INTRODUCTION

Section 30 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) offers unpaid subcontractors a powerful statutory remedy. Specifically, a subcontractor who has obtained an adjudication decision in its favour fails to receive payment of the adjudicated amount from the main contractor, it may seek direct payment from the principal instead.

However, this remedy has its limits. Where the main contractor has been wound up, Section 30 of CIPAA cannot be invoked. The Court of Appeal has confirmed this position in KTCC Mall Sdn Bhd v TCS Construction Sdn Bhd and another appeal [2026] MLJU 2526 (CA).

BRIEF BACKGROUND

In this case, the Respondent was appointed as a subcontractor by the main contractor, MPM Project Management Sdn Bhd (“MPM”) to carry out the main builder’s work for a project. Upon completion, a Certificate of Practical Completion was duly issued.

When MPM failed to pay the sums due, the Respondent commenced adjudication proceedings under the CIPAA. The adjudicator decided in the Respondent’s favour.

It is pertinent to note that MPM was subsequently wound up. Consequently, the Respondent invoked Section 30 of CIPAA and sought direct payment from the Appellant, as the employer, for the adjudicated sum of RM6,922,576.82.

The High Court allowed the Respondent’s application for direct payment. Dissatisfied with the decision, the Appellant appealed to the Court of Appeal.

ISSUES BEFORE THE COURT

The appeals raised two principal issues: –

• a) whether there are any sums due and payable by the Appellant; and
• b) if so, whether Section 30 of CIPAA can be invoked.

 
DECISION OF THE COURT OF APPEAL

The Court of Appeal allowed the appeal and overturned the High Court’s decision.

The Court of Appeal found that upon perusing the contemporaneous documentary evidence presented before the Court, no sum was due and payable by the Appellant to MPM. On that basis alone, the Respondent’s application could not succeed.

Nevertheless, the Court went further and held that even if sums had been due and payable, Section 30 of CIPAA could not be invoked as MPM is in liquidation.

MPM’s Insolvency is a Relevant Consideration

The Respondent sought to rely on CT Indah Construction Sdn Bhd v BHL Gemilang Sdn Bhd [2020] 1 CLJ 75 in support of his position that Section 30 of CIPAA creates an independent statutory obligation on the part of the principal to pay the subcontractor directly. This is a separate obligation to pay imposed by statute. It exists in parallel with the main contractor’s obligation to pay the subcontractor under the adjudication decision. Accordingly, whether MPM is in liquidation is irrelevant.

The Court of Appeal rejected the Respondent’s contentions.

The Insolvency Regime Must Not Be Displaced

Whilst the Court of Appeal agree with the preposition in CT Indah that the principal’s obligation to pay the subcontractor under Section 30 of CIPAA is an independent statutory remedy, it does not mean that such obligation can override, circumvent or bypass the insolvency regime under the Companies Act 2016, particularly, Section 527 and 528, which operate as follows: –

• a) Any debts owed to a wound-up company form part of its assets and if recovered, must be distributed to its creditors in accordance with Section 527 of the Companies Act 2016.
  
  
• b) Section 527 of the Companies Act 2016 prescribes the statutory order of priority for distributing a company’s assets during winding up. It also requires all unsecured creditors within the same class to be ranked pari passu, which means they must be treated equally in the distribution of assets.
  
  
• c) Section 528 of the Companies Act 2016 embodies the concept of “undue preference”, prohibiting any transaction or dealing that confers a preference or priority upon a particular creditor over the general body of creditors.

The overarching objective of the insolvency regime is to ensure that the assets of a wound-up company are distributed fairly and equitably amongst all creditors, so that none gains an advantage over the others. These statutory safeguards must be respected and cannot be displaced without compliance with the law on winding up and due process. 

Allowing the Respondent to invoke Section 30 of CIPAA would enable it to recover the sums due to it without going through the insolvency process, conferring upon the Respondent an unfair advantage over MPM’s other creditors and reducing the pool of assets available for distribution amongst them.

The Specific Provision Prevails Over the General Provision

The Court of Appeal further applies the generalibus specilia derogant maxim, when a general law and a specific law are in conflict, the specific law prevails.

CIPAA is a general law enacted to provide speedy, timely and cost-effective dispute resolution mechanism for payment disputes in the construction industry. The winding up provisions under Companies Act 2016, on the other hand, are specific laws governing companies that have been wound up. Accordingly, the winding up provisions must prevail.

The Court of Appeal further held as follows: –

• a) Relying on the Federal Court case of Dubon Bhd (in liquidation) v Wisma Cosway Management Corp [2020] 4 MLJ 288, the settled principles of insolvency law cannot be dislodged by any other statutory interpretation with regards the payment of preferential debts.
  
  
• b) Section 30 of CIPAA does not expressly state that it will or can override any other legal obligations imposed under any other law;

Accordingly, Section 30 of CIPAA cannot dislodge the statutory regime under the Companies Act 2016, and the settled principles of insolvency law remains paramount.

CONCLUSION

This decision serves as an important reminder that whilst CIPAA promotes cash flow and payment certainty in the construction industry, it does not operate in isolation. Where a main contractor has been wound up, the statutory insolvency framework takes precedence. A subcontractor in that position must pursue its claim through the proper insolvency process and cannot rely on Section 30 of CIPAA as a shortcut to recovery.

Disclaimer: This article is for general information only and does not constitute legal advice or legal opinion. It should not be relied upon as a substitute for specific legal advice. No person should act (or refrain from acting) based on this article without obtaining advice on the specific facts and circumstances. Halim Hong & Quek does not accept responsibility or liability for any loss or damage arising from reliance on this article. Halim Hong & Quek reserves the right to update, amend or withdraw this article at any time. All rights reserved.

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About the authors

Ankit R. Sanghvi
Partner
Dispute Resolution
Halim Hong & Quek
ankit.sanghvi@hhq.com.my

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Tan Zec Kie
Associate
Dispute Resolution
Halim Hong & Quek
zk.tan@hhq.com.my