CONSTRUCTION INDUSTRY
PAYMENT ADJUDICATION
ACT 2012
(CIPAA 2012)
LIFE AFTER…….
BY : SR HJH HASHIMAH HARUN
BQSM,MRISM
CERTIFIED ADJUDICATOR AIAC
[email protected]
HAK MILIK HHH@2023
HAK MILIK HHH@2023
What is Adjudication in Malaysia??
It is formal dispute resolution legal process, where the
decision is FINAL and BINDING unless it is set aside by the
High Court .
The parties reach a formal agreement that resolves the
subject matter of the dispute .
It differs from ADR (alternative dispute resolution), where is
more private and informal process, more of voluntary.
HAK MILIK HHH@2023
STATUTORY ADJUDICATION
CIPAA 2012
ONLY PAYMENT DISPUTES
FOR WORK DONE AND
Started operation only in SERVICES UNDER
15th APRIL 2014 EXPRESS TERMS OF A
CONSTRUCTION
CONTRACT ARE SUBJECTED
TO ADJUDICATION
COMPULSORY IN THAT ANY PARTY TO A CONSTRUCTION CONTRACT WHO IS
NEITHER EXCLUDED NOR EXEMPTED HAS THE RIGHT TO ADJUDICATION.
HAK MILIK HHH@2023
WHAT IS STATUTORY ADJUDICATION??
IT IS AN ADJUDICATION PROCESS PRESCRIBED BY CIPAA
CONDUCTED PRIVATELY AND ENSURES CONFIDENTIALITY
IT IS MANDATORY AND STATUTORY PROCESS DOES NOT REQUIRE THE AGREEMENT OF
THE PARTIES TO COMMENCE THE PROCESS
IT PREVAILS OVER ANY CONTRACTUAL AGREEMENTS TO THE
CONTRARY BETWEEN PARTIES
IT OFFERS A RELATIVELY SIMPLER, CHEAPER & FASTER PROCESS OF DISPUTE
RESOLUTION
THE DECISION IS TEMPORARILY BINDING AS IT CAN BE SUBJECTED TO ARBITRATION OR
LITIGATION IN COURT
HAK MILIK HHH@2023
CIPAA 2012 – PRINCIPLE AIMS
TO PROVIDE
TO IMPROVE DEFAULT
PAYMENT MAKE RECOVERY
PAYMENT
MECHANISM OF PAYMENT
PROCESS
-In the absence of express EFFECTIVE
-In respect of
payment provisions in the -Upon conclusion of
construction law
construction contract adjudication
- to facilitate regular
-To provide default payments - To provide remedies for
& timely payment
terms the recovery of payment
TO IMPROVE CASH TO EXPEDIATE
FLOW DISPUTE
-To prohibit conditional payment RESOLUTION
terms -To provide by means of
Eg pay if paid, pay when paid or adjudication an alternative
back to back dispute resolution procedure
-- ie speedy & cheaper
HAK MILIK HHH@2023
WHO DOES IT AFFECT??
1. APPLIES TO EVERY CONSTRUCTION CONTRACT (AS
DEFINED BY THE ACT) RELATING TO CONSTRUCTION WORK
CARRIED OUT WHOLLY OR PARTLY IN
MALAYSIA .
2. THEREFORE IT AFFECTS ALL LOCAL AND
INTERNATIONAL CONTRACTS THAT FALL
WITHIN THE AMBIT OF THE ACT.
3. ONLY APPLIES TO CONTRACTS MADE IN WRITING
HAK MILIK HHH@2023
WHO DOES IT AFFECT??
4. APPLIES EQUALLY TO GOVERNMENT
OF
MALAYSIA (FEDERAL & STATE, GLCs,
STATUTORY BODIES) AND THE PRIVATE
SECTOR
CONSTRUCTION CONTRACTS AND
5. ENCOMPASS ALL
CONSULTANCY SERVICES CONTRACT
BUILDING INDUSTRY, THE OIL & GAS
6. IT COVERS
INDUSTRY, THE PETROCHEMICAL INDUSTRY,
TELECOMMUNICATION , UTILITIES,
INFRASTRUCTURE, SUPPLY CONTRACTS AND
CONSULTANCY SERVICES
HAK MILIK HHH@2023
CIPAA 2012
EXCLUSION FROM CIPAA
(SECTION 3)
INDIVIDUAL OWNER I.E. RESIDENT
WHO IS BUILDING A HOUSE NOT
MORE THAN FOUR-STOREYS HIGH
WHICH IS WHOLLY INTENDED FOR
HIS OCCUPATION
HAK MILIK HHH@2023
WHO IS LIKELY TO MAKE USE
OF CIPAA 2012?
