Doctrine of Privity and CIPAA by Annzin

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TABLE OF CONTENTS 1.0

ANSWER FOR QUESTION 1:………………………………………………………………………. 2

1.1

INTRODUCTION…………………………………………………………………………………………….2-3

1.2

BACKGROUND OF THE CASE ………………………………………………………………………...4-5

1.3

PRIVITY OF CONTRACT ….…………………………………………………………………………….6-8

1.4

IMPACT OF DOCTRINE OF PRIVITY ………………………………………………………………9

1.5

APPLICATION IN OTHER COUNTRIES …………………………………………………………..10

1.4

CONCLUSION ……………………………………………………………………………………………….11

2.0

ANSWER FOR QUESTION 2:……………………………………………………………………….12

2.1

INTRODUCTION……………………………………………………………………………………………12-14

2.2

OVERVIEW OF CIPAA2012 ……………………………………………………..……………………15-16

2.3

CIPAA PROCEDURES………………. ……………………..……………………………………………17-19

2.4

ADVANTAGES & DISADVANTAGES OF CIPAA 2012 ……………………………………...19-20

2.5

CONCLUSION ……………………………………………………………………………………………...21

LIST OF REFERENCES ……………………………………………………………………………………………22-24

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1.0

ANSWER FOR QUESTION 1:

1.1

INTRODUCTION

[1] This paper is a commentary and discussion of a case analysis of City Cabinet Factory Sdn Bhd v Pembinaan Pasti Dinamik Sdn Bhd (2018) MLJU 1994. This case was held at High Court of Kuala Lumpur with Lee Swee Seng as a judge on 26th December 2018. In general, “commentary” is defined as “an expression of opinions or offering an explanations about an event or situation”1 while “discussion” is intended as “to talk or write about a subject in detail, especially considering different ideas and opinions related to it.”2 In regards to the said case analysis as above, the discussion will look into further in regard to the application of the doctrine of privity of contract in the Malaysia Construction Contracts which are the main disputes to the case as well. [2] According to Contracts Act 1950, contract has been defined as an agreement between two or more private parties that creates mutual legal obligations which is enforce by law. Section 2(h)3 reads, “ an agreement enforceable by law is a contract;” Section 2(g)4 also define, “an agreement not enforceable by law is said to be void;” [3] Contract also can be either oral or written or by any combination of such. Most of the contracts are governed by the state status and therefore it is important to consider the local laws when dealing with a contract issues. Section 26(a)5 reads as, “ An agreement made without consideration is void, unless – it is in writing and registered:………….”

https://www.lexico.com/ https://dictionary.cambridge.org/ 3 Section 2(h) of Contracts Act 1950 (Act 136) 4 Section 2(g) of Contracts Act 1950 (Act 136) 5 Section 26(a) of Contracts Act 1950 (Act 136) 2

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[4] The closest that could get, in the recent case of Globe Motors Inc v TRW Lucas Variety Electric Steering Ltd6. From the case , the Court of Appeal considered an agreement which are included the clause that the contract could only be amended by a written document signed by both parties. [5] The basics elements required for the agreement to be a legally enforced contract are based on mutual assent, expressed by a valid offer and acceptance, adequate consideration, capacity and legality 7. The interpretation of contract has been clearly define in various act such as : Section 10(1)8 reads, “All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

Globe Motors Inc v TRW Lucas Variety Electric Steering Ltd[2016] EWCA Civ 396. Teacher, Law. (November 2013). Malaysian Contract Law. Retrieved from https://www.lawteacher.net/free-law-essays/contract-law/malaysian-contract-law-essay.php?vref=1 8 Section 10(1) of Contract Act 1950 (Act 136) 6 7

