CIPAA Adjudication is no longer a dispensation of ‘rough-justice’ in a ‘fast-and-furious’ way. The true intention of CIPAA to expedite dispute-resolution as to enable contractor’s its life-source, which is payment, is off-tangent, into a ‘mini-trial’ or ‘mini-arbitration’, where counsels can actually test its evidence and arguments before going for a ‘final-resolution’, without giving ample ‘arsenals’ for the adjudicator to work on its own ‘competenze-competenze’; for a fee, far below of that of arbitration or the counsel’s own retainer, especially when ‘hearing’ is accorded.
 
CIPAA was once known to be of 88%-success rate for the Claimant, usually contractor, not until the first ‘spanner was thrown into the gearbox’, that Respondent has the right to raise defence at any point in time during the progress of CIPAA.[1] Claimant has 5-days to put in its Reply, taking advantage of this, the tactical- maneuvering of an ambush with documents in the Response, during prolonged ‘holiday-seasons’, left very little time for Claimant to Reply. Does the matter stop at Reply? The answer is ‘no’… for most adjudicator may find that the entire Response is dedicated to a ‘single-objective’, to ‘remove’ the adjudicator for the lack of jurisdiction to preside over the adjudication. Thus, request for further submission i.e. rejoinder, sur-rejoinder, rebuttal and sur-rebuttal are requested. Will a rational adjudicator obliged to allow such, fearing ‘lack of natural justice’ disposition? Usually the adjudicator will give-in, eating into his 45-days to serve its Decision.
 
The story doesn’t ends there yet. There were attempt by counsel, usually Respondent, to seek for Hearing and Written-Submission.[2] Such call was turned down by the HC, keeping faithfully to the spirit of CIPAA, which is dispensation of ‘rough-justice’ in a ‘fast-and-furious’ way. Having said that, some Respondent will put in ‘Expert-Report’ as evidence, some by the cartons of A4-boxes, mirrored such as in arbitration or litigation, holding faithfully to View-Esteem’s ruling, in Response, Rejoinder and maybe Rebuttal. Should the adjudicator allowed for hearing to review these ‘Expert-Report’ evidence? That is like walking tip-toe at the tight-rope, requiring a fine-balancing act, fearing a breach of natural-justice.
 
Alas, the Appeal-Court has then, opens a flood-gate, rendering breach of natural-justice if the adjudicator does not allow Hearing and Written-Submission, on the basis of insufficient time.[3] The second spanner was thrown into the gearbox, swinging the pendulum to the Respondent, as with Hearing and Written-Submission, the chances voiding the entire CIPAA processes are very high. There is yet, procedural aspect of Hearing and Written-Submission in a conduct of adjudication available in the adjudicator’s tool-boxes, especially so when the notion of competenze-competenze is absent. The stroke of genius on tactical-maneuvering for a ‘weak-case’ is vested upon the conduct of Hearing and Written-Submission, to prolong the processes and along the way, to nail the adjudicator for prejudice.
 
Will the story ends here? Not likely. By this time, after serving the Claim, the adjudicator will more likely to call for a preliminary meeting, set the agenda for exchange of documents, fixing hearing dates and those procedural-rules that is common in arbitration, in place for adjudication which is a lacuna for a moment, for AIAC to pluck out the spanner from the gearbox. Wonder, is there additional adjudicator fee for hearing and such?   

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[1] View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2017] 1 LNS 1378:
​  <https://themalaysianlawyer.com/2018/09/05/cipaa-adjudication-leading-the-way>
[2] MRCB Builders Sdn Bhd v. Wazam Ventures Sdn Bhd & Another Case [2020] 1 LNS 145
[3] GuangXi Dev & Cap Sdn Bhd vSycal Bhd [2018] MLJU 1542

Following the birth of a statutory adjudication scheme in the UK under the Housing Grants, Construction and Regeneration Act 1996[i] (the “1996 UK Act”), on 1 June 2015, many countries within the commonwealth had taken the similar bold steps to enact the similar Security of Payment Legislation SOPL within their own legislation. Fundamentally SOPL, as its name suggested, is a piece of legislation to ensure that payment to the contractors are secured as payment is a fundamental ‘life-line’ to any business of construction, without it the entire machinery of construction will collapse and such will create detrimental ripple effects to both the downstream and upstream of the economy. In a nutshell, the theory behind SOPL is to ‘pay first, argue later’ based on ‘rough justice’ with legally binding decision that has no ‘finality’ thus providing only temporal relief.

