The Construction Disputes Law Review: Malaysia

Introduction

The year 2020 saw the covid-19 pandemic having a drastic and adverse impact on the construction sector in Malaysia. In particular, the Malaysian government imposed a total lockdown, restricting movement from 18 March 2020 until 3 May 2020. Thereafter, various lesser restrictions on movement were effected to manage the spread of the pandemic.2 Nonetheless, the Malaysian construction sector has experienced a rebound in 2021, but only time will truly tell as to the long-term impact of the pandemic on the sector.

Despite the setback caused by the onset of the pandemic, the Malaysian legal sector, particularly the judiciary, swiftly undertook measures to ensure minimal disruption to dispute resolution mechanisms through the adoption of video technology in court proceedings, using various online videoconferencing platforms such as Zoom, Skype and Microsoft Teams. While there are still operational issues associated with the use of this technology, the principal dispute resolution mechanisms, namely the courts and other forms of alternative dispute resolution such as arbitration, are now progressing smoothly and these technological solutions are likely to be an integral aspect of the Malaysian legal framework in future. While it is not within the scope of this chapter to evaluate the pros and cons of the online conduct of trials, a slight degradation of the quality of evidence has been observed in complex construction dispute trials in comparison with the experience of traditional physical court appearances, and this includes assessments of witnesses' credibility. Nevertheless, this compromise could be deemed an acceptable trade-off in ensuring that legal proceedings reach a conclusion in a reasonable time.

In addition, the Asian International Arbitration Centre (AIAC), an international institution established under the auspices of the Asian-African Legal Consultative Organization and situated in Kuala Lumpur, typically caters for dispute resolution in, but not limited to, construction matters. The important roles carried out by the AIAC include being the appointing authority for arbitrators under the Arbitration Act 2005 (the AA 2005) and the appointing authority for adjudicators under the Construction Industry Payment and Adjudication Act 2012 (CIPAA). Since its establishment in Kuala Lumpur, the AIAC has been known for the development, and constant refinement, of its Arbitration Rules and its Mediation Rules. In addition, the AIAC is equipped with various modern and high-tech facilities to cater for the conduct of all forms of alternative dispute resolution, both locally and internationally. Together, the Malaysian judiciary and the AIAC have worked fervently and in tandem with the legal profession, other building-related professionals and stakeholders to create an environment that is both familiar and conducive to dealing with, and resolving, any dispute or issue arising from the construction sector.

When it comes to construction disputes, arbitration remains the first-choice dispute resolution mechanism and represents the standard means specified in all the standard forms of construction contracts in Malaysia. Legislatively, the AA 2005 (modelled after the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the UNCITRAL Model Law)) governs the applicability of the arbitral process in Malaysia and, having been updated in 2018, affords parties wide-ranging interim measures where Malaysia has been specified as the arbitral seat. Further, and specifically for construction disputes, CIPAA was passed to cater for payment disputes arising from the construction sector and operates as a temporary measure to ensure a smoother cash flow among construction sector operators.

Year in review

Following the above broad overview, this section and the remainder of the chapter will explore in further detail the legal developments that have occurred in Malaysia in 2020 and up until the second quarter of 2021. Malaysian legal cases on construction industry-related issues have seen robust developments in recent years, in two areas in particular, namely arbitration and construction adjudication under CIPAA, and these are outlined briefly below.

In relation to arbitration, the decisions of the Federal Court of Malaysia in Pancaran Prima Sdn Bhd v. Iswarabena Sdn Bhd3 and Master Mulia Sdn Bhd v. Sigur Rus Sdn Bhd4 shed light on, among other things, arbitrators' powers in relation to the extent to which they can draw upon their experience and knowledge, and the ambit of the law in setting aside an arbitral award under the AA 2005.

For construction adjudication under CIPAA, in Ireka Engineering & Construction Sdn Bhd v. PWC Corporation Sdn Bhd & Other Appeals,5 the Federal Court determined that CIPAA and the adjudication mechanism thereunder only apply to construction contracts concluded after the entry into force of CIPAA (i.e., after 15 April 2014). In Martego Sdn Bhd v. Arkitek Meor & Chew Sdn Bhd and another appeal,6 it was held that there was no distinction between interim and final payment claims7 and that CIPAA would not be limited to interim claims only.

