Welcome to MCO 04 from 28.04.2020 to 12.05.2020. Having gone through the 3 phases everybody in the construction industries are looking at the ‘crystal ball’ to see ‘when it is going to end’, what is the ‘exit plan’ and more importantly, how to face the ‘new normal’. While some is in ‘consolidation’, ‘downsizing’, ‘closing shops and claim frustration’ or ‘forge ahead’, it is no longer a question of ‘extension of time’, but who is going to pay for the ‘extra costs’ of ‘moving ahead’, while some contract provided the provision of ‘mitigation of delay’ vested upon the contractor to ‘forge ahead’, at whose costs? That is a question…

The PAM Form 2006 provided at least 4 routes to go about, or it could be more, but let’s look at this 4 possible ways to maneuver the delirium of post-MCO ‘new normal’…

Foremost, the force majeure exit plan. Everyone is chanting force majeure, from the President of PAM to our minister. What is this force majeure? Unlike other standard forms of contract, the PAM2006 has been very explicitly defined force majeure to include epidemic[1]. A question may arise, what is the different between an epidemic and a pandemic. Covid-19 was declared a pandemic. Does it automatically qualify as a force majeure? If the minister says so, where is the ‘gazette’? Sorry, forgot, the parliament too is in ‘lock down’. So, it remains a theoretical question at the moment. Having said that, based on an advisory from the President of PAM to the Architect to render and only to ‘recognize’ any EOT application under this force majeure while omitting the rest of the ‘other possibilities’ in the absent of a ‘national gazette’ automatically classifying the MCO as a force majeure, regardless of how the ‘contract is formed’, would any rational mind construe such as being ‘just’? Notwithstanding that the next, possible event to take place is to instruct the contractor to ‘mitigate delay’ by applying to MITI to resume work during MCO. The next logical question is, who is going to pay for the extra-costs and expenses incurred to fulfill MITI’s ‘strict conditions’, having to note that a force majeure is a ‘neutral event’ not due to anyone’s fault yet, the contractor may have to absorbed all costs and risk arising from its action of ‘mitigating delay’ to work during MCO, for all purpose that the contractor is still liable to indemnify against the employer for any breach[2].

Second, the ‘changes to the law’ exit plan. There are possibility to rely on a change in the ‘law governing the construction industry’ as an exit plan to forge ahead with a view to be compensated[3] for loss and or expenses arising from this ‘changes to the law’.[4] Reminded by the fact that MCO was invoked under two existing legislation namely the Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967, where is the ‘changes to the law’? The respective Local Authorities PBT is still relying on the power and jurisdiction under the Street Drainage and Building Act 1974 for administration of the MCO. Unless otherwise via an Act of Parliament such as those mirrored against our neighboring Singapore’s the COVID-19 Act 2020, such can be construed as ‘changes to the law’ exit plan with a view to be compensated for loss and or expenses besides EOT.

Third, the ‘Stop Work Order’ Architect’s Instruction AI exit plan. This is a ‘novel idea’ that some Architect friends actually say, “[…] you need a ‘spine’ or alternatively, a ‘steel ball’ to issue such an AI for such, you may not get another project from your Client, post-MCO” Acknowledging the fact that by virtue of this simple AI, it has placed upon the shoulder of the Architect that arising from this act, alone, he has caused the contractor to ‘stop work’[5], ‘discontinue work’ or ‘temporary halt work’ on site, for reasons only best known to the architects, thus the notion of the ‘satisfaction of the architect’. Under such circumstances, the PAM2006 form allows the contractor to be compensated[6] with loss and or expenses together with the relevant EOT, subject otherwise to any ‘mitigation of delay’ required by the contractor. At least such appear to be ‘fair’ to both parties and the most ‘noble act’ to have been performed by the Architect, without ‘fear and favor’, avoiding dispute in any manner foreseeable. Sorry, how many Architects actually do so?  

