April 2018 newsletter

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APRIL 2018 NEWSLETTER

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EDITORS COMMENTS
As we enter April it feels as though a third of
the year has flown by, but for contractors and
subcontractors the passage of four months
can seem like a lifetime where they have
payment and cash flow issues.
A lot of the international adjudication
schemes in common law countries have only
focussed on this issue and limit what disputes
can be referred to the adjudicator. As part of
this months newsletter we take a look at
overseas schemes and contrast them with the
current UK situation.
The government consultation on retention
and the amendments to the construction act
has not yet reported its findings and the
approach of the government is not yet clear
but there are certainly calls to improve the
poor drafting of the payment provisions and
the removal of the power and process
exemptions.
Sean Gibbs LLB(Hons)MICE FCIOB FRICS
FCIARB, is a director with Qualsurv
International and is available to serve as an
arbitrator, adjudicator, mediator, quantum
expert and dispute board member.
sean.gibbs@qualsurv.co.uk

SMASH AND GRAB? HOW ABOUT
SMASH AND GRAB PLUS?
On a daily basis, I seem to read something
about the “Smash and Grab” adjudication and
whether it is still alive and well. Leaving that
issue to one side for a moment (and also
whether or not I agree with the terminology
describing such an adjudication) recently I had
to consider whether or not I might have to
deploy a “Smash and Grab” adjudication for a
client.
A large contractor client, active in the
infrastructure sector, came to me with a bit of
a payment related dilemma. The client had
submitted a payment application in
accordance with its contract. The employer
proceeded to issue a payment notice which
certified several million pounds in favour of
our client. Although the contractor client
disagreed with the assessment on several
levels, it was quite prepared to take this on
the chin and seek to resolve any disagreement
amicably.
The employer then proceeded to issue a pay
less notice in time in accordance with the
contract. The pay less notice took away the
vast majority of the payment due. Our client
was obviously dismayed at the sudden change
in the employer’s approach, not least as
nothing had changed on the project as


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between the payment notice and the pay less
notice.
The client promptly asked me to challenge
the validity of the pay less notice, such that it
would be ineffective and fall away. In effect, it
would be as if no pay less notice had been
issued. Our client wanted a quick result, which
would not involve scrutinising the valuation of
the account.
At the time I advised the client against taking
such a restrictive approach, as I knew it would
be risky. The pay less notice was issued in
time and contained compliant content.
I advised the client to frame the dispute such
that the adjudicator had jurisdiction to
examine the pay less notice, as a matter of
the grounds of deduction and substance. On a
fundamental level, we attacked the pay less
notice on the basis that there was not one
shred of evidence in support any of the
deductions from the account.
The adjudicator found that the pay less notice
was contractually‐compliant and was valid,
although we led with the argument that it was
not effective. Had that been our sole
argument, unfortunately we would have lost
at that stage and we would have not
recovered anything. Thankfully we had gone
further with our case.

When he examined the content of the notice
(together with the employer’s submissions in
the adjudication as to why it should be
upheld) the adjudicator agreed with our
contractor client. There was no evidence
whatsoever in support of the deductions.
Although it was effective, essentially the pay
less notice failed as a matter of substance. As
we had asked the adjudicator to enforce the
valuation of the payment notice, our client
was awarded the several million pounds
which had previously been certified, plus a
considerable amount of interest on top. The
arguments were less involved than a valuation
adjudication and, as such, the decision was
reached swiftly and efficiently. Cash flow was
maintained and the parties went on to discuss
resolution of the wider disputes.
So, when you are considering your next
“Smash and Grab” as a payee, perhaps you
should dig a little bit deeper in framing the
dispute and your submissions? It could
ultimately pay dividends.