Courts and procedure

i Fora

When it comes to construction dispute resolution involving the Malaysian courts, it is noteworthy that the Malaysian judiciary established specialist construction courts in Kuala Lumpur and Shah Alam in 2014 to cater for the considerable volume of construction disputes brought through legal proceedings. These construction dispute-focused courts ensure a greater level of consistency in the application of construction-related law, with the judges in these specialist courts having significantly long tenure in office, further cementing familiarity with and positive development of construction law principles.

Malaysia is a Commonwealth jurisdiction and Malaysian law shares many similarities with the English common law traditions, with much of its legal jurisprudence drawn from jurisdictions such as Singapore, Hong Kong, India, Australia and the United Kingdom, although it retains its jurisprudential distinctiveness to suit local circumstances. Briefly, the Malaysian courts are divided into inferior (lower) and superior courts, with the lower courts consisting of the magistrates' and sessions courts while the High Court, the Court of Appeal and the Federal Court represent the superior courts. Like those of its Commonwealth counterparts, the courts are separated primarily by the monetary value of the matter at issue, as well as the type of equitable relief or declaration sought. Amendments to the Courts of Judicature Act 1964 have allowed lower courts to deal with equitable reliefs such as specific performance, injunctions and declaratory reliefs (previously the exclusive province of the High Court).

ii Jurisdiction

On the whole, Malaysia's legal system and jurisprudence are known for being receptive and arbitration-friendly. The Malaysian courts have regularly upheld the parties' commitments in contracts that contain an arbitration clause or agreement. Section 10 of the AA 2005 states, among other things:

10. Arbitration agreement and substantive claim before court
(1) A court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
. . .
(4) This section shall also apply in respect of an international arbitration, where the seat of arbitration is not in Malaysia.

Thus, unless the party seeking to rely on the arbitration clause or agreement has taken 'steps in the proceedings', the courts will grant a stay of court proceedings for the matter to be referred to arbitration for the substantive determination of the disputes or issues. In Tindak Murni Sdn Bhd v. Juang Setia Sdn Bhd (Tindak Murni),8 the Federal Court determined that the first step is to consider whether there is an arbitration agreement in respect of the dispute in question9 and whether the arbitration agreement is null and void, inoperative or incapable of being performed. Further, the crux of Tindak Murni was the Federal Court's affirmation that an arbitration clause or agreement would not be defeated merely through undertaking the court process. On the facts of Tindak Murni, the defendant failed to enter its appearance in the legal proceeding, resulting in a judgment in default of appearance being obtained by the plaintiff. The Federal Court emphasised that precedent must be given to the arbitration clause or agreement notwithstanding the grant of the judgment in default of appearance through court procedure rules. This, according to the Federal Court, is fortified by the filing of a legal suit, as the latter was done in breach of the arbitration clause or agreement.10

The other consideration is whether the applicant seeking the stay pending a reference to arbitration has to show that no other steps in the proceedings have been taken.11 The phrase 'steps in the proceedings' has been taken to include service of any pleadings but to exclude the filing of a memorandum of appearance.12 If the defendant were, for example, to file a statement of defence, the defendant would be deemed to have elected to submit to the court's jurisdiction for the determination of the dispute or issue. Thus, in those circumstances, the party would forfeit the right to refer the dispute to arbitration.

