DAMAI CITY SDN BHD v GRAND DYNAMIC BUILDERS SDN. BHD.

Case Significance

Reinforces the "pay-first" policy of CIPAA by refusing to set aside or stay an adjudication decision, holding that a section 16(1)(b) stay is not automatic and must not become a backdoor to deplete the decision's efficacy for a contractor who has done the work and is out of pocket.

This High Court (Kuala Lumpur) decision concerns applications to set aside and stay an adjudication decision made under the Construction Industry Payment and Adjudication Act 2012 (CIPAA). In the originating summons, Damai City Sdn Bhd applied under Order 69A rules 2, 3 and 7 and Order 92 rule 4 of the Rules of Court 2012, and under sections 15(b) and (d) of CIPAA, to set aside an adjudication decision dated 20 August 2024, and separately applied under section 16(1)(b) of CIPAA for a stay of that decision pending the disposal of related arbitration proceedings. The adjudication had been in favour of the contractor, Grand Dynamic Builders Sdn Bhd, as claimant against Damai City Sdn Bhd as respondent.

The setting-aside grounds under sections 15(b) and (d) of CIPAA address the situation where an adjudicator has acted in excess of jurisdiction or where there has been a denial of natural justice, while section 16(1)(b) concerns a stay of an adjudication decision. The court examined the contentions of the applicant against the statutory purpose of CIPAA, which is to provide a swift adjudication mechanism securing cash flow for contractors who have carried out work.

The court dismissed the applications. It reasoned that if an application under section 16(1)(b) automatically had the effect of staying an adjudication decision, it would amount to a backdoor to denude and deplete the decision of its efficacy, stultifying the purpose of CIPAA of providing cash flow for a contractor claimant who has done its work and is out of pocket. It therefore dismissed the stay application with costs, and, finding no merit in the contentions raised by Damai City Sdn Bhd, likened the arguments to "simply scrabbling around to find some argument, however tenuous, to resist payment", echoing the observation of the English Court of Appeal in Carillion Construction Ltd v Davenport Royal Dockyard Ltd. Both the setting-aside and stay applications in the originating summons were dismissed. The judgment reinforces the pay-first, argue-later policy of CIPAA and the restrictive approach to staying adjudication decisions.