CONSTRUCTION ADJUDICATION PROCESS (VOL. 2): PAYMENT CLAIM & PAYMENT RESPONSE

Introduction

Prior to initiating formal statutory adjudication under the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012), the unpaid claimant must strictly comply with mandatory statutory notice procedures by issuing a Payment Claim to the respondent.

Key Statutory Definitions (Section 2 & Section 5)

“Unpaid Party”: A party who claims payment of a sum which has not been paid in whole or in part under a construction contract.

“Non-Paying Party”: A party against whom a payment claim is made pursuant to a construction contract.

“Payment”: A payment for work done or services rendered under the express terms of a construction contract.

See the Federal Court decision in Anas Construction Sdn Bhd v. JKP Sdn Bhd & Another Appeal [2024] 2 CLJ 665 (FC) confirming statutory parameters of payment claims.

The Payment Response (Section 6)

Pursuant to Section 6(1), (2), and (3), upon receiving a Payment Claim, the non-paying party has a strict timeline of 10 working days to serve a written Payment Response stating one of the following:

Admits the whole claim: Agrees to pay the entire claimed sum;

Admits part of the claim: Sets out the specific disputed portions, the factual/legal reasons for dispute, and remits payment for the admitted balance; or

Disputes the entire claim: Sets out the full grounds and reasons for disputing liability.

Deemed Dispute Rule (Section 6(4)):
Under Section 6(4), if a non-paying party fails to serve a payment response within 10 working days, they are statutorily deemed to have disputed the entire payment claim.

See landmark Federal Court authority in View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2019] 5 CLJ 479 (FC) regarding defenses available during subsequent adjudication proceedings.

Modes of Service (Section 38)

Under Section 38 of CIPAA 2012, service of any notice or statutory document (including the Payment Claim and Payment Response) must be strictly effected through:

(a) Delivering the notice or document personally to the party;

(b) Leaving it at the usual place of business during normal working hours;

(c) Sending it to the last-known or usual business address by registered post; or

(d) Any other mode mutually agreed upon in writing by the parties.