A legal analysis of statutory adjudication in the construction industry : special reference to UK and Malaysian acts

Abstract

In the early 1990s, UK experienced a recession which led to massive job losses and insolvency of businesses, particularly in the construction sector. This state of affairs triggered the UK Government to enact the Housing Grants, Construction and Regeneration Act 1996 (Construction Act) and Part 1 of The Scheme for Construction Contracts (England and Wales) Regulations 1998 which came into force on 1 May 1998. This Act and its Scheme introduce a system to facilitate prompt payment to affected parties in the construction industry and a mechanism to resolve disputes speedily through statutory adjudication. Similar Acts soon emerged in Australia, New Zealand and Singapore to address acute cash flow problems in their industry. In Malaysia, an Act referred to as the Construction Industry Payment and Adjudication Act (CIPA Act) has been recently passed in May of 2012 to address the issues of payment and dispute settlement in the construction industry. This Act is expected to be in force early of 2013. During the drafting of its Act, Malaysia have the options to choose between the contrasting models from other jurisdictions, to learn from the mistakes made, and to pick and integrate the best practices under each model to produce a scheme acceptable by the participants in the construction industry. The CIPA Act 2012 is observed to be akin to the Construction Act in the UK. However, different from the UK Act which include issues other than payment, the CIPA 2012 confined the law to regulate payment issue and the introduction of statutory adjudication as a mechanism to resolve the issues. With reference to the UK Construction Act and equivalent Acts in other jurisdictions and legal principles derived from the UK precedents, this study intends to contribute and extend towards a basic cognizance and an appreciation of the concept of disputes and its causes and of the different forms of dispute resolution available for the construction industry, analyse the statutory adjudication mechanism in the UK Construction Act, in its Scheme, and in other legislation, derive the guiding principles from UK court decisions, and identify areas that have been and have not been addressed by the CIPA Act. It further intends to propose several mechanisms to ensure statutory adjudication meets its objective and to highlight other avenues available to resolve disputes. It is hope that this study will be able to lend some support and guidance to those who would be directly involved in the construction sector and will be able to assists policy makers to address the issues of concern that were not dealt by the CIPA Act in the event the Act undergoes a review on its efficacy in the future.