Another topical issue is when the arbitration clause or agreement contains several tiers – typical in construction contracts. The reason for these multi-tier dispute resolution clauses is primarily to minimise delays or disruptions to the progress of the construction work. An example can be found in Clause 65 of the Malaysian PWD Form 203A, which stipulates that any dispute or difference be first referred to the officer (SO) named in the appendix. The SO's decision is binding on the parties until completion of the works and the contractor is bound to proceed with the works with all due diligence regardless of whether a notice of dissatisfaction has been issued. In Juara Serata Sdn Bhd v. Alpharich Sdn Bhd,13 the Federal Court held that the dispute resolution clause requiring (1) that any dispute or difference be referred to the architect or consultant for a decision, and (2) that where either the architect or consultant failed to deliver a decision the dispute or difference should be referred to arbitration, or where a party gave notice to this effect, must be strictly complied with. In this case, the failure to give notice to refer the dispute or difference to arbitration meant that the architect's decision was final and binding and the appellant was therefore subsequently barred from resorting to arbitration.

iii Procedure rules

As with any other legal suit in Malaysia, construction disputes are not expressly governed by any special court procedures or rules. Typically, a demand notice is sent by a potential claimant to the respondent and, if the demands (or counter-demands) are not met, either party can commence a legal suit by filing a writ and statement of claim. As indicated earlier, the Malaysian courts are divided into several tiers, with the magistrates' courts having a monetary jurisdiction for disputes valued at up to 100,000 ringgit, the sessions court having a monetary jurisdiction up to 1 million ringgit and the High Court having monetary jurisdiction for claims exceeding 1 million ringgit in value.

The writ, once sealed and served on the defendant together with the statement of claim, sets in motion the pleading stage. Upon its conclusion, the court would usually issue pretrial directions that would include, among other things, the compilation of documents, preparation of a statement of agreed facts, issues to be tried, submission of witness statements, preparation of expert evidence (if any) and fixing of trial dates.

Although each court is the master of its own procedure, there is a general non-binding directive that each case ought to be concluded within nine months of the date of the writ. This may vary given the circumstances and, without a doubt, the covid-19 pandemic severely and adversely affected the timely conclusion of trials within the prescribed nine-month period.

iv Evidence

The taking and submission of evidence is governed by the Evidence Act 1950. A topical issue relating to construction litigation is the reception of expert evidence,14 with such evidence only admissible to furnish scientific information that is likely to be beyond the experience and knowledge of the court.15

In this context, it had been suggested that, where a party had adduced expert evidence in relation to a construction dispute, this might only be rebutted by expert evidence adduced by the other side. In UMW Toyota Motor Sdn Bhd v. Allan Chong Teck Khin & Anor,16 the Court of Appeal held that the notion that expert evidence could only be challenged by an opposing expert evidence was erroneous and a serious misdirection. The expert evidence first has to be both applicable and relevant before the court will proceed to consider the totality of the evidence, including the oral testimony elicited from the expert. Furthermore, caution has to be exercised where experts enter the legal arena not to present findings of fact but to assert legal interpretations favourable to their clients.17

Alternative dispute resolution

i Statutory adjudication

In addition to its provision for arbitration and court proceedings, to cater for a smoother cash flow in the construction industry, Malaysia enacted CIPAA, which affords construction participants an adjudication mechanism specifically dealing with payment matters. Since its enactment, the number of adjudication cases has skyrocketed, with the volume reducing slightly in 2020 because of the global covid-19 pandemic.18 Notwithstanding this, the overall legislative framework of CIPAA was meant to provide a shorter time frame in which to deal with construction payment claims compared with those for both arbitration and court proceedings. In this regard, from the issuance of a payment claim, the respondent would have 10 working days to submit a payment response. If there is no payment response, this does not limit the respondent's right given that Section 6(4) of CIPAA deems that the entire payment claim is disputed.19 Thereafter, either the unpaid party or the non-paying party is entitled to submit a notice of adjudication to the other party and to register the adjudication matter with the AIAC. The notice of adjudication would typically contain the nomination of an adjudicator and is to be agreed within 10 working days, failing which an application to the Director of the AIAC is made for the appointment of an adjudicator.

