Adjudication Decisions, Final Determination and the Limits of “Temporary Finality”

YS Chong Enterprise Sdn Bhd (In Liquidation) v Perkasa Jauhari Sdn Bhd (In Liquidation) [Civil Appeals No. J-02(NCC)(A)-464-03/2025 and J-02(IM)(NCC)-465-03/2025, Court of Appeal, 7 July 2026]

A successful party in a statutory adjudication under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA 2012“) can enforce the decision under section 28 CIPAA 2012 and subsequently present a winding-up petition against the unsuccessful party. But an adjudication decision is only temporarily final. Under section 13 CIPAA 2012, it stops binding the parties once the same dispute is finally decided the other way by a court or arbitral tribunal.

However, if a winning claimant has already enforced the decision and obtained a winding-up order, what happens when the underlying dispute is later decided otherwise in court or arbitration?

In YS Chong Enterprise Sdn Bhd v Perkasa Jauhari Sdn Bhd, the Court of Appeal held that an adjudication decision, even one registered and enforced under section 28, ceases to bind the moment the underlying dispute is finally decided against the successful claimant under section 13(c) CIPAA 2012.

The Court also settled a point of timing. A dispute is “finally decided by arbitration or the court” under section 13(c) CIPAA 2012 when the court of first instance delivers its judgment on the merits, not when appeals are eventually exhausted. It is the first-instance judgment that brings the adjudication decision to an end and, with it, extinguishes the enforcement order.

 

Background

YS Chong Enterprise Sdn Bhd (“YS Chong“) was a subcontractor engaged by Perkasa Jauhari Sdn Bhd (“Perkasa“) for works on a public infrastructure project. A payment dispute arose on the final account. YS Chong claimed RM2,458,513.54 for additional structural steel works. Perkasa counterclaimed RM2,795,000.00 for liquidated ascertained damages (“LAD“) and debit notes. In April 2018, Perkasa filed a High Court suit seeking a declaration that a revised progressive payment certificate was void.

Before that suit was tried, YS Chong referred substantially the same dispute to statutory adjudication. This produced the first round of results, all in YS Chong’s favour. The adjudicator allowed YS Chong’s claim (RM2,458,513.54 inclusive of interest and costs) and dismissed Perkasa’s LAD claim (“Adjudication Decision“). YS Chong then obtained an order enforcing the decision under section 28 CIPAA 2012 (“Enforcement Order“), which Perkasa did not appeal. Based on the Enforcement Order, YS Chong presented a winding-up petition against Perkasa and obtained a winding-up order against it in 2019 (“initial winding-up order“). Perkasa appealed that order but later withdrew the appeal.

The High Court suit then proceeded to trial on the same underlying dispute and reversed the outcome. On 21 July 2020, the High Court allowed Perkasa’s claim and dismissed YS Chong’s counterclaim (“JBHC Judgment“). YS Chong’s appeal was dismissed by the Court of Appeal. Further, YS Chong subsequently withdrew its motion for leave to appeal to the Federal Court.

With the dispute now decided in its favour, Perkasa (by its liquidator) served a statutory notice of demand under sections 465(1)(e) and 466(1)(a) of the Companies Act 2016 (“CA 2016“) for RM3,600,325.18 due under the JBHC Judgment and the costs orders (“Total Debt“). Due to non-payment, Perkasa presented a winding-up petition against YS Chong, and YS Chong was wound up. YS Chong appealed against that winding-up order and the order appointing its liquidator.

 

YS Chong’s case

YS Chong argued that the Adjudication Decision, enforced and never set aside, still gave rise to a debt owed by Perkasa (quantified with interest and costs at RM2,599,443.65), which should be set off under section 526 CA 2016 against the Total Debt, leaving a net balance of about RM1 million which YS Chong paid into court. It further argued that the initial winding-up order, made based on the Adjudication Decision and left standing after Perkasa withdrew its appeal, was res judicata (matter adjudged) and could not be challenged further.

