( b) when the obligation of one party to make payment is conditional upon the availability of funds or drawdown of financing facilities of that party. Interestingly, what constitutes a“ conditional payment” for the purposes of section 35( 1) has been put to the test notwithstanding that section 35( 2) suggests that it is to be limited to the two situations set out in that section of CIPAA.
BM City Realty & Construction Sdn Bhd v Merger Insight( M) Sdn Bhd [ 2016 ] AMEJ 1858(“ BM City”) concerned the impact of section 35( 1) on clause 25.4( d) of PAM Contract 2006. The plaintiff in its application to set aside an adjudication decision argued that it was not bound to make any further payment to the defendant until a final account is determined upon completion of the works as the contract had been terminated by the plaintiff. To support its contention, the plaintiff relied on clause 25.4( d) of PAM Contract 2006, which reads as follows:
“…. Until after the completion of the Works under cl. 25.4( a), the Employer shall not be bound by any provision in the Contract to make any further payment to the Contractor, including payments which have been certified but not yet paid when the employment of the Contractor was determined ….”
In dismissing the plaintiff’ s application, the High Court Judge quoted his judgement in Econpile( M) Sdn Bhd v IRDK Ventures Sdn Bhd & Another Case [ 2016 ] 5 CLJ 882(“ Econpile”) and held that“ the terms of s35( 1) CIPAA are clear in that it casts a wide net to cover“ Any conditional payment provision in a construction contract in relation to payment under the construction contract” and it expressly declared it to be“ void”.”
By giving an expansive meaning to“ conditional payment”, the High Court has taken the view that the instances of conditional payment set out in section 35( 2) are not exhaustive. The decision suggests that clause 25.4( d) of PAM Contract 2006 is void as it has the effect of postponing payment until final accounts are concluded thereby defeating the purpose of CIPAA.
At the time of writing, the appeal in Econpile to the Court of Appeal has been dismissed on the basis that it was within the adjudicator’ s jurisdiction to decide on the applicability of clause 25.4( d) and the Courts are not competent to review the correctness of that decision. The BM City appeal is presently pending in the Court of Appeal. It remains a moot point as to whether clause 25.4( d) of PAM Contract 2006 is void under CIPAA.
ZERORISING AN UNPAID PARTY’ S CLAIM
The Court in Tenaga Poly Sdn Bhd v Crest Builder Sdn Bhd( unreported) essentially declared that a successful defence based on liquidated and ascertained damages(“ LAD”) by a non-paying party will operate to zerorise an unpaid party’ s claim, but will not result in the unpaid party being ordered to pay the non-paying party. The learned Judge in this case also declared that an LAD claim is not a“ payment claim” within the meaning of sections 4 and 5 of CIPAA. It seems to suggest that a party cannot initiate adjudication proceedings under CIPAA to recover LAD against another party. At the time of writing, the full judgment has yet to be published.
LACK OF PROGRESS OR INTERIM CERTIFICATION
In Bina Puri Construction Sdn Bhd v Hing Nyit Enterprise Sdn Bhd [ 2015 ] 8 CLJ 728(“ Bina Puri”), the applicant sought to set aside the adjudication decision. One of the arguments raised by the applicant was that the payment claim was premature as the interim claims by the respondent were not certified.
The Judge rejected the argument and held that the“ lack of certification of progress or interim claim is not a bar to the adjudication process. Section 5 does not require the existence of certified progress or interim claim before a payment claim can be issued.” The Judge concluded that the adjudicator’ s powers under sections 25( n) and 25( m) of CIPAA which entitle him to“ decide or declare on any matter notwithstanding no
75