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![CIPAA: The Scope and How Does It Work?
SCOPE AND APPLICABILITY
• This Act applies to –
o Every construction contract
o Made in writing
o Relating to construction work
o Carried out wholly or partly within the territory of Malaysia
o Includes a construction contract entered into by the
Government of Malaysia
[SECTION 2 CIPAA]
Prepared by Messrs Richard Wee & Yip
2014](https://image.slidesharecdn.com/rwycipaaslides2105141-140907024930-phpapp02/85/RWY-CIPAA-2012-Scope-and-Applicability-15-320.jpg)
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RWY CIPAA 2012 - Scope and Applicability
- 1. CONSTRUCTION INDUSTRY PAYMENT AND ADJUDICATION ACT 2012 (“CIPAA”): The Scope and How Does It Work? Prepared By: Messrs. Richard Wee & Yip No. 21, Jalan Aminuddin Baki, Taman Tun, Dr Ismail, 60000 Kuala Lumpur
- 2. CIPAA: The Scopeand How Does It Work? CIPAA • What is CIPAA? • Governing Rules & Procedure • Why CIPAA? • Comparison • Pros (Litigation, Arbitration & Adjudication) • Cons (Litigation, Arbitration & Adjudication) • Objectives of CIPAA • Effect of CIPAA • Scope & Applicability • How Does It Work? Prepared by Messrs Richard Wee & Yip 2014
- 3. CIPAA: The Scopeand How Does It Work? WHAT IS THE CONSTRUCTION INDUSTRY PAYMENT AND ADJUDICATION ACT 2012 (“CIPAA”) ? Prepared by Messrs Richard Wee & Yip 2014
- 4. CIPAA: The Scopeand How Does It Work? WHAT IS CIPAA? • CIPAA was gazetted on 22 June 2012. • CIPAA came into operation on 15 April 2014. • Another form of Alternative Dispute Resolution • An Act of Parliament that makes adjudication compulsory via statutory adjudication • The primary objective is to address critical cash flow issues in the construction industry. Prepared by Messrs Richard Wee & Yip 2014
- 5. CIPAA: The Scopeand How Does It Work? CIPAA: Governing Rules & Procedure • Construction Industry Payment & Adjudication Act 2012 • Construction Industry Payment and Adjudication Regulations 2014 • Construction Industry Payment and Adjudication (Exemption) Order 2014 • KLRCA Adjudication Rules & Procedure Prepared by Messrs Richard Wee & Yip 2014
- 6. CIPAA: The Scopeand How Does It Work? Why CIPAA? • To create a statutory solution to specifically deal with the prevailing issues:- Payment default; Conditional payments; and Non-payment to contractors. • Fast and gives quick solutions Prepared by Messrs Richard Wee & Yip 2014
- 7. CIPAA: The Scopeand How Does It Work? COMPARISON: A. VENUE: 1. Litigation : Court 2. Arbitration : Anywhere 3. Adjudication : Anywhere B. PARTIES 1. Litigation : Plaintiff & Defendant 2. Arbitration : Applicant & Respondent 3. Adjudication : Claimant & Respondent Prepared by Messrs Richard Wee & Yip 2014
- 8. CIPAA: The Scopeand How Does It Work? COMPARISON (cont’d): C. REPRESENTATION 1. Litigation : Lawyers 2. Arbitration : Lawyers/Self-representation 3. Adjudication : Lawyers/Self-representation D. DECISION-MAKER 1. Litigation : Judge 2. Arbitration : Arbitrator 3. Adjudication : Adjudicator Prepared by Messrs Richard Wee & Yip 2014
- 9. CIPAA: The Scopeand How Does It Work? COMPARISON (cont’d): E. EFFECT OF SOLUTIONS 1. Litigation : Binding (Judgment in Law) 2. Arbitration : Binding (Arbitral Decision) Can seek order from Court to enforce 3. Adjudication : Temporarily Binding “Pay first, argue later” concept Prepared by Messrs Richard Wee & Yip 2014
- 10. CIPAA: The Scopeand How Does It Work? PROS: No. LITIGATION ARBITRATION ADJUDICATION 1. Final & Binding Final & Binding Temporarily Binding 2. Detailed arguments Specialization Specialization 3. Follows precedents Flexible Fast 4. Private Private 5. Internationally applicable Prepared by Messrs Richard Wee & Yip 2014
- 11. CIPAA: The Scopeand How Does It Work? CONS: No. LITIGATION ARBITRATION ADJUDICATION 1. Cost (High) Cost (Medium) Cost (Lower) 2. Open to public (No confidentiality) Time (Delay) Only temporarily binding 3. Time (Delay) Prepared by Messrs Richard Wee & Yip 2014
- 12. CIPAA: The Scopeand How Does It Work? Objectives of CIPAA 1. Facilitate regular and timely payment 2. Provide a mechanism for speedy dispute resolution through adjudication 3. Provide remedies for recovery of payment Prepared by Messrs Richard Wee & Yip 2014
- 13. CIPAA: The Scopeand How Does It Work? EFFECT OF CIPAA • CIPAA seeks to ensure that all employers of contractors in the construction industry (including the Government) pay their contractors promptly so that they are not starved for cash. • CIPAA introduces an intervening provisional stage in the dispute resolution process of ‘pay first argue later’. • Effectively removes conditional payment provisions of “pay when paid” or “pay if paid” which contributes to cash flow problems. Prepared by Messrs Richard Wee & Yip 2014
