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18 May 2021
It is well known in Malaysia that the governing law of the legal profession differs in Peninsular and East Malaysia. Should a party wish to commence a court action in East Malaysia, an advocate qualified under the Sabah or Sarawak Advocates Ordinance would have to be appointed.
However, what about adjudication proceedings conducted under the Construction Industry Payment and Adjudication Act (CIPAA) 2012, which allows parties to "be represented by any representative appointed by the party"? The high court case of Tekun Cemerlang Sdn Bhd v Vinci Construction Grands Projets Sdn Bhd(1) recently shed light on this matter.
Disputes arose between Tekun Cemerlang Sdn Bhd, a company based in Sabah, and Vinci Construction Grands Projets Sdn Bhd, a company based in Kuala Lumpur, concerning a construction project in Sabah.
Through a West Malaysian firm, Vinci Construction served a payment claim and later initiated adjudication proceedings by serving a notice of adjudication to Tekun Cemerlang. An adjudicator was subsequently appointed and directions were given with regard to the adjudication cause papers.
Subsequent to the service of the adjudication claim, Tekun Cemerlang filed an originating summons to stay the adjudication proceedings on the grounds that:
In general, the right to practise law in Sabah is governed by Section 8(1) of the Advocates Ordinance, which provides that persons admitted under Section 6 and enrolled under Section 7 as advocates thereunder have "the exclusive right to practise in Sabah and to appear and plead" in the different levels of court in Sabah and any appellate court in Malaysia. Nonetheless, advocates in Sarawak and advocates and solicitors of the Malaya High Court may appear and plead before the appellate courts sitting in Sabah for limited cases, as provided in Section 8(2) of the Advocates Ordinance.
Section 2 of the Advocates Ordinance further defines the phrase "to practise in Sabah" as those functions and acts that may be performed by barristers and solicitors in England. The high court was of the view that Section 2 of the Advocates Ordinance does not delimit or determine the exclusive right of advocates in those functions or acts as may be performed by advocates in their practice under the Advocates Ordinance.
Section 15 of the Advocates Ordinance prohibits any person from practising as an advocate or performing any act as an advocate if they are not enrolled as an advocate or do not possess a valid practising certificate issued under Section 9 of the Advocates Ordinance. Such persons are 'unauthorised persons'.
An unauthorised person who carries out an act listed in Section 16 of the Advocates Ordinance, including acting as an advocate in any of the Sabah courts, will have committed an offence and will be liable to a fine or imprisonment on conviction.
Acting as advocates
Vinci Construction did not dispute that the payment claim, notice of adjudication and adjudication claim had been prepared and served by the West Malaysian firm. The high court held that these actions signified that the West Malaysian firm could not have been acting merely as a messenger of Vinci Construction in the adjudication, but had instead been acting as its advocate. As such, the court was of the view that the West Malaysian firm had been practising in Sabah in the adjudication for the purpose of the Advocates Ordinance, even though Vinci Construction's business office was located in Kuala Lumpur and the West Malaysian firm had prepared the documents for the adjudication in Kuala Lumpur.
Territorial jurisdiction of Sabah
The court considered the fact that the necessary elements – or at least the substantial elements to sustain the adjudication – had occurred or were located in Sabah. These included the making of the relevant contract, the construction project itself and the adjudicator appointed. On that premise, the court formed the view that this was a Sabah adjudication.
The court proceeded to hold that the matters were plainly within the territorial jurisdiction of the High Court in Sabah and Sarawak with its branch in Kota Kinabalu, Sabah. The court further held that any court proceedings that may arise from the adjudication and any acts and decisions of the adjudicator would be within and subject to the jurisdiction of the Sabah courts.
As such, Vinci Construction's solicitors, which were part of a firm of advocates and solicitors based in Kuala Lumpur, were not qualified under the Advocates Ordinance and were prohibited from practising as advocates thereunder.