Once an adjudicator has been appointed, the parties are afforded a further 10 working days to confirm the adjudicator's terms of appointment, which would include his or her fees. Once this is done, the adjudicator would provide the deadlines for the submission of the required documents in accordance with the periods set out in CIPAA. This includes the adjudication claim within 10 working days, the adjudication response within 10 working days thereafter and, finally, the adjudication reply (if any) within five working days thereafter. The adjudicator is then required to deliver the adjudication decision within 45 working days of the expiry of the service of the adjudication response or adjudication reply, whichever is later. Failure to comply with these strict timelines would render the adjudication decision void.20

It is worth noting that the CIPAA process is only meant to provide a temporary albeit binding21 decision, unless it is set aside or the matter is settled by agreement between the parties or the dispute is finally decided by arbitration or the courts. Since the entry into force of CIPAA, the unsuccessful party in attempting to avoid paying the adjudicated sum would typically resort either to setting aside the adjudication decision or to applying for a stay pending a final determination on the dispute. This has led to some concern that the statutory adjudication mechanism under CIPAA is not achieving its intended objective.22 On the whole, however, the presence of CIPAA puts Malaysia on the same footing as its Commonwealth counterparts such as Singapore, Australia and New Zealand, with the provision of a 'quicker' mechanism to alleviate some of the endemic problems relating to cash flow in the construction industry.

ii Arbitration

In respect of arbitration, it is worth noting that Malaysia is a signatory to the New York Convention and the AA 2005 is modelled after the UNCITRAL Model Law. In terms of the arbitral process and arbitral awards, the courts have indicated that a hands-off approach is preferred. To further assist the smooth conclusion of arbitral proceedings, the AA 2005 was amended in 201823 to expressly include provisions for granting interim measures, principally on maintaining or restoring the status quo pending determination of the dispute, preventing or refraining from taking action likely to cause harm to the arbitral process, preservation of assets, preservation of evidence and the provision of security for costs.24

Furthermore, formerly one of the unique features of the AA 2005 was the provision in Section 42 that enabled a referral to the courts of a question of law25 arising out of an arbitral award.26 Prior to the removal of this provision, parties to the arbitral proceedings could refer questions of law to the court for determination (although Section 42(1A) of the AA 2005 stipulated that an application of this kind would be dismissed unless the question of law had materially affected the rights of one or more parties). However, this led to dissatisfied parties making such applications on the basis that a question of law had arisen.27 With the removal of Section 42, the only remedies afforded parties are now the setting aside of the arbitration award28 or the arbitral award being refused recognition or enforcement.29

The courts have indicated their preference that where parties have agreed to arbitration to resolve any dispute or difference arising, they should be held to that undertaking. The courts have indicated their reluctance to interfere, even where grounds have been made out under Section 37 of the AA 2005 for setting aside an arbitral award, on the basis that the courts ultimately retain an unfettered discretion to maintain an arbitral award.30 This fortifies Malaysia's commitment to being an arbitration-friendly jurisdiction and supports the AIAC in leading the way in encouraging and facilitating the seating of arbitration in Malaysia, both domestic and international.

iii Mediation

There is provision for the adoption of mediation in the context of dispute resolution mechanisms in Malaysia. The legislative framework for mediation is governed by the Mediation Act 2012. Further, in the effort to promote mediation and affirm its commitment to mediation as a means to resolve disputes or difference, Malaysia has become a signatory to the Singapore Convention on Mediation.

To facilitate mediation, both the AIAC and the Malaysian Bar Council have led initiatives in encouraging the use of mediation to resolve commercial or construction disputes. The Malaysian Mediation Centre was established under the auspices of the Malaysian Bar Council in 1999, whereas the AIAC Mediation Rules, which date from 2013, underwent revision as recently as 2018. The judiciary too has established its own mediation centre and litigants are often encouraged to seek mediation prior to matters being adjudicated by the courts.

However, it is a given that mediation is a voluntary process, hence the parties' agreement to have the matter mediated must be obtained first. In this regard, these are no sanctions for a party that refuses or is unwilling to undertake mediation. This is perhaps one of the stumbling blocks when it comes to the effectiveness of mediation in the area of construction disputes. Typically, by the time parties are in the preparatory stages for either arbitration or litigation, the absence of sanctions, such as costs penalties, makes it less likely that parties might be enticed to mediate. Given the benefits of mediation, contracting parties ought to be encouraged to incorporate a mediation clause into the arbitration clause or agreement.

