I received a request for mediation from an architect friend whom project has reached a dead-lock. Apparently, the pandemic has more often than not, caused havoc to the construction industries. I am more welcome to mediate for the parties. What happened next, send shivers to my spine. As a practice, I always perform a pre-mediation meeting with the parties. Foremost, it allows me to set out from the onset the procedures and efforts in mitigating parties’ expectations of the mediation. Second, is to allow the mediator to understand the nature of the dispute more and to correlate information.
The parties informed me that, the project started on a good footing, but ended on a bad note of delay and non-payment. That is very common in most of the disputes, I encountered. I thought to myself that this matter is mediatable. The architect also informed that since the project has gone ‘sour’ the contractor has in fact made an official complaint to LAM on the basis of the architect failing to perform its role as a contract administrator. That matter, is another good story for another day. Notwithstanding the complaint, the contractor proceeded to mount a claim against the employer. But realizing that it is going to be an expensive affair, they decided to mediate their disputes.
Upon probing further, they disclosed that from the onset, the employer has requested the project to be procured based on two separated contracts. One is as per the tendered sum, [cheaper-version], we called contract-A, two, the employer’s request [manipulated version], we called contract-B. Contract-B was necessary because the Bank would only finance 80% of the contract sum. So, in order to finance 100%, the tender price will need to be increased another 20%, thus the manipulation. Problem arises is when the employer refused to pay and in retaliation, the contractor demanded that they had never agreed to contract-A and all these while they only agreed on contract-B.
So, what made me shiver is the legal question of whether contract-B being the manipulated version is a fraudulent misrepresentation to the bank? If so, being a fraud, the case is criminally laced, can mediation be proceeded on this account?
The law governing mediation holds, foremost, “this Act shall not apply to – (a) any dispute regarding matters specified in the Schedule [11. Any criminal matter]”; second, “notwithstanding ss(1) [no person shall disclose any mediation communication], mediation communication may be disclosed if, (c) the disclosure is required under this Act for the purpose of […] criminal proceedings […]”; third, “Any mediation communication is privileged […], (2) notwithstanding ss.(1) [privilege], the mediation communication is not privileged if – (d) it is used or intended to be used to plan a crime, […] to conceal a crime […]”; and finally, “the mediator shall not be liable […] unless the act or omission is proved to have been fraudulent […]”.
The law governing fraudulent misrepresentation holds, that ‘misrepresentation’ is, being an unambiguous ‘false statement of facts’, addressed to the party misled, inducing the ‘victim’ into entering a contract. However, the law assumes that one commits fraudulent misrepresentation, which is a criminal offence, and the burden of proof is vested upon the defendant
The fact is the mediation is yet to commence; there is an attempt to fabricate the contract sum for the purpose of concealment and fraudulent misrepresentation may have elementally observed but has yet to be ascertained by the court. In application, the request of the employer on contract-B contains the element of fabrication, the contractor, consultant QS and architect are equally involved in such act. Matter turns complicated when the consultant QS who facilitate such arrangement had since passed away, leaving the architect to be potentially ‘grilled’ in the court of law.
Concluding, the mediation was not conducted owing to the element of crime. Parties were left to resolve their matters amicably. This is the sort of dispute that can never be mediated, arbitrated nor adjudicated. The only venue for recourse is the criminal court. Lesson learnt, it is a very common practice in the industries that a separate contract was kept for different purposes and this followed by issuance of certificates by the consultants. As contract administrator, we cannot guarantee that parties will keep to their end of the bargain, so, when matters are not within the controls anymore, hell break loose and consultants are trapped. Worth the risks?
 S.2(a) Mediation Act 2012 (‘MA2012’)
 Kleinwort Benson v LincolnCC.2AC349
 Brennon v BoltEXCACiv1017
 Renault v FletproEWCH2541
 Hedley Byrne v HellerAC465
 Derry v Peek(1889)14AppCas337
 Barclays Bank v O’Brien1AC180
 Esso v MardonQB801
DYA+C is set up by Ar. DAVID YEK TAK WAI to undertake resolution of commercial disputes through ARBITRATION and ADJUDICATION, specializing in CONSTRUCTION PAYMENT DISPUTES.
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