COVID-BILL IN THE CONSTRUCTION INDUSTRIES - PEACE BEFORE THE STORM, A PERSONAL REFLECTION

Postscript (2): Further s.7Covid-Act HC tests:

1. Proof of the ‘inability to perform’ the contractual obligation was due to the ‘measures taken’ under Covid-Act;
2. Covid-Act did not define “inability…to perform”, instead, established the principles such as a mere ‘breach of contract’ is insufficient to proof an ‘inability’. [1]
3. ‘Refusal to pay’ did not amount to an ‘inability’[2];
4. The Covid-Act cannot be relied upon in the ‘attempt to avoid liability’ i.e. a debt.[3]

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[1] Malaysian Federal Court in SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 CLJ 177; Ginma Industries Sdn Bhd v Xin He Feng (M) Sdn Bhd [2021] MLJU 1675
[2] Ravichanthiran A/L Ganesan v Lee Kok Sun (2021) MLJU 1876
[3] Armada Petroleum Sdn Bhd v Alam Maritim Resources Bhd [2021]

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Postscript: As at to date [Sept 2021], there were very limited case-law demonstrating the operation of the Covid-19 Act. So far courts had demonstrated that settlement agreement entered post termination of a tenancy fall outside the Act[1]; tenancy agreement expired within the publication of the Act, with prior notice to renew and eventually terminated, such agreement is deemed to have been validly terminated[2]; a consistent breach of payment obligations prior to the Act, will not be protected by the Act[3]; the Act provides protection to future ability to fulfil obligations and not existing obligation to pay[4]; and the Act provides extension to the time-bar to sue[5].

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[1] WPP Business Services Sdn Bhd v Cosmopolitan Avenue Sdn Bhd [2021] MLJU 1042: s.7 Covid-19 Act
[2] Ang Pi Kui & Anor v Lee Wee Teck & Anor [2021] 1 LNS 58: s.10 Covid-19 Act
[3] Pilecon Engineering Bhd v Malaysian Trustees Bhd [2021] MLJU 1167
[4] Armada Petroleum Sdn Bhd v Alam Maritim Resources Bhd [2021]
[5] Uni Construction & Realty Sdn Bhd v Tersaim Lall [2021]

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Having to term with the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Bill (“COVID Bill“), the reality of “Building Contract is ‘pregnant’ with disputes”[1], are very-very real. Not only that the Parliament, via its sovereignty- within the three-pillars of democracy[2], has in-interim, ‘re-wrote’ the contracts for the parties, not even by the courts[3], in certain ways[4], coupled with multiple ‘flip-flop’ conundrums from the Government of the day[5], impacted the construction industries with ‘gapping’ trench that the construction industries stakeholders are having difficulties to fill[6].
 
These ‘lacuna’[7] opportune upon many ‘fringe-parties’ to institutionalise their ‘relevancy’ from promoting mediation as not a dispute-avoidance mechanism but a dispute-resolution that has no statutory-bites[8]; to ‘creatively’ re-package ‘new-professionals’, i.e. ‘facilitative-negotiators’ to assist parties to ‘re-negotiate’ their existing-contract, often making them-murkier; the traditional core-consultants, i.e. the Architects, Engineers and QS having to find ways to ‘salvage’ the unprecedented-events as they are the parties that were hit the most, with the contract-terms that had never foresee such pandemic, at such a scale[9].
 
The Covid-Bill has left many questions unanswered; came rather-late when the damage has already been done[10]; ‘tapestry’ and temporal in nature[11] with no ‘statutory-solutions’ in place, even mediation is non-mandatory[12]. There also arise for the fact that many agencies are running to provide ‘mediation’ as dispute-resolution provider, with or without a single-idea as to the real issues faced by the construction-industry stakeholders, central on the cardinal-issues of payment and time.[13] Similarly, there are other quarters that question the ‘conflicting-interest’ and the effective roles of the Architects, Engineers and QS as ‘mediators’ for construction-related matters, especially those projects under their watch.[14] Who on earth, would not have been in a better position, for dispute-avoidance in the first place, if not for the role of the Architect, whom from the onset has been ‘statutorily-empowered’ to self-regulate[15]; statutorily-regulated[16]; and in common law provision, the impartial certifier[17]? Do the industry wish to re-invent the wheel, perhaps by introduction of another breed of specialist, ‘neutral-evaluator’ to provide ad-hoc ‘instant-expert’ non-binding recommendations for non-technical mediators to mediate dispute, thus additional costs and time required?
 