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BACKGROUND OF THE CASE

[6] The participants of this case are between Pembinaan Pasti Dinamik Sdn Bhd (Defendant) as the Main Contractor and City Cabinet Factory Sdn Bhd (Plaintiff) as the SubContractor . Meanwhile Metro Cabaran Sdn Bhd is the Project Manager who in this case are the ‘third party’ of this contract disputes. The nature of this contract are only involving Defendant and Plaintiff as the contract parties as mention in Letter of Award while the Project Manager are only to have a joint-venture agreement with Defendant as a responsible party to process and handle the payments submitted by the Plaintiff. [7] For a record, the disputes took place for a project of renovation works in the clinic and ward of UiTM Sungai Buloh Hospital, Sungai Buloh where the respective client is UiTM private Healthcare Sdn Bhd. Thus, the contractor binding between Plaintiff and Defendant will based on PWD 203A REV 1 2010. [8] According to PWD 203A REV 1 2010, under Clause 40.0 of Sub-Contractor or Assignment, the responsibilities of Main Contractor to Sub-Constrictor has been elaborate in more specific under Clause 47.3 with read as : “Notwithstanding

any sub-contact made pursuant to clause 47.1 and 47.2, the

Contractor shall be fully responsible for the acts, default or neglects of any sub-contractor, including ‘labour only’ sub-contracts, his agents, servants or workmen as if they were the acts, defaults or neglects of the Contractor, his agents, servants or workmen, PROVIDED THAT the provision of labour on a piecework basis shall not be deemed to be sub-contract under this clause.” [9] Plaintiff had claimed in the Session Court for the balance of payment which duly certified by the Defendant and unfortunately the whole claim was dismissed after a full trial. The Session Court Judge (“SCJ”) had dismissed all the plaintiff claims and stated that Plaintiff ought to look to sue the Project Manager for non-payment of the balance sum due. This is where the Plaintiff had appealed against the said decision to this court based on four

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main factors. One of the most fallibility to look through are regarding the doctrine of privity of contract. [10] This appeal case begins with the interesting question as to whether the Defendant in a construction contract entered into with a Plaintiff can shift the liability to pay to its Project Manager with whom they have a join-t venture agreement. This is because in the Letter of Award issued by the Defendant to Plaintiff has stated that “All progress claims, valuation and payment shall be process and handles by our Project Manager.” In this scenario, it is clearly show that Plaintiff only responsible to submit their claim to Defendant and not direct to the Project Manager. Thus, that is the responsible of Defendants to ensure their Project Manager to process and issues the payment to Plaintiff accordingly within the said period and certified amounts. [11] And in this ways, the Plaintiff appeal based on the ground that the SCJ had erred in law in not judicially appreciating that only parties to a contract may sue one another in contract and not a stranger to the contract. [12] The second erred in law also was the fact on the ground that the doctrine of privity of contract does not prevent the Plaintiff from suing the party responsible to make payments to the to the Plaintiff. [13] The Court of Appeal in Greenwood Shopping Plaza ltd v Robert Walker Beattie and Roy Vincent Pettipas [1980] 2 SCR 228, at p.229 said : “As an established principle of contract law, the common law doctrine of privity of contract stands for the simple proposition that, ‘no one but the parties to a contract can be bound by it or be entitled under it.”

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PRIVITY OF CONTRACT

[14] Generally only parties who are a privy to (named in) a contract can sue or be sued on the contract. Often, however, contracts involve third parties in any ways9. According to Court of Appeal of Tsang Yee Kwan v Majlis Perbandaran Batu Pahat [2011] 8 CLJ 913 at p 914 : “…..It is trite law that only the parties to a contract incur rights and obligations under the contract. This is kow as the privity rule. The second defendant as a third party to the SPA is not a party to the contract and has not provided consideration for the contract but the second defendant as a third party has an interest in the performance of the contract. It has been a long established rule that only parties to a contract could incur rights and obligation under it. This is described as the doctrine of privity and by this principle it is simply means that third party could neither sue or be sued under the a contract.” [15] While in the other page, the join-venture contract between Defendant and Project Manager may be based on the related act : Section 141(1)10 reads as , “An agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do the act.” Also mention in Section 141(2)11, “An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business.”

