Malaysia’s growing construction industry has led to increasingly complex disputes, often resulting in multiple adjudications under a single contract. This raises the question of whether findings in an earlier adjudication bind the parties in subsequent adjudication proceedings under s.13 of the CIPAA 2012 – in effect, bringing into question the application of the legal doctrine of res judicata.
.
The doctrine of res judicata
The doctrine of res judicata is defined in the locus classicus of Asia Commercial Finance (M) Bhd v. Kawal Teliti Sdn Bhd[1] as “a matter adjudged”. Simply put, it is a principle that expresses a general policy that “the same issue (or cause of action) should not be litigated more than once”[2] after it has been decided by a competent court or tribunal.
In Asia Commercial Finance, and indeed in subsequent case authorities over the years[3], it has been established that there are two forms of res judicata. The first form is res judicata in the narrower sense, where a party is prevented from re-litigating an issue previously decided by a competent court or tribunal[4]. The second form is res judicata in the wider sense – which concerns not only issues actually raised by the parties in previous litigation, but also “to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence might have brought forward at the time”[5].
In the years since, it has been established by a number of landmark decisions that the Courts ought to apply the wider, rather than narrower, form of res judicata in determining if a cause of action can be maintained in litigation[6].
.
Res judicata in adjudication
The genesis of res judicata in adjudication under Malaysian law can be found in the High Court case of Kining Exeton Sdn Bhd v. Majlis Perbandaran Kuantan[7].
In this case, Lee Swee Seng J (now FCJ) dealt with four Originating Summonses (OS), with two OSes filed by the Plaintiff seeking to enforce two adjudication decisions (CIPAA 1 and CIPAA 2) and two OSes filed by the Defendant seeking to set aside the same CIPAA 1 and CIPAA 2 decisions. Both of these CIPAA decisions arose from the same contract concerning the construction of a building for the Kuantan City Council.
The Plaintiff had brought both of the CIPAA proceedings in respect of variation orders instructed under the contract between the parties. The Plaintiff was awarded sums under both CIPAA 1 and CIPAA 2, and sought to enforce both of these decisions in the Courts.
In opposing the Plaintiff’s applications for enforcement, the Defendant had raised a number of arguments, with two of these arguments concerning the issue of res judicata. The first of these was that the Plaintiff had made a claim for the same VO for Exterior Finishes in both CIPAA 1 and CIPAA 2, and that the adjudicator in CIPAA 2 had exceeded his jurisdiction in deciding on a claim which had already been decided upon in CIPAA 1.
Swee Seng J dismissed this argument, citing a number of English authorities in holding that, though an adjudication decision may be unenforceable if it purports to decide a matter which had already been decided in previous adjudication proceedings, such a restriction was only relevant to what had been “actually and finally” decided in those proceedings. Further, on the facts, it was held that as the adjudicator in CIPAA 1 had expressly stated that he did not have jurisdiction to decide on this specific VO, it had not been decided on in CIPAA 1 and could be duly considered by the adjudicator in CIPAA 2.
The second argument on res judicata was that three of the six VOs raised in CIPAA 2 should have been brought in the CIPAA 1 adjudication, as they were already due by the time CIPAA 1 had commenced. Swee Seng J held that this was not the case, and in doing so made the express statement that the standard of res judicata to be applied in adjudication was less strict than that to be applied in the case of ordinary litigation:-
“[79] There is certainly no good rationale to prohibit a Payment Claim that could have been brought earlier as being included together in the earlier Payment Claim from being brought later. It certainly does not prejudice the Respondent here in any way though of course for saving of both time and resources, it would not be prudent to pursue an Adjudication in installments.
[80] However one can appreciate that sometimes the nature of a Claim is such that the documents may not be ready or that the Subcontractors involved are different persons or that there may be some rectification works to be done with respect to work which payment is due or that parties are still negotiating towards a settlement for that claim.
[81] I do not think that one should equate an Adjudication Proceeding to a Court Proceeding where a stricter stand on cause of action estoppel may apply.”
In summary, the judgment in Kining Exeton draws a key distinction between the forms of res judicata applicable in litigation and adjudication. Though Asia Commercial Finance and other decisions in its line have indicated that the Courts will apply res judicata in the wider sense in litigation, the judgment in Kining Exeton appears to confine the applicable form of res judicata in adjudication to the narrower sense, i.e what was “actually and finally” decided in a previous adjudication decision.
