IMSML Website Article 11/2024: Jumsar (Sarawak) Sdn Bhd v Robin Dockyard & Engineering Sdn Bhd and another appeal [2023] MLJU 413, An Attempt to Set Aside an Adjudication

This case was heard by the Court of Appeal at Putrajaya before Yaacob Haji Md Sam, Supang Lian and Gunalan Muniandy JJCA. It was an appeal from the High Court in Kuching.

Jumsar was in the business of supplying industrial equipment, parts, accessories, and general contract works. Jumsar was a sub-contractor for a project involving the Kuching Waterfront Darul Hana Musical Fountain Project (hereinafter referred to as ‘the Project’). Robin Dockyard was one of the sub-contractors appointed by Jumsar to install a ‘Floating Pontoon’ for the Project. At all material times, Robin Dockyard was in the business of operating dockyards and ship repair.

On 18 April 2018, Jumsar emailed preliminary drawings for the Floating Pontoon to Robin Dockyard. Jumsar requested for a quotation based on this drawing.

On 16 May 2018, Robin Dockyard sent its quotation to Jumsar. This First Quotation was for a sum of RM1,191,545.00. Also sent together with this were revised drawings for the Floating Platform. Jumsar realised that the revised drawings and the first quotation omitted a protection screen for the Floating Pontoon as per the original preliminary drawings made by Jumsar.

Jumsar did two things in response to this omission. First, Jumsar requested Robin Dockyard to revise the First Quotation and include the protection screen as part of the scope of work. Second, Jumsar requested that Robin Dockyard reduce the price stipulated in its First Quotation.

On 22 May 2018, a ‘Revised Quotation’ was sent to Jumsar by Robin Dockyard. This Revised Quotation dealt with the two concerns raised by Jumsar. First, it included the protection screen for the Floating Pontoon. Second, it came with a reduced price of RM1,150,000.00. On 5 June 2018, Jumsar accepted the Revised Quotation.

In early October 2018, Robin Dockyard delivered and installed the Floating Pontoon. Robin Dockyard then proceeded to issue various invoices to Jumsar for contract works and other variation works carried out for the Project.

Jumsar made partial payments for the invoices. However, Jumsar withheld the remaining payment on two grounds. First, the Protection Screen was not installed as required under the Revised Quotation. Second, the Floating Pontoon was damaged at the time of delivery.

As Jumsar withheld the remaining payment, Robin Dockyard commenced adjudication proceedings against Jumsar. These proceedings were carried out pursuant to the Construction Industry Payment and Adjudication Act 2012 (CIPAA) for sums Jumsar allegedly owed to Robin Dockyard.

On 3 January 2020, the Adjudicator ruled in favour of Robin Dockyard. Jumsar was ordered to pay the sums remaining under the Project for the Floating Pontoon. On 22 January 2020, Robin Dockyard sought to enter the Adjudication Decision a a judgment in accordance with CIPAA 2012, Section 28. On 7 February 2020, Jumsar sought to set aside the Adjudication Decision. Jumsar argued that the Adjudicator had acted in excess of his jurisdiction and also committed a breach of natural justice. On 12 August 2020, the High Court at Kuching dismissed Jumsar’s application and allowed Robin Dockyard to enforce the Adjudication Decision.

Jumsar’s Unhappiness with the Decision of the Adjudicator

The Adjudicator had relied on further additional evidence which he sourced on his own from the public domain at arriving without giving the parties an opportunity to comment on such further or additional evidence. The Adjudicator had decided the issue of whether the damage to the Floating Pontoon existed at the time of delivery or handing over upon a factual basis which had not been argued or put forward by either side, see Para [17]. Therefore, the Adjudicator had gone on a frolic of his own by relying on the Malaysian Audit Report (MAR) in finding that the Certificate of Practical Completion (CPC) had been issued for the Project.

Note that the Adjudicator had accessed MAR via the public domain under ‘Laporan Ketua Audit Negara - Pengurusan Aktiviti Dan Pengurusan Syarikat Karajan Nigeria Sarawak, Tahun 2018, Siri 2, Page 43 (Chapter 2-5). According to MAR, the Project had obtained its CPC on 18 October 2018.

Jumsar’s Disagreement with the Decision of the Learned Judicial Commissioner at the High Court at Kuching

The Judicial Commissioner (JC) held that it was erroneous for Jumsar to argue that the Adjudicator had based his whole decision on the CPC. The JC held that the Adjudicator had taken into account the CPC as merely one of the many factors, see Para [19]. The JC also held that an Adjudicator was very different from a Judicial Officer in a Judicial Proceeding. In particular, an Adjudicator has the power to ‘draw on his knowledge and expertise’ and to ‘inquisitorial take the initiative to ascertain the facts and the law required for the decision’, see Para [21].