Prior to the eventful year of 2012, the Pertubuhan Arkitek Malaysia (PAM) has taken the initial steps to initiate a version of the SOPL for the Malaysian construction industry owing to the fact that via its collaborations with various stakeholders, especially with the Construction Industry Development Board (CIDB), various issues pertaining to non-payments to the contractors had been raised. A joint working committee has been deployed to draft the framework for this SOPL. As the matter at hand, was largely attributed to the issues faced by contractors, it was naturally befitting CIDB to take the lead[ii]. This effort has since, taken a setback when the Kuala Lumpur Regional Centre for Arbitration (KLRCA) as it was known then before it was rebranded as the Asian International Arbitration Centre (AIAC), has taken the ‘idea’ and forged ahead to be passed and enacted in the Parliament as the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012), enforced in 2014, adopting the New Zealand’s Security of Payment Legislation model (NZ Act)[iii] with modification to suit ‘document only’, ‘fast track’ and ‘chess time’ procedural. Unlike other commonwealth jurisdictions, the CIPAA 2012 has the term ‘Adjudication’ included as the only statutory means to dispense ‘rough justice’ in recouping any unpaid claims in the construction industry, virtually monopolize by the AIAC as the sole appointing body[iv].    

In the beginning, any claims put forth by the claimant, in CIPAA, will stand an 80% chances of winning due to its ‘rough justice stance’ with no ‘finality’. ‘I will CIPAA you’, became the common phrase in town. The ‘fast and furious’ approach in dispensing rough justice via CIPAA has received various challenges in the Courts of law, notably with regards to the following issues: -
 
1) PROSPECTIVE OR RETROSPECTIVE?

Question, can CIPAA applies retrospectively or prospectively? Came 2015, as in UDA Holdings Bhd vs Bisraya Construction Sdn Bhd, CIPAA applies retrospectively[v] and take precedents over any contractual provisions that state otherwise nullified any substantive rights under the pre-existing contract agreements. However, this High Court’s decisions were later in 2018, overturned by the Court of Appeal as in the Bauer (Malaysia) Sdn Bhd vs Jack-In Pile (M) Sdn Bhd that held, the CIPAA applies prospectively and not retrospectively[vi]. What this judgment meant was, any applicable construction contracts that were entered into prior to 15th April 2014 would not be subjected to the operation of CIPAA. This matter has yet to be challenged in the Federal Court.

[Updated]: In 2019 the Federal Court, as per the ‘Jack-In Pile’ appeal, had ruled that CIPAA could only apply prospectively, i.e. it applies only to construction contracts executed after 15th April 2014, based on the following reasoning that unless expressly stated otherwise, the absence of an express provision, which can only be enacted by Parliament, CIPAA cannot operate to a construction contract entered into before such date. As a result the AIAC will no longer register payment disputes arising from construction contracts executed before 15th April 2014. 

[Updated-02]: The FC puts an end to this long-haul debate, by holding that CIPAA to be applied ‘Prospectively’.[1] Prospectively means CIPAA applies only to construction contracts executed after 15th April 2014 and not before. The ratio is that if Parliament intended such to be applied retrospectively, it has to be expressly state so. The ruling in Jack-In Pile is taken even further, where even though the main contract was entered upon before 15 Apr 2014, but the sub-contract entered after this date is subject to the application of CIPAA.[2] The prospective application is brought even further, to apply if there were material changes to the contract past the effective date of 15 Apr 2014.[3] Such also include the application of ‘agreement to novate’.[4]

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[1] Jack-In Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2020] 1 CLJ 299 
[2] Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd And Another Case [2020] MLJU 2308
[3] Naim Engineering v WCP Engineering [2020] MLJU 2059
[4] Encorp Iskandar Development Sdn Bhd v. Konsortium Ipmines Merz Sdn Bhd [2020] 1 LNS 1129

2) CONTRACTING OUT OF CIPAA?

Question, can parties contracting out (opt-out) of CIPAA based on the doctrine of ‘free-to contract’?  In Ranhill E&C Sdn Bhd vs Tioxide (Malaysia) Sdn Bhd [2015] and it was held that the terms of CIPAA as a legislation prohibits the parties from contracting out of its application, notwithstanding that there is no express-term within the Act. Any forms of contractual arrangement for dispute resolution would not exclude the application of CIPAA.
 
3) STAY OF ADJUDICATION DECISION?

Question, can parties apply for the stay of an adjudication decision? In Subang Skypark Sdn Bhd vs Arcradius Sdn Bhd [2015], it was held that a party seeking to stay a CIPAA decision under section 16 must show credible evidence that the financial impecuniosity on the part of the other party, being the sole “exceptional circumstances” that the probable inability of repayment of the adjudicated sum that may follow from concurrent court or arbitration proceedings. The merits of the case before the arbitration or the court and the chances of success in setting aside the adjudication decision are not relevant considerations. The Court retains the discretion as to whether or not to grant a stay.
 
4) PRE-QUALIFICATION FOR STAY 

Question, can parties pre-qualify for the stay of an adjudication decision? In Foster Wheeler E & C (Malaysia) Sdn Bhd vs Arkema Thiochemicals Sdn Bhd & Another Case [2015], the Claimant sought to enforce the CIPAA decision while the Respondent wanted to apply for a stay but cannot fulfil the condition for a stay of an adjudication decision due to the elaborate multi-tiered dispute resolutions.  It was held that the expression of ‘pending final determination by arbitration or the court’, which is a condition for a stay of an adjudication decision under section 16(1)(b) of CIPAA, requires the parties to have commenced arbitration or court proceedings. For such, arbitration cases in PAM has been increased by leaps and folds, to pre-qualify for the stay of an adjudication decision.
 
