1

CONSTRUCTION LAW

Introduction to
Construction Law
and
Alternative Dispute
Resolution (ADR)
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After attending this lecture, you (the students) should be able to:

1. have an overview of what is construction law and how it is taught overseas,

particularly in the context of the American, Australian and UK Universities.

2. have an overview of the alternative dispute resolution methods for mediation,

adjudication, arbitration, litigation and the specialist construction court.

3. have an overview of professional bodies such as the Malaysian Society

of Adjudicators (MSA), the Malaysian Institute of Arbitrators (MIArb),
the Kuala Lumpur Regional Centre for Arbitration (KLRCA) and the
Society of Construction Law Malaysia (SCL Malaysia).
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1.0 INTRODUCTION
Paula Gieber (2010) in her article titled: “The Teaching of Construction Law and the
Practice of Construction Law: Never the Twain shall meet?” reported that although
the overwhelming majority of major law firms in the United States, Australia and
UK promote construction law as one of their areas of expertise, the overwhelming
majority of law schools in these three jurisdictions do not offer construction law as
a subject in their Doctor of Jurisprudence (JD) or Bachelor of Laws (LLB) programs.
How could it be that an area of law, that is so widely practised, is not widely taught?
The construction law courses in the law schools is in stark contrast with the
construction law syllabus and offerings in the architecture, engineering and building
faculties. It appears that universities are producing construction professionals who
have an understanding of the laws regulating their industry, but not lawyers who
have the knowledge to advise and represent clients on construction-related issues.
Paula Gieber in her article also briefly analyses the meaning and scope of the term
‘construction law’, before examining the extent to which it forms part of the law
school syllabus and offerings in the United States, Australia and UK. It was then
followed by a critical analysis of the purpose of teaching construction law in law
schools in the United States, Australia and UK and a consideration of the knowledge
and skills that law students should have at the end of their study of construction law.
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2.0  WHAT IS CONSTRUCTION LAW?
Construction law is an umbrella term that covers all the legal principles and laws
relating to the construction industry. Construction law is multi-faceted in terms of
the legal principles and laws that are covered by the umbrella term. Although a
significant component of any construction law course is contract law, construction
law is much more than this and involves the contextual understanding of a variety
of legal principles, including torts, equity, statutory and regulatory laws. For this
reason, it is preferable that any student wishing to enrol in a construction law
course should first have successfully completed courses in law of contract and torts.
The construction industry is extremely diverse in its processes and procedures, as is
construction law, and many construction lawyers have sub-specialities within
construction law. For example, ‘front end’ construction lawyers are involved at
the commencement of the project, with tasks such as advising on the most
appropriate procurement method and the drafting of the contracts involved in any
construction project, while ‘back end’ construction lawyers specialise in the
resolution of disputes during the interim stages of construction and at the
completion stage of the project. A construction law course for law students
therefore needs to cover both the “front end” and “back end” of construction law as
well as the aspects of construction law that span both these sub-specialities.
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3.0  CONSTRUCTION LAW IN LAW SCHOOLS
Furthermore, Paula Gieber (2010) recommended in her article that the American
Association of Law Schools should be encouraged to identify construction law as a
speciality area. Her comments were made more than six years ago, yet the situation
remains unchanged, with construction law still a largely unrecognised discipline
within law schools in America, Australia and UK. There has been no attempt to
comprehensively map the offering of construction law in law schools around the
world. Her article on the teaching of construction law is a modest beginning,
documenting the instances of construction law being offered as an elective subject
in Juris Doctor programs in the United States and Bachelor of Laws (LLB) programs in
Australia and UK. While there has been no attempt to record the offering of
construction law electives in law degrees around the world, there has been an effort
to report the extent to which construction law forms part of the masters programs.
For example, the University of Melbourne in Australia and King’s College (London)
in the UK both offer specialist masters degrees in construction law. These two
programs are open to lawyers, architects, engineers, construction managers,
quantity surveyors and contractors; that is, anyone working in the construction
industry who has an undergraduate degree, preferably in the built environment
discipline with sufficiently high grades to satisfy the entrance requirements.
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3.1 MASTERS CONSTRUCTION LAW PROGRAMS
The specialist masters construction law programs do not lead to a qualification that
entitles a graduate to be admitted as an attorney or solicitor/barrister or solicitor.
Rather, these master degrees provide graduates with in-depth specialist knowledge
of construction law. A specialist masters degree in construction law serves a
valuable purpose in providing those working in construction law or the construction
industry with a more extensive understanding and expertise about this area of law.
However, they do not redress the problem of law schools failing to offer their
undergraduate law students an introductory construction law subject as part of
their legal education. Overwhelmingly, the construction law offerings that are
available within law schools are taught by practising lawyers, rather than full-time
academic staff. This can impact negatively on the effectiveness of the course.
