Statutory adjudication is a relatively new method of dispute resolution in Malaysia. It was introduced in 2014 when the Construction Industry Payment And Adjudication Act 2012 (“CIPAA”) came into force. The main purpose of CIPAA is to provide a speedy mechanism for resolving payment disputes arising from construction contracts. This is with a view to ease the case flow of contractors.
The type of claim that can be pursued under a CIPAA adjudication is a claim for payment for work done. Such a claim is typically made by a contractor against his employer. Other types of claim – whether by the contractor or employer – do not qualify, and will have to be pursued in arbitration or litigation.
The adjudication is “statutory” because the regime is imposed by statute, i.e. an Act of Parliament, and not pursuant to a contract clause. As such, a contractor can invoke adjudication if his claim qualifies under CIPAA, even though his construction contract did not provide for such a recourse.
Although CIPAA came into force on 15 April 2014, it applies retrospectively where adjudication is concerned. This means that it also applies to claims arising out of construction contracts signed before 15 April.
The adjudication process is governed by tight timelines under CIPAA. Generally, the process takes an average period of 5 months, from the 1st step (service of payment claim) to the outcome (delivery of adjudication decision), barring any undue delay.
The losing party in the adjudication has the right to apply to the High Court to set aside the adjudication decision. However, there are only very limited grounds on which such an application will succeed. The courts are generally more inclined to uphold the adjudication decision.
The adjudication decision is a “provisional”, and not a “final”, decision. This means that the parties may raise the same claim / dispute again in arbitration or litigation, to obtain a final decision on the matter. Despite being provisional, the adjudication decision has to be complied with in the meantime, until and unless a final decision is delivered. If no step is taken to obtain a final decision, then the adjudication decision will continue to be in force and bind the parties.
The contents of this article are published for the purpose of general information only; they are not to be regarded, used or relied on as legal advice for any matter. Please contact us if you require legal advice specific to your case.