MPPM

(Z-004-LP12)
Dispute Resolution

Sr Dr Wan Maimun Wan Abdullah

CCPM

13 -14 Aug 2022

UTMSPACE
 LECTURE CONTENT

CONTENT DAY 1 (Saturday) Day 2 (Sunday)

Part 1 Lecture Lecture
9.00 – 10.30 am
10.30 – 11.00 am Break Break
Part 2 Discussion Case study
11.00 – 1.00 pm
1.00 – 2.00 pm Lunch Lunch
Part 3 Lecture Discussion
2.00 – 3.00 pm
3.00 – 3.30 pm Break Break
Part 4 Lecture KA
3.30 – 5.00pm
 CONFLICT
Disagreement/ Difference of opinion

CONFLICT DISPUTE
Differ, diverge, incompatible Quarrel, wrangle, argue

Dispute start with a conflict

Internalize & Externalize 3
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 CONFLICT
Conflict can be more than a mere disagreement
The core of the problem is found in the roots

Respond

Perceive a threat (physical, emotional, power, status etc)

to their needs/ interests/ well-being. 4
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 CONFLICT

3 SIDES

CONFLICT

The challenge is to sense/

be aware of any conflict/
differences quickly before
the relationship deteriorate

5
 CONFLICT

Consider your office environment:

1. What are some key sources of conflict ?
2. How do you respond when conflict arise?
3. Do you want others to understand your point?
4. Do you listen to others’ point of view?
5. When you solve the problem, do you consider other
people’s interest over your own?
6. Is there some rule/protocol written or otherwise.

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 CONFLICT

HIGH Stand up for your Dig to identify

own rights underlying concerns

Minimally acceptable by all

LOW

Postpone the issue Yielding to others

LOW HIGH

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 DISPUTES
Simplified Model CONSULTANTS
Architect
of Construction
Engineer
Industry: Quantity Surveyor
Land Surveyor
Key Players
Project Manager

CLIENTS & AUTHORITIES

ADMINISTRATIVE
Clients
ORGANIZATIONS
Local Authorities
Financial Institution
Water, Electricity, Sewerage
Insurance Company
Road & Highway Authority
Legal firm
JPS
SITE ORGANIZATION
Contractor
Subcontractor
Specialist Contractor
Material Suppliers
Plant 8
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Labor subcontractor
 DISPUTE
 Contractual disputes arises when one party
claims something and the other party disagrees.
 One party perceive they have suffered losses & that
should be remedied or compensated.
 The other party rejects the claim or disagrees over
liability.
 Both parties are unable or unwilling to resolve
their disagreement.

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 DISPUTE AVOIDANCE

DISPUTE
AVOIDANCE

PREVENTION SEEDS OF CONFLICT

 Selection of contractors  Good working relationship –
 Experienced professionals Teamwork & Attitude
 Innovative delivery system  Good communication
 Clear project brief & documentation  Minimise external influences –
 Complete contract document politics, environmental

 Long-term working relationship
Contract administration procedure
 Clear rights & obligations
 Post-mortem project review
 Incentive program
 Lessons learnt
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 DISPUTE AVOIDANCE
Put in place proper documentations
 Contract Documentation
 Program
 Complete Design including schedule of drawings
 Scope changes identified
 Variations list
 Progress Report
 Correspondence
 Minutes of meetings
 Cost report
 Statement of claim
 Dispute resolution procedure
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 DISPUTE RESOLUTION