 

The statutory framework

The Court’s analysis turned on four provisions:

• Section 13 CIPAA 2012: An adjudication decision binds unless (a) it is set aside under section 15, (b) the subject matter is settled in writing, or (c) the dispute is finally decided by arbitration or the court.
• Section 28 CIPAA 2012: A party may apply to enforce an adjudication decision “as if it were a judgment” of the High Court, executable under Order 45 of the Rules of Court 2012.
• Section 466(1)(a) CA 2016: A company is deemed unable to pay its debts if it fails to satisfy a creditor’s statutory demand for a sum exceeding RM50,000.00 within 21 days.
• Section 526 CA 2016: Mandatory mutual set-off where mutual debts subsist between the company and a creditor at the commencement of the winding-up, with only the net balance provable or payable.

 

When is a dispute subject to an adjudication decision “finally decided”?

The threshold question was when section 13(c) CIPAA 2012 is applicable. Two readings of section 13(c) CIPAA 2012 were possible:

• On the first, a dispute is “finally decided” only once it has achieved unappealable finality. That is, once all avenues of appeal are exhausted, abandoned or have lapsed.
• On the second, the phrase describes the character of the decision as a final (as opposed to interim or interlocutory) decision on the merits. Section 13(c) CIPAA 2012 applies from the moment the court of first instance delivers its judgment irrespective of any pending appeal, or when the arbitral tribunal delivers its award.

The Court preferred the second reading due to the following reasons:

• Ordinary language. “Finally decided” reads naturally as an adjectival description of a final decision on the merits, not a decision that has since become incapable of further challenge.
• The disjunctive structure (in the Court’s view, decisive). Section 13(c) CIPAA 2012 applies a single phrase to both arbitration and the court. An arbitral award is final and binding upon delivery under section 36 of the Arbitration Act 2005, subject only to setting aside. Requiring court proceedings to exhaust all appeals would create an asymmetrical regime between litigation and arbitration.
• CIPAA 2012 policy. Temporary finality bridges the gap until a full trial or arbitration on the merits. Once a first-instance decision is delivered, the cash flow rationale for temporary finality is achieved.

Applying this principle, the JBHC Judgment delivered on 21 July 2020 was the final determination that triggered section 13(c) CIPAA 2012. Section 13(c) took effect on that date, rather than from when YS Chong exhausted all appellate options. The Court expressly recorded that no reported Malaysian decision had previously addressed this point, and that its conclusion was founded on statutory interpretation. The Court left open the question of what happens if a first-instance judgment is later reversed on appeal. Since the JBHC Judgment was affirmed, that issue did not arise on the facts.

 

Extinguishment of the enforcement order

The Court held that a section 28 enforcement order is not an independent judgment. It exists only while the underlying adjudication decision remains binding under section 13.

When the adjudication decision ceased to be binding upon the delivery of the JBHC Judgment, the enforcement order was automatically extinguished.

This extinguishment applies prospectively from the date of the JBHC Judgment. It does not invalidate past steps taken under the enforcement order, such as the initial winding-up order against Perkasa. However, those past steps did not provide YS Chong with an ongoing debt to set off against Perkasa.

 

No res judicata from the winding-up order

The Court rejected the argument that the earlier winding-up order made the adjudicated debt final and unchallengeable. A winding-up court does not decide the underlying merits of a debt. Its function is narrower: to check that the statutory preconditions to winding-up are met, namely a valid notice of demand, a debt above the threshold, and the company’s deemed or actual inability to pay, and to satisfy itself that no genuine and substantial dispute has been raised over the debt. As the merits were being tried in the High Court suit, the winding-up order created no res judicata or issue estoppel to protect the adjudication decision.

 

The ASM Development / Maju Holdings debate

The Court took the opportunity to address the long-standing High Court divergence on the effect of the words “as if it is a judgment or order of the High Court” in section 28(1) CIPAA 2012:

• In ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd [2020] MLJU 282, the High Court held that a decision enforced under section 28 remains disputable: “as if” permits enforcement without converting the decision into a judgment, unlike section 38(1) of the Arbitration Act 2005, under which an award is entered “as a judgment in terms of the award”.
• In Maju Holdings Sdn Bhd v Spring Energy Sdn Bhd [2020] MLJU 1196, the High Court considered this “a distinction without a difference”: a debt cannot be undisputed for execution yet disputed for winding up depending on the enforcement route the creditor happens to choose.

