BLUDREAM CITY DEVELOPMENT SDN BHD V PEMBINAAN BINA BUMI SDN BHD [2024] CLJU 545
Court of Appeal rules that a CIPAA adjudication decision can be used to wind-up a company
An adjudication decision pursuant to the Construction Industry Payment and Adjudication Act 2012 (CIPAA) has been described to be of temporary finality. This oxymoron gives rise to some disputes on whether a successful claimant can use a CIPAA adjudication decision to commence winding-up proceedings against the non-paying party.
In Bludream City Development Sdn Bhd v Pembinaan Bina Bumi Sdn Bhd [2024] CLJU 545, the Court of Appeal held that an adjudication decision is an indisputable debt for the purpose of winding-up proceedings, even when arbitration proceedings have commenced to resolve the dispute between the parties.
A. Background Facts
The Appellant (Bludream) had appointed the Respondent (PBB) as its contractor in relation to the construction of a service apartment project. PBB initiated a CIPAA adjudication proceedings against Bludream and obtained an adjudication decision in the sum of RM 5,510,197.91.
PBB successfully enforced the adjudication decision while Bludream failed to set aside or stay the same. Armed with the enforced adjudication decision, PBB commenced winding-up proceedings against Bludream in the High Court.
B. Decision of the High Court
The High Court was of the view that given that the adjudication decision has been enforced as a court order, the winding-up proceedings was premised on a judgment debt. Being a judgment debt, the enforced adjudication decision was indisputable even if there existed a pending arbitration proceedings to resolve the disputes between parties.
C. Decision of the Court of Appeal
On appeal, Bludream argued that one cannot rely on the adjudication decision to commence winding-up proceedings when the dispute has been referred for final determination by arbitration or the court. It was argued that it will deprive the losing party in CIPAA of its right to be heard in arbitration or litigation. Further, CIPAA which prescribes express remedies to enforce an adjudication decision, does not expressly provide for winding-up as an enforcement remedy. It also wrongly elevates the status of an enforced adjudication decision to that of a judgment of the court.
These arguments did not find favour with the Court of Appeal. The Court of Appeal first found that the enforced adjudication decision as a debt, amounted to a proper basis on which PBB could issue a winding-up notice and winding-up petition. Although not expressly provided in CIPAA, the winding-up mechanism in the Companies Act 2016 is still applicable by virtue of Section 31(2) of CIPAA, which states that the remedies in CIPAA are without prejudice to other remedies in any written law.
Having said that, the Court of Appeal went further to discuss the concept of disputability of a debt. In addressing Bludream’s contention that the debt is disputed by virtue of the ongoing arbitration proceedings, the Court of Appeal held that a debt which has been adjudicated “ceases to be disputable in an ensuring winding-up proceedings” because “the disputed debt has been independently adjudicated by a neutral third party”.
By so deciding, the Court of Appeal expressly overruled the High Court decisions of ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd [2021] 8 MLJ 99 and Setia Fontaines Sdn Bhd v Pro Tech Enterprise Sdn Bhd [2023] MLJU 628, which decided that a CIPAA decision remains disputable so long as the disputing party can show bona fide dispute on substantial grounds.
D. Comments
Prior to Bludream v PBB, there was uncertainty regarding whether a CIPAA adjudication decision can be used to wind-up a non-paying company. There was a divergence of views as to whether an enforced adjudication decision can be used to commence winding-up proceedings.
Aside from affirming the enforceability of CIPAA adjudication decision through winding-up proceedings, the Court of Appeal appears to have charted new grounds. The Court of Appeal decided that a CIPAA adjudication decision is an indisputable debt because the debt has been adjudicated by an independent neutral third party.
This appears to differ from previous cases in favour of using CIPAA decision to commence winding-up proceedings. Previously, it was thought that an enforced CIPAA decision is indisputable as it has been enforced by the courts and turned into a judgment debt. However, the Court of Appeal in Bludream v PBB found that as the debt has been independently adjudicated by a neutral third party (the adjudicator), it is no longer disputable.
The finding of the Court of Appeal that a CIPAA decision is no longer disputable appears to contradict the concept of temporary finality which is that the adjudication decision will be automatically set aside once the dispute is resolved either in court or arbitration. It appears to elevate the status of an adjudication decision.
Note: The Court of Appeal decision of Bludream v PBB is currently pending application for leave to appeal to the Federal Court.
** The information provided in this article is for general informational purposes only and is not intended as legal advice.