( 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
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