Are Retention Sums in Ongoing Projects Subject to Direct Payment under Section 30 CIPAA?
- Polwin Sua Shiang-Nian
- 12 minutes ago
- 8 min read
Section 30 of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”) provides a potent enforcement mechanism allowing the successful party (subcontractor) to an adjudication to seek direct payment from the principal where the unsuccessful party (main contractor) fails to satisfy an adjudication decision.
A key issue has emerged on the meaning of “due or payable” in Section 30(5) CIPAA, particularly in relation to retention sums where contractual conditions for a release of the said sums have not yet been fulfilled.
This issue was addressed in the High Court decision of BP Engineering Sdn Bhd v Jabatan Kerja Raya Malaysia & Ors [2026] 5 CLJ 94, which considered whether retention sums in an ongoing construction project may be subject to direct payment.
Brief Facts
The summary of facts in BP Engineering are as follows:
BP Engineering Sdn Bhd (“the plaintiff”) was appointed as the subcontractor by Hikmat Abadi Sdn Bhd (“HASB”), the main contractor.
Following disputes between the parties, the plaintiff commenced adjudication proceedings under CIPAA and obtained an adjudication decision dated 15th April 2025 awarding RM1,767,651.90 in its favour against HASB.
Upon the failure by HASB to comply with the demand to pay the adjudicated sums, the plaintiff issued a written request under Section 30(1) CIPAA on 13th May 2025 seeking direct payment from the defendants.
Pursuant to Section 30(2) CIPAA, JKR subsequently issued a notice to HASB requiring proof that payment had been made.
As no direct payment was forthcoming, the plaintiff filed the application for a direct payment order under Section 30 CIPAA.
The proceedings ultimately continued only against the Government of Malaysia as the 3rd defendant, as JKR and the Ministry of Works were not legal entities capable of being sued.
The 3rd Defendant's Contentions
The 3rd defendant opposed the application principally on the basis that the retention sum of RM1,394,611.31 did not constitute money “due or payable” under Section 30(5) CIPAA. In this regard, the 3rd Defendant contended, among others, that:
the retention sum was merely a security or performance bond which had yet to crystallise into a debt;
since the main contract remained ongoing, the project had not reached practical completion, the defects liability period had not expired and the certificate of making good defects (“CMGD”) had not been issued;
accordingly, the retention sum remained contingent and could not be regarded as money “due or payable”;
in this regard, the 3rd defendant sought to distinguish the Court of Appeal's decision in Kinu Sdn Bhd v Kerajaan Malaysia (Jabatan Kerja Raya Malaysia) [2025] 9 CLJ 299 on the basis that the main contract in that case had been terminated whereas the main contract in the present case remained ongoing; and
as such, it was argued that the retention sum remains conditional and has not crystallised into a debt.
The Meaning Of “Due Or Payable” – The Kinu Decision
In arriving at its decision, the High Court in BP Engineering undertook a detailed examination of the Court of Appeal’s decision in Kinu.
The High Court noted that Kinu represents the most authoritative judicial pronouncement to date on the meaning of the phrase “due or payable” under Section 30(5) CIPAA. It was further noted that the Court of Appeal held that the phrase must be read disjunctively.
The High Court observed that the subcontractor need not prove that the money is both "due" and "payable". It is sufficient to show that the money is either due or payable. This would effectively broaden the scope of Section 30 CIPAA as compared to garnishee proceedings which would require monies to be “due or accruing due”.
It was noted that this distinction was made by the Court of Appeal in Kinu by reference to the case of HSL Ground Engineering Sdn Bhd v Civil Tech Resources Sdn Bhd & Another Case [2020] CLJU 526; [2021] 8 MLJ 347, where it was held that the second limb ("payable") is wider than the first limb ("due"). In this regard, reference was made to Black’s Law Dictionary, 9th edition which provided as follows:
“payable, adj.... (Of a sum of money or a negotiable instrument) that is to be paid - An amount may be payable without being due. Debts are commonly payable long before they fall due.”
To this end, reference was made to the findings in HSL Ground Engineering as follows:
“[29] It is plainly provided in s. 30(5) of the CIPAA that the defendant is only obliged to make direct payment if there is money due or payable to CTSB. It is not due and payable. In the English Court of Appeal case of Videocon Global Ltd & Anr v. Goldman Sachs International [2016] EWCA Civ 130, it was held that there is a distinction between due and payable in that a debt accrues when it is due whilst an obligation to pay arises when it is payable. They are thus not synonymous and it seems that the former is stricter when compared to the latter …”
Against this framework, the High Court noted the treatment of retention sums in the case of Kinu. In this regard, the Court of Appeal in Kinu held as follows:
“[110] So long as the debt is present and existing that would more than satisfy the requirement that it is ‘payable’ quite apart from the fact that it would also be due as it is not a contingent debt. In the case of a contingent debt the existence of the debt is dependent on a contingency that may or may not happen and so there is no present obligation to pay. A debt is payable when the obligation to pay exists and the money is effectively owed even if the payment due date may be in the future as in awaiting the certificate of making good defects or the certificate of practical completion.
