A Defendant to a Claim under the CIPAA Cannot Raise a Counterclaim that Exceeds the Amount in the Claim
In the case of Tera Va Sdn Bhd v Ayam Bintang Istimewa Sdn Bhd [2024] 6 MLJ 849, the claimant contracted with a customer to install solar panels on the roof of the customer. After completing the works for Phase 1, the customer paid part of the contractual sum only. When the customer refused to settle in full, the claimant issued a notice for adjudication pursuant to the CIPAA for the outstanding sum of RM294,750. The customer, however, raised a counterclaim or set off for RM695,580, alleging for damage caused by the claimant to the roofs of the customer where the solar panels were installed and/or to be installed. The adjudicator found the sum of RM294,750 in favour of the claimant but also found a cross-claim for RM302,580 in favour of the customer. As a result, the adjudicator held for a sum of RM7,830 in favour of the customer.
Being dissatisfied with the adjudication decision, the claimant applied to set it aside, which was dismissed. The customer, in the mean time, applied to enforce the adjudication decision, and was granted.
Being dissatisfied with both decisions, the claimant appealed to the Court of Appeal, on several grounds, including fraud and breach of natural justice in the adjudication process, including the allegation that the customer had perpetuated fraud on the adjudicator by failing to disclose the fact that the customer was merely a tenant as opposed to the owner of the land on which the factory stood.
In addition to upholding that a tenant, like the customer, had the legal rights to institute legal actions, including defending against adjudication claims under the CIPAA, the Court of Appeal held that the CIPAA does not permit a counterclaim (or set off) that exceeds the sum in the main claim. The CIPAA merely allows a counterclaim (or set off) that reduces or at most zerorises the main claim. The Court of Appeal held that, insofar as the adjudicator allowed the set off for a sum that exceeded the main claim, the adjudicator acted in excess of his jurisdiction and that was a ground for setting aside the decision. However, as the claimant did not rely on that excess of jurisdiction to challenge the adjudication decision but, instead on other unsubstantiated grounds, the appeal to set aside the adjudication decision was dismissed. Similarly, the appeal against enforcement of the adjudication decision was dismissed as the adjudication decision remained valid after the failure to set it aside.
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27 January 2025