[A case summary of Hock Seng Trading & Construction and Hongler Enterprise [W-02(C)(A)-980-06/2024]
Key Takeaway:
1. A sole proprietorship must be sued in the name of the proprietor, with the business name stated in brackets.
2. Failure to name the right party would render the adjudication proceedings void ab initio.
3. A jurisdictional challenge is a live issue and can be raised at any stage.
4. Consent or waiver by the parties cannot cure a fundamental lack of jurisdiction.
Brief Background Facts:
Hock Seng Trading & Construction (“HS”) appointed Hongler Enterprise Sdn Bhd (“Hongler”) as a subcontractor for a project known as ‘Privatisation of Lebuhraya Persisiran Pantai Barat (Taiping to Banting) Section 2 – SKVE Interchange to SAE Interchange Bridge S2-3’ (“Project”) for RM4,579,514.40.
Payment disputes arose between the parties, particularly regarding the payments for Hongler’s work done. Hongler commenced an adjudication proceeding against HS on 10.11.2022. The Adjudication Decision dated 26.7.2023 was delivered in favour of Hongler (“Adjudication Decision”).
Subsequently, HS applied to set aside the Adjudication Decision under Section 15 of CIPAA 2012 (“Setting Aside OS”). On the other hand, Hongler applied to enforce the Adjudication Decision under Section 28 of CIPAA 2012 (“Enforcement OS”).
Preliminary Objection – Locus Standi of HS
In the Setting Aside OS, Hongler raised a preliminary objection that HS is a business and a sole proprietorship owned by one Chai Hong Sang (“Chai”). Therefore, HS does not have the necessary locus standi to commence the Setting Aside OS, as Chai has to sue in his own name and not under the name of the business (in reliance on Order 77 rule 9 of the Rules of Court 2012).
The High Court agreed with Hongler that HS does not have the necessary locus to bring the action in the Setting Aside OS. The High Court further held that although HS was named as a party in the adjudication proceedings, this did not cure the jurisdictional defect. The Court referred to the judgment of Tan Thoo Yow v Chia Kim San & Anor [1997] MLJU 142, confirming that sole proprietorships have no separate legal identity.
On that basis, the High Court found that the Adjudication Decision is unenforceable since the individual sole proprietor, Chai, was not named as a party to the adjudication proceedings, rendering the Adjudication Decision invalid.
Dissatisfied with the High Court’s decision, HS filed an appeal against the High Court’s decision in dismissing the Setting Aside OS (“Setting Aside Appeal”), and Hongler filed an appeal against the High Court’s decision in dismissing the Enforcement OS (“Enforcement Appeal”).
Court of Appeal
The issues raised by HS in the Setting Aside Appeal are as follows:
1. Whether the High Court Judge had erred in allowing Hongler’s preliminary objection that HS does not have the locus standi to bring the action in the business name known as ‘Hock Seng Trading & Construction’?; and
2. Whether Hongler’s preliminary objection was a mere technical objection that did not cause a miscarriage of justice to Hongler?
As regards the Enforcement Appeal, Hongler argued that in light of the dismissal of the Setting Aside OS by the High Court, there was no prohibition against allowing the Enforcement OS.
Court of Appeal’s Decision
The Court of Appeal agreed with the High Court that Hongler had wrongly initiated the adjudication against HS, who has no legal status, without naming Chai.
As the adjudication was commenced against a non-entity, the entire proceeding was void ab initio.
The Court of Appeal referred to and affirmed the decision made in KLIA Associates Sdn Bhd v Mudajaya Corporation Bhd [2020] 1 LNS 1253, which held that an action could not be taken against a body that has no legal status.
Conclusion
This case underscores a critical procedural point: Always ensure the correct legal entity is named in adjudication or court proceedings. In the case of a sole proprietorship, this means identifying the individual proprietor by name and indicating the business name.
Such jurisdictional defects are fatal. They cannot be remedied by participation, consent, or waiver. As affirmed by the Court of Appeal, misnaming a party strikes at the heart of the adjudicator’s jurisdiction and renders the adjudication legally void.
About the authors
Felicia Lai Wai Kim
Senior Associate
Dispute Resolution
Harold & Lam Partnership
felicia@hlplawyers.com
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