Cipaa Applies To Interim & Final Payment Disputes
On 1 August 2019, the Federal Court in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd, (Civil Appeal Nos. 02(f)-2-01/2018(W) and 02(f)-3-01/2018(W)) has confirmed inter alia that the Construction Industry Payment & Adjudication Act 2012 (“CIPAA”) applies to interim and final payment disputes, thereby affirming the majority decision of the Court of Appeal ([2018] 4 MLJ 496).
Martego originated from an adjudication pursuant to CIPAA, initiated by consultant architects against the employer of a condominium project, for professional fees of RM599,500, after the contract had been terminated. In his adjudication decision, the adjudicator awarded the consultant architects a sum of RM258,550.
Subsequently, the employer applied to the High Court under s. 15 of CIPAA ([2017] 1 CLJ 101) to set aside the adjudication decision on the basis that, inter alia, CIPAA has no application in respect of architectural fees. The High Court dismissed the said application, holding that (i) an architect’s fees in respect of a construction contract are claimable under CIPAA and (ii) besides arbitration under the Architect’s Act 1967, CIPAA would be an additional mode of dispute resolution in respect of an architect’s fees, though only the former is final and binding.
On appeal, the majority of the Court of Appeal upheld the High Court’s decision. In the majority judgment, David Wong JCA (as his Lordship then was) held that it does not matter whether the payment claims were interim or final, or claims made after unilateral or mutual termination as long as they relate to a construction contract defined in s. 4 of CIPAA. Hamid Sultan JCA dissented and held that it was wrong to construe CIPAA to apply to claims for final payment when the mischief of the Act was intended to cure timely payment for work related to progress payments.
The employer appealed further to the Federal Court. The Federal Court, affirming the majority judgment of the Court of Appeal, unanimously held that there is no reason to confine the applicability of CIPAA to “interim claims” only. The Court stated that so long as there is a sum payable under a construction contract for work done and as long as the party remains unpaid, the claim can still be brought against the other party through CIPAA. The Court also confirmed that adjudication under CIPAA exists separately from arbitration (where provided for) and there was no question about one prevailing over the other.
Martego is a landmark decision by the Federal Court that has reinforced the position of CIPAA as a comprehensive albeit temporary avenue for the speedy resolution of payment disputes in construction contracts.
For more information about CIPAA, please contact our Mr Lam Ko Luen or Ms Victoria Loi.
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Victoria Loi
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