Resolving Construction Disputes afuer the MCO 2 Wed 29 April 2020 - PowerPoint PPT Presentation

Wed 29 April 2020 11:00am (GMT +8) mwka.com/talks Speaker Speaker Moderator CHRISTINE TOH HANNAH PATRICK WONG SUE ANN Partner Senior Associate Associate MWKA ONLINE TALKS Resolving Construction Disputes afuer the MCO

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Wed 29 April 2020 11:00am (GMT +8) mwka.com/talks Speaker Speaker Moderator CHRISTINE TOH HANNAH PATRICK WONG SUE ANN Partner Senior Associate Associate MWKA ONLINE TALKS Resolving Construction Disputes afuer the MCO

About Us ● Welcome to MahWengKwai & Associates! ● Trusted by small medium enterprises (SMEs), family businesses and individuals. ● Established in 1985 by Dato’ Mah Weng Kwai, now a consultant with the firm. ● Medium-sized law firm with 22 lawyers and 19 staff. 4

Our Services ● Full-service law firm with 4 Departments: ○ Corporate ○ Dispute Resolution ○ Employment ○ Individuals & Families 5

Our Practice Groups ● 5 Practice Groups: ○ ASEAN-China Desk ○ Construction ○ Foreign Direct Investment ○ Real Estate ○ Sports & eSports 6

MWKA Online Talks ● To share knowledge, raise awareness, encourage networking ● For clients, potential clients, in-house counsel ● Recent MWKA Online Talk: ○ 27.4.2020: How to deal with the Impact of the MCO on Commercial Contracts? ● Upcoming MWKA Online Talk: ○ 4.5.2020: Arrest, Remand & Bail during the MCO 7

Hannah Patrick ● Senior Associate in Dispute Resolution department in MahWengKwai & Associates. ● Bachelor of Laws (University of Malaya). ● Admitted to the High Court of Malaya in 2013 and the High Court of Sabah and Sarawak in Sarawak in 2017. ● Involved in various civil, arbitration and adjudication construction matters. ● Areas of practice includes general litigation, administration of estate and debt recovery. 8

Christine Toh ● Partner in Dispute Resolution department in MahWengKwai & Associates. ● Bachelor of Commerce / Bachelor of Business System (Monash University). ● Bachelor of Law (University of London) (Honours Second Class Upper Division). ● Admitted to the High Court of Malaya in 2017 ● Association of Chartered Certified Accountants, certified Adjudicator and empanelled with the Asian International Arbitration Centre ● Areas of practice includes Construction adjudication, arbitration and litigation, taxation, family law, and contractual disputes. 9

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Talk Points ● Likely issues and disputes arising from the MCO ● Dispute resolution mechanisms ● Construction Adjudication under CIPAA 2012 ● Recent developments in the law 11

Likely issues and disputes arising from the MCO

Likely issues and disputes arising from the MCO ● Time - Application for Extension of Time (EOT) ● Liquidated Ascertained Damage (LAD) ● Claim for Variation Order Works (VO Works) ● Claim for Loss & Expenses ● Grounds - suspension of works during MCO, force majeure, etc ● Refer post: https://mahwengkwai.com/contractors-construction-industry-man age-problems-covid-19-mco/

Time ● Time is usually of the essence in construction contracts ● Questions which may arise due to MCO: ○ Works cannot be completed within the contractual date of completion. What happens then? ○ What if EOT not granted? ○ What if the certificate of non-completion not issued? ● PAM 2018 - Clause 23, IEM - Clauses 20.3(2) and 44, PWD - Clause 43

LAD ● LAD (Liquidated Ascertained Damages) ○ Damages recoverable as a result of non-completion of works or delay of works by contractor ○ Claimable? Amount reasonable? ○ PAM 2018 - Clause 22.1, IEM - Clause 46, PWD - Clause 40.2 ○ New developments in the law

Variation Orders ● Claim for Variation Order ○ Increase, decrease, omission or substitution of works, change in character or quality of work ○ PAM 2018 - Clause 11.1, IEM - Clause 51.2 (1), PWD - Clause 24.2 ● Procedures and notice requirements

