ADR Promotional Talk

1. The Chartered Institute of Arbitrators
East Asia Branch
Young Members Group
21th March 2018
CIArb (EAB) YMG
Alternative Dispute Resolution Seminar and Promotional talk
for Gammon Construction Limited

2. Alternative Dispute Resolution Seminar
Construction Adjudication
by Ir Albert Yeu

3. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
Contractual vs Statutory Adjudication
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■Dispute Resolution Clause
■Security of Payment Legislation (SOPL)

4. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
SOPL Background
4
■Other jurisdiction
UK(1996), New Zealand(2002), Singapore(2004), Malaysia(2012),
Australia(2002,2004,2009), Ireland(2013)...
■Hong Kong(2018??)
■2011 detailed industry wide survey
■2012 survey on payment practice in the industry
■June 2015 consultation document
■April 2016 report on public consultation
■LegCo

5. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
Features
5
■Fast, less expensive
■Temporarily binding
■Defined jurisdiction
■Independence and impartiality
■Enforcement
■Document-only proceedings
■Pay-when-paid provision
■Statutory right of suspension

6. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
Procedure
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■Payment Claim and Payment Response
■Notification of Adjudication
■Appointment of Adjudicator
■Adjudication Claim and Adjudication Response
■Oral Hearing
■Adjudication Decision
■Challenge

7. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
Recent Case
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■Bauer (Malaysia) Sdn Bhd (Appellant) v Jack-In Pile (M) Sdn
Bhd(Respondent) (2017, Court of Appeal Malaysia)
■Contract – Supply and installation of Spun Piles
■Appellant – main contractor, Respondent – Sub-contractor
■2012 – Employer wound up
■2013 – Appellant lodged its proof of debt with the liquidator of Employer
■August 2016 – Respondent commenced adjudication

8. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
8
Pay when paid clause
“Progress Payment
All payments shall be made within 7 days from the date the Specialist
Contractor received their related progress payment and subjected to 5%
retention…”

9. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
9
Security of Payment Legislation (Malaysia)
“Prohibition of Conditional Payment
1) Any conditional payment provision in a construction contract in relation
to payment under the construction contract is void.
2) … it is a conditional payment provision when:
a) The obligation of one party to make payment is conditional upon that
party having received payment from a third party; or
b) The obligation of one party to make payment is conditional upon the
availability of funds of drawdown of financing facilities of that party.”

10. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
10
Question
Can main contractor rely on the pay when paid clause and refuse
payment to sub-contractor?
Issue
Applicability of SOPL to construction contract existed prior to the
enactment of the SOPL in 2014
Adjudicator
Pay when paid clause is void, right of progress payment kicks in, i.e.
retrospective effect.

11. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
11
High Court
1. “… has retrospective effect, unless there is clear contrary intention in
the statue itself…”
2. “[The statue] which provides adjudication as an alternative forum for
payment dispute resolution as opposed to resorting to the court and
arbitration, a liberal and purposive interpretation must be adopted in
relation to [the statue].”
3. “… the choice of an additional forum of resolution should surely be
offered to all unless there is clear provision that it is not.”

12. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
12
Court of Appeal
1. “… a retrospective operation is not to be given to a statue so as to
impair an existing right or obligation… unless that effect cannot be
avoided without doing violence to the language of the enactment. If the
enactment is expressed in language which is fairly capable of either
interpretation, it ought to be construed as prospective only.” – Maxwell’s
Interpretation of Statues, 12th Edition
2. “Unless there are clear words in the legislation to the contrary, any
legislation affecting substantive rights must be given a prospective effect.
Similarly, if the legislation is procedural in nature, that legislation must be
given a retrospective effect unless clear words in the same show to the
contrary.” – NS Bindra’s Interpretation of Statute, 8th Edition

13. Construction Adjudication
CIArb celebrated its Centenary throughout 2015.
Tips for contractor
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■Select the techno-legal adjudicator
■Realize the requirements of payment response
■Retrospective effect on existing construction contracts?