Mike Waring is a dual qualified engineer‐
lawyer, adjudicator and partner, specialising
in construction disputes at Knights 1759 in
Cheltenham.
mike.waring@knights1759.co.uk


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MAYLAYSIAN CONSTRUCTION
ADJUDICATION
The Construction Industry Payment and
Adjudication Regulations 2014 and the
Construction Industry Payment and
Adjudication (Exemption) Order 2014 were
both implemented on 15th April 2014 to
complement CIPAA. CIPAA proceedings are a
summary procedure intended to reduce
payment defaults by establishing a cheaper
and speedier system of dispute resolution for
construction contracts in respect of work
done and services rendered, providing for the
recovery of payment upon the conclusion of
the adjudication process in addition to a host
of other remedies such as the right to reduce
the rate of work progress or to suspend work
or the securing of direct payment from the
principal. Anyone entering into a written
construction contract in Malaysia now has
the right to a statutory payment procedure
and an adjudication process for resolving
disputes.
The Act includes contracts entered into for
consultancy agreements, and the case of
Martego Sdn Bhd v Arkitek Meor & Chew Sdn
Bhd & Another Case [ 2017] 1 CLJ 101
confirms that the CIPAA applies to
consultancy contracts which provide purely
consultancy services. Contracts for buildings
of less than four storeys that are intended for
occupation by a “natural person” are
exempted, this exemption being very similar
to the householder exemption found in the
UK Construction Act.

The CIPAA includes oil and gas work, the case
of MIR Valve Sdn Bhd v TH Heavy Engineering
Berhad [2017] AMEJ 0538 decided that the
Claimant's claim in the Adjudication involving
the Provision to Supply Complete Package of
Actuated Shutdown Valve ("the valves") for
the Layang FPSO Project ("the Project") was
one falling within CIPAA. It can be seen that
the express wording of the CIPAA is a far more
inclusive of activities than the UK Construction
Act.
Only disputes relating to payment for work
done and services rendered under the express
terms of a construction contract may be
referred to adjudication under CIPAA.
However, the parties may agree after the
appointment of the adjudicator to extend the
jurisdiction of the adjudicator to decide on
any other matter arising from the
construction contract.
For the purposes of administration of
adjudication cases by the AIAC under CIPAA,
including the appointment of an adjudicator
under CIPAA, the AIAC takes the position that
CIPAA applies to a payment dispute which
arose under a construction contract on or
after 15.4.2014, regardless of whether the


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relevant construction contract was made
before or after 15.4.2014. In this regard, a
payment dispute under a construction
contract is said to have arisen when the non‐
paying party has, in breach of the contract,
failed to make payment by the contractual
due date for payment.
The CIPAA applies to every ‘construction
contract’ made in writing relating to
construction work carried out wholly or partly
in Malaysia, including a construction contract
entered into by the Government. It applies to
both local and international contracts,
provided the subject construction work is
carried out wholly or party in Malaysia..
The CIPAA only applies to contracts which are
made “in writing”. However, no definition or
elaboration is provided in CIPAA as to what
constitutes construction contract made in
writing. AIAC considers that a construction
contract must be wholly in writing, and that it
is made in writing:‐
– if the contract is made in writing (whether
or not it is signed by the parties);
– if the contract is made by exchange of
communications in writing; or
– if the contract is evidenced in writing.

Where parties agree otherwise than in writing
by reference to terms which are in writing,
they make a contract in writing. A contract is
evidenced in writing if a contract made
otherwise than in writing is recorded by one
of the parties, or by a third party, with the
authority of the parties to the contract.

The Act applies equally to the Government of
Malaysia as well as the Private Sector.
However, pursuant to the Construction
Industry Payment and Adjudication
(Exemption) Order 2014, two categories of
Government construction contracts are
exempted. The first category of Government
construction contracts are contained in the
First Schedule of the Exemption order namely
a contract for any construction works that
involve emergency, unforeseen circumstances
and that relate to national security or security
related facilities. The second category of
Government construction contracts are
contained in the Second Schedule of the
Exemption order namely construction
contracts with the Government of the
contract sum of twenty million ringgit
(RM20,000,000) and below. With regards to
this second category, the exemption order
merely exempts these contracts from the
application of subsections 6(3), 7(2), 10(1), 10
(2), 11(1) and 11(2) of CIPAA 2012, and relates
to the timeline for submissions and replaced
with a set of longer timelines for such
submissions. It is also a temporary exemption
from 15 April 2014 to 31 December 2015 for
this second category. However, the


