KPF NIAGA SDN BHD
V
VIGOUR BUILDERS SDN BHD AND ANOTHER CASE
HIGH COURT (KUALA LUMPUR)- ORIGINATING SUMMONS NOS WA-24C-193-09 OF 2019 AND WA-24C-273-12 OF 2019
ALIZA SULAIMAN J
29 January 2021
The appellant, KPF Niaga Sdn Bhd (‘KPF’), is the plaintiff in the first originating summons, who made an application to the Court to set aside the Adjudication Decision dated 10.9.2019 (“AD”), and the respondent, Vigour Builders Sdn Bhd (‘Vigour’), is the plaintiff in the second originating summons who made an application to the Court to enforce the said AD.
KPF, by way of the Surat Setuju Terima Tawaran Sebagai Pembekal Dan Penyedia dated 12.6.2018 (‘SST’), had accepted Vigour’s offer in the closed tender for the project described as “Membekal Tenaga Buruh, Peralatan, Bahan Dan Penghantaran Ke Tapak Untuk Cadangan Kerja-Kerja Pembinaan Jalan Claycrete Untuk Jalan Ke Kilang Sawit Ensengei Di Ladang Samarahan, Kota Samarahan, Sarawak” (‘Project’) for the contract sum of RM4,400,550.00 and subject to the terms and conditions as stated in the SST. During the contract period, Vigour had submitted the 1st Progress Payment Claim for works done up to 3.10.2018, however no payment was made to Vigour despite exchanging a series of letters with KPF from November 2018 until January 2019. In KPF’s letter to Vigour dated 15.11.2018, KPF stated that it had conducted a site visit on 1.11.2018 and found that the condition of the Claycrete road was not in accordance with the tender specifications, and KPF has requested a written explanation on this matter as well as the status of the 3 years guarantee for the Claycrete road following the termination of the distribution rights of Claycrete in Malaysia which was granted to Vigour. On 7.1.2019, KPF exercised its rights pursuant to Clause 28 of the conditions of the closed tender, which was incorporated as part of the contractual terms, to terminate the contract with Vigour.
In view of the dispute between the parties, a payment claim was issued by Vigour to KPF pursuant to section 5 of Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) for the total amount of RM2,262,500.00. On 10.9.2019, the Adjudicator issued the AD in the favour of Vigour for the Adjudicated Amount of RM 2,173,766.00. KPF then sought to set aside the AD under all four limbs of section 15 of CIPAA.
Issues
- Whether a party seeking to raise that an Adjudication Decision has been improperly procured through fraud must prove that the act of fraud was directly committed by a party in whose favour an Adjudication Decision is given?
- Whether the following actions would constitute as fraudulent acts:
- concealment of the fact that Vigour did not have a valid certificate of registration issued under sub-s 25(1) of the Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994 [Act 520] (‘CIDB Act’);
- concealment of the full text of the WhatsApp Messages such that the Adjudicator is given the impression that the supplier of Claycrete had indorsed the works carried out by Vigour for the Project; and
- concealment of the fact that Vigour, and not KPF, had placed the order for Claycrete.
- Whether a party can raise the defence of fraudulent behavior, acts or omissions, if such defence were not raised in the adjudication.
Decision
The Court set aside the AD on the ground of Section 15(a) CIPAA and dismissed the Enforcement Application. The reasons set out by the Learned Judge in her judgment are briefly as follows:
- The context of fraud used in section 15(a) of CIPAA has a distinctive meaning as compared to the definition in the context of contract law as set out in s 17 Contracts Act 1950. A party seeking to establish that an AD has been improperly procured through fraud under s. 15(a) CIPAA, has to prove the following two matters cumulatively. Firstly, a party must prove that fraud has been committed. However, the fraud in question need not be committed by the party in whose favour the AD was given as Section 15(a) of CIPAA does not require fraud to have been committed by the adjudicator, nor is it required to be proven that the opposing party or the adjudicator is complicit in the fraud. Secondly, it must be proved that the AD has been “improperly procured” through fraud, either directly or indirectly. [see para 60-62]
- The conduct of Vigour in concealing the fact that it does not possess a valid certificate of registration under the CIDB Act and selecting only parts of the WhatsApp Messages, which would otherwise prove that the correct amount of Claycrete was not used for the road, and yet submitting its claims to KPF for the CIDB Levy and the Claycrete Road, amount to wilful acts of dishonesty and was therefore found to be fraudulent. [see para 63]
- If the defence of fraudulent behavior, acts or omission were not raised as a defence in the adjudication but emerge afterwards, the question then is whether the fraud directly impacts on the subject matter of the said AD (and the decision of the Adjudicator). In determining this, the court should scrutinize the findings and reasons of the Adjudicator in the AD and determine whether the Adjudicator would reach a different conclusion if the complete evidence were not concealed from the Adjudicator. In this instance, as the issue on the invalid Certificate and the intentional concealment of facts and messages were found to directly impact the subject matter of the dispute and the decision of the Adjudicator, the Learned Judge found that the AD ought to be set aside. [see para 64 & 65]
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