Ingenieur Vol.72 ingenieur October 2017-FA3 | Page 76

INGENIEUR
Construction Consultancy Contract
The case of Martego Sdn Bhd v Arkitek Meor &
Chew Sdn Bhd & Another Case [ 2017] 1 CLJ 101
(“Martego”) considered an interesting question:
whether an architect rendering purely architectural
services with respect to a construction project
may claim his outstanding fees from his client
under CIPAA.
The learned High Court Judge disagreed with the
claimant’s argument that “construction consultancy
contract”, as defined under section 4 of CIPAA,
did not apply to contracts which provide purely
consultancy services. His Lordship found that the
word “includes” used in the definition was designed
to give an expansive meaning and not an exhaustive
one – the matters stated in the definition are more
by way of examples, leaving the scope and ambit
of the defined word open ended. This meant that
CIPAA applies to consultancy contracts which
provide purely consultancy services.
EXEMPTION FROM CIPAA
Although CIPAA’s scope of application is intended
to be wide and extensive, it is not without
exceptions.
Section 41 provides that CIPAA shall not affect
any proceedings relating to any payment dispute
under a construction contract which had been
commenced in any court or arbitration before
CIPAA came into force. According to View Esteem
Sdn Bhd v Bina Puri Holdings Sdn Bhd [2015]
MLJU 695 (“View Esteem”), this means that the
payment dispute referred to adjudication must be
the same as the one that is pending in court or
arbitration. If not, the particular payment dispute
will fall within the ambit of CIPAA. The intention
behind section 41 is to preserve the law on
payment disputes which are already pending in
court or arbitration when CIPAA came into force.
For identical disputes which are already pending in
court or arbitration, the law prior to April 15, 2014
will apply.
The other exemptions under CIPAA are contained
in section 3 (buildings of less than four storeys
intended for self-occupation) and section 40
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(exemptions pursuant to Ministerial order, such as
the 2014 Exemption Order) but these fall outside
the scope of this article.
CONTRACTING OUT OF CIPAA?
The application of the statutory adjudication
regime under CIPAA to every written construction
contract where the construction work envisaged
under such contract is to be carried out either
wholly or partly in Malaysia was considered in
Ranhill E&C Sdn Bhd v Tioxide (Malaysia) Sdn
Bhd and Another Case [2015] 1 LNS 1435. It
was held that a reading of the terms of CIPAA as
a whole prohibits the parties from contracting out
of its application, notwithstanding that there is no
express term to such effect in the statute. Specific
contractual arrangement for dispute resolution
by the parties would not exclude the application
of CIPAA which is meant to cater for an interim
or provisional resolution of a payment dispute.
As such, an agreement by the parties to arbitrate
does not exclude the application of CIPAA. It
merely means that the parties have chosen
arbitration as final resolution of their dispute.
IS CLAUSE 25.4(d) OF PAM CONTRACT
2006 VOID?
The practice of having a conditional payment
clause, be it a “pay-when-paid” or “pay-if-paid”
or “back-to-back” clause, was pervasive and
prevalent in the construction industry. It was
a way for the main contractor to pass down the
contractual chain the risk of not receiving payment
from the employer when it is due and payable.
Section 35(1) of CIPAA prohibits conditional
payment terms and provides that a conditional
payment provision in a construction contract is
void. Section 35(2) expressly declares that “for the
purposes of section 35(1)”, each of the following
to be a conditional payment provision:
(a) when the obligation of one party to make
payment is conditional upon that party
having received payment from a third party;
or