Claims That Can be Pursued under CIPAA 2012

What kind of payment claim can a party in a construction contract claim under the Construction Industry Payment and Adjudication Act? To find out more, let us briefly look at the Federal Court case of Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd & Another Appeal, where the court had the chance to decide whether payment claims made under the Act is confined to only interim claim or does it applies to any payment claim that is related to a construction contract.

Brief facts of the case

Martego engaged Arkitek Meor as a project architect for a development project in Kuala Lumpur. Martego subsequently terminated Arkitek Meor’s services (which Arkitek Meor accepted without fuss). However, a dispute arose as to the amount of professional fees that are needed to be paid to Arkitek Meor for works done for the development project prior to the termination (i.e. the final amount/ final claim). As both parties are unable to come to an agreement as to the amount that is needed to be paid, Arkitek Meor had no choice but to seek the recovery of the fees through an adjudicator under the Construction Industry Payment and Adjudication Act.

The adjudicator was in favor of Arkitek Meor’s claim ordered Martego to pay Arkitek Meor the sum that was claimed by Arkitek Meor (“adjudication award”). Dissatisfied with the decision, Martego appealed to the High Court to set aside the adjudication award. On the other hand, Arkitek Meor applied to the High Court to enforce the adjudication award. Martego’s application was dismissed in the High Court, Court of Appeal and subsequently in the Federal Court as well.

The parties contention

Martego argued (amongst others) that the claim that was brought forth by Arkitek Meor is a final claim and the Act does not provide a remedy to such a claim because:

1. The Act was intended to apply to interim claims only (i.e. progress payment claims). The main purpose of the act was to assist parties to receive prompt payments for interim claims (i.e. payment on account).  Any dispute as to the final claim must be resolved through other methods of dispute resolution such as a court/ arbitration process and not through the adjudication processes as dictated by the Act; and
2. The Act does not in any way mention or even indicate that it was intended to apply to any other claims other than an interim claim.

Arkitek Meor argued that the Act does not limit the type of claim that a party can put forth. The Act was created to alleviate the cash flow problem that has long plagued the construction industry. To limit what can be claimed vice versa would prejudice parties such as themselves, who are financially weaker than the main contractor, from making a claim against the main contractor. This would have effectively defeated the purpose of the Act, which is to ensure that payment issues are dealt with in an expedient manner.

The court’s rationale

The court agreed with Arkitek Meor’s argument. Furthermore, the court pointed out that:

1. The Act clearly stipulates who, when and how one can initiate a proceeding under the Act, namely:
   1. Any party who is being owed payments for work done, either in part or full arising from a construction contract;
   2. Those party can claim once work is done and the payment is due; and
   3.  Those parties issued a payment claim to the party who owed them money.
2. It does not make sense to conclude that the parliament had intended a different or separate approach between an interim payment and a final payment. If it were the case:
   1. Parliament would have included a provision to that effect; or
   2. Parliament would have deliberately used a different language to evince their intention for a separate approach between an interim payment and a final payment.
3. In this case, there is a need to interpret the Act in a purposive manner i.e. in a manner that reflects the intention of parliament when parliament enacted the Act. As pointed out by the court and Arkitek Meor, the Act is enacted by the parliament to provide a solution that is easily/ readily accessible, faster and cheaper for an aggrieved party to turn to when they are claiming unpaid monies arising from a construction contract. To restrict what can be paid vice versa will effectively defeat the intention of parliament and its purpose when enacting the Act.

In short, as long as it is a payment that is due under the Act (i.e. for work done in a construction contract), the party whom such payment is due can rely on the Act to pursue their claim.

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