[111] The rationale is not difficult to find. Parliament must have intended a s. 30 CIPAA enforcement to be different from a garnishment enforcement for otherwise it would stop at s. 28(1) of the CIPAA when it had allowed an adjudication decision to be enforced as if it is a judgment of the High Court, giving the option to the judgment creditor to proceed with execution of the judgment by way of garnishment. Parliament does not legislate in vain and one must presume that the s. 30 of the CIPAA application for direct payment from the principal is an additional enforcement mechanism for ss. 28 and 30 are parked under Part IV of the CIPAA under ‘Enforcement of Adjudication Decision’.
[112] It is precisely because of the peculiarity of the construction industry where in a chain of construction contracts, the subcontractor would be the party effectively and ultimately executing the construction works and the principal would be the ultimate beneficiary of the works and indeed retaining normally the 5% of the contract sum from what is due or payable to the main contractor that the CIPAA allows for the subcontractor to call upon the principal to make direct payment provided the four conditions housed in s. 30 are met. One does not have to imagine too hard to know that the retention sum retained by the principal is carved out from the works done ultimately by the subcontractor whose share in the retention sum would be proportionate to the reduced value of the subcontract when compared with the value of the main contract.”
Ultimately, the High Court held as follows:
retention sums constitute monies already earned by the subcontractor for works executed;
the notion that they are withheld by the principal does not negate the fact that they are owed; and
where the subcontractor has performed the work; the retention sum is effectively the subcontractor's money being held by the principal as a safeguard.
Kinu Is Binding And Dispositive
The High Court reaffirmed the binding effect of the Court of Appeal’s decision in Kinu, finding that the issue was already conclusively determined.
The Court held:
“[94] In Kinu (supra), the Court of Appeal held unequivocally that a retention sum, while payable at a future date, represents a present and existing debt. It is not a contingent debt. The obligation to pay exists; only the timing of payment is deferred. The superior court explicitly stated at para. [110] that such a sum is ‘payable’ within the meaning of s. 30(5) of the CIPAA, ‘even if the payment due date may be in the future as in awaiting the certificate of making good defects’.”
The High Court further emphasised the doctrine of stare decisis:
“[95] This holding is directly on point and is dispositive of the issue before me, the Court of Appeal has authoritatively determined that retention sums are ‘payable’ under s. 30(5) of the CIPAA. Unless and until the Federal Court overturns this holding, I am bound by it pursuant to the doctrine of stare decisis.”
Although leave to appeal had been granted in Kinu, the High Court reiterated that the decision remains binding.
In essence, the High Court found that Kinu establishes a clear principle. In that, a retention sum is not a contingent debt, but a present and existing debt, and therefore falls within the meaning of “payable” under section 30(5) CIPAA notwithstanding that the contractual payment due date has yet to arise.
The Attempt to Distinguish Kinu Failed
The High Court rejected the 3rd defendant’s attempt to confine Kinu to cases involving terminated contracts.
The High Court held that the distinction drawn by the 3rd defendant was unpersuasive premised on the fundamental character of the debt (i.e., the retention sum). It was held as follows:
“[98] The third defendant's attempt to distinguish Kinu (supra) on the basis that the contract there was terminated is unpersuasive. The ratio decidendi of Kinu regarding the nature of a retention sum as a present debt is not dependent on the contract's status. The reasoning is based on the fundamental character of the debt itself.”
To this end, it was held that a retention sum is a present and existing debt regardless of whether the contract is ongoing or terminated. In this regard, it was held as follows:
“[100] A retention sum is a present and existing debt regardless of whether the contract is ongoing or terminated. In both scenarios, the contractor has performed work, that work has been certified, and a portion of the certified sum has been retained. The obligation to eventually pay that retention sum exists in both scenarios; only the timing differs based on the contractual conditions.”
The High Court further observed that Section 30 CIPAA direct payment is most suited in cases where work is on-going:
“[101] Indeed, if anything, the distinction drawn by the third defendant militates in favour of the plaintiff. As correctly submitted by the plaintiff, the Court of Appeal in JDI Builtech (supra) at para. [45] expressly stated that ‘The s. 30 direct payment remedy would be most suited in cases where the work is on-going...’.
[102] This is because, in an ongoing project, the principal retains full control of the payment mechanism and can readily recover or adjust any sums paid to the subcontractor through set-offs in subsequent IPCs or through the final account. By contrast, in a terminated contract scenario, such adjustment mechanisms may no longer be available.”
Accordingly, the High Court held that the principle in Kinu applies equally to ongoing contracts. The 3rd defendant’s attempt to limit its application only to terminated contracts was held to be unfounded.
Commentary
The High Court’s ruling in BP Engineering makes it clear that retention sums in ongoing projects are not contingent debts but are present and existing debts. By reference to the Court of Appeal authority of Kinu, the High Court affirmed that retention sums fall within the meaning of “due or payable” under Section 30 CIPAA, even if their release is deferred by contractual milestones.
To this end, retention sums constitute debts that are for works already performed and form a portion of certified sums retained. They cannot therefore be treated as mere securities and are deemed as monies “payable” subject to direct payment pursuant to Section 30 CIPAA.