In the construction industry, payment disputes are a common challenge which often lead to project delays, abandoned works, and financial strain on contractors. To address this, Malaysia introduced the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”), a statutory framework designed to ensure timely payments and maintain cash flow in construction projects. If you are facing late or non-payment of certified work done or having disputes on under-certification of work done, CIPAA could be the solution to recover your dues without resorting to lengthy court or arbitration battles. But does your claim qualify under CIPAA?
Does CIPAA apply to your Contract?
Under Section 2 of CIPAA, CIPAA applies when:
- There is a written construction contract (including contracts entered into by the government).
- The construction work is carried out in Malaysia, whether wholly or partially.
However, pursuant to Section 3 of CIPAA, CIPAA does not apply to a construction contract entered into by a natural person for any construction work in respect of any building which is less than four storeys high and which is wholly intended for his occupation.
The term “construction contract” covers both construction work contracts and consultancy contracts. Meanwhile, “construction work” covers a wide range of works. Section 4 of CIPAA reads:
“Construction work” means the construction, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling, or demolition of:
a) Any building, erection, edifice, structure, wall, fence, or chimney, whether constructed wholly or partly above or below ground level;
b) Any road, harbour works, railway, cableway, canal, or aerodrome;
c) Any drainage, irrigation, or river control work;
d) Any electrical, mechanical, water, gas, oil, petrochemical, or telecommunication work;
e) Any bridge, viaduct, dam, reservoir, earthworks, pipeline, sewer, aqueduct, culvert, drive, shaft, tunnel, or reclamation work;
and includes:
a) Any work which forms an integral part of, or is preparatory to or temporary for the works described above, including site clearance, soil investigation and improvement, earth-moving, excavation, laying of foundation, site restoration, and landscaping;
b) Procurement of construction materials, equipment, or workers, as necessarily required for any works described above.
What should you do to prepare your case?
Document everything! Adjudication is a document-driven process, and the outcome largely depends on the strength of your evidence. Prepare and organize documents that can prove your work done, such as:
- Payment claims, certificates, invoices, or delivery orders
- Joint measurement sheets
- Site diaries or daily reports
- Photographs or videos
- Written instructions or variation orders
- Quotations and agreements on variation rates
- Any relevant correspondences including letters, emails, and WhatsApp messages between parties
Understand the Adjudication Process
The entire adjudication process under CIPAA typically takes around 95 working days. The process begins when the unpaid party serves a Payment Claim to the non-paying party on the claim sum which is due and payable. The non-paying party has 10 working days to respond or make payment on the non-payment. If there is no payment being made after the lapsed of the 10 working days, the unpaid party can then initiate CIPAA adjudication by serving a Notice of Adjudication to the non-paying party.
Below is a flowchart on the adjudication process:
In our next article, we will guide you on what to do after receiving the Adjudication Decision.
This article is prepared and published by
Messrs. Ben Lee & Sharen
Advocates & Solicitors