Trebilcock, M. (2007). The Doctrine of Privity of Contract: Judicial Activism in the Supreme Court of Canada. The University of Toronto Law Journal, 57(2), 269-291. Retrieved July 20, 2020, from www.jstor.org/stable/4491719 10 Section 141(1) of Contracts Act 1950 (Act 136) 9

Section 141(2) of Contracts Act 1950 (Act 136)

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[16] But the fact that Project Manager had and agreement with Defendant, and even the payments proceeding to Plaintiff had come from the Project Manager, it does not make the Project Manager liable under contract to the Plaintiff. It is said in Section 2(d)12 that, “when, at desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promises is called a consideration for the promise.” Also in the Section 4213 has clearly defined that “When a promise accepts of the promise from a third person, he cannot afterwards enforce it against the promisor.” [17] The famous case of Kepong Prospecting Ltd & Ors v Schmidt [1968] 1 MLJ 17014 had established that doctrine of privity applied in Malaysia. The Privy Council’s decision of this case has supports the view that even though consideration may move from the third party as mention under Section 2(d), but still, the third party cannot enforce a contract. [18] So, the question now is , ‘ In between the Plaintiff, Defendant and Project Manager, when the party not issues a payment to the Plaintiff, and when Plaintiff are not allowed to sue the Project Manager, whose breach the contract now? Which is the right party need to take the obligations?’ [19] When it is proved that the Project Manager did not pay the Plaintiff in the last Interim Claim No.9, the Defendant could sue the Project Manager for breaching the contract where the Project Manager failed to manage all payments to the Subcontractor and Suppliers as provided in clause 3d of the joint venture agreement. [20] While in the different page, the Plaintiff could sue the Defendants for breaching the contract due to their failing to ensure their Project Manager manage the payments to the 12

Section 2(d) of Contracts Act 1950 (Act 136) Section 42 of Contracts Act 1950 (Act 136) 14 For more explanation refer to All Answers Ltd. (November 2018). Kepong Prospecting v Schmidt - Case Summary. Retrieved from https://www.lawteacher.net/cases/kepong-prospecting-v-schmidt.php?vref=1 13

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Plaintiff. This is because, in Clause 3 of the Letter Award which was signed by both Plaintiff and the Defendants, it says as follow : “You shall submit your progress claim on a weekly basis. Payment shall be made within three (3) working days from the date of certification by our Project Manager….”15 [21] Another benchmark case that we can referred to is Beswick v Beswick16. In that case, the plaintiff’s husband sold his business to his nephew in return for an annual allowance to be paid to himself and, after his death, to his widow. Once the husband died, the nephew refused to make payments to the widow. Despite the fact that the husband had clearly intended her to benefit from the contract, it was held that the wife could not sue the nephew on her own behalf because she was not a party to the contract.17

CITY CABINET FACTORY SDN BHD v PEMBINAAN PASTI DINAMIK SDN BHD [2018] MLJU 1994 Beswick v Beswick, [1968] AC 58 17 City Cabinet Factory Sdn Bhd v Pembinaan pasti DInamik Sdn Bhd. Case Analysis. Retrieved from https://advance-lexiscom.ezaccess.library.uitm.edu.my/myresearchhome/?pdmfid=1522468&identityprofileid=2VSZHP60800&crid=55e ef415-52eb-417f-9b61-7af59d145028 15 16

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IMPACT OF DOCTRINE OF PRIVITY

[22] On the contrary, don’t you think that the doctrine of privity has pretty much deny the beneficiaries of the third party when they are unable to claim or suing for the benefits conferred by the contract? [23] Based on the reported produced by the English Law Commission, it repeatedly stated that doctrine of privity cause a commercial difficulties. (Anida Madmood,2013)18 [24] In Parimala a/p Muthusamy & Ors. v Project Lebuhraya Utara-Selatan19, the Plaintiff who was the passenger of the car that collided with stray cow which cause death of the deceased who was the driver on that time, had sued the defendants, the highway authority, for breach of contract in not ensuring the safety of the road users. However, the Plaintiff failed to prove whether she is a part of contract parties with the highway authority. (Meng, 2009) [25] There were few studies and proposal conducted by the researcher to reform the doctrine of privity in Malaysia contract law and suggested that the doctrine of jus quaesitum tertio should be adopted instead.20 The relationship between the doctrine of privity and consideration was also discussed in order to show that these two concepts were not inter-related to each other. (Anida Madmood, 2013)