DISPUTE DISPUTE RESOLUTION

 Dispute Resolution – Traditional and Alternative

 Structured/ formal methods of resolving dispute

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 DISPUTE RESOLUTION IN MALAYSIA: MAIN METHODS

TRADITIONAL DISPUTE ALTERNATIVE DISPUTE

RESOLUTION (TDR) METHODS RESOLUTION (ADR) METHODS

LITIGATION ARBITRATION

MISCELLANEOUS
CONCILIATION NEGOTIATIONS ADJUDICATION METHODS

DISPUTE RESOLUTION
MEDIATION MED-ARB MINI-TRIALS ADVISOR/BOARDS

FIG. 1-1: DISPUTE RESOLUTION IN MALAYSIA– MAIN METHODS

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 DISPUTE RESOLUTION IN MALAYSIA: MAIN METHODS

TRADITIONAL DISPUTE ALTERNATIVE DISPUTE

RESOLUTION (TDR) METHODS RESOLUTION (ADR) METHODS

LITIGATION ARBITRATION

MISCELLANEOUS
CONCILIATION NEGOTIATIONS ADJUDICATION METHODS

DISPUTE RESOLUTION
MEDIATION MED-ARB MINI-TRIALS ADVISOR/BOARDS

FIG. 1-1: DISPUTE RESOLUTION IN MALAYSIA– MAIN METHODS

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 DISPUTE RESOLUTION
COMMON DISPUTE RESOLUTION METHODS
1. Negotiation
2. Mediation or conciliation
3. Expert determination
4. Adjudication
5. Arbitration
6. Litigation

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 DISPUTE RESOLUTION

STRUCTURE
DEGREE OF FORMALITY
BINDING TO PARTIES
LOW HIGH

NEGOTIATION LITIGATION

ARBITRATION
MEDIATION/CONCILIATION
ADJUDICATION

EXPERT DETERMINATION

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 DISPUTE RESOLUTION
PWD FORM 203A
 Clause 5.0 – S.O’s Instructions
 Clause 65.0 – Arbitration

PAM CONTRACT
 Clause 2.0 – Architect’s Instructions.
 Clause 35.0 – Mediation.
 Clause 34.0 – Adjudication and Arbitration.

CIDB FORM OF CONTRACT

 Clause 47.1 – Reference to S.O.
 Clause 47.2 – Reference to Mediation
 Clause 47.3 – Reference to Arbitration.
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GROUP WORK

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 NEGOTIATION
 A process by which parties communicate in order to
arrange their business affairs by establishing
agreement and reconciling area of disagreement.
 To negotiate is to confer with the other party in
order to reach a compromise or agreement.
 Communication for the purpose of persuasion.
 Pre-eminent mode of dispute resolution.

 'Let us never negotiate out of fear. But let us never fear to negotiate.'
John F. Kennedy
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 NEGOTIATION

NEGOTIATION PROCESS
 Both parties communicate.
 Explore their differences.
 Information exchange.
 Leading to a greater understanding of the situation.
 Eventually convergence of goals and an agreement
OR abandonment of the negotiation process!!

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 NEGOTIATION

The 8-stage negotiation process

1. Prepare: Know what you want. Understand them.

2. Open: Put your case. Hear theirs.

3. Argue: Support your case. Expose theirs.

4. Explore: Seek understanding and possibility.

5. Signal: Indicate your readiness to work together.

6. Package: Assemble potential trades.

7. Close: Reach final agreement.

8. Sustain: Make sure what is agreed happens.

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 NEGOTIATION
BODY LANGUAGE
 Posture
 The Space Around You
 Hand-to-Face Movements
 Gestures
 Facial Expression
 Eye Contact

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NEGOTIATION

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 MEDIATION/ CONCILIATION
PAM CONTRACT : Clause 35.0
 Parties may refer any dispute for mediation.
 If fail to agree on mediator after 21 days, refer to PAM.
 PAM Mediation Rules.

CIDB FORM OF CONTRACT : Clause 47.2

 If S.O fails to decide within 30 days or dissatisfied with
S.O’s decision, refer dispute to Mediation.
 CIDB Mediation Rules.
 Condition precedent to Arbitration.

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 MEDIATION/ CONCILIATION
 An informal process where parties in dispute
are assisted by one or more neutral third
parties in their efforts towards settlement.
 Mediation & conciliation used interchangeably.
 Mediator/ Conciliator do not judge or arbitrate
the dispute.
 Mediator advise and consult impartially with
the parties to assist in bringing about a
mutually agreeable solution to the dispute.
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 MEDIATION/ CONCILIATION
COMMON TRAITS
1. A third party intervention
 The role of the third party is to facilitate the other parties’
decision-making
 The process builds on negotiation and the mediator
fundamentally sustains and reviews the situation

2. The third party is independent

 The essence is the impartially of the mediator
 The trust developed allows mediator to perform a
bridging role between the parties

