13th March 2018
[Revised & published in March 2018]
The Court of Appeal in the recent case of Bauer (Malaysia) Sdn Bhd v Jack-In Pile (M) Sdn Bhd [B-02(C)(A)-1187-06/2017] held that the Construction Industry Payment and Adjudication Act 2012 [“CIPAA”] applies prospectively and not retrospectively.
This would mean that any applicable construction contracts that were entered into prior to the effective date of 15th April 2014 would not be subject to the operation of CIPAA, which provides for amongst others, statutory adjudication of payment disputes. It was also held that those construction contracts are not subject to the prohibitions on conditional payment clauses, which s.35 CIPAA has clearly provided to be void.
“31. There is also a presumption when interpreting statutes and that is that Parliament will not take away the entrenched right of an individual retrospectively unless with clear words within the statute. As we are aware there are no such clear words in CIPAA 2012. That being the case, there is no hesitation on our part to conclude that CIPAA 2012 is prospective in nature. In so far as section 35 is concerned, clause 11 of the construction contract remains afoot and valid.
Prior to this recent decision of the Court of Appeal, CIPAA has been held by Malaysian High Court to be applicable to construction contracts even if it was entered prior to CIPAA coming into force (UDA Holdings Bhd v Bisraya Construction Sdn Bhd & Anor  5 CLJ 527).
It remains to be seen whether this case will be taken to the apex Federal Court for a final determination on the prospective / retrospective effect of CIPAA.
In view of the same, a respondent may want to avoid resisting a payment claim under CIPAA solely on the basis that it does not apply retrospectively to their contracts.
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