5) CONDITIONAL PAYMENT

Question, can a party imposed a payment condition to another party as a reason of non-payment? A very common pay when paid, pay if paid or any form of back to back payment, probably known as conditional payment clause that is found in most construction contract, notably with regard to clause 25.4(d) of the PAM 2006 Form. Section 35(1) of CIPAA prohibits conditional payment terms and provides that a conditional payment provision in a construction contract is void. In BM City Realty & Construction Sdn Bhd vs Merger Insight (M) Sdn Bhd [2016], the plaintiff in its application to set aside an adjudication decision, argued that it was not bound to make any further payment to the defendant until a final account is determined as the contract had been determined. Relying on Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd [2016], it was held that Section 35(1) of CIPAA prohibits conditional payment terms and construed such to be void. However, the BM City appeal is presently pending in the Court of Appeal. The High Court decision in Jack-In Pile has recently been overturned in 2018 by the Court of Appeal which held that a conditional payment clause prior to the commencement of CIPAA remains valid and is not affected by section 35. It is believed that an application is being made to the Federal Court for leave to appeal against the Court of Appeal’s decision.
 
[Updated]: Having held by the Federal Court, as per the ‘Jack-In Pile’ appeal in 2019, CIPAA could only apply prospectively thus a ‘conditional payment clause’ could effectively be enforceable for any construction contract came before 15th April 2014.  

[Updated-02]: It is settled law that conditional payment is not allowed in CIPAA, prospectively.[1] However, is this prohibition applied to all contract? In short, No, citing if Parliament wanted a prohibition to be generic, it would have amended the Contract Act 1950 and not CIPAA.[2] Yet, in another case, it was held, prohibition on conditional payment would also apply in court proceeding, not just CIPAA.[3] Similarly, prohibition in conditional payment is not limited to “pay when paid” clauses only but “Pay if certified” clauses will also be void.[4]

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[1] Jack-in-Pile[n3]
[2] Bond M&E (KL) Sdn Bhd v Isyoda (M) Sdn Bhd (Brampton Holdings Sdn Bhd) [2017] MLJU 376
[3] Khairi Consult v GJ Runding [2021] MLJU 694
[4] Lion Pacific Sdn Bhd v Pestech Technology Sdn Bhd And Another Case [2020] MLJU 2308


6) ZERORISING A PARTY’S CLAIM

Question, can the adjudicator awards the winning party Liquidated Damages LD? In Tenaga Poly Sdn Bhd vs Crest Builder Sdn Bhd (unreported), it was held that LD is not a ‘payment claim’ within the meaning of sections 4 and 5 of CIPAA, therefore party cannot initiate adjudication proceedings under CIPAA to recover LD. Any successful defence based on LD by a non-paying party will ‘zero-rise’ an unpaid party’s claim and no payment is to be made to the non-paying party.
 
7) NON CERTIFIED CLAIM

Question, can a party claim for payment based on progress of work that is not certified? In Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd [2015], the applicant sought to set aside the adjudication decision based on the argument that the payment claim was premature as the interim claims by the respondent were not certified. It was held that the adjudicator’s jurisdiction under sections 25 of CIPAA entitled him to decide or declare on any matter notwithstanding no certificate has been issued and to review and revise any certificate issued or to be issued. In the absence of certification, the non-paying party cannot deprive the unpaid party from availing the adjudication process.
 
8) EXEMPTION ORDER

Question, whether the expression encompasses construction contracts entered by statutory bodies and government-linked companies or is it to be limited to contracts entered into by the ‘Government’? In Mudajaya Corporation Bhd v Leighton Contractors (M) Sdn Bhd [2015], it was held that for it to fall within the meaning of a ‘Government construction contract’, it must be one where the government, be it the Federal or State, is a party to it.

[Updated-02]: Besides that of ‘statutory body’, much clarity or sometimes, ‘confusion’ has been accorded for ‘storey’ now included ‘basement’.[1] Occupancy has been given the widest interpretation to include residential or commercial.[2]

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[1] Tan Sri Dato' Yap Suan Chee v CLT Contract Sdn Bhd [2021] MLJU 1964
[2] Liew Piang Voon v WLT Project Management Sdn Bhd [2020] 1 LNS 1105

9) CONSULTANCY CONTRACT

Question, can a consultancy contract be claimed under CIPAA? In Martego Sdn Bhd vs Arkitek Meor & Chew Sdn Bhd [ 2017], it was held that architect rendering architectural services may claim his outstanding fees under CIPAA, notwithstanding the provision in the Architect’s Act. CIPAA applies to consultancy contracts which provide purely consultancy services. This judgement was re-affirmed by the Federal Court on 1st August 2019.
 
10) INTERIM OR FINAL?

