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What Kind of Payment Claims That A Party Can Pursue Under CIPAA 2012?

Updated: Sep 14, 2021

What kind of payment claim can a party in a construction contract claim under the Construction Industry Payment and Adjudication Act 2012 ("CIPAA")? Is it confined to only interim claims or does it also apply to any payment claim that is related to a construction contract?

Long story short, as long as it is a payment that is due under the Act (i.e. for work done in a construction contract), the party for whom such payment is due can rely on the Act to pursue their claim.

For the long story, let us briefly look at the Federal Court case of Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd & Another Appeal [2019] 8 CLJ 433.

Brief Facts

Martego engaged Arkitek Meor as the architect for a development project in Kuala Lumpur. They eventually terminate Arkitek Meor’s services. A dispute arose when both parties disputed over how much professional fees should be paid to Arkitek Meor for works done for the development project prior to the termination. This came to a stalemate and Arkitek Meor decided to seek the recovery of the fees through an adjudicator under CIPAA

The adjudicator ruled in favor of Arkitek Meor’s claim and ordered Martego to pay Arkitek Meor the sum claimed (the “adjudication award”).

Dissatisfied, Martego appealed to the High Court to set aside the adjudication award. While Arkitek Meor applied to the High Court to enforce the adjudication award. Martego’s application was duly dismissed, even when their grievances were appealed all the way to the Federal Court.

The Contention

Martego argued, amongst other contentions, that the claim brought forth by Arkitek Meor is a final claim and the Act does not provide a remedy to such a claim because:

  1. The Act was intended to apply to interim claims only (i.e. progress payment claims). They pointed out that the main purpose of the act was to assist parties to receive prompt payments for interim claims (i.e. payment on account). Any dispute as to the final claim must be resolved through other methods of dispute resolution such as a court/ arbitration process and not through the adjudication processes as dictated by the Act; and

  2. The Act does not in any way mention or even indicate that it was intended to apply to any other claims other than an interim claim.

Arkitek Meor argued that the Act does not limit the type of claim that can be put forth by a party. They pointed out that the intention of the Act was created to alleviate the cash flow problem that has long plagued the construction industry. Therefore, limiting what can be claimed would prejudice parties such as themselves, who were financially weaker than the main contractor, from making a claim against the main contractor. This would have effectively defeated the purpose of the Act, which intended to ensure that payment issues could be dealt with in an expedient manner.

Rationale of Court's Decision

The court pointed out that:

  1. The Act clearly stipulates who, when and how one can initiate a proceeding under Act, namely:

    1. Any party who is being owed payments for work done, either in part or full arising from a construction contract;

    2. Those parties can claim once work is done and the payment is due; and

    3. Those parties issued a payment claim to the party who owed them money.

  2. It does not make sense to conclude that the parliament had intended a different or separate approach between an interim payment and a final payment. If it were the case:

    1. Parliament would have included a provision to that effect; or

    2. Parliament would have deliberately used a different language to made their intention clear for a separate approach between an interim payment and a final payment.

  3. In this case, there is a need to interpret the Act in a purposive manner i.e. in a manner that reflects the intention of parliament when parliament enacted the Act. As pointed out by the court and Arkitek Meor, the Act is enacted by the parliament to provide a solution that is easily/ readily accessible, faster, and cheaper for an aggrieved party to turn to when they are claiming unpaid monies arising from a construction contract.

Therefore, the court noted that to restrict what can be paid vice versa will effectively defeat the intention of parliament and its purpose when enacting the Act.

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