Problems
Delayed payment is a pressing dilemma faced by contractors in Malaysia. It is apparent that timely payments of progress claims are vital in enabling the seamless completion of any project in the construction industry. Contractors facing cashflow issues resort to litigation or arbitration as the final recourse due to the exorbitant cost involved coupled with the prolonged duration of those approaches.
Solutions
Thence, the Construction Industry Payment and Adjudication Act (CIPAA) 2012 was enacted and has been in operation since 15 April 2014. CIPAA delivers a legal mechanism that ensures expeditious dispute resolution through adjudication and provides effective remedies for the recovery of outstanding payment(s). This in turn ensures construction works and projects progress smoothly and are not halted due to delayed payments.
Why Opt for CIPAA?
CIPAA is undoubtedly the fastest mode of resolution with numerous other advantages as follows: –
- The adjudication proceedings under CIPAA can be completed within 95 working days which expedites the recovery of outstanding payment(s).
- The adjudication decision made by the adjudicator is binding on the parties and an application may be made at the High Court for an order to enforce the decision as if it is a judgment obtained from the High Court.
- A winding up procedure can also be initiated without first having to obtain an order from the High Court to enforce the adjudication decision.
- In the event a party obtains an adjudication decision in his favour and the adjudicated amount remains unpaid, the winning party may choose to suspend or slow down the progress of the construction works.
- Enables direct payment from the principal/employer.
- The adjudicator has relevant expertise in specific fields of construction.
- The procedures of the CIPAA are straightforward.
What is CIPAA?
Adjudication of any construction dispute under CIPAA shall be heard by a neutral and impartial adjudicator appointed either by agreement of the parties or by the Asian International Arbitration Centre (AIAC) in the event the parties are unable to agree. The adjudicator may be someone with in-depth experience in the relevant construction field which is crucial to the subject matter of the dispute. In standard practice, adjudication is decided solely pursuant to written submissions and there will be no oral hearings involved.
The Process
The process of CIPAA can be summarized as follows:
- Payment Claim — The claimant serves a payment claim on the respondent setting out the amount claimed and basis.
- Payment Response — The respondent has the opportunity to serve a payment response disputing the claim.
- Notice of Adjudication — Where payment is not made or disputed, the claimant may serve a notice of adjudication to initiate proceedings.
- Appointment of Adjudicator — An adjudicator is appointed by agreement or through the AIAC within the prescribed period.
- Adjudication Decision — The adjudicator issues a decision within 45 working days of the adjudication response (extendable by agreement), binding on the parties.
Conclusion
Evidently, CIPAA has fulfilled its obligation of providing an express and cost-effective method of dispute resolution for payment claims in respect of construction disputes. It stems from the fact that the timeline for an adjudication proceeding to be completed under CIPAA is approximately 95 working days which is a significantly shorter period as opposed to arbitration or litigation procedures. All things considered, CIPAA has emerged to be the cornerstone for speedy resolution of construction disputes.