FAQ on Impact of Movement Control Order (MCO) to Parties on Statutory Adjudication Under Construction Industry Payment and Adjudication Act (CIPAA)

Q1. What is Movement Control Order (MCO)?

Answer: 

a. MCO is a preventative measure to curb the widespread of COVID 19 and was announced by the Prime Minister of Malaysia on 16.3.2020 with the sole purpose of restricting movement of anyone residing in Malaysia to, from and within an infected area.

b. The announcement of MCO was made based on Prevention and Control of Infectious Diseases Act 1988(“PCIDA”) and Police Act 1967.

Q2. How long is movement control going to last?

Answer: 

a. There are currently eight phases of movement control happening in Malaysia now. The First phase of MCO was from 18.3.2020 until 31.3.2020 as announced by Prime Minister Tan Sri Muhyiddin Yassin on 16.3.2020[1].

b. The Second phase of MCO was from 1.4.2020 until 14.4.2020 as announced by Prime Minister Tan Sri Muhyiddin Yassin on 25.3.2020[2].

c. The Third phase of MCO which is for the period of 15 April 2020 to 28 April 2020. This is based on the latest Prime Minister’s announcement on 10.4.2020 where the MCO is extended to 28.4.2020[3];

d. The Fourth phase of MCO is from 29 April 2020 to 3rd May 2020;

e. The Fifth phase has been converted from#_ftnref3 MCO to Conditional Movement Control Order (CMCO) from 4 May to 11 May 2020;

f. The Sixth phase has been converted from MCO to CMCO from 12 May 2020 to 9 June 2020;

g. The Seventh phase has been converted from CMCO to Recovery Movement Control Order (RMCO) from 10 June 2020 to 31 August 2020;

h. We are currently in Phase Eight and experiencing RMCO from 1.9.2020 to 31.12.2020.

Q3. Is the statutory timeline imposed by Construction Industry Payment and Adjudication Act 2012(CIPAA) automatically extended in view of MCO lockdown?

Answer: 

a. No.There is no provision for automatic extension under CIPAA and there is provision to cater for extension of time for pandemic such as COVID-19 and MCO.

b. In addition, it has been expressly stated by the Asian International Arbitration Centre that all existing and ongoing matters remain unaffected[4]. Parties that have matters ongoing would have to refer to their respective adjudicator for further direction in view of MCO.

Q4. Can I serve a Payment Claim and Payment Response during MCO?

Answer: 

a. Yes. During MCO, an unpaid party is entitled to serve its payment claim under Section 5 of CIPAA. A Non-paying party is as well entitled to serve its payment response under Section 6 of CIPAA. However, it may be difficult for the service to be executed under Section 38 of CIPAA in view of movement restriction and the closure of business premises.

b. The only possible service to be executed is by registered post which may be delayed due to MCO and limited operating hours of the post office. The service by registered post is provided under Section 38(c) of CIPAA and will be considered a good service at the time it is delivered in the ordinary course of the post when it has correctly addressed and made payment to the post office[5].

Q5. What happen if I failed to serve a Payment Response during MCO lockdown?

Answer: 

a. First of all, as mentioned earlier, the timeline to serve Payment Response still apply during the MCO period and is not be by any provision.

b. However, the decision of the Federal Court in the case of View Esteem Sdn Bhd v Bina Puri Holdings Bhd [2018] 2 MLJ 22 would somehow offer some protection to the non-paying party during MCO. The decision of Federal Court has reduces the significance of a Payment Response under Section 6 of CIPAA where any failure to response to a payment claim will be deemed to have disputed the whole of Payment Claim.

c. In view of the Federal Court’s decision, the Non-paying party could now raise its defence later in the Adjudication Response despite not issuing a Payment Response, and the adjudicator must consider all the defences raised by the non-paying party where failing which, the adjudicator would be acting in breach of natural justice.

d. Therefore, there is no real significance now even if a Payment Response is not being served on the unpaid party as the non-paying party can still raise its defence in the Adjudication Response in the later stage of adjudication.

Q6. In view that my claim is subjected to Limitation Act 1953 and my claim’s hit the limitation period within MCO period, what should I do?

Answer: 

a. Section 6 of Limitation Act 1953[6](“LA1953”) provides that actions founded on a contract shall not be brought after the expiration of 6 years from the date on which the cause of action accrued. An example of the application of Limitation period would be on the date of which the default payment occurs under the construction contract.

b. Any disputes referred to adjudication under CIPAA is subject to LA1953[7], just like any matters referred to the Court.

c. To avoid being time barred by the LA1953, a party should issue a notice of adjudication under Section 8 of CIPAA during the MCO period.

d. Although AIAC had announced that it will be closed and not registering any new matters under adjudication during MCO, limitation period in relation to the dispute raised in payment claim stops running upon the effective service of notice of adjudication under CIPAA.

e. This is because an adjudication matter is initiated upon effective service of an notice of adjudication, but not the effective service of payment claim.

