[A case summary of Tenaga Nasional Bhd v Malaysian Resources Corporation Bhd and other cases [2024] MLJU 682]

Key Takeaway:

Construction Industry Payment and Adjudication Act (“CIPAA 2012”) is not limited to adjudication initiated before or concurrent to reference to arbitration.

Brief Background Facts:

The interpretation of the words ‘referred concurrently’ in subsection 37(1) of the CIPAA 2012 was the main issue in this case.

Tenaga Nasional Berhad (“TNB”) appointed Malaysian Resources Corporation Berhad (“MRCB”) as the main contractor for a project located at Bangsar, Kuala Lumpur (“Project”).

Payment disputes arose between the parties in connection with the Project, particularly regarding the Final Account. MRCB referred the dispute to arbitration on 29.9.2021. MRCB pursued an adjudication proceeding pursuant to CIPAA 2012 after the commencement of arbitration proceedings, by way of a Notice of Adjudication dated 25.3.2022. The Adjudication Decision dated 10.8.2022 was given in favour of MRCB (“Adjudication Decision”).

TNB then applied to set aside the Adjudication Decision under section 15 of CIPAA 2012. One of the grounds raised by TNB in its setting aside concerned the issue of ‘whether the Adjudication Decision is null and void because the Adjudicator lacks absolute jurisdiction due to MRCB’s failure to comply with subsection 37(1) CIPAA by commencing the adjudication 5 months and 25 days after the reference to arbitration?’.

Section 37 of CIPAA 2012 sets out the relationship between adjudication and other disputes resolution process, as follows:

“(1) A dispute in respect of payment under a construction contract may be referred concurrently to adjudication, arbitration or the court.

 (2) Subject to subsection (3), a reference to arbitration or the court in respect of a dispute which is being adjudicated shall not bring the adjudication proceedings to an end nor affect the adjudication proceedings.

(3) An adjudication proceeding is terminated if the dispute being adjudicated is settled by agreement in writing between the parties or decided by arbitration or the court.”.

During the setting aside hearing, TNB took the position that section 37 of CIPAA 2012 envisages a situation where a party may opt to refer the dispute to arbitration or the court after initiation of adjudication proceedings under CIPAA, without any consequential effect to the adjudication proceedings. By commencing arbitration first, MRCB had thereby removed itself from the ambit of CIPAA and the claims do not form part of, or fall within, the parameters of CIPAA 2012 or the subject matter of which CIPAA 2012 has conferred jurisdiction on the adjudicator.

On this point, TNB had referred to the wordings in section 37 of CIPAA 2012 and section 23 of the Arbitration Act 2005 (“AA 2005”) on ‘Commencement of arbitral proceedings’, it is the issuance of the notice to arbitrate that has to be concurrent with adjudication under the CIPAA and it must not come after the initiation of adjudication proceedings by serving the written notice of adjudication as stipulated in section 8(1) of the CIPAA 2012. The reason relied upon by TNB is that the purpose of CIPAA 2012 would be defeated if a party opts to resort the dispute through another dispute resolution process instead of adjudication.

In addition, thorough discussions and legal research on the definition of the words ‘may’ and ‘concurrent’ in section 37(1) of CIPAA 2012 were submitted by the parties during the hearing.

Interestingly, TNB made a comparison between section 37(1) of CIPAA 2012 with section 10 of the AA 2005, and submitted that it is clear that the word “may” in the context of CIPAA 2012 should not be interpreted as merely directive. The word “may” must be considered in conjunction with the term “concurrently” in the same provision. The CIPAA 2012 explicitly states that adjudication proceedings should be commenced concurrently, indicating a requirement for timely action rather than unfettered discretion. The interpretation of “may” should not always be seen as optional, as demonstrated in legal precedents such as Bursa Malaysia Securities Bhd v Mohd Afrizan bin Husain and Maya Maju (M) Sdn Bhd v Putrajaya Homes Sdn Bhd [2018] MLJU 1629.

TNB concluded that the word “may” in the context of CIPAA 2012 recognises that parties have the option to choose between commencing adjudication as a stand-alone process or combining adjudication with arbitration or court proceedings. However, if the party selects the latter option, they must do so concurrently, as the mandatory nature of section 37(1) of CIPAA 2012 takes precedence over the discretionary use of the word “may.”

As regard to the word ‘concurrently’, TNB referred to Black’s Law Dictionary, Ninth Edition where ‘concurrent’ is defined as ‘Operating at the same time’. In the national language version of CIPAA 2012, the word ‘serentak’ is defined in the National Dictionary, 4^th Edition as ‘pada waktu yang sama’.

TNB then urged the High Court to consider the word ‘referred concurrently’ as denoting the timing for the commencement of the applicable dispute resolution process.

On the other hand, MRCB drew a parallel with the concept of imprisonment sentences to run concurrently as opposed to consecutively in criminal cases and therefore, the plain and ordinary meaning of the word would be ‘at the same time’. However, MRCB took the firm position that this interpretation cannot stand as it would lead to absurdity and cause an unpaid party to lose its right to adjudication if the available remedies are not strictly commenced at the same time.

Disagreeing with TNB’s interpretation, the High Court found that in interpreting section 37 of CIPAA 2012, the words “may” and “referred concurrently” shouldn’t be understood purely on a grammatical level but should be considered on the broader context of the purpose of CIPAA 2012. The Court was of the view that the Court ought to interpret the provision in a manner that aligns with the objectives of CIPAA 2012, as discussed in previous landmark cases. The phrase “being adjudicated” therefore doesn’t require an existing adjudication before parties can initiate litigation.

Conclusion

Accordingly, the words “referred concurrently” in the context in which these words are used in section 37(1) of CIPAA 2012 and bearing in mind the purpose or object of CIPAA 2012, adjudication proceedings under CIPAA 2012 can be initiated at any time, concurrently with arbitration or litigation, and even after arbitration or court proceedings have commenced and is still pending.

About the author

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