Statutory Adjudication: Signed, Sealed but not Delivered?

The High Court in the case of Utama Motor Workshop (S) Sdn Bhd v Besicon Engineering Works Sdn Bhd [2022] 7 CLJ 313 reiterates that section 12(3) of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) mandatorily requires an adjudicator to “make” an adjudication decision within the applicable prescribed periods set out in section 12(2) of CIPAA. The term “make” is different from the word “deliver” and “release”. When an adjudicator “makes” an adjudication decision is a question of fact and very much depends on the date stated on the first and last pages of the adjudication decision.
 
Brief Facts
 
The plaintiff appointed the defendant to build a three-storey car service workshop and office. The defendant commenced adjudication proceedings under CIPAA against the plaintiff for payment of works done but had not been paid. In response to an enquiry by the adjudicator, the defendant’s representative confirmed to the adjudicator that the hard copy of the adjudication reply had been served on the plaintiff’s representative on 7 October 2021. The defendant’s representative further sought the adjudicator’s confirmation of the date of delivery of the adjudication decision. The adjudicator emailed stating that the adjudication decision could be issued on 15 December 2021. There was no reply from the parties’ representatives. Thereafter, the adjudication decision was “delivered” on 14 December 2021.
 
The plaintiff contended that the adjudication decision had been made one day after the prescribed time period under CIPAA had expired and filed an originating summons at the High Court seeking, among others, a declaration that the adjudication decision was void under section 12(3) of CIPAA and that the decision be set aside pursuant to section 15(d) of CIPAA.
 
Issues
 
The originating summons at the High Court raised the following issues:
 
1. Whether an adjudicator has the power under section 12(1) read together with section 25(p) of CIPAA to extend the 45 working days’ time period prescribed in section 12(2)(a) of CIPAA for the adjudicator to “make” the adjudication decision.
 
2. If the answer to the above is “no” –
 
a. whether the doctrine of equitable estoppel bars a party against whom an adjudication decision is made from applying to court to set aside the adjudication decision on the ground that the adjudication decision is void under section 12(3) of CIPAA because the adjudication decision has been “made” beyond the prescribed time period; and
 
b. Can a party against whom an adjudication decision is made acquiesce to the breach?
 
Decision of the High Court
 
With regard to the first issue, the Learned High Court Judge answered in the negative. The High Court was of the view that powers granted to an adjudicator to extend time under section 25(p) of CIPAA only applies to “any time limit imposed on the parties”, not adjudicators. The literal interpretation of section 25(p) of CIPAA does not permit an adjudicator to extend the prescribed time period for an adjudicator to “make” an adjudication decision.
 
As the hard copy of the adjudication reply was served on the plaintiff’s representative on 7 October 2021, Justice Wong Kian Kheong determined that last day of the 45 working days period for the adjudicator to “make” his adjudication decision under section 12(2)(a) of CIPAA ended on 13 December 2021. As the adjudication decision was “made” on 14 December 2021, as evidenced by the first and last pages of the adjudication decision and the adjudicator’s letter under which the adjudication decision was sent to the representatives of the respective parties, the Learned Judge held that the adjudication decision was void pursuant to section 12(3) of CIPAA as it was “made” only after the expiry of the prescribed time period under section 12(2)(a).
 
Reference was made to the case of Celtex Supreme Sdn Bhd v Mega Bina Garisan Sdn Bhd [2021] 1 LNS 630, and a distinction was drawn between the term “make” and the words “deliver” and “release”. In essence, an adjudication decision is “made” when the adjudicator has signed and dated the adjudication decision. If an adjudicator has “made” an adjudication decision within the prescribed time period but the fees and expenses regarding the adjudication have not been deposited in full by the parties with the Director of the Asian International Arbitration Centre (“AIAC Director”), the adjudicator is entitled not to “deliver” or “release” the adjudication decision until the full amount of the fees and expenses have been deposited with the AIAC Director.
 
The High Court also rejected the defendant’s submission that there had been an agreement by the parties under section 12(2)(c) of CIPAA to extend the deadline for the adjudicator to “make” the adjudication decision as neither party had responded to the adjudicator’s email which stated that the adjudication decision could be issued on 15 December 2021. Referring to Skyworld Development Sdn Bhd v Zalam Corporation Sdn Bhd and other appeals [2019] MLJU 162, Pasukhas Sdn Bhd v Empire Multiple Sdn Bhd & Another Case [2019] 1 LNS 757 and MRCB Builders Sdn Bhd v SMM Resources Sdn Bhd [2021] 1 LNS 1449, the Learned Judge held that an extension under section 12(2)(c) should be with the express written agreement of the parties.
 
With regard to the second and third issues, the answers were in the negative. The High Court held that the doctrine of equitable estoppel and the doctrine of acquiescence have no application against the operation of a statutory provision and hence, the said doctrines cannot apply against the operation of the mandatory provisions of section 12 of CIPAA.
 
The Learned Judge also found that the adjudicator had exceeded his jurisdiction when he “made” the adjudication decision after the expiration of the prescribed time period in section 12(2)(a) of CIPAA.
 
In the above premises, the High Court issued a declaration that the adjudication decision was void pursuant to section 12(3) of CIPAA and set aside the said decision pursuant to section 13(a) read with section 15(d) of CIPAA. The Learned Judge also ordered the adjudicator to refund all fees and expenses paid by to the adjudicator by the parties.
 
Conclusion
 
Regardless of whether parties have deposited the fees and expenses in full with the AIAC Director, an adjudication decision must be “made” within the prescribed time period to avoid the adjudication decision being declared void under section 12(3) of CIPAA. Non-compliance will not only deprive an adjudicator of his fees, but may result in parties having to commence separate proceedings to recover the unpaid amount under the construction contract.
 
Article by Jocelyn Lim Yean Tse (Partner) of the Dispute Resolution Practice of Skrine / Construction and Arbitration Practice of Skrine .
 
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