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KLRCA CIRCULARS

KLRCA CIPAA CIRCULAR 1A

CIRCULAR BY KLRCA ON THE SCOPE OF APPLICATION OF CIPAA AND THE ADMINISTRATION OF ADJUDICATION CASES BY KLRCA

The KLRCA through Circular 01 issued on 23rd April 2014 had advised that the KLRCA would administer adjudication cases in accordance with the position taken therein.

On the 31st October 2014, the High Court in UDA HOLDINGS BHD V BISRAYA CONSTRUCTION SDN BHD (24C-6-09/2014) and CAPITAL AVENUE DEVELOPMENT SDN BHD V BAUER (M) SDN BHD (24C-5-09/2014), had determined that CIPAA 2012 was intended to apply retrospectively, namely, subject to sections 3 and 41 of the Act, the Act applies to every construction contract made in writing within the meaning of Section 4 of the Act regardless of when it was made and under which a payment claim is made.
Section 3 provides that CIPAA 2012 shall not apply to a construction contract entered into by a natural person for any construction work in respect of any building which is less than four storeys high and which is wholly intended for his occupation.
Section 41 provides that CIPAA 2012 shall not affect the proceedings relating to any payment dispute under a construction contract which had been commenced in Court or Arbitration before the coming into operation of the Act.

Given that the issue relating to the scope of the application of CIPAA 2012 has been determined by the High Court, the KLRCA will comply and administer adjudication cases in accordance with the decision of the High Court.

Therefore the KLRCA will henceforth register and administer adjudication cases filed with it under CIPAA 2012 provided that the relevant requirements of the KLRCA Adjudication Rules & Procedure are complied with.

This Circular 1A supersedes Circular 01 issued on 23rd April 2014 with immediate effect.

Dated this 11th November 2014.
director-signature
Professor Datuk Sundra Rajoo
Director of KLRCA

KLRCA CIPAA CIRCULAR 02

CIRCULAR ON KLRCA’S RECOMMENDED SCHEDULE OF FEES (Amended as at 1st August 2014)

The Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) and Construction Industry Payment and Adjudication Regulations 2014 (“Regulations”) came into effect on the 15th April 2014.

The Schedule of Fees under the Regulations sets out the standard fees for services and expenses of an adjudicator as imposed by the Ministry of Works.

The KLRCA is of the view that the schedule of fees under the Regulations may not be reasonable enough to attract qualified and experienced people capable of working under the very tight deadlines imposed by the CIPAA 2012.

The KLRCA highlighted its concerns to the Ministry of Works that should the scale fee be set too low there is a high likelihood that the selected adjudicator will try to negotiate with the parties to agree on a reasonable fee acceptable to the selected adjudicator, and decline the appointment if such an agreement cannot be reached. However, the Ministry of Works did not incorporate our comments and concerns in the imposition of the standard fees under the Regulations.

Therefore the KLRCA recommends an alternative adjudicator fee schedule to reduce the likelihood of adjudicators declining appointment due to the low fees. The recommended adjudicator fees takes into account factors such as the quality of professionalism required of an adjudicator, the timeline within which an adjudicator will be required to complete the adjudication as well as the claimed amount involved in an adjudication.

The adjudicator and parties can agree to adopt the KLRCA Recommended Schedule of Fees at any time during the negotiations of the adjudicator’s terms of appointment and fees chargeable.

KLRCA’s Recommended Adjudicator Fee Schedule is set out below:

1.1 KLRCA’s recommended adjudicator fee schedule

Amount In Dispute Adjudicator’s Fees (RM)
Up to 150,000 8,400
150 001 to 300 000 8,400 + 3.5% of excess over 150,000
300 001 to 800 000 13,650 + 1.3% of excess over 300 000
800 001 to 1 300 000 20,150 + 1.25% of excess over 800 000
1 300 001 to 1 800 000 26,400 + 1.1% of excess over 1 300 000
1 800 001 to 2 300 000 31,900 + 0.7% of excess over 1 800 000
2 300 001 to 2 800 000 35,400 + 0.5% of excess over 2 300 000
2 800 001 to 3 300 000 37,900 + 0.683% of excess over 2 800 000
3 300 001 to 5 000 000 41,315 + 0.65% of excess over 3 300 000
5 000 001 to 10 000 000 52,365 + 0.365% of excess over 5 000 000
10 000 001 to 15 000 000 70,615 + 0.38% of excess over 10 000 000
Over 15 000 000 89,615

1.2 Adjudicator fees to be paid by the parties as directed by the adjudicator.

1.3 Adjudicator fees prescribed in sub-paragraph 1.1 excludes the 20% administrative support fee prescribed in Schedule III of the KLRCA Adjudication Rules & Procedure and all taxes as may be imposed by the Government of Malaysia on the fee earned by the adjudicator.

2. Expenses

2.1 An adjudicator who is required to travel outside his place of residence to conduct a site visit and the like will be reimbursed with an economy class airfare, reasonable mileage claim (as agreed by both parties) or as prescribed by KLRCA or any other reasonable fare for mode of transportation (as agreed by both parties) whichever is applicable, subject to the submission of invoice, receipt or in original or such evidence acceptable to the KLRCA.

