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Section 30 of the Construction Industry Payment & Adjudication Act 2012 (CIPAA) generally enables a successful party in an adjudication to obtain payment from the principal of an unsuccessful party. For instance, if a subcontractor (as the successful party) has obtained an adjudication decision in its favour but the main contractor (as the unsuccessful party) does not make payment pursuant to that adjudication decision, the subcontractor may seek direct payment from the employer (as the principal of the unsuccessful party) provided that the requirements under the said Section 30 are fulfilled.

An issue that had arisen was whether a successful party could invoke Section 30 of CIPAA to obtain direct payment from the principal where the unsuccessful party is in liquidation or whether such direct payment would amount to undue preference and thus contravene insolvency laws.

This issue was recently clarified in the case of CT Indah Construction Sdn Bhd v BHL Gemilang Sdn Bhd where the Court of Appeal held that Section 30(3) of CIPAA imposes a legal and independent obligation on the principal to make payment and that such payment does not amount to undue preference. In other words, a successful party may obtain direct payment from the principal regardless of whether the unsuccessful party is solvent provided that the requirements under Section 30 of CIPAA are fulfilled. This case is pending leave to appeal to the Federal Court.

If you have any queries regarding the above or CIPAA, please do not hesitate to get in touch with us.