A Creditor’s Guide To CIPAA Adjudication In Malaysia
- Rule & Co Editorial Team
- 19 hours ago
- 6 min read
For parties in Malaysia’s construction industry facing non-payment, adjudication under the Construction Industry Payment and Adjudication Act 2012 (CIPAA) offers a resolution method that is faster and cheaper than civil litigation.
In fact, as it is also legally enforceable, claimants can think of a CIPAA adjudication in their favour as a fast-tracked court judgement, opening doors to legal debt enforcement methods in months rather than years.
That said, based on our decade of representing creditors in construction disputes CIPAA adjudication, though powerful, is not perfect, and to creditors considering it, we explain:
whether your claim qualifies
steps in the adjudication process
what happens after the decision, and
our thoughts on when there can be even better recovery strategies
Alternatively, skip the reading and get in touch for a free recovery assessment.
Otherwise, let’s begin.
For clarity, we refer below to the creditor as Claimant, the debtor as Respondent, and the upstream employer as Principal.
Whether your claim falls under CIPAA
Broadly speaking, CIPAA adjudication can apply to payment disputes for construction, engineering, and consultancy services (such as project management) that meet the following:
claims are based on expressly written contract terms (can be electronic messages)
the work was done wholly or partly in Malaysia
The one exception is that CIPAA does not apply to contracts with a natural person (not a company) for a home less than four storeys high meant for their own occupation.
Fees & costs
CIPAA adjudication is regulated by the Asian International Arbitration Centre (AIAC), who have set a list of standard fees as follows:
non-refundable dispute registration fee of RM 250
appointment fee If parties cannot agree on an adjudicator RM 400.
administrative fee calculated at 20% of the adjudicator’s total fees
standard adjudicator rates based on a sliding scale according to the disputed amount ranging from RM 2,760 (claims < RM 50,000) to RM 50,000 (claims 5,000,001 and above)
standard adjudicator expenses including travel, lodging, and meals
Note: Parties are free to negotiate and agree on specific fees directly with the adjudicator, and the general rates usually apply to AIAC appointed individuals.
As is usually the case, you get what you pay for, so it is recommended to offer above standard fees for complicated or high-value cases to ensure it is adjudicated by experienced professionals.
For claimants ready to proceed, time to establish a formal record of the payment dispute.
Note: As steps below are mandatory under CIPAA, noncompliance risks the claim being set aside and so we urge claimants to follow the steps exactly. CIPAA doesn’t provide official letter samples, so since we’re nice people, we’ve prepared templates to edit and send via email.
Pre-adjudication: Establishing payment dispute
This is a preliminary process described in Section 5 of CIPAA that consists of two steps:
Serving a Payment Claim, and
Allowing the respondent time for a response
Step 1: Serving Payment Claim
The claimant must serve a written Payment Claim stating:
the amount claimed
the due date
details of the cause of action (contract provisions relied upon)
description of work or services performed, and
a statement that it is made under CIPAA
Here is a sample Payment Claim for readers to use.
This document defines the adjudicator’s jurisdiction, as anything not stated in this claim cannot be adjudicated.
Step 2: Payment response
From the date of service of the Payment claim, the respondent has 10 working days to serve a Payment Response and either:
pay the claim
dispute it, or
fail to respond
A response disputing payment or failure to respond entirely within this period results in the claim being deemed disputed in full, at which point adjudication proper can begin.
Note: The adjudication process can only begin after 10 working days, so even if the respondent disputes it on Day 2, the formal Notice of Adjudication still cannot be served until Day 11.
The adjudication process
CIPAA adjudication proceedings follow a tightly regulated timeline with four main stages:
Service of Notice of Adjudication
Appointment of adjudicator
Pleadings
Final adjudicator decision
Step 1. Notice of Adjudication
The claimant serves a written Notice of Adjudication on the respondent and the matter is registered with the AIAC within 7 days, together with payment of the registration fee.
Here's a sample Notice of Adjudication.
Step 2. Appointment of adjudicator
Once registered with AIAC, the claimant and respondent have 10 working days to agree on an adjudicator, failing which the AIAC will usually be requested to appoint one.
In layman terms, the adjudicator acts as a judge with broad authority on how the dispute is heard without being bound by the usual formalities of a courtroom, including:
ordering the discovery and production of specific documents
conducting site visits and inspecting work or materials, and
reviewing and revising any certificate, opinion, or valuation
As adjudicators are usually legally trained individuals with years of experience in construction dispute resolution, their discretionary powers are usually in favour of the legally justified party.