Question, can the adjudicator determine on Final Account Claims in view of the ‘rough justice’ nature of CIPAA without ‘finality’? In Martego Sdn Bhd vs Arkitek Meor & Chew Sdn Bhd [ 2017], it was held that CIPAA is applicable to disputes pertaining to interim claims and to disputes relating to final claims[vii]. The Federal Court, on 1st August 2019, referred to several Singapore Court decisions where the term of progress payment was wide enough to include the final payment. As long as there are payment claims relating to a construction contract, CIPAA would apply. 
 
11) SETTING ASIDE

Question, under what grounds could the CIPAA decision be set aside? Section 15 of CIPAA provides limited grounds on which an adjudication decision may be set aside, namely:
 
(a)     The adjudication decision was improperly procured through fraud or bribery;
(b)     There has been a denial of natural justice[viii];
(c)     The adjudicator has not acted independently or impartially; or
(d)     The adjudicator has acted in excess of his jurisdiction[ix].

The effect of setting aside as in Wong Huat Construction Co v Ireka Engineering & Construction Sdn Bhd [2018], it was held that the setting aside of an adjudication decision will restore all parties to their original positions and parties are free to adjudicate.

[Updated-02]: Fraudulently obtained adjudication decision has been given the strictest and narrow interpretation.[1] This is applied to another case where evidence had been deliberately altered.[2] Enforcement application under s.28CIPAA and payment by principal under s.30CIPAA can be applied simultaneously.[3] Estoppel is not sufficient in and of itself, adjudicator must consider the merits of defence on the ground of estoppel, not entirely rely on estoppel to dismiss a defence.[4] Adjudicator, in going into his own definition of ‘loss and expense’ as a Construction Professional, had failed to consider the contractual pre-requisites for a claim in loss and expense, had essentially re-written the contract instead of interpreting the terms therein.[5]

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[1] Rosha Dynamic Sdn Bhd v Mohd Salehhodin bin Sabiyee & Ors and other cases [2021] MLJU 1222
[2] KPF Niaga Sdn Bhd v Vigour Builders Sdn Bhd and another case [2021] MLJU 229
[3] Dekinjaya Builder Sdn Bhd v Chong Lek Engineering Works Sdn Bhd and another case [2020] MLJU 2455
[4] Perbadanan Perwira Harta[n25]
[5] Perbadanan Perwira Harta[n25]

 
12) JURISDICTIONAL LIMIT

Adjudicator’s jurisdictions are limited to matters referred to in the payment claim and payment response, as prescribed in section 27(1) of CIPAA. However, the Court of Appeal in View Esteem Sdn Bhd vs Bina Puri Holdings Sdn Bhd [2016] held that the adjudicator must now, also consider matters referred in an adjudication response even if such defences were not included in the payment response. In other words, respondent can raise new claims or defences post the payment response, allowing a possible ambush in view that the claimant has only 5 days to reply. Adjudicator who fails to consider the defences raised in the adjudication response could have acted in breach of natural justice and risked decision being set aside under section 15 of CIPAA.

[UPDATED-02]: It is settled that the adjudicator’s jurisdiction under s.25,CIPAA entitled him to decide or declare on any matter notwithstanding no certificate has been issued and to review and revise any certificate issued or to be issued.[1] View Esteem has allowed issues not pleaded in the Payment Response to be adjudicated.[2] Similarly, the same ought to be said that Payment Claim ought to be revisable and it does not bound by the amount set out in the Payment Claim.[3] Errors in progress claims can be corrected in Payment Claim, including additional supporting document after submission of Payment Claim.[4] Therefore, Adjudicator’s power under s.25CIPAA are discretionary.[5] That also include discretion on quantum of costs.[6] With finality on costs and fees, interest.[7]

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[1] Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd. [2015] 8 CLJ 728
[2] View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2017] 1 LNS 1378
[3] Integral[n13]
[4] Puncak Niaga Construction v Mersing Construction & Engineering [2021]
[5] Seal Properties v Wabina Constructions & Engineering; P&A Management v WSH Development; Itramas Technology v Savelite Engineering; Pembinaan Melima v ATM Development
[6] MRCB Sentral Properties v GSIB
[7] Aston Star v Zumo Engineering

 
13) DOCUMENT ONLY ADJUDICATION?

Question, can either party request for hearing?  In Permintex JSK Resources Sdn Bhd vs Follitile (M) Sdn Bhd [2018], respondent applied to set aside the adjudicator’s decision on ground that there had been a breach of natural justice as the adjudicator had failed to conduct a hearing. The court held that it is within the jurisdiction of the adjudicator to conduct a documents-only adjudication.
 
[Updated-02]: Adjudicator has the right not to allow hearing.[1] However, this was overturned in another case, where Adjudicator must allow for hearing and cannot refuse hearing purely on the ground that time is limited.[2] Latest finding conclude that Adjudicator did not contravene natural justice after considering the written submission of the parties, concluded that hearing is not required.[3]

---------------------------------------------
[1] Permintex JSK Resources Sdn Bhd v Follitile (M) Sdn Bhd (and Another Originating Summons) [2018] 1 AMR 693
[2] Guangxi Dev & Cap Sdn Bhd v Sycal Bhd and another case [2017] MLJU 878
[3] Mei He Development Sdn Bhd v Eosh Industries Sdn Bhd [2021] MLJU 519

14) APPEAL ON ADJUDICATION DECISION ALLOWED?

