Construing Conditional Payment Terms Beyond Pay-When-Paid Clauses Under The Construction Industry Payment And Adjudication Act

• Published date: 21 September 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Contracts and Commercial Law, Trials & Appeals & Compensation, Construction & Planning
• Law Firm: SKRINE
• Author: Mr Ashok Kumar Mahadev Ranai and Hong Kiat Chong

INTRODUCTION

The Court of Appeal in IRDK Venture Sdn Bhd v Econpile (M) Sdn Bhd [2020] 5 AMR 865 and Lee Swee Seng J (as he then was) at the High Court in Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd and another case [2017] 7 MLJ 732 decided on, inter alia, the issue of whether an adjudicator has the jurisdiction to decide on payment claim when the contract has been terminated and/or whether the contractor was entitled to commence an adjudication proceeding under Construction Industry Payment and Adjudication Act 2012 ("CIPAA") after the contract had been terminated.

In this commentary, we also briefly discuss on several other cases decided by Lee Swee Seng J (e.g. BM City Realty & Construction Sdn Bhd v Merger Insight (M) Sdn Bhd and anor [2016] MLJU 1567 and Terminal Perintis Sdn Bhd v Tan Ngee Hong Construction Sdn Bhd and anor [2017] MLJU 242) and Lim Chong Fong J (e.g Genting Malaysia Berhad v PLM Interiors Sdn Bhd and anor [2020] MLJU 344) at the High Court in relation to the same issues as mentioned above with a view to provide the reader a more comprehensive perspective of the jurisprudence in Malaysia in relation to this issue.

ECONPILE AT A GLANCE: THE FACTS AND THE COURTS' DECISIONS

The Adjudication Proceedings

IRDK Ventures Sdn Bhd ("IRDK") (the Employer / the Respondent in the adjudication proceedings) had awarded Econpile (M) Sdn Bhd ("Econpile") (the Contractor / the Claimant in the adjudication proceedings) a construction contract Econpile claimed payment for works done under the contract by serving a payment claim for RM4,035,381.87, which was the sum total of two payment claims, namely payment certificate No. 5R1 ("Payment Certificate") amounting to RM1,805,866.65 and progress claim No. 6 ("Progress Claim") amounting to RM2,229,515.22, on IRDK.

IRDK refuted the payment claims on the grounds that Econpile's employment had been terminated by the architect. In the circumstances, IRDK argued that it was not under any obligation to make any payment to Econpile pursuant to Clause 25.4(d) of the PAM Conditions of Contract 2006.¹ Consequently, Econpile filed an adjudication claim against IRDK in accordance with the procedure laid down in the CIPAA. IRDK filed its adjudication response disputing the whole of the adjudication claim. The adjudicator allowed Econpile's claim under the Payment Certificate but dismissed the uncertified Progress Claim because it was premature.

The High Court Proceedings

Econpile then applied to enforce the...