Issue 21 | March 2021

OPEN
FOR
BUSINESS
Contents
5
Welcome, from Asia Pacific Managing Director, Alasdair Snadden

6
The Quantification of Acceleration Claims

8
Get to know Diales with Garth McComb

12
4 Welcome
From
Closing the CEO Markgap
infrastructure Wheeler
- Indonesia

14
6 Records
The emergence of third party funding
Why so shy?
18
Wanna be rich? Build roads first
8 Negotion vs Mediation
Some key considerations
22
Designing for durability

12 Take or Pay
26 Does the law of penalties apply?
The impact of the COVID-19 pandemic, and the challenges faced by
contractors in Malaysia
16 Seeing the wood from the trees
30
Hong Kong is still open for business, for the resolution of construction
18 Variations
disputes and Covid-19

32
20 ADR:
Q&A Independent
with Mukul expert
Soul, Country Director determination
of Australia

34
24 Q&A
How withhandling
is Singapore Simon Braithwaite
a new world order?

38
Game of Drones
26 The Claims Process under FIDIC 2017
40
How to claim compensation for idling owned plant: depreciation costs or
rental value?

44
Welcome new starters

47
Contact us

2
DIGEST | ISSUE 21

3
4
 DIGEST | ISSUE 21

Welcome
to the

Driver Trett Digest

It is my great pleasure to welcome you to the Asia Pacific
(APAC) focussed 21st edition of the Driver Trett Digest.

Asia Pacific has seen, and will continue to see,

major commitments to the construction and
engineering sectors. Angie Chai and Danang
Projosujadi provide context on the magnitude of such
developments with their articles on the infrastructure
works of Hong Kong and Indonesia respectively.

Notwithstanding this, such developments will come

with significant challenges; particularly given the
global conditions we all now find ourselves in. I would
therefore urge you to read the articles provided by my Alasdair Snadden
colleagues Liew King Wah, Ashlea Read, Garth McComb, Managing Director
Jung-guk Lee and John Mullen as they address some
key issues that are likely to be considered, possibly re-
Asia Pacific
considered, by parties dealing with claims and disputes.

This bumper edition also features a wonderful article from

one of our Technical Experts, Jeremy Ingham, who provides
a helpful insight into what he considers when looking at the
issue of ‘durability’. Mukul Soul also provides a wonderful
Q&A session on his background and key influences and
drivers that have made him the success he is today.

I am very grateful to our friends from external companies,

who provide helpful guidance on a variety of topics. Ben
Bury, Partner of HFW, provides a useful understanding on
Hong Kong as a, or even the, place to resolve a dispute. Joe
Durkin, an Investment Manager at LCM Finance, explains
the suitability and relevance of Third-Party Financing for
construction disputes. Danna Er, Partner of Eldan Law,
gives excellent insight into how Singapore has handled
and will likely handle the challenges of ‘a new norm’.

The Asia Pacific region is an exciting region and Driver Trett

will continue to strengthen its team in Asia Pacific. This
has been recently demonstrated with the appointments
of David Merritt, David Satchell, Mark Murphy and Adrian
Kong, who now form part of our regional APAC team.
I really hope you enjoy this edition of the Digest. Please
stay safe and well as we all move forward!

5
The Quantification of
Acceleration Claims
John Mullen, Principal and Quantum Expert

This short article focusses These can all lead to increased expense:
„ Increasing levels of resource. Either on the same or additional work fronts.
on the retrospective „ Changing resources. These might only be available at greater expense.
quantification of „ Changing methods. Particularly sequencing, overlapping, hours of work, and
procurement.
acceleration claims. „ Changing work scope or specification.

Prospective valuation, where parties The use of words such as “increase” and “change” begs the question “compared
reach a prior acceleration agreement, to what?”.
is not covered, though these can cause
their own problems. Potential legal Contractors often base acceleration claims on tender allowances. However, these
and contractual bases for acceleration may have been insufficient.
claims are also not considered.
An alternative baseline is levels before the acceleration, but these too may be
By way of introduction to quantification misleading. The proper baseline will usually be the contractor’s objectively
(and also because the author was reasonable ‘but for’ methods, resources and costs. These might be from a
expert for the defendant who was resourced programme, method statements, internal planning and budgeting,
awarded indemnity costs) it is worth witness statements, expert evidence, or a mutually supportive combination of
considering these words from HHJ these.
Hicks1:
Acceleration does not always only give rise to additional expense. Where work is
“increasing speed… finishing earlier… carried out more quickly savings can arise particularly in relation to time-related
increased expense…” costs. Where acceleration is achieved by changes to the works, savings can result
from omission or reduced specification.
In practice, such increasing speed and
finishing earlier might be achieved in Another area that is often overlooked in contractors’ submissions is duplication with
several ways. other claims. Where the cause of the acceleration relates to instructed Variations,

6
 DIGEST | ISSUE 21

their valuation may include the same these sources might establish this ‘but Materials costs can include: part load
costs. Claims for disruption can for’ baseline. Actual staff costs will be premiums; increased waste; double
particularly overlap with acceleration tested in terms of the reasonableness handling; costlier suppliers; and
claims. An often overlooked area of of their numbers, job descriptions and expedited delivery charges. Changes in
overlap is payments for cost escalation. rates. specification for earlier availability or
faster construction can also increase
The usual heads of acceleration costs Once the ‘but for’ and actual staff are costs.
include: established, comparison should not be
„ People, including both staff and of total numbers alone. Job descriptions Plant and equipment costs can include
operatives; should be looked at line-by-line. Who some similar features to the operatives
„ Preliminaries and general items was added, when and why, should be using them. In particular, owned plant
(site overheads); established from factual evidence. might be supplemented by hired plant
„ Materials; and In practise, such comparisons often at a greater cost and lower outputs.
„ Plant and equipment. show some reductions and this will
lead to debate, including: why there Additions to the above for risk/
Other potential heads are: is a reduction; whether the ‘but for’ contingency, quantification costs,
„ Off-site overheads; would ever have been required; and off-site overheads and profit tend
„ Profit; why there was no actual resource; and to be more relevant to prospective
„ Risk/contingency; and whether they should be off-set against acceleration agreements. Inclusion
„ The costs of quantification. the additions. will depend on such factors as: the
contractual or legal basis; whether
People costs are usually the largest Staff thickening particularly arises in they were incurred or lost; and the
head of acceleration claims, claims based on: bargaining strengths of the parties.
particularly staff. For both staff and „ The extent of changes, queries,
operatives, overtime payments often revisions and documents; Subcontractors can incur any of the
feature. Bonus payments can be „ Increases in work fronts; or cost headings identified above, and
additional bonuses paid in recognition „ Increased labour levels. can add complexity. Related questions
of the working circumstance or will include: whether a subcontractor’s
unearned bonuses which still have A useful analysis plots the levels costs actually arose from ‘domestic’
to be paid to retain people. Where of staff against time and numbers issues; whether they were reasonable;
additional people are introduced, they of documents or work fronts or how the subcontractor was procured
may be at a premium cost, particularly operatives. Discussion may ensue as to and managed; and whether the
where payroll employees are whether correlation proves causation contractor actually has an incurred
supplemented by those from agencies, and whether the resulting claim is cost or liability.
subcontractors or even imported into ‘Global’ in the pejorative sense.
a country. Recruitment fees might be Dispute as to whose culpable delays
incurred, and bringing new people to Regarding operatives, a number of led to the acceleration is likely to see
a project can add costs of transport, indirect effects can cause additional a counterclaim from the Employer. In
visas, work permits, site inductions, cost. Long hours, crowded workspaces particular, for additional fees paid such
health checks, accommodation, and and overlapping trades can reduce as to a FIDIC Engineer for providing
other indirect costs. production. Less obvious are learning additional staff or overtime and night
curves and the effect of changes in shift attendance. The relationship
“Staff thickening” claims often feature the ratio of operatives to such as between such costs and contractual
not only as an acceleration issue but supervision, management, plant, Delay Damages may have to be
also as a head of disruption or even equipment, and materials. Quantifying considered.
prolongation claims. Where staff labour productivity losses involves
thickening claims compare actual the usual difficulties with disruption Evaluating Contract Claims2 offers
and planned resources, the usual claims. further discussion on this broad and
questions apply to the differences. complicated topic.
Alleged ‘but for’ resources might be Methods include:
based on tender allowances or staff „ Comparing planned and actual;
organograms, but these might have „ Measured mile analysis;
been wrong or set intentionally low or „ Earned value analysis;
high respectively, to win a bid. Planning „ Records of lost time;
and budgeting by the project team often „ Comparisons with similar projects;
proves a much better basis, ideally „ Expert evidence; and
through contemporaneous documents, „ Historical data. 1. Ascon Contracting Ltd v Alfred
or otherwise through statements. McAlpine Construction Isle of Man
Objective evidence can be sought from Ideally a claim for lost productivity (1999) 66 ConLR 119
experts or similar projects. Ideally, a applies more than one of these methods 2. By JP Mullen and RP Davison,
mutually supportive combination of to mutually support each other. published by Wiley Blackwell.

7
 For those of you who may not yet be aware, Diales is
the brand name under which the most qualified and
experienced Experts in the Driver Group of companies
operate.

Get to know Diales was the initiative of Driver Group CEO, Mark Wheeler.
The brand was established to guarantee our clients a level of
experience and qualification, when requiring expert witness

Diales with
services.

When our clients engage a Diales expert, they are engaging

someone who has:

Garth McComb „ A minimum of 15 years’ industry experience;

„ Previously been cross examined or has successfully
completed cross examination training;
„ At least 50% of their workload as an expert;
„ Been trained in what is required of an expert in litigation
or arbitration.
Garth McComb, Regional Director
and Regional Head of Diales APAC I have personally been involved in two hearings where one
Driver Trett, Kuala Lumpur of the first questions put to the opposing party’s expert was:
“How many times have you given evidence as an expert prior

