- Debbie Lai
1. Introduction
The Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) provides a fast-track dispute resolution mechanism to ensure cash flow in the construction industry.
Once an adjudicator issues a decision, it is temporarily binding in nature unless and until it is set aside by the High Court. However, the grounds for setting aside an adjudication decision are limited and strictly construed.
This article outlines when and how an adjudication decision may be set aside in Malaysia.
2. Statutory Basis for Setting Aside
The power to set aside an adjudication decision is governed by Section 15 CIPAA, which provides that a party may apply to the High Court to set aside the decision on the following grounds:
a) The adjudication decision was improperly procured through fraud or bribery;
b) There has been a denial of natural justice;
c) The adjudicator has not acted independently or impartially; or
d) The adjudicator has acted in excess of his jurisdiction.
These grounds are exhaustive, and the Court will not lightly interfere with an adjudication decision.
3. Ground (a): Fraud or Bribery
An adjudication decision may be set aside if it was obtained through fraud or bribery.
This includes situations where:
- False documents or evidence were deliberately relied upon;
- Material facts were dishonestly concealed; or
- The adjudicator was improperly influenced.
The burden of proof is high, and the applicant must provide clear and cogent evidence of the alleged misconduct.
4. Ground (b): Denial of Natural Justice
A denial of natural justice typically arises where a party is not given a fair opportunity to present its case.
Common examples include:
- Failure by the adjudicator to consider material submissions;
- Deciding on issues not raised by the parties;
- Allowing one party to introduce new evidence without giving the other party an opportunity to respond.
5. Ground (c): Lack of Independence or Impartiality
An adjudicator must act independently and impartially at all times.
This ground may arise where:
- There is a conflict of interest;
- There is evidence of bias or apparent bias;
- The adjudicator has engaged in conduct that undermines confidence in his neutrality.
6. Ground (d): Excess of Jurisdiction
An adjudicator acts in excess of jurisdiction where he:
- Decides matters outside the scope of the payment claim or payment response;
- Determines disputes not referred for adjudication;
- Grants relief not contemplated by CIPAA.
Jurisdictional challenges are among the most commonly raised grounds but are narrowly interpreted by the Courts to preserve the efficiency of adjudication.
7. Important Considerations
(a) High Threshold for Intervention
Malaysian Courts adopt a non-interventionist approach, recognising that adjudication is intended to be quick and interim in nature.
(b) “Pay Now, Argue Later” Principle
Even if there are disputes on the merits, parties are generally expected to comply with the adjudication decision first, and pursue final resolution through arbitration or litigation thereafter.
(c) Not an Appeal on Merits
An application under Section 15 is not an appeal. The Court will not re-examine:
- The correctness of the adjudicator’s findings;
- The valuation of claims;
- Errors of fact or law (unless they fall within the statutory grounds).
8. Practical Tips
For the Respondent (Challenging the Decision)
- Identify whether the issue falls strictly within Section 15 grounds;
- Gather documentary evidence to support the application;
- Act promptly to avoid enforcement proceedings under Section 28 CIPAA.
For the Claimant (Defending the Decision)
- Emphasise the limited scope of judicial intervention;
- Demonstrate that the adjudicator acted within jurisdiction and fairly;
- Proceed with enforcement of the adjudication decision where appropriate
9. Conclusion
While Section 15 CIPAA provides a mechanism to set aside an adjudication decision, the grounds are narrow and strictly applied.
Parties should be mindful that adjudication decisions are intended to be temporarily binding and swiftly enforceable, and the Courts will only intervene in exceptional circumstances.
As such, the focus should always be on presenting a strong case during adjudication itself, rather than relying on setting aside proceedings as a fallback.
General Disputes Resolution and Construction Division
General Disputes Resolution and Construction Division
General Disputes Resolution and Construction Division
This article is prepared and published by
Messrs. Ben Lee & Sharen
Advocates & Solicitors