Finally, the ‘Government’s Stop Work Order’ exit plan. Having to ‘toe the line’ some Architects may be ‘smart enough’ to circumvent the ‘conundrum’ by issuing a rather ‘vague’ AI such as “You are herewith instructed to comply with the Government of Malaysia’s Order for MCO” In other words, the Architect has instructed the contractor to ‘follow government’s instruction’ not its ‘instruction to stop work’, brilliant! For obvious reasons, now the contractor has been placed in a ‘doubtful situation’ as can such AI be construed as a ‘stop work order’ enabling them to claim EOT and ultimately, loss and or expenses? It appears to be that the contractor is ‘statutory bound’ to comply with the government’s instruction and thus entirely and mandatory ‘self voluntarily’ that has nothing whatsoever to do with the ‘employer or its agent’. Another facet is to look at arising from the MCO, the contractor cannot carry out its work and not the force majeure arising from the pandemic as the MCO is the causa causans to the course of the ‘damages’ in the entire ‘matrix of causation’. However, it is interesting to note that the PAM2006 allows for loss and or expenses arising from a delay due to a ‘stop work order’ from the government, subject otherwise that such is due to the ‘omission by the employer or its agent’[7]. Having said that, the ‘burden of proof’ falls squarely upon the shoulder of the contractor and the ‘sufficient of proof’ is on balance that the Architect has ‘failed to discharge’ its duty, thus the omission. Voila! Under the ‘strict liability rule’ and having a ‘close proximity’ in terms of reasonable ‘duty of care’ for the Architect towards the contractor, it is easily for the contractor just to mount a claim that the architect ought to have issue an AI for ‘stop work’ but it didn’t thus the omission of a reasonable ‘duty of care’ that has violated their rights under the contract.       

When the dust settles, we are able to see more clearly and rationally the entire spectrum of the effects of the MCO towards the continuity of work in the ‘new normal’ society. The legal construct of the ‘standard forms’ may have been ‘blinded’ by so many possibilities that has not been taken into consideration when the parties sealed the contract. The best possible way is a call to the government, instead of reliance on the obscure version of force majeure that only the ‘Frenchman’ knows what it truly meant, to pass an Act of Parliament mirrored  the Singapore’s COVID-19 Act 2020 and ‘ctr-alt-del’ any ‘contractual omissions’ for a ‘level playing field’ for a ‘new normal’ future.
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Having wrote these as a personal reflection or opinion, not as a ‘lawyer’ or a legal counsel, as disclaimer, never take this writing of mine, to be your ‘legal advice’. You should seek appropriate ‘legal advice’ for your own situation. I am not liable for the accuracy of facts and representation on this writing.        

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[1] Art7(ad)PAM2006
[2] Cl.18.PAM2006
[3] Cl.4.3PAM2006
[4] Cl.4.1.PAM2006
[5] Cl.21.4.PAM2006
[6] Cl.24.3(c)PAM2006, “Compliance to a written AI in regard to the postponement […] to be executed under Cl21.4”
[7] Cl.24.3(n)PAM2006, “[…] provided always the same is due to negligence or omission on part of the employer […]”

Many professionals, especially from the legal fraternity, had written about this matter but more importantly, what is the sentiment of an architect with regards to this matter? As mentioned, it is call the ‘battle[i]’ of the standard forms of building contract[ii] and as to why it is indeed, a battle, has a long stories date back to the late sixties.

As a former colonized country of the colonial British Empire, we had adopted many of the common law jurisdictions and our construction law is built upon such as its core foundation. In UK, “under the sanction of the RIBA and in agreement with the Institute of Builders and the National Federation of Building Trades Employers of Great Britain and Northern Ireland”, in the 1903 the standard form of building contract was produced[iii]. In the late 60s, the Pertubuhan Arkitek Malaysia (PAM) came together with the Institution of Surveyor (ISM) formalized the first standard forms of building contract, called PAM-ISM Form 69 closely modeled on the UK Joint Contract Tribunal (JCT) Form 63 edition. It has its fair share of backlash from the industries due to its ‘farrago of obscurities’ legal draftsmanship[iv], tested in court and throughout the years for the next 30 years withstand the storms and set many precedents in the construction law of the country. It was so widely used in the private construction sectors[v], almost everyone knows this ‘devil’, practically inside out. As being an architect, administering this ‘devil’ has been our daily jobs and without fail, one must admit, this ‘devil’ has given the architect enormous power via its archaic ‘farrago of obscurities’ terminologies, one being the personal favorite, ‘to the satisfaction of the architect’. Honestly, nobody appreciate this phrase better than the architect and if you were to rephrase it, ‘how to satisfy the architect?’ such question opens a floodgate of legal entanglements that the current legal maxim such as ejusdem-generis could not well explained such!   

While the government or the public sector adopted the Public Work Department (PWD) or commonly also known as the Jabatan Kerja Raya (JKR) 203A Form. Architects who has worked in the public sector projects would have known well the intricacies of this JKR 203A Form. The construction of this form was largely contributed from the RIBA form of Building Contract 1931 Edition. By the same token, the Institution of Engineers (IEM) standard forms of contract called the IEM Form are mainly used for engineering matters. In all purpose, most of the IEM standard forms modified from the International Federation of Consulting Engineers (FIDIC) contract[vi]. At this time, various forms were tailor suit for their purposes and failure to adopt or to advise the correct use of these standard forms will ultimately result in costly, if not ‘painful’ legal disputes.

