Contributed by Melissa Sasidaran and Fahri Azzat
Datuk Sundra Rajoo, the Director of the Kuala Lumpur Regional Centre for Arbitration, who moderated the session, kicked it off with an introduction of the panellists, all of whom are leading players in the field of adjudication.
Jurisprudence behind the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”)
The first speaker, Lim Chong Fong, a partner at Azman Davidson & Co., presented a paper on the legal philosophy behind CIPAA. Lim began with a brief overview on the background of the recently gazetted CIPAA, and an explanation on its objectives, which is primarily to address cash flow problems in the construction industry.
Lim highlighted some major problems in the construction industry, namely unfair contractual terms between parties, problem with project financing, undercertification of contractors, and inadequate dispute resolution procedure. According to Lim, the construction industry is not in good health financially. Hence in the event of a default in payment terms, the CIPAA provides for a speedy recovery of payment. He said that statutory adjudication is a swift and cheap way of resolving payment disputes, and the decision by an adjudicator although binding, is not final.
Lim concluded his presentation by saying that he believes the CIPAA to be a boon rather than a burden to parties. However, the success of its implementation depends on the availability of competent adjudicators and strong support from the judiciary.
IPAA 2012: Will its bite be as good as its bark
The second speaker, IR Harban Singh KS. Singh is highly accomplished with vast experience. He is a professional engineer as well as a chartered arbitrator and a member of the Adjudication Society and the Association of Independent Construction Adjudicators.
His presentation was focused on the implementation of CIPAA. Singh said that because every level of work in the construction industry is sub-contracted, it needed a solution for the cash flow problems which, if restricted, would affect the quality of work. CIPAA allows parties to have
cash flow in the interim.
Singh explained a few problems faced by a typical adjudicator. The first is the satisfaction of sections 2 and 4 of CIPAA. There is uncertainty about the ambit of the term “construction contract”. Another problem lies in the extent of the territorial enforcement of an adjudication decision.
Secondly, there are risks in initiating an adjudication process. Singh stated that although the business relationship is considered important in Malaysia the prevalence of a ‘vindictive culture’ in Malaysian business relationships did not encourage an adjudication process. A good business relationship flounders the minute one party takes the other to adjudication.
Despite these problems, Singh feels that the enactment of CIPAA is better than nothing. He recognies that it is a compromise. Whether CIPAA will work or not will depend on cooperation from the courts, and more importantly, there must be a change in the domestic business culture as vindictiveness will not encourage a progressive change.
The UK experience
Next, Alan Steward, the Managing Director of Sweett Resolution in the UK, spoke briefly about his experience with the UK’s adjudication process.
He began with an overview of the Latham Report, which was commissioned by the UK government and industry organisations to identify the failings in the UK construction industry. He also provided an insight into the statutory right to adjudicate construction disputes under the Housing Grants, Construction and Regeneration Act 1996.
Steward agreed with the previous speakers about the intention of the Parliament in enacting a legislation which could introduce a speedy mechanism for settling disputes in construction contracts. He further presented the case of Hart Investments Ltd. v Fidler, where the court stated that the whole point of adjudication is that speed is given precedence over accuracy, and it matters is a quick decision, not necessarily a correct one.
The nature of adjudication
Robert Fenwick Elliott, a partner at Fenwick Elliott Grace, Australia, summarised that the CIPAA may not revolutionise lives now, but predicted it to take a turn in the future. To him, a crucial factor in determining the success of statutory adjudication lies in a fair system so that the losing party will be less likely to challenge an adjudication decision.
Elliott also spoke on the techniques in an adjudication hearing, noting that it entails a different style of presentation compared to running arguments in court. His advice was to approach an adjudication hearing like one would in a political or public relations campaign, putting forth only one’s strong points.