CASE UPDATE: CIPAA Claim can only be Initiated After the Due Date of Payment

Ideal City Development Sdn Bhd v PWC Bina Sdn Bhd & Other Appeals [2019] 2 CLJ 615

In this case, the Court of Appeal ruled that an Unpaid Party / Claimant can only bring a CIPAA claim against the Non-Paying Party / Respondent after the due date of payment provided in the contract.

As a result, if an Unpaid Party / Claimant brings an action against the Non-Paying Party / Respondent before the due date of payment:

  1. the Adjudicator may refuse to decide on the matter on the ground that the Adjudicator does not have jurisdiction to adjudicate payment which is not due yet; or
  2. Alternatively, if the Adjudicator decides on the matter, the Adjudication Decision is liable to be set aside under Section 15 on the ground that the Adjudicator had acted in excess of jurisdiction.

Background Facts

The superstructure work Contractor brought a CIPAA claim against the Developer, alleging the non-payment for the Interim Payment Certificate No. 29 (IPC29) dated 25.10.2016.

The period of honouring IPC29 is 30 working days, which puts it on 06.12.2016.

However, the CIPAA Payment Claim was prematurely issued on 29.11.2016, which is well before the due date of payment.

The Adjudication Decision was rendered in the Contractor’s favour and the Developer mounted a jurisdictional challenge to set aside the Adjudication Decision

Firstly, the Court of Appeal ruled although the jurisdictional challenge was not raised during the Adjudication Proceedings,  it can be raised at any stage.

Pertinently, the Court of Appeal ruled that the Adjudicator had acted in excess of her jurisdiction when she dealt with in futuro payments, i.e. payment not yet due. The Court of Appeal reasoned that since the payment is not yet due, the Contractor cannot claim to be an ‘unpaid party’ on the date of issuance of Payment Claim and therefore, the Contractor cannot validly invoke the mechanism of CIPAA.

Significance:

An Unpaid Party can only bring its claim against the Non-Paying Party after the due date of payment provided in the contract.

If the contract is silent on this, then Section 36 of CIPAA provides that the default due date of payment is 30 calendar days from the receipt of the progress claims / interim payment certificates.

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