8
 DIGEST | ISSUE 21

to today?” Their response, it was the first time. In both cases, implementing a change simply because the contractor failed
nobody seemed more surprised than their own clients, who to submit a notice in time does not seem equitable. However,
presumably had assumed they had engaged a battle-scarred the Contract is the Contract and in our industry it is rare for
expert with many victories under their belt. a party to a contract to be able to say convincingly that it
entered into a contract with its eyes closed.
Diales Experts hail from a wide variety of backgrounds,
but can be generally grouped into one of three categories, Shortly after I moved from Singapore to Malaysia about 10
namely: Quantum, Delay and Technical Experts. years ago, I was in a meeting discussing a report that we
had prepared for a contractor. The report was a review of the
Probably the best place to start, should you be looking for Contract they had recently signed and was intended to give
an expert in one of those fields, is the Diales App. The app them guidance on compliance requirements and potential
can be downloaded from Google play / Apple iStore, and pitfalls within the Contract.
contains the background experience for each Diales expert,
our services and contact details. For additional information, The Contract contained a clause in relation to claims for
you can refer to our website: www.diales.com. additional money and stated that if the contractor intended to
claim additional money for any reason, including variations,
I was immensely proud to have been appointed as Regional it had to notify the engineer within 21 days of becoming aware
Head of Diales for APAC (Asia Pacific) late last year, and I am of the issue giving rise to the claim.
ambitious to not only promote the high quality experts that
we already have in the region, but also to promote the whole Part of our advice to the contractor was to review all drawings
of the Diales team. issued by the engineer and submit a notice of intention to
claim for any changes in the drawings within 21 days of
While much of a Diales Expert’s role is acting in formal receipt of the drawings.
dispute resolution, I just wanted to take this chance to extol
the benefits of hiring a Diales Expert in the early days of a The Project Director asked me if I was really saying that if he
project. was issued a drawing which included changes to the work,
and he did not submit a notice of his intention to claim for the
One thing I have noticed in many of the disputes that I change, then he could lose his right to claim anything. I told
have been involved with, is that parties, be it Claimant or him that is what his Contract said. He told me I did not know
Respondent, often both, are regularly put in a compromised how construction works in Malaysia.
position due to a lack of appropriate records detailing the
matters that gave rise to the dispute.
We were not hired for claim services throughout the Contract,
With years of experience and first hand but I did hear later that most of the contractor’s subsequent
claims were rejected on the grounds of there being no
knowledge of how disputes are resolved, notices.
Diales experts can provide invaluable As mentioned above, I am not a proponent of restrictive
advice at the outset of a project - to notice requirements that appear to be an attempt by the
client/employer to avoid having to pay compensation for
explain what records should be kept, their own actions, or inactions. I was therefore heartened to
in order to comply with the particular read one recent case report from Malaysia where the Judge,
in my opinion, made a fair and reasonable decision that
contract conditions - so that in the event compensated the Claimant for some, though not all, of its
of a dispute, the party that was so advised losses, despite the lack of any notice of its intention to seek
compensation.
is fully prepared, and able, to substantiate
In the case of Sunissa Sdn Bhd v Government of Malaysia,
their position and / or justify their losses. there was no dispute that the Plaintiff had been awarded
extensions of time for matters that could be compensable
Another area where Diales experts can help to reduce the issues under the terms of the Contract. The Plaintiff was
likelihood of a dispute, is the identification and notification of claiming loss and expense for the delay periods based on
claim issues in a timely manner. recurring preliminary items costs and head office overheads.
The Defendant had rejected the claims on the grounds that
I have never been a proponent of notice requirements that the Plaintiff had not submitted any notice of their intention to
deny a contractor the right to make a claim simply because claim compensation.
they have not notified the employer of their intention to claim
in time. I understand that there may be circumstances when Clause 44.1 of the Contract in question provided inter alia
an employer, if faced with a potential claim, may be able to that “if…[EOT was granted under certain clauses as it had
consider alternative solutions and avoid additional costs; But been in this case] …and the contractor has incurred direct
for an employer to avoid incurring additional costs for loss and/or expense beyond that reasonably contemplated…

9
…then the contractor shall within thirty (30) days of the
occurrence of such event or circumstances or instructions
give notice in writing to the S.O. of his intention to claim…”.

In short, the judge held that the portion of the Plaintiff’s claim
which was based on recurring Preliminary Items costs were
“within that reasonably contemplated” and therefore clause
44.1 did not apply and hence no notice was required to claim
for such costs. The other main portion of the claim for head
office overheads was rejected as it was considered “beyond
that reasonably contemplated” and therefore required the
submission of a Notice.

While I am not totally convinced that head office overheads

should be considered to be beyond that reasonably
contemplated, I do feel that had this matter been in front
of an Arbitrator, many would have simply held that the loss
and expense claim should fail due to the lack of the required
Notices. In my opinion, the judge should be applauded for
this decision.

Garth McComb, Quantum and Delay Expert,

Regional Head of Diales for Asia Pacific

10
DIGEST | ISSUE 21

11
CLOSING THE
INFRASTRUCTURE GAP -
INDONESIA
Danang Projosujadi, Operations Manager
Driver Trett, Indonesia

Indonesia is the world’s 16th-largest Since President Joko Widodo was elected in 2014, Indonesia has witnessed
economy and as a large archipelago significant growth in major infrastructure projects, and in particular the transport
country, the infrastructure in sector with the current transport systems failing to keep pace with Indonesia’s
Indonesia continues to play a key growing economy. Development of the national railway network is the country’s
part in the growth of the Indonesian top priority, which will provide much needed and affordable public transport, as
economy and its ability to compete well as the ability to move goods and raw materials quickly around the country, and
on the global stage. Inadequacies in importantly, to and from the major ports.
the country’s infrastructure have for
many years hindered its industrial The Indonesian construction industry registered an
growth but times are changing, and
changing quickly.
annual growth rate of 5.8% in real terms in 2019.
The construction industry is expected to continue to grow substantially over the
next 5-years notwithstanding any short-term disruption caused by Covid-19.
President Joko Widodo, who was re-elected in the April 2019 elections, is expected
to continue to drive forward with large-scale investment and development.

12
 DIGEST | ISSUE 21

At the start of his second term in office, President Joko Widodo announced a new SO, WHAT ELSE DOES THE
policy in the government development plan that is solely dedicated to infrastructure FUTURE HOLD FOR INDONESIA?
with plans to launch a $412billion programme to boost investment.
Under Presidential Decree number
To achieve the country’s aggressive infrastructure targets, 2019 alone saw the 109 of 2020, which is the third revision
Government complete 91 nr strategic national projects from a total of 223. of the Presidential Decree number 3
of 2016, the Government announced,
One of the major projects to be completed in 2019 was the Palapa Ring1 that that 201 projects are to be included as
connects 34 provinces through optical fibre with a broadband network. part of the Strategic National Projects
between 2020 – 2024, with 55 of them
Adding to the list, the government is also developing clean and potable water being new projects. The total value of
projects and water network systems, including: dams, flood control projects, the Strategic National Projects is an
smelters, fisheries, and marine projects. estimated $340 billion.
Another major project on the horizon is the construction of a new capital city. In The 55 new Strategic National Projects
April 2019, the President approved plans to relocate the country’s capital city to East include 9 new major road and bridge
Kalimantan, a province on the island of Borneo, due to overpopulation and traffic projects, 9 dams, 6 energy projects,
gridlock in Jakarta. The current Indonesian capital is sinking by 25cm annually, 6 new and expansions of airports, 5
making it one of the fastest-sinking cities among the world’s coastal cities. It is clean water projects, 4 major seaports,
estimated that 95% of North Jakarta will be submerged by 2050. The cost of the 4 new railway projects, 4 new industrial
project is officially estimated at US$33 billion, and it is expected to take a decade to zones, 4 irrigation projects and a major
complete, jointly funded by the state and private sector. defence project.
Julian Smith, global transport and logistics leader at PwC, based in Indonesia, told Inadequate infrastructure has long
OBG2, “The new capital city is an opportunity to show that Indonesia can design, been a challenge for this archipelagic
build and operate a modern urban transport system, which includes maximum state, which is possibly the most
opportunities for walking.” complicated country in the world in
terms of its logistical challenges.
However, after many years of
infrastructure neglect and struggles
with funding, the country’s economic
growth plans over the next five years
NOTABLE PROJECTS WHICH ARE CURRENTLY UNDERWAY INCLUDE THE are one to watch, and will certainly
FOLLOWING: close the infrastructure gap.

„ New Priok Port, Jakarta.

The project is to construct a new extension of the existing Tanjung Priok “Where we see
harbour in the northern part of Jakarta. The development was started in 2012
and is targeted to be completed by 2023.
challenges. I see
opportunities. Indonesia’s
„ Mass Rapid Transit (MRT), Jakarta.
This US$ 1.7 billion project will provide a public transport solution to ease challenges are your
the traffic congestion in Jakarta. Currently the first phase of the South-North opportunities”
corridor is already complete and in operation, while the construction of the
second phase is underway with a target completion date of 2022. President Joko Widodo

„ Trans Java Island Toll Road.

This US$ 5.5 billion project will provide a 619 km toll road network on Java
Island to connect main cities along the northern part of the Island from
Merak Port in the West to Banyuwangi port in the East.

„ Trans Sumatra Toll Road.

This US$ 36 billion project is to connect all the major cities in Sumatra 1. http://investvine.com/indonesia-
from Banda Aceh in the North to Bandar Lampung in the South, covering a brings-high-speed-internet-
distance of approximately 2,000 km. to-remote-eastern-provinces/
indonesian-national-palapa-ring-
project-development-iskandar/
The Government also added that several toll road projects would commence in nggallery/slideshow
2021, including a 14 km section of the Banda Aceh – Sigli toll road in Sumatra,
a 33 km section of Balikpapan – Samarinda toll road in East Kalimantan, and a 2. The Oxford Business Group
131 km Pekanbaru – Dumai toll road in Sumatra. Indonesia

13
 Andrew Miller, Associate Director, Driver Trett, London

THE
EMERGENCE
News in the legal press towards the end of last year, that
a global construction firm had entered into a funding
arrangement, supporting the funding of up to 20 arbitrations
seated in jurisdictions ranging from London to Dubai, seeing

OF THIRD
the engagement of several international law firms, claims
consultancies and expert service providers, has created a
stir and caught the attention of contractors, experts and
arbitrators across the GCC and APAC (Asia Pacific).

PARTY
What grabbed the attention of CEOs of regional and
international construction firms, from Turkey to Korea and
further afield, was that there had been up until then, little

FUNDING
insight of funders involvement in construction disputes in the
Middle East.

Where third party funding has long been a resource to

contractors involved in disputes in common law arbitration
hubs such as London, New York and Sydney, what is really
interesting now is the sea change in how third party funding
is being used by contractors across the Middle East and Asia,
Joe Durkin, an Investment Manager at third party which appears to be the tip of the iceberg.
funder, LCM Finance, gives insight into how contractors
are increasingly turning to litigation funding across the There are several reasons for why this change has come
Middle East and Asia Pacific. about and how contractors are benefiting from it.

14
 DIGEST | ISSUE 21

WHY CONTRACTORS ARE TURNING TO THIRD the book as a whole, not just the strongest case(s), which
PARTY FUNDING. allows the funding of claims which may not be funded on an
individual basis.
Construction disputes are on the rise. There has been the
announcement across GCC jurisdictions of the insolvency This portfolio approach considerably lowers the cost for the
of several high-profile contractors, which has had a domino business as the risk is spread across multiple cases and
effect on the supply chain. has the additional benefit of potentially creating a financial
provision for any defense cases.
Prior to the disruption caused by COVID-19, the numbers of
disputes in the construction sector had been increasing. Pre- When dispute finance is used in this manner, more
COVID there had been the insolvency of several high-profile commonly known as corporate portfolio financing, it
contractors across the GCC, which has worsened in the past results in a company being able to:
year, having had a domino effect on the supply chain.
„ Move the financial risk of disputes;
The DIFC-LCIA recorded a 300% increase in cases registered „ Remove the costs associated with disputes from the
in 2017 which had doubled by the first half of 2018. All other company’s balance sheet; and
major arbitration institutions have shown increases in „ Release the financial upside of multiple claims where
disputes registered. returns are generated at zero cost.