Construction contracts

i Public procurement

When it comes to construction contracts, and building-related and infrastructure works, the availability and use of the various local standard contract forms issued by the Public Work Department (PWD), Institution of engineers Malaysia (IEM), Pertubuhan Akitek Malaysia (PAM), the Construction Industry Development Board (CIDB) and the AIAC ensure the certainty of practices and procedures in the execution and completion of such works. Further, the New Engineering Contract and the International Federation of Consulting Engineers contracts (known as FIDIC contracts) are known to have been used in Malaysia as well.

While these standard-form contracts contain individual differences, they generally cover those aspects of the construction process typically encountered in construction projects in Malaysia. By and large, determining which standard form of contract is to be applied (plus its conditions of contract) very much depends on the parties' assessment of, among other things, the nature, scale, financing and risks of the particular construction project. Another key determinant is the manner in which the courts approach the interpretation of these contractual terms.

ii Contract interpretation

As Malaysia is a Commonwealth jurisdiction, many of the country's legal traditions are drawn from the English legal system and from other Commonwealth jurisdictions. As regards contractual interpretation, the Malaysian courts have adopted the English legal position31 in that contract terms are to be read literally but in a sensible manner.

The 'sensible manner' portion does not mean that the courts can reinterpret or ascribe a more reasonable interpretation of the terms agreed between the parties. Thus, contracting parties ought to be aware that where the governing law provision stipulates the laws of Malaysia, the terms of the contract should be drafted in a clear and complete fashion. The courts would not come to the aid of a party claiming either a 'lack of choice' or the unfairness of a particular provision.32

Common substantive issues and remedies

i Time bars as condition precedent to entitlement

When adopting standard forms for construction projects in Malaysia (and as indicated above, given the courts' approach to contractual interpretation), contracting parties ought to be aware that contractual terms are to be interpreted strictly. This makes compliance with the requirements for a claim essential; for example, a loss and expense claim under Clause 44.1 of the PWD Form 203A (Rev 2007) would require the contractor intending to claim to give written notice within 30 days of the occurrence of the relevant event, together with an estimate of the amount of the loss and expense, and failing to do so would operate as a bar to the contractor's claim.33

It is perhaps worth highlighting that the Limitation Act 1953 prescribed a six-year limitation period (from the date the cause of action arose) for an aggrieved party to take legal action, failing which such action would be time-barred unless the aforesaid party could demonstrate that there had been a fresh accrual of the action.34 In this regard, it is crucial that contracting parties, especially in construction-related matters or projects, keep sufficient documentation of the events or activities that occurred during the work's progress to avoid these pitfalls.

ii Right to payment for variations and varied scope of work

Another topical issue is the contractor's entitlement in relation to variation works. All standard forms of contract prescribe the application and approval procedures for variation works. Failure to comply with the contractual procedure for variation works would result in a claim being rejected.35 Nonetheless, practical problems do arise during construction projects where the contractor may be encouraged or verbally given an instruction (without contemporaneously confirming the instruction or time and costs involved for the variation work) only to find related claims being rejected at a later stage.

However, a contractor's entitlement for variation works is not entirely lost if the contractor can demonstrate, for example, that the works were carried out with the knowledge of the employer's appointed consultant36 or that the disputed variation works were reflected in the progress claims and no efforts were made to stop the contractor from carrying out the variation works,37 or that the employer or the employer's appointed consultant had previously received the contractor's claim for the variation works and did not reject it at that time.