Furthermore, a facilitative approach in the construction industries is a ‘waste of time’. “A strictly facilitative mediation seems like such a waste of time. If they are in dispute and at gridlock it doesn't provide any avenues for resolution except further discussions which presumably they've already exhausted which is why they are still in dispute avenues.”[18] Some legal fraternity recognise such, as a way to mitigate, another new-breed of professionals are brought into facilitative-ly re-negotiate existing-contracts of the parties[19]; often mutilating standard-forms beyond its recognisable-forms into ‘bespoke-contract’, possibly untested, ambiguous and so much foreign to the Architects, Engineers or QS to administer.[20]  
 
As to the existing standard-form, i.e. PAM-Form has provided ‘force-majeure’ a civil-law jurisdiction clause that is so foreign in our common law traditions; where applications become rather awkward as the pre-condition of ‘epidemic’[21] has narrower ambit compared to ‘pandemic’ of a global-scale, thus the question in law, should ‘pandemic’ be construed as ‘epidemic’ as envisioned by the parties when they enter into their contract, or entirely unforeseeable that such an unprecedented change in the contract conditions warrant repudiation under ‘frustration’[22]? We have yet to see the findings of the court, although PAM has been too-quickly to conclude such[23]; impacting many contractors ‘desolate’ without any recourse for loss and or expenses which are very-very real[24]. Mirrored the advice from the JCT, which is absent in the long-awaited PAM-advisory, it was instead suggested that as a matter of procedural-rule, within the stipulated conditions of the contract, the Covid-19 situation shall be viewed as pre-governmental intervention and governmental intervention.[25]
 
In situation of pre-governmental intervention, if the site has been affected by Covid-19, it is deemed to fall within the provision of force-majeure, a neutral-event qualifies for EOT but not loss and expenses[26]. Whereas, with the governmental intervention, i.e. the MCO, CMCO or others, it is a compulsory-order from the government, thus delay-prevention is no longer a choice of the contractor, warrants EOT with automatic loss and expenses[27]. This is a ‘just, fair and reasonable’ approach in extra-contractual, i.e. tort relationship governing this industry[28], without to succumb for any ‘maverick’ or novel approach such as ‘good faith’ that is not the ‘overarching principle’ of our common law. Having to say that, we have really yet to see any substantive, concrete, workable and detail proposals from PAM on the interim-measures for contract administrator to work on immediately especially on procedural-matters, leaving the substantive-issues to be agreed upon by the parties, failing which, again arbitration, adjudication and the court, are the only options; of which technical mediation as provided by PAM shall easily have avoided such disputes.[29]      
A lot have been spoken thus far, but political-will to act upon such has yet to be seen. There is no walking the talk at the moment, unfortunately.

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[1] Linden Gardens Trust Ltd v Lenesta Sludge Disposal Ltd [1994] 1 AC 85, per Lord Browne-Wilkinsonat, p.105E
[2] <https://www.parliament.uk/about/how/role/sovereignty/>: Mirrored that of Westminster
[3] Arnold v Britton [2015] UKSC 36, per Lord Neuberger, p.18
[4] P.II,Covid-Bill
[5] <https://www.straitstimes.com/asia/se-asia/muhyiddins-government-seen-flip-flopping-on-covid-19-battle-as-its-fate-hangs-in-the>
[6] <https://www.edgeprop.my/content/1762708/council-welcomes-covid-19-act>
[7] <https://www.freemalaysiatoday.com/category/nation/2020/10/23/covid-19-act-too-little-too-late-says-house-buyers-group/>
[8] <https://en.wikipedia.org/wiki/Non_liquet >: In law, a non liquet (commonly known as "lacuna in the law") is any situation where there is no applicable law. Non liquet translates into English from Latin as "it is not clear"
[9] <http://www.davidyek.com/adr/movement-control-order-mco-from-the-lens-of-an-architect>
[10] <https://www.theworldlawgroup.com/news/covid-19-bill-2020-affecting-housing-developers-and-homebuyers>
[11] P.II,Covid-Bill: 18 Mar 2020 - 31 Dec 2020
[12] Cl.9,Covid-Bill: use of the word “may”, the mediation option is voluntary
[13] <https://www.scl.org.uk/resources/delay-disruption-protocol>
[14]<https://www.ibanet.org/Document/Default.aspx?DocumentUid=e2fe5e72-eb14-4bba-b10d-d33dafee8918>
[15] S.24.A.UBBL 1984
[16] Housing Development Act 1966 HDA: Reg.11,Cl4.P.2
[17] Sutcliffe v Thackrah [1974] AC 727
[18] RICS’s ACRE-Model of Evaluative Mediation
[19] Facilitative Negotiator, mooted by MMC Bar-Council Malaysia
[20] Some Institutional Administered Arbitration only administer dispute based on the standard-form that the institute has published.
[21] Article 7(ad)PAM2006
[22] Treitel, Frustration and Force Majeure, (3rdEd.,2014), 7-001
[23]<http://pam.org.my/images/announcements/2020/PAM_Advisory_Note_Covid19_MCO_18.3.2020.pdf>
[24] <https://www.nst.com.my/news/nation/2020/04/586175/mco-reducing-construction-workforce-will-affect-projects>
[25] <https://corporate.jctltd.co.uk/coronavirus/>
[26] Cl.23.8(a)PAM2006
[27] Cl.24.3(n)PAM2006
[28] Caparo Industries v Dickman [1990] 2 AC 605
[29] <http://www.davidyek.com/adr/roles-of-architects-as-construction-mediators-in-post-mco-recovery-in-malaysia>