Who Can Use CIPAA in Malaysia? Which Contracts and Claims Are Covered?

CIPAA does not apply to every dispute connected with a construction project. Before an adjudicator can decide the merits, the contract, the work, the parties and the payment claimed must all fall within the Construction Industry Payment and Adjudication Act 2012.

The practical question is simple: can this dispute actually be adjudicated under CIPAA? If not, the decision may be set aside for excess of jurisdiction even if money is genuinely owed.

In Uzma Engineering Sdn Bhd v Khan Co Ltd & Other Cases [2020] MLRHU 992, the High Court identified four cumulative requirements. There must be a construction contract, it must be made in writing, it must relate to construction work, and that work must be carried out wholly or partly in Malaysia.

What is a construction contract under CIPAA?

Section 4 defines a "construction contract" as either a construction work contract or a construction consultancy contract.

Construction consultancy includes services such as planning, architectural work, engineering, surveying, decoration, landscaping and project management. In Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd & Another Appeal [2019] 5 MLRA 584, the Federal Court confirmed that an architect's professional fee claim could fall within CIPAA.

"Construction work" is also broad. It includes buildings, roads, drainage, electrical and mechanical works, oil and gas works, bridges, pipelines, tunnels and related preparatory work such as site clearance, excavation and foundations.

The label used by the parties is not decisive. The court looks at the actual nature of the work.

In MIR Valve Sdn Bhd v TH Heavy Engineering Berhad & Other Appeals [2017] 4 MLRH 642, installation work involving valves for an FPSO conversion fell within the statutory concept of construction work. In TH Heavy Engineering Berhad v Innovative Synergy Solutions Sdn Bhd [2017] MLRHU 1503, design, engineering and project-management work for a fuel gas skid was also capable of falling within CIPAA.

The contract must be in writing

Section 2 applies CIPAA to construction contracts made in writing.

A long formal contract is not always necessary. Depending on the facts, a Letter of Award or written correspondence may provide the required contractual basis. But a purely oral arrangement falls outside CIPAA.

Uzma Engineering treats the writing requirement as part of the jurisdictional threshold. Construction work being performed in fact does not by itself give the adjudicator jurisdiction.

The work must have a Malaysian connection

CIPAA applies where the construction work is carried out wholly or partly within Malaysia.

The word "partly" matters.

In TH Heavy Engineering v Innovative Synergy Solutions, relevant design, procurement and preparatory work was carried out in Malaysia even though installation occurred in Dubai. The Malaysian element was sufficient for CIPAA to apply.

For cross-border projects, the parties should therefore examine where the contractual work was actually performed, rather than looking only at the location of the finished project.

Who can make a CIPAA claim?

Section 5 allows an "unpaid party" to serve a payment claim on a "non-paying party".

Under section 4, "payment" means payment for work done or services rendered under the express terms of a construction contract.

This creates an important limit. CIPAA is a payment recovery mechanism, not a general shortcut for every financial dispute arising from a project.

In FZL Power Engineering Sdn Bhd v Norangkasa Enterprise Sdn Bhd & Another Case [2022] MLRHU 1334, a party sought to recover an alleged overpayment through adjudication. The High Court held that this was not a claim by an unpaid party for its own work or services. The overpayment claim fell outside CIPAA.

Loss of profit and damages fall outside CIPAA

Rosha Dynamic Sdn Bhd v Mohd Salehhodin Sabiyee & Ors & Other Cases [2020] MLRHU 2050 is a useful example.

The subcontractor claimed payment for work performed together with loss of profit. The claim for work could fall within CIPAA, but the loss-of-profit claim could not because it was a damages claim arising from breach.

The Federal Court in Martego likewise confirmed the importance of the statutory definition of "payment". General damages for breach do not become adjudicatable simply because the breach arose under a construction contract.

The practical rule is simple: CIPAA is for recovering payment for work or services, not general damages.

What about late payment interest?

An adjudicator can award interest in connection with a proper payment claim. A stand-alone claim for historical late-payment interest after the principal certificates have already been fully paid is different.

