1. Statutory Framework
Under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA 2012”), an adjudication decision is given “temporary finality”. In other words, it is binding and enforceable immediately, subject to limited statutory challenges.
Section 13 of CIPAA provides that an adjudication decision is binding unless:
- It is set aside by the High Court under Section 15 of the same Act;
- The dispute is finally determined by arbitration or the court; or
- The parties reach a written agreement settling the dispute.
Once an adjudication decision is pronounced, a party may enforce it as if it were a judgment of the High Court by way of Section 28 of CIPAA.
2. Stay of Enforcement: Section 16 CIPAA
Section 16(1) permits a party to apply to the High Court for a stay of an adjudication decision in two situations:
- Where an application to set aside the adjudication decision has been made (Section 16(1)(a)); or
- Where the subject matter of the adjudication decision is pending final determination by arbitration or the court (Section 16(1)(b)).
The High Court in Foster Wheeler E & C (Malaysia) Sdn Bhd v Arkema Thiochemicals Sdn Bhd & Another Case [2015] 1 LNS 632 held that the phrase “pending final determination by arbitration or the court” requires that the arbitration or court proceedings must already have commenced, and that mere intention or multi-tiered negotiations is insufficient.
Additionally, Section 16(2) vests the High Court with broad discretion to grant a stay, order the adjudicated amount or part of it be deposited with the Director of the Asian International Arbitration Centre, or issue any other orders it deems appropriate.
Importantly, a stay must be sought before the adjudication decision is enforced under Section 28. Once an enforcement order has been granted, Section 16 cannot be invoked to stay the adjudication decision. This was affirmed by the Federal Court in Econpile (M) Sdn Bhd v ASM Development (KL) Sdn Bhd and another appeal [2024] 3 MLJ 157 (“Econpile 2024”).
3. Judicial Principles on the Stay of Adjudication Decisions
In one of the earliest stay decisions under CIPAA, the High Court in Subang Skypark Sdn Bhd v Arcradius Sdn Bhd [2015] 11 MLJ 818 made it clear that if a party seeks a stay of enforcement of an adjudication decision on the basis that there are concurrent arbitration or court proceedings, simply showing that those proceedings exist is not enough on its own. The applicant must produce credible evidence to justify why the stay should be granted. One important factor the court will consider is whether there is a probable inability of the other party to repay the adjudicated sum if it ultimately loses in the arbitration or court proceedings.
Prior to the Federal Court decision in Econpile 2024, the Federal Court in View Esteem Sdn Bhd v Bina Puri Holdings Sdn Bhd [2015] MLJU 695 (“View Esteem”) held that Section 16 should be interpreted with flexibility to allow a stay where:
- There are clear errors in the adjudication decision; or
- It is necessary in the interest of justice for the individual case.
The Court of Appeal in ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd and Other Appeals [2022] 6 MLJ 392 accepted that a stay might be granted under Section 16 even after an enforcement order, subject to the satisfaction of the thresholds under Section 16 and the existence of “special circumstances”. However, this was subsequently reversed by the Federal Court in Econpile 2024.
The landmark Econpile 2024 Federal Court decision now stands as the leading authority on stays post-enforcement where it held that once an adjudication decision has been enforced under Section 28, a stay cannot be invoked under Section 16(1)(b) because there is no statutory provision empowering such a stay after enforcement. The court emphasised that CIPAA’s purpose is to effect “pay now, dispute later”, and allowing a stay post-enforcement would defeat this purpose. It also reaffirmed that the principles for determining a stay application, including clear errors or the interests of justice, remain relevant when Section 16 is properly invoked prior to the enforcement.
4. Key Implications
An application for a stay under Section 16 of CIPAA must be made before the adjudication decision is enforced under Section 28. Once the adjudication decision has been enforced as a judgment or order of the High Court, the statutory mechanism for a stay under Section 16 is no longer available, as CIPAA does not confer any power on the court to stay an adjudication decision after enforcement.
A pending arbitration or court action may justify a stay under Section 16(1)(b), provided the statutory threshold is met where the arbitration or court proceedings concerning the same subject matter as the adjudication decision have already been commenced, and that the stay application is made prior to enforcement under Section 28.
The High Court retains discretion to consider all relevant factors, including the interests of justice and any clear errors in adjudication, consistent with View Esteem and reaffirmed by the Federal Court in Econpile 2024.