Question, can party appeal on the adjudication decision on the ground of law? VVO Construction Sdn Bhd v Bina MYK Sdn Bhd [2017], respondent appealed against the adjudication decision under Order 55A rule 1 of the Rules of Court 2012 and it was held that under CIPAA, there is no provision for appeal. If parties are allowed to appeal, it will contravene the purpose of CIPAA in disposing rough justice. In other word, you cannot adjudicate the same matter twice.

[Updated-02]: Parties are not allowed to raise new sets of defence, not contemplated in the adjudication, for setting aside application.[1] However, in another case, parties are allowed to adduce new evidence in setting aside application.[2]

---------------------------------------------
[1] Hiform (M) Sdn Bhd v Tsr Bina Sdn Bhd and another summons [2020] MLJU. 808; Punj Lloyd Sdn Bhd v Ramo Industries Sdn Bhd & Anor and another case [2019] 11 MLJ 574; Gazzriz Sdn Bhd v Hasrat Gemilang Sdn Bhd [2017] AMEJ 1630
[2] Bluedream City Development sdn bhd v Pembinaan Bina Bumi Sdn Bhd and another [2020] MLJU 2531

 
15) SHIPPING AND MINING CONTRACT

In MIR Valve Sdn Bhd v TH Heavy Engineering Berhad [2017], it is held that ‘ship building’ contract is excluded from CIPAA within the meaning of “construction work”. The similar judgment is held for YTK Engineering Services Sdn Bhd v Towards Green Sdn Bhd [2017], where a shipping contract or a mining contract does not fall within the meaning of “construction work” under section 4.
 
16) OBJECTION OF ADJUDICATOR APPOINTMENT

In Zana Bina Sdn Bhd v Cosmic Master Development Sdn Bhd [2017], it was held that party who participated fully in an adjudication proceeding without raising any objection as to the validity of the adjudicator’s appointment during the proceeding was estopped from raising the objection subsequently in its setting aside application. However, in a recent case of 2019, Mega Sasa Sdn Bhd vs Kinta Bakti Sdn Bhd and Others [2019], the plaintiff seek to set aside the adjudication decision on ground that the adjudicator’s appointment was not valid for the reason that the appointing director of the AIAC has no locus standi in view that his position as the Director of AIAC is not legitimate in accordance to the Asian African Legal Consultative Organisation AALCO Host Country Agreement. The court has yet to make a judgement on this.

[Updated]: The High Court held that CIPAA does not violate Article 8(1) Federal Constitution. It also rejected the challenge, that CIPAA is a ‘usurpation of the judicial power of the court’ in violation of Article 121 Federal Constitution, reason being CIPAA is a judicial function and not a replacement of the courts' judicial power. It further affirmed that the acting director had the power and duty to appoint the adjudicator, regardless if his position as the ‘director’ has yet to be finalized.

[Updated-02]: Whether the parties must first attempt to agree on an adjudicator before a request for nomination from the Director of AIAC? Short answer, No.[1] Similarly, court holds the validity of appointment by ‘acting’ Director of the AIAC, albeit impasse with its recognition from AALCO.[2]

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[1] KLIA Associates Sdn Bhd v Mudajaya Corporation Berhad [2020] 1 LNS 1253
[2] Prestij Mega Construction v Estate of Vinayak Pradhan BA-24C-13-02/2020 and BA-24C-25-03/2020


17) EXTENSION OF TIME FOR RESPONSE/REPLY

Question, whether there was a breach of natural justice when an adjudicator refused to allow the respondent’s application for extension of time to submit a payment response? In Binastra Ablebuild Sdn Bhd v JPS Holdings Sdn Bhd [2018], it was held that it is not a breach of natural justice merely because an adjudicator, after hearing both sides, refused to allow the respondent’s application for extension of time. However, an adjudicator has the power under section 25(p) of CIPAA to extend any time limit.
 
18) CONSIDERING EXTENSION OF TIME (EOT) CLAIM BY ADJUDICATOR

Question, can the adjudicator jurisdiction extended to adjudicate extension of time EOT? Such matter arises when there is a jurisdictional challenge, as to what is the jurisdiction of the adjudicator under CIPAA?  

1. Core jurisdiction – as to where CIPAA applies
2. Competence jurisdiction – validity of payment claim and adjudication appointment and such.
3. Contingent jurisdiction – adjudicator can decide on any matter of a consequential and ancillary nature such as EOT is necessary to determine Loss and Expense as in LD. See SKS Pavillion Sdn Bhd vs Tasoon Injection Pile Sdn Bhd [2019].

