Introduction
There is much debate on the extent of adjudicators’ powers and jurisdiction under section 25 of the Construction Industry Payment And Adjudication Act, 2012 (“CIPAA”). While there are several permutations on this issue, the few top trending questions are:-
(i) is the adjudicator bound to pick between either submission made by the parties in the adjudication proceedings; and
(ii) to what extent an adjudicator could employ his/her inquisitorial powers.
This article briefly discusses the recent High Court case of Sun Plaza Development Sdn Bhd (“Sun Plaza”) v Hejingkang Sdn Bhd (“Hejingkang”) where Sun Plaza sought to set aside the adjudication decision obtained by Hejingkang on the ground, among others, that the:-
(i) manner in which the adjudicator decided on the Hejingkang’s quotation vis-à-vis the letter of acceptance was not raised by the parties; and
(ii) the parties, specifically Sun Plaza, was not afforded the opportunity to comment on the adjudicator’s aforesaid reasoning.
Factual Background:
Hejingkang commenced an adjudication proceeding CIPAA against Sun Plaza for unpaid sums for work done. In resisting Hejingkang’s claim, Sun Plaza had, amongst others, claimed for liquidated damages due to alleged late completion by Hejingkang.
One of the contentious issues in this case revolved around the applicability of Hejingkang’s quotation given that there was a letter of acceptance issue, albeit unsigned. The appointed adjudicator had issued further queries to the parties for submissions, particularly on whether Hejingkang’s quotation forms part of the contract between the parties. Both parties had submitted in several written submissions addressing the issue and both parties accepted that the Hejingkang’s quotation applied.
Interestingly, the adjudicator was unpersuaded and determined that Hejingkang’s quotation did not form part of the contract because the terms therein were inconsistent with the terms in the letter of acceptance. Particularly, the adjudicator relied on his knowledge and expertise under Clause 25 (d) of CIPAA and reasoned that the presence of the letter of acceptance issued by Sun Plaza “killed” the quotation (the “Quotation Point”).
Unsurprisingly, Sun Plaza applied to set aside the adjudication decision on the ground that the adjudicator had breached the principles of natural justice or acted in excess of jurisdiction. Simply put, Sun Plaza complained that:-
(i) the parties had agreed that quotation formed part of the contract and that the Quotation Point was not raised by either party [NB. It was held that the letter of acceptance was part of the contract between the parties]; and
(ii) Sun Plaza was not given the opportunity to address on the Quotation Point.
High Court:
The High Court dismissed the Sun Plaza’s argument on the excess of jurisdiction point given that the issue of what is the contract between the parties is similarly a relevant consideration to decide on Sun Plaza’s defence of set-off for liquidated damages. Furthermore, this issue was clearly raised in the adjudication proceedings.
On Sun Plaza’s argument that there was a breach of natural justice, the High Court dismissed the same given that:-
(i) the adjudicator had requested the parties to submit specifically on whether Hejingkang’s quotation formed part of the contract between the parties and both parties had duly submitted in their respective written submissions;
(ii) an adjudicator is not bound to accept either parties’ submissions, relying on AECOM Design Build Limited v Staptina Engineering Services Limited [2017] EWHC 723 (TCC); and Victory House General Partner Limited v RGB P&C Limited [2018] EWHC 102 (TCC), provided that sufficient opportunity was afforded to the parties to address the underlying issue;
(iii) there is no need to specifically seek further submission from the parties on the adjudicator’s proposed reasoning or determination on the issue to be determined, even where the adjudicator would answer the issue not in the way responded to by the parties.
The High Court further held that even if it could be said that the adjudicator had deprived the parties the opportunity to address this specific point (i.e. the Quotation Point), the breach was not material as the term in the quotation does not assist Sun Plaza.
To appreciate the above point, Hejingkang completed works on blocks A, B, C and D of the project. However, the quotation and (unsigned) letter of acceptance do not have a variation clause and was in respect of block A only. Sun Plaza argued that they are not obliged to pay for works done by Hejingkang in respect of blocks B, C and D as there was no variation clause in the contract and that there was no (separate) contract for blocks B, C and D.
The adjudicator rejected that Sun Plaza’s argument given that he found that the fact an oral agreement for Hejingkang on works for blocks B, C and D and this amounted to an agreed additional works. Thus, the rejection of Hejingkang’s quotation as being part of the contract notwithstanding that the parties agreed the same applied, had little, if no, impact to natural justice as far as the adjudication proceedings went.
Analysis and Comments:
This case highlights the point that adjudicators are not bound to accept only one of the two alternatives put to him/her by the parties in the adjudication proceedings. The adjudicator is well entitled under Section 25 (d) of CIPAA to rely on his/her own knowledge and expertise on the issues raised when arriving at the relevant determinations in adjudication decision.
This does not mean that the adjudicator is given a blank cheque to determine as s/he pleases. Where the adjudicator feels that further submissions would assist in a particular determination, it would be prudent to list down the relevant issues or queries for the parties as this will enable them to:-
(i) understand the adjudicator’s train of thoughts; and
(ii) formulate the appropriate responses in respect of the queries raised.
A failure to guide the parties in terms of the queries to be raised may well lead the Court to conclude that such an adjudicator’s determination is a ‘new proposition’ where the parties ought to be afforded the opportunity to address on unless it only concerns subsidiary issues [see Genting Malaysia Berhad v PLM Interiors Sdn Bhd and another case [2020] MLJU 344].
In all, it is worth noting that adjudication proceedings are carried out under a tight timeframe and underlying objective is deliver what is colloquially termed as ‘rough justice’. Thus:-
(i) unless there is some prevailing reason to the contrary, and as a matter of prudence, adjudicators ought to decide along the lines of the parties’ submission. Parties, and their representatives, best understood the issues involved and would have refined their approach in presenting their cases in the adjudication; and
(ii) where divergence or other issues that the parties may not have raised or understated, adjudicators ought to bring forth such queries on the issues so that parties are well-informed to address the issues in submissions.
More often than not, the losing party will file an application to set aside the adjudication, thus, adjudicators ought to keep in mind points that could be argued in setting aside applications when drafting their adjudication decisions. This minimizes the adjudication decisions from being set aside and this would ensure that the objective of CIPAA in enabling cashflow in the construction industry is met.
