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

In the previous article, we explored the requirements to set aside an Adjudication Decision (“AD”) improperly procured through fraud, as outlined in Section 15(a) of CIPAA 2012. 

This article focuses on the second ground to set aside an AD, i.e. Section 15(b) of CIPAA 2012, 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.

What is Natural Justice?

Natural justice is commonly defined as the parties’ right to a hearing that is fair and free from bias. 

A breach of justice occurs when a party is denied a fair opportunity to present evidence and arguments before an adjudicator makes a decision.

Examples

Below are the two examples of a breach of natural justice that resulted in the setting aside the AD:

1. The adjudicator referenced to a document that was not previously disclosed to the parties:
   
   In the case of Cescon Engineers Sdn Bhd v Pesat Bumi Sdn Bhd & Another Case [2021] MLJU 2248, one of the main issues arose was that the Adjudicator had conducted a Companies Commission of Malaysia (SSM) search on a third-party company without informing the parties involved and relied on the search results without sharing them with the parties. The Court in this case adopted the judgement from the case of Samado Sdn Bhd v. Kerajaan Malaysia & Another Case [2020] 5 MLRH 165 as follows:

   “[34]  In the course of deliberating on the conflicting contentions and submissions of the parties in Samado Sdn Bhd v. Kerajaan Malaysia & Another Case [2020] 5 MLRH 165, this Court had said that:

   ...

   “[24] In the course of His Lordship’s judgment in CJP Builders Ltd v William Verry Ltd [2008] EWHC 2025 (TCC), Akenhead J discussed the issue of breach of natural justice as follows:

   “79. …

   …

   83. Reliance was placed upon my observations in Cantillon Ltd v Urvasco Ltd [2008] BLR 250 at Paragraph 57:

   “From this and other cases, I conclude as follows in relation to breaches of natural justice in adjudication cases:

   1. it must first be established that the adjudicator failed to apply the rules of natural justice;
   2. any breach of the rules must be more than peripheral; they must be material breaches;
   3. breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it is one which is either decisive or of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant.
   4. whether the issue is decisive or of considerable potential importance or is peripheral or irrelevant obviously involves a question of degree which must be assessed by any judge in the case such as this.
   5. it is only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis which has not been argued or put forward by either side, without giving the parties an opportunity to comment or, where relevant put in further evidence, that the type of breach of the rules of natural justice with which the case can be Balfour Beatty Construction Company Limited v The London Borough of Lambeth was concerned comes into play. It follows that, if either party has argued a particular point and the other party does not come back on the point, there is no breach of the rules of natural justice in relation to thereto.”

   ...

   [36]  In para 10.039 at p 259 of Construction Adjudication in Malaysia, Second Edition, 2018, Sweet & Maxwell by Lam Wai Loon and Ivan YF Loo, the learned authors penned that “The rules of natural justice requires the adjudicator to inform the parties of the view he has formed independently of both parties and the information relied on by him which is obtained by his own initiative or investigation.”.

2. The adjudicator refused or failed to consider all claims or defences:

   In the case of View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22, the Court held that the adjudicator had wrongly construed the scope of his jurisdiction under Section 27(1) of CIPAA 2012 by refusing to consider all the defences raised in the adjudication response. It was clear that an adjudicator who wrongly ruled out considering a defence presented to him would be in breach of natural justice as follows:

   “[65]  We are of the view that an adjudicator who wrongly rules out considering a defence presented to him would be in breach of natural justice…

   …

   [74]  For the reasons above stated it is our considered view that an adjudicator is not excluded from considering all the defences raised by a respondent in the adjudication response whether found in the first response under s 6 of the CIPAA or not. In the circumstances of this case, the adjudicator had acted in breach of natural justice in excluding and refusing to consider certain defences raised by the appellant, and his decision cannot stand for that reason.”

As discussed above, the principle of natural justice is fundamental to the adjudication process, ensuring fairness and impartiality in the decision-making. Hence, breaches of natural justice, such as reliance on undisclosed evidence and/or the failure to consider all defences can lead to an AD being set aside under Section 15(b) of CIPAA 2012.

Nonetheless, it is important to recognize that not every alleged breach will meet the threshold required to set aside an adjudicator's AD. The breach must be material, significant, and impact the fairness of the proceedings.