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:
| STIPULATED TIME | FRAMEWORK OF PROCEDURE |
| Initiation of timeline | The unpaid party serves a Payment Claim to the non-paying party. |
DAYS 1 – 10 | The non-paying party may choose to serve a Payment Response within 10 working days. The failure of a non-paying party to serve a Payment Response is deemed as them disputing the entire claim. |
NO STIPULATED TIMELINE | Upon receipt of the Payment Response or immediately after the expiry of the period for the non-paying party to serve a Payment Response, the unpaid Party may refer the dispute for Adjudication by serving a Notice of Adjudication to the non-paying party and a Notice to Register the Adjudication to the AIAC. |
DAYS 10-25 | Thereafter, within 10 working days from the service of the Notice of Adjudication, the parties shall mutually agree on the appointment of an adjudicator or if they are unable to agree, the adjudicator may be appointed by the Director of the AIAC upon the request from the parties which shall be done within 5 working days upon the request. |
DAYS 25-35 | The parties shall then proceed to negotiate and agree on the terms of the adjudicator within 10 working days. The unpaid party also known as the Claimant must then submit its adjudication claim along with supporting documents on the non-paying party or also known as the Respondent. |
DAYS 35-45 | The Respondent has 10 working days to provide an adjudication response. |
DAYS 45-50 | The Claimant may then serve an adjudication reply within 5 working days from the receipt of the adjudication response. |
DAYS 90-95 | The adjudicator shall deliver his decision within 45 working days from the adjudication response or adjudication reply. |
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.
***Please take note that the contents of this Article do not constitute as legal advice. We assess each case individually and as such feel free to contact us in the event you require legal consultation.***
By Mathan Raj
Edited by Ashmini K Gnanasegaran
PROBLEM
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.
SOLUTION
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:
| STIPULATED TIME | FRAMEWORK OF PROCEDURE |
| Initiation of timeline | The unpaid party serves a Payment Claim to the non-paying party. |
DAYS 1 – 10 | The non-paying party may choose to serve a Payment Response within 10 working days. The failure of a non-paying party to serve a Payment Response is deemed as them disputing the entire claim. |
NO STIPULATED TIMELINE | Upon receipt of the Payment Response or immediately after the expiry of the period for the non-paying party to serve a Payment Response, the unpaid Party may refer the dispute for Adjudication by serving a Notice of Adjudication to the non-paying party and a Notice to Register the Adjudication to the AIAC. |
DAYS 10-25 | Thereafter, within 10 working days from the service of the Notice of Adjudication, the parties shall mutually agree on the appointment of an adjudicator or if they are unable to agree, the adjudicator may be appointed by the Director of the AIAC upon the request from the parties which shall be done within 5 working days upon the request. |
DAYS 25-35 | The parties shall then proceed to negotiate and agree on the terms of the adjudicator within 10 working days. The unpaid party also known as the Claimant must then submit its adjudication claim along with supporting documents on the non-paying party or also known as the Respondent. |
DAYS 35-45 | The Respondent has 10 working days to provide an adjudication response. |
DAYS 45-50 | The Claimant may then serve an adjudication reply within 5 working days from the receipt of the adjudication response. |
DAYS 90-95 | The adjudicator shall deliver his decision within 45 working days from the adjudication response or adjudication reply. |
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.
***Please take note that the contents of this Article do not constitute as legal advice. We assess each case individually and as such feel free to contact us in the event you require legal consultation.***
By Mathan Raj
Edited by Ashmini K Gnanasegaran