If you are a contractor, subcontractor, or construction consultant in Malaysia who has not been paid for work done or services rendered, you do not have to wait years for a court judgment to recover what you are owed.
The Construction Industry Payment and Adjudication Act 2012, or commonly known as CIPAA, gives you a statutory right to resolve payment disputes through adjudication, a process that is faster and generally more cost-effective than conventional court litigation, with decisions that are temporarily binding unless and until it is set aside by the High Court or finally determined by arbitration or court proceedings. A decision can often be obtained within approximately 100 working days from the date of the Payment Claim, depending on the complexity of the dispute and procedural timelines.
This guide explains everything you need to know about making a CIPAA claim in Malaysia: who can use it, what you can claim for, the step-by-step process, the key deadlines you must not miss, and what happens after a decision is made.
If you need legal advice on a specific CIPAA matter, our construction lawyers are available to assist.
CIPAA came into force on 15 April 2014. It was introduced to address a long-standing problem in Malaysia’s construction industry: chronic payment delays that disrupted cash flow across every level of a project, from main contractors down to subcontractors, suppliers, and consultants.
Before CIPAA, an unpaid contractor’s only real option was to wait until project completion before commencing arbitration or court proceedings, a process that could take years to resolve. CIPAA changed this by introducing a statutory adjudication mechanism that operates on the principle of “pay now, argue later.”
This provides a temporarily binding resolution of payment disputes quickly, while leaving the door open for either party to take the matter to arbitration or court afterwards if they wish to challenge the decision on its merits.
CIPAA is governed by the Construction Industry Payment and Adjudication Act 2012 (Act 746) and is administered through the Asian International Arbitration Centre (AIAC).
CIPAA is available to any unpaid party under a written construction contract. This includes:
- Main contractors claiming against developers or employers
- Subcontractors claiming against main contractors
- Sub-subcontractors claiming against subcontractors
- Construction consultants, including architects, engineers, quantity surveyors, and project managers, claiming for unpaid professional fees
CIPAA applies to construction contracts made in writing for work carried out wholly or partly within Malaysia. Importantly, a contract does not need to be formally signed to qualify. A contract evidenced by an exchange of emails, letters, or written purchase orders is sufficient.
If you are unsure whether your project qualifies, our construction law firm specialising in Malaysian law can review your contract and advise you on the available options.
CIPAA does not apply to:
- Construction contracts entered into by a natural person (individual, not a company) for the construction of any building less than four storeys high that is wholly intended for their own occupation. For example, a contractor cannot bring a CIPAA claim against a homeowner building a two-storey bungalow for personal use.
- Contracts that are wholly or partly oral. There must be a written record of the agreement.
- Certain government contracts may be exempted by order of the Minister under Section 3 of CIPAA.
- Claims that are not payment-based. CIPAA only covers payment disputes. Standalone claims for overpayment recovery may fall outside CIPAA’s intended scope and may need to be pursued through court or arbitration.
A CIPAA claim must be for payment for work done or services rendered under the express terms of a written construction contract. The following types of payment claims are covered:
- Progress payments – interim payments for work completed during the course of a project
- Final account payments – the balance due at completion of the project
- Retention sums – amounts withheld by the employer as security for defects, which can be claimed once they are due for release under the contract
- Variation works – payment for additional or varied scope of work, where the variation work is supported by the contractual terms and relevant supporting documents
- Preliminaries and provisional sums – where these are expressly provided for under the contract terms
- Consultancy fees – professional fees owed to architects, engineers, quantity surveyors, or project managers under a written consultancy contract
The following cannot be pursued through CIPAA adjudication:
- Overpayment recovery. CIPAA is generally intended for payment claims rather than standalone overpayment recovery claims
- Loss of profit claims
- Tortious claims or claims for general damages arising outside the express terms of the contract
- Extension of time (EOT) claims on their own. EOT is relevant only where it affects payment (such as resisting a liquidated damages deduction)
The CIPAA adjudication process follows a structured statutory timeline. Missing a deadline can seriously damage your claim or your defence. Here is a clear overview of each stage:
The process begins when the unpaid party serves a Payment Claim on the non-paying party under Section 5 of CIPAA.
