Okay....I want to discuss on the arbitration issue.
For those who involve in construction, you should know what arbitration is!
This is a case where the Developer practicing arbitration
to Contractor.
The Scenarios;
The Landscape Contractor has stopped work since end October 2000. The percentage of work done is 95%. By October 2001, the Contractor was terminated on grounds of default.
Commencement of arbitration started on March 2008 and the final award given by the Arbitrator are on September 2013.
The Verdict!
Contractor wins.
Legal issues being address;
The Landscape Contractor has stopped work since end October 2000. The percentage of work done is 95%. By October 2001, the Contractor was terminated on grounds of default.
Commencement of arbitration started on March 2008 and the final award given by the Arbitrator are on September 2013.
The Verdict!
Contractor wins.
Legal issues being address;
- “Regularly and Diligently”;
- Coordination of the Works;
- Care of the Works;
- Time at large and impact on retrospective Extension of Time (EOT) and
- Liquidated Ascertained Damages (LAD)
Detailing of Legal Issues
“Regularly and Diligently”;
Developer’s
Submission
Developer claims that since starting of the project, the Contractor failed to proceed regularly and diligently with the Works.
Developer claims that since starting of the project, the Contractor failed to proceed regularly and diligently with the Works.
Contractor’s
Reply
Contractor submitted that the various causative delaying events were due to the obstructions, acts of preventions and omissions by Developer and that Developer was in breach of contract for having hindered or prevented Contractor from executing the Works in a regular and orderly fashion.
Arbitrator’s Decision
“The words "regularly and diligently" are not defined in the Contracts.
“I find that the delay in obtaining statutory approvals, defects, internal design revisions and the change of sub-contractors cannot be attributed to Contractor and caused it not to proceed diligently and regularly. On the other hand, I find and hold that Developer was in breach of contract for having hindered or prevented the Claimant from executing the Works in a regular and orderly fashion. I have already concluded that it was Developer conduct that caused the delay to the Works and contributed to the slow work progress in the affected areas.
It stands to reason that Developer cannot capitalize to say that Contractor did not proceed with the Works regularly and diligently when it had in fact caused the delay.
Coordination of the Works;
Developer’s Submission
Contractor is deemed to have made adequate allowance in the schedules for its obligations to coordinate and for any interference with the progress of Works caused by the concurrent and sequential work by others.
Contractor’s Reply
Contractor submitted that Contractor’s obligations was carried out by way of submitting their progress reports regularly and that it was not possible for Contractor to truly coordinate the works since all Developer’s contractors will have to coordinate with each other.
Contractor also submitted that the business common sense construction of the contract must be that the Project Manager ought to be and in fact was at all material times the proper coordinator of the overall works under all Developer’s contract.
Arbitrator’s Decision
“My reading of the contract suggest that it is being the Project Manager for the overall project is best placed to see the progress and impact of the various activities. In this instance, it was the Project Manager who was designated as such….. Developer's contractors are only required to coordinate and accommodate with each other.”
Care of the Works;
Developer’s Submission
Developer submitted that Contractor was obliged as stipulated in contract to take full responsibility for the care of the works and to rectify any damage from any cause whatsoever at its own cost.
Contractor’s Reply
Contractor’s obligations pursuant to Clause (that stipulated in contract) does not extend to rectifying loss and damage caused by 3rd party contractors engaged by Developer.
Arbitrator’s Decision
“I disagree. I find that the Claimant is not obliged under Clause (as stipulate in the Conditions of Contract) to rectify damage or to carry loss caused by third party contractors engaged by the Respondent.”
Time at large and impact on retrospective EOT; and
Developer’s Submission
Developer submitted that the events of delay have been assessed and particulars of the assessment and submissions on each event of delay were set out in Appendix A to Respondent’s Submission. Developer emphasized that based on this assessments, the extension of time granted in the Certificates of Delay and Extension of Time were more than Contractor was entitled to in fact and law.
Developer also submitted that it was not possible for Developer, at the material time, to conduct a detailed analysis of Contractor’s purported applications for extension of time, as Contractor had failed, neglected and/or omitted to provide the scheduling documentation and other particulars in breach of clause 42.2 of the Contracts. In any event, Respondent emphasized that all the Certificates of Delay and Extension of time were signed and agreed by Contractor.
