A Glance At CIPAA Payment Claims In Malaysia

Rule & Co Editorial Team
6 hours ago
3 min read

For contractors and subcontractors in Malaysia owed progress payments, a CIPAA payment claim can be a practical strategy to recover a construction debt in as little as 10 working days.

That said, CIPAA is not ideal for every scenario, and even when it is, there are mandatory steps to follow and considerations to make, all of which we explain below.

Alternatively, skip the reading and get in touch for a free recovery assessment.

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Otherwise, let’s begin.

What to prepare before filing a CIPAA claim

Gather supporting documents that establish and strengthen a claimant's position including:

the signed construction contract
all progress claims submitted
payment certificates (if applicable)
site instructions and variation orders
correspondence regarding delays or non-payment, and
proof of work completion (site reports, photographs, delivery orders)

Once documents are compiled, the claimant may commence with service of a Payment Claim.

How a CIPAA payment claim works

Ideally, the service of a CIPAA Payment Claim is a simple two-step process similar to sending a letter of demand.

1. Service of Payment Claim

The claimant issues a formal Payment Claim stating:

the amount claimed
the due date
supporting documentation (listed above)
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.

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 (treated as disputing the claim)

Ideally, the respondent pays the claim in full or begins genuine negotiations.

However, as Payment Claims are often used as a mandatory step in the larger CIPAA adjudication process, the claimant should be prepared to have the claim disputed, at which point they can initiate adjudication by serving a Notice of Adjudication.

Be warned however, that this shifts a simple matter to a relatively protracted affair.

CIPAA adjudication overview

For the purposes of this guide, we'll provide an abridged version, so claimants expecting a brawl may want to read our full guide to CIPAA adjudication.

CIPAA adjudication follows a tightly regulated timeline with four main stages:

Service of Notice of Adjudication
Appointment of adjudicator
Pleadings
Final adjudicator decision

As the final decision is immediately and legally binding, it is akin to a creditor securing a court judgement in their favour but without the lengthy time period of a civil suit.

That said it still usually takes just under 90 working days to go from service of Payment Claim to final adjudication decision, which is still a considerable amount of time for a contractor. If extensions are filed, it could take even longer than this.

A possible alternative to CIPAA adjudication

In our experience, statutory demands under the Companies Act 2016 can be the most ideal strategy to secure payment for uncontested construction debts involving operational corporate debtors.

sample statutory demand used effectively in construction debt recovery case

A statutory demand is a formal notice requiring the debtor to pay within 21 days. Failure allows the creditor to petition for a compulsory winding-up - incentivising immediate settlement without having to go through the relatively lengthy adjudication process.

In a nutshell, definitely start with a CIPAA Payment Claim, and if that doesn't work, consider a statutory demand instead of defaulting to adjudication proceedings.

That’s all from us, and we wish you a smooth debt recovery 🙂

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