The Payment Claim must:
- Be in writing
- State the amount claimed and the basis for it
- Reference the relevant contract and the work or services performed
- Be accompanied by supporting documents such as invoices, payment certificates, variation orders, site instructions, and relevant correspondence
This is a critical document as it generally defines the scope of the dispute to be adjudicated. Issues not properly raised in the Payment Claim may be restricted or disallowed later depending on relevance and adjudicator discretion. It is strongly advisable to have a construction lawyer review and prepare this document.
Timeline: There is no statutory deadline for serving the Payment Claim itself, but the 6-year limitation period under the Limitation Act 1953 still applies. You must serve the Payment Claim within 6 years from when the payment became due.
Once the Payment Claim is served, the non-paying party has 10 working days to serve a Payment Response under Section 6 of CIPAA.
The Payment Response must set out:
- The amount disputed (whether all or part of the claim)
- The reasons for the dispute
If the non-paying party fails to serve a Payment Response within 10 working days, they are deemed to have disputed the entire Payment Claim. The unpaid party may then proceed directly to adjudication. Crucially, a non-paying party who does not respond may be restricted from raising certain defences that were not properly set out in the Payment Response. The Federal Court confirmed this in View Esteem Sdn Bhd v Bina Puri Holdings Bhd.
If the dispute is not resolved after the Payment Response (or if no response is received), the unpaid party may serve a Notice of Adjudication under Section 8 of CIPAA.
The Notice of Adjudication must contain:
- The nature and description of the dispute
- The remedy sought
- Supporting documents
The Notice of Adjudication must be registered with the AIAC within 7 working days of being served, along with payment of the AIAC registration fee.
Once the Notice of Adjudication is registered with the AIAC, both parties have 10 working days to agree on the appointment of an adjudicator.
If they cannot agree, either party may request the AIAC to appoint one from its panel of registered adjudicators. Adjudicators are qualified professionals, typically lawyers, engineers, quantity surveyors, or experienced construction practitioners, who are registered with the AIAC and must meet strict competency and impartiality standards.
Adjudicator fees follow a sliding scale based on the applicable AIAC fee schedule and the amount in dispute. Parties are free to negotiate fees directly with the adjudicator for complex or high-value cases.
Once the adjudicator is appointed, the formal adjudication proceedings begin. The typical sequence is:
- Claimant’s Adjudication Claim – served within a timeline set by the adjudicator, usually based on the Payment Claim already served
- Respondent’s Adjudication Response – the non-paying party’s defence, served within a further period set by the adjudicator
- Claimant’s Adjudication Reply – a reply to the Respondent’s response, if permitted by the adjudicator
The adjudicator has broad powers to conduct proceedings, including ordering the discovery of documents, requesting further submissions, and conducting site visits if necessary. Unlike court proceedings, CIPAA adjudication is not bound by strict rules of evidence or procedure.
The adjudicator must deliver a decision within 45 working days from the date the Adjudication Response is served (or from when the adjudicator receives all relevant submissions, whichever is later). This period may be extended with the consent of both parties.
The adjudication decision is temporarily binding on both parties unless and until it is set aside by the High Court, the dispute is settled in writing, or it is finally determined by an arbitrator or court.
The grounds for setting aside an adjudication decision under Section 15 of CIPAA are limited to:
- Fraud or corruption
- Breach of natural justice
- The adjudicator exceeding their jurisdiction
- Failure of the adjudicator to act independently or impartially
| Stage | Timeline |
|---|---|
| Payment Response after Payment Claim | 10 working days |
| Registration of Notice of Adjudication with AIAC | Within 7 working days of serving |
| Agreement on adjudicator appointment | 10 working days |
| Adjudicator delivers decision | Within 45 working days of Adjudication Response |
| Full process (typical) | Approximately 90 to 100 working days |
The non-paying party is required to pay the adjudicated sum within the timeframe specified in the decision. If they fail to do so, you have several options under CIPAA:
- Enforce the decision as a court judgment
Under Section 28 of CIPAA, you may apply to the High Court to enforce the adjudication decision as if it were a court order. You do not need to prove the merits of the case again. The court generally does not re-examine the merits of the dispute when considering enforcement of the adjudication decision.
