This presentation traces the evolution of Court decisions on CIPAA from 2015 to present day.

1. CIPAA update - a case of
creeping complexities?
Chan Kheng Hoe
Kheng Hoe Advocates

2. Swift access to rough justice
CIPAA was introduced to provide a “mechanism for speedy dispute resolution
through adjudication” (long title, CIPAA).
It changed the landscape of dispute resolution in Malaysia, because for the first
time, we were introduced to the concept of “rough justice”, where decisions are
only of “temporary finality”, and parties can always re-litigate every dispute.
CIPAA has changed the “slow and steady” process of dispute resolution into a
“fast and furious” one.

3. In the beginning, it was paradise (for the Claimant)
In the beginning, the Court saw everything that Parliament made with CIPAA, and
the Court declared that it was good. The attitude of the Court in the beginning was
to overwhelmingly support CIPAA, to the point that one may even be almost
immediately discouraged upon receiving a Payment Claim.

4. The early cases (2015)
UDA Holdings Bhd v Bisraya Construction Sdn Bhd [2015] 11 MLJ 499, HC
● CIPAA applies retrospectively and takes precedence even over contractual
provisions. Substantive rights under pre-existing contracts can be avoided by
reference to CIPAA.
Subang Skypark Sdn Bhd v Arcadius Sdmn Bhd [2015] 11 MLJ 818, HC
● A respondent seeking to stay a CIPAA decision under §16 must show
financial impecuniosity on the part of the Claimant as the sole reason for stay.

5. The early cases (2015) (continued)
Foster Wheeler E&C (Malaysia) Sdn Bhd v Arkema Thiochemicals Sdn Bhd
[2015] MLJU 1952, HC
● The contract provided elaborate multi-tiered dispute resolution process which
would take 120 days. Meanwhile, the claimant sought to enforce the CIPAA
decision. The respondent wanted to apply for a stay but cannot fulfill the
threshold requirement to have commenced arbitration because of the
elaborate multi-tiered dispute resolution process. Court held that
nevertheless, the threshold must be met and §16 cannot be interpreted
liberally, therefore there is effectively no stay application.

6. The early cases (2015) (continued)
Mudajaya Corporation Bhd v Leighton Contractors (Malaysia) Sdn Bhd
[2015] MLJU 293, HC
● Exemption orders must be read narrowly and restrictively. However, once an
exemption applied, it would be enjoyed by all parties involved along the
contractual claim.

7. The party continues for the Claimant (2016)
Ranchan Heavy Engineering Sdn Bhd v Pelabuhan Tanjung Pelepas Sdn
Bhd [2016] MLJU 1182, HC
● It would be an excess of jurisdiction for the adjudicator to consider defences
raised in the Adjudication Response (but not raised in the Payment
Response)
● However, it is still incumbent upon the Claimant to prove its claims. The
adjudicator cannot simply accept or blindly endorse the claim.
● The adjudicator is not in breach of natural justice if he/she rejects the right to
comment on a “material” authority raised in the Adjudication Reply

8. The party continues for the Claimant (2016) (cont’d)
Gazzris Sdn Bhd v Hasrat Gemilang Sdn Bhd [2016] MLJU 1054, HC
● A written contract need not be signed. Here, parties referred to the PAM Form
but did not sign it, however, the PAM Form was found to be a binding written
contract.
● There cannot be reference to any material that was not before the Adjudicator
to allege a breach of natural justice to justify a setting aside application.
● No fresh evidence is allowed to be tendered for purposes of setting aside
applications.

9. The party continues for the Claimant (2016) (cont’d)
Murni Environmental Engineering Sdn Bhd v Eminent Ventures Sdn Bhd &
Anor [2016] MLJU 691, HC
● Claim under §30 “does not require that the money due and payable by (the
principal)...should be in reference to ...progress claim in question. So long as
there is money due and owing by (the principal)...that money should be paid
to the plaintiff”
● Principal cannot in a §30 application question the Claimant’s claim as it would
tantamount to a re-litigation of issues
● Query: What if that money is for another project? Arguably, not a principal?

10. The evolution of challenges
As case-laws clarified the position in CIPAA, it seemed to make it simpler and
easier for Claimants to prevail. Respondents were learning in 2015 and 2016 that
challenges pursuant to §15 and 16 were an extremely uphill battle.
Essentially, as long as the Adjudicator answered the correct question (even if the
Adjudicator gave the wrong answer in fact or in law), the CIPAA decision was
enforced. That was truly a very low benchmark for Adjudicators to pass.
So then the nature of the challenge evolved.

