In short. A main contractor on a Selangor residential project claimed RM2m–2.5m under CIPAA 2012: certified sums, uncertified work and the first half of its retention. The employer tried to set off RM2m–4.5m in LAD. The adjudicator awarded 100% of the claim with 5% interest and costs, and dismissed the LAD set-off. The employer had not followed the contract's LAD procedure.
At a glance
| Trade | Building works, main contractor |
|---|---|
| MCS acted for | Claimant (contractor) |
| Contract form | PAM 2006 Standard Form of Building Contract with Letter of Acceptance |
| State | Selangor |
| Year of decision | 2023 |
| Claim | RM2m–2.5m (certified, uncertified, 1st moiety retention) |
| Employer's set-off / counterclaim | RM2m–4.5m in LAD (dismissed) |
| Outcome | 100% of claim awarded |
| Interest | 5% p.a. before and after the decision |
| Costs | AIAC and adjudicator fees, plus party-to-party costs |
Background
The contractor built a multi-block residential development under an amended PAM 2006 contract. In March 2023 the progress meeting minutes recorded the works as 100% complete, and the C&S and M&E consultants both recommended that the Certificate of Practical Completion (CPC) be issued. The employer took possession and even rented some units back to the contractor as workers' quarters.
The CPC was not issued until November 2023. Sewerage manhole defects had surfaced during the sewerage authority's inspection, and the CPC recommendation was withdrawn. By then the employer had paid LAD to house buyers for late vacant possession and blamed the contractor.
The dispute
The contractor served a payment claim in 2023 for three items:
- Certified but unpaid sums under the interim certificates: RM1m–1.5m
- Uncertified work done: under RM100k
- First moiety of retention: RM800k–900k
The employer argued that the works were not practically complete in March 2023 and that every sum was subject to its right to deduct LAD. It said the retention had to be kept for defects. It first put its LAD set-off at more than RM4m and later reduced it to RM2m.
Key issues and how they were argued
1. What were the contract documents? The contractor argued that only the LOA and an unamended PAM form applied. The adjudicator preferred the employer's amended version. The contractor lost this point, but it did not change the result.
2. When was practical completion? The contractor relied on the employer's own records: minutes confirmed by every party that recorded 100% completion, the consultants' CPC recommendations, the local council's finding that the works were complete, and the employer's taking over and renting out the site. The adjudicator found that the Architect never gave the written notice required by clause 15.2(a), and that the sewerage authority does not decide practical completion. The Architect does. The CPC date was revised to March 2023.
3. Could the employer withhold certified sums for LAD? No. Under clauses 30.1 and 30.2, an interim certificate has "temporary finality" and must be paid within the period for honouring certificates. Any deduction comes afterwards.
4. Was LAD deductible at all? No. After the Architect granted the fifth extension of time, the earlier Certificate of Non-Completion was revoked and no new one was issued. The employer also never notified the contractor in writing under clause 22.1. A notice from the QS did not count, because the contract defines "the Employer" as the named party. Practical completion in March 2023 also fell before the extended completion date.
5. Could retention be held back for defects? No. The defects ground was raised only after the dispute had been referred to adjudication. The employer had not given the written notice that clause 30.6(b) requires, and it gave no details of what was rectified or what it cost. The CPC itself declared that the first moiety was to be released.
The decision
- 100% of the claim (RM2m–2.5m) awarded
- Pre-award interest at 5% p.a., about RM100k–150k
- Post-award interest at 5% p.a. until payment
- Employer to bear the AIAC and adjudicator fees, plus party-to-party costs. The adjudicator awarded about one-third of the costs the contractor claimed, because the request was considered too high.
- LAD set-off and counterclaim dismissed in full
- Payment within 30 days
Lessons for contractors
- 1Keep the employer's own records. Signed minutes, consultants' recommendations and authority letters won the completion argument.
- 2Certified means payable. An interim certificate must be paid on time even when the employer says it will deduct LAD later.
- 3LAD has a procedure. Without a valid Certificate of Non-Completion and a written notice from the employer, LAD cannot be deducted. A new extension of time can cancel the old Certificate of Non-Completion.
- 4Check the payment period in the Appendix. The contract said 30 days, not the default 21, and the adjudicator used the 30 days.
- 5Read the contract you signed. The contractor lost the contract documents point. Keep a full signed copy.
FAQs
- Can an employer withhold a certified interim payment to cover LAD?
- Not under PAM 2006 clauses 30.1 and 30.2 as applied in this decision. The certified sum had to be paid within the period for honouring certificates, and any LAD deduction had to follow clause 22 separately.
- Does a new extension of time affect a Certificate of Non-Completion?
- Yes. In this case the fifth extension of time revoked the earlier Certificate of Non-Completion under clause 22.3. No new one was issued, so the employer could not impose LAD.
- Can uncertified work be claimed under CIPAA?
- Yes. The adjudicator confirmed that the lack of certification does not stop an unpaid party from adjudicating, and awarded the uncertified work in full.
Anonymised and shared with client consent.