Facts
High Court
Court of Appeal
Comment
This article examines the law concerning the application of the decisions of the Federal Court of Malaysia in Ireka Engineering & Construction Sdn Bhd v PWC Corp Sdn and Ors(1) (Ireka) and Jack-In-Pile (M) Sdn Bhd v Bauer (M) Sdn Bhd and Ors(2) (Bauer). These cases deal with adjudication proceedings that have been exhausted, wherein the construction contract was entered into prior to the introduction and coming into force of the Construction Industry Payment and Adjudication Act 2012 (CIPAA).
Kining Exeton Sdn Bhd (Kining) entered into a construction contract with Majlis Bandaraya Kuantan (MBK) in August 2011, which was close to three years before the CIPAA came into force on 15 April 2014. In 2016, Kining commenced two CIPAA adjudication proceedings against MBK and was successful in both. MBK filed two applications to set aside the adjudication decisions but was unsuccessful before the High Court of Malaysia(3) and the Court of Appeal of Malaysia(4) in 2018.
It is important to note that MBK did not file an application for leave to appeal to the Federal Court of Malaysia regarding both adjudication decisions and, as such, the national courts in Malaysia finalised both decisions.
A year later, on 16 October 2019, the Federal Court of Malaysia in Ireka and Bauer held that the CIPAA does not apply to construction contracts entered into prior to 15 April 2014, thereby overruling the decision in UDA Holdings Bhd v Bisraya Construction Sdn Bhd & Anor and another case.(5) However, when the judgments were delivered in Ireka and Bauer, the Federal Court did not state whether the decision itself would take effect retrospectively or prospectively. Relying on the Federal Court decision in Ireka and Bauer, MBK filed an application with the High Court to set aside the two adjudication decisions and to recover the monies paid to Kining, on the ground that the Federal Court had not applied the doctrine of prospective overruling. MBK also relied on the decision in Milsonland Development Sdn Bhd v Macro Resources Sdn Bhd and other appeals.(6)
Justice Lim Chong Fong, in delivering the High Court judgment,(7) dismissed MBK's application and held the following:
- In the absence of any pronouncement of prospective overruling, a judicial decision is retroactive and unbounded by time by reference to the following passage in the said judgment:
[37] I am satisfied and accept his first proposition that in the absence of any pronouncement of prospective overruling by the Federal Court, it is presumed that the decision in retroactive unbounded by time. There is consensus here between the parties that the Federal Court in Jack-In-Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd and Ireka Engineering & Construction Sdn Bhd v PWC Corporation Sdn Bhd did not pronounced that the decisions applied prospectively only.
- The dicta of Justice Abdul Malek Ahmad FCJ in Public Prosecutor v Mohd Radzi Abu Bakar(8) was to be adopted. He had held that that:
[44] In the circumstances, I have carefully read both the Mohd Radzi and Tan Tatt Eek cases. When they are broadly interpreted, I can surmise that the decision on retrospectivity (including limitation thereto to cases which have not been finally determined) are findings made on the fact in issue; hence ratio decidendi.
[45] However when they are narrowly interpreted, I can equally surmise that since the facts of both cases concerned an appeal which was still pending and not finally determined yet; hence any further comment on the effect of retrospectivity on other cases which are already finally determined is obiter. This is because it is immaterial and unnecessary to the fact directly in issue.
[46] That notwithstanding, this narrow interpretation may be rebutted in that the aforementioned further comment is really in substance the flipside of the ratio decidendi without anything extra added obiter.
- Mr Justice Abdul Malek Ahmad FCJ's remarks in PP v Mohd Radzi were not made in passing as there was concurrence by the justices in that case:
[50] Be that as it may, I am also not convinced that the opinion of Justice Abdul Malek Ahmad has been made en passant or in the passing contrary to that as submitted by Dato' Vendargon. It was concurred by Chief Justice Ahmad Fairuz in the Mohd Radzi case. Furthermore, the same opinion was concurred by Justices Siti Norma and Pajan Singh Gill in the Tan Tatt Eek case. There must have been deliberations done. I therefore believe that the apex court consciously introduced the limitation to develop Malaysian jurisprudence on retrospectivity differently from the English jurisprudence as adopted in Public Prosecutor v Dato' Yap Peng [1987] 2 MLJ 311.
[51] In the premises, I am not so bold and confident to hold that the opinion of Justice Abdul Malek is obiter because it is definitely not plainly and obviously so. Nonetheless based on stare decisis, I am also bound by the Court of Appeal case of Hamzah Mat Sah v Ambank (M) Berhad which has faithfully followed and applied Justice Abdul Malek Ahmad's opinion; see Dalip Bhagwan Singh v Public Prosecutor [1997] 4 CLJ 645 on the principles of stare decisis.
