Adjudication under the Construction Industry Payment and Adjudication Act 2012 ("CIPAA") has strict timelines to be complied with, and that is the one main purposes of this dispute resolution mechanism - speed.

The Court of Appeal decision of Encorp Iskandar Development Sdn Bhd v Konsortium Ipmines Merz Sdn Bhd [2023] 1 LNS 1788 explored how a misinterpretation of the timeline required to deliver the adjudication decision resulted in the decision being set aside.

Brief facts

    The Appellant, Encorp Iskandar Development Sdn Bhd ("Encorp"), is the owner of a mixed development project where the Respondent, Konsortium Ipmines Merz Sdn Bhd ("Ipmines"), was its sub-contractor.
  • Disputes arose between Encorp and Ipmines over payment for work done which resulted in Ipmines commencing an adjudication claim under the CIPAA against Encorp.
  • The project was in Johor, but the adjudicator appointed was based in Kuala Lumpur.
  • Given that the working days in Johor (Sunday to Thursday) differ from Kuala Lumpur (Monday to Friday), and that there are different state holidays, the calculation of the last date to deliver the adjudication decision would change depending on whether one uses the working days of Johor or Kuala Lumpur.
  • Based on the facts, the last day for the adjudicator to deliver his decision would either have been 25 September 2019 (using Johor's working days) or 26 September 2019 (using Kuala Lumpur's working days).
  • The adjudicator delivered his decision in favour of Ipmines on 26 September 2019.
  • Ipmines went to the High Court to enforce the decision. At the same time, Encorp applied to set aside the adjudication decision.
  • The High Court allowed Ipmines application to enforce the adjudication decision and dismissed Encorp's application to set aside the same.
  • Encorp appealed to the Court of Appeal against the High Court's decision.

    • Court's Decision

      There were several issues before the courts but the focus of this article is on whether the adjudicator exceeded the statutory timeline provided under Section 12(2) of CIPAA when he delivered his adjudication decision.
    • Section 12(2) of CIPAA provides that:
      "Subject to subsection 19(5), the adjudicator shall decide the dispute and deliver the adjudication decision within -
      - forty-five working days from the service of the adjudication response or reply to the adjudication response, whichever is later;
      - forty-five working days from the expiry of the period prescribed for the service of the adjudication response if no adjudication response is received; or
      - such further time as agreed to by the parties."

      At the High Court
    • The High Court dismissed Encorp's argument that there was a breach of Section 12(2) by the adjudication because it was not pleaded by Encorp in its affidavits and the High Court took the view that the definition of "working day" depends on where the adjudicator is located and not the project site.
    • However, under Section 4 of CIPAA, (i) "working day" is defined as "a calendar day but exclude weekends and public holidays applicable at the State or Federal Territory where the site is located"; and (ii) "site" means "the place where the construction work is affixed whether on-shore or off-shore".
    • The High Court took the view that the definition of "working day" and "site" under Section 4 does not apply to Section 12(2)(a) and (b) because there could be discrepancies between what constitutes working days at the location of the adjudicator's office and where the site is located. If it applies, it would then result in the adjudicator having to work during a weekend or public holiday because the state where the project site is situated is not a weekend or public holiday.

      The Court of Appeal
    • In disagreeing with the High Court's reasoning, the Court of Appeal found that the definitions of "working day" and "site" under Section 4 is clear and unambiguous. Working day is based on the calendar day at the State or Federal Territory where the project site is at.
    • If Parliament intended for the working days to be calculated based on where the adjudicator's office is, then the definition under Section 4 would have spelt it out.
    • Therefore, since the project site is in Johor, the adjudication decision should have been delivered on 25 September 2019. The Adjudicator had exceeded the statutory timeline by 1 day when he delivered his decision on 26 September 2019.
    • Given that non-compliance of the mandatory timeline of 45 working days is fatal, and the Adjudicator cannot unilaterally extend the timeline for the delivery of the adjudication decision, there is a breach of Section 12(2) which resulted in the adjudication decision being set aside.

      • Key Takeaways

      Given this Court of Appeal decision, adjudicators must remember to use the working days of where the construction project site is located, and not follow the working days of his or her own office.

      There may be significant impact on the calculation of the timelines, especially where the regular working days between the two locations are different. In addition, the different state holidays play a crucial role in calculating the number of working days it takes for the adjudicator to deliver the adjudication decision.

      Parties or their legal representatives should also take proactive steps in ensuring that the adjudicator delivers his or her decision within the statutory timeline. It will not be an efficient allocation of time and costs for a completed adjudication decision set aside based on non-compliance of the deadline under CIPAA.

      The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Sean Ferdinand Ng
Donovan & Ho
15-2, Oval Damansara
685, Jalan Damansara
Kuala Lumpar
60000
MALAYSIA
URL: www.dnh.com.my

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