The JC also held that even if Jumsar could have the opportunity to comment or to submit on the CPC, the issue arises as to what exactly could Jumsar have said or submitted. Being denied there’d the right or opportunity to address the Adjudicator, according to the JC, did not amount to a denial of Jumsar’s right to be heard in the decision-making process, see Para [22] and [23]. According to the JC, the CPC is not conclusive evidence that there were no defects. His Lordship explained that the defects could be latent (ie not patent), see Para [24]. In particular, the CPC denotes “a state of affairs in which the works have been completed free from patent defects other than ones to be ignored as trifling’, see Xtreme Engineering Sdn Bhd v Paragon Promenade Sdn Bhd [2019] 1 LNS 113.

The Decision of the Court of Appeal

At the Court of Appeal, Jumsar argued that the High Court was wrong to dismiss its application to set aside the Adjudication Decision. The Court of Appeal agreed with Jumsar the MAR document that was extracted by the Adjudicator from the public domain was a material fact. The JC was plainly in error when he found that the inferences drawn by the Adjudicator was within CIPAA 2012, Section 25, ie within the Adjudicator’s knowledge and expertise, see Para [29] and [30].

There were two areas of concern for the Court of Appeal. First, their Lordships held that the date of issuance of the CPC was not within the statutory meaning of ‘knowledge’ in Section 25(d) because it was derived from an external source. Second, although the Adjudicator is given statutory leeway to make inquiries under Section 25()i), that did not extend to an Adjudicator souring external facts or evidence (outside the hearing) without affording the parties to be heard on such evidence and/or facts, see Para [31]. As the parties were not afforded the right to be heard on that document, that amounted to a breach of natural justice, see Para [32].

The Court of Appeal disagreed with the Respondent that this was not a mistake of fact per se which is not among the statutory grounds  upon which an adjudication decision could be set aside under CIPAA 2012, Section 15, see Para [35]. The Court of Appeal held that there was indeed a breach of natural justice, and the matter had gone beyond a mere mistake of fact per se, see Para [36] and the JC failed to correctly apply the established principles of natural justice, see Para [40] when the Adjudicator did not give Jumsar the right to be heard when the Adjudicator took into consideration an extraneous document neither party to the litigation referred to, see Para [40].

The Court of Appeal stressed that the rule of natural justice requires the Adjudicator to disclose any information he obtained from sources other than the parties to the adjudication proceedings, and to allow the parties to address him on such information, see Para [41]. The Adjudicator should have taken the simple step of disclosing the additional evidence procured by him from an external source to the parties concerned, in order to dispel any suggestion of injustice, see WRP Asia Pacific Sdn Bhd v NS Bluescope Lysaght Malaysia Sdn Bhd [2015] 1 LNS 1236.

Conclusion

The decision of the Court of Appeal in this case is a warning to more ‘adventurous’ Adjudicators to rein in any desires to seek information pertinent to the case from external sources. But if such a course of action is indeed chosen by the Adjudicator, the person should be transparent about it and give the litigating parties a chance to reply. Such breaches of natural justice are more than a mere mistake of fact which cannot be appealed against. The approach of the Court of Appeal is probably going to encourage Adjudicators to just sit back and listen to the evidence adduced by the parties, nothing more, nothing less.

Note that this Court of Appeal’s decision was by the majority of the Bench, ie Justices of the Court of Appeal Supang Lian and Gunalan Muniandy. The sole dissenting judge was Yaacob Haji Md Sam JCA who took the view that the JC’s decision was not plainly wrong to justify appellate intervention. Sadly, there is no report of this dissenting judgment in the LexisNexis database. The only note of it is found in in the majority’s judgment at Para [48].

Thank you for reading IMSML Website Article 11/2024

Stay tuned for the next IMSML Website Article 12/2024: Astimewa Sdn Bhd v Budget Marine Limited & Ors [2023] MLJU 2010 - Part 1 (of 2), Measurement of Cargo Quantity, Ownership of the Cargo, the Fixture Note and Passage Plan

Signing-off for today,

Dr Irwin Ooi Ui Joo, LL.B(Hons.)(Glamorgan); LL.M (Cardiff); Ph.D (Cardiff); CMILT

Professor of Maritime and Transport Law

Head of the Centre for Advocacy and Dispute Resolution

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

Tuesday,  6 February 2024

Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my