal Court has in its grounds of judgment for the case of ECONPILE (M) SDN BHD v ASM DEVELOPMENT (KL) SDN BHD [Civil Appeals Nos.: 02(f)-2-01/2023(W) and 02(f)-34-05/2023(W)] answered the following questions of law:
Question 1 (answered in the negative)
“Whether an adjudication decision, after having been enforced pursuant to Section 28 of CIPAA 2012 as an Order of the Court, can be stayed pursuant to Section 16(1)(b) of the CIPAA 2012”
Question 2 (answered in the positive)
“Whether the Court of Appeal in so deciding to allow the stay application pursuant to section 16(1)(b) CIPAA 2012 has overruled or disagreed, or gone beyond the ratio decidendi of the Federal Court decision in View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd [2018] MLJ 22; [2019] 5 CLJ 479.”
The Facts
Adjudication Decisions
Econpile obtained 2 separate adjudication decisions against ASM for the respective sums of RM59,767,269.32 (CIPAA 1) and RM5,959,024,99 (CIPAA 2).
High Court (CIPAA 1)
Due to ASM’s failure to pay the sums awarded under the CIPAA 1 Adjudication Decision, Econpile had made an application to enforce the CIPAA 1 Adjudication Decision as a judgment of the High Court under Section 28 CIPAA 2012. Consequently, ASM had filed applications to set aside and/or stay the CIPAA 1 Adjudication Decision under Section 15(b), 15(d), and 16(1)(b) of CIPAA 2012.
On 29.11.2019, the High Court dismissed ASM’s applications for setting aside and stay of the CIPAA 1 Adjudication Decision, and allowed Econpile’s application to enforce the CIPAA 1 Adjudication Decision. In relation to ASM’s stay application, the High Court found that:
a) the fact that ASM has a claim which exceeds Econpile’s payment claim in arbitration cannot be regarded as a special circumstance unless it can be shown that there is a real danger that Econpile would not be able to pay ASM, which ASM failed to do so.
b) further, there were no clear and unequivocal errors on the part of the learned Adjudicator in arriving at the adjudication decision, nor were there cogent reasons why a stay is warranted to meet the justice of the case or that the discretion ought to be exercised in ASM’s favour.
Court of Appeal (CIPAA 1)
ASM appealed against all three of the High Court’s decisions to the Court of Appeal. On 26.4.2022, the Court of Appeal dismissed ASM’s appeal against the High Court’s decision to enforce the adjudication decision, and ASM’s appeal against the High Court’s dismissal of ASM’s setting aside application.
However, despite the Court of Appeal’s affirmation of the High Court’s enforcement order, the Court of Appeal allowed ASM’s appeal against the High Court’s dismissal of ASM’s stay application (“CIPAA 1 COA Stay Order”), and amongst others, held that there are no express prohibitions in the CIPAA stating that stay applications cannot be allowed after the enforcement order has been made.
On 3.1.2023, Econpile was granted leave to appeal against the CIPAA 1 COA Stay Order to the Federal Court.
ASM did not file an appeal against the Court of Appeal’s dismissal of ASM’s other two appeals.
High Court (CIPAA 2)
Similarly, due to ASM’s failure to pay the sums awarded under the CIPAA 2 Adjudication Decision, Econpile had made an application to enforce the CIPAA 2 Adjudication Decision as a judgment of the High Court under Section 28 CIPAA 2012. ASM also filed applications to set aside and/or stay the CIPAA 2 Adjudication Decision under Section 15(b), 15(d), and 16(1)(b) of CIPAA 2012. On 28.10.2020, the High Court allowed Econpile’s application to enforce the CIPAA 2 Adjudication Decision and dismissed ASM’s applications to set aside the CIPAA 2 Adjudication Decision.
On 4.2.2021, the High Court dismissed ASM’s application to stay the CIPAA 2 Adjudication Decision. In relation to ASM’s stay application, the High Court found that there are neither instances of disregarding nor wrong interpretation of statute or misreading and/or application of case authorities that resulted in the CIPAA 2 Adjudication Decision as being erroneous and there are no unequivocal errors to justify the stay.
Court of Appeal (CIPAA 2)
ASM appealed against all three of the High Court’s decisions to the Court of Appeal. The appeal was heard before a different panel from the CIPAA 1 Appeals. On 28.10.2022 and 25.11.2022 respectively, the Court of Appeal after considering the circumstances of the individual case, dismissed ASM’s appeals against the High Court’s decision which enforced the adjudication decision, the High Court’s dismissal of ASM’s setting aside application and the High Court’s dismissal of ASM’s stay application (“CIPAA 2 COA Dismissal of Stay Order”).
On 13.4.2023, ASM was granted leave to appeal CIPAA 2 COA Dismissal of Stay Order to the Federal Court.
ASM did not file an appeal against the Court of Appeal’s dismissal of ASM’s other two appeals.
Federal Court’s Findings (CIPAA 1 & CIPAA 2)
Leave to appeal was granted for both cases.
At the appeal proper, the Federal Court allowed Econpile’s appeal against the CIPAA 1 COA Stay Order, and dismissed ASM’s appeal against the CIPAA 2 COA Dismissal of Stay Order, with global costs of RM100,000.00 to be paid by ASM to Econpile.
Question 1 (answered in the negative)
The Federal Court found that the Court of Appeal’s (CIPAA 1) decision in finding that there is no express provision in CIPAA prohibiting the granting of a stay after an enforcement order is granted, an application for stay can be considered and granted, is flawed for the following reasons:
A court must favour construction of a statute which promotes the purpose, object or intent of the legislation. CIPAA is a legislation crafted to address issues common in the construction industry in particular relating to cash flow problems for the unpaid party and only as temporary finality to the payment claims. It is not the end of the end. The Act was designed with the ultimate aim to assist the parties in construction dispute to be paid expeditiously for the work which they had carried out and for adjudication proceedings for payment claims that are due and payable before the determination of the contract.
There is no provision for a stay of adjudication decision (S.16) after an enforcement order is given. Applying the principles of interpretation of statutes, in the absence of a specific provision the court is not statutorily empowered to grant a stay if the adjudication decision is not set aside. To do so would be incongruent to the intent and purpose of CIPAA.
Question 2 (answered in the positive)
In answering Question 2, the Federal Court held that the principles enunciated in View Esteem must be followed in an application for a stay of an adjudication decision pursuant to Section 16 CIPAA if an application to set aside the adjudication decision under Section 15 of the same Act has been made or the subject matter of the adjudication decision is pending final determination by arbitration or the court.
KEY TAKEAWAYS
In view of the Federal Court’s decision that after an enforcement order under Section 28 CIPAA 2012 is made, an adjudication decision cannot be stayed under Section 16(1)(b) of CIPAA 2012, it is prudent for legal practitioners to ensure that a stay application under Section 16(1)(b) of CIPAA 2012 to be decided before / together with an application under Section 28 of CIPAA 2012.
In the circumstance where a party wishes to appeal to the Court of Appeal against a dismissal of a Section 16(1)(b) stay application, it is also prudent for the party to ensure that where an enforcement order has already been made, an appeal should also be filed against the enforcement order.
However, one must also bear in mind that the Court’s jurisdiction to grant stay of execution of a court order, based on the special circumstances test, is not curtailed by this Federal Court decision.
The Federal Court’s decision on this issue is important to the development of the statutory adjudication framework in Malaysia as it has provided clarity to the relationship between Section 28 CIPAA 2012 and Section 16(1)(b) CIPAA 2012.
About the author
Lim Ren Wei
Associate
Construction & Energy
Harold & Lam Partnership
renwei@hlplawyers.com
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