Although lawyers who practise in this area of law will know a lot about the subject
matter, they may have given little thought to how to teach the subject effectively.
Knowing how to teach is as important to the success of a subject as knowing the
substantive content. It is clear that the success of a construction law course depends
on having it taught by someone who not only understands construction law, but
also understands the pedagogical principles that underpin effective teaching.
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4.0 TEACHING CONSTRUCTION LAW
While there is abundant literature about teaching construction law to non-law
students there is lack of literature of teaching construction law to law students and
it is no doubt reflective of the fact that construction law has, for some time, been a
firm feature of most architecture, engineering, building, construction management
and quantity surveying courses whereas it is still a rarity in the LLB law programs.
Another researcher, Philip Bruner (2007) undertook a scholarly analysis of the
historical emergence of construction law (see, William Mitchell Law Review 1, 13-
14). His article traces the origin of the standard form of construction contracts, the
enactment of legislation regulating payments on construction projects, the
development of construction law principles by the courts and the advancement of
specialised construction dispute resolution practices and procedures. In a short
section devoted to construction law scholarship, Bruner noted that legal scholars
pay little attention to the law relating to construction and suggested that this may
be due to legal scholars being unwilling to acquire practical understanding of the
complexities of the construction process and hence have been unable to develop
significant capability to contribute to the development of the laws underpining the
construction industry. It is time for legal scholars to play a role in the advancement
of construction law through education and research in this important discipline.
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Prof. Allen Overcash, an Adjunct Professor of Construction Law at the University of
Nebraska Law School argued convincingly the case for teaching construction law to
undergraduate law students in an article: The case for construction law education
(2009) which was published in the Construction Lawyer 5, 29 (3), on two grounds:
First, it is important that the legal professions have an understanding of the
construction industry and the construction related laws that govern it. Prof. Allen
Overcash noted that the construction industry is the largest single industry in the
United States, employing more than 5 per cent of the country’s workforce. Second,
the peculiar legal issues and problems faced by the construction industry are not
covered in the syllabus and curriculum for law students. While a law student
studying contract law may encounter some construction cases in their case book,
construction contracts are invariably not a focus of the law of contract course.
Furthermore, construction disputes are rarely decided by simply interpreting the
express terms of a written contract and require ‘an intensive investigation of the
facts and laws of the case and the relationship of the numerous parties who are
attempting to perform the project’. Thus, Prof. Allen Overcash concludes that a law
graduate who attempts to advise a client with a construction problem based only on
the interpretation skills they acquired through studying the law of contract and the
law of tort will be struggling to provide an effective advice to the client.
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5.0 WHAT KNOWLEDGE AND SKILLS DO CONSTRUCTION LAWYERS NEED?
Like many complex areas of human endeavour, the construction process has
spawned its own unique customs, practices and technical terminology. Thus, an
aspiring construction lawyer wanting to practise in the area of construction law
needs to understand how the construction industry operates, be familiar with the
technical terminology used in the construction industry and have an appreciation of
the issues that arise and how they can best be avoided, managed or resolved.
Construction clients expect their construction lawyers who are handling their
construction cases or disputes to have at least a fundamental understanding of
technical aspects of construction industry practices and processes, so that they do
not have to spend too much time educating them about the basics. A construction
law subject should therefore ensure that law students learn and understand how
the construction industry operates, its processes and practices, who the players and
stakeholders are, and the respective roles they play in the construction process. In
addition, it is obviously crucial and vital that construction lawyers should
understand and can apply the case laws as set out in the court decisions. These
include the terms that the courts have implied into the construction contacts, based
on the principles of contract, torts, equity and construction industry good practices.
 10

The decision in many a building case has turned on whether the court has found
there to be an implied term in the parties’ construction contract. e.g, that materials
incorporated into the structure will be of specified quality or that the design of the
building will be fit for its purpose. Thus, the law students should learn about key
construction cases that have influenced the development of construction law.
Not only do construction lawyers need to understand the construction industry, its
processes and practices and be familiar with construction law jurisprudence, but
they also need to know and be able to advise clients about the legislation regulating
the construction industry. In most jurisdictions, there are statutes and codes that
govern safety on construction sites, licensing of persons involved in construction,
payment obligations and insurance requirements. All of these laws affect the way
parties to a construction project conduct themselves and manage their relationships.
It is therefore essential that a construction lawyer be able to advise clients about
the impact of the regulatory framework on their projects. The construction industry
‘enjoys’ a reputation of being highly adversarial and litigious. For these reasons,
there is a focus on reducing the risk of a dispute arising during a construction
project and resolving any dispute that does arise in an efficient and timely manner.