- 14. CIPAA: The Scopeand How Does It Work? SCOPE & APPLICABILITY Prepared by Messrs Richard Wee & Yip 2014
- 15. CIPAA: The Scopeand How Does It Work? SCOPE AND APPLICABILITY • This Act applies to – o Every construction contract o Made in writing o Relating to construction work o Carried out wholly or partly within the territory of Malaysia o Includes a construction contract entered into by the Government of Malaysia [SECTION 2 CIPAA] Prepared by Messrs Richard Wee & Yip 2014
- 16. CIPAA: The Scopeand How Does It Work? SCOPE AND APPLICABILITY (CONT’D) • Parties: o Natural Individuals o Corporate Bodies o Statutory Bodies o Government of Malaysia • The Act would apply unless exempted by the Works Minister. • Note: CIPAA only applies to breaches which occur after 15th April 2014.* * Circular by KLRCA on the Saving Provision in Section 41 of the CIPAA and the Administration of Adjudication Cases by the KLRCA dated 23rd April 2014. Prepared by Messrs Richard Wee & Yip 2014
- 17. CIPAA: The Scopeand How Does It Work? OUT OF THE SCOPE SECTION 3 CIPAA: CIPAA does not apply to a construction contract entered into – • By a natural person • For any construction work • In respect of any building which is less than four storeys high AND • Which is wholly intended for his occupation Prepared by Messrs Richard Wee & Yip 2014
- 18. CIPAA: The Scopeand How Does It Work? HOW DOES IT WORK? Prepared by Messrs Richard Wee & Yip 2014
- 19. PAYMENT CLAIM -SECTION 5 - SERVED BY UNPAID PARTY PAYMENT RESPOND - SECTION 6 - SERVE BY NON-PAYING PARTY INITIATE ADJUDICATION - SECTION 8 - SERVE WRITTEN 'NOTICE OF ADJUDICATION' BY CLAIMANT APPOINTMENT OF ADJUDICATOR - SECTION 21 - BY KLRCA DIRECTOR OR BY AGREEMENT OF PARTIES ADJUDICATOR ACCEPTS THE APPOINTMENT AND PROPOSES TERMS AND FEES - SECTION 22(2) 10 days after acceptance by Adjudicator 10 days after receipt 10 days after receipt 10 days after notifying the Adjudicator ADJUDICATION CLAIM - SECTION 9 - SERVE BY CLAIMANT CIPAA: The Scope and How Does It Work? Prepared by Messrs Richard Wee & Yip 2014
- 20. ADJUDICATION CLAIM -SECTION 9 - SERVE BY CLAIMANT ADJUDICATION REPLY ADJUDICATION RESPONSE - SECTION 10 - SERVE BY RESPONDENT - SECTION 11 - SERVE BY CLAIMANT DECISION BY ADJUDICATOR - SECTION 12 10 days after receipt 5 days after receipt 45 days from service of adjudication response or reply to the adjudication response, whichever later CIPAA: The Scope and How Does It Work? Prepared by Messrs Richard Wee & Yip 2014
- 21. FLOWCHART Section 5(1)- unpaid party may serve payment claim to non-paying party Section 6(1) - Admits partly or wholly Section 6(4) - Fails to response is deemed to have disputed Section 6(2) - Disputes partly or wholly ADJUDICATION PROCEEDINGS - Section 7 -Within six years based as per Limitation Act 1950 Admits partly to the payment claim Admits wholly to the payment claim CIPAA: The Scope and How Does It Work? Prepared by Messrs Richard Wee & Yip 2014
- 22. ADJUDICATION PROCEEDINGS -Section 7 Section 8(1) – Claimant send notice of adjudication to respondent Section 8(2) & Section 21 – Appointment of adjudicator Section 21(a) – appointment of adjudicator by agreement of parties Section 21(b) – appointment of adjudicator by Director of the KLRCA Section 22(1) – Claimant shall notify the adjudicator Section 23 – Director of the KLRCA shall appoint the adjudicator within five days after request and shall notify the adjudicator and the parties CIPAA: The Scope and How Does It Work? Prepared by Messrs Richard Wee & Yip 2014
- 23. CIPAA: The Scopeand How Does It Work? CIPAA Announcements/Guidelines • Press Statement o 15th May 2014 – The Construction Industry Payment and Adjudication Act 2012 Comes Into Operation • KLRCA CIPAA Circulars o KLRCA CIPAA Circular 01 – Dated 23rd April 2014 • On the saving provision in Section 41 of CIPAA and the administration of adjudication cases by the KLRCA o KLRCA CIPAA Circular 02 – Dated 28th April 2014 • KLRCA’s recommended schedule of fees Prepared by Messrs Richard Wee & Yip 2014
- 24. CIPAA: The Scopeand How Does It Work? CIPAA Announcements/Guidelines • KLRCA CIPAA Circulars (cont’d) o KLRCA CIPAA Circular 03 – Dated 28th April 2014 • Guideline on the meaning of “construction contract made in writing” o KLRCA CIPAA Circular 04 – Dated 28th April 2014 • Procedure for exemption application made under Section 40 of the Construction Industry Payment and Adjudication Act 2012 Prepared by Messrs Richard Wee & Yip 2014
- 25. CIPAA: The Scopeand How Does It Work? THANK YOU. Prepared by Messrs Richard Wee & Yip 2014