Payment Claim & Payment Response under the Construction Industry Payment and Adjudication Act 2012 (Act 746) (‘CIPAA 2012’)
Prior to commencing an adjudication under the CIPAA 2012, the unpaid party must first serve a payment claim to the non-paying party for payment pursuant to a construction contract.
Section 2 of the CIPAA 2012 defines: –
“unpaid party” means 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” means a party against whom a payment claim is made pursuant to a construction contract; and
“payment” means a payment for work done or services rendered under the express terms of a construction contract.
Section 5(2) provides that the payment claim shall be in writing and shall include-
(a) the amount claimed and due date for payment of the amount claimed;
(b) details to identify the cause of action including the provision in the construction contract to which the payment relates;
(c) description of the work or services to which the payment relates; and
(d) a statement that it is made under this Act.
In the Federal Court case of Anas Construction Sdn Bhd v. JKP Sdn Bhd & Another Appeal [2024] 2 CLJ 665, the adjudicator had relied on clause 36.6 of the contract in allowing the appellant’s claim but the clause was not relied upon by the appellant in the payment claim nor mentioned by the respondent in the payment response. The Federal Court affirmed the Court of Appeal’s decision on the ground that the adjudicator had acted in excess of his jurisdiction when deciding the adjudication on the clause of the contract that was not relied upon by the appellant in its payment claim and adjudication claim to support its cause of action.
Nordin Hassan FCJ held that “Section 5(b) requires the claimant to include in the payment claim the cause of action and the provision under the contract to which the payment relates. Thus, the claimant must identify the cause of action and the provision under the contract that supports the cause of action. If not, the phrase ‘…including the provision in the construction contract…’ under the said subsection will be meaningless or otiose. Certainly, the Parliament does not legislate in vain.”
As such, it is very crucial that the case is properly set up in the payment claim.
Pursuant to Section 6(1), (2) and (3) of the CIPAA 2012, the non-paying party upon receiving the payment claim, may serve a payment response in writing to the unpaid party within 10 working days from the receipt of the payment claim and:-
(a) admits to the whole payment claim and make payment to the whole payment claim amount as admitted;
(b) admits to part of the payment claim and state the part of the claim which is disputed and the reason for the dispute and make payment of the admitted amount; and
(c) disputes the whole payment claim and state the reason for the dispute.
Section 6(4) of the CIPAA 2012 also provides that a non-paying party who fails to respond to a payment claim is deemed to have disputed the entire payment claim.
In the case of View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2019] 5 CLJ 479, the Federal Court stated that an adjudicator is not excluded from considering all the defence raised by a respondent in the adjudication response whether found in the payment response under s. 6 of CIPAA or not. As such, the non-paying party is not precluded from raising further or additional defence in the adjudication response even though such defence is not raised in the payment response.
Section 38 of the CIPAA 2012 provides that the service of a notice or any other document under CIPAA 2012 (including the payment claim and payment response) shall be effected on the party to be served:-
(a) by delivering the notice or document personally to the party;
(b) by leaving the notice or document at the usual place of business of the party during the normal business hours of that party;
(c) by sending the notice or document to the usual or last-known place of business of the party by registered post; or
(d) by any other means as agreed in writing by the parties.
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