The cheapest may not win

If you were the lowest bidder in a tender, would you win the contract? How about if you were the only bidder?

In the old case of Spencer v Harding, there was a tender for sale of stock in trade in one lot at a discount. However, the stock in trade was not sold to the Plaintiff who offered the highest price, but to another party instead. The Plaintiff being dissatisfied sued for breach of contract.

In discussing the matter, the judges considered the practice of tenders in building contracts. It was submitted by counsel for the Defendant that in a tender for building, the employer is never bound to accept the lowest tender. In fact, the employer does not even have to accept any bid if there is only one bidder on record. This is because the tender exercise is only an invitation for offers.

The rationale makes sense. Surely in addition to price, a consultant would have to consider whether the contractor who bid for the project has the character and capacity to delivery the work. One may even suggest that even if a contractor has the character and capacity to deliver, nevertheless an employer ought not to accept a tender that is overly low, because clearly there had been some mismatch of pricing. Ultimately, this would translate into issues as the construction progresses. Unless a tender expressly states that it would be given to the lowest bidder (which is an unusual practice), the employer’s consultants should still vet the bidders to identify a suitable contractor.

Employers and consultants need to bear in mind that the greatest interest that they seek to protect is not the Employer’s interest to save money, but the interest of the project itself in being completed properly, and on time.

Kheng Hoe Advocates advises clients in arbitration, litigation, adjudication (CIPAA) and mediation of construction disputes. We can be reached at khenghoe@khenghoe.com. 

Good Writing Habits

We are one week away from Chinese New Year. I thought this would be a good time to stay away from heavier technical topics and present a lighter article instead on good writing habits.

A lawyer cannot escape from having to read and write a substantial quantity of documents every single day. Unfortunately, practice does not make perfect where writing is concerned. Instead, practice makes permanent all the bad habits that one has when writing. To overcome our bad writing habits, we need to be mindful of good habits that will help us write better. Here is a list of some good habits that may be helpful. These habits are not original. I have adopted them from various books and articles, and hopefully you find them helpful.

  • Start with the end. By that, I don’t mean to start with the end “in mind”. I mean to literally start with the end. State the conclusion right at the beginning. In this way, we can help readers to keep the conclusion at the top of their minds as they read our writing.
  • Plan the flow. It is simply too easy in the age of computers to start typing and hope that our flow of thought would somehow turn out to be brilliant. What we learned in primary school when we started writing essays is still relevant. We need to plan our points beforehand.
  • Shut out the world. Shut the door, silent the phone, switch off the Internet. Calls can be returned later. Colleagues can be spoken to later. Happy hour plans can wait.
  • Stay focused. Not only must we stay focused on our task, we must also stay focused on the specific point we are elaborating. If any new idea comes up, simply jot it down on a piece of paper and go back to writing the particular point you were working on.
  • Read the research beforehand. Reading the research will help you see other points which have been argued before, and how they were handled. You may have additional thoughts leading to further research before the task of writing starts.
  • Complete the section you are working on and plan your next section before taking a break. Once you start a section, push through it. And when it is completed, plan the next section before taking a break. This is so that you don’t start the next session with a blank mind.
  • Emulate good writing of colleagues and opponents. I always learn from my opponents. When I see a good cross-examination technique, I apply it immediately in my next trial. When I see a good piece of writing, I emulate the style immediately in my next piece of work. As a result, I always evolve in my approach and style.

That’s it for now. Law Alert will take a break next week for Chinese New Year. Here’s wishing everyone a happy and prosperous year ahead.

Can a QS be held liable to a contractor for errors in BQ?

Under the PAM Form, any errors or omissions in the Contract Bills shall not vitiate the contract, but can be corrected by the Architect or Consultant. When such errors are corrected, they may affect the price of the contract, and dealt with as a variation (either addition or omission).

However, if a contract does not provide for correction of the Bills, an error in the BQ may lead to disputes as to whether the particular item is already included as part of the contract price. In Patman and Fotheringham v Pilditch, the test employed by the Courts seems to be whether the items were “obviously required”. If yes, then the court takes the view that such items should have already been costed in despite the item not being specifically set out as a line item in the BQ. In such an instance, the contractor then bears the cost of such item.

Older cases suggest that a contractor who ends up holding the shorter end of the stick due to errors in the BQ cannot claim against the QS for such errors, because the QS was engaged by either the employer or the architect and therefore would not be liable to the contractor per se (for instance, see Priestly v Stone).

However, that may not necessarily be good law today, as surely the QS as a professional would owe a duty of care to the contractor who would have relied on the BQ prepared by the QS in preparing its tender bid. That does not mean that the BQ prepared must be perfect, but it must at the very least mean that there must not be errors of the type and magnitude that would not be common amongst QS-s exercising reasonable care and skill.

Kheng Hoe Advocates represents contractors in arbitration, litigation, adjudication (CIPAA) and mediation of construction disputes. We can be reached at khenghoe@khenghoe.com.