Bombarded with the onslaughts of mounting pressures from the contractors, developers, the legal fraternities, end users and notably the government, PAM for the very first time, after 30 years, decided to make revision to its PAM 69 Form just to make it ‘relevant’ in view of its popularity among the industry players. In hope that the ‘devil’ becomes much of a lesser ‘evil’, the PAM council at that time, commissioned[vii]  its own sole council member at his own personal capacity, to redraft the PAM Form. As a result, the PAM 98 Form was born. In substance, the PAM 98 Form was an improvement to the PAM 69 Form with less ‘farrago of obscurities’ in legal draftsmanship, however, it was view as a unilateral revision (drafted by one person) without participation from the stakeholders of the construction industries and to a larger degree, ‘pro-employers’[viii]. In forms, the first issuance of the PAM 98 Form was ‘technically challenged’ and a re-launch was made in 1998. The PAM 98 Form being a relatively new form, was yet to be tested in court, but like the saying goes, is better to be with ‘the devil you know than the devil you don’t know[ix]’, through time the industry took it stock load and barrel.

The Construction Industry Development Board (CIDB) took the opportunity to make its presence felt. Collaborated with the other stakeholders (for all-inclusive policy, it was a strange sight to notice that PAM was not represented in the drafting committee) in the industry and through their newly minted Procurement Policy Committee, they came out with their very own version of standard forms called CIDB 2000 Form[x]. Differ from PAM 98 Form, any of the allied professionals such as engineers or quantity surveyors could be the named contract administrator or commonly known as the Superintendent Officer (SO). The most peculiar point of this form is the risk allocation that has been shifted to the employer, meaning, it is ‘extremely pro-contractors’. CIDB 2000 Form, conceived as the ‘knight in shiny armors’ was rarely employed in the private sector. To many of the allied professionals, especially the architects, it has since faded into oblivion[xi].

The PAM 98 Form has since continued to be the ‘preferred choice’ among the industrial players. As approaching 2006, the PAM 98 Form has since been tested in court, deliberated at length and constructively criticized by the stakeholders of the construction industries. It has come to a point that PAM needs to re-look into the PAM form again, to make it ‘watertight’. Instead of a sole member’s commissioned work, a committee was set up to undertake the revision. The new PAM 2006 Form was born with a more ‘regimented’ approach where ‘time is of the essence’ is given to almost every specific performance, failing to comply may amount to a breach. Gone were the days of archaic ‘farrago of obscurities’, such as ‘to the satisfaction of the architect’. More documentation work and liabilities were placed onto the shoulders of the architect as contract administrator. Legal implication with regards to ‘conditions precedents’ and ‘specific performance’ were introduced, almost making the architect’s ‘freedom to administer’, almost non-existence. The so called ‘devil’ was beyond recognition, making contract administration a ‘full time and painful job’ fit for a ‘keyboard administrator’ architect. Very pitiful with regards to its remuneration against the quantum of liabilities vested upon it[xii]. Strangely, recognizing the fact that failure to adopt or to advise the correct use of these standard forms will ultimately result in costly, if not ‘painful’ legal disputes, the act of omission was now, transferred to someone else probably liked the ‘poor’ architect as there was an exclusion clause finely printed in the PAM 2006 Form that read, ‘all parties must rely upon their own skill and judgement … when using this document and PAM assumes no liability to any user … in connection with such use’[xiii], classic indeed.

Came 2012, the year of reckoning with the Construction Industry Payment and Adjudication Act 2012 (CIPAA), spearheaded by the Asian International Arbitration Centre (AIAC), the construction industries were thrown to its tipping point, welcomed by the contractors, sub-contractors and to a far degree, consultants too[xiv] and shunned by some employers notably developers, any claims put forth by the claimant, in CIPAA, will stand an 80% chances of winning due to its ‘rough justice stance’ with no ‘finality’. ‘I will CIPAA you[xv]’, became the common phrase in town. No doubt that the pendulum of wining, has since shifted to the respondents post the ‘View Esteem Case[xvi]’, adjudication decisions had been making rounds in the court of law without consistent and predictable outcomes. In the matter of the PAM 2006 Form, the ‘commercial agreement to any conditional payment’ has been made void as in the ‘Econpile Case[xvii]’. Now, the newly minted, PAM 2006 Form, with regard to its clause 25.4(d) on conditional payment upon determination, has been made completely unenforceable.