6.0 STANDARD FORM OF CONTRACT 11
The construction industry relies heavily upon the standard form of contract (e.g.
the PAM 2006 standard form of contract, the JKR standard form of contract and the
CIDB standard form of contract). As students of construction law, you should learn
about the role that these standard forms of contract play, the importance of the
understanding of the standard form of contract and the hazards in amending the
standard form of contract. By acquiring such knowledge of the various types of
standard form of contract, you will be able to advise your clients on the selection of
an appropriate standard form of contract for their projects and any modifications to
be made to the standard form of contract that should be considered, if required.
6.0.1 CONSTRUCTION CONTRACTS
Traditionally, the construction process begins with an architect or engineer
preparing the design, contractors bidding or tendering for the work, and finally the
construction being undertaken. This can be done pursuant to a fixed price/lump
sum contract whereby the contractor undertakes to complete the works within an
agreed time period and for an agreed amount. The process of ‘design and build’
does not allow for fast-tracking of work, because construction cannot begin until
the design is fully completed and documented. In a traditional construction contract
there is no opportunity for contractors to contribute their experience and skills into
the design, since they become involved only after the design is fully completed.
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As construction management or quantity surveying students of construction law,
you should be introduced to various types of construction contract, which although
less common than the fixed price/lump sum contract, are still traditional types of
contract that you are likely to come across in the practice of construction law. These
include cost-plus contracts, where the contractor undertakes the work and is paid
the actual cost of the work (labour and materials) plus a fee, generally a percentage
of the cost; and the schedule of rates contracts which are used where the precise
scope of the works cannot be quantified at the time the contract is entered into.
One of the objectives of this lecture is to ensure that students have a understanding
and overview of the way in which the construction industry operates; in particular,
its practices when it comes to construction contracts. This lecture on construction
law is designed to enable construction management and quantity surveying
students to acquire the basic knowledge and skills necessary to practice in the area
of construction law and alternative dispute resolution (ADR) not as a construction
lawyer but as a construction manager or a quantity surveyor or an ADR practitioner.
Understanding the case laws and statutory laws relating to the construction
industry in the local jurisdiction and the contractual framework that applies to the
majority of construction projects is a basis for such knowledge acquisition.
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7.0 QUALITY OF WORK ISSUES
Allegations of defective work provide another fertile ground for payment disputes.
What warranties (express and implied) does the contractor provide to the owner
regarding the end product? What obligations does the contractor have to remedy
the allegedly defective work, both during construction and after completion?
What remedies can an owner pursue under the contract, and elsewhere? What is
the measure of damages for defective work: rectification costs or diminution in
value? As students of construction law, you should understand the way defective
work is dealt with in construction contracts, as well as potential extra-contractual
causes of action, such as professional negligence or breach of any statutory duties.
8.0 VARIATION / CHANGE ISSUES
It is extremely rare for a construction project to be completed strictly in accordance
with the contract drawings. Invariably, variations/changes are required. This may be
because the owner has changed his mind regarding an aspect of the design; the
ground conditions are not what were anticipated and therefore a re-design is
required; or the original design has proven to be impractical when it comes time to
building the structure. Construction contracts anticipate that changes will be
required as the building progresses and include clauses allowing for variations.
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9.0 PAYMENT ISSUES IN THE CONSTRUCTION INDUSTRY
Lord Denning MR famously described cash flow as the life blood of the construction
industry. As a result, issues regarding late or non-payment of claims provide fertile
grounds for payment disputes. At the peak periods of construction, contractors can
expend huge sums of money on labour and materials in a very short period of time.
If reimbursement of these financial outlays does not occur in a timely manner,
contractors (and subcontrators) can quickly become insolvent. It is for this reason
that all construction contracts contain provisions that govern payments to the
contractor and most jurisdictions have legislative regimes to provide contractors
with some level of security for payment. These range from the use of performance
bonds, bank guarantees and regulatory regimes that provide for the adjudication of
payment disputes and judicial enforcement of the adjudication decision.
9.0.1 INSTITUTIONAL RULES AND STATUTORY LAWS (Adjudication and Arbitration)
As students of construction law you should learn about the institutional rules and
statutory laws relating to adjudication and arbitration that are applicable in
Malaysia. For the construction management and quantity surveying students taking
this construction law course, you shall learn about the application of the PAM 2006
clauses for adjudication and arbitration and the application of the JKR clauses for
arbitration in the Contract Administration or the Practice and Procedure course.
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10. WHAT IS ALTERNATIVE DISPUTE RESOLUTION (ADR)?
ADR is a collective term for the methods that parties can use to settle their disputes
without resorting to court proceedings. Traditionally, the two most common
methods of ADR are mediation and arbitration. Statutory adjudication is a process
for the resolution of construction payment disputes which was introduced by the
Construction Industry Payment and Adjudication Act (CIPAA 2012) on 15 April 2014.