See also UK Law Commission, Privity of Contract : Contracts for the Benefit of Third Parties, Consultation Paper No.121 (1991) and UK Law Commission, Privity of Contract: Contracts for the Benefit of Third parties, Report No 242 (1996) 19

[1997] 5 MLJ 488

Sakina Shaik Ahmad Yusoff and Suzana Mohamed Isa. (2007). ‘Doktrin Privity ke Jus Quaesitum Tertio: Rasional Peralihannya’. 11 Jurnal Undang & Masyarakat 41. See also Suzanna Mohamed Isa, Sakina Shaik Ahmad Yusoff and Azimon Abdul Aziz. (2011). ‘Hak Pihak Ketiga Dalam Kontrak: Pembukaan Ruang oleh Daya Kreatif Kehakiman Menerusi Kaedah Kontraktual . 4 MLJ xxvi.

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APPLICATION IN OTHER COUNTRIES

[26] Apart from Malaysia, there were several countries who applied the doctrine of privity of contract in their Contract Law. 

Position in England Doctrine of privity was a common law principle in Act 1999 before it was reformed as Contracts (Right of Third Parties) Act 1999 after been heavily criticized by judges such as Lord Denning due to in unfairness.



Position in India Unlike in England, the law of Contract in India is codified. (Pandey, 2013) According Indian Contract Act,1872, there is no single provision related to doctorine of contract. However, there were a glimpse of the position of doctorine of privity of contract in few provision such as Ss.2(a), 2(b), 2(c), 2(e), 2(h), 73, 74, and 75 of Indian Contract Law,1872.



Position in New Zealand New Zealand reformed the doctrine of privity by statue

in 1982 when the

parliament adopted the Contracts (Privity) Act 1982 which enables third party to sue if the were sufficiently indentified as a beneficiaries of the contract21 .

Available in https://en.wikipedia.org/wiki/Privity_of_contract

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CONCLUSION

[27] As we discussed earlier, the rigid adherence of doctrine of privity of contract is bound to cause a hardship. The privity becomes swallowed up in the larger rule that consideration must move from the promise and any reform of privity it is a essentials to take steps that the reform is not nullified by the practical effects of the doctrine of consideration.22 [28] Tripartite agreement was one of the method been discussed during the stage of appeal proceeding for the case23. The similar case of Bond M&E(KL) Sdn Bhd v Isyoda (M) Sdn Bhd; Brampton Holdings Sdn Bhd (Third Party)24, it says that : â&#x20AC;&#x153; Our present position is no different. Back to basics, the rule of privity of contracts dictate that only parties to a contract may sue and be sued contractually. Even if a benefit is conferred on a no-party, that non-party cannot sue unless made a party in tripartite agreement where the initial obligation of Isyoda to pay Bond is now taken over by Brampton with corresponding rights of Brampton to sue Bond for any defective works during the Defect Liability Period.â&#x20AC;? [29] Despite other countries already reformed their contract law in regards to doctrine of privity, the law in Malaysia in fact still in the same notch where it is unlikely Malaysia Parliament legislate or create a new Act that designed for rights of third party. (Awang, 2012)

Mahadil, Awang. (2012). Privity of Contract - Comparisons Study between United Kingdom and Malaysia.

CITY CABINET FACTORY SDN BHD v PEMBINAAN PASTI DINAMIK SDN BHD [2018] MLJU 1994 Bond M&E(KL) Sdn Bhd v Isyoda (M) Sdn Bhd; Brampton Holdings Sdn Bhd (Third Party)[2017] 1 LNS 259

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ANSWER FOR QUESTION 2: “…….To give satisfactory decision as to the truth it is necessary to be rather an Arbitrator than a party to the dispute.” Aristotle25

