DELAY AND DISRUPTION PROTOCOL (MALAYSIAN SUPPLEMENT)

DELAY AND DISRUPTION PROTOCOL (MALAYSIAN SUPPLEMENT)

Janice and Chih-wen provide an overview of the Delay and Disruption Protocol (Malaysian Supplement)

INTRODUCTION

On 20 January 2017, the Society of Construction Law (Malaysia) (“SCL (Malaysia)”) launched a Malaysian supplement (“First Malaysian Supplement”) of the Second Consultative Draft Delay and Disruption Protocol in the United Kingdom (“Second Consultative Draft Protocol”). Given that both documents are to be read together, the background and journey of the Delay and Disruption Protocol (“Protocol”) have to be appreciated.

This article will provide an overview of the Protocol, its reception by the courts and revisions made to the Protocol since it was first published before dwelling on the First Malaysian Supplement.

WHERE IT ALL BEGAN

The Society of Construction Law (“SCL”) was founded in the United Kingdom (“SCL (UK)”) in 1983 to promote for the public benefit, education, study and research in the field of construction law and related subjects, both in the United Kingdom and overseas. SCL (UK) has international links with similar SCLs in Europe (consisting of 21 national SCLs), the Caribbean, the Gulf States, Australia, Hong Kong, New Zealand, Singapore and Malaysia. SCL (Malaysia) was formed in 2003 to cater for members in Kuala Lumpur and Selangor and expanded to become a national society, admitting members from all states of Malaysia in 2009. SCL (Malaysia) has since become part of SCL-International, the world-wide federation or alliance of national or regional SCL organisations.

The First Edition of the Protocol was published by SCL (UK) in 2002. The object of the Protocol then (and now) is to provide useful guidance on some of the common delay and disruption issues that arise in construction projects. For example, where one party wishes to obtain from the other an extension of time or recover loss and expense incurred for the additional time spent to complete the project. The purpose of the Protocol is to provide a means by which the parties can resolve such matters and avoid unnecessary disputes. The focus of the Protocol is therefore to provide practical and principled guidance on proportionate measures for dealing with delay and disruption issues that can be applied to all projects.

With the passage of time, the developments in law, practices and technology, increased scale of larger projects and feedback from international use (which was not initially anticipated) necessitated the Protocol to be relooked and reviewed.

In July 2015, the review committee of the Protocol published ‘Rider 1’ which reviewed the Protocol against a backdrop of developments in law and technology.

In 2016, the review committee appointed by the Council of SCL (UK) produced the Second Consultative Draft Protocol for public consultation. The Second Edition of the Protocol was recently published in February 2017 and supersedes the First Edition and Rider 1.

JUDICIAL RECOGNITION

Since the publication of the Protocol, judicial recognition to it has been diverse.

England

In England, the courts have taken judicial notice of the existence of the Protocol. This can be seen from Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 where Hamblen, J observed that:

“… the SCL Protocol is not in general use in contracts in the construction industry and nor has it been approved in any reported case. There was no evidence that the parties were aware of it or that they contracted with it in mind. Further, the SCL Protocol itself says that "it is not intended to be a contractual document. Nor does it purport to take precedence over the express terms of a contract or be a statement of law” … In such circumstances the SCL Protocol can be of little assistance in relation to the legal causation issues which arise in this case.

Examples of other cases in England citing the Protocol include Mirant Asia-Pacific Construction (Hong Kong) Limited v Ove Arup [2007] EWHC 918 and Great Eastern Hotel Company Ltd v John Laing Construction Ltd [2005] EWHC 181.

Hong Kong

Likewise, in Hong Kong, judicial notice was given to a method of delay analysis recommended by the Protocol in Leighton Contractors (Asia) Limited Stelux Holdings Ltd [2004] HKCFI 804. However, the Court ultimately held that the arbitrator’s rejection of this method did not amount to a misconduct. 

Australia

In contrast, the approach in Australia towards the Protocol has been markedly different, with greater recognition being accorded to the Protocol. In Alstom Ltd v Yokogawa Australia Pty Ltd & Anor (No 7) [2012] SASC 49, the Supreme Court of South Australia rejected an expert’s method of delay analysis on the basis that it was not a method featured in the Protocol nor was it in any text on construction law. The Supreme Court held as follows:

These methods were also recognised as such in the Society of Construction Law Delay and Disruption Protocol (“the Protocol”) …  The first problem with this method is that it is not an accepted method of delay analysis for construction programming practitioners. Mr King had never encountered this particular method before. It is not mentioned in the Protocol as a recognised method of delay analysis.”

Examples of other cases in Australia citing the Protocol include SMEC Australia Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (No 3) [2012] VSC 557 and 620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd [2006] VSC 490.

Malaysia

At present, there are no Malaysian cases citing the use and effect of the Protocol.

THE MALAYSIAN CHAPTER

It has long been pondered whether a Delay and Disruption Protocol should be formulated based specifically on the needs of the Malaysian construction industry.