MAIN CONTRACTOR SUB-CONTRACTOR Vs
Vs MAIN CONTRACTOR
DEVELOPER/OWNER
CONSULTANT /DESIGNER
SUBCONTRACTOR Vs Vs
SUBCONTRACTOR CONTRACTOR/DEVELOPER/
OWNER
OTHERS – SUPPLIER Vs
CONTRACTOR/DEVELOPER/
OWNER
HAK MILIK HHH@2023
CONSTRUCTION CONTRACTS
SECTION 4 - CIPAA
CONSTRUCTION CONSTRUCTION
WORK CONTRACTS CONSULTANCY
CONTRACTS
Planning & Feasibility
Services in studies,
PERMANENT PREPARATORY, relation to Architectural wks,
WORKS INTEGRAL, construction Engineering,
TEMPORARY WORKS contract Surveying,
Ext & Interior Wks,
PROCUREMENT Landscaping, PMC
HAK MILIK HHH@2023
SCOPE OF PAYMENT UNDER CIPAA
PAYMENT FOR PC
PROGRESS/INTERIM
SUMS,
PAYMENT
PROVISIONAL SUMS,
RETENTION SUMS
PAYMENT FOR VARIED
/CHANGES WORKS PAYMENT FOR
PENULTIMATE
AND FINAL PAYMENT
All these must be expressly
stated in the Construction Claims for Loss &
Contracts.
Expense
HAK MILIK HHH@2023
WHY CONDITIONAL PAYMENT IS VOID
AND UNENFORCEABLE??
TO CURB THE PERSUASIVE UNFAIR PRACTICES
IMPROVE CASH FLOW RISK BETWEEN PARTIES
IMPROVE CASH FLOW ESPECIALLY DOWN THE `SUPPLY LINE’
TO ENSURE THAT `ONE SIDE’ CONTRACTUAL PROVISIONS REGARDING
PAYMENT ARE NOT UNITERALLY IMPOSED AND ENFORCED
TO ELIMINATE THE EFFECTS OF ECONOMIC DURESS IN THE INDUSTRY
HAK MILIK HHH@2023
DEFAULT PROVISIONS IN ABSENCE OF TERMS
OF PAYMENT – SECT 36
COVERAGE
CONSULTANCY CONSTRUCTION SUPPLY
SERVICES WORK CONTRACTS
FREQUENCY MONTHLY UPON DELIVERY
MONTHLY OF SUPPLY
DUE DATE TIME TO RUN
FOR
WITHIN 30 CALENDAR DAYS
PAYMENT
FROM DATE OF
RECEIPT OF
INVOICE
HAK MILIK HHH@2023
WHO CAN START THE
ADJUDICATION
EITHER PARTY TO A
CONSTRUCTION HOW??
