Whether Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) applies to construction contracts entered into before the coming into operation of the Act – Whether Section 35 of CIPAA 2012 should also apply to construction contracts entered into before the coming into operation of the Act – Whether the CIPAA 2012 has retrospective or prospective operation?

Jack-In Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd
(Civil Appeal No.:02(f)-58-07/2018(B), Federal Court

see the grounds of judgment here

Facts The appellant is a contractor appointed by the respondent as its subcontractor for a project a contract sum of more than MYR1 million (the agreement). Under the agreement, all payments to the appellant shall only be made within 7 days from the date the respondent received their related progress payments from the employer of this project namely ITD-Vertex Consortium Sdn Bhd (the employer). From this clause, there is no obligation on the respondent to make payment to the appellant until and unless the respondent has received payment from the employer for the related progress payment. Payment disputes arose in respect of progress claim which was later reduced in the later part of the adjudication proceedings. The appellant contended that the said progress claim was not certified as paid by the respondent. Adjudication proceedings pursuant to the CIPAA were thus commenced by the appellant. At the conclusion of the adjudication proceedings, the adjudicator delivered his decision whereupon the respondent was required to pay the appellant the reduced adjudicated amount. Pursuant to an Originating Summons, the appellant sought to enforce the adjudication decision. However the respondent, sought to set aside the adjudication decision. The High Court allowed the appellant’s claim to enforce the adjudication decision and dismissed the respondent’s setting aside application. Dissatisfied with the said High Court’s decision, the respondent appealed in the Court of Appeal against both the High Court’s decision and the appeals were allowed. Hence, this appeal.

Issues The main issue is whether the Construction Industry Payment and Adjudication Act 2012 (CIPAA) which came into force on 15.4.2014 is to be construed as having retrospective or prospective operation?

Held In dismissing the appeal, the Federal Court held that held that the entire adjudication proceedings including the adjudication decision are rendered void and CIPAA can only be applied prospectively. Disagreed with the rationale in the High Court decision in UDA Holdings Bhd v Bisraya Construction Sdn Bhd & Anor [2015] 11 MLJ 499
[1], neither CIPAA nor the Hansard records expressly provide that the Act is to be applied retrospectively. It is the intention of Parliament to provide a speedy resolution to payment disputes in the construction industry. But that intention, without more, does not lead to the conclusion that Parliament intended for CIPAA to be applied retrospectively.

[1] High Court held that the CIPAA including section 35 (Prohibition of Conditional Payment) is to be applied retrospectively