 
19) LOSS AND EXPENSE CLAIMS (Read in Tandem with ZERORISING A PARTY’S CLAIM)

In Syarikat Bina Darul Aman Berhad & Anor vs Government of Malaysia [2017], it was held that an adjudicator who decided that he had no jurisdiction to decide on loss and expense claims was in breach of natural justice as such claims came within the ambit of CIPAA as these claims were due to the delay in completion of works and therefore payable as part of the amount claimable for the additional costs incurred for work. Not all loss and expense claims are within the purview of CIPAA, ie. Claim for special damages.
The test is:

1. Whether the claim is one which inevitably arises from the carrying out of the work and
2. Whether the construction contract provides for the party to be paid the amount claimed in consideration for its performance of construction work. 

 
[UPDATED-02]: This matter is truly unsettled. Previously, Syarikat Bina Darul Aman allowed Loss and Expense claim (LnE) in CIPAA.[1] However, if the LnE is not a provision of the contract, it cannot be awarded by the Adjudicator.[2] This argument went further that HC held LnE is not a ‘payment’, thus not allowable in s.4,CIPAA.[3]

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[1] [2017] MLJU 2381 | [2017] MLJU 673 | [2017] 1 LNS 559
[2] Kuasatek (M) Sdn Bhd v HCM Engineering Sdn. Bhd and other appeals [2018] MLJU 1919
[3] Integral Acres Sdn Bhd v BCEG International (M) Sdn Bhd and other cases [2021] MLJU 1889


20) PRE-AWARD INTEREST

In Milsonland Development Sdn Bhd v Macro Resources Sdn Bhd [2017], it was held that an adjudicator has the power to grant pre-award interest pursuant to section 25(o) of CIPAA.

[Updated]: In Naza Engineering & Construction v SSL Dev [2019], the High Court held that the adjudicator has exceeded his jurisdiction under s.27(1) read with s.5(1)CIPAA by awarding the 4th Pre-Award Interest Sum, of which it was not claimed in the Adjudication Claim. Also read Court’s Power to vary the Adjudication Decision.  
 
21) WINDING UP BEFORE REGISTERING ADJUDICATION DECISION

In Likas Bay Precinct Sdn Bhd v Bina Puri Sdn Bhd [2019] , it was held by the Court of Appeal, that a successful claimant in adjudication need not have the adjudication decision registered before issuing a statutory notice of ‘winding up’ under section 465 of CA 2016[x].

[Updated]: In ASM Development v Econpile [2019], the High Court granted an injunction restraining ‘winding up’ and held that the adjudication decision, which formed the basis of the ‘statutory demand’, had been disputed in an arbitration proceeding with cross-claims exceeding the amount in the adjudication decision on grounds that:
 

1. Nature of an adjudication decision which is "temporarily finality";
2. Adjudication decision may be enforced in accordance with Order 45 Rules of Court 2012 ‘as if’ it is a judgment pursuant to s.28(1) CIPAA, it should not be converted and be enforced as a judgment of court.
3. An injunction restraining the presentation of a ‘winding-up petition’ maybe issued, provided that the AD is disputed for a greater amount than the adjudicated sum in arbitration for ‘finality’.

 
22) [UPADTED]: COURT’S POWER TO VARY THE ADJUDICATION DECISION

[Updated]: JEKS Engineering Sdn Bhd v PALI PTP Sdn Bhd [2021] 9 MLJ held in contrasts the decision of Naza Engineering & Construction v SSL Dev [2019] that the court now has the power to severe any part of the AD as these were compelling and sensible on the grounds of in excess of jurisdiction by the Adjudicator. Such is against the earlier judgement of the HC, that Justice Wong KK held, ‘the court has no power to set aside a part of the AD under s.15CIPAA relying on BM City v Merger Insight [2016]. If the Parliament intended the court to have power under s.15 to vary the AD, Parliament would have to expressly provided for such analogues s.28(2)’. So, that is ‘unsettled’ as at the moment.

What is taken to be settled are one, court could not set aside AD on grounds of mistake in facts and/or in law; the court will not re-evaluate the evidence; and any reasons, brief as they may be, is taken as the adjudicator’s justification [a topic for another day]

In Naza Engineering & Construction v SSL Dev [2019], the High Court contemplated whether it has the jurisdiction to vary the adjudication decision to only allow enforcement of the ‘enforceable portion’ of the decision or to set aside the adjudication decision entirely. Justice Wong KK in his judgement relied on:

1. Common law cases, have to be ‘read with caution’ as there is no legislation in those countries for the court to set aside an adjudication decision.
2. S.28(2)CIPAA the court may make an order in respect to the adjudication decision AD either ‘wholly or partly’ to enforce only the part of an AD. In this matter, the court can either enforce only a part or severs the AD. Court exercising S.28(2)CIPAA as in:
   1. YTK Engineering Services v Towrds Green [2017];
   2. PCP Construction v Leap Modulation [2017];
   3. Harmony Teamwork Construction v Vital Talen [2017]
3. The court has no power to set aside a part of the AD under s.15CIPAA relying on BM City v Merger Insight [2016]. If the Parliament intended the court to have power under s.15 to vary the AD, Parliament would have to expressly provided for such analogues s.28(2).
4. The learned judge ‘disagree’ that the court has the power to set aside the AD where the adjudicator has exceeded his jurisdiction as opined in ‘Construction Adjudication in Malaysia’ due to:
   1. Syarikat Bina Darul Aman’s case, no discussion whether the courts are empowered under s.15 to set aside a portion of the AD;
   2. In BM City, the court has not sever an AD pursuant to s.15.
5. The AD was set aside entirely.