CONTRACT
BY SERVING A NOTICE OF
ADJUDICATION
HAK MILIK HHH@2023
MAIN STEPS INVOLVED IN
ADJUDICATION
1. Making the PAYMENT
CLAIM
2. Initiation of
ADJUDICATION – 6. ADJUDICATION
NOTICE OF ADJUDICATION DECISION
3. NOMINATION of
ADJUDICATOR
5. THE ADJUDICATOR
4. Adjudication CLAIM &
RESPONSE
HAK MILIK HHH@2023
3. Issue Notice of
Adjudication Process
adjudication – Cl 8
AIAC
Selection of appt
2. Non-paying adjudicat
party to respond to Adjudicator by Adjudicator
or upon
payment claim – cl parties – Cl 21 & negotiate the
request –
P 6 terms & fees – cl 23
22 cl 21
A
R
T
I
E
10 DAYS 10 DAYS 5 10 DAYS Claimant
S serves
DAYS
adjudication
10 claim cl 9
DAYS
1. The unpaid party
serve payment Respondent
claim to non- serves
paying party - cl 5 5 10 adjudication
45 DAYS DAYS DAYS Response – cl
10
DECISION
delivered
Claimant
Adjudication and to serve
Decision – Cl 12 adjudicatio
n reply (if
any) Cl 11
ADJUDICATION - PROCESS FLOW AND TIME OVERVIEW ( 100 DAYS)
HAK MILIK HHH@2023
REMEDIES FOR `WINNING PARTY’
IF PAYMENT IS NOT MADE AFTER
ADJUDICATION’S DECISION
`WINNING’ PARTY WINNING PARTY WINNING PARTY
TO SUSPEND OR HAVE THE RIGHT TO CAN APPLY TO HIGH
REDUCE RATE OF REQUEST FOR COURT TO
PROGRESS DIRECT PAYMENT ENFORCE
FROM THE ADJUDICATOR’S
PRINCIPAL PARTY DECISION
CIPPA ALLOWS THE WINNING PARTY TO EXERCISE ANY OR ALL OF THE
ABOVE RIGHTS / REMEDIES CONCURRENTLY
HAK MILIK HHH@2023
WHO PAYS FOR THE
ADJUDICATION?
BOTH PARTIES ARE REQUIRED TO EQUALLY SHARE THE
COST OF THE ADJUDICATOR’S FEES & EXPENSES
THE LOSER OF THE ADJUDIACTION WILL
HAVE TO PAY ALL COSTS.
(COSTS FOLLOW EVENTS)
THE LOSER OF THE ADJUDICATION MUST PAY FOR THE
AMOUNTS AS DECIDED BY THE ADJUDICATOR IN REGARD TO
THE PAYMENT DISPUTE
HAK MILIK HHH@2023
IMPACT TO THE
CONSTRUCTION INDUSTRY
HAK MILIK HHH@2023
HOW TO PREPARE FOR LIFE AFTER CIPAA
GENERAL AWARENESS OF CIPAA is necessary
• A good document
• Agree schedules
management system
of payment in the
• A good system for
contract or prior to
compiling and records of
commencement of
document will be of great
work.
benefit
• Submit relevant Credible evidence
details/ evidences and records of joint
including photographs site measurement
of work done and valuation.
HAK MILIK HHH@2023
IMPACT TO CONSTRUCTION
INDUSTRY
1. CHANGE THE PAYMENT CULTURE
2. PERMIT A MORE EVEN ALLOCATION OF PAYMENT RISK
3. CURB UNFAIR & PERVASIVE PRACTICE OF
CONSTRICTING CASH FLOW IN THE SUPLLY LINE
4. IMPROVE QUALITY OF WORK & PROFESSIONALISM
5. MINIMIZE PAYMENT DISPUTES FROM PROCEEDING TO
ARBITRATION, LITIGATION ETC.
HAK MILIK HHH@2023
IMPACT TO EMPLOYERS
1. CHANGE ATTITUDE TOWARDS PAYMENT
2. COMPLEL A MORE FAIRER ALLOCATION OF RISK DISPITE
DOMINAT POSITION
3. COMPEL MANDATORY PAYMENT OF THE AMOUNT DUE TO
THE CONTRACTOR WITH EFFECTIVE SANCTIONS
4. IMPROVE PROFESSIONAL AND GOOD GOVERNANCE IN
ADMINISTRATING PAYMENTS
5. WEED OUT DELIQUANT AND RECALCITRANT PAYMENTS
6. IMPROVE QUALITY OF WORK/FINISHED PRODUCT
HAK MILIK HHH@2023
IMPACT TO CONTRACTORS
1. AMELIORATE THE HARSH & PERVASIVE RISK ALLOCATION
IMPOSED ON THEM BY EMPLOYERS
2. ALLOW RECEIPT OF REGULAR & TIMELY PAYMENT
3. IMPROVE CASH FLOW
4. ENABLE SPEEDY RESOLUTION OF PAYMENT DISPUTES CHEAPLY
THROUGH ADJUDICATION
5. ALLOW STATUTORY MANDATED RECOVERY OF PAYMENT AFTER
ADJUDICATION
6. AS FOR EMPLOYERS IN REGARD TO THEIR OBLIGATION TO
THEIR SUB-CONTRACTORS
HAK MILIK HHH@2023
IMPACT TO SUB-CONTRACTORS,
SUPPLIERS
1. ALLOW ENFORCEMENT OF PAYMENT IN THE
ABSENCE OF EXPRESS PROVISIONS IN THE SUB-
CONTRACT.