In Mayfair Ventures Sdn Bhd v Setiakon Builders Sdn Bhd & Another Appeal [2025] MLRAU 351, also reported at [2026] 2 MLRA 770, the Court of Appeal held that such stand-alone interest was not payment for work done or services rendered. Once the principal had been paid, the claimant was no longer an unpaid party for those certificates.

Not every construction-related agreement qualifies

An agreement can involve a construction project without itself being a construction contract.

In YTK Engineering Services Sdn Bhd v Towards Green Sdn Bhd & Other Cases [2017] 5 MLRH 160, the arrangement was in substance a joint-venture and profit-sharing agreement. CIPAA did not apply simply because construction work formed part of the wider project.

The same caution applies to a bare sale of goods. Supplying a product is not automatically construction work merely because the product will eventually be used on a construction site. The substance of the contractual obligation matters.

Private owners and Government contracts

Section 3 creates a specific exclusion for certain contracts entered into by individuals.

CIPAA does not apply where a natural person enters into a construction contract for work on a building that is less than four storeys high and wholly intended for that person's occupation.

Government projects are not automatically excluded either. The Construction Industry Payment and Adjudication (Exemption) Order 2014 continues to exempt specified Government contracts involving urgent emergency works and certain national-security or security-related facilities.

The former Second Schedule exemption for Government contracts of RM20 million and below was temporary and expired on 31 December 2015.

In Mudajaya Corporation Bhd v Leighton Contractors (Malaysia) Sdn Bhd [2015] MLRHU 223, the court also made clear that the Government must be a party to the relevant construction contract. A private subcontract does not become exempt merely because the wider project is a Government project.

What about contracts signed before CIPAA?

CIPAA applies prospectively.

In Ireka Engineering & Construction Sdn Bhd v PWC Corporation Sdn Bhd & Other Appeals [2019] 6 MLRA 1, the Federal Court held that CIPAA does not apply to construction contracts entered into before the Act came into force on 15 April 2014.

A quick CIPAA coverage checklist

Before starting adjudication, check:

• Is there a construction work or construction consultancy contract?
• Is the contract in writing?
• Does the work fall within section 4 and was at least part performed in Malaysia?
• Is the claimant genuinely an unpaid party?
• Is the claim for work done or services rendered, rather than damages, loss of profit, an overpayment refund or stand-alone historical interest?
• Does section 3 or a Government exemption apply?
• Was the contract entered into on or after 15 April 2014?

If any answer creates doubt, jurisdiction should be checked before adjudication begins.

Frequently Asked Questions

Can consultants use CIPAA?

Yes. Architectural, engineering, surveying, planning and project-management services can fall within CIPAA if the statutory requirements are satisfied.

Can a contractor claim loss of profit under CIPAA?

Generally, no. Loss of profit for breach is ordinarily a damages claim rather than payment for work done or services rendered. It may need to be pursued through court or arbitration.

Can CIPAA be used to recover an overpayment?

Generally, no. A payor seeking a refund is not ordinarily an unpaid party claiming payment for its own work or services.

Does CIPAA apply to Government projects?

It can. Government projects are not automatically excluded. The specific contract and any applicable exemption must be checked.

Final takeaway

The first question in a CIPAA dispute should be whether the Act applies to the contract and the particular claim.

A written construction contract, qualifying construction work, a Malaysian connection and a genuine unpaid claim for work or services are central to jurisdiction. Damages claims, refunds, joint-venture arrangements and exempt contracts may need to be pursued elsewhere.

For claimants, checking jurisdiction early avoids spending time and money on an adjudication that should never have started. For respondents, the same review may reveal a threshold defence before the merits are considered.

Speak to JPP LAW

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

If you are considering a CIPAA claim, or have received one and need to determine whether the contract or claim falls within the Act, 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 jurisdiction depends on the contract, nature and location of the work, identity of the parties, type of payment claimed, contract date and any applicable statutory exemption. You should seek advice based on your specific circumstances.