Q7. Can I register my Adjudication matter with AIAC during MCO?

Answer: 

No.AIAC has made an announcement on 11.4.2020[8] in relation to Prime Minister’s announcement on 10.4.2020[9] as follows:-

i. Temporary closure of its business premises until 28.4.2020;

ii. AIAC will not be accepting any physical service of documents during MCO;

iii. AIAC is constrained from registering new adjudication, mediation and MYNIC matters during MCO period;

iv. All existing and ongoing alternative dispute resolution(“ADR”) matters remain unaffected;

v. All appointment requests, decisions and/or approvals requiring the Director of the AIAC’s consideration will continue to be hold until a further announcement is made.

Q8. Can I request for appointment of an Adjudicator with AIAC during MCO?

Answer: 

a. No.Following AIAC’s announcement on 10.4.2020, all appointment requests requiring the Director of the AIAC’s consideration will continue to be hold until a further announcement is made.

b. Hence, it is likely that any party may not request for appointment of an Adjudicator until MCO is lifted and/or AIAC resume operation.

Q9. I just received Notice of acceptance of the appointment to act as adjudicator (Form 6) from the Adjudicator during MCO, am I bound by the 10 working days dateline to serve my Adjudication Claim since my premise is not allowed to operate during MCO?

Answer: 

a. Yes. For on-going adjudication proceeding, the time limits to serve Adjudication Claim continues to apply during MCO period.

b. Since the party may be hindered for not having full access to supporting documents that are kept in business premise that was ordered to close by the Prime Minister, it will be prudent for the party to carry out the following actions:-

i. Try to seek an agreement with the other party for an extension of time to serve the Adjudication Claim;

ii. Try to apply to the appointed adjudicator for an extension of time to serve the Adjudication Claim.

c. Although the other party may be unreasonable and attempt to object the extension of time for service of Adjudication Claim, the adjudicator may exercise his or her discretionary power under Section 25(p) of CIPAA to extend the same as reasonably required[10].

Q10. I just received an Adjudication Claim but I have no access to my documents in my business premise, what can I do？

Answer: 

a. More often than not, supporting documents plays an especially vital role in the Adjudication Response in order to defence the massive claims by the Claimant and it is needed for justification of its defence in the Adjudication Response.

b. However, access to supporting documents may be delayed or hindered by not having access to business premise which was ordered to be closed and movement restriction imposed by MCO.

c. There may even be difficulties to procure any documents from the Consultants or third parties in view of business closure.

d. In this regard, it is advisable to carry out the following actions: –

i. Try to seek an agreement with the other party for an extension of time to serve the Adjudication Response;

 ii. Try to apply to the appointed adjudicator for an extension of time to serve the Adjudication Response.

e. Upon the request by the parties, an adjudicator may exercise its discretionary power under Section 25(p) of CIPAA to extend the timeline to serve Adjudication Response in view of the hindrance caused by MCO.

Q11. I just received an Adjudication Reply but I have no access to my supporting documents stored in my business premise, what can I do?

Answer: 

a. First of all, the party must take note that the timeline to serve an Adjudication Reply remain unchanged during MCO and is 5 working days from the date of receipt of Adjudication Response pursuant to Section 11(1) of CIPAA.

b. If the party foresee that it is unable to meet the statutory timeline under Section 11(1) of CIPAA caused by Covid19 and MCO, the party must carry out the following actions:-

 i. Try to seek an agreement with the other party for an extension of time to serve the Adjudication Reply;

ii. Try to apply to the appointed adjudicator for an extension of time to serve the Adjudication Reply.

c. Even if there is objection raised by the Respondent, an adjudicator may still exercise its discretionary power under Section 25(p) of CIPAA to grant the extension of time if reasonably required upon request by the parties.

Q12. Can the Adjudicator withhold the release of Adjudication Decision due to MCO?