The construction/engineering and energy sector often

generates the most cases in leading arbitration institutions. WHAT TO KNOW ABOUT THE DRIVING FACTORS IN
It was the largest sector in the ICC accounting for 40% of the THE MIDDLE EAST AND FURTHER AFIELD
ICC caseload. It is also a significant sector in the LCIA, in
SIAC and in regional centers such as ADCCAC and DIAC. Several key factors have emerged in recent years. Regulators
have addressed lingering uncertainty in many jurisdictions
The construction industry has been further disrupted by concerning the acceptance of funding.
the impact of COVID-19 with reduced profit margins, late
payments and time overruns. Sydney, London and New York have permitted third party
funding for years. In recent times Singapore and Hong Kong
The construction industry is well suited to third party funding. have adopted regulations to permit third party funding in
international arbitrations. The DIFC and ADGM soon followed
At its simplest, third party funding in the construction by separately recognising and regulating the use of third
industry sees a funder, a party with no direct interest in a party funding for litigation in their courts.
piece of litigation, who deploys capital to a contractor who
is typically the claimant in a dispute. In return, the funder This has coincided with the expansion of the arbitration
receives a return on its investment. In the most common infrastructure across the region and further afield. The
form of litigation finance, the return received is conditional DIFC-LCIA is strategically located in the Dubai International
on the success of the case and is paid to the funder from Financial Centre.
the proceeds of it. It is usual for the return on the funder’s
investment to be a multiple of the amount advanced, or a Recent legislative improvements are also a factor. The
percentage of the proceeds, or a combination of both. introduction of the UAE Federal Arbitration Law was
introduced in the UAE in 2018. We now have over two years of
implementation of the law which highlights how increasingly
FUNDING MANAGES THE COST OF A arbitration-friendly the jurisdiction has become. A set of
CONTRACTOR’S LEGAL CLAIMS AND TURNS THE new laws and the introduction of an international arbitration
LEGAL DEPARTMENT INTO A PROFIT CENTRE. centre in Saudi Arabia in recent years also indicates
improvements in the Kingdom.
There is also a growing understanding by CEOs and CFOs
of Middle East construction and energy companies, about The ICC announced just in December 2020 the opening of its
how dispute finance can be used as an effective and case management office for the ICC Court Secretariat in the
profitable financial solution. Abu Dhabi Global Markets. The regional arbitration centres of
DIAC and ADCCAC are also very active and their rules appear
There has been a shift in the mindset of leading contractors in a significant number of construction and energy contracts.
about how third party funding can help a company manage
the cost of its legal claims, turn the legal department into Indian contractors operating in the Gulf are well used to
a profit centre and even offer the potential for monetisation the appearance of SIAC as the arbitral institution in their
straight into the P&L. contracts, where SIAC has representative offices in Mumbai
and Gujarat, which has seen a considerable increase in
Most contractors will have numerous disputes, which can be disputes involving contractors from the sub-continent. We
viewed as a portfolio by grouping together some, or all cases. are finding that awareness of litigation funding among Middle
By funding a portfolio of cases, financing is secured against Eastern clients is high. CEOs and CFOs see funding as a tool

15
to unlock asset value. Law firms see how funding brings
in more work from existing clients and how to attract
more clients by offering an innovative, complete solution
for corporate and law firm litigation portfolios. Insolvency
practitioners see it as a means of financing the disputes of
an insolvent business.

LOOKING FORWARD

Awareness and interest in third party funding continues to

grow. The sheer number of high value construction disputes
in the Middle East, which had difficulties before the pandemic,
has led the industry to look at alternative ways to address its
legal spend on disputes.

There always will be a place for single case funding where a

contractor has a single high value dispute. The construction
and energy sectors are also poised to benefit from the new
and developing corporate portfolio approach to third-party
funding.

We are already seeing a wave of COVID-19–related litigation

and arbitrations. As in other regions, insolvencies and
bankruptcies are likely to follow in the aftermath of the
pandemic. Saudi Arabia and the UAE have modernised their
insolvency legislation. Litigation funders are often essential
in the insolvency context to assist insolvent, distressed or
cash-poor contractors recover receivables.

Joint ventures are another specific feature of business

in the Middle East. Many joint ventures are facing liquidity
challenges. We are seeing an increase in disputes between
joint venture partners.

There is an increase in the demand for third-party funding

from all types of claimants.

Third party funding’s effect on the legal landscape has been

accelerated by the pandemic. The increasing awareness of
funding by CEOs and lawyers, together with regional legal
developments will see significant use of third-party funding
across the Middle East and APAC.

16
DIGEST | ISSUE 21

17
要想富 先修路
WANNA BE RICH?
BUILD ROADS FIRST

Angie Chai, Senior Consultant, Driver Trett Hong Kong

18
 DIGEST | ISSUE 21

There is a well-known Chinese saying – “Wanna be rich? Build

roads first!” 要想富 先修路 and Hong Kong is no stranger
when it comes to investing in infrastructure.
Hong Kong, renowned as ‘the Pearl of the East’, is a beautiful and modern megapolis with a combination
of skyscrapers, beaches, historical landmarks, and heritage buildings in a compact space.

As an ex-British colony, Hong Kong’s culture has been deeply influenced by the West. As a result, a mixture
of East meets West culture has emerged and made Hong Kong a unique and distinctive society that has an
international perception, attracting people from all over the world for business, work, travel, and education.

Hong Kong is one of the world’s most active financial centres having developed from a small fishing village
in the 19th century. The fast-moving growth in population it has experienced since then has required Hong
Kong to quickly adapt its infrastructure, and in July 2017 the governments of Guangdong, Hong Kong and
Macau signed the ‘Framework Agreement on Deepening Guangdong-Hong Kong-Macau Cooperation in the
Development of the Greater Bay Area’.

There are seven areas of development1:

1. Developing an international innovation and technology hub.

2. Expediting infrastructural connectivity.
3. Building a globally competitive modern industrial system.
4. Taking forward ecological conservation.
5. Developing a quality living circle for living, working, and travelling.
6. Strengthen cooperation and jointly participating in the Belt and Road Initiative
7. Jointly developing Guangdong-Hong Kong-Macau cooperation platforms.

Two of the recent Greater Bay Area mega infrastructure projects in Hong Kong include the Hong Kong-
Zhuhai-Macau Bridge (HZMB) and the Guangzhou–Shenzhen–Hong Kong Express Rail Link (XRL), both
projects were completed in 2018.

HONG KONG-ZHUHAI-MACAU BRIDGE (HZMB)

The 55km bridge connects Hong Kong, Zhuhai and Macau comprising a 12km Hong Kong Link Road, 29.6km
Main Bridge (with 22.9 km above the sea and 6.7 km undersea) and 13.4km Zhuhai Link Road (Fig. 1.):

Fig. 1., extracted from www.hzmb.gov.hk/en/info/sea%20crossing-EN.pdf

19
HZMB is the world’s longest sea crossing bridge. It took nine years to complete the
construction of the whole project and was originally set to finish by the end of 20162.
However, the HZMB officially opened to the public on 24 October 20183.
HZMB is designed to have a 120-year life span and it cost a staggering RMB126.9 Billion (approximately US$18.3 Billion).

It has a six-lane carriageway with three lanes each side.

HZMB significantly reduces the travel time between Hong Kong and Zhuhai:

Fig. 2., extracted from www.hzmb.gov.hk/en/info/sea%20crossing-EN.pdf

HZMB was an extremely complex project that faced numerous challenges and difficulties during construction. The steel bridge
deck at the main bridge (Figure 3) used a total of 420,000 tons of steel (the equivalent of 60 Eiffel Towers) and the bridge deck
area is 700,000-metres square (the equivalent of 98 football pitches)4. As the main bridge was constructed in open sea, most
of the bridge structures were precast and prefabricated off-site and delivered to site for erection using an integral erection
method5.

Another challenge was the

construction of the tunnel
works at the Hong Kong
link road section as the
box jacking operation was
executed underneath the
Airport Express Line (AEL).
This involved excavation
works and casting tunnel
box segments in a deep and
narrow shaft. The works
were completed with a high
degree of precision using
a computerised system to
synchronise the movements
of the hydraulic jacks6.

The mega link has been

described as a “blood and
sweat project” by many
people in the building sector.

Fig. 3., extracted from www.hzmb.gov.hk/en/info/sea%20crossing-EN.pdf

20
 DIGEST | ISSUE 21

GUANGZHOU - SHENZHEN -
HONG KONG EXPRESS RAIL
LINK (XRL)

Guangzhou - Shenzhen - Hong Kong

Express Rail Link (XRL) is an express
rail (total length of 140km) that
connects Hong Kong (West Kowloon)
to Guangzhou (Shibi) via Futian and
Longhua in Shenzhen and Humen in
Dongguan.

The Hong Kong section of the XRL is

a 26km underground rail-run from
the terminus in West Kowloon Station
(WKT) to the boundary at Huanggang7
(Figure 4). XRL is operated by the
MTR Corporation8 and train speeds
can reach 200km/h in the Hong Kong
section and up to a maximum of
350km/h in the Mainland section.

The construction works commenced

in 2010 and were completed in 2018,
a three-year delay from the original
completion date (4 August 2015). The
official opening of the XRL to the public
was on 23 September 2018.

The construction work for the Hong

Kong section was divided into 20 major
civil contracts and awarded to 17
contractors9 due to the complexity of
the construction works.
Fig. 4., extracted from www.wikipedia.org/wiki/Guangzhou–Shenzhen–Hong_
However, this type of contract Kong_Express_Rail_Link
arrangement involved a high degree of
interfacing and coordination between
the parties. So, to conclude with another well-known Chinese saying
One of the major setbacks on this
一只蜂酿不成蜜 一颗米熬不成粥.
project was the difficulty encountered
at the WKT and the cross-boundary ‘It requires a joint effort to achieve anything worthwhile’.
tunnelling works which were subject
to unexpected construction conditions
and a shortage of labour.

The completion of the XRL has 1. https://www.bayarea.gov.hk/en/outline/plan.html

significantly reduced the travel time 2. https://www.thestandard.com.hk/section-news/section/11/173208/Bridge-to-
between Hong Kong and major Chinese open-in-one-go-despite-HK-delays
cities. For example, it takes 14 minutes 3. https://www.scmp.com/video/china/2169817/chinese-president-xi-jinping-
from WKT to Futian (previously circa declares-hong-kong-zhuhai-macau-bridge-open
100 minutes via numerous forms of 4. https://www.hzmb.gov.hk/tc/project/main-bridge.html
transportation). As of today, people can 5. https://www.hzmb.gov.hk/tc/project/main-bridge.html
easily travel to 58 Mainland Chinese 6. https://www.hzmb.gov.hk/tc/project/hk-link-road.html
7. https://www.thb.gov.hk/eng/policy/transport/issues/cbt_4.htm
stations from Hong Kong10. Overall, the
8. MTR Corporation Limited is a majority state-owned Hong Kong company
Greater Bay Area development initiative
9. https://www.info.gov.hk/gia/general/201405/28/P201405280337.htm
will benefit the Chinese economy and
10. https://www.highspeed.mtr.com.hk/en/about/hsr-intro.html
boost internationalisation, both an
important part of the next stage in
China’s economic growth.