11. Evolution in 2017
Terminal Perintis Sdn Bhd v Tan Ngee Hong Construction Sdn Bhd [2017] 7
AMR 887, HC
● What is meant by a jurisdictional challenge?
● Core jurisdiction - whether CIPAA applies
● Competence jurisdiction
○ Validity of Payment Claim and Adjudicator’s appointment
○ As long as Payment Claim complies with §5 on the face of it, the Court will not interfere (SKS
Pavillion Sdn Bhd v Tasoon Injection Pile Sdn Bhd [2019] 9 MLJ 396, HC)
● Contingent jurisdiction- Ambit of Adjudicator’s jurisdiction - Adjudicator can
decide on any matter of a consequential and ancillary nature (SKS Pavillion
EOT necessary to determine L&E)

12. Evolution in 2017 (cont’d)
Zana Bina Sdn Bhd v Cosmic Master Development Sdn Bhd [2017] MLJU
146, HC
● Challenge made that claim was not a claim under CIPAA but a claim for
quantum meruit, therefore without contractual foundation. Adjudicator found
that the Claimant was entitled to fall back on default §36 provisions, and the
Court declined to intervene.
● Further challenge as to whether the terms of appointment of the Adjudicator
were clear was rejected - the Court held that the Respondent could have
clarified from AIAC concerning the terms of appointment during the
proceedings itself

13. Evolution in 2017 (cont’d)
VVO Construction Sdn Bhd v Bina MYK Sdn Bhd [2017] 2 AMR 502, HC
● Case was mounted as an “appeal” and not a 15 setting-aside. The Court held
that “there is no right of appeal”, but proceeded to hear the case as a setting-
aside application.
● The CIPAA decision was then set aside under §15 on grounds of illegality
because the directors of the Claimant acknowledged that they were mere
nominees to a bankrupt, and the law prohibits a bankrupt from conducting
business. Any attempt to adjudicate would be an excess of jurisdiction
because no Adjudicator has jurisdiction to adjudicate on an illegal contract.
● Note: Illegality is NOT a ground under §15

14. Evolution in 2017 (cont’d)
Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd [2017] MLJ 732, HC
● A terminated contract nevertheless attracts the application of CIPAA
● Cl 25.4(d) PAM 2006 is void for purposes of CIPAA by reason of §35 which
prohibits conditional payments (c.f. UDA Holdings Bhd v Bisraya
Construction Sdn Bhd (supra) opined that “conditional payment” has a
limited meaning
● However, not all conditional payments are void. Only those with the effect of
defeating the purpose of CIPAA, which is to be determined from case to case.
● Note: Pending FC decision

15. Conclusions from 2017 cases
The Courts remained supportive of CIPAA, however, it can be seen that the
nature of challenges had evolved and attained some complexity as compared to
the kinds of challenges mounted earlier.
Therefore, we have challenges on:
● Jurisdiction
● Competence of Adjudicator
● Whether it is a contractual or a quantum meruit claim
● Right of appeal as opposed to the setting-aside procedure
● Underlying illegality as an additional ground for setting-aside
● Voiding of Cl 25.4(d) PAM 2006

16. The year of the pivot (2018)
Many of the earlier cases eventually made it through the appeal process, which
led to the landmark Federal Court decision of View Esteem Sdn Bhd v Bina Puri
Holdings Bhd [2018] 2 MLJ 22, FC
● Adjudicator has the duty to consider all defences even if not raised in the
Payment Response. Failure to do so would be a breach of natural justice.
● An application for stay under §16 is not limited to financial considerations, and
a stay procedure can be a safeguard against wrongful CIPAA decisions.

17. The year of the pivot (2018) (cont’d)
The impact of View Esteem was tremendous because:
● It totally negated the need for a Payment Response. A Respondent now need
not disclose its defences because all defences must be considered anyway.
As a Claimant only has 5 working days to reply, this essentially means that
the Respondent has an opportunity to conduct adjudication by ambush.
● It opened up the avenue for the Courts to consider the merits of the CIPAA
decisions as a ground for stay. How would Courts be able to use §16 as a
safeguard against wrongful decisions if the merits are not considered?
Therefore, some form of review of the merits must be considered by the
Courts.

18. The year of the pivot (2018) (cont’d)
Bauer (Malaysia) Sdn Bhd v Jack-in-Pile (M) Sdn Bhd [2018] 4 MLJ 640, CA
● Although this case was asked to construe essentially §35 (pay when paid
clauses), it concluded that CIPAA only applies prospectively and not
retrospectively.
● This goes against the long-held position of UDA Holdings v Bisraya
Construction which was cited by the FC in View Esteem v Bina Puri
● Bauer v Jack-in-Pile had led to questions as to whether the case relates only
to §35 or the entire CIPAA. There are different HC authorities on the matter.

19. Meanwhile, in the HC in 2018
The general trend of being generally pro-Claimant continues.
Syarikat Bina Darul Aman v Government of Malaysia [2018] 4 CLJ 248, HC
● A losing Claimant can also apply to set aside under §15
● If claims and decisions are severable, Court can set aside a decision in part
● A loss and expense claim can be allowed under CIPAA because there is clear
nexus between such a claim and works/services rendered (c.f. A claim for
loss of profits for wrongful termination)

20. Meanwhile, in the HC in 2018 (cont’d)
Tidalmarine Engineering Sdn Bhd v Conlay Construction Sdn Bhd [2018] 2
CLJ 376, HC
● Where setting aside is dismissed, enforcement must necessarily be allowed.
● Adjudicator can disallow submissions under his/her wide powers of §25.
● Any attempt to allege partiality on the part of the Adjudicator must be
supported by clear and cogent evidence.
● There is no real distinction between an interim claim and a final claim- both
are equally subject to CIPAA.

