The Act applies to a construction contract made in writing for construction work carried out wholly or partly in Malaysia, including a contract entered into by the Government. It came into operation on 15 April 2014. A contract entered into on or before that date cannot be referred. The Federal Court decided this in Jack-in Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd. The residential exception, and emergency government work, are in the guide. The Act is also open to a subcontractor, supplier or consultant who has not been paid.
A working day is a calendar day excluding a weekend and a public holiday in the State or Federal Territory where the site is. The periods below run from service or receipt, as the section states. They are not added into one total.
The payment claim
Section 5
Payment claim
An unpaid party may serve a written payment claim on the non-paying party. It states the amount claimed and the due date, details identifying the cause of action including the provision in the construction contract, a description of the work or services, and that the claim is made under the Act. Section 5 does not require an interim certificate.
10working days
Payment responseSection 6
The non-paying party has ten working days from receipt of the payment claim to serve a payment response. A party who admits the claim states the amount admitted. A party who disputes it, in whole or in part, states the amount disputed and the reason. If no response is served, that party is deemed to have disputed the entire claim.
The notice of adjudication
Sections 7 and 8
Notice of adjudication
The right to refer the dispute arises only after those ten working days have expired. The claimant then serves a written notice of adjudication on the respondent. The notice states the nature and description of the dispute and the remedy sought, together with any supporting document.
10working days
Agreement on the adjudicatorSection 21
The parties may agree an adjudicator within ten working days from service of the notice of adjudication.
5working days
Appointment by the DirectorSection 23
If the parties do not agree, either party may ask the Director of the Asian International Arbitration Centre to appoint an adjudicator. The Act names that office as the Director of the Kuala Lumpur Regional Centre for Arbitration. The Director appoints within five working days of the request. Agreement and appointment are alternatives. They are not added together.
10working days
AcceptanceSections 22 and 23
The adjudicator has ten working days from notification to accept the appointment and state the terms, including fees. The adjudicator accepts the appointment and issues Form 6 once the terms are agreed.
The decision
10working days
Adjudication claimSection 9
Within ten working days of receiving the adjudicator’s acceptance, the claimant serves a written adjudication claim on the respondent, with a copy to the adjudicator. It states the nature and description of the dispute and the remedy sought, together with any supporting document.
10working days
Adjudication responseSection 10
The respondent has ten working days from receipt of the adjudication claim to serve a written response answering the claim, with any supporting document. If none is served, the claimant may proceed once that time has expired.
5working days
Adjudication replySection 11
The claimant may, within five working days of receiving the adjudication response, serve a written reply. A reply is allowed. It is not required.
45working days
Adjudication decisionSection 12
The adjudicator delivers the decision within forty-five working days from service of the adjudication response or the reply, whichever is later. If no adjudication response is served, the forty-five working days run from the expiry of the time for that response. The parties may agree further time. A decision delivered outside that period is void. The decision is in writing and gives reasons, unless the parties dispense with reasons.
The reference is registered with the Asian International Arbitration Centre. About 100 working days is this firm’s span to review a matter and complete the adjudication. That span is ours. It is not the sum of the periods above, and it is not a promise that a particular claim will finish then.
Under section 13 the decision is binding unless it is set aside by the High Court, the subject matter is settled by written agreement, or the dispute is finally decided by arbitration or the court. Enforcement is an application to the High Court under section 28. An agreement to arbitrate does not exclude adjudication. Section 37 allows the same payment dispute to be referred to adjudication, arbitration or the court.
In a CIPAA reference, a set-off may reduce the claim, including to nil. CIPAA is not a procedure for recovering liquidated damages as payment for work done. Where the deduction is liquidated damages, the extension of time and the damages clause remain matters of the contract.
Enforcing a decisionHow to avoid LADThe CIPAA procedure
Questions
- What must a CIPAA payment claim contain?
- A CIPAA payment claim is in writing. Section 5 requires the amount claimed and the due date, details identifying the cause of action including the contractual provision, a description of the work or services, and a statement that the claim is made under the Act. It does not require an interim certificate.
- When can a notice of adjudication be served?
- A notice of adjudication can be served only after the ten working days for a payment response have expired. Section 8 requires a written notice stating the nature and description of the dispute and the remedy sought, together with any supporting document. It is served on the respondent.
- What if the non-paying party does not respond?
- If no payment response is served within ten working days of receipt of the payment claim, section 6 deems the non-paying party to have disputed the entire claim. The unpaid party may then refer the dispute to adjudication.
- Who appoints the CIPAA adjudicator?
- The parties may agree an adjudicator within ten working days from service of the notice of adjudication. If they do not agree, either party may ask the Director of the Asian International Arbitration Centre to appoint one, and the Director does so within five working days of the request. The Act calls that office the Director of the Kuala Lumpur Regional Centre for Arbitration.
- When is the CIPAA decision due?
- The decision is due within forty-five working days from service of the adjudication response or the reply, whichever is later. If no adjudication response is served, those forty-five working days run from the end of the time for the response. The parties may agree more time. A decision given outside the period in section 12 is void.
- A CIPAA payment claimThe instruction, the documents, and the published fee, from RM4,000.
- FeesThe standard fee, the subsidy, and the enforcement limit, as published.
We prepare the payment claim and the notice, and we remain instructed through the decision. The online consultation is free of charge. To have that work taken in hand, file a CIPAA payment claim.
These notes describe the legislation and the scope of our usual instructions. They are not advice on a particular contract. A consultation may be arranged here.