With the implementation of an unprecedented Movement Control Order (“
MCO”) in Malaysia from 18 March 2020 to 28 April 2020 (“
MCO Period”), non-essential business premises and many construction companies have to cease operations during the MCO Period. The adjudication authority, Asian International Arbitration Centre (“
AIAC”), has also announced that its premises will be closed during the MCO Period, and that it will not be accepting any physical service of documents or register any new adjudication during this period of time
1. This has a ripple effect on adjudication proceedings under the
Construction Industry Payment and Adjudication Act 2012 (“
CIPAA”) (both ongoing or pending commencement), especially on the statutory timeline and the prescribed mode of service of relevant notices and documents.
This Alert sets out the general impact of the MCO on statutory adjudication and some practical steps for consideration when navigating in the current sea of uncertainty.
Payment Claim
Whilst an unpaid party is still entitled to serve his payment claim on a non-paying party pursuant to
Section 5 of CIPAA, it may be impractical or difficult for an unpaid party to serve the payment claim in accordance with the prescribed modes of service under paragraphs (a) to (c) of
Section 38 of CIPAA2 as a result of the MCO. Personal service and service by leaving the payment claim at the non-paying party’s place of business may be impractical due to the mandatory closure of the business premises and the movement restrictions under the ongoing phase 2 of the MCO (which took effect since 1 April 2020) (“
MCO Phase 2”).
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However, service of a payment claim by registered post may be possible despite certain delays due to the overwhelming number of documents being posted and the limited operating hours of the post office. Notices or documents which have been or are to be served via registered post pursuant to Section 38(c) of CIPAA are subject to Section 12 of the Interpretation Acts 1948 and 1967
4. Unless the contrary is proved, service shall be effected by properly addressing, prepaying and posting by registered post the document in question and service shall be presumed to have been effected at the time when the letter would have been delivered in the ordinary course of the post.
Alternatively, an unpaid party should check the contract provisions to ascertain if parties have agreed to alternative modes of service that remain viable during the MCO Period.
5 For example, if parties have contractually agreed that documents can be served by way of fax or email, then an unpaid party may serve its payment claim on the non-paying party in the agreed manner.
Payment Response
A non-paying party must take note that the 10 working days period to serve a payment response on the unpaid party upon the receipt of the payment claim
6 continues to apply during the MCO Period. The same difficulties as mentioned above may be faced by a non-paying party for service of the payment response. The non-paying party should likewise check the contract provisions to ascertain if it contains alternative modes of service which remain viable.
Further, a non-paying party may face difficulties in responding to a payment claim within the prescribed timelines under CIPAA. This, however, is mitigated by the fact that a non-paying party will be deemed to have disputed the entire payment claim if it does not respond to the claim and the non-paying party is not prevented from raising additional defences in the Adjudication Response.
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Notice Deemed Served by Registered Post
Some standard form building contracts contain deeming provisions on receipt of notices sent by way of registered post. These deeming clauses provide that notices or documents are duly served and received by the other party after a number of days from the date of posting.
8 The word ‘deem’ had been held to mean that something is considered done once the conditions are fulfilled regardless whether the recipient has actually received it or not.
9 These clauses had been held to be enforceable in adjudication proceedings.
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In this regard
, if parties decide to serve their payment claim or payment response by way of registered post, such deeming provisions (if any) should be taken into consideration as the same will be deemed served and received after the lapse of the prescribed period. This is especially important for a non-paying party who is statutorily given only 10 working days to serve his payment response. As such, a non-paying party will not want to serve the payment response on the due date itself but earlier to allow sufficient lapse of time for the payment response to be deemed duly served within the 10 working days period.
Notice of Adjudication, Registration of Adjudication and Appointment of Adjudicator
After the expiry of the 10 working days period to serve a payment response, either the unpaid party or the non-paying party (“
Parties”) may refer a dispute arising from a payment claim to adjudication by issuing a notice of adjudication
11, subject to the abovementioned difficulties in relation to service of documents and practical considerations moving forward during the MCO Period.
It should be noted that any disputes referred to adjudication under CIPAA is subject to the
Limitation Act 1953 (“
Limitation Act”)
12. In this regard, Parties who may find their adjudication barred by the Limitation Act may consider issuing the notice of adjudication to prevent their actions from being time-barred even though AIAC had announced that it will not be registering any new adjudication during the MCO Period. This is because the limitation period in relation to the dispute arising from the payment claim stops running upon the effective service of the notice of adjudication pursuant to CIPAA, and not upon the registration of the adjudication or the effective service of the payment claim.
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Alternatively, Parties may consider filing an action in the courts using the e-Courts system as the filing of new civil actions in such courts proceeds as usual by way of e-filing. Further, the corollary case managements by way of e-Review proceeds as usual during the MCO Period. This is to ensure that the limitation period does not set in to deny the Parties their respective claims. If Parties have agreed to arbitration as the dispute resolution mechanism, one of the Parties may consider issuing a notice of arbitration and serving it on the other, subject to the abovementioned difficulties and practical considerations during the MCO Period.
