Conditional payment provisions that inhibit cash flow are void under CIPAA, emphasizing the necessity for adherence to statutory requirements in adjudication.

Lee Swee Seng J:

Project

[1] Terminal Perintis Sdn Bhd (Terminal Perintis) as Employer had entered into a contract with Tan Ngee Hong Construction Sdn Bhd as Contractor for the construction and completion of a project known as:

"Cadangan Pembangunan Berstrata Komersial Bercampur, 1 Blok Apartment Servis Dan 1 Blok Hotel 27 Tingkat Yang Mengandungi : 1 Blok Apartment Servis-Blok A, 2 Tingkat (265 Unit); 1 Blok Hotel-Blok B, 22 Tingkat (303 Unit); Podium 5 Tingkat Yang Melibatkan: Ruang Tempat Letak Kereta Bertingkat, Termasuk 2 Tingkat Aras Bawah Tanah, Berserta Aras Kemudahan 1 Tingkat (Aras Tingkat 3); 19 Lot Ruang Perniagaan Pejabat Pengurusan, Pusat Pengumpulan Sampah Dan 1 Unit Stesen Suis Utama (SSU) Aras Tanah; 1 Unit Rumah Pengawal Di Atas PTD 166944, Mukim Pulai, Daerah Johor Bahru, Johor Darul Takzim-Pinetree Marina Resort" ("Contract" or "Project").

[2] The commencement date of the Contract was 1 April 2014 and the completion date was 31 July 2016, for a total construction duration of 28 months. A formal contract was executed by the parties on 23 December 2014 following the PAM 2006 standard conditions of contract with amendments.

[3] Arising out of what the Architect perceived to be the Contractor's falling behind time in the schedule of completion, the Architect had by letter dated 4 August 2015 to the Contractor ("Notice of Default") under cl 25 of the Contract, specified the Contractor's defaults, namely:

i. without reasonable cause, the Contractor wholly/ substantially suspended carrying out works at site before completion; ii. the Contractor failed to proceed regularly and diligently with the works at site; iii. the Contractor persistently refused or neglected to comply with Architect's Instructions ("AI"); and iv. the Contractor failed to comply with assignment and sub-contracting.

[4] The Contractor responded to the said Notice of Default by their letter dated 10 August 2015 to the Architect, disagreeing that it was in default. It further stated that it would try its "best endeavour to resolve matters and to prevent any causes to the delay in the progress of works". It further referred to its proposed mitigation plan dated 10 Jun 2015 (which included employing additional manpower and working overtime, purchasing equipment and early awarding of sub-contractors) and said that all these plans "demonstrate our effort and commitment toward the completion of project on time ...".

[5] The Employer subsequently by a letter dated 18 August 2015 to the Contractor ("Notice of Determination"), exercised its right to determine the Contractor's employment pursuant to Cl 25.1 of the Contract. The Employer further stated that the Contractor must vacate and return the site possession and it shall pay other person to carry out and complete the Works and make any good defects pursuant to Cl 25.4. The Employer also drew the Contractor's attention to Cl 25, which sets out the latter's duties and obligations upon determination of the Contract, and to comply with the provisions.

Problem

[6] The Contractor as Claimant commenced adjudication proceedings against the Employer as Respondent ("Adjudication Proceedings") under the Construction Industry Payment and Adjudication Act 2012 ("CIPAA"). On 11 November 2015, the Contractor as the unpaid party, served a Payment Claim on the Employer, as the non-paying party, pursuant to s 5 of CIPAA. On 30 November 2015, the Employer served its Payment Response pursuant to s 6 of CIPAA.

[7] The Contractor, in its Payment Claim, claimed for:

i. Payment for value of works done as certified in Int