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 MEDIATION/ CONCILIATION
MEDIATION PROCESS
1. Pre-mediation – agreeing to mediate and
preparation
2. The mediation – direct or indirect mediation
3. Post-mediation – complying with the outcome

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 ORGANIZATIONS PROVIDING MEDIATION SERVICES

 Asian International Arbitration Centre (AIAC)

 Malaysian Mediation Centre, Bar Council (MMC)
 Banking Mediation Bureau & The Insurance Mediation Bureau
 Construction Industry Development Board (CIDB)
 Industrial Courts
 Consumer Tribunal
 Syariah Courts
 Bureau Bantuan Guaman
 Professional Institutions e.g. Institution of Engineers Malaysia (IEM),
Pertubuhan Akitek Malaysia (PAM), etc.

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 MEDIATION ACT 2012

MEDIATION ACT 2012 (ACT 749)

 Date of Royal Assent: 18th June 2012

 Date of Publication in the Gazette: 22nd June 2012
 Date of Coming into operation per S1(2): 1st August 2012

Aims/Purposes of the Act:

1. To promote and encourage “mediation” as a method of alternative

dispute resolution (ADR);

2. To facilitate the settlements of disputes in a fair, speedy and cost

effective manner; and

3. To provide for related matters.

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 MEDIATION ACT 2012

• Definition of “Mediation” (Section 3)

“A voluntary process in which a mediator facilitates communication and
negotiations between parties to assist the parties in reaching an agreement
regarding a dispute.”

• Folberg and Taylor

“A process by which participants, together with the assistance of a neutral

person or persons, systematically isolate disputed issues in order to
develop options, consider alternatives, and reach a consensual settlement
that will accommodate their needs.”

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 MEDIATION ACT 2012

What is a Mediator’s Role?

Section 9 Mediation Act 2012

Facilitate mediation and determine the manner in which mediation is to
be conducted.
Assist parties to reach satisfactory resolution of dispute and suggest
options for the settlement of dispute.
Act independently and impartially.

It is important to explain the role of the mediator i.e.:

• a neutral, independent and impartial facilitator
• will not offer solution or give legal advice
• the parties shall decide their own outcome

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 MEDIATION ACT 2012

Mediator is NOT:
 to be a detective - get information and stop

 to be an arbitrator - decide the best outcome

The Mediator structures the process to

 separate out emotions

 move from positions to interests

 channel communication between the parties

 provide a reality check

 initiate brainstorming & generation of options

 create opportunities to see the other side

 identify the signposts of agreement.

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 EXPERT DETERMINATION
 Process by which disputing parties instruct an
expert third party to decide a particular issue.
 The third party is selected due to his expertise in
relation to the issues between the parties.
 Normally in the contract that a third party will
decide on a disputing issue between the parties

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 EXPERT DETERMINATION
CLAUSE IN THE CONTRACT
 Jurisdiction - Issues to be determined clearly
and precisely expressed
 Role – To act as an expert not as an arbitrator
where his opinion is of value and is not
capable of being challenged
 Binding – The decision is final and binding.

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 ADJUDICATION
PAM CONTRACT - Clause 34.0
 Parties have the freedom to refer any dispute to
adjudication.
 A dispute shall be referred to an adjudicator to be
agreed between the parties.
 A decision made by an adjudicator shall bound the
other party until Practical Completion period.
 If there is any disagreement on the adjudicator’s
decision, the other party must sent a notice to
arbitrate within 6 weeks of the adjudicator’s decision.

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 ADJUDICATION
• A process by which an adjudicator decides the
case before him. The decision is binding unless
revised in arbitration/ litigation.
• Adjudicator is a neutral individual who is not
involved in the project.
• Unlike mediation, the process does not require
cooperation of both parties.
• It could be held any time there is a dispute.
• It is subject to the procedural of the CIPAA Act.