Answer: 

a. No, there is no automatic extension of time to release Adjudication Decision provided under any laws.

b. An adjudicator is still required to deliver an adjudication decision within 45 working days despite during MCO period.

c. If the Adjudicator has difficulties to deliver the Adjudication Decision pursuant to the mode of service under Section 38(a) to (c) of CIPAA, the Adjudicator must obtain the parties agreement to deliver in a mode agreed by both the parties under Section 38(d) of CIPAA.

i. If the mode of service has been agreed, the Adjudicator must deliver the adjudication decision within 45 days from the receipt of Adjudication Reply or Adjudication Response(if there is no Adjudication Reply).

ii. Failure by the Adjudicator to deliver the adjudication decision based on agreed mode of service within 45 days will result in the Adjudication decision being void under Section 12(3) of CIPAA and bound to be set aside in the Court later.

d. If the parties are unable to agree to a common mode of service under Section 38(d) of CIPAA, the adjudicator must then seek an extension of time to deliver an adjudication decision under Section 12(2)(c) of CIPAA.

i. If the parties has agreed to an extension of time to deliver the adjudication decision, the adjudicator must deliver the adjudication decision in accordance to the extension of time.

ii. Failure to do so by the Adjudicator will result in adjudication delivered out of time void under Section 12(3) of CIPAA and bound to be set aside in the Court.

e. Overall, if an Adjudication Decision is not delivered within the time stipulated under Section 12(2) of CIPAA and in the absence of consent by the parties to extend the due date to deliver the same, an adjudication decision is void and bound to be set aside as seen in the case of Skyworld Development Sdn Bhd v Zalam Corp Sdn Bhd and other appeals [2019] MLJU 162.

Q13. I can’t serve the physical copy of the Adjudication cause paper to the AIAC which required under CIPAA, will it implicate my case? 

Answer: 

a. No. This is because it was AIAC itself who made the announcement of not accepting any physical service of documents[11]. It was the act of prevention by the AIAC itself to prevent service of physical copy to it during MCO which is required under Rule 4, 5 and 6 of Asian International Arbitration Centre Rules & Procedure, PART IV of CIPAA[12].

b. However, it is advisable that the parties shall still send a copy of the cause papers as required under CIPAA to AIAC via email as there are still AIAC staffs working from home based on AIAC’s announcement.

Q14. Is there any alternative for me to recover my construction claim beside statutory adjudication?

Answer: 

a. Yes. The Chief Justice Tengku Maimun Tuan Mat has announced that Courts continue to function despite MCO[13].

b. It is affirmed by Chief Justice that e-filing system will function as usual, thus any party may initiate a civil action by filing an action in the Courts by using the e-Courts system.

c. The hearing of the matter in Courts was also allowed by way of online hearing provided both parties consented to it.

d. In the absence of any arbitration clause, any party may proceed with civil actions in the Courts within limitation period. It need not be mentioned that there are specific Construction Courts in both Kuala Lumpur High Court and Shah Alam High Court and hence the matter will be properly heard by the field experts.

e. If there exist an arbitration clause in the contract between the parties and the parties are not interested in statutory adjudication, one of the parties may proceed with issuing notice of arbitration and serve it on the other, to prevent being caught by limitation period.

FOOTNOTES 

[1]https://www.malaymail.com/news/malaysia/2020/03/16/pm-malaysia-in-lockdown-from-wed-until-march-31-all-shops-closed-except-for/1847204

[2] https://www.bernama.com/en/general/news_covid-19.php?id=1824718

[3] https://www.bernama.com/en/general/news_covid-19.php?id=1830577

[4]https://www.aiac.world/news/293/Continued-Temporary-Closure-of-AIAC-Premises-in-Response-to-Extension-of-the-Movement-Control-Orders

[5] https://www.jkptg.gov.my/images/pdf/perundangan-tanah/Act_388-intepret.pdf

[6] http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20254.pdf

[7] Section 7(3) of CIPAA

[8]https://www.aiac.world/news/293/Continued-Temporary-Closure-of-AIAC-Premises-in-Response-to-Extension-of-the-Movement-Control-Order

[9] https://www.pmo.gov.my/2020/04/perutusan-khas-perdana-menteri-10-april-2020/

[10] Inovatif Engineering (M) Sdn Bhd v Nomad Engineering Sdn Bhd [2016] MLJU 1351

[11]https://www.aiac.world/news/293/Continued-Temporary-Closure-of-AIAC-Premises-in-Response-to-Extension-of-the-Movement-Control-Order

[12] https://admin.aiac.world/uploads/ckupload/ckupload_20190930053228_47.pdf

[13]https://www.freemalaysiatoday.com/category/nation/2020/04/17/courts-continue-to-function-despite-mco-says-cj/

THIS FAQS ARE PREPARED AND PUBLISHED BY MESSRS GAN & ZUL, ADVOCATES & SOLICITORS, KUALA LUMPUR.-CONSTRUCTION & ALTERNATIVE DISPUTE RESOLUTION DIVISION-