The appellant (Jack-In Pile (M) Sdn Bhd) in these appeals was a contractor appointed by the respondent (Bauer (M) Sdn Bhd) by a letter of award dated 16 March 2011 as its subcontractor for a project ('the project').
Under clause 11.1 of the agreement, all payments to the appellant shall only be made within seven days from the date the respondent received their related progress payments from the employer of this project, ITD-Vertex Consortium Sdn Bhd ('the employer').
On 3 August 2016, the appellant issued a payment claim to the respondent pursuant to Construction Industry Payment and Adjudication Act 2012 ('CIPAA') and it was allowed.
The appellant then sought to enforce the adjudication decision whereas the respondent sought to set aside the adjudication decision in the High Court.
Both applications were heard together and the High Court allowed the appellant’s application to enforce the adjudication decision and dismissed the respondent’s setting aside application.
The High Court held that the CIPAA, including s. 35, applied retrospectively. Therefore, Clause 11.1 of the agreement had been rendered void by s.35 of the CIPAA. This was overturned the Court of Appeal whereby it was ruled that CIPAA was prospective in nature.
The appellant then appealed to the Federal Court to decide on the novel issue of the whether CIPAA is to be applied retrospectively as the date of the Letter of Award is before the date of enforcement of CIPAA ie 15.4.2014.
Questions of Law
Whether Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) applies to construction contracts entered into before the coming into operation of this Act i.e. 15.4.2014.
If the answer to question (i) above is answered in the affirmative, does it follow that Section 35 of CIPAA 2012 should also apply to construction contracts entered into before the coming into operation of this Act i.e. 15.4.2014.
Decision
The Federal Court held that the entire Act ought to be applied prospectively. Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) does not apply to construction contracts entered into before the coming into operation of this Act i.e. 15.4.2014. It therefore follows that Section 35 of CIPAA 2012 does not apply to contracts entered into before the coming into operation of this Act.
The main reason is the fact that there is no express intention by Parliament that the CIPAA is to be applied retrospectively; hence, CIPAA can only be applied prospectively.
The adjudication decision is set aside and the decisions of the Court of Appeal are affirmed.
The case will undoubtedly place a significant impact on construction disputes. With this decision in place, it is now settled that CIPAA does not apply to construction contracts that were entered into before 15.4.2014. In effect, party to such a contract will not be able to resort to adjudication proceedings. Adjudication Decisions made based on such contracts would be liable to be set aside whereas the ongoing proceedings would have to be discontinued.
In respect of conditional payment provision, while pay-when-paid clause is void under Section 35 of CIPAA, it is valid if it had been agreed by parties before 15.4.2014.
This case also echoes the principle that an act of Parliament is not intended to have retrospective operation unless a clear intention is evinced in express terms.