CIPAA Payment Claims in Malaysia: What Makes a Claim Valid?

A valid CIPAA payment claim must satisfy section 5 of the Construction Industry Payment and Adjudication Act 2012 and must relate to payment that is already due. A claim served too early, or one that fails to identify the contractual basis properly, can create a jurisdictional defect and undermine the adjudication.

The payment claim is not an ordinary demand letter. It defines the dispute and helps set the adjudicator's jurisdiction.

Why the payment claim matters

CIPAA gives an unpaid party a relatively quick route to adjudicate payment disputes under a construction contract.

The process begins with a payment claim under section 5. The non-paying party then has 10 working days to serve a payment response under section 6. If the dispute remains unresolved, it may be referred to adjudication after that response period expires.

Section 27 limits the adjudicator's jurisdiction to the matter referred through the payment claim and payment response, unless the parties agree in writing to extend it.

A defect at this stage can affect everything that follows.

The four requirements under section 5

Section 5(2) requires a written payment claim to contain four matters.

First, it must state the amount claimed and the due date. The amount should be precise, and the due date should be identified by reference to the contract, certificate, invoice or applicable payment mechanism.

Second, the claim must identify the cause of action, including the relevant provision of the construction contract. If the claim arises from an interim payment, variation, loss and expense or another contractual entitlement, the clause creating the payment obligation should be identified clearly.

Third, the claim must describe the work or services to which the payment relates. The description should be detailed enough for the respondent to understand the progress period, work items, valuation or services claimed.

Fourth, the claim must expressly state that it is made under CIPAA. This should not be left to implication.

A demand letter is not automatically a CIPAA payment claim

Giatreka Sdn Bhd v SGW Engineering Construction Sdn Bhd & Another Case [2022] 2 MLRH 132 shows the danger of treating a payment claim like an ordinary demand.

The High Court found material defects where the document failed to identify the cause of action and relevant contractual provisions properly and did not expressly state that the claim was made under CIPAA.

A demand for money does not become a valid section 5 payment claim merely because the dispute concerns construction work.

At the same time, not every minor mistake is fatal. In Ou Yang Chow Min v Green Venture Capital Sdn Bhd & Another Case [2022] MLRHU 470, technical naming issues did not invalidate the proceedings where the relevant party and underlying claim remained sufficiently identifiable.

The distinction is between a curable technical irregularity and a defect affecting the statutory foundation of the adjudication.

The premature claim trap

A payment claim must also be served at the right time.

The claimant must first be an "unpaid party". If the contractual due date has not arrived, there may be no unpaid payment capable of being claimed under section 5.

In Ideal City Development Sdn Bhd v PWC Bina Sdn Bhd & Other Appeals [2019] 1 MLRA 275, the payment claim was served before the relevant contractual due date.

The timing issue was fundamental because the claimant had not yet become an unpaid party for that amount. A payment expected to become due in the future is not the same as an amount that is already due and unpaid.

The due date therefore determines when the statutory right to serve the payment claim arises.

One day can matter.

Refining an earlier claim is different from introducing a new one

Not every amendment to an earlier claim makes the CIPAA claim premature.

In Puncak Niaga Construction Sdn Bhd v Mersing Construction & Engineering Sdn Bhd [2022] MLRAU 201, the contractor had already submitted interim claims and later corrected and reduced parts of them in its CIPAA payment claim.

The Court of Appeal did not treat those corrected figures as entirely new claims requiring the contractual process to restart. They remained refinements of claims that had already been advanced.

The case is important because the Court also recognised the broader rule that claims which are premature and not yet due do not comply with the concept of a payment claim under section 5.

Correcting or reducing an existing claim may therefore be permissible. Introducing a genuinely new payment entitlement that has not matured is different.

Do not start adjudication before the response period ends

Timing remains important after the section 5 claim is served.

Section 6 gives the non-paying party 10 working days to serve a payment response. Section 7 allows the dispute to be referred to adjudication only after that period expires.

