Sunday, January 13, 2013

How To Enforce An Adjudication Decision In CIPAA 2012 Malaysia

The success of Construction Industry Payment & Adjudication Act 2012 ("CIPAA 2012") as a legal mechanism for unpaid parties in a construction contract for works carried out wholly or partly in Malaysia to settle payment disputes will be largely determined by the "bite" which enables the successful party to enforce the adjudication decision.

Enforcement Through the High Court of Malaysia

If the unpaid party / claimant obtains an adjudication decision in his favour, s.28 CIPAA 2012 empowers him to enforce it by applying to the High Court for an order as if it were a judgment or order of the High Court. This means that the whole gamut of enforcement via the Court including writ of seizure and sale, winding-up proceeding, bankruptcy, debtor summons and likely garnishee order, is available by the winning unpaid party to enforce the decision obtained at adjudication.

The key proviso is that the adjudication decision has not been stayed or set aside or overruled by arbitration or the Court. However,as enforcement through the mechanisms of the Court will be costly and maybe time consuming, it is envisaged that it will be a disincentive in cases where the claim amount does not justify it.

Other than enforcement of the adjudication decision through the Court, CIPAA 2012 offers a rather more effective method of enforcing the said decision, i.e:


1. suspend the performance or reduce the rate of progress of performance in the construction contract in which the payment dispute arose;

2. obtain payment of the adjudicated decision direct from the principal of the construction contract.

1. Suspend or Slow Work Performance


If the proper procedure of providing written notice of intention to do so to the other party if the adjudicated amount is not paid within 14 calendar days from the date of receipt of the notice. S.29 of CIPAA 2012 affords protection to the party who exercises his right to suspend or "go-slow" without having to repudiate or terminate the on-going construction contract, and also being able to be entitled to recover any loss and expenses incurred as a result of the suspension or "go-slow" from the Respondent of the adjudicated decision.

2. Direct Payment From Principal

The other option open to the unpaid party of the adjudication decision, pursuant to s.30 CIPAA 2012 is to attempt to to get the principal of the party against whom the adjudication decision is made.

This will only be effective if money is due or payable by the principal to the party against Respondent of the said decision, at the time the request was received from the unpaid party.

If the said Respondent or losing party fails to show proof of payment to the unpaid party, the principal shall pay the adjudicated amount to the party who obtained the adjudication decision in his favour.

Within CIPAA 2012, the principal referred to does not necessarily mean the ultimate Employer / Developer / Owner in the construction contract between the unpaid party Claimant and the non-paying party Respondent.  The "principal" means the party one level above the said Respondent and in many cases may turn out to be the Main Contractor or even a sub-contractor as the construction industry in Malaysia tends to have a long chain in the construction process consisting of  a chain of sub contractors, manpower providers, tools and machinery providers, outsourced maintenance contractors and services providers, consultancy services, hardware and building material suppliers, etc.

It is anticipated after CIPAA 2012 comes into force, many principal / employers consisting  owners, developers, main contractors and possibly large sub-contractors in the construction industry in Malaysia will be surprised to one day receive a notice demanding payment for the adjudicated amount for work done or goods supplied by a sub-contractor or supplier 2 levels below the principal. Are you ready Malaysia?

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