Reading Advocates Ordinance with CIPAA
Section 8(3) of the CIPAA provides that a party to an adjudication proceeding "may represent himself or be represented by any representative appointed by the party". At first glance, this would suggest that anybody can be chosen, even advocates in Kuala Lumpur, for adjudication in Sabah.
However, the high court held that Section 8(3) of the CIPAA gives parties liberty to choose only between self-representation or representation by another in adjudication proceedings; it does not give parties the right to representation which is prohibited by law.
The high court cautioned that this decision deals solely with West Malaysian advocates and solicitors acting and representing Vinci Construction in the adjudication as advocates in Sabah. The court expressed that this decision does not concern other professionals in building construction who have technical skills in building construction and legal knowledge but are unauthorised under the Advocates Ordinance.
The Tekun Cemerlang decision raises some concerns.
Classification of adjudication as Sabah adjudication
One of the factors for this classification was the appointment of the adjudicator based in Sabah. Would the classification change if the appointed adjudicator was from West Malaysia? Assuming that the classification would change, the appointment of an adjudicator from Singapore would arguably suggest that the adjudication would become a Singapore adjudication, placing it beyond the jurisdiction of advocates and solicitors of the high courts of Malaya and of Sabah and Sarawak.
Adjudication under the CIPAA is administered by the Asian International Arbitration Centre (AIAC). The CIPAA itself does not restrict the AIAC from appointing adjudicators based on the locality of the dispute. There is no provision in the CIPAA which requires the determination of the locality of the adjudication or for the same to be considered when appointing adjudicators or party representatives. Thus, Section 8(3) of the CIPAA allows a party to either "represent himself or be represented by any representative appointed by the party".
The considerations in Section 23(1) of the Courts of Judicature Act 1964 do not apply to the AIAC when the appointment of an adjudicator is made. Thus, weighing factors such as the locality of the project, where the contract was entered into and the identity of the adjudicator to determine that this was a Sabah adjudication was arguably an erroneous approach.
Further, it is also inconsequential that these matters "are plainly within the territorial jurisdiction of the High Court in Sabah and Sarawak with its branch in Kota Kinabalu Sabah", since the legal representation was not for court proceedings but for an adjudication. Unlike an arbitration, there is no provision for a seat for the adjudication under the CIPAA. Therefore, from a jurisdictional standpoint, there is no juridical location for adjudication.
The classification of an adjudication based on its location creates a difficult precedent. It creates a non-existent divide between the adjudication of construction payment disputes between East and West Malaysia. That would also suggest that advocates and solicitors of the High Court in Sabah and Sarawak cannot be appointed to act as adjudicators in a West Malaysia-based adjudication.
West Malaysian firm had to apply legal knowledge and advise on contractual provisions
Second, the High Court viewed as a relevant factor the fact that the West Malaysian firm had to apply legal knowledge and advise on contractual provisions. In Tekun Cemerlang, adjudication papers were served on an entity in Sabah. No issue was raised on the firm or its lawyers operating physically in Sabah. Nevertheless, the high court found that the West Malaysian firm was effectively practising as an advocate in Sabah under the Advocates Ordinance. Premised on the same rationale, this approach may also prevent West Malaysian firms of advocates and solicitors from rendering legal opinions or even issuing a letter of demand from their offices in West Malaysia and delivering them to an entity in Sabah.
What about adjudicators?
Would advocates and solicitors be prevented from being appointed as adjudicators in the other territorial jurisdiction? As with a party representative, the adjudicator would also have to possess and apply a level of legal knowledge.
Tekun Cemerlang will affect ongoing and past adjudication proceedings in Malaysia which transcend the East and the West.
For further information on this topic please contact Foo Joon Liang or Tasha Lim Yi Chien at Gan Partnership by telephone (+603 7931 7060) or email (email@example.com or firstname.lastname@example.org). The Gan Partnership website can be accessed at www.ganlaw.my.
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