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In TRT Engineering (M) Sdn Bhd v Hansol KNM Greentech Sdn Bhd (BA-24C(ARB)-2-02/2019, 29 January 2020), the High Court considered: (a) the scope of an adjudicator’s powers when it comes to awarding costs and the extent of which the High Court can interfere with such decisions; and (b) what happens when an adjudicator refuses to correct computational errors in his decision.

 

Brief Facts

  • An adjudication decision (“Decision”) was issued in favour of TRT Engineering (M) Sdn Bhd (“TRT”) against Hansol KNM Greentech Sdn Bhd (“Hansol”).
  • TRT filed an application to the High Court to enforce the Decision.
  • Hansol filed an application to set aside or vary the Decision, or otherwise remit the Decision to the adjudicator for re-adjudication regarding certain errors in the Decision.
  • Some of the core issues in dispute between the parties were:
    • Whether the adjudicator had power to award financing costs of RM 10,000.00 in favour of TRT against Hansol;
    • The scope of the adjudicator’s discretion under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) in awarding fees, expenses and taxes;
    • What happens when the adjudicator refuses to correct computational errors in his decision

 

Court’s Findings

 

Financing Costs, Fees, Expenses and Taxes

 

The High Court ruled that it had no power to review the Decision to assess whether the adjudicator was right to award financing costs, fees, expenses and taxes. Even if the adjudicator had committed such errors, it can only be rectified by arbitration or litigation as provided under CIPAA.

In any event, the High Court found that there was no error by the adjudicator as:

  • The Adjudicator was empowered to grant financing costs in the Decision. Section 25(o) of CIPAA expressly states that the adjudicator shall have the power to “award financing costs and interest”.
  • CIPAA mandatorily provides that an adjudicator “shall order the costs to follow the event”. Once the adjudicator has awarded costs to a successful party, he has a wide discretion under CIPAA to award the amount of costs. In this case, TRT was successful in the adjudication. Consequently, the Adjudicator is mandatorily required to award costs in favour of TRT, and in the exercise of such a wide discretion, the adjudicator had awarded TRT the entire sums of fees, expenses and taxes.


Computational Errors

 

The Decision awarded post-award interest of 5% from 3.1.2018 until date of full payment, although the Decision was only delivered on 31.12.2018.

When Hansol brought the computational error to the attention of the adjudicator, the adjudicator refused to correct his decision on the basis that the adjudicator found that the decision was in order, based on the documents submitted by parties during the adjudication.

Under Section 12(7) of CIPAA, the adjudicator may at any time correct any computational or typographical error on the adjudicator’s own initiative, or at the request of any party. The High Court was of the view that the word “may” confers a discretion on the adjudicator, and if the adjudicator refuses to correct such an error, the court cannot review this refusal in a setting aside application.

There was no breach of natural justice when the adjudicator refused to correct his decision, as the adjudicator had considered and rejected the contents of Hansol’s letter and documents when Hansol requested a correction of the decision.

Even if it is assumed that the adjudicator had breached natural justice by failing to correct his decisions, such a breach would not be decisive or material to the Decision that would warrant it to be set aside.

However, as TRT’s counsel conceded that the adjudicator erroneously imposed post award interest from 3.1.2018 instead of 3.1.2019, the High Court allowed leave to enforce the post-award interest from 3.1.2019 instead of 3.1.2018.  In so doing, the High Court exercised its powers under Section 28(2) of CIPAA to enforce only part of the Decision by severing the erroneous post-award interest clause from the Decision.

 

No power to remit the Decision for re-adjudication

 

Hansol had also applied for an order to remit the Decision to the adjudicator for re-adjudication regarding the computational errors.  The High Court refused to grant such an order because:

 

  • The Court has no power under CIPAA to make such a remittance order;
  • One of the purposes of CIPAA is to ensure contractors and subcontractors are not deprived of cash-flow. A remittance order would be contrary to the purpose of CIPAA since it would delay the payment of the adjudication sum and increase costs.

 

Key Takeaways

 

The High Court’s decision affirms the current position of having minimal court intervention in adjudication and arbitration proceedings.  There are very limited grounds to set aside an adjudication decision, especially on the issue of costs and expenses awarded.  In the event of dissatisfaction, the appropriate form of challenge would be to have the dispute settled finally through arbitration or litigation, instead of through a setting aside application.

This case also makes it clear that the High Court cannot order an adjudicator to reconsider / re-adjudicate any matter, even when there is a clear computational or typographical error. Instead, the High Court may sever the erroneous part of the Decision from being enforced.

***

This article was written by Donovan Cheah. Donovan is an advocate and solicitor of the High Court of Malaya. He is a Fellow at the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and the Asian Institute of Alternative Dispute Resolution. He is also a registered foreign lawyer with the Singapore International Commercial Court. 

Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory.  Have a question? Please contact us.

 

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