Thus, it does seem open for contractors to rely on the employer's or the appointed consultant's subsequent conduct where it could reasonably be interpreted as accepting, condoning or encouraging the contractor's works and to put in a claim for variation works based on the doctrine of estoppel. However, the likelihood of success of such a claim is typically fact-sensitive and must be borne out in evidence to the satisfaction of the court or arbitrator, as the case may be.

iii Concurrent delay

One of the usual issues encountered in construction projects would be incidents of delay. This issue is usually intertwined with issues regarding the imposition of liquidated damages. Firstly, the legal position on delays is expressed as the 'prevention principle', which considers whether it would be fair to insist that a contractor stick to a completion date where delaying events were partly caused by the employer.38

While it is perhaps easier to determine the cause and effect of a single delaying event, concurrent delays39 pose a conundrum in the dispute resolution setting. In this regard, the Malaysian legal position draws on that of the English jurisdiction40 and, where concurrent delays are involved, it remains for the court or arbitrator to determine (1) the contract between the parties to identify the relevant scope of work, (2) which event is relevant, and (3) the appropriate extension of time, notwithstanding the effect of the other concurrent delay. However, if both the employer and contractor are equally blameworthy for the concurrent delays, the contractor would be entitled to an appropriate extension of time but, as a general rule, not to claim for the loss caused by the delay.41

The actual determination of who is responsible for the delays and the consequences are fact-sensitive and are greatly assisted by sufficient documentation from all parties in the event of litigation or arbitration.

iv Suspension and termination

Termination or suspension of works will very much depend on the terms of the contract between the parties.42 For example, in a case of suspension of work in accordance with a contractual provision, such as for non-payment by the employer43 where the contractor has adhered to the stated procedures, the contractor may be allowed an equivalent extension of time.

With regard to the termination of the contractor's employment, the courts have held that the clauses in the contract have to be applied strictly.44 Failure either to comply strictly with a specified termination clause or to conform to the procedures thereunder would be likely to result in the termination being unlawful, and the party in breach of the clause being liable for any damages arising.

v Penalties and liquidated damages

The Malaysian legal position on liquidated damages is found in Section 75 of the Contracts Act 1950, which states:

When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

In Cubic Electronics Sdn Bhd (in liquidation) v. Mars Telecommunications Sdn Bhd,45 the Federal Court 'relaxed' the stringent requirement arising from Hadley & Anor v. Baxendale & Ors46 in that the claimant must prove the actual loss suffered and that the losses were foreseeable. The current legal position in Malaysia is that reasonable compensation can be awarded irrespective of whether actual loss is proven and factors to consider include legitimate interest and proportionality.47 This provides a greater latitude for the courts or arbitrator (i.e., in adopting a more pragmatic common-sense approach) with the proviso that, in determining the quantum of reasonable compensation, there must not be a significant difference between the level of damages spelt out in the contract and level of loss or damage likely to be suffered by the innocent party (and which must not exceed the amount of damages stated in the contract).48

vi Defects correction and liabilities

With regard to defects, all the Malaysian standard forms of contract contain provisions for a defects liability period. This ties in with the release of the 'retention monies' typically required and acts as a lever to require the contractor to attend to all defects in their scope of work arising from either quality or workmanship issues.

While patent defects are typically identified through the joint inspections conducted between the contractors and appointed consultants, a larger issue involving latent defects is said to be only discoverable by reasonable diligence or otherwise discovered by a competent professional upon an inspection, survey or examination.49 Thus, whether a defect could be classified as a latent defect remains a factual determination and if it were found to be so, the party responsible for the works in question would be liable for the costs of rectifying the latent defect. It is also worth noting that the issuance of a certificate of making good defects would not abrogate the contractor's liability in respect of valid latent defects.

vii Bonds and guarantees

In most construction projects, some form of payment assurance is required and may be in the form of a performance bond or bank guarantee. In Malaysia, the common prescription is for the contractor to provide a performance bond (i.e., to ensure the satisfactory performance of the contractor's obligations) in the nature of a bank guarantee. In most cases, such a bank guarantee is typically worded as an 'on-demand' guarantee and requires merely the calling of the guarantee by the employer without being subject to proof that the underlying circumstances merit such a call.