This lecture (and subsequent lectures) are designed to enable you (construction
management and quantity surveying students) to acquire the fundamental
knowledge of construction law and ADR and its applications. You will be introduced
to the various available ADR methods, mechanisms and techniques for resolving
construction related disputes such as mediation, adjudication, arbitration, litigation
and also the relevant statutory and case laws relating to the Construction industry.
As students of construction law, you should learn about the way how each method
of ADR works, its advantages and disadvantages, and the different paths to ADR, for
example, via a contractual clause or requirement in the standard form of contract or
via an order or judgement of the High Court. It is hoped that after you have taken
this course and graduated as construction managers or quantity surveyors, you can
advise your client on which method of ADR to pursue, and skilfully represent them
in the ADR process as the client's representative, if it is required to do so.
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10.1 What IS MEDIATION?
Mediation is a voluntary process in which a mediator facilitates communication and
negotiations between disputing parties to assist the parties in reaching an amicable
settlement. The Mediation Act (2012) seeks to facilitate this process. Generally, the
parties are free to agree on the appointment of any person as their mediator. If
parties cannot come to a consensus, they can request the Malaysian Mediation
Centre (MMC) of the Bar Council to appoint a qualified mediator from its panel. Any
agreement arising from a successful mediation is reduced to writing in a Settlement
Agreement signed by the parties. In the event the mediation is not successful,
parties may proceed to pursue their respective rights in arbitration or litigation .
Very often, parties commence legal proceedings without first attempting mediation.
In such circumstances, it is common for the judge to suggest that parties attempt
mediation. Where the mediation is unable to bring about an amicable settlement,
the case is returned to the hearing judge for disposal. All disclosures, admissions
and communications made in and during mediation sessions are made on a without
prejudice basis. This means that in the event the mediation is unsuccessful, parties
involved in the mediation cannot later use or repeat any disclosures, admissions
and communications in mediation to further their case in arbitration or litigation.
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10.2 STATUTORY ADJUDICATION IN MALAYSIA
The consistent growth of the construction industry has continued to
give rise to many construction-related disputes. Some problems in the
construction industry include speculative development without
sufficient financial capital, the extensive period of time, the high cost
of existing dispute resolution mechanisms and the unequal bargaining
powers between parties have led to abuse. These problems bring
undesirable effects to the industry and ultimately the economy.
Datuk Professor
Insolvent contractors and subcontractors and abandoned projects are Sundra Rajoo, Director
just some of the many consequences. To address these problems, the of the KLRCA
Construction Industry Payment and Adjudication Act 2012 (Act 746)
(CIPAA 2012) was passed and came into force on 15 April 2014. The
adjudication proceeding as a method of dispute resolution is binding
unless it is set aside by the High Court, the matter is settled by both
parties in writing, the dispute is finally decided by arbitration or the
court, or there is a stay of adjudication decision pursuant to sections
13 and 16 (CIPAA 2012). If either or both parties do not agree with the
adjudication decision, the case can be reopened by arbitration or
litigation at the conclusion or termination of the construction contract.
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10.2.1 WHAT IS THE PURPOSE OF CIPAA 2012?
The purpose of CIPAA 2012 is to provide a mechanism for dispute resolution
through adjudication and to provide remedies for the speedy recovery of payments
in order to ease the cash flow in the construction industry. This Act applies
restropectively to every construction contract made in writing before 15 April, 2014
relating to construction work carried out wholly or partly within Malaysia and
include construction contracts entered into by the government. Construction here
carries a wide meaning and covers a wide array of construction works in different
areas and even includes the oil and gas industry and telecommunication.
The Act does not, however, apply to a construction contract entered into by an
individual for any construction work in respect of any building which is less than
four storeys high and which is wholly intended for his occupation. Adjudication has
a judicial element in that the adjudicator hears both sides and decides the dispute.
The main thing that distinguishes arbitration and litigation from adjudication is that
arbitration and litigation are usually the last options resorted to only when parties
are ready to terminate the contract. Adjudication under CIPAA 2012 is concerned
with getting a quick decision in relation to the resolution of construction-related
payment disputes. It is a summary procedure and an interim solution which in
theory should not stop or delay the progress of the contract or construction works.
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10.2.2 WHO IS AN ADJUDICATOR AND WHAT IS HIS ROLE?
An adjudicator is a qualified and an independent industry expert who need not
necessarily be a lawyer. He can be a lawyer, an architect, an engineer, a construction
manager or quantity surveyor who is appointed by the parties to assess the merits
of an adjudication claim and decide on it based on the CIPAA 2012, the rules,
regulations, and circulars of the Kuala Lumpur Regional Centre for Arbitration.
The adjudicator has his duties and obligations stipulated under section 24 (CIPAA
2012). He shall have the powers and discretion under section 25 to establish the
procedures in conducting the adjudication proceedings, draw on his own knowledge
and expertise, carry out inspections as is deemed necessary and to award financing
costs and interest, amongst others. Despite the powers and discretion being in the
adjudicator’s hands, an adjudicator must apply the terms of the contract.