Contractor’s Reply
Contractor submitted that the E.R. is obliged under Clause 42.3 of the Contract to assess and make in writing a fair and reasonable extension of time for the completion of the Works for the respective packages as soon as he is able to estimate the delay, failing which the time for completion would also be set at large.
Contractor also submitted that the retrospective extension of time given by E.R. is bad and had rendered the time for completion to be at large.
Arbitrator’s Decision
“I have considered the opposing positions of the parties. Based on the above, I find and hold that the E.R.'s retrospective extension of time is bad in law. It had rendered the time for completion to be at large…..Arising from the aforesaid, I find and hold that Contractor is only bound to complete the Works within a reasonable time.”
Liquidated Ascertained Damages (LAD)
Developer’s Submission
Developer submitted that it is entitled to recover the Liquidated and Ascertained Damages stated in the Contracts.
Contractor’s Reply
Contractor submitted that the LAD deductions were wrongfully and excessively imposed upon Contractor and should be disregarded as time is at large and accordingly Developer had lost its right to any alleged LAD.
Contractor also submitted that Developer also had failed to prove its actual damage or loss.
Arbitrator’s Decision
“I find that the LAD deductions were wrongfully and excessively imposed upon Contractor. It should be disregarded as time is at large and accordingly Developer had lost its right to any of the LAD.…The subject matter in this arbitration is the construction of parks and promenade as part of the new Government Administrative Centre. I find that any delay to the completion of the same would clearly result in actual loss. In fact, I note that Developer has not sought to prove its actual losses by adducing evidence in the arbitration.”
“Contractor have per se challenged Developer to prove its actual losses whenever the latter wishes to deduct liquidated damages for delay. Developer to prove its loss suffered before the imposition of LAD…In the instant arbitration, Developer had failed to prove its loss for the alleged delay caused by Contractor in completing the Works.”
LESSONS LEARNT
“Regularly and Diligently”
It may be prudent to request from the contractor the work programme in carrying out his obligations under the contract. Generally, the required regular and diligent progression of the works by the contractor may be measured against the work programme.
Coordination of the Works
The Project Manager should enforce the contractor’s co-ordination of the works and may be done in the following manner:
a) to request from the contractor to incorporate a section on the extent of his
co-ordination obligation in the Progress Reports;
Contractor submitted that the various causative delaying events were due to the obstructions, acts of preventions and omissions by Developer and that Developer was in breach of contract for having hindered or prevented Contractor from executing the Works in a regular and orderly fashion.
Arbitrator’s Decision
“The words "regularly and diligently" are not defined in the Contracts.
“I find that the delay in obtaining statutory approvals, defects, internal design revisions and the change of sub-contractors cannot be attributed to Contractor and caused it not to proceed diligently and regularly. On the other hand, I find and hold that Developer was in breach of contract for having hindered or prevented the Claimant from executing the Works in a regular and orderly fashion. I have already concluded that it was Developer conduct that caused the delay to the Works and contributed to the slow work progress in the affected areas.
It stands to reason that Developer cannot capitalize to say that Contractor did not proceed with the Works regularly and diligently when it had in fact caused the delay.
Coordination of the Works;
Developer’s Submission
Contractor is deemed to have made adequate allowance in the schedules for its obligations to coordinate and for any interference with the progress of Works caused by the concurrent and sequential work by others.
Contractor’s Reply
Contractor submitted that Contractor’s obligations was carried out by way of submitting their progress reports regularly and that it was not possible for Contractor to truly coordinate the works since all Developer’s contractors will have to coordinate with each other.
Contractor also submitted that the business common sense construction of the contract must be that the Project Manager ought to be and in fact was at all material times the proper coordinator of the overall works under all Developer’s contract.
Arbitrator’s Decision
“My reading of the contract suggest that it is being the Project Manager for the overall project is best placed to see the progress and impact of the various activities. In this instance, it was the Project Manager who was designated as such….. Developer's contractors are only required to coordinate and accommodate with each other.”
Care of the Works;
Developer’s Submission
Developer submitted that Contractor was obliged as stipulated in contract to take full responsibility for the care of the works and to rectify any damage from any cause whatsoever at its own cost.
Contractor’s Reply
Contractor’s obligations pursuant to Clause (that stipulated in contract) does not extend to rectifying loss and damage caused by 3rd party contractors engaged by Developer.