Claim for Loss & Expenses ● Claim for Loss & Expenses ○ Reimbursements to contractors when they incur loss and expenses due to events outside the contractual provision ○ PAM 2018 - Clause 24.1, IEM - Clause 20.3(1), PWD - Clause 44 ● Examples of Loss & Expenses arising from the Covid-19 MCO ○ Demobilisation and remobilisation costs ○ Site staff salaries, accommodation, utilities ○ Rental for sheet piles, forklift, excavator, other plant equipments, scaffolding ○ Extended insurance coverage

Dispute Resolution Mechanisms

Remedies available ● Court proceedings ○ Magistrate Court - Below RM100,000 ○ Sessions Court - Below RM1,000,000 ○ High Court - Above RM1,000,000 ■ Construction Court in Kuala Lumpur - Lim Chong Fong J & Hajah Aliza binti Sulaiman J ■ Construction Court in Shah Alam - Wong Kian Kheong J ● Arbitration ● Adjudication - contractual (PAM) or statutory (CIPAA 2012)

Construction Adjudication under CIPAA 2012

CIPAA 2012 ● Construction Industry Payment and Adjudication Act 2012 ● Came into effect on 15.4.2014 ● To facilitate regular and timely payment by providing a mechanism for speedy dispute resolution ● Adjudication is timely, from the service of the 1st “cause paper” up to the delivery of the Adjudication Decision - Not more than 105 working days (approximately 5.25 months)

Essential Characteristics 程序是 简 易和非正式 Procedure is summary No negotiations A statutory procedure Procedure is summary & informal involved & informal Short time frame Can be both inquisitorial and adversarial (relatively) Provides an interim/temporary solution

Application of the CIPAA 2012 ● CIPAA 2012 applies to: ○ Every construction contract made in writing relating to construction work carried out wholly or partly within the territory of Malaysia including a construction contract entered into by the Government. ● CIPAA 2012 does not apply to: ○ Construction contracts by a natural person for any construction works for a building which is less than 4 storeys high and is wholly intended for his occupation .

Time Overview Source: AIAC

Effect of an Adjudication Decision ● Temporary finality - finally decide in arbitration or court ● What if the losing party refuses to pay? ○ Application for enforcement under Section 28 of CIPAA 2012 ○ Effect of enforcement - may be executed in accordance with the rules on execution of the orders or judgment of the High Court.

Other Provisions under CIPAA 2012 ● Suspension / slowdown of work Section 29 ● Direct payment from Principal under Section 30 ○ Article: Getting Direct Payment from the Principal under Section 30 of the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) ● Prohibition of Conditional Payment under Section 35 ● Default Provisions in the Absence of Terms of Payment under Section 36

Recent Developments in the Law

Applicability of CIPAA ● Previously : ○ Uda Holdings Bhd V Bisraya Construction Sdn Bhd & Anor And Another Case [2015] 11 MLJ 499 ● CIPAA 2012 is now prospective ○ Jack-In-Pile (M) Sdn Bhd v Bauer (Malaysia) Sdn Bhd & Anor Appeal [2020] 1 CLJ 299 - Idrus Harun FCJ ○ Article: Update: CIPAA Is Prospective! ● What happens if Letter of Award/Letter of Offer was issued before 15.4.2014 but contract was signed after 15.4.2014?

Applicability of CIPAA 2012 ● Konsesi Kota Permatamas Sdn Bhd v Tech Art Sdn Bhd and another case [2020] 1 LNS 196 - Wong Kian Kheong J ○ LA concluded on 8.5.2013, PAM signed on 21.7.2014. ○ As of 8.5.2013, parties had contractual rights under the LA which should not be impaired in any manner by CIPAA 2012. ○ Even before CIPAA 2012 came into force, parties acted on their vested contractual rights and entered into transactions. ○ CIPAA 2012 not applicable.

Applicability of CIPAA 2012 ● KLIAA-KLIAC Consortium & Ors v Latipah bt Abu t/a LA Architect [2020] 1 LNS 129 - Lim Chong Foong J ○ Letter of Offer on 13.1.2014, Consultancy Agreement 19.5.2015. ○ Court held: According to Clause 5 of the LO, parties contemplated further negotiations. As a matter of fact, parties further negotiated and eventually concluded the agreement on additional terms as well as terms that are at variance with those in the LO. ○ Consultancy Agreement could not have merely been a formality to formalize the desire of the parties. ○ Contract is made on 19.5.2015, CIPAA 2012 is applicable.