To qualify as an adjudicator in Malaysia, a person needs to have a law degree or a
relevant degree in the built environment, at least 7 years of working experience in
the construction industry, successfully complete the KLRCA Adjudication Training
Programme, be awarded the KLRCA Certificate in Adjudication and be empanelled
on the KLRCA's Panel of Adjudicators. Since CIPAA (2012) came into operation on 15
April, 2014, six training programmes have been held and about 500 KLRCA's panel of
adjudicators are now qualified and ready to adjudicate payment disputes.
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10.2.3 THE ROLE OF THE KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION
By virtue of Part V (CIPAA 2012), the Kuala Lumpur Regional Centre for Arbitration
(KLRCA) is the default appointing authority and administrative body for statutory
adjudication in Malaysia It is responsible for the determination of the adjudicator's
fees, standard terms of appointment, setting of the competency standards and
criteria required of an adjudicator pursuant to section 32(a). The adjudicator and
KLRCA as the default appointing and administrative body are entitled to immunity.
10.2.4 THE MALAYSIAN SOCIETY OF ADJUDICATORS (MSA)
The Malaysian Society of Adjudicators (MSA) was launched on 5 July 2013 with the
objective of promoting ethical and professional standards of service of adjudicators
in Malaysia. It aims to encourage and develop statutory adjudication as a method of
resolving construction disputes without denouncing other dispute resolution
methods and also to provide a forum and communication channel for which
adjudication practices and issues may be discussed among professionals. The MSA
keeps adjudicators updated on current policies, practices, procedures and standards,
it is also tasked with providing training and educational facilities for professionals
who would like to become adjudicators. Malaysia joins developed countries such as
Australia, New Zealand, United Kingdom and Singapore where the practice of
adjudication has gained popularity as an alternative dispute resolution mechanism.
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10.3 STATUTORY ARBITRATION IN MALAYSIA
Arbitration is a private and judicial determination of a dispute by an independent
third party. The difference between mediation and arbitration is that parties
maintain full control of the workings and outcome of the mediation; whereas in
arbitration, the arbitrator decides the outcome of the proceedings and the parties
are bound by that decision. Arbitration is similar to court proceedings in that the
arbitrator (like the judge) will decide the dispute; the difference is that parties can
decide on the appointment of the arbitrator and the rules and procedures to be
applied in the arbitration. Parties to a contract may agree by way of an arbitration
clause to refer any dispute that might arise in respect of that contract to arbitration.
The Arbitration Act 2005 is the law governing statutory arbitration in Malaysia. The
UNCITRAL Model Law on International Commercial Arbitration has been adopted as
part of the working provisions of the Act. Parties are at liberty to decide on the
number of arbitrators that will decide the arbitration matter. In the event, the
parties cannot mutually agree on the choice of an arbitrator (or arbitrators), the
seat of the arbitration and the rules to be applied to the arbitration, the parties can
consult the Kuala Lumpur Regional Centre of Arbitration (KLRCA). Pursuant to the
Arbitration Act 2005, the KLRCA is the default appointing and administrative body.
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10.4 THE MALAYSIAN INSTITUTE OF ARBITRATORS (MIArb)
Just like the Malaysian Society of Adjudicators which was set up by adjudicators for
the adjudication profession, the MIArb was set up in 1991 by arbitrators for the
arbitration profession with the aim of promoting the resolution of disputes by
arbitration. Since its inception, MIArb’s panel list of arbitrators has expanded to
include respected individuals with eminent qualifications and experience in a
variety of professional disciplines from industries such as building and construction,
engineering, banking, finance, law, insurance, service and manufacturing industries.
MIArb has widened its objectives to promoting and facilitating other methods of
ADR such as mediation and adjudication. MIArb has developed its Mediation Rules
and Arbitration Rules for the mediator's, the arbitrator's and the parties’ adoption
to govern the practice and procedure of their mediation and arbitration. MIArb has
a proud history of educating the public and training its members in ADR.
MIArb also runs assessment courses for individuals to qualify as Fellows of MIArb.
Over the years, MIArb has built strong collaborative relationships with local and
international ADR institutions, industry associations and centres of higher learning
to raise awareness and expand the use of ADR methods. MIArb is also actively
engaged in ADR law reform. MIArb is a non-profit and non-governmental Institute.