Dissatisfied with the decision of the High Court, MBK filed an appeal with the Court of Appeal,(9) raising two issues – namely, the doctrine of stare decisis and the doctrine of finality.
In the Court of Appeal, MBK argued that the High Court had erred in:
- its finding that it was bound by the decisions in PP v Mohd Radzi Abu Bakar, as the dicta of Mr Justice Abdul Malek FCJ was obiter; and
- failing to appreciate that a judicial decision is unbounded by time, applying the principle of the declaratory theory of law.
Kining, in response, argued the following:
- The decision in PP v Mohd Radzi had been adopted in two Federal Court decisions – namely, Public Prosecutor v Tan Tatt Eek & other appeals(10) and Letchumanan Chettiar Alagappan @ L Allagappan (as executor to SL Alameloo Achi alias Sona Lena Alamelo Acho, deceased)D & Anor v Secure Plantation Sdn Bhd.(11) It had also been adopted by the Court of Appeal in Hamzah Mat Sah v Ambank (M) Berhad.(12)
- The decision in PP v Mohd Radzi had not been held to be made with lack of regard to the law or wrongly decided; nor had it been distinguished by the Federal Court or the Court of Appeal. As such, the Court of Appeal was bound by the principle set out in Kejuruteraan Bintai Kindenko Sdn Bhd v Fong Soon Leong,(13) the decision of which was approved by the Federal Court in Lembaga Kumpulan Wang Simpanan Pekerja v Edwin Cassian a/l Nagappan(14) and Tenaga Nasional Bhd v Chew Thai Kay & Anor.(15)
- The Court of Appeal was also bound by the decision in PP v Mohd Radzi in view of the doctrine of stare decisis as laid out in the case of Dalip Bhagwan Singh v Public Prosecutor.(16)
Kining went on to argue that, in so far as the doctrine of finality is concerned, the Federal Court, in a number of decisions starting with the decision in Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd,(17) had held that when finality has been reached in respect of the decision, it ought not to be used to set aside previously decided cases. Further support for this proposition can be seen in the following cases:
- Letchumanan v Secure Plantation;
- Ling Peek Hoe & Anor v Ding Siew Ching and another appeal;(18)
- Dato' Prem Krishna Sahgal v Muniandy a/l Nadasan & Ors;(19)
- Indira Gandhi a/p Mutho v Pengarah Jabatan Agama Islam Perak & Ors and other appeals;(20) and
- Veheng Global Trades Sdn Bhd v AmGeneral Insurance Bhd (formerly known as Kurnia Insurance (M) Bhd.(21)
After hearing submissions and having considered the authorities, the Court of Appeal held that MBK's appeal was without merit and dismissed it on 8 November 2022. At present, there are no written grounds of judgment of the Court of Appeal available.
The decision of both the High Court and the Court of Appeal ought to be welcomed by the construction industry. The courts' decisions have sought to clarify that a party will be unable set aside an adjudication decision, even if contract which was the subject matter of the adjudication proceedings was entered into prior to the coming into force of the CIPAA (provided that there has been clear and absolute finality of legal proceedings).
As such, the decisions of the Federal Court in Ireka and Bauer only apply to pending cases and not to cases that were already disposed of by referencing the procedure available under the national court system.
The need for clarity by referencing the decision of the High Court and Court of Appeal would not have been warranted had the Federal Court in Ireka and Bauer been sensitive to the practical implications arising from its decisions and specifically addressed the issue as to whether its decision was to have either a retrospective or prospective effect. This shortcoming in the decisions of the Federal Court in Ireka and Bauer has now been addressed in part by the High Court and Court of Appeal in this present dispute. Nevertheless, it remains to be seen whether MBK will elect to take this matter further by seeking leave to appeal to the Federal Court.
Regardless, the decision of the High Court and Court of Appeal as it presently stands, bodes well for the construction industry.
For further information on this topic please contact Tan Sri Dato' Cecil Abraham, Aniz Ahmad Amirudin or Shabana Farhaana Amirudin at Cecil Abraham & Partners by telephone (+60 3 2726 3700) or email ([email protected], [email protected], or [email protected]). The Cecil Abraham & Partners website can be accessed at cecilabraham.com.
Endnotes
(3) Kuala Lumpur High Court Originating Summons No. WA-24C-24-01/2020.
(4) Court of Appeal Civil Appeal No. W-01(C)(A)-182-04/2021.
(6) Federal Court Civil Appeal No. 02(f)-38-05/2018(W) and No. 02(f)-39-05/2018(W).