Can you claim for Loss & Expense under CIPAA? (Part 2)

Introduction

In the previous article, we explored cases where the Court had decided that an Adjudicator has the jurisdiction to decide on claims for loss and expense arising out of extensions of time. (Re: Syarikat Bina Darul Aman Berhad & Anor v Government of Malaysia [2017] MLJU 63; SKS Pavillion Sdn Bhd v Tasoon Injection Pile Sdn Bhd [2019] 9 MLJ 396)

In today’s article, we will look at the case where the Court held that the adjudicator had exceeded his jurisdiction when he allowed the claim for loss and expense arising out of extensions of time.

INTEGRAL ACRES SDN BHD V BCEG INTERNATIONAL (M) SDN BHD AND OTHER CASES [2021] MLJU 1889

The High Court in Integral Acres Sdn Bhd v BCEG International (M) Sdn Bhd and other cases [2021] MLJU 1889 had decided that the adjudicator had exceeded his jurisdiction when he allowed on the claim for loss and expense arising out of extensions of time.

Background Facts

This case concerns an originating summons filed by Integral Acres Sdn Bhd (“IASB”) against BCEG International (M) Sdn Bhd (“BCEG”) to set aside an adjudication decision made on 22.2.2021, in favour of BCEG against IASB.

IASB appointed BCEG as a main contractor of a construction project in Sandakan, Sabah (“Project”).

BCEG claimed to have performed the works (“Works”) in the Project but IASB did not pay various sums allegedly due from IASB to BCEG regarding the Works.

BCEG commenced an adjudication proceeding against IASB. The Adjudicator delivered the adjudication decision in favour of BCEG.

Interestingly, the contract in Integrated Acres adopts the PAM Conditions of Contract 2006 (With Quantities), similar to that in SKS Pavilion.

Decision of the Court

The learned judge found and held:

1. an adjudicator only has “jurisdiction” to adjudicate claims for “payment” for “work done or services rendered” under a “construction contract”;

2. a claim for “loss and expense” “cannot fall within Claims (Works) as understood in the definition of “payment” in s 4 read with ss 5 and 27(1) CIPAA.”;

3. that the adjudicator had exceeded his jurisdiction when he allowed the claim for loss and expense;

4. that unless there is a written agreement extending his/her jurisdiction within the meaning of section 27(2) of CIPAA, an adjudicator has no jurisdiction to adjudicate on loss and expense.

COMMENTARY

The learned judge in Integral Acres did not refer to either Syarikat Bina Darul Aman or SKS Pavillion in his judgment.

In fact, the learned judge referred only one earlier decision which was decided by him in Rosha Dynamic Sdn Bhd v Mohd Salehhodin bin Sabiyee & Ors [2021] MLJU 1222 which was not on loss and expense (in that case, the learned judge held that an adjudicator has no jurisdiction under CIPAA to adjudicate a claim on loss of profit due to breach of a construction contract).

More importantly, the ratio in Integral Acres cannot be reconciliated with that of Syarikat Bina Darul Aman. In the latter, the court permits for loss and expense if the contract allows for the same to be “added to the contract sum” or be “claimed under the Final Account”. Bearing in mind, clause 24.4 of the PAM Conditions 2006 (which is what was used in Integral Acres) expressly provides “any amount so ascertained from time to time for such loss and/or expense shall be added to the Contract Sum, and if an Interim Certificate is issued after the date of ascertainment, such amount shall be included in the certificate”.

The case of Integral Acres stands apart from cases such as Syarikat Bina Darul Aman or SKS Pavillion.

Ultimately, the case of Integral Acres is being appealed, it remains to be determined and it would be interesting to see if the appellate court of Malaysia would continue to adopt this principle.