Financing | CIPAA ADVISORS

Financing Your CIPAA Claim: Navigating Construction Payment Disputes in Malaysia

Pursuing a Construction Industry Payment and Adjudication Act 2012 (CIPAA ACT 2012) claim in Malaysia can be complex and costly, often requiring claimants to seek financing. This is especially true given the cash-intensive nature of construction disputes and the potential delays involved in the CIPAA claim process. For those seeking effective CIPAA claim solutions, understanding financing options is crucial. Here’s a detailed breakdown of why financing is often necessary when navigating CIPAA claims, along with information about CIPAA Advisors' in-house financing option managed by Allix Holdings:

1. Upfront CIPAA Claim Cost:

Even though CIPAA (governed by the CIPAA Act) aims to be a more efficient alternative to traditional litigation for CIPAA dispute resolution, significant upfront costs remain. These can be a barrier for claimants, particularly smaller contractors and subcontractors.

These costs include:

Adjudicator’s Fees: The AIAC CIPAA handles adjudications, and adjudicators' fees, based on a sliding scale, can range from RM5,000 to RM100,000 or more depending on the claim amount.
CIPAA Legal Advice & Lawyer Fees: Engaging a CIPAA claim lawyer or consultant for expert CIPAA legal advice and representation is crucial. Legal fees for drafting and arguing your case can range from RM10,000 to RM100,000, depending on the complexity of the dispute.
Expert Fees: Supporting your CIPAA Payment Claim may require expert reports, forensic delay analysis, or quantity surveying reports, costing between RM5,000 to RM50,000.
Document Preparation & Submission: The CIPAA Procedure involves meticulous documentation. Professional time and administrative costs are associated with preparing and submitting these documents.

Without readily available capital, claimants can struggle to meet these initial CIPAA claim cost requirements.

2. Prolonged Cash Flow Issues Due to Construction Industry Payment Disputes CIPAA:

CIPAA primarily assists unpaid subcontractors and contractors in recovering outstanding payments. These claimants are often already experiencing financial strain due to delayed or non-payment, impacting their ability to meet existing obligations (salaries, suppliers, loans) and potentially preventing them from taking on new projects. Since the CIPAA adjudication process can take several months, financing can help bridge the cash flow gap while awaiting a decision. This is especially important when dealing with challenging construction industry payment disputes CIPAA.

3. Uncertainty of Enforcement & Recovery After CIPAA Adjudication:

Winning a CIPAA Adjudication doesn't guarantee immediate payment. Claimants may face resistance, leading to enforcement delays. There’s also the possibility of judicial review or setting aside of the decision, which adds more legal costs. Respondent insolvency is another risk. Financing provides a buffer to navigate these challenges and pursue rightful payments.

4. Opportunity Cost of Capital During the CIPAA Claim Process:

Instead of tying up limited capital in legal fees, contractors might use financing to maintain business operations while awaiting the CIPAA decision. This prevents project slowdowns, loss of opportunities, and strained relationships with suppliers and employees.

5. Financing Options for CIPAA Claimants in Malaysia:

Several financing options are available for those pursuing a CIPAA claim in Malaysia:

Legal Financing (Litigation Funding): A financier covers legal costs in exchange for a share of the adjudicated sum.
Factoring/Invoice Discounting: Selling outstanding invoices or claims at a discount for immediate cash.
Short-Term Business Loans: Borrowing from financial institutions to cover legal costs and operational expenses during the CIPAA claim process.

In-House CIPAA Claim Financing by CIPAA Advisors (Managed by Allix Holdings):

CIPAA Advisors, managed by Allix Holdings, understands the financial pressures associated with CIPAA claims. We offer in-house financing options designed specifically for our clients.

This allows you to access the necessary funds to pursue your claim without the complexities of dealing with external financiers.

Conclusion:

Financing is often essential for CIPAA claimants because pursuing a claim involves significant costs, can disrupt cash flow, presents enforcement risks, and requires capital to maintain business operations. Without access to financing, many smaller businesses would be unable to effectively utilize CIPAA claim solutions and protect their rights under the CIPAA Act, leaving them vulnerable to unfair payment practices in the construction industry. Understanding the CIPAA procedure, seeking CIPAA legal advice from a qualified CIPAA claim lawyer, and exploring financing options, including the in-house solutions offered by CIPAA Advisors and managed by Allix Holdings, are crucial steps for anyone looking to file a CIPAA claim and navigate the complexities of construction payment disputes in Malaysia. Effective CIPAA claim solutions often involve a combination of strategic legal counsel, a thorough understanding of the CIPAA claim process, and access to appropriate financing.