The
blame game of KLIA2
The
Star Online
Saturday
June 29, 2013
By
CHOONG EN HAN
I like to make a few
comments on some of the facts and statements that was made by Datuk Azmi Murad,
the General Manager of MAHB.
[QUOTE
from Para 5-7 ]
According
to MAHB operations senior general manager Datuk Azmi Murad, the last-minute
instructions are just minor changes needed by stakeholders, and this doesn't
affect the completion date of the seven sectors of the terminal itself. Among
the requests are the addition of 45 more immigration counters, and additional
ticket booths and counters. “The instructions for the immigration counters are
a valid point, and the contractors can apply for extension of time (EOT) to
justify the extension. This may take only a further two to four weeks to
complete, but does not justify an EOT for one year. The JV (referring to
UEMC-Bina Puri JV, who is the Main Contractor for the Main terminal Building
and Satellite Building & Associated works) already has enough time to
complete the works before June,” he says.
[UNQUOTE]
My
remarks:
As reported, Datuk Azmi acknowledged that “the
instructions for the immigration counters are a valid point and the Contractors
can apply for EOT to justify the extension.” (ibid)
But what was puzzling
is: Datuk Azmi had acknowledged the VO works for the extra 45 immigration
counters and that such additional works (or what we call, 'Variation Order'
works) may take 2 to 4 weeks to complete. This statement in itself means that
the Contractors are contractually entitled to EOT. The fact is, this VO
Instruction was issued on 29th May 2013 and the Contract Completion Date is
15th June 2013. So, would MAHB still expect the Contractor to complete the
works by 15th June 2013? And if Datuk Azmi admitted that it may only take 2 to
4 weeks to complete, then the Contract Administrator (CA) must perform his
fiduciary duty by granting the Extension of Time (EOT) accordingly. However,
the CA failed to do so, and instead choose to issue the Certificate for Non
Completion on 16th June 2013 and thereof imposed the LAD. From the
presentations made at the press conference on 28th June 2013 at the KLIA2 site,
there were quite many instructions issued by MAHB for additional works and
modification of designs during the period between March to June 2013. The period
between March to June was significant as the earlier EOT granted was made on
15th March 2013. As such, it was imperative that the CA would have to assess
the EOT fairly and reasonably.
It is trite
construction law that there will be implied into every construction contract
terms whereby the owner shall cause the Contract Administrator (CA) to act
fairly, impartially and within the times required by the contract conditions.
It is also understood that the CA has a legal obligation to so act, using his 'professional skills' and 'best endevours' to reach the correct
decision rather than necessarily deciding in the owner's favour.
On the legal
perspective, the Employer and/or his Contract Administrator (CA) had wrongfully
issued the Certificate for Non Completion (CNC) because it is trite law that
the CA is duty bound, before issuing the CNC, to act fairly and reasonably, by
assessing and exhausting all the events of delay caused by the Employer before
he forms his opinion, and that the Contractor has no more valid entitlement to
any EOT. However, the Variation Order instruction to add 45 extra immigration
counters was issued only on May 29, 2013 while the CNC was issued on 16th
June 2013, i.e. 2 weeks later.
Clearly, the Contract Administrators are ignorant of
the law of contracts. What is puzzling is the fact that MAHB has a legal department
filled with legal experts.
In Peak Construction
(Liverpool) Ltd v McKinney Foundations Ltd (1970) the Court of Appeal held that
Peak Construction was not entitled to recover Liquidated Damages from McKinney.
The Court of Appeal found that at least part of the 58-week delay had been
caused by the corporation itself, and no attempt had been made by the
corporation to extend time. Accordingly, there was no date from which
Liquidated Damages under the main contract could begin. Lord Salmon held “If
the failure to complete on time is due to the fault of both the employer and
the contractor, in my view, the clause does not bite. I cannot see how, in the
ordinary course, the employer can insist on compliance with a condition if it
is partly his own fault that it cannot be fulfilled.”
The Court of Appeal had held that:
'Notwithstanding that
the Contractor is not entitled to or has not claimed an extension of time, the
Superintendent Officer (SO) or CA may at any time and from time to time before
the issue of the Certificate for Non Completion (CNC) by notice in writing to
the Contractor extend the time for practical completion for any reason.'