In Tenaga Nasional Berhad v Blocklink (M) Sdn Bhd & Another Case [2022] MLRHU 1879, the notice of adjudication was served before the response period had fully expired.

The premature commencement created a jurisdictional defect.

The practical lesson is simple. Calculate the working days carefully and allow the entire response period to expire before serving the notice of adjudication.

Prematurity goes to jurisdiction

If the claim was not yet due, the problem is not merely one of entitlement.

In Hong Xin Construction Sdn Bhd v Rebana Maju Sdn Bhd [2024] MLRHU 1411, the adjudicator found the relevant progress claim premature but nevertheless continued to assess it substantively.

The High Court held that the adjudicator had acted in excess of jurisdiction.

Once the statutory basis for adjudication is absent, the adjudicator cannot simply continue to determine the merits of the claim.

A genuine prematurity objection should therefore be raised as a jurisdictional issue.

CIPAA does not cover every monetary claim

CIPAA is directed at payment for work done or services rendered under the express terms of a construction contract.

It should not be assumed that every monetary claim connected with a construction project is suitable for adjudication.

In Rosha Dynamic Sdn Bhd v Mohd Salehhodin Sabiyee & Ors [2020] MLRHU 2050, the High Court considered the limits of the adjudicator's jurisdiction in relation to a claim for loss of profit arising from breach.

The case illustrates an important point. A claim connected to a construction contract does not automatically become a CIPAA payment claim. The nature and contractual basis of the amount claimed still matter.

Practical checklist

Before serving or responding to a CIPAA payment claim:

• Confirm that the contractual due date has passed and the sum remains unpaid.
• State the precise amount and due date.
• Identify the cause of action and the specific contract clause.
• Describe the work or services clearly.
• State expressly that the claim is made under CIPAA.
• Serve the correct legal entity.
• Wait until the full 10-working-day response period expires before commencing adjudication.
• If correcting an earlier claim, keep the connection to the existing claim clear.
• Respondents should raise genuine jurisdictional objections promptly.

Section 15 allows the High Court to set aside an adjudication decision on specified grounds, including where the adjudicator has acted in excess of jurisdiction.

A disagreement with the adjudicator's assessment of evidence or contractual entitlement is different. CIPAA does not provide a general appeal simply because one party believes the adjudicator reached the wrong conclusion.

Frequently Asked Questions

What must a CIPAA payment claim contain?

It must state the amount claimed and due date, identify the cause of action including the relevant contractual provision, describe the work or services, and state that the claim is made under CIPAA.

Can I issue a CIPAA payment claim before payment is due?

No. A claim for an amount that has not yet become due may be premature. The claimant should first have become an unpaid party under the construction contract.

How long does the respondent have to reply?

The respondent has 10 working days from receipt of the payment claim to serve a payment response. Adjudication should only be commenced after that period expires.

Can a defective payment claim be fixed later?

Some technical irregularities may be curable, but defects affecting jurisdiction are more serious. The nature of the defect will determine whether it can be corrected.

Final takeaway

A CIPAA payment claim is the foundation of the adjudication. It should identify the amount, due date, contractual basis and work or services clearly, and it must expressly state that it is made under the Act.

Timing is equally important. The payment must already be due, and the statutory response period must fully expire before adjudication begins.

For claimants, careful drafting at the section 5 stage can prevent a strong case from failing on jurisdiction. For respondents, reviewing the claim immediately may reveal defects that should be raised before the adjudication progresses.

Speak to JPP LAW

Justin, Poh & Partners, also known as JPP LAW, assists employers, contractors, subcontractors and consultants with construction payment disputes, CIPAA payment claims, adjudication responses, jurisdictional challenges, enforcement and setting-aside proceedings in Malaysia.

If you are preparing a CIPAA payment claim or have received one and need to assess its validity, timing or contractual basis, you may contact us to discuss the matter.

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Disclaimer: This article is for general information only and does not constitute legal advice. CIPAA disputes depend heavily on the construction contract, payment provisions, certificates, dates, documents and procedural history. You should seek advice based on your specific circumstances.