In 2018, the PAM Committee that has since went into overdrive while waiting for the Federal Court’s decision on ‘Econpile Case’ did not see any light at the end of the tunnel, proceeded to account for such a decision, came with a minor revision, with complicated rewording of its clause 25.4(d) and called it the PAM 2018 Form. The content of the PAM 2006 Form, no doubt, were intact and fortified with numeral annotation rearrangement, however, more documentation work and liabilities were placed onto the shoulders of the architect as contract administrator such as having the architect to certify such breach so to allow the employer to cash the performance bond as in clause 39.5 and having the architect spelt out what were the outstanding works while issuing its CNC, almost suggesting to the contractor that ‘they don’t even know what is their work, and has to be reminded by the architect’. As the architect, one feels it is liken to use a ‘sledgehammer to nail a nail’.

The story didn’t quite end here. In the same year 2018, the Asian International Arbitration Centre (AIAC) took the PAM 2006 Form, almost word by word and adopted the same as their AIAC 2018 Form of building contract. Needless to say ‘dispute’ arise on matter of copyright and subsequently a revise AIAC 2019 Form[xviii] of building contract with a total revamp has been introduced. In this AIAC 2019 Form anyone can be the contract administrator including anyone from the legal fraternity. Without prejudice, what would you think when anyone from the legal fraternity without technically trained, administer the contract? Often one may asked, how would anyone from the legal fraternity acquire his 7 years’ experience in the construction industry? Doing litigation works on behalf of the contractors or employers accounts for such including reading up construction case laws? 

When someone[xix] pointed that in 2016, as published by the AIAC (there was no such breakdown analysis anymore), there were 363 CIPAA adjudicators and out of these, 177 were lawyers, 59 were Engineers while QS made up 51 and others accounted for 65. Architects, only 11! Does it means to say that architects were so incompetent to even pass the adjudication examination let alone competent enough to administer a construction contract? I overheard someone is telling that majority of the arbitration awards that were thrown out of court were written by ‘non-legal trained’ arbitrators. Frankly, as an architect, one cannot, not ask, as to these 177 lawyers seating as CIPAA adjudicators, where do they obtain their 7 years’ experiences in the construction industries as a fundamental prerequisite to be a CIPAA adjudicator? As an architect, one may view that having the AIAC 2019 Form, it is an avenue for the legal fraternity to acquire their 7 years’ experience in the construction industries as a fundamental prerequisite to be a CIPAA adjudicator. Not long thereafter, there could also be many from the legal fraternity, claiming to be expert in architecture, construction, engineering and so forth.

In 2017, other forms of contract such as the New Engineering Contract (NEC-4)[xx] were also making its round in the market, just a ‘keyboard button’ away that may set you back RM4,000.00[xxi] poorer. In essence NEC-4 fundamental principles of risk and costs collaborations[xxii] between the contractor and the employer was only popular in HongKong Government’s Public Funded Projects.

While penning this personal reflection of an architect’s sentiment on the forms of the building contract (now, they fashionably called it suite) the construction industries are in disarray with regards to the less predictability of the Court’s decision on CIPAA, damages such as LD and the multitudes of pitfalls contractors and employers come to face maneuvering the intricate nexus of the conditions of contract that may not necessarily reflects the parties true intentions. Contract administrators such as the architects now having to perform multiple roles that they themselves were not familiar with including the ‘devil’s advocate’ just to make sure that the building is built according to his design and intention. Why so difficult?
 

[i] ‘Battles of the Forms’ is a legal term for the common situation in which one business firm makes an offer in the form of a pre-printed form contract and the offeree responds with its own form contract, see www.fenwickelliott.com/research-insight/annual-review/2011/battle-forms. At common law, any discrepancy between the forms would prevent the offeree's response from operating as an acceptance. However, for the purpose of this article, it takes the literal meaning of the standard forms of building contract one ‘outdoing’ one another to garner a larger acceptance in the building industry.

[ii] Standard Form Contracts are agreements that employ standardised, non-negotiated provisions, usually in pre-printed forms; retrieved from www.designingbuildings.co.uk/wiki/Standard_form_of_contract

[iii] History of the JCT, retrieve from www.corporate.jctltd.co.uk/about-us/our-history

[iv] Powell-Smith, Vincent, “The Malaysian standard form of building contract (PAM/ ISM 69)”, Malayan Law Journal, (1990).