Perhaps in view of the inflexible nature of such on-demand guarantees, in Sumatec Engineering and Construction Sdn Bhd v. Malaysian Refining Co Sdn Bhd (Sumatec),50 the Federal Court held that, in addition to incidents of fraud, if a party establishes that the call on a guarantee is 'unconscionable', an injunction should be granted to restrain the release of the sums under the guarantee. In Sumatec, the term 'unconscionable' could not be adequately pre-defined and although what amounts to unconscionable would depend on the particular circumstances in each case, they must be events or conduct 'of such degree such as to prick the conscience of a reasonable and sensible man'.51

Malaysian case law is replete with decisions finding certain sets of events to be unconscionable and other sets not so, thereby justifying the granting or the refusal of an injunction. It would be beyond the scope of this chapter to cite all the case law as cases are, essentially, fact-sensitive.

Outlook

As Malaysia and the world begin to recover from the covid-19 pandemic and deal with its aftermath, one of the prime movers of the economy will no doubt be the construction industry.52 With the commencement or recommencement of various construction projects, it is to be expected that the incidence of disputes or differences will inevitably rise. If this indeed proves to be the case, all parties involved – including the legal profession, construction professionals, the arbitration community and the judiciary – may find themselves adapting to a post-covid-19 world sooner rather than later.

Footnotes

1 James Ding Tse Wen is a partner at C H Tay & Partners.

2 Allowing only those construction works deemed essential, such as those relating to national security.

3 [2021] 1 MLJ 1.

4 [2020] 12 MLJ 198.

5 [2020] 1 MLJ 311.

6 [2020] 6 MLJ 224.

7 The initial premise being that final payment claims under the final account ought not to be subject to CIPAA in view of the more complex considerations involved in the computation and preparation of such final accounts.

8 [2020] 3 MLJ 545.

9 Affirming the decision in TNB Fuel Services Sdn Bhd v. China National Coal Group Corp [2013] 4 MLJ 857, read together with Section 9 of the AA 2005, which defines the term 'arbitration agreement'.

10 In Press Metal Sarawak Sdn Bhd v. Etiqa Takaful Sdn Bhd [2016] 5 MLJ 417 at para. [56], the Federal Court of Malaysia held that, among other things: 'The parties must be held to what they have agreed to in an agreement. Therefore, it is essential to consider the wordings of the clause specifically and determine what they have agreed to. Whether a dispute falls within an arbitration clause must depend on (a) what is the dispute or difference between the parties and (b) what disputes the arbitration clause covers.'

11 Section 10(1) of the AA 2005.

12 Sanwell Corp v. Trans Resources Corp Sdn Bhd & Anor [2002] 2 MLJ 625.

13 [2015] 6 MLJ 773.

14 Section 45(1) of the Evidence Act 1950.

15 Chou Kooi Peng & Anor v. Public Prosecutor [1998] 3 SLR 593.

16 [2021] 3 MLJ 107.

17 Era Kemuncak Jaya (M) Sdn Bhd v. Tenaga Switchgear Sdn Bhd [2021] MLJU 1855.

18 The number of cases registered at the AIAC for adjudication matters under CIPAA for 2020 was 537 compared to 816 for 2019.

19 This is affirmed by the Federal Court's decision in View Esteem Sdn Bhd v. Bina Puri Holdings Bhd [2018] 2 MLJ 22.

20 Section 12(3) of CIPAA.

21 Section 13 of CIPAA.

22 Harbans Singh, 'Construction Industry Payment and Adjudication Act 2012: Is it Moving in the Right Direction?' [2016] 5 MLJ xiii.

23 Arbitration (Amendment) (No. 2) Act 2018 (A1569).

24 ibid., Sections 19 and 19A to 19J.

25 The Federal Court had elaborated on what could constitute questions of law in Far East Holdings Bhd & Anor v. Majlis Ugama Islam dan Adat Resam Melayu Pahang and other appeals [2018] 1 MLJ 1.

26 Section 42 of the AA 2005, now deleted.

27 An example of this can be seen in Sykt Pembenaan Yeoh Tiong Lay Sdn Bhd v. Sunway City Sdn Bhd [2019] 2 MLJ 495 in which the questions of law were, in essence, a mix of facts and law. The Court of Appeal held that a proper application of a question of law ought to be premised on a full and unqualified acceptance of the arbitrator's findings of fact.