2.1

INTRODUCTION

[1] Malaysia nowadays is getting well developed and has significant amount to the Gross Domestic Product at 4.3%26. The cusses of economic development will further lead to a increase in incomes, generating demand for additional construction activities. Construction industry has become more and more dramatic in terms of the progress and quality. Today’s construction projects become more complex in nature. The complex, relational,

and

lengthy process of designing and building makes construction a process in which disputes are virtually ensured.(McManamy, R.,1994) [2] Apart from that, the industry provide works for many ranging from professionals, main contractors, subcontractors, suppliers and manual labour who area employed by these contractor. However, there remains a chronic problem of delayed and non-payment in the Malaysia construction industry affecting the entire delivery chain.(Ang Su Sin,2006). [3] In that regard, there were few studies has been conducted by researcher. One of the survey by Abidin27, there were in total eight main areas or nature of construction disputes, which are payment (51%), delay (19%), termination (18%), variation (13%), damages (11%), performance bond (8%), default (8%) and defect (1%). In short, payment problems has recorded as the highest percentage in contributing to construction disputes and has been severe for a long time. Aristotle (384–322 B.C.E.) numbers among the greatest philosophers of all time. Judged solely in terms of his philosophical influence, only Plato is his peer 26 Available at https://www.thestar.com.my/business/business-news/2019/10/11/economic-outlook-2020-fastergdp-growth-of-48 25

Abidin A.(2007) The Profile of Construction Disputes. Universiti Teknologi Malaysia.

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[4] Payment disputes has become an inflammation in our construction industry. Based on the research conducted by Construction Industry Development Board(CIDB) Malaysia, both contractors and consultants have agreed that the most frequent causes of late and nonpayment, the study includes are (CIDB,2006):

a. Paymaster’s poor financial management b. Paymaster’s withholding of payment c. Local culture/attitude d. Conflict among the parties involved e. Contractor’s default f. Contractor’s work performance

[5] Since construction projects involve many parties, any payment problem encountered at the higher end of the hierarchy may give a huge impact on the cash flow through the chain of contract28. Thus, intervention by third parties for resolution using methods such as adjudication is needed to reduce the possibility of factors that may lead to payment defaults29.

N A Hadi et al. (2018). The Perception on the Importance of Construction Industry Payment and Adjudication Act (CIPAA) 2012 Towards Remedying Payment Disputes: A Research on Subcontractors in Kuching, Sarawak. Universiti Teknology MARA. 28

Mazani, Q.,Sahab, S., & Ismail,Z. (2018). Trends of Adjudication Cases in Malaysia. International Conference on the Built Environment and Engineering [IConbee 2018]. 266,p.03001. Johor Bahru: MATEC Web of Conference. 29

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Table 1: Payment defaults (Ameer Ali,2005 in Judi and Muhamed Sabli,2010) No.

Payment Defaults

Description

Under Payment

The certified and paid amount by the Client is Lower than the Value of Contractorâ&#x20AC;&#x2122;s work done.

Late Payment

Client taking longer time than the allocated time (beyond the period of honoring certified) to issue/making payment to the Contractor.

Non-Payment

No payment is release to Contractor albeit the Contractor has completed certain area of works.

Above table shows the most common payment disputes that happen in Malaysia construction industry. The scenario has contribute to the cash flow problem in the project where the contractor have to upfront their capital to ensure project delivery before receives payment from client.

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OVERVIEW OF CIPAA 2012

[6] And for that particular reason, Government of Malaysia have embarked serious afford to reduce payment default issues by enacting Construction Industry Payment and Adjudication Act (CIPAA) in 2012.30 [7] According to S.Rajoo (2014)31, The Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) was gazette on 22nd June 2014, and effectively implement on 15th 2014 a speedy dispute resolution through adjudication, provide remedies for the recovery of in the construction industry and provide for connected and incidental matters. [8] Order 69A rule 5(1)32 of the Rules of Court 2012 states that, “An application for permission to enforce an adjudication decision, either wholly or partly, in the same manner as a judgement or an order of the High Court under section 28 of the Act may be made by originating summons in Form 5.” The amendment of those Act clearly shown that this situation needs more serious attention and action so that this problem can be taken to then proper level. [9] The preface of the CIPAA provides the purpose of CIPAA as “An act to facilitate regular and timely payment, to provide remedies for the mechanism for speedy disputes resolution through adjudication, to provide remedies for the recovery of payment in the construction industry and to provide for connected and incidental matters”. (Ismail Z. , 2020)