2.2 A per diem of RM1800 shall be paid to an adjudicator who is required to travel outside his place of residence to conduct a site visit and the like, whenever overnight accommodation is required. Where no overnight accommodation is required, a per diem of RM900 shall be paid.

2.3 The expenses covered by the per diem above shall include the following items:

    • Hotel accommodation
    • Meals/beverages
    • Laundry/dry cleaning/ironing
    • City transportation (excluding airport transfers)
    • Communication costs (telephone, fax, internet usage etc)
    • Tips

2.4 Expenses to be paid by the parties as directed by the adjudicator.

A copy of the KLRCA Recommended Schedule of Fees together with the complete set of the KLRCA Rules & Procedure can be found at: www.klrca.org

Dated 1st August, 2014.
director-signature
PROFESSOR DATUK SUNDRA RAJOO
DIRECTOR OF KLRCA

KLRCA CIPAA CIRCULAR 03

CIRCULAR ON KLRCA’S GUIDELINE ON THE MEANING OF “CONSTRUCTION CONTRACT MADE IN WRITING”

The Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) came into operation on 15 April 2014. Section 2 of the Act provides that statutory adjudication regime shall apply to construction contracts made in writing.

However, no definition or further elaboration is provided in the Act as to what ‘construction contract made in writing’ means.

Given the fact that there are various means by which a construction contract may be made, a clear guideline on the meaning of a ‘construction contract made in writing’ will ensure that parties to a construction contract are guided as to whether or not payment disputes arising under their contract can be referred to adjudication under the Act. Further, it will eliminate the need for the adjudicator who may not be legally trained to grapple with the complexity of the issue of whether a construction contract is in writing.

As such the KLRCA is of the view that it would be expedient and/or necessary to provide clear guidance and definition as to what the phrase ‘construction contract made in writing’ mean, for giving full effect and the better carrying out of the provisions of the Act.

The KLRCA adopts the following definition of a ‘construction contract in writing’:-

‘Construction Contract In Writing’

  1. There is a contract in writing:-
    1. if the contract is made in writing (whether or not it is signed by the parties);
    2. if the contract is made by exchange of communications in writing; or
    3. if the contract is evidenced in writing.
  2. Where parties agree otherwise than in writing by reference to terms which are in writing, they make a contract in writing.
  3. A contract is evidenced in writing if a contract made otherwise than in writing is recorded by one of the parties, or by a third party, with the authority of the parties to the contract.

The KLRCA Guideline on Construction Contract in Writing shall apply to all adjudication cases commenced under CIPAA. A copy of the KLRCA Guideline can be found at: www.klrca.org

Dated 28th day of April, 2014.
director-signature
Professor Datuk Sundra Rajoo
Director of KLRCA

KLRCA CIPAA CIRCULAR 04

CIRCULAR ON KLRCA’S PROCEDURE FOR EXEMPTION APPLICATION MADE UNDER SECTION 40 OF THE CONSTRUCTION INDUSTRY PAYMENT AND ADJUDICATION ACT 2012

Under Section 40 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”), the Minister may upon considering the recommendation of the KLRCA, make an order for exemption of any person or class of persons or any contract, matter or transaction or any class thereof, from all or any of the provisions of CIPAA, subject to such terms and conditions as may be prescribed.

In order for the Director of KLRCA to make a recommendation to the Minister of Works for exemption under Section 40 of the CIPAA, the KLRCA has introduced a procedure for an application for exemption.

The KLRCA procedure for the application of exemption, as set out in the KLRCA Rules and Procedure, is set out below:-

PROCEDURE FOR EXEMPTION APPLICATION

  1. An application for exemption under section 40 of the Act shall be made in writing to the Director of KLRCA.
  2. The application for exemption must –
    1. be accompanied by a non-refundable application fee in the amount of RM 40,000.00;
    2. contain the name and address of the applicant;
    3. identify the person or class of persons, or contract, matter, transaction or any class thereof, and the provisions of the Act from which the applicant seeks to be exempted;and
    4. contain a statement of the grounds and furnish any relevant documents (if any), in support of the application.
  3. Upon receiving an application for exemption, the Director of KLRCA may –
    1. decline the application if it fails to comply with paragraph 2 above; or
    2. request any further information from the applicant that he or she may require for his or her review; or
    3. review the application.
  4. The Director of KLRCA may consult with any relevant party for the purpose of reviewing an application for exemption upon receipt of the application or of the further information referred to in paragraph 3(b) above.
  5. The Director of KLRCA will thereafter make a recommendation to the Minister pursuant to section 40 of the Act, to –
    1. accept the application, with or without conditions; or
    2. decline the application, wholly or partly.

All applications for exemption must comply with the above procedure prior to the Director of KLRCA making the recommendation to the Minister of Works.