28 Section 37 of the AA 2005. The listed grounds are, 'a party to the arbitration agreement was under any incapacity', 'the arbitration agreement was not valid under the law to which the parties have subjected it', 'the party making the application was not given proper notice of the appointment of the arbitrator or the arbitral proceedings or was unable to present that party's case', 'the award dealt with a dispute not contemplated or not falling within the terms of submission to arbitration', 'the award contains decisions or matters beyond the scope of arbitration' or 'composition of the arbitral tribunal or arbitral procedure was not in accordance with the agreements of the parties'. In Pancaran Prima Sdn Bhd v. Iswarabena Sdn Bhd and another appeal [2021] 1 MLJ 1, the Federal Court held that the grounds set out in Section 37 of the AA 2005 are exhaustive and are to be interpreted narrowly and restrictively to support the finality of arbitral awards.

29 Section 39 of the AA 2005.

30 Master Mulia Sdn Bhd v. Sigur Rus Sdn Bhd [2020] 12 MLJ 198, in which the Federal Court determined, among other things, that such a discretion is to be exercised with regard to the policies and objectives underpinning the AA 2005. To this effect, it held that, 'In particular, due cognisance must be taken of the purposes of encouraging arbitration as a method of dispute resolution and facilitating the recognition and enforcement of arbitral awards.'

31 Attorney General of Belize and others v. Belize Telecom Ltd and another [2009] UKPC 10, also Trollope & Colls Ltd v. North West Metropolitan Regional Hospital Board [1973] 1 WLR 601; for Malaysian cases – SPM Membrane Switch Sdn Bhd v. Kerajaan Negeri Selangor [2016] 1 MLJ 464 and Catajaya Sdn Bhd v. Shoppoint Sdn Bhd & Ors [2021] MLJ 374 (both Federal Court decisions).

32 Malaysia does not have an equivalent of the UK Unfair Contract Terms Act 1977.

33 A similar approach is applied in evaluating whether termination of the contractor's employment is valid or otherwise; see Catajaya Sdn Bhd v. Shoppoint Sdn Bhd [2021] MLJ 374.

34 Section 26A of the Limitation Act 1953; see also Mustafa Bin Tasaduk & Ors v. Kerajaan Malaysia [2019] 10 MLJ 413.

35 Hasrat idaman Sdn Bhd v. Mersing Construction Sdn Bhd [2015] 11 MLJ 464.

36 Casa Tenaga Sdn Bhd v. Efektik Sempurna Sdn Bhd & Anor [2016] 7 MLJ 389.

37 KC Leong Holdings Sdn Bhd v. Datin Moh Bee Ling [2015] 7 MLJ 10.

38 Yuk Tung Construction Sdn Bhd v. Daya CMT Sdn Bhd [2020] 1 LNS 1314 (Court of Appeal).

39 John Marrin QC, 'Concurrent Delay' (2002) 18(6) Const. L.J. 436.

40 Walter Lily and Co Limited v. Giles Patrick Cyril Mckay and Another [2012] B.L.R. 503 and Henry Boot Construction (UK) Ltd v. Malmaison Hotel (Manchester) Ltd (1990) 70 Con. L.R. 32.

41 De Beers v. Atos Origin IT Services UK Ltd [2011] B.L.R. 274.

42 For example, Clause 30.7 of the PAM Form 2006 (With Quantities) entitles the contractor to suspend the works if the employer fails or refuses to pay the amount shown in the payment certificate and continues to default for 14 days after receipt of a written notice from the contractor.

43 ibid.

44 Fn. [33].

45 [2019] 6 MLJ 15.

46 9 ExCh 341.

47 Cavendish Square Holding BV v. Talal El Makdessi [2015] UKSC 67.

48 Fn. [45] at paras. [68] and [69].

49 Pearson Education Ltd v. The Charter Partnership Ltd [2005] EWHC 2021 TCC.

50 [2012] 4 MLJ 1.

51 ibid., para. [39].

52 New Straits Times, 'Construction sector to drive growth' (7 April 2021) – this news report indicated year-on-year growth of 14.9 per cent for the Malaysian construction sector for 2021.

The Law Reviews content