CONSTRUCTION ADJUDICATION PROCESS (VOL. 1): APPLICATION AND SCOPE OF CIPAA 2012

Introduction

Statutory Construction Adjudication in Malaysia is governed by the Construction Industry Payment and Adjudication Act 2012 (Act 746) (‘CIPAA 2012’) and the Construction Industry Payment and Adjudication Regulations 2014 (PU(A) 103/2014) (‘CIPA Regulations 2014’).

CIPAA 2012 was specifically enacted to provide a swift, summary dispute resolution mechanism for payment claims in construction contracts, designed to prevent cash-flow bottlenecks and preserve financial liquidity across the Malaysian construction industry.

This legal series explores the entire statutory adjudication framework across the following key pillars:

• Application and Scope of CIPAA 2012 (Vol. 1)
• Payment Claim & Payment Response (Vol. 2)
• Commencement of Construction Adjudication (Vol. 3)
• Appointment of the Adjudicator
• Conduct of Adjudication Proceedings
• Enforcement and Setting Aside of the Adjudication Decision

Application and Scope of CIPAA 2012

Pursuant to Section 2 of CIPAA 2012, the Act applies to every construction contract that satisfies three cumulative criteria:

1. Made in writing;
2. Relating to construction work (comprehensively defined under Section 4 of CIPAA 2012); and
3. Carried out wholly or partly within the territory of Malaysia, explicitly including construction contracts entered into by the Federal or State Governments.

Under Section 4 of CIPAA 2012, a “construction contract” encompasses both a construction work contract and a construction consultancy contract (including architectural, engineering, surveying, and project management services).

Statutory Exemptions

1. Residential Exception (Section 3):
Section 3 expressly excludes construction contracts entered into by a natural person for any construction work in respect of any residential building which is less than four storeys high and wholly intended for his or her personal occupation.

2. Ministerial Exemption Powers (Section 40):
Under Section 40, the Minister may exempt any person, class of persons, contract, or transaction from all or any provisions of CIPAA 2012, subject to prescribed terms and gazetted orders.

Prospective Application: The Ireka Engineering Principle

In the authoritative Federal Court ruling in Ireka Engineering & Construction Sdn Bhd v. PWC Corporation Sdn Bhd & Other Appeals [2019] 6 MLRA 1, the apex court affirmed that CIPAA 2012 cannot be applied retrospectively to substantive contractual rights.

Consequently, CIPAA 2012 applies strictly to construction contracts executed on or after its operational commencement date, namely 15 April 2014. Contracts executed prior to this date fall outside the statutory adjudication regime.