23) [UPDATED-02] CONSTRUCTION CONTRACT – refers to ‘singular’ contract and not ‘contracts’.[1] Unsigned quotation qualifies as a contract in writing for purposes of CIPAA.[2]

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[1] Ireka Engineering & Construction Sdn Bhd v PWC Corporation Sdn Bhd [2020] 1 MLJ 311
[2] Ong Teik Beng (t/a MJV Construction) v Wow Hotel Sdn Bhd [2022] 8 MLJ 10 

24) [UPDATED-02]: REJOINDER – Mirrored arbitration, CIPAA Adjudicator has no jurisdiction to allow for Rejoinder.[1]

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[1]  Ireka Engineering & Construction Sdn Bhd v. Tri Pacific Engineering Sdn Bhd and another [2020] MLJU 548

[UPDATED-02]: 

25) TIMELINE – ‘Working Day’ is generally construed as the ‘working day’ of where the site is located. However, the HC held that the ‘Working Day’ for the delivery of the Adjudicator’s Decision must be construed as the ‘working day’ of where the Adjudicator’s office is located.[1] This law is, however unsettled, pending appeal. As to the definition of “Date” in s.5(2)CIPAA must necessarily mean “a calendar date or a statement by which the due (calendar) date for payment is capable of being identified” and not simply, “immediate” for “instantly”, “promptly”, “forthwith”, “at once” or “straight away”.[2] On another matter, commencement of adjudication is upon appointment of adjudicator as compared to serving of the notice of adjudication.[3]

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[1] Encorp[n6]
[2] Perbadanan Perwira Harta Malaysia v Kuntum Melor Sdn Bhd and another case [2021] MLJU 1593
[3] Granstep Development Sdn Bhd v Tan Chong Heng & Ors [2020] MLJU 2364

26) BREACH OF CONTRACT – CIPAA is not the avenue for claims of damages from a breach of contract, notwithstanding one would be allowed to raise such claims as a cross-claim of defence or set-off against a Claimant’s claim.[1]

27) ANSWER RIGHT QUESTION, WRONGLY – Courts are not concerned with merits or correctness of the decision.[2] This include, erroneous assessment of documentary evidence.[3] Therefore, Adjudicators are not bound by the disputes referred to them in the exact way as pleaded by the parties, especially with regard to the remedies sought.[4]

28) NATURAL JUSTICE – The 1st rule of natural justice “overlaps with” but is “distinct from the Duty to be Impartial” envisaged by s.15(c)CIPAA, borne out in fact; and in the objective perception of a “fair-minded and informed observer”[5], i.e. there must be a “reasonable suspicion” or a “real possibility” that the adjudicator would be biased, either in fact or in perception; which also include ex-parte communication with the adjudicator.[6] 

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[1] Hiform (M) Sdn Bhd v Pembinaan Bukit Timah Sdn Bhd and another case [2020] MLJU 2452
[2] Maju Holdings v Spring Energy; Acoustic & Lighting System v Les Engineering
[3] Ong Teik Beng[n10]
[4] First Commerce v Titan Vista [2021] MLJU 376.
[5] Halliburton  v Chubb [2020] 3 WLR 1474
[6] Rosha Dynamic Sdn Bhd v Mohd Salehhodin bin Sabiyee & Ors and other cases [2021] MLJU 1222

As to date, CIPAA has been plagued with crippling complexities with more and more cases brought up in court for a finality in judgement that appears to be inconsistent and unpredictable in many areas beyond the true intention of CIPAA that is in dispensing justice based on the notion of to ‘pay first, argue later’ dispensing ‘rough justice’ with legally binding decision that has no ‘finality’ thus providing only temporal relief. The initial pro-claimant outcomes had thus swing to the other side of being pro-respondent post 2017.
As more cases move up to the court, as in Leap Modulation Sdn Bhd v PCP Construction Sdn Bhd [2018], the court has gone as far as to interject the manner and efficacy of CIPAA in dispensing ‘rough justice’ and to the nature of AIAC being a ‘foreign entity’ with very little or no ‘check and balance’ self-regulation, had a monopoly grip on the dispensation of justice in Malaysia, no matter how ‘rough’ it is[xi]. The AIAC has since taken the same matter to the Federal Court to have this portion of the judgement expunged[xii].

The fate of CIPAA, while having put ‘off tangent’ from its initial purposes with more and more inconsistent and unpredictable judgements from the court, was plagued by alleged corruptions resulted in the former Director of the AIAC being replaced, based on the detailed insider content of just a ‘poison-penned’ letter[xiii].  However, in a recent case of 2019, Mega Sasa Sdn Bhd vs Kinta Bakti Sdn Bhd and Others [2019], the plaintiff seek to set aside the adjudication decision on ground that the adjudicator’s appointment was not valid for the reason that the appointing director of the AIAC has no locus standi in view that his position as the Director of AIAC is not legitimate in accordance to the Asian African Legal Consultative Organisation AALCO Host Country Agreement. The court has yet to make a judgement on this.

