Stay Applications against Adjudication Decisions: Issues and Developments (Part 2)

INTRODUCTION

In our previous article, we explored the rationales adopted and considerations taken into account by our courts in the determination of stay applications against adjudication decisions under Section 16 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) (“Stay Application”). In sum, Stay Applications are not freely and readily allowed because to allow otherwise would be inconsistent with the object and purpose of CIPAA and would render the adjudication process futile. This is because successful parties to adjudications would effectively be kept away from the fruits of the favourable adjudication decision. In this context, it would come to no surprise to observe that Stay Applications are often vigorously contended.

This article will turn to explore the issue of whether Stay Applications can be heard after an enforcement order has been granted.

WHERE AN ENFORCEMENT ORDER HAS BEEN GRANTED

Once an adjudication decision is obtained, the winning party would likely apply under Section 28 CIPAA for an order to enforce the adjudication decision as if it was a court judgment or order (“Enforcement Order”). In this conversation and in the context of stay, the issue of whether a Stay Application can be made subsequent to the grant of the Enforcement Order may arise.

i. THE POSITION IN EA TECHNIQUE

In the case of EA Technique (M) Sdn Bhd v Malaysia Marine and Heavy Engineering Sdn Bhd (2021) 1 AMR 594, the High Court held that as there is no express prohibition in CIPAA providing that Stay Applications cannot be made or allowed after an Enforcement Order has been granted, Stay Applications under s. 16 CIPAA can be made (notwithstanding an existing Enforcement Order) so long as the threshold under s. 16 is satisfied. The High Court adopted the finding in the case of ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd (2020) MLJU 282 which held that an Enforcement Order merely permits the adjudication decision to be enforced as a judgment of the court, but the adjudication decision does not become or merge into a judgment of the court.

ii. THE POSITION IN MKP BUILDERS

On the other hand, in the case of MKP Builders Sdn Bhd v PC Geotechnic Sdn Bhd [2021] MLJU 1061, it was held that where an Enforcement Order has been granted and a Stay Application is made subsequently, the Stay Application cannot be heard.

In this case, the High Court had previously ruled in favour of PC Geotechnic Sdn Bhd (“PC”) and allowed its application for an Enforcement Order and dismissed MKP Builders Sdn Bhd’s (“MKP”) Setting Aside Application. MKP subsequently applied for a stay of the adjudication decision pending the disposal of MKP’s suit against PC. The High Court dismissed the Stay Application and premised its decision on several grounds:

1) A Stay Application can only be made before the grant of an Enforcement Order. This is because if the High Court were to stay an adjudication decision when there is already an existing Enforcement Order, there would effectively be two conflicting High Court decisions. Hence, there is an implied interpretation of s. 16 and s. 28 CIPAA, that a Stay Application can only be made before the Enforcement Order has been granted;

2) The above interpretation does not prejudice a party against whom the Enforcement Order is made, this is because he may still apply to stay the execution of the Enforcement Order;

3) The above interpretation is consistent with the object and purpose of CIPAA, i.e., to ensure that a party who has done construction work is paid expeditiously for the work; and

4) Pursuant to s. 13 (c) CIPAA, all adjudication decisions are only “temporarily final” and are subject to Litigation or Arbitration. In view of this, any errors or omissions under an adjudication decision can easily be remedied through Litigation or Arbitration. Thus, no irreparable prejudice against whom the Enforcement Order is made arises from the above interpretations.

It must be noted that the court caveated its position by holding that in the event the court has erred in its interpretation, the court ought to proceed to discuss all other issues pertaining to the application. On the issue of estoppel, the court held that because a Stay Application could have been filed at the time of the hearing of the setting aside application and the Originating Summons for the Enforcement Order, it was only just to invoke the doctrine of estoppel in this case by virtue of the indolence of MKP. In other words, MKP was estopped from proceeding with its Stay Application.

iii. RESOLVING THE UNCERTAINTY

It is apparent that there is a lack of certainty in this area of law. To resolve this uncertainty, it is posited that reference can be made to the test in obtaining an Enforcement Order. In the case of Inai Kiara Sdn Bhd v Puteri Nusantara Sdn Bhd [2018] MLJU 1710, the Court of Appeal held that the interpretation of s. 28 CIPAA must be congruous with the other provisions under CIPAA. An Enforcement Order may be granted if the applicant can satisfy to the court that:

1) there is an adjudication decision rendered in the applicant’s favour;

2) there has been non-payment of the adjudicated sum by the date specified in the adjudication decision; and

3) there is no prohibition to the grant of the Enforcement Order sought.

This means that the adjudication decision has not been set aside or stayed. Once these matters have been established the Enforcement Order ought to be granted.

The principle laid out in Inai Kiara provides that an adjudication decision which is stayed or set aside amounts to a prohibition for the grant of an Enforcement Order. In turn, this would entail that an Enforcement Order contravenes an order for stay or setting aside of an adjudication decision, and vice versa. Therefore, it would be reasonable to understand that if an Enforcement Order was first allowed, a later stay or setting aside of the adjudication decision being allowed would necessarily result in contradictory decisions of the court. This line of reasoning is consistent with the decision in MKP Builders.

The conflict between the High Court judgments in MKP Builders and EA Technique could very well be settled in the near future. However, it would be prudent for a losing party of an adjudication decision to take heed of the position under MKP Builders and be mindful that once an Enforcement Order has been granted against him, he would risk being barred from making a Stay Application. In this regard, a losing party of an adjudication decision should attempt to expeditiously pursue his right to make a Stay Application, as soon as practicable and ideally before an Enforcement Order is granted.

CONCLUDING REMARKS

The answer to the question of whether a Stay Application can be made in the event there is an existing Enforcement Order presents some uncertainty in the law. In practice, applications for: (1) setting aside; (2) stay; and (3) enforcement of an adjudication decision are heard together, sequenced in that respective order (see Skyworld Development Sdn Bhd v Zalam Corp Sdn Bhd and other appeals [2019] MLJU 162). However, it would nevertheless be prudent for a losing party of an adjudication decision to pursue its right to make a Stay Application as soon as practicable, with uncompromising vigour.