Is The Contractor Forbidden/Estopped To Claim Under-Certification After Accepting Payment On The Under-Certified Payment Certificate?

Scenario:-

Contractor X submitted a penultimate progress claim for the period ending  at year 2019 for a sum in excess of RM5 million to Contractor Y. However, Contractor Y only certified a sum in excess of RM500,000.00 in respect of the said claim and  Contractor X accepted it. Can the Contractor X later on claim RM4,500,000 from the Contractor Y?

Answer:-

In the case Meridian Contracts Sdn Bhd v Bauer (Malaysia) Sdn Bhd and another summon [2020] MLJU 1405, Bauer was the piling subcontractor and Meridian the sub-subcontractor for basement carcass works.   

Meridian submitted a penultimate progress claim for the period ending 28.12.2017 for a sum in excess of RM5 million. However, Bauer only certified a sum in excess of RM500,000.00 in respect of the said claim. The certified sum was duly paid and accepted by Meridian on 12.6.2018. 

Dissatisfied with the certified sum, Meridian commenced adjudication proceedings for the uncertified sum. An Adjudication Decision was issued on 31.10.2019 in Meridian’s favour. 

Meridian then applied to enforce the Adjudication Decision pursuant to s. 28 CIPAA. True to form, Bauer applied to set aside and/or stay the Adjudication Decision pursuant to ss. 15 and 16 CIPAA. 

One of the arguments mounted by Bauer in its application to set aside and/or stay the Adjudication Decision was that Meridian was estopped from challenging the Interim Payment Certificate No 26 (which certified payment in excess of RM500,000) because Meridian had already accepted payment pursuant to the said certificate.  

The Adjudicator deliver the award in favour of the Meridian. Later on, Bauer file an originating summon in High Court to set aside the award.

The learned High Court Judge maintained the award. The learned Judge held that the mere fact of accepting payment under an under-certified certificate cannot amount to acceptance of the same because it is in the very nature of progressive payment certificates that they cannot be considered as final determination of the value of works done. 

The Adjudication Decision was therefore duly enforced, and the applications to set aside and/or stay the Adjudication Decision were dismissed. 

BY Lawyer KHOO AI THENG, P.J.K. (NSDK)

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