.
Application of res judicata in adjudication
The decision in Kining Exeton has been raised in several subsequent cases, which each demonstrate the Courts’ application of the doctrine of res judicata in adjudication proceedings under the CIPAA 2012.
Such cases include the subsequent High Court decisions of Samsung C&T Corp v. Bauer (Malaysia) Sdn Bhd[8] and Meridian Contracts Sdn Bhd v. Bauer (Malaysia) Sdn Bhd[9], which affirmed that adjudicators may be held to have acted in excess of jurisdiction if they decide on claims and cross-claims which have already been determined in prior adjudication proceedings, resulting in the setting aside of their respective adjudication decisions.
.
Conclusion
Ultimately, the conclusion that can be drawn from the cases set out above is that the Courts are only willing to apply a less rigorous form of res judicata in adjudication than that applied in litigation, as per the judgment in Kining Exeton. The permissive wording of the judgment by Lee Swee Seng J (as he was then) evidently allows the claimant significant leeway in the preparation of its claim, and further appears go so far as to permit the claimant to bring its claim piecemeal over the course of multiple adjudications.
However, it is still worthwhile for parties to consider the nature of claims and cross-claims raised in adjudication, as the Courts appear to be willing to set aside adjudication decisions where the adjudicator has determined issues and claims which have been very clearly decided upon in previous adjudication decisions.
[2] See Letchumanan Gopal v. Pacific Orient & Co Sdn Bhd [2011] 5 CLJ 866;
[3] See, for example Lin Wen-Chih Sdn Bhd v. Pacific Forest Industries Sdn Bhd & Anor [2023] 8 CLJ 671;
[4] See Chee Pok Choy & Ors v. Scotch Leasing Sdn Bhd [2001] 2 CLJ 321;
[5] See Asia Commercial Finance, quoting Henderson v. Henderson [1843] 67 ER 313
[6] See the cases of Lin Wen-Chih Sdn Bhd v. Pacific Forest Industries Sdn Bhd & Anor [2023] 8 CLJ 671 and Chee Pok Choy & Ors v. Scotch Leasing Sdn Bhd [2001] 2 CLJ 321;
Res Judicata in Adjudication Proceedings under the Construction Industry Payment and Adjudication Act 2012
Introduction
Malaysia’s growing construction industry has led to increasingly complex disputes, often resulting in multiple adjudications under a single contract. This raises the question of whether findings in an earlier adjudication bind the parties in subsequent adjudication proceedings under s.13 of the CIPAA 2012 – in effect, bringing into question the application of the legal doctrine of res judicata.
.
The doctrine of res judicata
The doctrine of res judicata is defined in the locus classicus of Asia Commercial Finance (M) Bhd v. Kawal Teliti Sdn Bhd[1] as “a matter adjudged”. Simply put, it is a principle that expresses a general policy that “the same issue (or cause of action) should not be litigated more than once”[2] after it has been decided by a competent court or tribunal.
In Asia Commercial Finance, and indeed in subsequent case authorities over the years[3], it has been established that there are two forms of res judicata. The first form is res judicata in the narrower sense, where a party is prevented from re-litigating an issue previously decided by a competent court or tribunal[4]. The second form is res judicata in the wider sense – which concerns not only issues actually raised by the parties in previous litigation, but also “to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence might have brought forward at the time”[5].
In the years since, it has been established by a number of landmark decisions that the Courts ought to apply the wider, rather than narrower, form of res judicata in determining if a cause of action can be maintained in litigation[6].
.
Res judicata in adjudication
The genesis of res judicata in adjudication under Malaysian law can be found in the High Court case of Kining Exeton Sdn Bhd v. Majlis Perbandaran Kuantan[7].
In this case, Lee Swee Seng J (now FCJ) dealt with four Originating Summonses (OS), with two OSes filed by the Plaintiff seeking to enforce two adjudication decisions (CIPAA 1 and CIPAA 2) and two OSes filed by the Defendant seeking to set aside the same CIPAA 1 and CIPAA 2 decisions. Both of these CIPAA decisions arose from the same contract concerning the construction of a building for the Kuantan City Council.
