Overview Of Adjudication Process In Malaysia

• Published date: 15 February 2023
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Arbitration & Dispute Resolution, Construction & Planning
• Law Firm: Kevin Wu & Associates
• Author: Tan Zu Hao

On 15th of April 2014, the Construction Industry Payment and Adjudication Act 2012 (CIPAA) came into effect. As an alternative to the lengthy and expensive processes of arbitration or litigation, CIPAA establishes a statutory adjudication mechanism to settle disputes in the construction industry.

The passage of CIPAA represents an effort to address challenges that frequently arise in construction projects, such as delays in completion or project abandonment due to issues with underpayment, late payment, or non-payment. In other words, CIPAA encapsulates the core principle of 'Pay now, Argue later'¹.

The applicability of CIPAA

Whether the contract is made with the government or a private party, CIPAA is applicable to all written construction contracts in relation to construction work carried out entirely or partially within Malaysian territory².

The word "construction contract" includes both a construction work contract and a consultancy contract, whereas the term 'construction work' entails construction, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling, or demolition works³.

Further, CIPAA only acts as a mechanism for the unpaid party to claim for 'payment' which is defined as a payment for work done or services rendered under the express terms of a construction contract. This means that other types of claims other than for payment for work done such as tortious claim will not be allowed under CIPAA.

How to commence or defend a claim under CIPAA

An unpaid party may serve a payment claim on a non-paying party for payment pursuant to a construction contract⁴. As the names suggest, unpaid party means a party who claims payment of a sum which has not been paid in whole or in part under a construction contract, whereas non-paying party refers to a party against whom a payment claim is made pursuant to a construction contract⁵.

It is crucial that the payment claim must contain the amount claimed and due date for payment of the amount claimed, details to identify the cause of action including the provision in the construction contract to which the payment relates, description of the work or services to which the payment relates and a statement that it is made under this.

After that, the non-paying party must serve a payment response within 10 working days⁶. If the non-paying party fails to serve a payment response, the entire payment claim would still be deemed disputed.

Reference to adjudication

The right to...