Friday, February 8, 2013

Do I Need a Lawyer To Handle Payment Disputes In CIPAA 2012?

Lets face it. The professional relationship with a lawyer is best described by U2... "I can't live, with or without you".

Like it or not, if a payment dispute in a construction contract is brought to adjudication within the ambit of Construction Industry Payment & Adjudication Act 2012 ("CIPAA 2012"), the services of lawyers will be inevitable, ultimately.

CIPAA 2012 enables an unpaid party to make a "Payment Claim" for work done or goods / services supplied under a written contract for construction works carried out wholly or partly in Malaysia. If the claim remains unpaid by the non-paying party, the unpaid party can then proceed to submit an "Adjudication Claim" lodged with the KLRCA, and thereon proceed with the appointment of the adjudicator, whose job will be to come up with the adjudication decision which has to be delivered within 45 days of either the Adjudication Response or Adjudication Reply, whichever is the later.

A Two-Tier Involvement

A two-tier involvement can be anticipated for lawyers in payment disputes brought for adjudication in CIPAA 2012, i.e. - pre-adjudication decision and post-adjudication decision.

Pre-Adjudication Decision.

CIPAA 2012 does not impose any specific format on parties for filing of various documents to bring or to defend a claim to be adjudicated by an adjudicator certified by Kuala Lumpur Regional Centre For Arbitration ("KLRCA") at this moment. This is quite unlike an action in the Courts whereby the format and filing of cause papers is determined by various statutes and therefore requires the services of a lawyer if one is to avoid the pitfalls of Do-It-Yourself litigation. 

The scope of involvement of lawyers at initial stages of the Payment Claim and Payment Response may not be required by parties, especially where the disputed amount is not substantial, and the payment dispute does not involve complicated facts and issues. The preparation of documents required for "Payment Claim" by the unpaid party and "Payment Response" by the non-paying party, and subsequently the "Adjudication Claim" and "Adjudication Response" can very well be handled by non-lawyers. It can be ably be dealt with by persons within the company with sufficient legal exposure, but with detailed personal knowledge as to the details of the dispute at hand. The key contribution a lawyer can provide at this stage is to provide compilation expertise to prepare relevant submissions in what may turn out to be invaluable when the adjudication decision is disputed in Court or arbitration.

If a lawyer is involved in the preparation of all documents and communications between parties and the appointed adjudicator prior to the adjudication decision, he / she will be able to provide valuable input in such preparation, including being able to keep an eye open to look out for issues which may result in improperly procured adjudication decision, such as denial of natural justice and bias, fraud, bribery, etc which can then be used to contest the adjudication decision and get it set aside by the Courts.

The growth and penetration of CIPAA 2012 will largely depend on KLRCA, as the adjudication authority, who can be expected to introduce rules, policies and guidelines to regulate adjudication claims, including standardization of the format of cause papers and its administration. As this evolves, the level of expertise required to adhere to such rules will follow naturally and resulting in it becoming a specialized area for claim consultants which is likely to consist mostly of lawyers, or at the very least those who are legally trained.  

Post-Adjudication Decision

Both the winning and the aggrieved party can be expected to turn to the Courts., either to enforce the adjudication decision or to set aside and/or stay the execution of the same. So then, it follows that both parties will have to engage services of their lawyer as such applications are highly technical in nature with specific formats and procedures to adhere to.

The options available to the aggrieved party includes:

1. apply to the High Court to set aside the adjudication decision on grounds that it was improperly procured    through :
  a. fraud or bribery;
  b. there has been a denial of natural justice;
  c. the adjudicator has not acted independently or impartiality; or
  d. the adjudicator has acted in access of his jurisdiction.

2. apply to the High Court for a stay of the adjudication decision.

If a lawyer had been involved during the pre-adjudication decision, then he / she would have been able to identify the grounds on which the adjudication decision may be set aside.

One thing is certain. The way documents are filed and kept will be of utmost importance in enabling the payment dispute to progress smoothly. Whether lawyers are involved or not, the success or failure in such payment disputes will rest on parties' ability to compile its documents quickly, given the short time frames accorded to the parties for filing of relevant cause papers under CIPAA 2012.