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 CIPAA 2012
Passed in Parliament in 2012
Come into operation on 15.4.2014
37
The CIPAA Journey

2003
Initial discussions
2004 Forums
2005 Conference and Industry Consultations
2006 Key Recommendation on CIPAA in CIMP
2007 Roadshows and Awareness

2008 Cabinet Paper

2009 Approval in Principle from Cabinet

2010 Briefing to AG and more consultations

2011 1st CIPAA draft from AG (March)

1 DEC 2011 2 APR 2012 3 MAY 2012 4 JUNE 2012 5 JUNE 2012 6 APRIL 2014
1st Reading 2nd Reading 3rd Reading Royal Act 746 Full
In Parliament In Parliament In Parliament Assent Gazzetted Enforcemen
38
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 CIPAA
Three documents in implementing CIPAA
1. Construction Industry Payment and Adjudication Act
2012 (CIPAA 2012)
2. Construction Industry Payment and Adjudication
Regulations 2014 (CIPAA Regulations)
3. Asian International Arbitration Centre Adjudication
Rules and Procedure (AIAC ARP)

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WMAIMUN/CIPAA
 ADJUDICATION

 Main objective is to alleviate payment problems which

stifle cash flow in the construction industry.
 Non-payment, late payment, under-payment.
 Objective of CIPAA:
1. To facilitate regular and timely payment.
2. To provide speedy and dispute resolution through
adjudication.
3. To provide remedies for the recovery of payment
upon the conclusion of adjudication.
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 ADJUDICATION
Coverage of CIPAA 2012 (Act 746)
• Geographically – work must be carried out wholly or
partly within Malaysian territory
• Parties – all construction contracting parties including
individuals, body corporate, statutory bodies and
government agencies.
• Type of work – all types of works except residential
building less than 4-storey intended for occupation.
• Contracts – all work contracts, supply contracts and
consultancy services contracts relating to construction
works. Contract must be in writing.
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 ADJUDICATION

NON-APPLICATION (3 & 40)

• Construction contract for residential occupier.
• Building less than 4 storeys high.
• Building wholly intended for occupation i.e. not for rent,
lease, sale etc.
• Where exempted by Minister.

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 ADJUDICATION
SUBJECT MATTER
1. Payment Issues (35 & 36)
a) Prohibition of Conditional Payment
b) Default provision in absence of term of payment
c) Adjudication of Payment Disputes

2. Non-Payment Issues (27(2))

a) Agreement by parties in writing to extend
adjudicator’s jurisdiction
b) Only after adjudication proceedings started

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 ADJUDICATION
ADJUDICATION DECISION

Adjudication decision is binding unless (Section 13)

 Set aside by High court on any of the grounds
referred in Section 15 (fraud, denial of natural
justice, adjudicator not impartial or in excess of
his jurisdiction)
 Settled by written agreement between parties, or
 Dispute finally decided by arbitration or the court

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 ADJUDICATION
ENFORCEMENT OF DECISION (16, 28 to 31)
1. Loser can apply to High Court to stay Decision.
2. Winner can apply to High Court to enforce Decision.
3. Other remedies available to Winner:
– Can seek Direct Payment from Principal.
– Can suspend or Reduce Rate of Progress of
Performance.
4. Winner can exercise these remedies concurrently.

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 PROCEDURE & PROCESS

Step 1: Payment Claim & Response

Step 2: Initiation of Adjudication

Step 3: Adjudication Claim

Step 4: Adjudication Response

Step 5: Adjudication Reply

Step 6: Adjudication Proceeding

WMAIMUN/CIPAA 46
 PROCEDURE & PROCESS
STEP 1: Payment Claim & Payment Response
• Serve a Payment Claim on the non-paying party. It
includes amount claimed, due date, detail, contract
provision and description of work or service (Section 5)
• Non-paying party respond within 10 working days by
serving a Payment Response admitting whole or part
and make payment or disputing the claim (Section 6)
• Failure to respond deemed payment claim is disputed
• Either party may then refer dispute to adjudication
• Form 1 & Form 2– KLRCA Adjudication Rules
WMAIMUN/CIPAA 47
 PROCEDURE & PROCESS
STEP 2: Initiation of Adjudication
• Serve a written Notice of Adjudication. It contains
nature and description of dispute, remedy sought and
supporting documents (Section 8)
• Appointment of Adjudicator either by mutual
agreement or written request to KLRCA (Section 21)
• Competency criteria of Adjudicator (Regulation 4 of
CIPAA Regulations). KLRCA shall appoint Adjudicator
within 5 working days.
• Form 3 – KLRCA Adjudication Rules
• Notice to KLRCA within 7 days after notice of
Adjudication (Rule 2 of KLRCA Adjudication Rules)
WMAIMUN/CIPAA 48
 PROCEDURE & PROCESS
STEP 3: Adjudication Claim
• Claimant to serve Adjudication Claim to
respondent within 10 working days from date of
receipt of acceptance of appointment by
adjudicator (Section 9)
• Form 7 – KLRCA Adjudication Rules
• Claimant to serve a copy of the Adjudication Claim
on KLRCA within 7 working days after serving a
written adjudication claim