The Court adopted Maju Holdings on indisputability. While it subsists, a section 28 CIPAA 2012 judgment is an undisputed debt for all purposes, no less so than a section 38 Arbitration Act 2005 award-judgment. But it identified one distinction Maju Holdings had understated. A section 28 CIPAA 2012 judgment is, by reason of section 13 CIPAA 2012, liable to extinguishment upon a section 13(c) CIPAA 2012 final determination, a vulnerability with no counterpart in the Arbitration Act 2005. To that limited extent, the “distinction without a difference” formulation may not be entirely correct.

 

No set-off under section 526

The set-off argument therefore failed. Section 526 CA 2016 operates on mutual debts subsisting at the commencement of the winding-up. By the time Perkasa presented its winding-up petition against YS Chong (and at all times thereafter), the Adjudication Decision and Enforcement Order had already ceased, by operation of section 13(c) CIPAA 2012 upon the final determination, to represent any binding or enforceable debt owed by Perkasa. With no mutual debt on YS Chong’s side of the account, section 526 CA 2016 had no application, and the notice of demand correctly stated the full Total Debt of RM3,600,325.18 without any set-off.

The Court of Appeal accordingly dismissed both appeals, affirmed the winding-up of YS Chong and the appointment of its liquidator, and ordered the RM1,000,881.53 paid into court to be released to Perkasa in part-satisfaction of the Total Debt, without prejudice to Perkasa’s right to recover the balance.

 

Reading YS Chong with VKPT and KTCC Mall

YS Chong is the third recent Court of Appeal decision to draw the boundary between CIPAA 2012’s “pay now, argue later” policy and the insolvency regime:

• KTCC Mall Sdn Bhd v TCS Construction Sdn Bhd: A section 30 CIPAA 2012 direct payment cannot create a back-door priority over the general body of creditors of an insolvent contractor; the remedy yields to the pari passu principle.
• VKPT Sdn Bhd v LLC Infra Sdn Bhd: An unregistered adjudication decision is a disputable debt for winding-up purposes. Registration under section 28 CIPAA 2012 is what converts it into an indisputable judgment debt.
• YS Chong: Even a registered and enforced decision does not confer permanent indisputability. It remains vulnerable to extinguishment under section 13(c) CIPAA 2012 once the underlying dispute is finally decided the other way.

Read together, the three decisions confirm that CIPAA 2012 remains a cash flow statute, not an insolvency statute, and that its temporary finality cannot be leveraged into a permanent advantage against the insolvency regime. YS Chong sits closely alongside VKPT. VKPT explains that registration/enforcement hardens a disputable adjudicated debt into an indisputable judgment debt. YS Chong adds that indisputability lasts only so long as the judgment subsists, and a section 13(c) CIPAA 2012 final determination brings it to an end.

 

Practical points

For unpaid winning parties: Registration/enforcement under section 28 CIPAA 2012 crystallises the adjudicated debt while it subsists, but it is not a permanent shield. If the unsuccessful party is commencing court or arbitration proceedings on the same dispute, a favourable first-instance judgment or award for that party will extinguish the adjudicated debt, and any enforcement order and set-off built on it, from the date it is delivered, not the date appeals run out. The lesson is to move quickly. Enforce, demand, and (where the debtor is solvent) execute or petition before the underlying dispute is finally determined against you. Once a final determination has gone the other way, the adjudication decision is spent, and earlier orders founded on it, including a winding-up order, will not supply a continuing set-off.

For paying or debtor parties: A company facing a petition founded on an enforced adjudication decision should press the underlying dispute to a first-instance decision on the merits. A judgment or award in its favour engages section 13(c) CIPAA 2012 immediately and extinguishes the adjudicated debt prospectively, without waiting for appeals to be exhausted, and may be raised against a set-off or a petition presented thereafter. The fact that a winding-up order was previously obtained against a party on the basis of an adjudication decision does not, in itself, give rise to a res judicata precluding reliance on section 13(c) CIPAA 2012.

This article was authored by Shaun Tan (Partner) and Rachel Tan (Associate).

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