Adjudication Claim, Adjudication Response and Adjudication Reply
For on-going adjudication proceedings, the claimant and the respondent must take note that the time limits to serve an adjudication claim,
14 adjudication response
15 and adjudication reply
16 under CIPAA continues to apply during the MCO Period. However, finalisation of such claim, response and reply may be delayed or hindered for various reason including not having full access to the supporting documents which may be kept in the business premises. If parties anticipate that they may not be able to meet the time limits imposed on them under CIPAA, it will be prudent to seek an agreement from the other party for more time, or to apply to the appointed adjudicator for an extension of time to serve the abovementioned documents. Upon the request of the parties, the adjudicator may then exercise his/her power under
Section 25(p) of CIPAA to extend the same as reasonably required.
The claimant and the respondent may consider agreeing to service by email, if they have not already done so to enable effective service by email during the MCO Period. Even if they are unable to reach an agreement, the adjudicator may exercise his power under
Section 25(p) of CIPAA to extend the same as reasonably required.
Adjudication Decision
The adjudicator must take note that the 45 working days period to deliver an adjudication decision
17 continues to apply during the MCO Period. If the adjudication decision is due to be delivered during the MCO Period and parties have not agreed alternative modes of service other than the ones listed under paragraphs (a) to (c) of
Section 38, the adjudicator should consider delivering his adjudication decision by way of email, subject to the parties’ agreement.
If service by email is not agreed and the adjudicator anticipates that he might fail to deliver an adjudication decision within the said time limit due to restrictions during the MCO Period, it may be prudent for the adjudicator to promptly inform the parties and seek their agreement to extend the time to deliver an adjudication decision under
Section 12(2)(c) of CIPAA. If Parties do not agree to the adjudicator’s request for extension of time, then the adjudicator should not wait till the last day of the 45 working days to send his adjudication decision but should likewise send the adjudication decision earlier to allow sufficient time for the decision to be delivered within the time prescribed under CIPAA to avoid the adjudication decision being void pursuant to
Section 12(3) of CIPAA.
The panacea for all ills?
From the above, it can be seen that there may be circumstances where a party can behave unreasonably, such as by refusing to grant extensions of time or to vary the mode of service of documents, to gain an unfair advantage from the restrictions imposed during the MCO. To level the playing field, the Government should consider introducing legislation similar to the COVID-19 (Temporary Measures) Act 2020 of Singapore to exclude the MCO Period from the computation of time under contract and statutory provisions (including limitation provisions).
If you have any queries, please contact our Mr. Jeremiah Ch’ng (Associate) at jeremiah@skrine.com or Mr. Chong Hong Kiat (Associate) hong.kiat@skrine.com.
2 Section 38 of CIPAA allows: (a) personal service; (b) service by leaving the relevant document at the other party’s usual place of business; (c) service by registered post to the other party’s usual or last-known place of business; and (d) any other mode of service as agreed by the parties.
3 See Prevention and Control of Infectious Diseases (Measures within Infected Local Areas) (No. 2) (Regulations) 2020. In essence, it imposes a travel limit of 10km-radius from one’s home and the purpose of travelling is confined to purchase of food and other necessities.
4 Section 12 Interpretation Acts 1948 and 1967 states: Where a written law authorises or requires a document to be served by post, then, until the contrary is proved, service: (a) shall be presumed to be effected by properly addressing, prepaying and posting by registered post a letter containing the document; and (b) shall be presumed to have been effected at the time when the letter would have been delivered in the ordinary course of the post.
5 Section 38(d) of CIPAA.
7 See Section 6(4) of CIPAA. See also the Federal Court decision of
View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 which held that the adjudicator must consider defences raised in the adjudication response which was not found in the payment response failing which he will be in breach of natural justice.
8 See clause 36.2(b) of the PAM 2006; clause 75.2(c) of the PWD DB 2007; clause 67.2(iii) of the PWD 203 & PWD 203A.
9 See
AMT Engineering Services v Ah Design Communication Sdn Bhd and another appeal [2018] MLJU 1860.
10 See the Supreme Court of New South Wales’ decision of
Chase Oyster Bar v Hamo Industries [2010] NSWSC 332. The payment claim was served by post on 23 December 2009. According to the terms of the contract, the date of service was deemed effective on 31 December 2009. The judge held that the parties’ agreement as to manner of service should be respected and following the terms of the contract, the payment claim was served on 31 December 2009, although there was no evidence as to when it was actually received.
11 Sections 7(1) and 7(2) of CIPAA.
12 Section 6 of Limitation Act 1953 provides that actions founded on a contract shall not be brought after the expiration of six years from the date on which the cause of action accrued (i.e. the date of which the non-payment under the construction contract occurred).
13 Sections 7 and 8(1) of CIPAA.
14 Sections 9(1) and 9(2) of CIPAA provide that the claimant shall within ten working days from the receipt of the acceptance of appointment by the adjudicator, serve a written adjudication claim on the respondent and the adjudicator.
15 Sections 10(1) and 10(2) of CIPAA provide that the respondent shall within ten working days from the receipt of the adjudication claim, serve a written adjudication response on the claimant and the adjudicator. Failing which, the claimant may proceed with the adjudication pursuant to Section 10(3) of CIPAA.
16 Sections 11(1) and 11(2) of CIPAA provide that the claimant may within five working days from the receipt of the adjudication response, serve a written reply to the adjudication response on the respondent and the adjudicator.
17 The 45-day period commences from the service of the adjudication response or adjudication reply (Section 12(2)(a) of CIPAA) or the expiry of the period prescribed for the service of the adjudication response if no adjudication response is received (Section 12(2)(b) of CIPAA).