Late Payment Interest under CIPAA 2012

Introduction

1. It is not uncommon for a claimant to impose late payment interest on total sum due and owing when there is a default of payment.

2. The High Court of Malaya recently delivered its decision in MAYFAIR VENTURES SDN BHD V SETIAKON BUILDERS SDN BHD (2025) CLJU 108, which addressed critical issues regarding the adjudicator’s jurisdiction under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA 2012”), particularly in awarding late payment interest.

3. This article examines the Court’s findings on:

• the validity of late payment interest claims under CIPAA 2012; and
• whether the adjudicator had exceeded her jurisdiction in awarding such interest.

Brief Facts

4. Setiakon was appointed as a main contractor by Mayfair for a development of serviced apartments in Petaling Jaya.

5. Setiakon completed the works, for which a certificate of practical completion was issued on 31.1.2020. Despite the issuance of interim certificates and the acknowledgment of Setiakon’s invoices, Mayfair failed to pay the balance of progress works and release retention sums to Setiakon.

6. The letter of award between Setiakon and Mayfair incorporated the Agreement of Condition of PAM Contract 2006 (“COC”) where Setiakon is entitled to a simple interest based on base lending rate plus 1% payable by Mayfair on default of payments pursuant to clause 30.17 of the COC.

7. Payment claim was issued by Setiakon under CIPAA 2012 which included RM2,493,315.94 being late payment interest at a rate of 7.6%. Since Mayfair made no payment, an adjudication proceeding was commenced for the non-payment of progress payments, retention sums and late payment interest.

8. Upon the conclusion of the adjudication proceedings, the adjudicator allowed Setiakon’s claim. Dissatisfied, Mayfair filed an originating summons to set aside the adjudication decision pursuant to Section 15(b) of the CIPAA 2012 on the ground that there had been a denial of natural justice by the adjudicator and or that the adjudicator had acted in excess of her jurisdiction in awarding late payment interests.

Findings of the High Court

9. Upon hearing the case, the High Court dismissed Mayfair’s setting aside application and allowed Setiakon’s application to enforce the adjudication decision.

10. A fundamental issue was whether late payment interests fell within the statutory definition of “payment” under CIPAA 2012. Mayfair contended that late payment interest is not a claimable sum under Section 4 of CIPAA 2012 and therefore, could not be adjudicated upon since principal amount under interim certificates had been paid.

11. The High Court, however, found that:

• late payment interest was contractually provided under clause 30.17 of the COC;

• such interest accrued as a consequence of Mayfair’s delayed payment, and had become payable to Setiakon. It is within the interpretation of “payment” of CIPAA 2012;

• late payment interest was stated in Setiakon’s payment claim and Mayfair had neither denied the claim nor raise any jurisdictional objection to Setiakon’s claim in its payment response;

• in addition, the adjudicator had the discretionary power under section 25(o) of CIPAA 2012 to decide on interest.

12. The High Court further distinguished cases cited by Mayfair as they were cases for loss and damages due to termination of contract and for loss of profit due to breach of contract.

13. In view of the above findings, the High Court found that Mayfair failed to discharge its burden to prove that the learned adjudicator had acted in excess of jurisdiction in arriving to the adjudication decision. Mayfair’s setting aside application was dismissed.

Observations

14. This judgment provides clarity on the scope of payment claims under CIPAA 2012 that late payment interest, can be validly claimed under CIPAA 2012 if it is contractually stipulated and arising from certified payment delays.

15. The High Court decision reinforces the adjudicator’s jurisdiction to award late payment interest. The ruling further underscores the importance of addressing all disputes comprehensively during adjudication proceedings particularly the position taken in adjudication claim and response to prevent jurisdictional challenges from being precluded at later stages.