Din N M D N and Ismail Z (2014). Construction Industry Payment and Adjudication Act (CIPAA) Remedying Payment Issues : CIDB G7 Contractors’s Perspective S.Rajoo, (2014). “The Construction Industry Payment and Adjudication Act 2012 Comes into Operation,” Press Release of Kuala Lumpur Regional Centre for Arbitration. 31

Order 69A rule 59(1) Rules of Court Amendment 2018

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[10] The main objectives of this Act is to address cash flow problems in the construction industry. It migitigates the pervasive and prevalent practice of conditional payment which is ‘pay when paid,pay if paid’ and decreases payment defaults by establishing a cheaper and speedier system of disute resolution in the form of adjudication. (Mazani et al.,2019). [11] Meanwhile for the authorisation process, The Kuala Lumpur Regional Centre for Arbitration (KLRCA), currently known as Asia International Arbitration Centre (AIAC) has been chosen to be as the adjudication authority to appoint adjudicator, manage adjudicator’s appoinment procedure and giving practical training courses for statuory adjudication.(Fong L C,2005) [12] Payment issues are widely happen in Malaysia either in governement-funded projects or private-funded projects. In regards to the payment provision in both PWD 203A Revision 1 2010 and PAM 2018, there were also emphasise on Adjudication and Arbitration provision in the contract to cater the related disputes that might happen during the contruction progress. Clause 36.2 of PAM 201833 has stated , ‘Where a party requires a dispute or difference under Clause 36.1 to be referred to adjudication, such disputes or differences shall be referred to an adjudicator to be agreed between the parties. If after the expiration of twenty one (21) Days from the date of the written notice to concur on the appoinment of the adjudicator, there is a failuer to agree on the appoinment, the party initiating the adjudication shall apply to the President of Pertubuhan Arkitek Malaysia to appoint adjudicator,and such adjudicator so appointed shall be deemed to be appointed with the agreement and consent of the parties to the Contract’.

Clause 36.2 of PAM Contract 2018 (With Quantities)

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CIPAA PROCEDURES

[13] Refering to the statement by Mari Lim, J in UDA Holdings Bhd v BisrayaConstruction Sdn Bhd34 paraghaphs 130 justifies on the object and purpose of CIPAA; and hallmark of the Statutory Adjudication as follow : [P.130] From this examination, it can thus be seen that the legislative bodies of the respective jurisdications disucssed all had substantially the same common intention, object and purpose in enacting their own versions of CIPAA as our Parliament in relation to CIPAA. Adjudication was considered the most viable option in addressing the same ills or inequotable practices faced by the the construction industries the world overpayment disputes oer progress or stage payments. The disputes invariable were on delayed, insufficient or simply non-payment of interim claims made by main,subcontractors or sub-subcontractos.

[14] The need for cheaper and speedier mechanism to resolve disputes had led to the enactment of CIPAA as mention in Clause 7,Part 2 of the CIPAA. Thus, CIPAA will provide platform for disputes resolution by way of statutory adjudication. (Ismail,Z, & N. M., 2014) [15] Acknowledging the fact that CIPAA is newly introduced to the industry, simultaneously the possibility of industryâ&#x20AC;&#x2122;s key players to be lack of information and awareness about CIPAA is greater.

UDA Holdings Bhd v Bisraya Construction Sdn Bhd & Anor and another case [2015] 11 MLJ 499

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For a better understanding on the CIPAA procedures, the details of Adjudication process under CIPAA has been simply conclude in the below table :

Table 2 : Procedure and time taken of Adjudication (Shirley,2012) No.

Item

Section

Requirements To state : a) Amount claimed and due date b) Cause of action and provision in contract relied on c) Description of work or services to which payment relates d) Statement that it is made under the Act a) May admit or disputes partly or wholly b) Attach payment of amount admitted c) If fail to respond then it is deemed that the entire claim is disputed State a nature and description of dispute and remedy sought together with supporting documents.

Payment Claim

Payment response

Notice of Adjudication

7(2) and 8

Adjudication Claim

State a nature and description of dispute and remedy sought together with supporting documents.