21
DESIGNING Construction projects should be designed and specified to
provide an appropriate level of durability for their intended

FOR
service life and service environment. Failure to achieve
durability requirements frequently becomes a factor in
disputes as associated defects present themselves. Often,
technical experts are called upon to determine causation

DURABILITY
and provide advice regarding remediation and future
maintenance.

DEFINING DURABILITY

Definitions of durability are found in the following

standards:

Jeremy Ingham, Diales Technical Expert, summarises „ Section 2.4 of BS EN 1990:2001+A1:2005 Eurocode —
the use and pitfalls of durability design for construction Basis of structural design (section 2.4).
projects. „ Section 4.1 of BS EN 1992-1-1:2004+A1:2014 Eurocode
2: Design of concrete structures - Part 1-1: General
rules and rules for buildings.
„ Section 3.10 of ISO 13823:2008 General principles on the
design of structures for durability.
„ Section 2.1.3 of fib Model Code for Service Life Design
(2006).
„ Section 2.3 of ACI 318-14 Building Code Requirements
for Structural Concrete.

22
 DIGEST | ISSUE 21

The definition of durability differs slightly between these A recent high-profile example is the New Safe Confinement
standards, but there is commonality between them, in built to cover and allow dismantling of the remains of the
that they all require structural elements to exhibit the number 4 reactor at the Chernobyl Nuclear Power Plant.
following qualities if they are to be classified as durable: Completed in 2018 its shed-like structure comprising a steel
arch with cladding was slid into position and is the largest
„ They should be designed with their service environment moveable land-based structure ever built. Long design life
in mind. requirements (100 year minimum) combined with harsh
„ They should last for their intended working life (i.e., climatic conditions at a heavily contaminated site made
design/service life). careful consideration of the durability of the materials and
„ There should be no appreciable loss of utility during the structures imperative. A combination of durable materials
intended working life. and special corrosion protection measures were used. This
„ There should be no need for any unforeseen maintenance includes treating the air around the steel arch on an on-going
or repairs. basis to maintain low humidity that will prevent corrosion of
the structural steel members.
In essence, durability is the capability of a building, assembly,
component, structure, or product, to maintain a required
minimum performance over at least a specified time, while PRACTICAL APPLICATION TO CONCRETE
in its environment of operation. STRUCTURES
Modern design codes are increasingly based on the durability Concrete is the most widely used construction material in
performance of buildings and it must be ensured that adequate modern buildings and civil engineering structures. When
performance continues throughout the service life of the appropriately designed and constructed, concrete structures
structure. A durability design approach offers considerable bring considerable sustainable, societal, economic, and
benefits for both asset owners and society. By understanding environmental benefits throughout their whole life.
the deterioration processes affecting structures, design and
maintenance can be optimised to ensure that service life Designing durability into new concrete structures is an
aspirations of employers are met without unnecessary use of effective means of minimising their whole-life cost and
resources, both during construction and while the structure improving their sustainability.
is operational. This offers improvements in sustainability,
climate change resilience and potentially the whole life cost. For many structures this can be achieved through design
using tabulated guidance in internationally recognised
DURABILITY DESIGN standards. However, special consideration is required for
concrete structures, if:
Standards provide guidance on how to design for durability
in specific service environments and for certain minimum „ The service environment is particularly aggressive to
lengths of working life. However, employers will sometimes concrete (e.g., marine conditions, arid climates, etc.).
require a service life that is longer than allowed for in „ The service life is very long; greater than 100 years (up to
standards and/or that the construction materials should 120 or even 150 years).
remain durable in harsher environments than allowed for by „ The asset is regarded as critical infrastructure where the
standards. In these situations, a technical specialist (usually consequence of failure is great (e.g., bridges, tunnels,
a specialist materials engineer) can undertake a durability power facilities, etc.).
study to determine the type of materials and protective
measures that are required. These durability studies often In such cases, a project-specific durability study that
involve the use of deterministic or probabilistic modelling includes the use of predictive modelling tools, should be
using predictive computer modelling tools. undertaken. These may be deterministic or probabilistic in
nature. Durability studies that include modelling are now a
It is now common on large projects for tender-stage and fundamental part of the tender design and detailed design
design-stage durability reviews and reports to be provided stages for major infrastructure projects.
by materials engineers. These typically include:
Rusting of steel reinforcement bars that are
„ An overview of the applicable codes and standards.
embedded in reinforced concrete is the most
„ A description of the structures with breakdown into
principal structural components. important form of deterioration in concrete
„ Details of the environmental and in-service exposure structures worldwide (see Fig.1, page 25).
conditions.
„ Details of the anticipated deterioration mechanisms. The corrosion reaction is initiated by differences in electrical
„ A detailed strategy for achieving durability. potential caused by variations in the environment along
„ Specification and construction guidance for achieving a reinforced concrete element. Such variations include
durability. exposure to moisture, oxygen and salts, differences in the
„ Maintenance and operational requirements for achieving depth of cover concrete, stray electrical currents or where
durability. two dissimilar metals are connected.

23
Chloride contamination is the most common cause of vulnerable to deterioration. As an example, for concrete this
reinforcement corrosion. Chlorides can be cast into concrete involves eliminating or reducing details which are likely to
with marine aggregates, saline mix water or chemical make concrete placement and full compaction difficult to
admixtures. More commonly, concrete is exposed to chlorides achieve, particularly overly congested reinforcement.
from external sources such as seawater (marine structures),
de-icing salts (highway structures) or industrial processes This should not be neglected, and key to this is liaison and co-
(e.g., certain building structures such as abattoirs). operation between the structural engineer and the materials
engineer, to ensure nothing is missed. The engineers should
Consequently, the use of predictive tools for determining also consider the ‘buildability’ of their design to assist the
chloride ingress for reinforced concrete structures and constructer in reducing workmanship defects.
estimating the time taken to reach critical levels have become
an important part of the tender and/or detailed design
stages of new build structures, as well as of the condition
Whilst the primary durability strategy
assessment of existing structures and of asset management is the principal means of achieving
planning for deteriorating concrete structures.
durability (through quality of materials,
By using durability modelling tools, the service life of a detailing and additional protective
structure is estimated by assessing the resistance capacity
of the examined concrete (i.e. durability that is associated measures), it is prudent in the case
with a specific concrete type and specified concrete cover of critical infrastructure to have a
to reinforcement) against certain environmental and
special exposure conditions or ‘actions’ (e.g. temperature, secondary durability provision as an
humidity, chloride-ion exposure, carbonation, freeze/thaw
mechanisms, etc.) on the basis of a desired limit state, such
‘insurance policy’.
as the initiation of attack or the partial or full deterioration of
the structure or element under consideration. Specifically,
This can be used to achieve the required service life, or to
a time-dependent load or action distribution (S) is compared
provide the option of an extension of the service life beyond
to the corresponding time-dependent resistance distribution
that originally envisaged. In the case of reinforced concrete
(R) of the structure.
structures this can be by means of making provision for
future cathodic protection of the structure to be incorporated
As shown in Fig.2, the intersection of the S(t) and R(t) curves
as a contingency measure in the event of unforeseen
gives the deterministic solution for the mean service life, t, of
circumstances. This involves ensuring in the design that the
the examined structure or element.
reinforcement within each element is in electrical continuity,
and installing connection points where a cathodic protection
The deterministic modelling approach is based on the
system can be retrofitted to stop corrosion, if the structure
analysis of a defined set of input parameters (e.g. concrete
is found to be deteriorating while in service by routine asset
cover depth, chloride penetration resistance of concrete
condition inspections.
mix, exposure conditions), which by being fed into a model,
gives a unique, consistent output that is certain (occurrence
risk: 100%), neglecting any risk that is associated with the
variation of these parameters. Conversely, the probabilistic
approach is a statistical way to analyse deterministic models
and comprises the estimation of the probability that the
predefined limit state will not be exceeded during the service
life of a structure.

PITFALLS AND SOLUTIONS

The accuracy of durability modelling exercises is limited 1. Sfikas IP and Ingham J P. 2016. Service life design of
by the quality of data that is input to the model; this concrete structures using probabilistic modelling tools:
is based upon assumptions, laboratory or fieldwork statistical analysis of input parameters. In: Grantham
data. The most significant parameters include surface MG, Papayianni I and Sideris K (Eds), Concrete Solutions:
chloride concentration, chloride migration coefficient, Proceedings of the 6th International Conference on Concrete
critical threshold for corrosion and age factor. Incorrect Repair. 20-23 June 2016, Thessaloniki, Greece-CRC Press,
assumptions will result in inaccurate durability predictions. Taylor & Francis Group. London. pp. 437-446. ISBN: 978-1-
This can be mitigated to a degree by undertaking ‘sensitivity 138-03008-4, 2016.
analysis’, whereby a range of input parameters are modelled
to determine the durability significance of varying the values.

An essential part of any durability strategy is having a

structural design that avoids non-durable features that are

24
 DIGEST | ISSUE 21

ACCOMPANYING
FIGURES

Fig.1., Chloride-induced steel reinforcement corrosion in a highway structure

Fig.2., Estimation of service life of reinforced concrete1

25
THE IMPACT OF
THE COVID-19
PANDEMIC, AND
THE CHALLENGES
FACED BY
CONTRACTORS IN
MALAYSIA

26
 DIGEST | ISSUE 21

Kingwah Liew TYPICAL CHALLENGES FACED

Driver Trett Country Manager, Malaysia BY CONTRACTORS DURING THE
COVID-19 PANDEMIC

CASH FLOW

Cash flow problems were an immediate

The COVID-19 pandemic impact of the COVID-19 pandemic
experienced by most contractors.
has intruded everyone’s Project payments are generally
evaluated based on the amount of
lives, not just regionally, work done. The suspension of almost
but globally. all construction activity during the
MCO meant no work being carried out
and thus no payments being made, yet
Many countries including Malaysia contractors continued to incur their
have experienced a seemingly ever- recurring costs, e.g. rental charges,
increasing number of virus infections; wages, and overheads, etc.
causing the implementation of national
lockdowns and other restrictions on EXPOSURE TO LIQUIDATED
movement and proximity. DAMAGES & TERMINATION
Since March 2020, the government To regularly and diligently carry out
of Malaysia implemented a series of and complete the construction works
measures including, Movement Control in accordance with the contract within
Order (“MCO”)1 , Conditional Movement the specified times is a fundamental
Control Order (“CMCO”)2, Enhanced contractual obligation for a contractor.
Condition Movement Control Order
(“EMCO”)3 and Recovery Movement When a contractor has failed to
Control Order (“RMCO”)4 in attempts to complete the works within the
curb the spread of the virus. prescribed time and in instances where
no extension of time has been granted,
THE IMPACTS TO THE an Employer or Client normally has the
MALAYSIAN CONSTRUCTION contractual right to impose liquidated
INDUSTRY damages and sometimes other
related charges, or to terminate the
Businesses and the economy in general contract in the worst-case scenario.
were badly affected by the virus and the
measures implemented to try to control Many contractors have successfully
it. For example, the crude oil price claimed for extensions of time for the
benchmark, West Texas Intermediate, MCO period under the contract when
dropped into negative territory, an their projects were suspended with
historical low around a month after the all site activities ceased. However, in
WHO declared COVID-19 a pandemic. many cases we have observed that
contractors have, and continue to,
Much like everything else, the struggle to secure further extensions
construction industry in Malaysia was of time for events post MCO.
severely affected by the COVID-19
pandemic. Most construction work, TYPICAL CHALLENGES FACED BY
except that classified as critical CONTRACTORS POST MCO
or essential services, were halted
throughout the MCO. Even after the Typical challenges in our experience
MCO was lifted, contractors have that contractors have faced when their
continued to encounter disruption, works were allowed to resume after
such as that arising from having the initial MCO period include having to
to incorporate stringent standard implement new health and safety SOPs,
operating procedures on health shortage of workers, restricted working
and safety measures (“SOPs”) for hours, delay in their supply chains,
construction sites. Such disruption has rework after the long suspension,
prevented them carrying out their works disruption due to limits on the number
as originally and normally envisaged. of workers by having to comply with

