Setting Aside an Adjudication Decision under Section 15(a) of CIPAA 2012

CIPAA is one of the most versatile dispute resolution choices in Malaysia. To maintain its accessibility, an aggrieved party can challenge an adjudication decision by applying to set it aside at the High Court.

Section 15 of CIPAA 2012 states as follows:

15. Improperly procured adjudication decision

An aggrieved party may apply to the High Court to set aside an adjudication decision on one or more of the following grounds:

1. The adjudication decision was improperly procured through fraud or bribery;
2. There has been a denial of natural justice;
3. The adjudicator has not acted independently or impartially; or
4. The adjudicator has acted in excess of his jurisdiction.

This article will explore how to set aside an adjudication decision based on the first ground in paragraph (a) above, particularly when the decision was improperly obtained through fraud.

What is Fraud?

The High Court in KPF Niaga Sdn Bhd v Vigour Builders Sdn Bhd and another case [2021] MLJU 229 held that the meaning of ‘fraud’ in CIPAA has a distinctive meaning as compared to Section 17 of Contracts Act 1950.

While there is no set definition of “fraud” stipulated within CIPAA, it is commonly referred to as “something dishonest and morally wrong”, and “inconsistent with a claim of right made in good faith, however unfolded”.

The Process

The process of setting aside an adjudication decision can be complex and lengthy. The following must be met to establish a ground based on fraud.

1. Burden of Proof
   The aggrieved party who has applied to have the adjudication decision set aside bears the burden of proof on the standard of balance of probabilities that the decision was improperly procured.
2. Elements
   When the aggrieved party establishes the decision was improperly procured, there are two elements that must be satisfied.
   
   According to the case of Gumi Asli Electrikal Sdn Bhd v Dazzling Electrical (M) Sdn Bhd & Another Case [2020] 1 LNS 189, the High Court held that two elements must be proven to invoke Section 15(a) of CIPAA 2012 are as follows:
3. 1. Fraud has been committed; and
   2. The adjudication decision has been “improperly procured” through the fraud.

Fraud has been committed

The fraud in question does not need to be committed by the party in whose favour the adjudication decision was given because CIPAA does not require fraud to have been committed by the adjudicator, nor is it required to be proven that the opposing party or the adjudicator is complicit in the fraud. 

The adjudication decision has been “improperly procured” through the fraud

It must be proved that the adjudication decision has been “improperly procured” through fraud either directly or indirectly.

The second requirement holds a high threshold because if fraud does not affect the adjudication decision, the first requirement will not succeed, even though there is fraud.

In other words, even if fraud is proven but the fraud does not affect the adjudication decision, the decision may not be set aside. Parties will have to adduce sufficient evidence to prove fraud, and that the fraud led to the adjudication decision.

As such, it is not easy to satisfy this limb as the burden and the causal link to be proven are difficult.

However, in the following case KPF Niaga Sdn Bhd v Vigour Builders Sdn Bhd and another case [2021] MLJU 229, the ground to set aside a decision through fraud was achieved. The Court held:

“[63]  It is my considered view that Vigour’s conduct in concealing the fact that it does not possess a valid certificate of registration under the CIDB Act and selecting only parts of the WA Messages, which would otherwise prove that the correct amount of Claycrete was not used for the road, and yet submitting its claims to KPF for the CIDB Levy and the Claycrete Road, amount to wilful acts of dishonesty and are therefore fraudulent.”

In the above case, the issue of the invalid Certificate, the intentional concealment of facts and revealing only selected messages, were found to directly impact the subject matter of the dispute and the decision of the Adjudicator, and the Learned Judge set aside the adjudication decision. 

As seen above, it is a very high threshold for the losing party to apply to set aside the adjudication decision pursuant to Section 15(a) of CIPAA 2012. As of to-date, there are very limited cases that have succeeded under this provision.