A wrap for 2018- our key performance indicator

Today is 31 December 2018, and as I pen this post, it is already past work hours. So 2018 work is officially a wrap.

There are certain KPIs that we keep track of in the firm, to ensure that we are on track in achieving our goals, as well as servicing our clients. One of these KPIs that I track is our win/settle vs loss ratio. Allow me to explain this ratio before disclosing what we achieved for the year.

  • A lawyer cannot win all cases, regardless whether he/she is a good lawyer or otherwise. This is because we are oftentimes tied down by the facts of the case, the documents available to us, as well as how our client has conducted themselves previously before consulting us.
  • Of course, we do our best with any case that we are instructed on, and where the facts of those cases are not favourable, then we try to achieve a settlement that will be a win for our client.
  • Even in cases where the facts favour us, our client may prefer to settle earlier rather than go through the entire process which is both costly and time-consuming.
  • For that reason, I categorise a win and a settlement together in one category, whilst losses are categorised separately.
  • Even a loss may not necessarily be an actual loss. One very dramatic case we had this year was where our client faced a claim in the region of RM10m, and eventually we lost approximately RM600k. However, to ensure that we remain honest with ourselves, I still count it as a loss (although as you can imagine, we were quite happy with that particular defeat).

Clearly then, this statistic on its own does not mean very much and cannot be used to judge whether one is a good lawyer or otherwise. In other words, you CANNOT use this statistic to compare between lawyers. A lawyer fighting political and public interest causes would expect to lose most of the time and the occasional win would be a big thing. On the other hand, a lawyer handling routine work for institutional clients would expect to win most of the time, and the occasional loss would be a big thing.

Having said that, I track this KPI for the following reasons:

  • I am comparing myself with my own past results. If previously I achieved X% win/settle vs loss and this year my results have dropped, I would want to know why.
  • I am also ensuring that I keep challenging myself. If my win/settle rate is too high, like close to 100%, then I must ask myself whether I am purposely refusing to take on the more challenging and difficult cases.

Having explained the above, and emphasising yet again that this does NOT indicate the firm’s abilities as lawyers (or otherwise), the win/settle vs loss ratio for the firm for 2018 is 78%. That is slightly less than the 80% that I aim for annually. Having analysed the results, I find that this percentage was affected by reason of the number of cases where I represent respondents in CIPAA claims – mainly employers and main contractors. CIPAA is of course the statutory adjudication process whereby the philosophy is to “pay first, argue later”. Therefore, most of the contentious issues like delay damages, defects claims etc are deferred to subsequent litigation or arbitration, and it is an uphill task to defend against a certified claim (or even a claim which has been valued but not yet certified). Even then, we have managed to successfully resist a good number of claims, or at least reduced the claim by a substantial sum.

So all in all, 78% is not bad to my mind. Of course, with the dawn of 2019, it is a clean slate and we have to work hard all over again. A wise man once said, “So I saw that there is nothing better for a person than to enjoy their work, because that is their lot. For who can bring them to see what will happen after them?

Here’s wishing every client and friend, associate and opponent a Happy New Year 2019. May you find much joy in your lot in life for the upcoming year.

Can a winding-up petition be used to claim for an adjudicated sum without an enforcement order?

Adjudication under CIPAA encompasses the concept of “pay now, argue later”. Consequently, the entire process if oftentimes seen to be favorable to the unpaid party.

For example, a contractor may claim for unpaid value of works done, and the employer may have a legitimate LAD deduction for delay. However, due to the stringency of Selva Kumar, and because an accusation of delay oftentimes needs to be considered in greater detail, an adjudicator may not be inclined to allow any LAD deductions. Therefore, the contractor would be successful in its CIPAA appeal despite having delayed the works and despite there being legitimate LAD due to be deducted.

Can the successful contractor petition for a winding-up of the employer on the basis of its adjudication “win”?

In Shaw v MFP Foundations and Piling, the successful party in adjudication sought to enforce payment by use of a statutory demand. The judge set aside the statutory demand for payment, saying that “(where) a statutory demand is founded on an adjudicator’s decision, if the debtor can show that he has a substantial cross-claim, the insolvency regime does not contemplate that he should be shut out from raising those matters in opposition to bankruptcy proceedings simply because he could have, or even unsuccessfully did, also raise those matters before the adjudicator“.

However, CIPAA also provides a mechanism for the enforcement of the adjudication decision by way of a High Court order. Once an enforcement order is granted, it would appear that the adjudication decision then carries the full force of a High Court order, and a non-paying party would be hard-pressed to resist any intended winding-up petition notwithstanding the CIPAA regime to “pay first, argue later”.

The non-paying party would then have to seek for a stay at the High Court of the enforcement, perhaps on grounds of mistake as envisaged by the Federal Court in View Esteem.

Kheng Hoe Advocates are construction dispute lawyers in Malaysia. A lot of our work revolves around CIPAA claims and defences. We can be contacted at khenghoe@khenghoe.com.