The chosen adjudicator must formally indicate their willingness to act and propose their terms and fees within 10 working days of being notified, after which the pleadings stage can begin.
Step 3: Pleadings
This is where parties formally submit their detailed written arguments and evidence to the adjudicator, consisting of three primary documents in the following order:
Adjudication Claim
Adjudication Response
Adjudication Reply
Details on each document can be seen in the table below.
Document | Prepared by / Sent to | Timeframe | Content |
Adjudication Claim | Prepared by Claimant; served on Respondent and Adjudicator | 10 working days of adjudicator’s acceptance | Nature and description of the dispute, reliefs sought, and supporting documents |
Adjudication Response | Prepared by Respondent; served on Claimant and Adjudicator | 10 working days of receiving Adjudication Claim | Respondent’s version of facts and grounds for dispute |
Adjudication Reply | Prepared by Claimant; served on Respondent and Adjudicator | Within 5 working days of receiving the Adjudication Response | Limited to answering points raised in the Response; cannot introduce entirely new claims |
As the table shows, the claimant is responsible for the Adjudication Claim and Reply and here are samples of both documents:
Note that copies of both must be submitted to AIAC within seven working days of being served on the adjudicator and respondent.
Once pleadings are finished, the adjudicator is required to deliver a written decision within a strict statutory timeframe of 45 working days (though it can be extended in certain circumstances).
Step 4. Final decision
Within 45 days of the final pleading submissions, if the adjudicator finds in favour of the claimant, they may pass a decision that outlines:
the adjudicated amount, and
the time and manner of payment
The decision is immediately binding, meaning the losing party must pay the adjudicated amount even if they intend to challenge it in court or arbitration.
And of course, there is always the chance that the adjudicator finds in favour of the respondent, in which case the claimant may be the one doing the challenging.
Post-adjudication: Decision enforcement or challenge
If the adjudication finds in favour of the claimant, they can then pursue the following remedies:
apply to the High Court to enforce the decision like a court order, granting access to various judgement debt enforcement options
suspend or reduce the rate of work progress with 14 working days’ notice
get paid directly from the Principal who owes the respondent (like a garnishee order)
If dissatisfied, the claimant may petition to have the adjudication decision set aside by the High Court.
Permissible grounds include:
the decision was procured through fraud or bribery
there was a denial of natural justice (fancy term for unfairness)
the adjudicator failed to act independently or impartially, or
the adjudicator acted in excess of their jurisdiction
Bear in mind that by this point, a significant amount of time has already passed and escalating to the courts will incur significantly higher costs.
Our professional thoughts
Compared to litigation, CIPAA adjudication is undoubtedly superior in speed, but is still often too slow to be a practical alternative for a contractor in financial distress.
When all statutory steps are followed as they must be, the time from serving the Payment Claim to receiving the final adjudication decision is typically just under 90 working days.
Step | Working days |
Payment Claim | 1 |
Payment Response | 10 |
Notice of Adjudication | 1 |
Adjudicator Appointment | 5–10 |
Adjudicator Acceptance & Terms | Up to 10 |
Adjudication Claim | 10 |
Adjudication Response | 10 |
Adjudication Reply | 5 |
Final Decision | 45 |
We didn’t even get into extensions, so it could take even longer!
For cash-strapped claimants (and we’ve never met a contractor who wasn’t) this could mean three payment cycles of defaulting on their own payments.
An alternative debt recovery method
In our experience, construction disputes often involve high-value debts owed by solvent, operational corporate debtors making statutory demands under the Companies Act 2016 a potentially even faster way to secure payment.
A statutory demand is a formal notice requiring the debtor to pay within 21 days. Failure to do so allows the creditor to petition the court for a compulsory winding-up - a powerful incentive for immediate settlement, as seen in several of our past cases.
While CIPAA adjudication moves recovery into months, a statutory demand in the right circumstances can reduce the timeline to just weeks.
That’s all from us, and we wish you a smooth debt recovery 🙂
Let Rule & Co handle your construction debt recovery
If you’ve sent reminders and been ignored or simply don’t want the hassle of chasing payments, Rule & Co is a debt recovery law firm that focuses on helping creditors recover debts via legal strategies that minimise upfront cost, maximise recovery, and protect your reputation.
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