CHOP LEE HUAT CERMIN & ALUMINIUM SDN BHD v Kerajaan Malaysia

Case Significance

Illustrates the strict requirement under section 30 of the Construction Industry Payment and Adjudication Act 2012 of a proven principal-and-party relationship before direct payment can be ordered against an alleged principal, and the difficulty of establishing that relationship by 'single entity' or corporate-veil arguments.

This High Court decision at Alor Setar concerns the direct-payment mechanism under section 30 of the Construction Industry Payment and Adjudication Act 2012. The plaintiff, a subcontractor, had obtained an adjudication decision against the party that had engaged it, a construction company, which then failed to honour the adjudicated sum and became the subject of winding-up proceedings. Unable to recover from that party, the plaintiff sought to invoke section 30, which allows an unpaid party that has obtained an adjudication decision to claim the adjudicated amount directly from the principal of the party liable to pay. The plaintiff sought that direct payment from the Government, which it alleged was the principal. The difficulty for the plaintiff lay in establishing the necessary chain of principal and party. The court found that the plaintiff had failed to show that the Government, said to be the principal to a joint-venture company, was also the principal to the company that had actually engaged the subcontractor, for the purposes of section 30. The principal had never acknowledged the plaintiff, and the plaintiff had adduced no cogent evidence of the relationship between the engaging company and the joint-venture company; its attempt to bridge the gap by treating them as a single or unified entity, or by lifting the corporate veil on the basis of common directors and shared addresses, could not prevail against the principle that a company is a separate legal person. The court accordingly declined to order direct payment against the Government and dismissed the plaintiff's claim. The decision underscores that the direct-payment remedy is a targeted statutory shortcut against a specific principal, not a general means of recovering an unpaid adjudicated sum from any party with a commercial connection to the defaulting contractor. The judgment illustrates the strict requirement, under section 30 of the Act, of a proven principal-and-party relationship before direct payment can be ordered against an alleged principal.