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exemption order does not extend to
construction contracts to which the
Government is not a party.
The process starting from the dispute until the
adjudication decision is as follows:
Claim of Payment – Sec. 5, CIPAA – to be
served by the unpaid party on the non‐paying
party
Payment Response – Sec. 6, CIPAA – to be
served by the non‐paying party to the unpaid
party (within 10 working days). A party who
admits to the claim shall state the whole
amount claimed or any amount as admitted
while one who disputes the claim shall state
the amount disputed and the reason for the
dispute.
Adjudication Notice – Sec. 7 & 8, CIPAA – to
be served together with any supporting
document by the claimant on the respondent
(within 5 working days)
Appointment of Adjudicator: – Sec. 21 & 23,
CIPAA – may be by agreement of the parties
in dispute (within 10 working days from the
service of the notice of adjudication) or by the
Director of the AIAC upon the request of both
parties or by either party in dispute if there is
no agreement by both parties in the
appointment (within 5 working days upon the
receipt of a request)

Terms of appointment – Sec. 22 &23, CIPAA –
to be negotiated and agreed with the
adjudicator (within 10 working days, after
which the parties or the Director of the AIAC
may proceed to appoint a new adjudicator)
Adjudication Claim – Sec. 9, CIPAA – to be
served together with any supporting
documents by the claimant on the respondent
and the adjudicator (within 10 working days)
Adjudication Response – Sec. 10, CIPAA – to
be served together with any supporting
documents by the respondent on the claimant
and the adjudicator (within 10 working days).
Adjudication Reply – Sec. 11, CIPAA – to be
served with any supporting documents by the
claimant on the respondent and the
adjudicator (within 5 working days)
Representation – Sec. 8, CIPAA – parties may
be self‐represented or be represented by any
party appointed by them, including solicitors
Adjudication proceedings – Sec. 25, CIPAA –
to be conducted according to the directions of
the adjudicator, which may or may not involve
oral evidence
Decision – Sec. 12, CIPAA – to be delivered
within 45 working days from the service of
adjudication response or reply, whichever
later; or if no adjudication response is
received, 45 working days from the expiry of
the prescribed period for the adjudication


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response; or such further time as agreed to by
the parties.
The adjudication proceeding is binding unless
it is set aside by the High Court, the matter is
settled by both parties in writing, the dispute
is finally decided by arbitration or the court,
or there is a stay of adjudication decision
pursuant to Sec. 13 and 16, CIPAA. If either or
both parties do not agree with the
adjudication decision, the case can be
reopened by arbitration or litigation at the
conclusion or termination of the construction
contract.
According to Section 3(1) of the Arbitration
(Amendment) Act 2018 [Act A1563] and the
Ministers’ appointment of the date of coming
into operation, gazetted on 27th
February
2018, the name of Kuala Lumpur Regional
Centre for Arbitration (the “KLRCA”) was
changed to the Asian International Arbitration
Centre (Malaysia) (the “AIAC”) starting from
28th February 2018. Any reference to the
KLRCA in Construction Industry Payment and
Adjudication Act 2012 published by the
KLRCA, in any written law or in any
instrument, deed, title, document, bond,
agreement or working arrangement shall,
after the 28th February 2018, be construed as
a reference to the AIAC. All approvals,
directions, notices, guidelines, circulars,
guidance notes, practice notes, rulings,
decision, notifications, exemptions and other
executive acts, howsoever called, given or
made by the KLRCA before 28th February
2018, shall continue to remain in full force
and effect, until amended, replaced,
rescinded or revoked.
The Maylasian drafters took into account the
UK and Australian schemes and opted to limit
the type of dispute that may be referred
following the Australian model rather than
the UK model which allows to refer any
dispute arising under the contract.
It has been successful with thousands of
referrals being made with most decisions
being upheld.
Thomas Johnson, is a director in the global
construction claims consultancy Hanscomb
Intercontinental.

WHAT DISPUTE CAN BE REFERRED
TO ADJUDICATION IN THE UK
The LDEDCA applies to contracts entered into
on or after 1 October 2011 and requires that a
party to a construction contract has the right
to refer a dispute arising under the contract
for adjudication as per section 108 of the
1996 Act.