27
social distancing requirements at the workplace, etc. Such delay and disruption In view of the above, it therefore seems
have undoubtably led to reduction in productivity and caused further delay to project that if a contractor can prove that it
completion dates resulting in additional costs being incurred by contractors. was unable to perform its work due to
the observance of the Prevention and
Productivity loss is not always easy to establish and evaluate, and the effects on a Control of Infectious Diseases Act 1988
construction programme can often be overlooked until much later in time. between 18 March 2020 and 31 March
2021, the Employer or Client may not
There are a number of established methodologies for measuring productivity loss, be able to invoke its contractual rights
e.g. measured mile analysis, earned value analysis, programme analysis, to name even if the project has been delayed.
a few.
Notwithstanding this, it goes without
However, in order to run a meaningful analysis, sufficient and accurate saying that for a contractor to rely on the
contemporaneous records and data are a necessity. In addition, such records COVID-19 Act to avoid having imposed
are vital for establishing the causation between disrupting events and the liquidated damages levied against it or
resultant productivity losses. being terminated due to project delay,
the contractor will have to substantiate
with evidence that the delay was due
MALAYSIA GOVERNMENT INITIATIVES TO MITIGATE THE ECONOMIC, to events related to or to have close
SOCIAL AND INDUSTRIAL IMPACT OF THE COVID-19 PANDEMIC proximity to the observance of the
Prevention and Control of Infectious
On 23 October 2020, the Government of Malaysia gazetted an act which will be Diseases Act 1988. In addition, the
in effect for two years, titled “Temporary Measures for Reducing the Impact of contractor will have to demonstrate
Coronavirus Diseases 2019 (COVID-19) Act 2020” (“COVID-19 Act”). that the related delay events have
impacted their work programme and
Section 7 of the COVID-19 Act provides that, between 18 March 2020 and 31 the contract completion date, despite
December 2020 (the period was subsequently extended by the Minister for Works their best efforts to reduce or mitigate
to 30 June 2021), if any party whose contract falls under the categories listed below, the delays caused by COVID-19 related
is unable to perform its contractual obligation due to the measures prescribed, factors.
made or taken under the Prevention and Control of Infectious Diseases Act 1988,
the aggrieved party or parties to the contract cannot exercise their rights such as
imposing liquidated damages under the contract. CONCLUSION

LIST OF CATEGORIES OF CONTRACTS The Malaysian COVID-19 Act pertains

to a wide range of different types
1. Construction work contracts or construction consultancy contracts and any of contracts including contracts
other contract related to the supply of construction materials, equipment or executed only by a brief letter of
workers in connection with a construction contract. award, purchase order, etc., even when
2. Performance bond or equivalent that is granted pursuant to a construction such contractual documents contain
contract or supply contract. insufficient provisions to deal with the
3. Professional services contract. unprecedented and complex COVID-19
4. Lease or tenancy of non-residential immovable property. pandemic situation.
5. Events contracts for the provision of any venue, accommodation, amenity,
transport, entertainment, catering or other goods or services including, for Any party who is unable to perform
any business meeting, incentive travel, conference, exhibition, sales event, their contractual obligations due
concert, show, wedding, party or other social gathering or sporting event, for to the impact of their observance
the participants, attendees, guests, patrons or spectators of such gathering of the Prevention and Control of
or event. Infectious Diseases Act 1988 can
6. Contract by a tourism enterprise as defined under the Tourism Industry Act now seek relief under the COVID-19
1992 [Act 482] and a contract for the promotion of tourism in Malaysia. Act. Notwithstanding this, the onus
7. Religious pilgrimage-related contract. of proof of such claims still lies with
the contractor. Good record keeping,
However, Section 10 of the COVID-19 Act also provides that Section 7 shall not e.g. detailed daily, weekly, monthly
invalidate any contract terminated, performance bond forfeited, damages received, reports, updated working programme,
any legal proceedings, arbitration or mediation commenced, judgment or award notices, etc. will play a big role in
granted, and any execution carried out for the period from 18 March 2020 until the contractors being able to substantiate
publication of the Act, i.e. 23 October 2020. such claims. Ultimately the success
or otherwise of a claim is often in
While the Act has attempted to allow relief for contractors in circumstances where proportion to the quality and extent
the inability to perform their contractual obligations is through no fault of their own of the contemporaneous records that
but by events arising from the pandemic, it remains unclear as to the method or were kept.
amount of relief that contractors will be able to secure.

28
 DIGEST | ISSUE 21

1. On 16 March 2020, Malaysia Prime Minister announced the movement control order under the Prevention and Control of Infectious
Diseases Act 1988 and the Police Act 1967. The MCO effective date was on 18 March 2020 and ended on 3 May 2020.
2. CMCO started from 4 May 2020 and ended on 9 June 2020. A relaxation of regulations to prepare for reopen of the national economy.
3. EMCO or stricter order for 14-days duration would be implemented to specific locations where a large cluster of Covid-19 positive
cases was detected.
4. RMCO was started after CMCO ended on 9 June 2020. Subsequently another stage of CMCO 2.0 was announced to take effect on 14
October 2020 due to spike of COVID-19 positive cases in the country.

29
HONG KONG IS STILL
‘OPEN FOR BUSINESS’
FOR THE Hong Kong has been in the news a lot over the past 18

RESOLUTION OF months. From mid-2019 to early 2020, Hong Kong was

rocked by protests against a proposed amendment to the law

CONSTRUCTION
relating to extradition of suspected criminals, including to
Mainland China. The proposed amendment was withdrawn,
but the protests continued until the outbreak of the COVID-19

DISPUTES
pandemic was fully realised in early 2020. In June 2020, the
Central Government enacted legislation prohibiting acts of
secession, subversion, terrorism, and collusion with foreign
or external forces in Hong Kong. The Central Government
and the Hong Kong Government argued the legislation was
necessary, but it was criticised by some foreign governments
Ben Bury concerned about Hong Kong’s autonomy and has led to Hong
Partner, HFW Kong losing some aspects of its special trading relationship
with the United States.

30
 DIGEST | ISSUE 21

Many people in the construction In any event, most construction You might also ask yourself questions
industry watching these events from disputes in Hong Kong are resolved such as: 'Are the courts in this
overseas might have questioned by confidential arbitration, whether jurisdiction pro-arbitration?'; 'Is there
whether Hong Kong is still an the disputes are between Hong Kong an established legal structure?'; 'Can
appropriate jurisdiction for the parties, Mainland Chinese parties, or I instruct well renowned lawyers?'; 'Do
resolution of their disputes, particularly foreign parties. arbitral awards rendered by tribunals
with State Owned Contractors in this jurisdiction have a good track
from Mainland China. State Owned Contrary to popular opinion, the record of enforcement in the country of
Contractors may themselves have number of arbitrations in Hong Kong origin of my opponent?'
questioned whether Hong Kong is a increased in 2020 and a significant
safe and secure place for the resolution number of these arbitrations included If you ask yourself these questions,
of disputes. foreign parties in dispute with we suspect Hong Kong would present
Mainland Chinese entities6. In addition, itself as a real alternative to some
In this regard, it is important to during the past 18 months, there other seats which have not received
understand the recent events in have been a number of steps taken so much publicity in recent months.
their context. Whilst significant and by the Governments in Hong Kong
newsworthy for a variety of reasons, and Mainland China towards mutual
these events have had surprisingly recognition of arbitrations and arbitral
little, if any, impact on the way in which awards in the two jurisdictions. This
construction disputes are resolved includes legislation to allow parties to
in Hong Kong. That includes the have recourse to the courts in Mainland
resolution of disputes against State China for interim measures, including
Owned Enterprises from Mainland preservation orders, in support of Hong
China and, indeed, the Hong Kong Kong arbitrations7.
Government itself. As Peter Burnett,
the Managing Director of Standard These measures have made it
Chartered Bank, and Chairman of considerably harder for arbitral parties
the British Chamber of Commerce, with assets in the Mainland to avoid
recently remarked, “Hong Kong is complying with awards made against
one of the few jurisdictions across them in Hong Kong. It is important
Asia-Pacific where you can sue the to note that Hong Kong is the only
Government and win, if the merits of jurisdiction outside the Mainland that
the case are in your favour.”1 enjoys the benefit of these measures.

As any Hong Kong student of

constitutional law will tell you, Hong
When selecting a 1. Andrew Kemp, “Hong Kong Arbitration
Remains Resilient Despite Detractors”,
Kong is an inalienable part of Mainland
China, and in this regard the Central
seat of arbitration for 20 October 2020, https://www.lexology.
com/library/detail.aspx?g=c676482b-
Government is responsible for foreign dispute resolution 40dc-46e5-9e1e-74d7c617a079
2. Article 1, 13 and 14 of the Basic Law of
affairs relating to Hong Kong2 and the
defence of Hong Kong. However, Hong clauses in construction the Hong Kong Special Administrative
Kong has been granted a high degree Region of the People’s Republic of
of autonomy in all other respects3. contracts, it is China (“Basic Law”).
3. Articles 2 and 12 of the Basic Law.
Whilst Mainland China is a civil law
important that parties 4. Article 19 of the Basic Law.
5. For further information and a list of
jurisdiction, in Hong Kong the law is
based on the English common law.
make informed all Permanent and Non-Permanent
Judges of the Court of Final Appeal
decisions based on all visit: https://www.hkcfa.hk/en/about/
The courts enjoy judicial independence who/judges/introduction/index.html
and the right of final adjudication4, the relevant concerns. 6. Statistics on arbitrations submitted
meaning that there is no recourse to to the Hong Kong International
the courts in the Mainland for you or If you haven’t ever previously asked Arbitration Centre can be found here:
your opponent if you have exhausted all yourself: ‘What is the national security https://www.hkiac.org/about-us/
lines of appeal before the Hong Kong legislation in this jurisdiction?’ or ‘Does statistics
courts. Judges from other common law this jurisdiction enjoy a special trading 7. The Arrangement Concerning
jurisdictions sit on the Court of Final status with the US?’; you may want to Mutual Assistance in Court-ordered
Appeal in Hong Kong, including the consider whether it is necessary to do Interim Measures in Aid of Arbitral
current President of the UK Supreme so now, when selecting a jurisdiction Proceedings by the Courts of the
Court, Lord Reed, and three former as the seat of arbitration for your Mainland and the Hong Kong Special
Presidents5. Administrative Region, which came
construction disputes.
into force on 1 October 2019.