Arbitrator’s Decision
“I disagree. I find that the Claimant is not obliged under Clause (as stipulate in the Conditions of Contract) to rectify damage or to carry loss caused by third party contractors engaged by the Respondent.”
Time at large and impact on retrospective EOT; and
Developer’s Submission
Developer submitted that the events of delay have been assessed and particulars of the assessment and submissions on each event of delay were set out in Appendix A to Respondent’s Submission. Developer emphasized that based on this assessments, the extension of time granted in the Certificates of Delay and Extension of Time were more than Contractor was entitled to in fact and law.
Developer also submitted that it was not possible for Developer, at the material time, to conduct a detailed analysis of Contractor’s purported applications for extension of time, as Contractor had failed, neglected and/or omitted to provide the scheduling documentation and other particulars in breach of clause 42.2 of the Contracts. In any event, Respondent emphasized that all the Certificates of Delay and Extension of time were signed and agreed by Contractor.
Contractor’s Reply
Contractor submitted that the E.R. is obliged under Clause 42.3 of the Contract to assess and make in writing a fair and reasonable extension of time for the completion of the Works for the respective packages as soon as he is able to estimate the delay, failing which the time for completion would also be set at large.
Contractor also submitted that the retrospective extension of time given by E.R. is bad and had rendered the time for completion to be at large.
Arbitrator’s Decision
“I have considered the opposing positions of the parties. Based on the above, I find and hold that the E.R.'s retrospective extension of time is bad in law. It had rendered the time for completion to be at large…..Arising from the aforesaid, I find and hold that Contractor is only bound to complete the Works within a reasonable time.”
Liquidated Ascertained Damages (LAD)
Developer’s Submission
Developer submitted that it is entitled to recover the Liquidated and Ascertained Damages stated in the Contracts.
Contractor’s Reply
Contractor submitted that the LAD deductions were wrongfully and excessively imposed upon Contractor and should be disregarded as time is at large and accordingly Developer had lost its right to any alleged LAD.
Contractor also submitted that Developer also had failed to prove its actual damage or loss.
Arbitrator’s Decision
“I find that the LAD deductions were wrongfully and excessively imposed upon Contractor. It should be disregarded as time is at large and accordingly Developer had lost its right to any of the LAD.…The subject matter in this arbitration is the construction of parks and promenade as part of the new Government Administrative Centre. I find that any delay to the completion of the same would clearly result in actual loss. In fact, I note that Developer has not sought to prove its actual losses by adducing evidence in the arbitration.”
“Contractor have per se challenged Developer to prove its actual losses whenever the latter wishes to deduct liquidated damages for delay. Developer to prove its loss suffered before the imposition of LAD…In the instant arbitration, Developer had failed to prove its loss for the alleged delay caused by Contractor in completing the Works.”
LESSONS LEARNT
“Regularly and Diligently”
It may be prudent to request from the contractor the work programme in carrying out his obligations under the contract. Generally, the required regular and diligent progression of the works by the contractor may be measured against the work programme.
Coordination of the Works
The Project Manager should enforce the contractor’s co-ordination of the works and may be done in the following manner:
a) to request from the contractor to incorporate a section on the extent of his
co-ordination obligation in the Progress Reports;
b) the Project Manager is then to instruct
and monitor the contractor’s
co-ordination obligation at the Site Meetings; and
c) if
there are instructions from the Project Manager on the co-ordination
obligations of the contractor which are yet to be executed by the contractor,
the
Project Manager may then follow up these instruction with reminders to the
contractors.
Care
of the Works
The Contracts should be amended to expressly cover damage
caused by third
party contractors engaged by Developer.
Time
at large and impact on retrospective EOT; and
All
contracts should expressly allow for retrospective extension of time.
Developer should
enforce by issuing reminders to the contractor if the contractor failed to
provide the written particulars and scheduling documentation of the effect upon
the Works Schedule and the contractor’s proposals for reducing or preventing
such delay as required.
An express agreement should be entered with the contractor to
show that the Certificate of Delay and Extension of time have been agreed.
Liquidated
Ascertained Damages (LAD)
Developer to
maintain records of actual loss incurred and if no such loss occurred, Developer should be ready to
compromise.
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