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 PROCEDURE & PROCESS
STEP 4: Adjudication Response
• Respondent to serve an Adjudication Response
within 10 working days from date of receipt of
Adjudication Claim (Section 10)
• Failure to respond, the claimant may proceed with
adjudication after expiry of the time specified
• Form 8 – KLRCA Adjudication Rules
• Respondent to serve a copy of the Adjudication
Response on KLRCA within 7 working days after
serving a written Adjudication Response
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 PROCEDURE & PROCESS

STEP 5: Adjudication Reply

• Claimant may serve an Adjudication Reply within
5 working days from date of receipt of Adjudication
Response (Section 11)
• Form 9 – KLRCA Adjudication Rules
• Claimant to serve a copy of the Adjudication Reply
on KLRCA within 7 working days after serving a
written Adjudication Reply

WMAIMUN/CIPAA 51
 PROCEDURE & PROCESS
STEP 6: Conduct of Adjudication Proceedings
• Adjudicator shall conduct adjudication in manner he
considers appropriate within powers provided under Section
25 (Section 12)
• Adjudicator shall decide dispute and deliver decision within
45 working days or such further time as agreed by parties.
An adjudication decision not made within the period is void
• Decision in writing and reasoned and determine the
adjudicated amount and the time and manner of payment
(Section 12.4 and 12.5)
• Adjudicator shall order the cost to follow the event and fix
quantum of cost to be paid (Section 18 and Regulation 7)
• Form 15 – KLRCA Adjudication Rules
WMAIMUN/CIPAA 52
 PROCEDURE & PROCESS
95d

Payment Adjudication Process

Disputes

Non-paying
party serves
Payment
Response to
KLRCA
unpaid party
appoints
(Clause 6) adjudicator Claimant Respondent Claimant
Claimant upon serves serves serves
serves Notice request of Adjudication Adjudication Adjudication
of parties in Claim to the Response to Reply to the Adjudicator to deliver
1d 10d Adjudication dispute respondent the claimant respondent Adjudication Decision
to respondent (Clause 21) (Clause 9) (Clause 10) (Clause 11) (Clause 12)
(Clause 8)

Unpaid Party serves

Payment Claim to
non-paying party
(Clause 5)
10d 5d 10d 10d 5d 45d

Appointment of Acceptance of
adjudicator upon appointment by
receipt of Notice adjudicator
of Adjudication (Clause 22 (2) or
(Clause 8) 23(2))
Unpaid Claimant/
party Non-paying Adjudicato KLRCA Claimant Responden Claimant Adjudicator
party r t
 ARBITRATION
 A private formal dispute resolution process
subject to statutory control.
 A process available as an alternative to litigation.
 Provided in the contract but to be held upon the
completion of the construction.
 Arbitration Act 1952 (Act 93).
 Amendments.

54
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 ARBITRATION
ARBITRATION ACT 2005 (ACT 646)
 The 1952 Act did not distinguish between
domestic and International & courts given wide
berth to intervene and control arbitral process.
 Arbitration Act 2005 enacted on 30 Dec 2005
repeal and replace the Arbitration Act 1952.
 It was based on the United Nations Commission
on International Trade Law (UNCITRAL) Model
Law on International Commercial Arbitration.
 KLRCA Arbitration rules, 2018
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 ARBITRATION
PWD FORM 203A: Clause 65.0
1. If any dispute arise, parties shall refer the matter to
officer named in Appendix for a decision.
2. Decision in writing and binding until completion,
whether or not notice of dissatisfaction is issued.
3. If no decision within 45 days or is dissatisfied with
decision, then refer to arbitration within 45 days to
an agreed arbitrator or KLRCA.
4. Arbitration commence after completion, or alleged
completion, or determination, or abandonment
unless with written consent of both parties.
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 ARBITRATION
PWD FORM 203A: Clause 65.0
5. If consent given, does not waiver other obligations.
6. Parties may make any counter claim.
7. Cost and award shall be at discretion of arbitrator.
8. Award shall be final and binding on parties.
9. If arbitrator dies/unable/unwilling, parties appoint
another person or by KLRCA.
10. Arbitration governed by Arbitration Act 2005.