31
 Q&A WITH
MUKUL SOUL

WHAT IS YOUR ROLE? HOW DID YOU GET INTO THE INDUSTRY AND HOW DID YOU GET TO WHERE
YOU ARE TODAY?
As Country Initially, I didn’t have my mind set on a specific career, so I enrolled in one of the most diverse
courses: a double bachelors in Engineering & Commerce. During my time at university
Director of I became more inclined towards engineering, however maintained a strong interest in
Australia, commerce. On graduation, I ultimately accepted a graduate Planning & Project Controls role
as the associated workload, responsibility, and career direction appealed to me the most.
I oversee Due to the passion that subsequently grew in planning, genuine interest in the projects I worked
Driver Trett’s on, hard work with an outcomes-based focus, and exceptional support from well-wishing
family, mentors and peers, I’ve been able to rapidly progress my career. I was managing the
Australian planning of minor projects (<A$100m) within my first year in industry. By the latter stages of
my second year, I was appointed as Lead Planner on a major construction project (>A$500m)
Business. where I was able to get my first taste of large team management and site/international
rotations. Following the successful completion of this project, which was delivered in record-
breaking time, I got the opportunity to become Lead Planner on a A$10billion project which
involved overseeing 64 integrated programmes of work on behalf of the Owner. This diversity
allowed me to rapidly excel my expertise in the discipline and gave me a formal introduction
to forensic delay analysis. The project was a success, receiving 14 awards including Project of
the Year, and excellence in Project Management. Following this project, I went on to become
Planning Manager for a major construction contractor, however as I grew a desire to become
a Delay Expert and wanted to further diversify myself by adding value to multiple projects, for
multiple companies across industry; I joined Driver Trett as a Senior Consultant.

Within the three years that I have been with Driver Trett, I have been promoted to Associate
Director, Director, and most recently Country Director. Again, I attribute this to the items
mentioned earlier (passion, interest, hard work, focus and support). Solving clients’ problems
has brought me repeat work. This repeat work has brought recognition and respect in industry
which has resulted in reward.

32
 DIGEST | ISSUE 21

I believe in celebrating every

accomplishment and failure equally,
as they ultimately contribute to the
end destination.

WHO HAS BEEN THE GREATEST INFLUENCE ON HOW HAVE YOU FOUND TAKING ON A NEW ROLE
YOUR CAREER? DURING LOCKDOWN?

I cannot specify a single individual as there have been many Not too bad to be honest. COVID-19 and the associated
great influences in my career. I can summarise them into lockdowns were unprecedented times for all. However,
three distinct groups: the best thing about humanity is that we find ways to
turn constraints into opportunities. Through the use of
„ Family: I have a very supportive family that have always technology, I found that not only have I been able to maintain
motivated me to achieve my best, and given me that communication with those near, but I’ve actually increased
little over-confidence that is at times needed to break how much I communicate with colleagues and prospective
barriers. clients across the nation and globe.
„ Management: I have been fortunate to have some
incredible managers (leaders) who have guided my
growth, taught me the skills I have today, and directed WHAT MAKES YOU TICK?
me towards how to succeed further.
„ Industry: I actively seek predecessors in my field who have Achieving results makes me tick. Other than that, I’ve always
‘done it’. With entire respect to their accomplishments, I drawn inspiration from race car driver Mario Andretti’s quote,
set them as benchmarks and aim to better what they’ve “If everything seems under control, you’re not going fast
already proven to be achievable. enough.”

WHAT HAS BEEN THE BEST MOMENT OF YOUR TELL US A LITTLE-KNOWN FACT ABOUT YOU.
CAREER?
I’m of Indian descent, was born in Kenya, and moved to
I believe in celebrating every accomplishment and failure Australia when I was 6. I’m highly passionate about travelling
equally, as they ultimately contribute to the end destination. and experiencing all the differing cultures and experiences
My most recent accomplishment, however, of being the world has to offer – travel is the only thing you buy
considered and subsequently appointed as the new Australian that makes you richer. Otherwise I have an unexplainable
Country Director for Driver Trett, was a very special moment obsession with lions and support the best football club in the
in my career. world, Liverpool FC – YNWA.

33
 HOW IS SINGAPORE
HANDLING A NEW
WORLD ORDER?

Alasdair Snadden, Managing Director of Asia Pacific, Driver Trett

Danna Er, Partner, Eldan Law LLP

34
 DIGEST | ISSUE 21

PROTECTION THROUGH LAW enforcement on a judgment, award and

adjudication determination (although
Singapore introduced the COVID-19 there is no prohibition on commencing
Singapore is no stranger (Temporary Measures) Act (the adjudication proceedings)11, seeking
“COVID-19 Act”) which functioned as a enforcement of security and
to adversity. It has risen legal moratorium to prevent amongst commencing insolvency proceedings12.
from colonisation, warfare others, a huge increase in lawsuits and Under the second category of additional
insolvencies arising from the inability reliefs, a party is prohibited from
and expulsion from the to meet contractual obligations making a call on a performance bond
Federation of Malaysia under construction contracts, supply in the seven days before the expiry
contracts and performance bonds. of a performance bond13, the period
to become an impressive of subject inability is disregarded for
city-state, considered by PART 2 OF THE COVID-19 ACT purposes of calculating any liquidated
damages14 and where the inability to
many as the benchmark On 20 April 2020, Part 2 of the COVID-19 supply goods or services in accordance
Act which dealt with temporary reliefs with the terms of the contract is
on how a modern economy for construction contracts, supply materially caused by COVID-19, it is
should operate. contracts and performance bonds a defence to a claim for breach of
came into force. contract15.

It should therefore be no surprise to Under Part 2 of the COVID-19 Act, a PART 8 OF THE COVID-19 ACT
know that Singapore reacted decisively non-performing party is generally
against the global pandemic. After eligible for relief where it is able to By 30 September 2020, Part 8
entering a lockdown on 7 April 2020, show that: of the COVID-19 Act which deals
which ended on 1 June 2020, this has with contracts affected by delay
been followed up with progressive (i) The contract is one which is entered in the performance or breach of
measures that have allowed the level into or renewed before 25 March 20205 a construction contract, supply
of COVID-19 found in the community or renewed automatically on or after 25 contract or related contract came
to reduce to nearly zero and only 29 March 2020 into effect.
deaths being linked to COVID-19 at the (ii) The contractual obligation which it
end of 2020. is unable to perform or will be unable Part 8 of the COVID-19 Act only applies
to perform is one which is to be in three scenarios, of which one is of
Compared with other countries, this performed on or after 1 February 20206 interest to the construction sector.
is a remarkable feat. However, it and
has come at a cost. None more so (iii) The inability to perform the This deals with a situation where a
than to the construction industry contractual obligation is one which person who has rented goods used for
in Singapore. From Singapore’s is materially caused by a COVID-19 construction work, is, or will be liable,
construction sector being at a five-year event7. for rental expenses due to a delay or
peak in 2019 and contributing around breach in a separate construction or
S$17.8 billion to Singapore’s Gross The reliefs under the COVID-19 Act8 are supply (or related) contract, and that
Domestic Product (“GDP”)1, there was not automatic and parties will need to delay or breach is due to COVID-1916.
a subsequent 46.6% contraction2. This issue a notification for relief under the
has been exacerbated by global travel COVID-19 Act. The period of temporary Once an application for relief is
restrictions which affected the inflow relief for construction and supply submitted under Part 8 of the COVID-19
of foreign labour that Singapore’s contracts and performance bonds was Act, an assessor may arrive at a just
construction industry is heavily reliant initially for a period of 6 months from and equitable outcome, adjust the date
on3. Migrant workers were also the 20 April 2020 but was further extended by which a party is required to return
most badly affected by the COVID-19 to 31 March 20219. The types of reliefs the rented goods or the rental rate
pandemic, forming the largest share of under Part 2 of the COVID-19 Act can be for the duration that the party holds
infections in the country4. categorised into two broad categories: possession of the rented goods17.

In normal circumstances, such a (i) A legal moratorium on dispute BUILDING AND CONSTRUCTION
situation could destroy a sector and resolution proceedings, and AUTHORITY (“BCA”) CIRCULARS,
the businesses found within it. So, (ii) Additional reliefs from breach of PART 8A AND 8B OF THE COVID-19
the obvious question to ask is - how contract. ACT
is Singapore managing to handle this
drastic shift to its construction sector? Under the first category of reliefs, a A set of BCA circulars18 were issued for
party is prohibited from amongst others, public sector projects to expeditiously
The answer is quickly gathered from commencing court and arbitration grant a default 4-month extension of
an overview of the legal framework in proceedings (except for international time to contractors for the common
Singapore. arbitration proceedings)10, seeking period of delay from the start of the

35
circuit breaker on 7 April 2020 until By way of simple illustration, workers will spend half a day
the date when all dormitories are
announced to be cleared on 6 August for a bi-weekly and mandatory swab test, which in itself
2020. The government agencies
would also co-share on an ex-gratia
is a loss of productivity of 4% per month. Alongside this,
basis 50% of the prolongation costs many projects simply cannot get to the level of resource
for project delays due to the circuit
breaker, capped at 1.8% of the awarded
needed to maintain the original progress allowed for and
sum for a period of nine months. anticipated.
The above scheme was soon extended We have been working on projects where labour levels are at half the level
to include private sector projects originally allowed. This is because many projects relied upon daily commuters
through Part 8A and Part 8B of the from neighbouring Malaysia coming to Singapore, which remains suspended due
COVID-19 Act which came into effect to the COVID-19 levels found in Malaysia.
on 30 November 2020. Under Part
8A of the COVID-19 Act, a universal Such restrictions in other countries continue to affect delivery of necessary
extension of time of 122 days was materials. For example, suspension of manufacturing in China and Malaysia means
granted to address delays that arose projects in Singapore are unable to obtain the necessary materials on time and are
for the period between 7 April 2020 to either having to wait or source materials, often at a premium, from other places.
6 August 2020 (both dates inclusive)19.
Under Part 8B of the COVID-19 Act, Therefore, it is essential that careful attention is given to the contemporaneous
contracting parties are to co-share documents being maintained for a project, and that avenues are still being
50% of the qualifying costs20 subject to reviewed to ensure:
a monthly cap of 0.2% of the contract
sum per month, and a total 1.8% of the 1. Delays and reduced productivity can be identified and assessed ; and
contract sum where such costs are due 2. Claims for both time and cost against delay disruption are addressing the
to delays caused by COVID-19 during wider issues.
the period between 7 April 2020 and 31
March 2021 (both dates inclusive)21. How this occurs is not universal and will be specific to each case.