A copy of the KLRCA Rules and Procedure can be found at: www.klrca.org

Dated 28th day of April, 2014.
director-signature
Professor Datuk Sundra Rajoo
Director of KLRCA

KLRCA CIPAA CIRCULAR 05

CIRCULAR BY KLRCA ON THE PROCEDURE FOR IMPLEMENTATION OF GOODS AND SERVICES TAX IN CIPAA PROCEEDINGS ADMINISTERED BY KLRCA

Pursuant to the Goods and Services Tax Act 2014, commencing 1 April 2015 a 6% Goods and Services Tax (“GST”) will become payable on the provision of all services. This will include the provision of services by the KLRCA and also by adjudicators in relation to all CIPAA proceedings administered pursuant to the CIPAA 2012, the CIPAA Regulations 2014 and the KLRCA Adjudication Rules & Procedure.

The procedure for the collection of GST will be as follows.

Upon the adjudicator issuing a direction pursuant to Rule 9(2) of the KLRCA Adjudication Rules & Procedure ordering the parties to deposit with the KLRCA the full adjudicator’s fees and expenses and the administrative fees of the KLRCA, the KLRCA will collect the full costs of the adjudication by way of security deposit.

The security deposit, including the adjudicator’s fees plus GST and the administrative fees of the KLRCA plus GST, will be collected in equal shares from the parties by the KLRCA. No fees shall be payable to the adjudicator at this stage.

Payments requested by the KLRCA in MYR can be made by cheque made out to the Kuala Lumpur Regional Centre for Arbitration or to the following account:

Account Name:
Kuala Lumpur Regional Centre for Arbitration

Account Number:
5143 5680 7190

Bank Name:
Malayan Banking Berhad

Bank Address:
Ground & Mezzanine Floors, Wisma Genting, Jalan Sultan Ismail, 50250 Kuala Lumpur

SWIFT Code:
MBBEMYKL

After the security deposit has been paid, the adjudicator shall issue tax invoices reflecting the full adjudicator’s fees and expenses as well as any GST payable. The tax invoices will be issued in the parties’ names and delivered to the KLRCA. The KLRCA will subsequently forward the tax invoice to the parties.

If the adjudicator is registered in Malaysia for the purposes of GST, GST will be payable on their fees. If the adjudicator is not registered, the party will need to account for the GST directly to the Department of Customs.
The KLRCA, after the security deposit has been paid, shall issue tax invoices reflecting the administrative fees of the KLRCA as well as the GST payable. The tax invoices will be issued in the parties’ names and delivered to the parties.

The security deposits already paid by the parties will be entirely set off against the costs of the adjudication in satisfaction of the tax invoices issued by the adjudicator and the KLRCA.

Any additional or supplementary deposits that may become payable over the course of proceedings will be collected in the same way. Tax invoices will be issued in the parties’ names by the relevant service provider (being the adjudicator or the KLRCA), including GST, with the deposit thereafter collected by the KLRCA. If the service provider is not registered for GST, GST will not be included.

Should proceedings be completed prior to the delivery of the final decision, the adjudicator may direct reasonable costs to be paid, including reasonable fees and expenses of the adjudicator. The adjudicator shall issue tax invoices reflecting those reasonable fees and expenses. In the event there is any difference between those reasonable costs and any tax invoice previously issued then a corresponding credit note will need to be issued by the adjudicator.

Any unexpended balance will then be refunded to the parties.

This Circular 05* will take effect on 1 June 2015.

Dated this 1 June 2015.

Sundra-sign
Datuk Professor Sundra Rajoo
Director of KLRCA

*As revised on 1 June 2015.

KLRCA CIPAA CIRCULAR 06

CIRCULAR BY KLRCA ON THE EXEMPTION OF GOVERNMENT CONSTRUCTION CONTRACTS AS SPECIFIED IN THE SECOND SCHEDULE OF THE CONSTRUCTION INDUSTRY PAYMENT & ADJUDICATION (EXEMPTION ORDER) 2014

Reference is made to subparagraph 2(2) of the Construction Industry Payment & Adjudication (Exemption Order) 2014 (hereinafter referred to as “Exemption Order”), which makes the following order:

‘2. Exemption

2) Subject to subparagraph (3), a Government construction contract as specified in the Second Schedule is exempted from the application of subsections 6(3), 7(2), 10(1), 10(2), 11(1) and 11(2) of the Act from 15 April 2014 to 31 December 2015.’

The Second Schedule of the Exemption Order reads as follows:

‘A contract for any construction works as defined under the Act with the contract sum of twenty million ringgit (RM20, 000,000) and below.’

The above subparagraph 2(2) provides that the operative period of the Exemption Order upon a Government construction contract as specified in the Second Schedule shall lapse after 31st December 2015.

Accordingly, commencing 1st January 2016 and pursuant to subparagraph 2(2) of the Exemption Order, a Government construction contract as specified in the Second Schedule shall cease to be exempted from the provisions of subsections 6(3), 7(2), 10(1), 10(2), 11(1) and 11(2) of the Construction Industry Payment & Adjudication Act 2012.

Following the same, the procedures under subparagraph 2(3) of the Exemption Order shall also cease to apply to a Government construction contract as specified in the Second Schedule from 1st January 2016 onwards.

This Circular 06 will take effect on 1st January 2016.

Dated this 1st January 2016

Yours sincerely,

Sundra-sign
Datuk Professor Sundra Rajoo
Director of KLRCA