In such a case where
MAHB and his CA has issued the CNC and LAD notice, Edmund Davies has this
advice:
“The stipulated time
for completion having ceased to be applicable by reason of the employer’s own
default and the extension clause having no application to that, it seems to
follow that there is in such a case no date from which liquidated damages could
run and the right to recover them has gone.”
Importantly, common law
courts have construed extension of time clauses narrowly when determining their
application to events of owner-caused delay. By way of example, courts have
held that clauses providing general grounds for delay, including the catch all other
causes beyond the contractor's control and for any cause not under the control
of the builders will not cover specific acts of prevention by an owner. As
stated by Professor Wallace QC as editor of the 11th edition of
Hudson's Building and Engineering Contracts, it is likely courts
interpreted these clauses narrowly because of their dislike of, and willingness
to invalidate, liquidated damages provisions for any event not expressly
provided for in a contract or within the contractor's scope of responsibility.
A well-known example of
the prevention principle is the 1971 English Court of Appeal judgment,
Peak Construction (Liverpool)Limited v McKinney Foundations Limited.
In Summary, it can be
observed that MAHB had shot their own feet by issuing the CNC and invoking the
LAD while at the same time, they acknowledged that they had knowledge of the
delay events caused by the issuance of Written Instruction for Variation
(legally classified as Employer’s Delay) whereof MAHB and his CA had failed to
grant the necessary EOT to the Contractor. In this circumstances, the Contract
will become time at large and any wrongful deductions enforced unto the
contractors’ payment will be construed as an Act of Prevention to Completion
and a Fundamental Breach of Contract that activates Section 56 and Section 74
of the Contracts Act 1950.
PARA
11 of the News report
[QUOTE]
Besides the incomplete terminal, the taxiway and the
new Runway 3 are also unfinished, which according to MAHB would not prevent
KLIA2 from a delayed opening as it can direct air traffic to KLIA2 via the
existing Runway 2, assuming if the terminal was operational.
[UNQUOTE]
REVIEW
& LEGAL OPINION ON PARA 11
According to the
report, MAHB states that “the taxiway and new Runway 3 (contracted to other
corporations) which are unfinished till today (where EOT was granted until
August 2013) would not prevent KLIA2 from a delayed opening (in reference to
June 15, 2013 completion date for Main Terminal Building & Satellite
Building Contract) as it can direct air traffic to KLIA2 via the existing
Runway2, assuming if the terminal was operational.”
I am puzzled and flabbergasted!
How is it possible for MAHB to assume that the terminal can be operational
without the planned taxiway at the Main Terminal Building and Satellite
Building? The taxiway and runway has not been completed and will not complete
till probably September 2013. So how do the airplanes get to the link-bridge to
allow the passengers disembark? And would DCA permit the airplane to land at
the airport where construction works and heavy machinery and equipment are
still plying and working at the airport sites? What are the safety compliance
standards and requirements specified by ICAO, IATA and NACO for this LCCT? The
photographic proof and evidence of the existing site conditions will convince
any judges to dump this argument. MAHB prides itself of their international
standards of Management of Airports and such statement will be embarrassing to
potential airport owners.
PARA
12 [QUOTE]
First
envisioned to become a low cost carrier terminal (LCCT) with a price tag of
RM1.9bil, it has ballooned to RM4bil featuring state-of-the-art specifications.
It is a LCCT but definitely not a low cost terminal.
[UNQUOTE]
REVIEW
& OPINION ON PARA 12
Rightly said, this
KLIA2 is not a “Low Cost Terminal” as envisaged in the tender document. The
design was intended and tendered out to the Contractors as LCCT but the enforcement
of the Concept Design Consultants (CDC) who forced unto the Contractors to
deliver a detailed design that encompasses high state of the art specifications
that ultimately produced a High Cost Terminal (similar or of much higher
standards and specification compared to the current KLIA Terminal) for a Low
Cost Carrier Terminal Design-and-Build Contract which may be arbitrated in a
legal forum at a later date.
The Blame Game of KLIA2
Main
contractor of KLIA2 to appeal fine for delay