2. DEVELOP HEALTHY & PROFESSIONAL
BODY/CORPUS OF DOWNSTREAM
SUPPLIERS/SUB-CONTRACTORS EFFECTIVELY
SUPPORTING THE UPSTREAM PLAYERS/PARTIES
HAK MILIK HHH@2023
IMPACT TO THIRD PARTIES
CONSTRUCTION PROFESSIONALS
1. PAYMENT FOR CONSULTANCY WORK :
A) EASIER TO RECEIVE
B) MADE IN TIME
C) REMEDIES FOR DEFAULT AVAILABLE THROUGH CIPAA
2. FOR VALUATION & CERTIFICATION ROLE:
A) IMPROVE PROFESSIONALISM & GOOD PRACTICE
B) DEFAULT – POSSIBLE CLAIMS IN BREACH OF CONTRACT & TORT OF
NEGLIGENCE
3. NECESSITY TO GET PROFESSIONAL INDEMNITY
4. OPPORTUNITY TO BECOME ADJUDICATORS AND DO
ADJUDICATORS SUPPORT WORK
HAK MILIK HHH@2023
IMPACT OF CIPAA TO THIRD
PARTIES
CLAIM CONSULTANTS /LAWYERS
1. NEW / INCREASED OPPORTUNITIES:
A) FOR ADJUDICATION SUPPORT WORK
B) TO BECOME ADJUDICATORS
2. FOR LAWYERS:
A) NEW / INCREASED OPPORTUNITIES
B) FOR CONSEQUENTIAL LITIGATIONWORK E.G APPLICATION FOR STAYS,
APPEAL, ENFORCEMENT ETC
3. LIABILITY FOR DEFAULT:
A) BREACH OF CONTRACT
B) TORT OF NEGLIGENCE
HAK MILIK HHH@2023
IMPACT OF CIPAA TO THIRD PARTIES
ADJUDICATORS
1. NEW OPPORTUNITIES FOR INCREASE IN VOLUME OF
WORK AVAILABLE
2. NEED TO MAINTAIN COMPETENCY, INTEGRITY &
PROFESSUIONALISM
3. STATUTORY IMMUNITY AGAINST:
A) ANY ACTION/SUIT
B) PROVIDED ACTING IN GOOD FAITH
HAK MILIK HHH@2023
IMPACT OF CIPAA TO THIRD
PARTIES
COURTS
1. Need to be educated / updated on the philosophy, aims/objectives,
implementation , etc on adjudication
2. Necessary to recognize between adjudication and other alternative
dispute resolution (ADR) and TDR methods
3. Give effect to cipaa whole heartedly
4. Must be prepared for an increase in adjudication – generated
litigation
HAK MILIK HHH@2023
Impact on CONTRACT DOCUMENTS
TERMS OF ALL REVIEWED AND
CONSTRUCTION REVISED
CONTRACTS MUST BE:
CONFORM TO CIPAA
PROVISIONS
TERMS WHICH
CONTRADICT TO CIPAA
TO BE
REMOVED/REVISED CONDITIONS FOR
PAYMENTS
TERMS TO SUB-CONTRACTORS
TO BE ALIGNED TO THOSE OF
MAIN CONTRACTOR TO
CONFORM TO CIPAA
PROVISIONS
HAK MILIK HHH@2023
IMPACT TO CONTRACT
ADMINISTRATION
ISSUES AFFECTING PAYMENT
BY CIPAA
VARIATION
NECESSERY TO ENSURE
1. CLAIMS ARE PROPERLY REVIEWED , PROCESSED, CERTIFIED &
HONOURED IN COMPLIANCE WITH CIPAA
2. PROPER RECORD /DOCUMENTS ARE GENERATED & AVAILABLE
3. PROPER PROCEDURES ARE SET & FOLLOWED TO OBVIATE
DEFAULT
HAK MILIK HHH@2023
IMPACT TO CONTRACT ADMINISTRATION
GOOD CONTRACT
ADMINISTRATION
PRACTICES ARE
ADOPTED AND
FOLLOWED
HAK MILIK HHH@2023
HOW SUCCESSFUL IS
CIPPA 2012 TODAY????......