CIPAA in itself is a two-tier processes. Winning the first-tier as in obtaining a favorable adjudication decision is not going anywhere with regards to recouping your unpaid payment claim. Subsequent enforcement of the decision as in the second-tier, is where the challenges begin as in setting aside and stay by the court. That is going to complicate matters, while many in the legal fraternity has been advocating, forget CIPAA, let’s see you in court!   
 

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[i] Craig J Enderbury, “Changes to the Construction Act: Payment certainty…uncertain terms”, Chartered Institute of Building CIOB (UK), reference from https://www.ciob.org/sites/default/files/Hill%20Intl%20CIOB%20slides.pdf
[ii] A survey was conducted to coincide with the Construction Industry Development Board’s plan to incorporate the survey’s outcomes in the Cabinet Paper which includes the Construction Industry Payment and Adjudication Bill 2006 which is targeted for submission to the Ministry of Works of Malaysia in March 2006, see M.S. Mohd Danuri , M.E. Che Munaaim , H. Abdul Rahman , M.Hanid, “LATE AND NON-PAYMENT ISSUES IN THE MALAYSIAN CONSTRUCTION INDUSTRY – CONTRACTORS’ PERSPECTIVE”, Center for Project and Facilities Management, Faculty of the Built Environment, University of Malaya. Reference from https://www.irbnet.de/daten/iconda/CIB4392.pdf
[iii] Philip Davenport, “SECURITY OF PAYMENT IN NEWZEALAND” reference from  http://www.austlii.edu.au/au/journals/AUConstrLawNlr/2002/79.pdf
[iv] The seed of discontent has been raise as to the nature of the AIAC as the sole appointing body for adjudication under CIPAA is well reflected in the judgment of Leap Modulation Sdn Bhd vs PCP Construction Sdn Bhd, see “AIAC: Judge Hamid Sultan diverged from case facts in judgment”, Malaysiakini reference from https://www.malaysiakini.com/news/465089
[v] In attempts to challenge the jurisdiction of the adjudicator appointed by KLRCA under CIPAA 2012, the respondents in at least two adjudications have taken issue with the retrospective application of CIPAA 2012 to construction contracts entered into before 15 April 2014. UDA Holdings Berhad v Bisraya Construction Sdn Bhd & MRCB Engineering Sdn Bhd (Originating Summons No: 24C-6-09/2014) (“UDA v Bisraya”) was heard together with Capital Avenue Development Sdn Bhd v Bauer (Malaysia) Sdn Bhd (Originating Summons No: 24C-5-09/2014) (“CAD v Bauer”). The applications were heard in the Construction Court of the Kuala Lumpur High Court and were decided by Mary Lim J on 31 October 2014. The grounds of judgment is reported as UDA Holdings Berhad v Bisraya Construction Sdn Bhd & MRCB Engineering Sdn Bhd & Another Case [2014] 1 LNS 1584.,  “Construction Adjudication: Prospective, Retrospective or Somewhere in-between?” reference from https://mahwengkwai.com/construction-adjudication-prospective-retrospective-or-somewhere-in-between/
[vi] Read “Bauer (Malaysia) Sdn Bhd v Jack-In Pile (M) Sdn Bhd – CIPAA 2012 applies prospectively not retrospectively”, reference from https://www.zicolaw.com/resources/alerts/bauer-malaysia-sdn-bhd-v-jack-in-pile-m-sdn-bhd-cipaa-2012-applies-prospectively-not-retrospectively/”
[vii] The Federal Court in its grounds of judgment dated 1 August 2019 in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd decided on important points of law on adjudication and final payments under a construction contract. https://themalaysianlawyer.com/2019/08/13/case-update-federal-court-decides-on-final-payments-adjudication/
[viii] See WRP Asia Pacific Sdn Bhd v NS Bluescope Lysaght Malaysia Sdn Bhd [2016], the unilateral communication of the adjudicator was found to be a material breach of natural justice.  
[ix] See Skyworld Development Sdn Bhd v Zalam Corporation Sdn Bhd, the Adjudicator had issued his Adjudication Decision one day out of time and this rendered the decision void. 
[x] Reference from https://www.zainmegatmurad.com/2019/02/20/cipaa-adjudication-466-statutory-notice-winding-up/
[xi] Reference from http://judgments.my/ca/leap-modulation-sdn-bhd-v-pcp-construction-sdn-bhd-and-another-appeal/10309 and https://www.malaysiakini.com/news/465089
[xii] Read “AIAC: Judge Hamid Sultan diverged from case facts in judgment”, Malaysiakini, reference from https://www.malaysiakini.com/news/465089
[xiii] Read “AIAC director resigns over MACC investigation”, Edge Markets, reference from https://www.theedgemarkets.com/article/aiac-director-resigns-over-macc-investigation