EFFECTS PRACTICALLY

Although the law has sought to calm CLAIMS FOR INCREASED COSTS
drastic measures being taken and/or
imposed by companies operating in the The effects of the pandemic have meant, essentially, it is now more expensive
construction sector, the reality, from to build in Singapore. Simply put, the cost per m2 or m3 has increased, and in
a practical perspective, is that many many instances, increased significantly.
issues remain uncertain and have yet
to be addressed. Both labour and material shortages are, naturally, causing a supply and demand
issue whereby the average cost will, and has, increased. Similarly, significant
CLAIMS FOR DELAY AND extended periods of time are being required to build, which causes the time related
costs to become much
DISRUPTION
higher.
Without doubt, the COVID-19 Act and
Even though some recovery of the increased costs is allowed under the new
legal assistance provided has meant
COVID-19 Act, it is, without doubt, leaving a significant hole in the construction
most businesses have protection
sector as the original revenue anticipated will not cover the actual costs being
from being imposed with liquidated
incurred. As such, the obvious question being asked and needing to be answered
damages from their employer to a
is - who should pay?
certain extent; particularly for the
lockdown periods encountered within
Needless to say, all parties are, or should be, looking to consolidate what these
Singapore. However, what must be
additional losses are and the extent to which they can be recovered.
remembered is that the number of
workers and conditions upon how work
can be completed has fundamentally WHAT NEXT FOR THE CONSTRUCTION INDUSTRY IN SINGAPORE?
changed for many, from what could
have ever been contemplated when the While the COVID-19 Act has temporarily staved off a multitude of lawsuits, with
works were tendered. the impending deadline of 31 March 2021 looming over the construction industry,
it cannot be ignored that parties must consider their positions very carefully;
particularly when so many practical issues which remain unresolved will inevitably
be commercially significant.

36
 DIGEST | ISSUE 21

It is important to pay attention to the

variation, recovery of loss and expense
and extension of time provisions in the
construction contract to determine if
these provisions are sufficiently broad
to accommodate the COVID-19 event
and any consequential effects of the
COVID-19 event. Generally, under
the major standard form contracts
in Singapore22, parties would likely
be entitled to more time but not
loss and expense for delays arising
from a COVID-19 event. However, the
nuances of the particular case must
be considered along with the specific
conditions and requirements placed
upon the parties under the Contract.
Alternative options such as, parties
considering force majeure provisions
or the possibility of raising frustration
as a defense to a COVID-19 event
cannot necessarily be ignored and may
have to be addressed as disputes look
to be resolved.

Notwithstanding this, these immediate

challenges will emphasise the need
to continue to push forward the
construction industry in a positive way.
With a strain being placed on traditional
forms of building, such as the use of
1. Statista, https://www.statista.com/statistics/625473/gdp-of-the-construction-
foreign labour, the need to re-think or
industry-in-singapore/
accelerate new ways of construction 2. Ministry of Trade And Industry https://www.singstat.gov.sg/-/media/files/news/
should become paramount. For gdp3q2020.pdf.
example, Singapore made Design for 3. See footnote 1.
Manufacturing and Assembly (DfMA) a 4. See footnote 1.
key pillar of the Singapore Construction 5. Section 4, COVID-19 Act.
Industry Transformation Map. It is a 6. Section 5A(1)(a), COVID-19 Act.
method of construction that involves 7. Section 5A(1)(b), COVID-19 Act.
a much more controlled form of 8. Section 5A(1)(c), COVID-19 Act.
construction, off site in manufacturing 9. Regulation 3(3), COVID 19 (Temporary Measures) (Extension of Prescribed Period)
type conditions, which in turn reduces (No. 2) Order 2020.
reliance on labour intensive methods 10. Section 5(3)(a) and Section 5(3)(b), COVID-19 Act.
of construction. There is no doubt that 11. Section 5(3)(n), COVID-19 Act.
if anywhere can push these progressive 12. Section 5(3)(c), (d), (e), (f), (g), (h), (i) COVID-19 Act.
measures forward, it is Singapore! 13. Section 6(2), COVID-19 Act.
14. Section 6(5), COVID-19 Act.
15. Section 6(6), COVID-19 Act.
16. Regulation 3(3)(c) COVID 19 (Temporary Measures) (Part 8 Relief) Regulations
2020.
17. Section 37, COVID-19 Act.
18. Circular on Treatment of Claims Arising from COVID-19 in Public Sector
Construction Contracts dated 25 September 2020 and Circular on Ex-Gratia Co-
Sharing of Prolongation Costs due to COVID-19 dated 29 June 2020.
19. Section 39B(1) and (2) of the COVID-19 Act.
20. Qualifying costs include rent, hire purchase agreement, costs for maintaining
construction site, costs to extend the validity period of any insurance obtained
and performance bond issued, any rent / fee to store construction materials or
equipment etc.
21. Section 39D(1), (2) and (9) of the COVID-19 Act.
22. For e.g. SIA Building Contract and PSSCOC 2020.

37
GAME OF DRONES
Ashlea Read, Regional Director for Asia Pacific, Driver Trett Hong Kong

“Drones overall will be more Eight trillion US dollars a year — that is the amount the
construction industry is currently valued at.
impactful than I think people However, as we are all aware, it is not the most efficient
recognise, in positive ways to industry and a 2020 report on worldwide construction claims
stated that the global average value of a construction delay
help society.” dispute is a staggering US$30.7 million1.

The use of commercial drones on construction sites is

Bill Gates
readily becoming common practice with usage rising by 239
percent year2 over year from day-to-day use, to use in dispute
resolution.

Drones are currently being used on construction sites to track

equipment, mapping and surveys, security surveillance, site
safety measures, structure inspections and to track project
progress to name just a few.

38
 DIGEST | ISSUE 21

Their efficiency and ever adapting capabilities allow them to Alternatively, the collection of data could be used jointly
reduce construction costs, improve workflow and accuracy between the parties to assist with extensions of time being
and maintain real-time control based on real-time data, all agreed and a dispute being avoided altogether, when
of which reduce risks and can lead to higher certainty when both parties have clear access to the same facts. These
working on construction projects. The data captured can also fundamental factual records may reduce the scope for
be integrated with BIM technology and therefore assist in the conflicting delay events and subsequently reduce dispute
development of BIM models and increase efficiency levels costs.
throughout the entire life cycle of buildings.
For the parties, the experts, and importantly the tribunal,
Although drones are being successfully used on projects being able to view accurate progress weekly or daily is a
daily, how can they be positively utilised within dispute huge advantage.
resolution?
Expert evidence and particularly that of a delay expert, can
often be criticised for being too theoretical, or for using an
approach too complicated for a ‘non-delay’ person to easily
We are all familiar with the phrase ‘records,records, records’, understand.
and yet a lot of the time, projects find themselves making the
same mistakes time and time again. Why is it that we do not WHAT DOES THE FUTURE HOLD FOR DRONES IN
always learn from our mistakes? DISPUTE RESOLUTION?
Collecting data on a daily basis, especially on large mega It is yet to be actively seen how drones can be used in
projects, is certainly a timely and labour intensive activity construction disputes. However, in my opinion, it is just a
and does not always allow contractors or employers the matter of time before their use becomes common practice.
opportunity to react quicky to changes on the ground or
for that matter be made aware of them in a timely manner. The speed and ease that a drone can accurately collect
This inefficiency creates a huge opportunity for the use of data has revolutionised the construction industry and
commercial drones. drones will only be used more and more, especially as
technology continues to advance which will only aid the
Delays are unfortunately common on construction projects dispute resolution process.
and are often mismanaged as sourcing accurate data and
records and establishing the progress of the works post Although there is not much data generated yet as to the
event can be problematic. If a potential delay event on site successful use of drones in the dispute resolution process,
is missed, or even missed for a few days, it can essentially I have no doubt that the use of drones will ‘take off’, so until
result in significant setbacks, pushing projects over budget. then I guess all we can do is watch this ‘air’ space.
Even if this happens a handful of times, it can sometimes
result in millions of dollars of additional cost which could
have easily been avoided.

How could this risk be mitigated using

a drone? A 30-minute drone flight could
potentially collect the same data that it
may take a surveyor up to a day to collect
and ultimately achieve a higher grade of
accuracy.
However, one important consideration when seeking to utilise
drones on site, is for any relevant regulatory restrictions that
may apply. In many countries, there are restrictions relating
to the use of drones, especially in sensitive areas such as the
aviation sector.

The use of daily drone flights monitoring and tracking the

progress of a project could be invaluable in the event of a
dispute. More often than not the necessary records are
incomplete, missing, or simply do not exist, leading to 1. Global Construction Disputes Report 2020 - Arcadis
conflicting conclusions between the parties, and often, 2. UAVs are changing the world, one industry at a time.
assumptions being made which can subsequently lead to MARCO MARGARITOFF JULY 9, 2018
disputes becoming lengthy and costly to all.

39
HOW TO CLAIM
COMPENSATION FOR IDLING
OWNED PLANT
DEPRECIATION In order for a delay cost claim to be compensated, the
costs should be justified, reasonable and provable. Idling
power-driven mechanical plant1 (“Plant”) is one of the

COSTS OR categories of cost that most often appears in construction

delay claims.

RENTAL VALUE? The costs of idling plant owned by a contractor (“Idling

Owned-Plant”) are generally assessed based on the costs of
ownership. As such, most claims for Idling Owned-Plant are
likely to be limited to interest, maintenance and depreciation
associated with that plant. Depreciation is often the largest
portion of such costs and is an annual accounting cost, which
is calculated based on purchase value, anticipated life-span
Jungguk Lee and salvage/re-sale value of the Plant.
Operations Manager
Driver Trett The concept of separate standby rates in a schedule of plant
rates is normally based on the premise that during periods

40
 DIGEST | ISSUE 21

when the plant is not able to work, the contractor incurs CLAIMS FOR DAMAGES
reduced costs because of the reduced wear and tear and cost
of operation. It also reflects that a large part of the ‘actual’ Where a contractor suffers damages as a consequence of an
depreciation (as opposed to any ‘fiscal’ depreciation rules) Employer’s breach of contract, and the recovery of costs is
of items of major plant and equipment directly owned by not addressed in the contract, entitlement to damages might
the contractor arise from the consumption of hours of the nevertheless exist.
‘working life’ of the plant and equipment.
Loss of profit seldom qualifies as an additional cost item.
Challenges frequently arise with respect to the quantification However, take for example, a situation where a particular item
of claims for such costs, when the Plant has already reached of Plant is kept on a particular site longer than anticipated
the end its anticipated life-span such that the cost of and this results in the need to hire an equivalent item of plant
depreciation no longer exists. In such situations, contractors on another contract to which the Idling Plant was originally
often try claiming the hire value of such Plant to eliminate planned to be moved to.
the limitations of claiming depreciation costs in the case of
older Idling Owned-Plant. For Owned Idling-Plant Costs, it could be argued that delays
due to an Employer’s breach, which has the effect of the
This article explores: Owned-Plant being required on site longer than originally
planned, may result in loss of profit or loss of opportunity
1. Claims under Contract; costs. However, without clear evidence of lost profit or
2. Claims for Damages; and opportunity, any claim for Idling Owned-Plant is likely to be
3. How to advance hire value claims for plant in event of limited to interest, maintenance and depreciation. This is
delay. because lost profit often depends on whether there is strong
demand for hire in the construction market for the particular
plant at that time.
CLAIMS UNDER CONTRACT