The Plaintiff had brought both of the CIPAA proceedings in respect of variation orders instructed under the contract between the parties. The Plaintiff was awarded sums under both CIPAA 1 and CIPAA 2, and sought to enforce both of these decisions in the Courts.
In opposing the Plaintiff’s applications for enforcement, the Defendant had raised a number of arguments, with two of these arguments concerning the issue of res judicata. The first of these was that the Plaintiff had made a claim for the same VO for Exterior Finishes in both CIPAA 1 and CIPAA 2, and that the adjudicator in CIPAA 2 had exceeded his jurisdiction in deciding on a claim which had already been decided upon in CIPAA 1.
Swee Seng J dismissed this argument, citing a number of English authorities in holding that, though an adjudication decision may be unenforceable if it purports to decide a matter which had already been decided in previous adjudication proceedings, such a restriction was only relevant to what had been “actually and finally” decided in those proceedings. Further, on the facts, it was held that as the adjudicator in CIPAA 1 had expressly stated that he did not have jurisdiction to decide on this specific VO, it had not been decided on in CIPAA 1 and could be duly considered by the adjudicator in CIPAA 2.
The second argument on res judicata was that three of the six VOs raised in CIPAA 2 should have been brought in the CIPAA 1 adjudication, as they were already due by the time CIPAA 1 had commenced. Swee Seng J held that this was not the case, and in doing so made the express statement that the standard of res judicata to be applied in adjudication was less strict than that to be applied in the case of ordinary litigation:-
In summary, the judgment in Kining Exeton draws a key distinction between the forms of res judicata applicable in litigation and adjudication. Though Asia Commercial Finance and other decisions in its line have indicated that the Courts will apply res judicata in the wider sense in litigation, the judgment in Kining Exeton appears to confine the applicable form of res judicata in adjudication to the narrower sense, i.e what was “actually and finally” decided in a previous adjudication decision.
.
Application of res judicata in adjudication
The decision in Kining Exeton has been raised in several subsequent cases, which each demonstrate the Courts’ application of the doctrine of res judicata in adjudication proceedings under the CIPAA 2012.
Such cases include the subsequent High Court decisions of Samsung C&T Corp v. Bauer (Malaysia) Sdn Bhd[8] and Meridian Contracts Sdn Bhd v. Bauer (Malaysia) Sdn Bhd[9], which affirmed that adjudicators may be held to have acted in excess of jurisdiction if they decide on claims and cross-claims which have already been determined in prior adjudication proceedings, resulting in the setting aside of their respective adjudication decisions.
.
Conclusion
Ultimately, the conclusion that can be drawn from the cases set out above is that the Courts are only willing to apply a less rigorous form of res judicata in adjudication than that applied in litigation, as per the judgment in Kining Exeton. The permissive wording of the judgment by Lee Swee Seng J (as he was then) evidently allows the claimant significant leeway in the preparation of its claim, and further appears go so far as to permit the claimant to bring its claim piecemeal over the course of multiple adjudications.
However, it is still worthwhile for parties to consider the nature of claims and cross-claims raised in adjudication, as the Courts appear to be willing to set aside adjudication decisions where the adjudicator has determined issues and claims which have been very clearly decided upon in previous adjudication decisions.
.
[1] [1995] 3 CLJ 783;
[2] See Letchumanan Gopal v. Pacific Orient & Co Sdn Bhd [2011] 5 CLJ 866;
[3] See, for example Lin Wen-Chih Sdn Bhd v. Pacific Forest Industries Sdn Bhd & Anor [2023] 8 CLJ 671;
[4] See Chee Pok Choy & Ors v. Scotch Leasing Sdn Bhd [2001] 2 CLJ 321;
[5] See Asia Commercial Finance, quoting Henderson v. Henderson [1843] 67 ER 313
[6] See the cases of Lin Wen-Chih Sdn Bhd v. Pacific Forest Industries Sdn Bhd & Anor [2023] 8 CLJ 671 and Chee Pok Choy & Ors v. Scotch Leasing Sdn Bhd [2001] 2 CLJ 321;
[7] [2017] 1 LNS 1905;
[8] [2019] 1 LNS 2104;
[9] [2023] 1 LNS 917
About the author
Tan Joon Meng
Associate
Dispute Resolution
Harold & Lam Partnership
[email protected]
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