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 ARBITRATION
PAM CONTRACT : Clause 34.0
5. Any dispute during progress or after completion or
abandonment shall be referred to arbitration.
6. Agreed arbitrator or failure after 21 days refer PAM.
7. Upon appointment, arbitrator shall initiate
arbitration proceedings of Arbitration Act 2005 and
PAM Arbitration rules.
8. Power of arbitrator – rectify contract, direct
remeasurement, review certificate/opinion/
decision/requirement/notice, determine all matters
of dispute, award interest.
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 ARBITRATION
PAM CONTRACT: Clause 34.0
9. Dispute between contractor and NSC, shall use
best endeavor to appoint same arbitrator
10. Arbitration commence after completion, or alleged
completion, or determination, or abandonment
unless with written consent of both parties.
11. Award shall be final and binding.

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 ARBITRATION
CIDB FORM OF CONTRACT: Clause 47.3
a) Give notice to refer to arbitration and agree on an
arbitrator or failure after 14 days refer to KLRCA.
b) Arbitration commence after completion unless with
written consent of both parties, except on question
of instruction empowered by contract, withheld
payment, payment in accordance with contract, or
withheld/delayed consent.
c) Notice of arbitration.

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WMAIMUN/LP12
 ARBITRATION
CIDB FORM OF CONTRACT : Clause 47.3
d) Power of arbitrator – review certificate/opinion/
decision/requisition/notice, determine all matters of
dispute, award damages including interest.
e) Cost and award shall be at discretion of arbitrator.
f) Award shall be final and binding on parties.
g) If arbitrator dies/refuse/incapable/removal by court
or mutual agreement of parties, appoint another
person or by KLRCA.
h) Place for arbitration shall be in Kuala Lumpur.
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 LITIGATION
 A process of submitting dispute to the court.
 Court will dictate a final legally binding and
enforceable remedy.
 Current system of courts – Superior courts,
Subordinate courts & Syariah courts

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 LITIGATION
Subordinate courts
 Sessions court – jurisdiction to try offences not
punishable by death and hear civil matters of
which claim >RM25,000 but <RM250,000.
 Magistrates court - hear civil matters with less than
RM25,000 in dispute.
 Other court – court of a penghulu to hear civil
matters of claim not exceeding RM50.

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 LITIGATION
Superior courts
 Federal court – highest court in Malaysia. Hear
appeals of civil & criminal decisions of court of
appeal where it grants leave to do so.
 Court of Appeal – hear civil & criminal appeals
against decisions of High courts.
 High court – general supervisory and revisionary
jurisdiction over all Subordinate Courts, and
jurisdiction to hear appeals from the Subordinate
Courts in civil and criminal matters.

WMAIMUN/LP12 64
 Construction Court
in Kuala Lumpur

Construction Court

Construction Court
in Shah Alam
GROUPWORK
CASE STUDY

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 SUMMARY: DISPUTE RESOLUTION
Nature Purpose Duration Effectiveness Source

Interest Workable only if

Seek Voluntarily by
Mediation based
compromise
2 weeks genuine willingness to
agreement
process settle the dispute

Independent & binding

decision but dissatisfied Statutorily
Rights
Temporarily party may recommence enabled and
Adjudication based
final justice
2 months
dispute resolution by governed by
process
arbitration or court CIPAA
litigation
Independent & binding Voluntarily by
Rights
At least 2 award subject to appeal agreement but
Arbitration based Final justice
years on issues of law to High governed by
process
Court Arbitration Act

Independent & binding Constitutionally

Rights
Court At least 4 judgment subject only enabled and
based Final justice
Litigation years to appeal to Appellate governed by the
process 67
Court law
67