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CIPAA 2012

CIPAA payment claim

A CIPAA payment claim is for a contractor, subcontractor, supplier or consultant in Malaysia who has not been paid under a written construction contract, and for a party who has to answer a claim already served. We prepare the payment claim or the response, conduct the adjudication through the Asian International Arbitration Centre, and advise on enforcement. The online consultation is free of charge, by Zoom. Attendance at the office is by appointment.

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Who may claim

An unpaid party under a written construction contract

CIPAA is available to contractors, subcontractors, suppliers and consultants. The work must be carried out wholly or partly in Malaysia, under a construction contract made in writing. The Act came into operation on 15 April 2014. A contract entered into before that date cannot be referred. The residential exception, and emergency government work, are set out in the guide.

When CIPAA applies

Meeting room used for consultations

  1. 01

    The payment claim

    The payment claim is prepared to meet section 5 of the Act. It identifies the construction contract, the work or services, the sum claimed, and the basis on which that sum is due. A claim that does not meet those requirements is a common ground for a jurisdictional objection.

    Before it is served, the claim is checked with the project team against what was carried out, what was certified, and what the contract provides as to payment. The absence of an interim certificate does not, of itself, prevent a payment claim. Section 5 does not require a certified claim.

  2. 02

    The papers

    The instruction is taken with the project team. The claim is drawn from the contract, the programme, the certificates and valuations, and the contemporaneous records. A later narrative is not a substitute for those papers.

  3. 03

    The reference

    If the payment response does not resolve the dispute, a notice of adjudication is served and the reference is registered with the Asian International Arbitration Centre. The parties may agree the adjudicator within ten working days. Failing agreement, the unpaid party requests the Director of AIAC to appoint one.

    We prepare the adjudication claim, and the reply where the response raises a set-off. We expect to review the matter and complete the adjudication in about 100 working days. That is our span for the instruction. The statutory periods, counted in working days from service, are set out on the procedure page.

  4. 04

    The decision

    The decision is binding unless and until it is set aside, settled, or finally determined in arbitration or court. The sum is not left outstanding pending that final determination. Enforcement is by application to the High Court under section 28.

    Where we are instructed on the adjudication, the costs of enforcing the decision may be subsidised by up to RM10,000. The extent of that subsidy is confirmed before those instructions are accepted.

Timeline

The Act’s periods, counted in working days, are set out on the procedure page: ten for the payment response, ten to agree an adjudicator or five for the Director of AIAC to appoint, then ten, ten and five for the claim, the response and the reply, and forty-five for the decision. Agreement and appointment are alternatives. They are not added together. About 100 working days is our span to review a matter and complete the adjudication. That span is ours. It is not the sum of those periods, and it is not a promise for a particular claim.

The CIPAA procedure

  • Arbitration

    An agreement to arbitrate does not exclude CIPAA. It is a further forum. It does not displace adjudication.

  • Conditional payment

    Pay-when-paid and pay-if-paid clauses are void where the Act applies. Non-payment upstream is not a defence.

  • Participation

    A non-paying party cannot contract out of the Act, or bring the reference to an end by declining to take part.

  • Set-off

    A set-off may reduce the claim, including to nil. It does not produce a decision in favour of the responding party.

Usually in the instruction

An instruction often begins with one unpaid sum. The contract usually raises further points, and those are identified before the payment claim is served. CIPAA determines the payment dispute. It is not a procedure for recovering liquidated damages as payment for work done.

  • A progress claim or final account that has been ignored, or reduced without a proper response.
  • Set-off and back-charges that do not match the contract.
  • Late or missing certificates, relied on as a reason not to pay.
  • Retention held after the contract provides for its release.
  • Liquidated damages deducted while an extension of time has not been dealt with.
  • A termination, or the threat of one, while money for work done is still outstanding.

Time, damages and certificationAnonymised case studiesReal case outcomesFormwork Subcontractor Recovers 100% of a RM400k–500k Final Account Balance Years After CompletionM&E Subcontractor Recovers 100% of a RM400k–500k Retention Claim on a Government Project

Fees

Standard

From RM4,000

Payable on engagement, for the payment claim and representation through to the adjudication decision.

Enforcement

Up to RM10,000

Where we are instructed on the adjudication, enforcement may be subsidised by up to this sum. The amount is confirmed before those instructions are accepted.

A subsidy for a contractor whose cash flow has already failed is stated in the engagement. It is not a published percentage of the standard fee.

Bring to the consultation

Bring what is to hand. A complete set is not required before the first meeting.

  • The contract, including any letter of award and supplements.
  • The programme, the certificates, and the valuations.
  • Correspondence about the unpaid sum.
  • The calculation of the sum said to be outstanding.

Questions

Who is a CIPAA payment claim for?
Contractors, subcontractors, suppliers and consultants who have not been paid for work, services or materials under a written construction contract in Malaysia. A party who has been served with a payment claim or a notice of adjudication can be advised on the response.
What documents are needed?
The contract, including any letter of award, the programme, certificates and valuations, correspondence about the unpaid sum, and the calculation of what is outstanding. A complete set is not required before the first meeting.
How long does a CIPAA claim take?
The Act sets each step in working days, from the payment response to the decision. Those periods are on the procedure page. About 100 working days is this firm’s span to review a matter and complete the adjudication. It is not the sum of the statutory periods, and it is not a promise that a particular claim will finish then. The working-day timetable.
What does a CIPAA claim cost?
The standard fee is from RM4,000, payable on engagement, through to the decision. Where the firm is instructed on the adjudication, enforcement may be subsidised by up to RM10,000. Any other subsidy is stated in the engagement. The fees are published here.
Can the other side refuse to take part?
A non-paying party cannot contract out of CIPAA, or end the reference by staying silent. An agreement to arbitrate does not exclude adjudication.

The Asian International Arbitration Centre has reported that 88 per cent of adjudication decisions have been in favour of the claimant. That figure is AIAC’s. It is not an indication of the outcome of any particular reference.

If a payment claim or a notice of adjudication has already been served on you, see Responding to a claim.

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