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Since the dispute must arise ‘under the
contract’, you cannot seek adjudication upon
matters arising before the contract came into
existence or in the course of negotiating the
contract for example a claim for
misrepresentation or upon matters that arise
outside of the contract or example a claim for
nuisance.
Other than these limits any dispute can be
referred to adjudication. This is in contrast to
a lot of the commonwealth construction
adjudication statutory schemes where only a
dispute about payment may be referred to
adjudication.
The case of Banner Holdings Ltd v Colchester
Borough Council [2010] EWHC 139 (TCC)
confirms that the contract cannot prevent a
dispute about the validity of a contractual
determination from being referred to
adjudication. Whilst the contract may widen
the matters that could referred to
adjudication it cannot limit them to less than
the minimum required by the LDEDCA.
The Irish Construction Contracts Act 2013
limits the scope of the adjudication to
‘payment disputes’. Payment disputes have
not been explicitly defined in the Act and it is
likely to require Court decisions before this
term is adequately defined and understood by
adjudication advisers in Ireland.

The various studies and research by Janey
Milligan and Lisa Cattanach point to the main
issues being referred in the UK as Valuation of
Final Account, Failure to comply with payment
provisions, Valuation of interim payments,
Withholding monies, Extension of time, Loss
and expense, Valuation of variations,
Defective work , Determination, Non‐payment
of fees which arguably could possibly all touch
upon a payment dispute if the Irish model was
applied.
It is submitted that the UK model is
sufficiently widely worded to allow all
common disputes to be determined whilst
those of some of the other countries are not
and will prevent users being able to refer
disputes to adjudication.

ESCL CONFERENCE 2018
The European Society of Construction Law
conference 2018 is due to take place from
Thursday, 25 October 2018 to Saturday, 27
October 2018 in Bucharest.
http://rscl.ro/en/escl‐2018/


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SCL INTERNATIONAL CONFERENCE
2018

The Society of Construction Law 8th

International Conference is being held at the
Palmer House Hotel Chicago from the 26th‐
28th September 2018.
https://www.scl‐
na.org/system/files/SCL_Program_Final.pdf

https://www.scl‐na.org/conference‐
registration

ESCL SUMMER SCHOOL
Comparative European construction and
procurement law course is being held from
the 2‐7 July 2018 at KIVI, Prinsessegracht 23,
The Hague, the Netherlands.

ADJUDICATION SOCIETY ANNUAL
CONFERENCE 2018
The Society's Seventeenth Annual Conference
will be held at the Mercure Bristol Hotel on
Thursday 8th November 2018.
FIDIC CONFERENCES 2018
The FIDIC Asia Pacific contract users'
conference takes place in July 2018, the Latin
America contract users' conference takes
place in September 2018 and the Africa
contract users' conference is taking place at
Livingstone, Zambia in October 2018.
The FIDIC International Infrastructure
Conference takes place in Berlin from the  9‐
11 September 2018 at the Intercontinental
Hotel Berlin.


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DRBF CONFERENCES 2018
Mexica City, Mexico 25‐26 April 2018
Tokyo, Japan 23‐25 May 2018
Bangkok, Thailand 28‐29 May 2018
Charlotte,  USA 17‐19 October 2017
Geneva, Switzerland 14‐16 November 2018
SCL (SINGAPORE) ANNUAL
CONFERENCE
This year's SCL (Singapore) Annual
Conference is being held at Fort Canning Hotel
on the 12th
September 2018.
UK ADJUDICATORS DINNER
The UK Adjudicators will be holding a dinner
at Loch Fyne restaurant in Bristol the evening
of the 7th
November 2018 7.00pm for 7.30pm.
Anyone with an interest in adjudication is
welcome to attend. Further details will follow
in due course.
11TH
INTERNATIONAL CONFERENCE
ON CONSTRUCTION LAW AND
ALTERNATIVE DISPUTE
RESOLUTION

The 11th International Conference on
Construction Law and Alternative Dispute
Resolution hosted by Kailash Dabeesingh
Arbitration Chambers in association with
Society of Construction Law is taking place in
Mauritius from Wednesday 23 to Thursday 24
May 2018 at the  Sofitel Imperial Hotel, Flic‐
en‐Flac, Mauritius.
Speakers at the 11th International Conference
on Construction Law and Alternative Dispute
Resolution event include:
 Kailash Dabeesingh
 Sir Rupert Jackson
 Peter Collie
 Martin Green
 Prof. Sundra Rajoo
 Christopher Ennis


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 Abdul Jinadu
 Johan Beyers
 Nigel Grout
https://mailchi.mp/f440dceebb8c/11th‐
international‐conference‐on‐construction‐
law‐and‐alternative‐dispute‐
resolution?e=bdd8b6183f

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April 2018 newsletter