- Suspend performance or reduce rate of progress
Under Section 29 of CIPAA, if the adjudicated amount is not paid within 14 calendar days of a written notice of intention to suspend, the unpaid party has the right to suspend work or reduce its rate of progress under the contract.
- Direct payment from the principal
Under Section 30 of CIPAA, a subcontractor who has obtained an adjudication decision in their favour may, in certain circumstances, apply directly to the principal (the employer or main contractor above the non-paying party) for payment.
If you are the non-paying party and the decision goes against you, you have the right to:
- Pay the adjudicated sum and subsequently refer the dispute to arbitration or court for a final determination on the merits
- Apply to the High Court to set aside the decision on one of the limited grounds under Section 15 of CIPAA
- Apply for a stay of enforcement, but courts have held that a stay requires exceptional circumstances, particularly relating to the financial instability of the winning party
| CIPAA Adjudication | Civil Court Litigation | |
|---|---|---|
| Timeline | ~100 working days | 1 to 5 years |
| Cost | Lower | Higher |
| Decision | Temporarily binding | Final and binding |
| Right to appeal on merits | No (limited grounds only) | Yes |
| Representation | Not mandatory but recommended | Recommended |
| Scope | Payment disputes only | Any legal claim |
- Incomplete Payment Claim
The Payment Claim defines the adjudicator’s jurisdiction. Any amount or issue left out cannot be raised later. A poorly drafted Payment Claim is one of the most common reasons claims are reduced or defeated.
- Missing the 10-working-day response deadline
If you are the respondent, failing to serve a Payment Response within 10 working days severely limits your ability to raise defences in adjudication.
- Oral contracts
CIPAA only applies to written contracts. If your agreement was made verbally, with no written record, you cannot use CIPAA even if you can prove the work was done.
- Claiming outside CIPAA’s scope
Attempting to claim for items not expressly covered by the contract terms, such as tortious damages or loss of profit, will result in those claims being dismissed for lack of jurisdiction.
- Waiting too long
Although the 6-year limitation period under the Limitation Act 1953 applies, delays in commencing a CIPAA claim allow debts to grow more difficult to recover, particularly if the other party’s financial position deteriorates.
- Can I make a CIPAA claim without a lawyer?
Legal representation is not mandatory under CIPAA. However, the process involves strict statutory deadlines, technical drafting requirements, and legal arguments that can significantly affect the outcome. For any claim above RM50,000 or involving contested issues, engaging a construction lawyer is strongly recommended.
- Can CIPAA be used for disputes under government contracts?
CIPAA generally applies to all written construction contracts carried out in Malaysia, including those with the government. However, certain government contracts have been specifically exempted by ministerial order. Your lawyer can advise whether your contract falls within an exemption.
- What if the respondent has already been wound up?
If the non-paying party is a company that has been wound up, CIPAA adjudication proceedings against it generally require leave of court. You should conduct a winding-up search via the Malaysian Department of Insolvency (MdI) before commencing any proceedings.
- Can the respondent raise a counterclaim in CIPAA?
A respondent may raise set-offs or cross-claims defensively, but CIPAA is generally intended to resolve payment claims rather than independent counterclaims for affirmative recovery. Whether a set-off may be relied upon depends on the contractual terms and the nature of the dispute. Courts have also confirmed that a set-off can only reduce the claim or reduce it to zero. It cannot result in a net sum being awarded to the respondent.
- Can I use CIPAA and also go to court or arbitration at the same time?
CIPAA adjudication does not prevent either party from commencing or continuing court or arbitration proceedings. The adjudication decision is temporarily binding pending the outcome of those proceedings.
A CIPAA claim is one of the most effective tools available to contractors, subcontractors, and construction consultants in Malaysia who have not been paid for their work. The process is faster and more cost-effective than litigation, and the decision is legally enforceable. This provides unpaid parties with meaningful statutory remedies without waiting years for a court outcome.
However, CIPAA’s strict statutory timelines and technical requirements mean that errors in the process can be costly. Whether you are preparing a Payment Claim, responding to one, or seeking to enforce an adjudication decision, having an experienced construction lawyer on your side significantly improves your prospects.
Our construction law team at Chambers of Koon handles CIPAA adjudication proceedings for both claimants and respondents. Contact us to discuss your situation and understand your options.