In 2016, SCL (Malaysia) formed a legal and technical committee to propose a Delay and Disruption Protocol in Malaysia. The committee eventually decided to draft a Malaysian Supplement to the Protocol with the intention of making the Supplement a “living document”, that is, a document with improvements being continuously made to its contents based on regular feedback from industry players. The committee envisaged that SCL (Malaysia) would eventually publish a Delay and Disruption Protocol in Malaysia.

A draft of the First Malaysian Supplement was then circulated to individuals and eminent organisations such as the Construction Industry Development Board, Master Builders Association Malaysia, Chartered Institute of Building, Institute of Engineers Malaysia, Pertubuhan Akitek Malaysia, Royal Institute of Chartered Surveyors, Royal Institute of Surveyors Malaysia and Wanita Industri Binaan Malaysia for review and comments.

On 20 January 2017, SCL (Malaysia) launched the First Malaysian Supplement to the Second Consultative Draft Protocol. As the Second Consultative Draft Protocol has been superseded by the Second Edition of the Protocol recently, SCL (Malaysia) will be making eventual changes to the First Malaysian Supplement.

Contents of the First Malaysian Supplement

Read together with the Second Consultative Draft Protocol, the First Malaysian Supplement consists of 21 core principles and seven guidance sections relating to areas such as delay damages, extension of time claims, delay analysis, acceleration of work, global claims, disruption claims and valuation of variation claims.

There are three main differences between the First Malaysian Supplement and the Second Consultative Draft Protocol in relation to the areas of liquidated ascertained damages (“LAD”), claims for extension of time (“EOT”) and the Malaysian statutory adjudication regime under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”).

LAD

LAD are pre-estimated damages for delay in a construction project due to delay by a contractor. In Malaysia, such damages are governed by Section 75 of the Contracts Act 1950 which governs penalty clauses in contracts. Based on the Federal Court’s decisions in Selva Kumar a/l Murugiah v Thiagarajah a/l Retnasamy [1995] 1 MLJ 817 and Johor Coastal Development Sdn Bhd v Constrajaya Sdn Bhd [2009] 4 MLJ 445, actual loss claimed in respect of LAD must usually be proven.

The First Malaysian Supplement suggests that unless new developments in the law occurs, any party claiming LAD should include evidence of actual losses it had suffered which are not too remote.

EOT

Construction contracts generally provide for delay or disruption events and allocate risks accordingly by EOT clauses.

The benefit to the contractor of an EOT clause is to relieve the contractor from liability for LAD for any period prior to the extended contract completion date. The benefit of such a clause for the employer is that it establishes a new contract completion date, and prevents time for completion of the works becoming “at large”.

A key emphasis in any construction project is record keeping, especially when a contractor seeks an EOT. The contractor would be required to make the application as comprehensive as possible and to include details such as the causes of delay, effect of the delay on the work programme, estimated length of delay, steps taken to minimise or mitigate delay and the required EOT.

The First Malaysian Supplement sets out the general requirements in dealing with EOT claims. Such considerations include the following:

(1)    What would be considered as comprising adequate particulars or necessary submissions to be included in an EOT application;

(2)    How a contract administrator should deal with EOT and delay/disruption issues; and

(3)    How to deal with “condition precedent” situations.

The First Malaysian Supplement emphasises that the relevant information would be easily obtainable and readily available if the project records are kept in proper order. Principal sources of such information include official works records, progress reports, site diaries, letters, instructions, emails, drawings, photographs and other records.

CIPAA

With the advent of CIPAA in the Malaysian construction industry on 15 April 2014, recognition must be given to the provisions of CIPAA which affect the timing of a project. For example, a contractor who is successful in an adjudication under CIPAA and has not been paid the adjudicated sum after delivery of the adjudication decision may suspend performance or reduce the rate of progress of performance by giving 14-days’ written notice to other party in accordance with Section 29 of CIPAA.

The First Malaysian Supplement highlights the effect of CIPAA on delay and disruption in greater detail. 

LOOKING AHEAD

Akin to the Protocol, it is not intended that the First Malaysian Supplement be a contract document nor does it purport to take precedence over the express terms of a contract or be a statement of the law. It represents a scheme to deal with delay and disruption issues, whilst recognising that some issues may not have absolute answers.

The launch of the First Malaysian Supplement was well-received by all attending parties. Nonetheless, the reaction of the construction industry to the First Malaysian Supplement remains to be seen, both locally and internationally.

Writers’ email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it & This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Janice and Chih-wen are among the co-authors of the First Malaysian Supplement. Janice is the Deputy President of SCL (Malaysia) and Chih-wen is a Committee Member of SCL (Malaysia).


SUBJECT MATTER: CONSTRUCTION LAW

WRITERS' NAMES : JANICE TAY & OOI CHIH-WEN

WRITERS’ PROFILE:

Janice is a Partner in the Construction and Engineering Practice Group of SKRINE. Her main practice areas include arbitration and adjudication.

Chih-wen is an Associate in the Construction and Engineering Practice Group of SKRINE. He graduated from the University of Cardiff in 2013.

 

 
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