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Adjudication in Malaysia

Updated: Sep 24, 2023

Adjudication Proceedings are an economical and expedient method for contractors to recover debts due and owing to them from the Main Contractor or Developer.


Are you a contractor who has not been paid by the Main Contractor or Developer?


If you are, and if there is a written contract entered into between you and the Main Contractor or Developer, you may recover your debt via Adjudication Proceedings pursuant to the Construction Industry Payment and Adjudication Act 2012 (‘CIPAA 2012’).


Adjudication Proceedings are an economical and expedient method for contractors to recover debts due and owing to them from the Main Contractor or Developer without having to go through the full court process, which is more often than not expensive in both time and costs.


The relevant construction work that can undergo Adjudication Proceedings may be in the form of conventional construction works, water works, oil & gas works, petrochemical works or telecommunication works, as widely defined under section 4 of CIPAA 2012. Also, the relevant construction works must not involve a building for a natural person which is less than four-storeys intended for his own occupation per section 3 of CIPAA 2012.


Adjudication Proceedings can be concluded expeditiously. An Adjudication can be initiated by the debtor Company within 10 working days after service of a payment claim to the defaulting party. By law, the appointed Adjudicator is required to deliver an Adjudication Decision within 45 working days from the service of the Adjudication Reply or Adjudication Response (whichever is later). The usual turnaround time for an Adjudication Process takes roughly 95 working days.


The Unpaid Contractor may proceed with Adjudication Proceedings even though the Written Contract contains an Arbitration Clause.


An Adjudicator via their Adjudication Decision may order a party to pay another any sums of money as decided upon and the Adjudication Decision will be binding on both parties.


Though an Adjudication Decision may thereafter be challenged before a court, there is a growing tendency by the courts to honour, and not disturb, the Adjudication Decision unless there are exceptional circumstances such as fraud. This is because the courts have recognised that Adjudication Proceedings under CIPAA 2012 was enacted by Parliament to solve cash flow problems that have long plagued the industry and the key to solving issues of cash flow is to give parties a speedy way to resolve their financial disputes.


 

Legal Disclaimer


We trust that you have gained some information from this article. If you have any specific questions related to this article, please contact us at askdonny@dwc.com.my.


This article is posted for general information purposes only and should not be construed as legal advice. Facts and circumstances differ from case-to-case. Please consult your lawyer for specific legal advice and action to be taken.


This article is brought to you by Cheong Su Yin from Messrs Cheong Su Yin & Co. and is copyrighted accordingly.





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