Articles

HAPPY BIRTHDAY CIPAA!

HAPPY BIRTHDAY CIPAA! By Rodney Martin INTRODUCTION The Malaysian security of payment legislation, The Construction Industry Payment and Adjudication Act 2012 (“CIPAA”), celebrated its first birthday on the 15th of April 2015, having come into force on 15 April 2014.  How have the months or of life been for this much anticipated legislation?  I would argue that CIPAA has had an excellent start – all said and done.  And yes, much has been said, written, and done – but what hard evidence do I have to support my view?  Well, fortunately, the Kuala Lumpur Regional Centre for Arbitration (“KLRCA”) which is responsible under the Act as the adjudication authority for all CIPAA adjudications has gathered solid evidence in the form of statistical data.1 REGISTRATIONS As of 12 June 2015, a total of ninety-nine adjudications had been registered with the KLRCA.  There were twenty-nine adjudications registered in the two-hundred and sixty calendar days in 2014 after 15 April and  seventy adjudications registered in the first  one-hundred and sixty three calendar days of 2015 to 12 June.  Put another way, in 2014 one matter was registered every nine days on average whereas in 2015 one matter so far has been registered more frequently than every three days.. Wow!  That is a staggering acceleration.  On the basis alone, one can safely conclude that in its first year of operation, CIPAA has had a very respectable start.  An initial modest referral rate to the new statutory regime should be expected as few parties wish to be pioneers in testing an untried dispute resolution system.  For this and related reasons, similar construction industry statutory...

How Much Are Your Records Worth?

HOW MUCH ARE YOUR RECORDS WORTH? By Rodney Martin Contractors are often placed in the position of having to prepare claims for extensions of time and loss and expense which are then assessed by a third party on behalf of the Owner or Employer. Assessing entitlement to extensions of time usually requires access to a massive amount of data on the average construction project and experience shows that there are usually not enough factual records to establish the entitlement being claimed. Apart from scarcity of records, the key management tool available to assess the impact of delays, the project schedule, is also frequently neglected for one reason or another or worse, it is abused to give a fictitious presentation of progress month on month going unchallenged by the other side. Under such circumstances where there is a dearth of necessary information the parties tend more often than not to rely on their perceptions of what caused the critical delay or delays to the project when assessing extension of time claims under the Contract. Such were the circumstances in the now much written about case of Mirant Asia-Pacific Construction v Ove Arup1. The dispute revolved around which delays were on the critical path – a very common conundrum. In this particular case, delays caused by the defective foundations of a power plant were deemed by all and sundry to be the obvious source of the critical delay. This resulted in a significant eight figure compensation amount being claimed by Mirant from Ove Arup for breach of contract and negligence. Now the foundations may have actually been defective and the consequence...

Challenging A Call On An On Demand Performance Bond

CHALLENGING A CALL ON AN ON-DEMAND PERFORMANCE BOND By Rodney Martin SATO KOGYO (M) SDN BHD v SALINI (M) SDN BHD [2014] 10 MLJ 614 This Malaysian High Court judgment revisits the grounds available to challenge a call on an on-demand performance security and illustrates the high threshold set previously by the Federal Court1 for establishing the separate and distinct ground of ‘unconscionability’ to restrain a beneficiary from making such a call. Sato Kogyo was engaged to construct internal access roads involving earthworks as part of a preliminary works sub-contract for Salini relating to a power plant project in Cameron Highlands. The earthwork required an earthwork permit under Section 6(1) of the Land Conservation Act 1960. The problem was that although there was one such permit it was restricted to an area of 8.5 hectares and Sato Kogyo was required by Salini to carry out earth works beyond the area of the earthwork permit. A dispute arose between the parties essentially as to whether Sato Kogyo could carry on with the works without the permit, which party was responsible for procuring the permit and over Sato Kogyo’s notification of its intention to claim for an extension of time. Sato Kogyo was advised by its lawyer to stop earthwork immediately because to proceed without the permit was illegal. Alternatively Sato Kogyo was advised to obtain indemnities from Salini if it did continue with the earthwork in the absence of the permit. On 24 May 2011, having refused to further perform the Sub-Contract, Sato Kogyo issued a notice of withdrawal from the Sub-Contract to Salini. Salini responded on 30 May 2011...

What Is The Implication Of A Notice Being A Condition Precedent In PAM 2006?

What Is The Implication Of A Notice Being A Condition Precedent In PAM 2006? By John Wong INTRODUCTION It is an undeniable fact that construction projects are often fraught with events that delay the completion of the projects thus causing the contractual completion dates to lapse. The delays could either be caused by the Employer or Contractor or by a neutral event such as force majeure. It is a common practice that such contracts incorporate provisions for liquidated damages for the period in which the construction works remain incomplete due to delays by the Contractor for which he may not be excused so that there is a date from which such damages can run. In the event of delays to the works being caused by the Employer, provisions to extend the time for completion date are drafted into the contracts to preserve the Employer’s right to levy liquidated damages. In the absence of any such extension of time provisions, the date for completion could not be extended in the event of the Employer’s delay and as such there would not be a date from which liquidated damages could run, thus setting time at large. PAM 2006 was launched in early April 2007. The question that arises is whether PAM 2006 adequately preserves the Employer’s right to impose liquidated damages. PAM 2006 – CLAUSE 23 PAM 2006 standard form of building contract contains provisions that empower the Architect to extend the Date of Completion for delays to the completion of the Works. Without such provisions, the Architect would have no power to extend time for completion thus exposing the time...

The Foundation of Extension of Time

Shawn Chong Seow Nyee BSc (Hons) PGDip MSc MBA MSc MRICS MCIOB MRISM ICECA RegQS Adjudicator [KLRCA] Director, Charlton Martin Consultants Sdn Bhd Introduction “Extension of Time” is often a hotly contested issue in the construction industry and probably cause more disputes than any other issues in projects. The question of time is usually an essential element in any construction contracts. Construction contracts specify performance periods either by prescribing: • the start and completion dates; or • a specified number of days that the work shall be completed, calculated from the notice to proceed or commencement of work. Contracts may also include interim milestone or sectional completion dates for certain portions of the works. These specified completion date(s) become a material part of the contract, and if the contractor fails to complete by the contracted date, then he is in breach and liable to pay damages to the employer. Damages for late completion are expressed as liquidated damages/delay damages. All Standard Forms of Contract include provisions to extend time if the contractor has been delayed by certain defined risk events during the course of the contract. These provisions are commonly known as the Extension of Time (“EOT”) provisions. The events giving rise to an entitlement to an extension of time are usually set out in considerable detail in Standard Forms of Contract. These events may be referred to as “Relevant Events” , “Relevant Project Event” , “events” , “cause of delay” or simply as “grounds” . These contractually identified events represent excusable delays expressly provided for under the contract. Excusable delays may be subdivided into compensable delays, which permit...

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