 23
As arbitration proceedings do not come within the purview of the Legal Profession
Act 1976, parties may choose to be represented by a legally trained construction
professional such as an architect, an engineer, a construction manager or a quantiy
surveyor to represent them in the arbitration proceedings. Nevertheless, in practice,
parties to arbitration proceedings are commonly represented by lawyers. Although,
arbitrators do not necessarily have to be lawyers, they must be independent and
impartial. Professional arbitrators are usually Fellows of the Chartered Institute of
Arbitrators (UK) and empanelled on the KLRCA's Panel of Abrbitrators. Parties are
advised to appoint arbitrators who have sufficient knowledge and experience in
arbitration laws as well as the technical knowledge on the subject matter in dispute.
The arbitrator is required to give a reasoned award, that is, an award explaining the
grounds for his decision. In the event a losing party refuses to comply with an award,
the winning party may apply to the Construction Court to register the award and
pursue enforcement proceedings. There is no appeal against an award made in
Malaysia under the Arbitration Act 2005. The only challenge that can be made is an
application to the Construction Court to set aside the award. Such an application
has to be within 90 days of the receipt of the award. The grounds for setting aside
such an award are limited to fraud or breach of the rules of natural justice. We shall
be looking at the process and procedure of setting aside of arbitration awards and
the stay of court proceedings in a subsequent lecture on construction litigation.
 24
If ADR is unsuccessful in resolving a construction dispute, the disputing parties are
likely to end up in construction litigation. Construction litigation is in many ways
unique, and often conducted within a specialist court. We shall look at construction
litigation in a subsequent lecture and it will focus on various aspects of construction
litigation that distinguish it from other forms of litigation. At the conclusion of that
lecture, you should be able to identify, understand and apply the process and
procedural rules that have been developed within the construction court to more
effectively manage complex construction litigation such as stay of proceedings, etc.
As students of construction law, you should learn about the innovative rules and
procedures that some specialist courts (for example, the construction court) have
developed in order to respond to certain aspects of construction litigation, including,
for example, the ‘outsourcing’ of technical aspects of the dispute for determination
by an expert witness, that is, a person with specialist technical skills, such as an
architect, an engineer, a construction manager or a quantity surveyor with profound
specialist technical skills, preferably, with a working knowledge of construction law
and ADR. The trial judge is free to accept or reject the findings of an expert witness
but, in practice, an expert witness's report is generally accepted by the trial judge,
unless there is a failure to adhere to the procedural requirements or due process.
 Construction Court, 25
10.4 THE CONSTRUCTION COURT IN MALAYSIA Kuala Lumpur and
Shah Alam
Malaysia is the second country in the world after the UK to have Established.
1 April, 2013
established a construction court. In the UK, the specialist construction High Court Judges
court is known as the Technology and Construction Court (TCC).
It was reported in The Star Newspaper on 5 October 2012 that “The
Construction Industry Development Board (CIDB) said: Justice in the
construction sector would be best served by statutory adjudication,
arbitration and the construction court. Speedy dispute resolution often
requires knowledge of industry intricacies and technical complexities.
A Malaysian Bar Council representative added that the Bar Council is Yang Arif
strongly in support of the construction court as there is sufficient case Datuk Mary Lim
load to justify the setting of the construction court by the Malaysian
Judiciary.”, and on 13 January 2013, the Chief Justice Tun Arifin Zakaria
said: “Construction cases are unique as they involve technical issues,
multiple parties and varying terms of payment. Thus, a specialist
construction court would be beneficial to the industry. By having
specialised judges, it will help in the speedy disposal of such cases. A
construction court will be set up in Kuala Lumpur and Shah Alam soon
to hear construction disputes as demand for projects continue to rise”. Yang Arif
Datuk Lee Swee Seng
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10.4.1 THE RESOLUTION OF CONSTRUCTION INDUSTRY DISPUTES IN MALAYSIA
Adjudication, Arbitration or Litigation in the Construction Court?
Traditionally, Malaysian construction-related disputes are resolved in mediation and
arbitration, or otherwise in the normal courts of law. These construction-related
disputes are often technically complex involving mixed issues of fact and law. Both
modes of dispute resolution have in recent years been increasingly perceived as
inadequate and unsatisfactory by the users especially in respect of cost and time
taken to dispose the construction disputes. It is observed from the UK experience
that construction justice is best served by the trinity of statutory adjudication,
construction arbitration and the specialist Technology and Construction Court (TCC).
Thus, by the initiative of the Construction Industry Development Board (CIDB) to
transform the Malaysian construction industry alternative dispute resolution
landscape in line with the vision of the Construction Industry Master Plan, the
Construction Industry Payment and Adjudication Act 2012 (CIPAA) was enacted in
June 2012 after several years of debate. This Act came into operation on 15 April,
2014 and is applicable restropectively to all written construction contracts entered
into prior to 15 April, 2014. The specialist Construction Court was established by the
Malaysian Judiciary on 1st April 2013 in Kuala Lumpur and Shah Alam as a branch of
the High Court at the joint request of the CIDB and the Bar Council of Malaysia.
