Section 30 Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) takes precedence over the general sections of Companies Act 2016 (“CA”).

Key Takeaway:

A separate and distinct statutory obligation under one legislation (for e.g. CIPAA) shall take precedence over a general section in another legislation (for e.g. CA).

Brief Background Facts:

Concrete Empire Sdn Bhd (“CESB”) applied for direct payment from Turnpike Synergy Sdn Bhd (“TSSB”) who is the principal of Panzana Enterprise Sdn Bhd (“Panzana”), pursuant to Section 30 of CIPAA based on an Adjudication Decision obtained by CESB against Panzana for a sum of RM1,308,958.30 on 11.10.2021.

Subsequently, due to the failure of Panzana to make payment to CESB according to the Adjudication Decision, CESB made a demand for direct payment against TSSB under Section 30 of CIPAA on 27.10.2021. TSSB denied the existence of any monies due or payable by TSSB to Panzana.

Thereafter, on 14.12.2021, Panzana obtained an adjudication decision against TSSB and was awarded the sum of RM28,457,038.75. It was therefore not disputed that by then, there were monies due or payable by TSSB to Panzana.

On 6.1.2022, TSSB wrote to Panzana to provide proof of payment pursuant to Section 30(2) of CIPAA, failing which TSSB will be constrained to pay the adjudicated amount of RM1,308,958.30 to CESB pursuant to Section 30(3) of CIPAA.

On 18.2.2022, CESB made another demand for direct payment of the Adjudicated Sum of RM1,308,958.30 by TSSB to CESB.

As no payment was forthcoming, CESB then proceeded to initiate a proceeding against TSSB under Section 30 of CIPAA. In response, TSSB filed an interpleader application, amongst other, premised on the ground that TSSB has filed a Judicial Management Application (“JM”) at the Shah Alam High Court.

Two (2) questions were posted for the determination of the High Court Judge, namely:

(a) whether there were monies owed by TSSB to Panzana at the time of the receipt of CESB’s notices dated 27.10.2021 and 18.2.2022 (“Notices”) – Issue No.1; and

(b) the effect of section 410 and section 426 of CA on section 30 of CIPAA – Issue No.2.

Issue No.1:

Premised on the chronology of events presented to the High Court Judge, the Court was satisfied with the evidence presented which show that there were monies owed by TSSB, the principal, to Panzana as at the date of the Notices received by TSSB. Further, the Court found that TSSB had failed to comply with CESB’s request under section 30 of CIPAA.

Issue No.2:

Having considered the relevant provisions in CIPAA and CA, the High Court Judge held that sections 410 and 426 of CA would on the face of the same be in direct contradiction to the provision in section 30 of CIPAA.

Nevertheless, the High Court Judge was of the view that sections 410 and 426 of CA must be read subject to section 30 CIPAA by applying the maxim of generalibus specialia derogant. The Judge opined that sections 410 and 426 of CA are general sections on the powers of the court at the hearing of the JM, whereas section 30 of CIPAA is a specific section on the powers of the court in a construction industry claim under CIPAA, an Act which deals with specifically construction industry claims only.

It is worth mentioning that the High Court Judge maintained his decision even though subsequently a JM Order was granted by the High Court on 23.8.2023.

Conclusion

This case appears to suggest that a contractor is now able to initiate a proceeding against the principal of the losing party under section 30 CIPAA, subject to compliance and fulfilment of the requirements under section 30 of CIPAA, notwithstanding that a judicial management scheme may be in place (which provides a statutory moratorium on all proceedings, execution and legal process).

It would be interesting to see whether this finding by the High Court would apply to the other provisions of the CA that provides a statutory moratorium.

About the Author

Felicia Lai Wai Kim
Senior Associate
Construction and Engineering, Dispute Resolution
Harold & Lam Partnership
[email protected]