Staying an adjudication decision under s16 CIPAA

An adjudication decision is always an interim measure, which is enforceable under the provisions of the Construction Industry Payment and Adjudication Act provided it is not stayed, set aside, or the merits of the issue in dispute be finally determined by arbitration or litigation.

The provision allowing for a stay of the adjudication decision is found in s16 of the Act.

In brief, s16 CIPAA allows the Court to grant a stay if:

  • An application to set aside the adjudication decision has been made; or
  • A dispute is pending in court or arbitration.

This section had occasion to be judicially clarified in the case of Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd (No 1).

The High Court, in considering s16 CIPAA, set down the following principles:

  • Since the purpose of CIPAA is to provide for a speedy adjudication mechanism, therefore any application to stay an adjudication decision under s16 CIPAA must be strictly construed.
  • This means that the applicant must have complied with either s16(a) or (b) before the stay application can even be considered by the Courts.
  • To comply with s16(a) CIPAA means that the applicant must have filed an application to set aside the adjudication decision beforethe application for stay is filed.
  • To comply with s16(b) CIPAA, there must be a pending dispute before the courts or before arbitration and the pending dispute must be directly related to the dispute in the adjudication.

The Court went further to state that even if all the above conditions were met, the Court nevertheless had a discretion whether to grant a stay of the adjudication.

Usually, such discretion would be exercised dependent upon the financial position of the Respondent.

Comment: It is clear that CIPAA delivers “rough justice” in that adjudicators functioning under a tight time frame does not delve deeply into the issues in dispute but merely looks cursorily at the documents presented. This is evident by the fact that in excess of 90% of adjudication claims are in fact successful. It is unfortunate, in my view, that the Courts are now adopting an approach that upholds the “rough justice” handed down by the adjudicators without scrutinising it in greater detail, as this can lead to much injustice for the party required to make payment. All the more so when considering the fact that CIPAA is used as a “shortcut” to get payment even for final claims, and is not limited only to interim claims. It may be more understandable to uphold CIPAA’s “rough justice” in interim claims only in order to ensure cashflow for the project does not dry up, because adjustments can be made subsequently.

Kheng Hoe Advocates
Building contract and construction contract dispute lawyers
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