21. Meanwhile, in the HC in 2018 (cont’d)
Sazean Engineering & Construction v Bumi Bersatu Resources Sdn Bhd
[2018] MLJU 839, HC
● Although construction contract was executed by bankrupt director, it was still
valid because the company had two directors, and the company is a separate
legal entity (cf VVO Construction Sdn Bhd v Bina MYK Sdn Bhd (supra))
● Clearly this was an attempt by the HC to save the construction contract
● This case was overturned at appeal - CA says that as the no of directors fell
below the statutory minimum (under the then- Companies Act 2016), any
resolution to file CIPAA proceedings would be invalid and illegal

22. Meanwhile, in the HC in 2018 (cont’d)
WRP Asia Pacific Sdn Bhd v NS Bluescope Lysaght Malaysia Sdn Bhd
[2018] MLJU 1016, HC
● Principles of waiver and estoppel do not apply to deprive a party from
challenging jurisdiction of adjudicator
● Reg 4 CIPA Regulations (on qualification of Adjudicator) is mandatory, but it
is for the AIAC to determine (Query: Does this lead to a challenge against
AIAC itself?)
● Unilateral communications are allowed provided it is made known to the other
party

23. Conclusion from 2018 cases
The FC and CA decisions seem to have tilted the balance slightly in favour of the
Respondent, as opposed to the earlier cases which were overwhelmingly pro-
Claimant.
Meanwhile, at the HC stage, principles of CIPAA continue to be refined.

24. How is 2019 looking like?
Ireka Engineering and Construction Sdn Bhd v PWC Corp Sdn Bhd [2019]
MLJU 35, CA
● Adjudicator rejected a re-measurement by the Respondent, as well as a CNC
that was served 5 years late.
● Court held that the sufficiency of evidence and weight attached to it are not
matters that may be raised in a setting aside application.
● Court upheld Adjudicator’s decision not to allow a set-off for a separate
project to be taken into consideration.
● A party cannot raise the same issues in two adjudication processes, as they
amount to an abuse of process.

25. How is 2019 looking like? (cont’d)
Likas Bay Precinct Sdn Bhd v Bina Puri Sdn Bhd [2019] MLKU 49, CA
● Enforcement procedures in CIPAA are in addition to, and not in derogation, of
each other
● Winding-up notices can be issued based on CIPAA decisions that are not yet
registered
● Note: We can expect a slew of Fortuna injunctions as a result
Inai Kiara Sdn Bhd v Puteri Nusantara Sdn Bhd [2019] 2 MLJ 362, CA
● If there is no setting aside application, a Respondent cannot rely on any
grounds of §15 to resist enforcement under §16

26. Creeping complexities?
When CIPAA was first launched, it was substantially pro-Claimants. However,
obviously many principles had to be clarified seeing that adjudication was new to
our shores, and there was a substantial increase of consultants and non-legally
trained adjudicators handling CIPAA cases which comprise a mix of questions of
facts and law.
The nature of CIPAA being pro-Claimant also led to the evolution of the issues
and challenges raised. Respondents had no choice but to find new ways to resist
this new mode of speedy dispute resolution mechanism that led to sometimes
very rough justice.

27. Creeping complexities? (cont’d)
It is submitted that it is not so much a matter of creeping complexities but a
balancing of interest which needs to be carried out. Hence we see 2018 FC
decision like View Esteem (Respondent need not file Payment Response,
grounds for stay extended) and 2018 CA decision like Bauer (no reciprocal
effect), balanced against the 2019 CA decision of Likas Bay (Claimant can
petition for winding-up without registration).

28. Casualties of war
As more cases move up the appeals process, there may be further changes in
law. In Leap Modulation Sdn Bhd v PCP Construction Sdn Bhd [2019] 1 MLJ
354, CA, an Adjudicator’s decision was set aside due to View Esteem despite
being correct in law at the material time (refusal to hear set-off not raised in
Payment Response).
In Skyworld Development Sdn Bhd v Zalam Corp DSdn Bhd [2019] MLJU
162, HC, Court set aside decision for being delivered in 46 working days, but held
that in any event decision would have to be stayed due to change in law brought
about by Cubic Electronics v Mars Telecommunications Sdn Bhd

29. Conclusion
Claimants must bear in mind that CIPAA is a two-step process:
a. CIPAA proceedings; and
b. Subsequent enforcement, setting aside and stay.
Whilst CIPAA proceedings would be a mixture of law and facts, the subsequent
proceedings would be more heavily slanted towards issues of law.
It is still somewhat (but no longer overwhelmingly) pro-Claimant. Therefore, when
mounting CIPAA, make sure you’re ready and think about both steps of the
process.

30. Thank you.
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Email: khenghoe@khenghoe.com