 27
Meanwhile, it is noted that the KLRCA has in the last couple of years also undergone
rapid transformation and is actively promoting arbitration as the preferred ADR
method. The Arbitration Act (2005) has been revised by the Malaysian Government
in 2011 to strengthen arbitration. The transformed ADR landscape and availability of
these alternative modes of construction dispute resolution pose a challenge for
both the construction lawyer and client to determine and select the mode that is
best suited for the dispute. Arbitration is available as a mode to resolve the dispute
if there is an arbitration agreement between the parties. The existence of the
arbitration agreement is seldom a problem in construction contracts at the higher
level of construction contracting pyramid where standard forms of contract are used.
Problems are often seen in subcontracts especially bespoke ones at the lower level.
The arbitration is confined to the parties to the arbitration agreement and there
cannot be an inclusion of other third parties except by consent even though the
disputes may be related ones. The arbitrability of the subject matter in dispute is
dependent on the scope of the arbitration agreement. Most contractual issues are
encompassed by the arbitration agreement but related issues such as professional
negligence in tort may not necessarily be so included. In such situations, the dispute
involving negligence cannot be resolved satisfactorily together in the arbitration.
 28
As often prescribed in the arbitration agreement in the construction contract, there
are certain limitations in the commencement of arbitration proceedings. The
commencement of arbitration is usually postponed till the completion of the works
or termination of the contract. Besides, it is normal practice for the referral of and
obtaining the decision of the contract administrator or adjudicator to be made the
condition precedent to the initiation of the arbitration proceedings. There are also
standard forms of contract for large commercial projects that require reference to
mediation or adjudication as the condition precedent to the initiation of arbitration.
The limitation to the commencement or initiation of arbitration proceedings is an
important consideration particularly when speed of obtaining the arbitration award
is an essential consideration. The arbitration award is recognized and enforceable as
a judgment of the High Court (for example, the specialist construction court of Kuala
Lumpur and Shah Alam). Very importantly, the arbitration award is enforceable
abroad by virtue of the New York Convention (1958). This is the distinct superiority
of arbitration over the other modes of dispute resolution. The enforceability of the
dispute resolution outcome has to be considered when one of the disputing parties
is a foreign entity since there are many international contractors and developers
operating in Malaysia and their assets are housed in their home country.
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10.4.2 LITIGATION IN THE SPECIALIST CONSTRUCTION COURT OF MALAYSIA

The specialist Construction Court is a branch of the High Court of Malaya and has
unlimited monetary jurisdiction as well jurisdiction to grant equitable reliefs such as
specific performance, injunctions, etc. The jurisdiction of the Construction Court
that has been established as from 1st April 2013 is as follows:
a) Building, engineering or other construction disputes including;
(i) Claims arising from the Construction industry Payment and Adjudication Act,
CIPPA 2012 (Act 746) excluding judicial review;
(ii) Claims relating to performance bonds, guarantees and insurance;
(iii) Claims in connection with quality of goods sold or leased, and work executed or
materials supplied or services rendered;
(iv) Claims in connection with the environment (e.g. environment pollution cases);
b) Claims by or against engineers, architects, surveyors, accountants, consultants
and other specialist consultants in connection with services rendered;
 30

c) Claims by or against local authorities in connection with their statutory duties in

relation to land development and building construction;
d) Arbitration related proceedings including challenges against arbitration awards;
and
e) Appeals from the subordinate courts.
The jurisdiction of the Construction Court is wide and though the local jurisdiction
as prescribed is confined to the Federal Territory of Kuala Lumpur and Selangor, it is
possible by consent of the parties to transfer construction related disputes from the
High Courts in the other States of West Malaysia to the Construction Court.
It is the constitutional right of the parties to refer any dispute to the High Court or in
the case of a construction related dispute to the Construction Court. Unless a stay of
proceedings is applied for and obtained, the parties can still have their dispute
resolved in court notwithstanding that there is an arbitration agreement. Unlike an
arbitration tribunal, the Construction Court is able to determine multi-party
disputes in the same forum and this is important in relation to defective work
dispute where there is often the claim against both the contractor and the designer.
 31

The judgment of the Construction Court is final and binding subject to the usual
appeal to the Court of Appeal and Federal Court with leave.
Judgment of the Construction Court is subject to review on appeal and is in that
sense of lesser finality than an arbitration award where the parties have opted out
of court intervention. As discussed earlier on enforcement of the adjudication
decision, there is the similar limitation on the enforcement of the judgment of the
Construction Court abroad. The court proceedings in the Construction Court are
adversarial and governed by the Rules of Court (2012) and the Evidence Act 1950 as
modified by Practice Directions (PD) that will likely be issued by the Construction
Court in due course. As seen from the workings of the High Court in recent years,
the average time frame to commence and conclude a case after trial is one year.