Adjudication Response

Answer the adjudication claim and include any supporting documents. If not filed,

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The Limit None

10 working days

May serve on respondent after expiry of time limited for payment response 10 working days from receipt of acceptance of appointment by adjudicator under Section 22(2) or 23(2) 10 working days from receipt of adjudication claim

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Adjudication Reply

claimant may proceed with the adjudication after time limited to do so. Reply to response and include any supporting documents.

5 working days from receipt of adjudication response.

ADVANTAGES & DISADVANATGES OF CIPAA 2.4.1 Advantages of CIPAA [16] CIPAA consider a big relief to the disputed parties it act as a third party in assisting payment disputes occurring in the Malaysia construction industry. Apart from that, there were also few more advantages of the implementation of CIPAA such as : 1) CIPAA offers lower fees by having adjudication as a method of dispute resolution. 2) CIPAA provides Legal Remedy to Non-Payment. 3) CIPAA provides high level of enforcement. It allows suspension of works or reduce rate of progress. 4) CIPAA allow the parties to choose their own adjudicator. 5) CIPAA enables direct payment from principal. 6) CIPAA provides binding and enforceable decision on payment disputes. The Adjudicatorâ&#x20AC;&#x2122;s decision can be enforced as judgment. 7) CIPAA provide private and confidential. Parties in disputes are able to remain confidential compared to litigation ranked second in the analysis which considered an importance of CIPAA implementation.

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2.4.2

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Disadvantages of CIPAA

[17] A survey has been done and the results that majority of the respondents are lacking awareness of CIPAA35. Besides that, among of the disadvantages of CIPAA also concern of : 1) CIPAA 2012 only confines to payment disputes in relation to construction contract falls under section 4 of CIPAA 2012. 2) While under Section 3 of CIPAA 2012, states that, â&#x20AC;&#x153;CIPAA 2012 shall not apply to a construction contract into by a natural person for any construction work in respect of any building which is less than 4 storeys high and which is wholly intended for his occupation.â&#x20AC;? It is seems to be unfair for the projects that below than 4 storeys but in a scene of they have 6 units of projects with disputed large total disputed amount, and they are only can proceed with Arbitration instead of CIPAA that offers much lower fees than Arbitration. 3) The decision made by the Adjudicator is interim in nature as it is subjected to arbitrator and litigation. 4) The Adjudicator will decide the course and direction of the proceeding. Parties has little room to negotiate.

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CONCLUSION

[18] The concept of statutory adjudication through the enforcement of security of payment legislation in the Malaysia construction industry under CIPAA 2012 follows the successful implementations conducted in United Kingdom, Australia, New Zealand and Singapore as assistance to problems of payment defaults in the construction industry.(S.Rajoo,2014) To-date there are 233 cases published by the Malayan Law Journal on the various issues, however by far the number is relatively small if compared to the number of cases registered with AIAC, even so upon careful scrutiny, the majority of the court decisions seem in favour of the existence CIPAA. (Ismail Z. , 2020). The increasing of adjudication cases intervened by the courts over the years since the enforcement on 2014, it shows the effectiveness of CIPAA in assisting the payment disputes in construction industry. To ensure the effective implementation of CIPAA, the industry must collaborate as a whole and play their own roles to take ownership of the issues and challenges.

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M.N.A, Azman & Dzulkalnine, Natasha & Abd. Hamid, Zuhairi & Mohamad Kamar, Kamarul Anuar & Mohd Nawi, Mohd Nasrun. (2013). Payment Scenario in the Malaysia Construction Industry Prior to CIPAA. Pg.99-108

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CONSTRUCTION PROCUREMENT & CONTRACTS

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Ramachandra, Thanuja & Rotimi, James. (2015). Mitigating Payment Problems in the Construction Industry through Analysis of Construction Payment Disputes. Journal of Legal Affairs and Dispute Resolution in Engineering and Construction. 7. A4514005. 10.1061/(ASCE)LA.1943-4170.0000156.

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CONSTRUCTION PROCUREMENT & CONTRACTS

Shirley,H.(2012). The Conference on the Practice and Procedure of Adjudication. MIArb Newsletter. The Newsletter of the Malaysia Institute of Arbitrators.

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