By:
Bryan Lui (Co-Managing Partner) [bryanlui@luibhullar.com]
Harneshpal Karamjit Singh (Co-Managing Partner) [harnesh@luibhullar.com]
Contracting Out of CIPAA 2012?
In the construction industry, the interplay between contractual and statutory adjudication is a crucial area of concern. A recent landmark case, Aspen Glove Sdn Bhd v Tialoc Malaysia Sdn Bhd [2024] 7 CLJ 1, brought this issue to the forefront. This article explores the Court of Appeal's decision and its implications for the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012).
FIDIC Construction Contract 2017 or CIPAA 2012?
In Aspen Glove, the parties had signed the FIDIC Construction Contract 2017, which included a provision for referring disputes to the Dispute Avoidance Adjudication Board (DAAB). This raised a critical question: can parties, by mutual agreement, refer their disputes exclusively to contractual adjudication and thus bypass the statutory adjudication mechanism under CIPAA 2012?
The Legal Question
The central issue was whether the agreement to refer disputes to DAAB was binding, effectively estopping parties from seeking statutory adjudication under CIPAA 2012. This question has significant implications for the enforcement of statutory rights versus contractual agreements.
Court of Appeal's Ruling
The Court of Appeal decisively rejected the idea that contractual adjudication could supersede statutory adjudication rights under CIPAA 2012. The court held that allowing parties to contract out of CIPAA 2012 would undermine the Act's purpose and contravene public policy.
Key Findings: CIPAA 2012 cannot be contracted out
1. Statutory Rights Are Paramount: The court emphasized that CIPAA 2012 provides a statutory right to adjudication that cannot be overridden by contractual agreements. This ensures that contractors and subcontractors have a reliable means to resolve payment disputes promptly.
2. Void Contracts: Any contract attempting to exclude the application of CIPAA 2012 would be deemed void for being against public policy, as stipulated under section 24 of the Contracts Act 1950. This ruling reinforces the principle that statutory protections cannot be waived through private agreements.
3. Public Policy Considerations: The decision underscores the importance of public policy in maintaining the integrity of statutory rights. The court highlighted that allowing parties to contract out of CIPAA 2012 would defeat the Act’s objective of facilitating timely and fair payment in the construction industry.
Implications for CIPAA Lawyers and Industry Stakeholders
For CIPAA lawyers, this ruling provides clear guidance that contractual provisions cannot impede statutory adjudication rights. Legal practitioners must advise their clients that any attempt to bypass CIPAA 2012 through contractual agreements will not hold up in court.
Moreover, for industry stakeholders, this case underscores the importance of understanding the limits of contractual autonomy in the context of statutory rights. It is essential for parties to recognize that CIPAA 2012 offers robust protection that cannot be negated through mutual agreement.
CIPAA Advice for Contractors and Subcontractors
1. Understand Your Rights: Contractors and subcontractors should be aware that CIPAA 2012 guarantees their right to statutory adjudication, regardless of any contractual terms to the contrary.
2. Review Contracts Carefully: When entering into construction contracts, it is crucial to review dispute resolution clauses with a clear understanding that statutory adjudication rights under CIPAA 2012 cannot be waived.
3. Seek Legal Counsel: Engaging a knowledgeable CIPAA lawyer can provide invaluable guidance on navigating contractual and statutory adjudication. Legal advice can help ensure that your rights are protected and that you are fully informed about the implications of your contractual agreements.
Conclusion
The Aspen Glove v Tialoc decision reaffirms the inviolability of statutory adjudication rights under CIPAA 2012. Contractual provisions attempting to circumvent these rights are void and against public policy. This ruling is a significant reminder for contractors, subcontractors, and legal practitioners of the enduring protections provided by CIPAA 2012.
For tailored CIPAA advice and to ensure your statutory rights are upheld, consulting with an experienced CIPAA lawyer is crucial. Understanding the legal landscape will empower you to navigate disputes effectively and ensure fair and timely resolution of payment issues in the construction industry.
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