IS IT STILL RELEVANT??
HAK MILIK HHH@2023
IMPACT ON PAYMENT PROBLEMS
CIPAA 2012 HAS IMPROVES THE
CONSTRUCTION PROJECTS CASH
FLOW
RELIEF PROVISIONS TO UNPAID
CLAIMANTS FOR WORK DONE.
HAK MILIK HHH@2023
IMPACT ON PAYMENT PROBLEMS
ANY WITHHOLDING OF PAYMENT
NEED TO SETTLE WITHIN 30 DAYS
FROM RECEIPT OF INVOICE unless
otherwise agreed.
Confidential settlement of conflict
among dispute parties (not an open
hearing)
PROHIBITION OF CONDITIONAL PAYMENTS
HAK MILIK HHH@2023
IMPACT ON PAYMENT PROBLEMS
ALLOWANCE OF DIRECT PAYMENT
FROM PRINCIPAL
THE CULTURE OR ATTITUDE OF LATE
PAYMENT HAS REDUCED.
(ie not 100% - at the mercy of the client)
HAK MILIK HHH@2023
TRENDS of ADJUDICATION
CASES IN MALAYSIA
HAK MILIK HHH@2023
TRENDS of ADJUDICATION CASES IN
MALAYSIA
BASED ON STATISTICS FROM AIAC
TIME FRAME No of Registerd Cases
with AIAC
As of 31/12/14 29
2015 181
2016 447
2017 704
2018 882
2019
TOTAL = 1605 cases
*credit to Quratul Ain Mazani, Siti Suhaidah & Zuhabri Ismal (UITM Shah Alam faculty of architecture)– Trend of
Adjudication Cases in Malaysia
HAK MILIK HHH@2023
EFFECTIVENESS OF CIPAA 2012
COURT
DECISION
YEAR Allowed Dismiss Allowed & Total no of
Adjudication Adjudication Dismissed Part of Cases
Decision Decision Adjudication
Decision
As of Feb 5 1 1 7
2018
2017 23 7 3 33
2016 11 0 1 12
2015 7 1 1 9
2014 1 0 0 1
62
Measured through cases that have been intervened by the court within the period of
2014 -2018 ( based on Malaysian Law Journal Unreported -MLJU)
*credit to Quratul Ain Mazani, Siti Suhaidah & Zuhabri Ismal (UITM Shah Alam)– Trend of Adjudication Cases in Malaysia
HAK MILIK HHH@2023
CASES FROM (RATIO)
GOVERNMENT – 10 %
PRIVATE PRACTICE – 90 %
PARTIES INVOLVED
( CLAIMANT & RESPONDENT)
EMPLOYER - 15 %
MAIN CONTRACTORS - 30 %
SUB-CONTRACTORS - 15%
SUPPLIERS - 29 %
CONSULTANTS – 1 %
HAK MILIK HHH@2023
IS CIPAA STILL A FAST
SOLUTION AND CHEAP??
ISSUES REASONS
1. IT HAS BECOMES LONGER MANY CASES ARE REFERRED TO COURT
PROCESS TO SOLVE DISPUTES – no DECISION – TREND IS GETTING
more fast track solution/speedy INCREASED
AIAC annual Report… - WINNING PARTY TO ENFORCE
2019-2021 – 200 + cases refer to HC DECISION OF ADJUDICATOR.
- LOSING PARTY NOT SATISFIED WITH
ADJUDICATOR’S DECISION
- DOUBT OF ADJUDICATOR’s DECISION
2 It has becomes EXPENSIVE – no more More legal fees and documentation, when
cheap. refer to court decision.
3 Decision made is ROUGH DECISION - Unrealistic for a FINE DECISION – based on
45 days documentation. This may takes longer.
4. No NEGOTIATION Decision within short period.
HAK MILIK HHH@2023
After almost 10 years in
implementation, CIPAA IS still a
successful platform to resolve
disputes in payment.
CIPAA 2012 is still relevant and
continuous reforms by AIAC are in
progress to meet the new
environment & challenges.
HAK MILIK HHH@2023
HAK MILIK HHH@2023
THANK YOU
HAK MILIK HHH@2023
