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Issues 15

Movie Day Out &
Makan-Makan Qthai Steamboat
Venue: MBO Galaxy Ampang &
Taman Dagang

The Construction Industry Payment and Adjudication Act 2012 ('CIPAA') has come into operation effective 15 April 2014. Section 2 of the Act states that the Act applies to every construction contract made in writing relating to construction work carried out wholly or partly within the territory of Malaysia including a construction contract entered into by the Government.

The primary objective of the Act is simply to provide a statutory right for the parties to demand payment for work done and to create a simple process to ensure that a decision and payment is madeto address critical cash flow issues in the construction industry by establishing a cheaper, speedier system of dispute resolution in the form of adjudication. The adjudication process however does not stop the aggrieved party to arbitrate and litigate the matter at the same time. However, the adjudicator’s decision is a binding decision and must be complied with at an intervening provisional stage until the dispute is finally resolved.

Unlike arbitration or mediation, adjudication does not require the parties' agreement for the process to begin. As such, once either party opts for adjudication, it becomes a compulsory process wherein both parties are involved whether they agree to or not.

As the main aim of CIPPA 2012 is to ensure cash flow problems in the construction industry is solved swiftly, the process prescribed by the Actis concise. The adjudication process begins with a claimant (unpaid party) serves a written notice of adjudication (payment claim) on the respondent (non-paying party).The main feature in invoking the adjudication process under the Act is that the unpaid party must SPECIFICALLY make clear his INTENTIONS with a statement that it is made under the Act. The intention is crucial as the lack of it may render the adjudicator’s decision to be set aside. The time accorded to the adjudicator to produce written decision is 45 days from receipt of the adjudication reply unless the parties extend the time. However, the entire process is

approximately 100 days from payment claim is served until decision is passed. The Act is so strict in that in the event that the adjudicator fails to decide the dispute within the period, the adjudicator will not be entitled to his or her fees.

The adjudication process does not accord the adjudicator luxury of time to hear all parties in great length. As such the Evidence Act does not apply to adjudication proceedings under the Act.  The adjudicator is empowered to conduct short trial to review the construction contract and other documents to decide whether there is compliance with the standard of work required by the contract. The adjudicator may also visit the construction site to investigate the dispute. The adjudicator will then give decision with the primary aim to alleviate cash flow problems between the disputing parties.

The Kuala Lumpur Regional Centre for Arbitration (KLRCA) is appointed as the adjudication authority which is tasked with ensuring that the process of statutory adjudication is properly implemented. The KLRCA also take on a role of being the stakeholder of adjudicator's fees wherein parties shall contribute and deposit the adjudicator's fees in equal share to the Director of the KLRCA.

We at KIQ has been consulted, litigated in court as well as involved in construction arbitration.