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Because of the firm’s experience as a commercial litigation firm for business organisations, we have a knack for advising corporate clients to pre-empt problems and disputes.

Construction Industry Payment & Adjudication Act 2012 (CIPAA)

If you are a main contractor, sub-contractor or nominated sub-contractor, who is being deprived of payment for work done, CIPAA could be a solution for you to ease your cash flow.

CIPAA stands for the Construction Industry Payment and Adjudication Act 2012 ("CIPAA"). It was gazetted on 22 June 2012.

CIPAA is also accompanied by the Construction Industry Payment and Adjudication (Exemption) Order 2014 (the "Order") and the Construction Industry Payment and Adjudication Regulations 2014 (the "Regulations"). They came into effect on 14 April 2014.

The very main aim and concept of CIPAA is ‘Pay Now and Argue Later’. It is intended to resolve the ‘cash flow starvation’ problem in the construction industry especially for the sub-contractors and/or contractors.

It is highly recommended for contractors who are being deprived of payment for work done and suffering cash flow problems due to unscrupulous employers and/or any party who refuse to pay outstanding claims.

CIPAA is applicable to all construction contracts made in writing in relation to construction work carried out wholly or partly within Malaysia.

However, Section 4 of CIPAA does not apply to a construction contract entered into by a natural person for any construction work in respect of any building less than four storeys high and which is wholly intended for his occupation.

Set out below are the steps and timeline for successfully adjudicating a claim:-

1. Payment claim by contractor Commencement of claim
2. Payment response by the employer/payee 10 working days from receipt of payment claim
3. Notice of adjudication To be served on employer/payee after expiry of time permitted for payment response
4. Adjudication claim (statement setting out the details of contractor’s claim) 10 working days from receipt of acceptance of appointment by adjudicator
5. Adjudication response (a defence to adjudication claim) 10 working days from receipt of adjudication claim
6. Adjudication reply (contractor’s reply to the adjudication response) 5 working days from receipt of adjudication response
7. Decision to be delivered 45 days

However, take note that the adjudicator may under Section 25(p) of CIPAA extend any time limit imposed for compliance as may be reasonably required.

Notwithstanding that the adjudication claim, response and reply require supporting documents to be attached, the adjudicator retains the discretion under Section 25 to order discovery and production of documents, and set deadlines for the production of documents. This suggests that further documents not already included in the pleadings may be admitted.

An adjudicator will be appointed to make such decisions. Parties involved will have to agree on the terms of appointment and the fees of the adjudicator. In the event that parties fail to agree on the terms and appointment of the adjudicator, the Kuala Lumpur Regional Centre for Arbitration’s standard terms of appointment and fees for adjudicators shall be applicable.

The parties to the adjudication are jointly liable to pay the adjudicator’s fees and expenses and the adjudicator may recover the fees and expenses due as a debt. The parties shall contribute and deposit with the Director of the Kuala Lumpur Regional Centre for Arbitration (KLRCA) a reasonable proportion of the fees in equal share as directed by the adjudicator in advance as security. Before releasing the adjudication decision to the parties, the adjudicator may require full payment of the fees and expenses to be deposited with the Director of the KLRCA.

The adjudicator will not be entitled to any fees or expenses relating to the adjudication if the adjudicator fails to decide the dispute within the period specified under Subsection 12(2) of CIPAA 2012. An exception is when the delay in the delivery of the decision is due to the failure of the parties to deposit the full payment of the adjudicator’s fees and expenses with the Director of the KLRCA.

For further information on CIPAA 2012, kindly contact Mr Brian Cumming (brian@gtrz.com.my) and/or Ms Khong Jo Ee (joee@gtrz.com.my).