The compensation to which a contractor HOW TO ADVANCE HIRE VALUE CLAIMS FOR A
PLANT IN THE EVENT OF DELAY
is entitled, arising from delays for which
the Employer is responsible, may be In the case of Sunley6, it was held that the costs recoverable in
the event of a prolongation claim being successfully pursued
prescribed by the terms of the underlying were limited to the depreciation costs of the Idling Owned-
Plant. There was no clear evidence as to disturbance of the
contract. contract or loss of profit. It was held that in the absence of
evidence of loss of profit, the damage claimable was limited
For example, FIDIC contains provisions that allow a contractor to depreciation, interest and maintenance.
to be compensated for additional costs incurred due to delay
or disruption and the word “Cost” is defined2 as being “…all In the Converse7 case however, the contractor was deemed
expenditure reasonably incurred (or to be incurred) by the entitled to recover the fair and reasonable hire value of a
Contractor, whether on- or off-site, including overhead and dredger on the basis of evidence, which was considered
similar charges, but does not include profit…”. sufficient to establish that, but for the delay, the Idling Owned-
Plant would actually have been used on other work and that
Julian Bailey states3 that such entitlement does not usually such other work was available and awaiting the use of this
extend to permit a contractor to recover loss or damage Plant. Similarly, in the Cotton8 case , the plaintiff successfully
(“Damages”) that do not represent costs directly incurred, for proved that it had other work available in connection with
example loss of profit opportunity (“Lost Profit”). which the claimed Plant would have been used but-for the
delay.
The specific contractual provisions regarding Idling Owned-
Plant are illustrated in the leading case of Alfred McAlpine In the Bahen Wright9 case, the claimed hire value of the
Homes4. It was held that a contractor’s entitlement under the certain Plant was denied on the grounds that the Plaintiff
JCT standard form5 of contract to recover direct loss and/or had submitted inadequate evidence of availability of other
expense (“Direct Loss/Expense”) for delay did not entitle it use, and no material evidence of the availability of a hire
to recover a notional hire value in respect of Idling Owned- market for the Plant in question.
Plant.
ADJUSTMENT
The contractual compensation under a contract is generally
the actual cost incurred by the contractor for Idling Owned- In Laburnum10, it was held that the fair hire value of Idling
Plant, where that cost is often measured as the depreciation Owned-Plant was a proper basis for Claims for Damages but
in the value of the plant. This is because construction also that the hire value should be multiplied by a percentage
contracts such as the JCT standard form often have clauses (50 per cent) to account for the lack of wear and tear on the
excluding liability for consequential loss. Idling Owned-Plant.

41
MITIGATION

It should also be noted that a contractor has a duty to

mitigate its damages and hence find alternative uses for
Idling Plant where available. In the Phoenix Bridge11 case
it was highlighted that if a contractor can hire or use Idling
Plant during a delay period and elects not to do so, it would
then be difficult to recover damages based on a hire value.

EQUIPMENT RATE MANUALS

There are popular equipment rate manuals available for

reference such as the RICS Schedule and AGC12 Equipment
Cost Guide. Anyone using such manuals should thoroughly
read and understand the manuals when using them to assist
in calculating the components relating to Plant ownership
rate and/or a hire rate and determining Plant operating costs.
However, the application of published guides is limited to a
pricing exercise and is not always appropriate for a damages
assessment for costs of delay.

CONCLUSION

In order to succeed with a claim for Idling Owned-Plant

based on hire value, a contractor will need to be able to:

1. Prove that the Idling Owned-Plant could have been hired

out, or that it would have been used on other work but
for delay; and
2. Show that a reasonable hire rate has been demonstrated.

It is not usually appropriate to simply use commercial pricing

sources as proof of loss. It is necessary to demonstrate the
actual loss which, more often than not, will comprise actual
recorded items such as depreciation and finance related
costs.

1. Plant as used by the builder or contractor in construction

work may be divided into two classes: 1. Small and non-
mechanical plant and tools 2. Power-driven mechanical
plant, which consists of such plant as lorries, backhoe
loaders, concrete mixers, compressors, cranes, excavators,
dumpers, tractors, rollers, etc.
2. FIDIC Sub-Cl.1.1.4.3
3. Bailey, Julian. Construction Law 11.131
4. Alfred McAlpine Homes North Ltd v Property & Land
Contractors Ltd (1995) 76 BLR 59.
5. 1980 Edition, clause 26.
6. Sunley & Co Ltd v Cunard White Star Ltd [1940] 1 K.B. 740.
7. Converse et al. v. U.S
8. Cotton et al. v. U.S.
9. Bahen & Wright, Inc. v. United States, 94 C. Cls. 356, 360,
361, 365
10. Laburnum Construction Corporation (1964) 163 Ct. Cl. 339.
11. Phoenix Bridge Co. v. United States, 86 C. Cls. 603, 631
12. The associated General Contractors of America Contractors

42
DIGEST | ISSUE 21

43
Our team gains a new world
class expert...
It was with delight that we welcomed Quantum Expert David Merritt to Driver
Group in October 2020, based in our Dubai office. David is a Chartered Quantity
Surveyor and Chartered Civil Engineering Surveyor with over 35 years’
experience in the construction industry.

On David’s appointment to the Group, Mark Wheeler, Chief Executive Officer said:

When the opportunity came along to talk to David about joining our
team, I was very keen to ensure we went the extra mile to secure his
services. He is extremely professional and very experienced, not only
in delivery but in business management and strategy. David is highly
respected by his industry peers and someone whose values entirely
reflect ours. I am delighted to have David as part of the Driver Group
team.

Based in Dubai, David has been When I met with Mark Wheeler, the Phil Duggan, Head of Diales Middle
engaged by contractors, private and Chief Executive Officer, and he set East said:
public sector employers and various out his plans and vision for the Driver
professional practices. David’s major Group, I was on board straight away.
sector experience includes buildings, I knew of Driver Group and their
“David is an excellent
infrastructure, marine and energy rich heritage and pedigree in the addition to our team in
projects across Europe, Africa, Far construction claims and expert witness
East and the Middle East where he has sector, but it was Mark’s enthusiasm the Middle East. Not only
worked on many high-profile projects and commitment to the business that does he provide us with
with values in excess of $5 billion. won me over.
another top quality expert
David’s main area of technical expertise
is in evaluating contractual claims,
Driver is passionate about its people to assist clients old and
and its clients, and that resonates with
covering such subject matters as me. They do not compromise on quality, new, but he also brings a
prolongation, disruption, acceleration, which of course is very important.
cost escalation, depreciation, head wealth of knowledge and
office overheads, and loss of profit In short, Driver Group was a great fit for experience that will no
claims. me. They are a world class business in
a niche industry, with some of the very
doubt prove invaluable to
His move to the Group was influenced best practitioners around. Driver Group the development of all of
by various elements including the has always had a very strong presence
rich heritage and pedigree in the in the United Kingdom, but it is now our team.”
construction claims and expert witness firmly established and recognised as
sector, the passion shown by Mark one of the leading commercial, claims
Wheeler, CEO, and the calibre of the and expert witness businesses in the
Middle East team and the Group’s world.
global practitioners.
The Diales Expert Witness brand is
globally recognised as one of the very
On why he made the move to Driver best, so that was a big attraction. When
Group, David commented: you add into the mix an enviable list
of blue-chip clients, it was an easy
“It was an easy decision really! decision.”

44
 DIGEST | ISSUE 21

... and welcomes three new

starters to the APAC region
Mark Murphy
Director
APAC

A Quantity Surveyor with over 18 years’ experience in the construction industry, Mark
has worked for Professional Quantity Surveying (PQS) firms engaged on large scale
commercial and residential projects, and for owners, main and sub contractors,
on contract and claims matters. Mark has extensive international experience,
working on projects across Asia, the Middle East, North Africa and Europe. He is a
Certified Assessor and Counsellor for the Royal Institution of Chartered Surveyors.

We are delighted that Mark has joined our team based in Singapore.

Adrian Kong
Director and Delay Expert
APAC

An Experienced Delay Expert with over 15 years’ industry experience, Adrian also
joins our Singapore office as a Director and brings with him extensive knowledge
and experience from projects across Asia Pacific, North America and Europe.

Adrian has testified as a Delay Expert in Court and Arbitration proceedings and
has particular expertise in offshore construction, oil and gas, refineries and
petrochemical plants.

We are delighted to have him as part of the team.

David Satchell
Technical Expert
APAC

David is a Structural Engineer with over 25 years’ industry experience, from

projects spanning Australia, Hong Kong, Macau, Vietnam and the UK.

David has extensive experience in the design and construction supervision of

a variety of structures, including: large and complex steelwork structures and
high-rise reinforced concrete buildings, and he has been cross-examined twice.

David joins our team in Hong Kong.

45
 Article byte

NOT BITING THE HAND THAT DOESN’T

FEED YOU
Stuart Baird, Regional Operational Director
Driver Trett, UAE

In this article published on LinkedIn, Stuart Baird reflects

on Driver Trett’s experience in managing disputes
across the Middle East, where we work with a number
of contracting entities who, as part of a wider business
strategy, do not fully protect and/or pursue their
entitlement under the contract as they believe it may be
considered as acting badly towards an employer or, in the
context of the title, biting the hand that feeds them.

Read the article to find out some techniques that can be

used by a contractor when submitting a claim to maintain
a positive working relationship with an employer and at the
same time, fully protect the entitlement to receive additional
time and/or payment under a contract.

Scan the QR code to go to LinkedIn and

read the article in full.
https://www.linkedin.com/pulse/biting-hand-doesnt-feed-
you-stuart-william-baird/

46
 DIGEST | ISSUE 21

CONTACT US

With 31 offices across 17 countries, spreading over 5 continents,

we understand the needs of our clients - their culture, and
the culture of their location - enabling us to understand their
problem, and set about the solution.
AFRICA ASIA PACIFIC EUROPE MIDDLE EAST
SOUTH AFRICA AUSTRALIA FRANCE Haslingden KSA
+27 11 234 8410 Brisbane +33 1 73 79 58 68 +44 1706 223 999 +966 11 834 3640
+61 (0)7 3184 9171
AMERICAS GERMANY Liverpool KUWAIT
Melbourne +49 89 208 039 535 +44 151 665 0665 +965 2267 5050
CANADA
Calgary +61 3 9935 2900
SPAIN London OMAN
+1 587 952 6228 +44 20 7377 0005
Perth +49 89 208 039 535 +968 2 461 3361
Toronto +61 8 6316 4572
THE NETHERLANDS Reading QATAR
+1 416 639 2177 +44 1189 311 684
Sydney +31 113 246 400 +974 4 435 8663
Vancouver +61 (2) 9248 0100
UNITED KINGDOM Teesside UNITED ARAB
+1 604 692 1151 +44 1740 665 466
HONG KONG Bristol EMIRATES
UNITED STATES +852 3460 7900 +44 1454 275 010 Abu Dhabi
+1 (917) 415 9484 +971 2 4410 112
MALAYSIA Coventry
+603 2273 8098 +44 2476 697 977 Dubai
+971 4 453 9031
SINGAPORE Glasgow
+65 6226 4317 +44 141 442 0300

For more information, visit: www.drivertrett.com, or email: [email protected]

47
 WORLDWIDE EXPERTISE, DELIVERED LOCALLY

www.drivertrett.com

48