[v] It is estimated that 90 per cent of the building contracts in the private sector are based on the PAM form (Sundra, 2010), Zarabizan bin Zakaria, Syuhaida binti Ismail and Aminah binti Md Yusof ; “An Overview of Comparison between Construction Contracts in Malaysia: The Roles and Responsibilities of Contract Administrator in Achieving Final Account Closing Success”, Proceedings of the 2013 International Conference on Education and Educational Technologies (2013), retrieved from http://www.inase.org/library/2013/rhodes/bypaper/EET/EET-02.pdf

[vi] Oon CheeKeng, “Standard Construction Contracts in Malaysia Issues and Challenges”, retrieve from www.academia.edu/5722671/STANDARD_CONSTRUCTION_CONTRACTS_IN_MALAYSIA_Issues_and_Challenges_CK_OON_and_CO._Advocates_and_Solicitors_STANDARD_CONSTRUCTION_CONTRACTS_IN_MALAYSIA_Issues_and_Challenges_BY

[vii] P Kasi reported that Sundra Rajoo has offered his services in his personal capacity to complete the task of revising the PAM Formof Contract from where the late KC Cheang had left off… Council accepted Sundra Rajoo’s offer to complete the revision … for a fee of RM 30,000.00; disclosed by Ezumi, PAM Council Minute of Meeting.

[viii] … aspiration to produce a fair and balanced form of contract that would satisfy the role and to respond positively to the feedback from the industries…extract from the Background, “PAM Contract Drafting Committee, Handbook for PAM Contract 2006”, Pertubuhan Arkitek Malaysia, KL (2010).

[ix] used to say that it is better to deal with a difficult person or situation one knows than with a new person or situation that could be worse, retrieved from www.merriam-webster.com/dictionary/better%20the%20devil%20you%20know%20than%20the%20devil%20you%20don't

[x] Ong SeeLian and team; “Guide on the CIDB Standard Form of Contract for Building Work”, CIDB (2000). Retrieved from cidb.gov.my/images/content/pdf/p2p/guide-on-cidb-standard-form-of-contract-for-building-work.pdf

[xi] Although it appears that CIDB’s intention is to make the use of their forms commonplace, the question as to whether these CIDB Standard Forms will ultimately replace the existing JKR Standard Forms for the moment at least begets no precise answer, Sundra Rajoo, “Standard Forms of Contract – The Malaysian Position”, IBA Tokyo (2014). Retrieved from www.aiac.world/news/82/IBA-Tokyo-:-Standard-Forms-of-Contract-–-The-Malaysian-Position-by-Datuk-Professor-Sundra-Rajoo

[xii] The fees do not commensurate with the work done, response taken from an interview between the Edgeprop and Zulhamlee (former PAM President), “Why Malaysian architecture doesn't have to suffer from the Gucci syndrome”, EdgeProperty Lifestyle Edition (2015), retrieved from www.edgeprop.my/content/why-malaysian-architecture-doesnt-have-suffer-gucci-syndrome

[xiii] Sundra Rajoo, WSW Davidson and Harban Singh, “The PAM 2006 Standard Form of Building Contract”, Lexis Nexis Malaysia Sdn Bhd (2010).

[xiv] Consultants can claim for unpaid fees via CIPAA with reference to the judgement in Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd [2016] MLJU 1827

[xv] Sounded liked ‘I will slap you’ in the Malay language – ‘sepak’ means slap.

[xvi] View Esteem Sdn Bhd v Bina Puri Holdings Berhad, read www.lh-ag.com/wp-content/uploads/2017/11/DR-e-Alert-LHAG-update-20171113.pdf

[xvii] Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd and anor [2017] 7 MLJ 732, also read christopherleeong.com/media/3011/clo_201804_cipaa.pdf

[xviii] Read www.lexology.com/library/detail.aspx?g=98bd7c4b-8587-406b-8506-20ad2207a981

[xix] As pointed out by David Cheah in the Joint IEM MIArb RISM and PAM’s ADR course for Practitioners held in IEM on 1st Aug 2019.

[xx] See www.designingbuildings.co.uk/wiki/NEC4#Confidentiality

[xxi] Exchange rate to Ringgit Malaysia from Pound Stirling of 812.00 see https://www.neccontract.com/NEC4-Products/NEC4-Contracts/NEC4-June-2017-Edition-including-Alliance-Contract

[xxii] Read www.fenwickelliott.com/research-insight/newsletters/insight/75