An employer may be entitled to terminate a contract if the contractor has failed to proceed with the works “regularly and diligently”. However, what does that phrase mean?
There was an attempt to define the phrase “regularly and diligently” in West Faulkner Associates v The London Borough of Newham. The said case defined the obligation “to proceed regularly and diligently with the works” to mean that the contractor must proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work.
The court further held that the failure of the contractor to proceed with the works either regularly or diligently would entitle the employer to terminate.
This test has been applied in Malaysia, firstly by his Lordship Lee Swee Seng, JC (as his Lordship then was) sitting in the Ipoh High Court in the case of Kerajaan Malaysia v Ven-Coal Resources Sdn Bhd. This principle was re-affirmed by his Lordship Lee Swee Seng, J himself sitting in the Kuala Lumpur Construction Court (see for example Hartajaya-Benteng Timur-Amr Jeli JV Sdn Bhd v Kerajaan Malaysia and another appeal, Poratha Corp Sdn Bhd v Technofit Sdn Bhd, and Daya CMT Sdn Bhd v Yuk Tung Construction Sdn Bhd.)
His Lordship Vazeer Alam, J sitting in the Construction Court in Shah Alam had equally adopted the dicta of West Faulkner Associates in Sunshine Fleet Sdn Bhd v Jabatan Kerja Raya Malaysia & Anor (GM Healthcare Sdn Bhd & Anor, third parties).
The principles that can be gleaned from all these cases, in summary, are:
a. The obligation to proceed with the works “regularly and diligently” refers to a singular obligation.
b. It is the duty of the employer to show that the contractor has failed to proceed “regularly and diligently”, and not for the contractor to justify itself.
c. The way to determine whether a contractor has been proceeding regularly and diligently is by reference to the SKALA or CPM method to determine whether there has been delay to the extent that the works cannot be completed on time.
d. Where extension of time is not granted despite there being legitimate grounds for the same, then it would be unfair for the employer to rely on the original work programme to show that the contractor has failed to proceed with the works “regularly and diligently”.
e. Whether the delay is sufficiently substantial to justify termination would be a matter of fact.
Kheng Hoe Advocates advises clients on arbitration, adjudication (CIPAA), litigation and mediation of construction disputes. We can be reached at email@example.com.