Legal Bytes
Failure to consider responses after an adjudication reply – A Breach of Natural Justice?
Introduction
Similar to statutory adjudication proceedings in other jurisdictions, the adjudication proceedings under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA 2012”) are also known for their strict timelines. With respect to the adjudication decision, S.12 of CIPAA 2012 provides that an adjudicator shall deliver its decision within 45 working days from the service of the adjudication response or reply to the adjudication response, whichever is later. Failure to deliver its decision within the stipulated time frame would render the adjudication decision void as illustrated in the High Court case of MRCB Builders Sdn Bhd v SMM Resources Sdn Bhd and another case1.
Pleadings are deemed to be closed after the filing of the Adjudication Reply, unless leave is sought and granted under section 25 of CIPAA 2012 for the filing of a Rejoinder.
The issue arises when a party submits a further response without leave of the tribunal to address issues raised in the Adjudication Reply. Does the Adjudicator have an obligation to consider it? Furthermore, would a failure to consider by the Adjudicator amount to a breach of natural justice
In the recent High Court case of Ahmad Zaki Sdn Bhd v YDI Synergy Sdn Bhd [2023] 1 LNS 974, the Court was asked to determine whether the Adjudicator’s failure to consider letters issued to the Adjudicator after the service of the Adjudication Reply amounted to a breach of natural justice.
Brief Facts
The Plaintiff was appointed as a contractor for the construction of an academic building in Ipoh, Perak. The Plaintiff then appointed the Defendant as its sub-contractor to supply, install, testing and commission of electrical services.
Disputes arose between parties after the completion of the project for unpaid certified sums and non-certification for works carried out. The Defendant then commenced adjudication proceedings against the Plaintiff. The Plaintiff opposed the adjudication on various grounds, amongst others, it’s entitlement to impose Liquidated Ascertained Damages (“LAD”) and set off the same against the sums due to the Defendant. In challenging the Plaintiff’s entitlement to impose LAD, the Defendant raised the issue relating to the Plaintiff’s failure to grant EOT in its Adjudication Reply. Ten (10) days before the due date for the delivery of the adjudication decision, the Plaintiff issued letters to the Adjudicator, and responded to the position taken by the Defendant in relation to EOT raised in the Adjudication Reply.
The Adjudicator allowed the Defendant’s claim in part, and rejected the Plaintiff’s entitlement to impose LAD. The Adjudicator also refused to consider the letters issued by the Plaintiff on the ground he has no power to consider fresh submissions after receipt of the Adjudication Reply. The Adjudicator also took into account the strict timeline of 45 working days after receipt of the Adjudication Reply to issue the adjudicated decision.
Dissatisfied with the decision, the Plaintiff applied to set aside the adjudication decision under Section 15(b) and (d) of CIPAA 2012 on the following grounds:
a) Failure to consider the Plaintiff’s case as pleaded in the Adjudication Response which would have entitled the Plaintiff to impose LAD against the Defendant; and
b) Failure to take into consideration the letters dated 03.12.2021 and 10.12.2021 (or fresh submissions as described by the learned adjudicator) issued by the Plaintiff to the learned adjudicator after the service of the Adjudication Reply which resulted in a breach of natural justice.
On 12.5.2023, the learned High Court Judge dismissed the Plaintiff’s application to set aside the adjudication decision. In respect of the Plaintiff’s contention that the learned Adjudicator committed a breach of natural justice for failing to consider the letters issued, the learned High Court Judge stated as follows:
1) “the right to file further responses, such as a rejoinder for example, is not automatic”
2) “the Plaintiff’s letters, albeit sent just 10 days before the Adjudicator’s decision is due could not have impacted the Adjudicator’s ability to render his decision on time.”
3) “Be that as it may, it is also this Court’s view however that the Plaintiff should have first sought the Adjudicator’s leave before submitting those letters since pleadings had already closed, more so when the Plaintiff took 2 months before deciding to submit them.”
4) “Although those letters did not set out new issues or disputes but were merely clarifications of matters raised in the Adjudication Reply this Court does not find any explanation for the 2 months delay taken by the Plaintiff in submitting the first letter. Neither was any explanation found in the second letter.”
The High Court Judge distinguished cases like Guangxi Dev & Cap Sdn Bhd v Sycal Bhd and Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd & Anor where unlike in Guangxi Dev and Martego where oral hearings and the examination of witnesses were requested, this present case relates to the Plaintiff seeking to only highlight and clarify issue through the said letters.
Conclusion
The High Court held that the Adjudicator has the power and duty to consider further replies, responses and defences of parties under Section 25 of CIPAA. However, any further responses and defences after the Adjudication Reply is filed must be properly brought before the Adjudicator by seeking leave of Adjudicator and it must be done expeditiously. This is in line with the decisions in Haluan Prisma Sdn Bhd v Kumpulan Awambina Sdn Bhd and another summons2 and Pembinaan Melima (M) Sdn Bhd v ATM Development Sdn Bhd and another case3.
The need to take steps expeditiously is necessary to prevent parties from taking casual approach in filing further documents at their whims and fancies which would undermine the authority of the Adjudicator over the adjudication proceedings.
This article is authored by Balan Nair Thamodaran (Partner) and Justin Yap (Associate) of the Construction and Adjudication Practice of Lavania & Balan Chambers. It contains general information only. The contents are not intended to constitute legal advice on any specific matter nor is it an expression of legal opinion and should not be relied upon as such.
