CASE UPDATE: Meaning of the ‘Construction Work’ in CIPAA shall not be Construed Restrictively

MIR Valve Sdn Bhd v TH Heavy Engineering Bhd and other cases [2018] 7 MLJ 796

In this case, the High Court held that the meaning of construction work and construction consultancy work under CIPAA shall be construed widely.

Significantly, the High Court stated that one shall look at the functional purpose of the work and not the form of the work.

Background Facts:

The project in this case relates to the work done on a ship to convert it into a floating production storage and offloading (FPSO) vessel.

The Claimant was appointed by the Respondent to supply and install valves on FPSO vessel.

The Claimant alleged that the Respondent failed to honour two tax invoices and proceed to refer the dispute to adjudication proceeding pursuant to Construction Industry Payment and Adjudication Act 2012 (CIPAA).

The Adjudication Decision was decided in favour of the Claimant and the Respondent sought to set aside the Adjudication Decision on the ground that the Contract in question is not a construction contract within the ambit of CIPAA.

Decision of High Court

The High Court held that the meaning of construction work and construction consultancy work as defined in CIPAA shall not be construed restrictively.

Section 4 of CIPAA defines ‘construction work’ as:

‘construction work’ means the construction, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling, or demolition of:

(a)Any building, erection, edifice, structure, wall, fence or chimney, whether constructed wholly or partly above or below ground level;

(b)Any road, harbour works, railway, cableway, canal or aerodrome;

(c)Any drainage, irrigation or river control work;

(d)Any electrical, mechanical, water, gas, oil, petrochemical or telecommunication work; or

(e)Any bridge, viaduct, dam, reservoir, earthworks, pipeline, sewer, aqueduct, culvert, drive, shaft, tunnel or reclamation work, and includes —

(a)Any work which forms an integral part of, or are preparatory to or temporary for the works described in paragraphs (a) to (e), including site clearance, soil investigation and improvement, earth-moving, excavation, laying of foundation, site restoration and landscaping; and

(b)Procurement of construction materials, equipment or workers, as necessarily required for any works described in paragraphs (a) to (e).

The High Court held that the conversion work from a ship to an FPSO vessel would mean that it no longer serves the purpose of a ship but is now transformed into a different purpose; that of the oil and gas industry.

As such, the conversion work from a ship to an FPSO vessel is construction work.

The Court held that one must look at the functional purpose of the work and not the form of the structure with respect to its type of structure.

Read More at: What is CIPAA? The requirement to launch a CIPAA Claim

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