Thus, it is foreseeable that the construction dispute resolution in the Construction
Court will be an expedited one compared with arbitration. This expedited litigation
procedure will likely involve adopting techniques utilized in the UK Technology and
Construction Court (TCC) such as the imposition of limited time hearings and use of
expert witnesses to assist and facilitate the court on the factual portions of the
dispute particularly on issues of causation and quantum of the claims.
 32
Besides, the Construction Court is also implementing electronic filing, retrieval,
presentation and management of documentary evidence. Presently, the filing fee of
a case in the Construction Court is nominal at a lump sum of RM 400. In view of the
nominal fee that is subsidized by public funding, it is thus fair to expect that the
disputing parties will not be afforded the opportunity to present their case to the
fullest but subject to supervision by the judge on time management.
The parties must however be represented by a lawyer (Advocate & Solicitor) and
that will incur costs of representation. The proceedings in the Construction Court
are public and there is no privacy and confidentiality protection. In other words, the
public has access and is able to view the entire proceeding in the open court room.
All judgments of the Construction Court will be published in a dedicated law report.
It can be surmised that there is no one mode of dispute resolution that fits all
circumstances. As always in most human endeavours, it is situational and the best
fit has to be chosen. The sensible first step is perhaps to begin by exclusion to wit,
and dispensing the mode that is inapplicable due to its inherent jurisdictional
limitation. Hence, it should be noted that arbitration is unavailable to the disputing
parties if there is no arbitration agreement. Similarly, statutory adjudication is
unavailable to the disputing parties, if the dispute is not a payment dispute.
 33
It is possible for parties to a payment dispute to commence statutory adjudication
concurrently with arbitration or litigation in the Construction Court on the same
dispute. However this is unlikely to happen in reality as there is little practical
benefit in doing so. It is more probable that the dissatisfied party in relation to the
adjudicator's decision will thereafter probably proceed to arbitration using the
KLRCA Fast Track Arbitration Rules or litigation in the Construction Court to finally
re-determine the payment dispute. At that point the party may also apply to the
Construction Court to set aside the effect of the adjudication decision.
However, if adjudication is not utilized in the first instance, the pivotal consideration
between arbitration and litigation in the Construction Court in the case of a
domestic construction dispute will then centre on the nature of the dispute because
that nature dictates the required case presentation necessary to achieve a just result.
In conclusion, The Malaysian alternative dispute resolution landscape has changed
by the advent of the Mediation Act (2012), the Arbitration Act (2005, amended
2011), the Construction Industry Payment and Adjudication Act (CIPAA, 2012) and
establishment of the Construction Court (2013) by the Malaysian Judiciary. The
change is definitely for the better. There are now vibrant ADR and litigation options
for disputing parties but it requires wisdom and experience of the ADR Practitioner
or legal counsel and client to select the most appropriate one that best serves them.
 34
10.5 THE SOCIETY OF CONSTRUCTION LAW MALAYSIA (SCL Malaysia)
The Society of Construction Law Malaysia is an affiliated organisation of the Society
of Construction Law based in the UK. In most common law countries such as Canada,
Australia, New Zealand, Singapore and Hong Kong, there are also similarly affiliated
Societies of Construction Law. The objectives of the SCL Malaysia are as follows:-
1. Promoting, supporting, organizing or participating in Conferences, Seminars,
Exhibitions, Scholarships, Courses, Lectures and similar projects for the benefit of
the members of the Society and public.
2. Initiating research and studies and working parties, obtaining information on all
aspects of construction law and technology and publishing the useful result thereof
for the benefit of the members of the Society and public.
3. Publishing or communicating by any desirable and effective means information
relating to construction law, and all matters relating thereto for the benefit of the
members of the Society and public.
4. Establishing relationships, association and liason with other persons and other
bodies with similar or related objects and exchanging information and studies and
results concerning all matters relating thereto to further the object of the Society
and for the benefit of the members of the Society.
 35
5. Employing agents or servants (not being members of the Council) as may be
necessary to further the object of the Society.
6.Subject to such consents as may be required by law, purchasing, selling,
mortgaging, charging or leasing any property which may be required for the
purposes and benefit of the Society.
7. Collecting application fees and subscriptions for memberships to the Society.
8. Collecting donations and grants subject to prior approval of the Registrar of
Society and other relevant authorities as may be necessary to further the object of
the society.
9. Providing, equipping, furnishing, fitting-out with all necessary plant, furniture and
equipment andmanaging buildings and properties for the benefit of the members of
the Society.
10. Encouraging professionals and other persons from all related disciplines and
sectors of the construction industry to join the Society
Any person who has a keen interest in Construction Law can join the SCL Malaysia as
an ordinary member and have access to its resources and construction law
publications. Student membership is available but the application must be approved
by the Vice-Chancellor of the University or College. (SCL Constitution, article 5.1.3.3)
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Thank you