Posted: 08 November 2007 at 10:14pm | IP Logged

The Star Business - Wednesday November 7, 2007

Construction assets draw foreign interest - Infrastructure and development projects a boon to sector

PETALING JAYA: Local construction assets seem to be attracting the interest of foreign investors of late. 

Last month, Putrajaya Perdana Bhd saw the entry of a new controlling shareholder, Swan Symphony Sdn Bhd, which bought over Eastern & Oriental Bhd¡¦s stake in the former.  Swan Symphony is jointly owned by Abu Dhabi-Kuwait-Malaysia Investment Corp (ADKM) and Autron Investment.  With the support of the new shareholders, Putrajaya Perdana is anticipated to expand its presence to the Middle East. 

Meanwhile, PJBumi Bhd told Bursa Malaysia on Monday that its substantial shareholder, PJS Industries Sdn Bhd, planned to sell a 10.2% stake to Al-Saudia for RM3.1mil. This was on top of the 25% that PJS disposed of to Metro Utilities Sdn Bhd in September.   PJBumi, which is trying to return to profitability, is involved in the design, trading, installation and maintenance of fibre-reinforced plastic, reinforced concrete sewage treatment plants and underground petrol cum storage tanks. 

It also manages wastewater treatment, solid waste and garbage collection. 

The Government¡¦s efforts to improve the quality of water in the country by rolling out various projects look set to benefit PJBumi.  Another company that is going to see a new shareholder is low-profile water player Loh & Loh Corp Bhd.  The shares, which are usually thinly traded, seemed to have sprung to life, having appreciated more than 30% over the one week period.   The counter was last traded at RM4.12 before being suspended in afternoon trade yesterday. 

Loh & Loh told the exchange that its substantial shareholder, Vital Achievement Sdn Bhd, intended to dispose of its shares.  An analyst at AmResearch said Loh & Loh was well known as a dam builder in the water sector, having completed several jobs as a sub-contractor for Gamuda Bhd.  The company also has experience in bulk earthworks and rail track construction, having built bridges for the Ipoh-Rawang double-track project. 

Aseambankers in a report said the domestic construction scene could be seeing another boom, given that at least RM165bil worth of infrastructure and development projects identified by the Government and the private sector were likely to kick off by the turn of the decade.  Government spending should pick up since it had to date only spent 25.4% of the RM200bil in development allocation under the Ninth Malaysia Plan, it said. 

¡§We foresee high impact and chunkier projects in the rail, water, and oil and gas sectors, and the government¡¦s regional development efforts, to be the key drivers,¡¨ the brokerage added.

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The way  I see it this is a good tonic for the local construction industry. Of course, this has something to do with IDR, ECER, NCER just being launched,  It is also related to the relatively competitive project management costs that Malaysia has to offer. With various crisis happening almost everywhere in the world, Malaysia is drawing construction FDI interests and possibly JV, smart partnership, strategic alliance and  even merging possibilities would be happening. Despite my worries about uncontrolled construction materials cost; come to think of it; the FDI may help the local construction firms in terms of long term financing - thus may help in the long run to ensure the construction industry sustains.

There are somehow other concerns:

a. Shareholding in terms of JV or smart partnerships? Will our construction firms be too strict and not embarking on a 'win-win' situation?

b. Is the local construction firms ready with

i) all the necessary expertise,

ii) possible mixed work cultures influence,

iii) more than enough 'quality' services to provide - in terms of system/process/workmanship, the necessary infrastructures/machinery/ICT capabilities, corporate governance good practices etc.?

c) Will (more and more) our financial institutions be willing to cooperate - help out the local construction industry or just hope that the foreign construction firms come out with majority of financial backups and in the end, we promise them a big amount of concessions, contra with finished properties, or share the future profit reaped from the finished projects? etc? in order to cover the financial backups that are rendered by the foreign construction firms? (via foreign financial institutions e.g. soft loan or long terms bonds or  any other financial instruments)

Thus, while we are happy almost seeing big money coming in, I think the local construction firms should also think of what I've said herein. Based on history (and my experience working with the local JV partners) many mega projects management appear to love doing things 'last minute'  - I hope this is not the example we're going to show them.

Let's welcome construction FDI with wide hands..WELCOME..but please...let's local construction firms be ready to show a very professional ethics in terms of our personal traits, business, technical, system etc.

Posted: 30 October 2007 at 12:40am | IP Logged

My friend ahvincent.....I'm IMPRESSED!!

ahvincent wrote: Hehehe....whatever assignment that you are doing Corpbaby....your lecturer couldn't have picked a broader and more complex topic.

I think corpbabies should bring his (her?) lecturer here to this forum and ask the question himself...hehhehe..just joking...

ahvincent wrote: The question of trying to pass the buck, warranties & who can sue who and building in "escape clauses" in the contract is very complex and even the highly paid experts get it wrong.

I really reading love this para and the rest of of it as well!

ahvincent wrote: I will give you a real life example, originally the owner ask the engineer to design a shopping center. After the design was completed and construction started the owner ask the Engineer to change the design. He had signed up a new tennant willing to pay more rent. Instead of a Supermarket on the 1st floor he want to build a complex of five cinemas on the 1st floor. The engineer complied and changed the floor plan and design. Within 12 months of the complex opening the operator (tennant) of the Cinema complex wanted to terminate the lease and sued the Owner for millions of dollars. The tennant's reason was the building was not fit for it's intended purpose because it had received too many complains about the pillars in the cinemas' screening area blocking some of the patrons' view and the floor plan was not sloping at the correct angle. Patrons on the back row had difficulty look over the heads of the patrons in the front row. Also the acoustics wasn't exactly right. As a result the cinemas' patronage dropped. The Owner pointed to his contract with the Engineer which stated that he the owner was not responsible for the design. The tennant's lawyers then joined the Engineer as a co-defendant. The Engineer's insurance denied the claim on the grounds that the Engineer had without written permission from his insurers accepted more liability than would have otherwise attached by agreeing that he the engineer will be liable for all design faults and held the Owner harmless. In this case the Owner was held to be partly at fault because he changed the brief half way through construction. The Engineer cannot just simply move the pillars around and change the floor plan without placing unacceptable stress on the basement floors. As a result he came out with a sub standard design not entirely suitable for a cinema complex. But because the Engineer had contractual released the owner he had no case against the owner for his part of contributory negligence and he had no insurance to pay for his own negligence and error. And this is the most important part of the whole case. The owner had a bad building and he cannot sue the engineer because the engineer had no insurance and had already gone broke because he can't even pay the tennant. In the end because of one "smart" get out of jail free clause in the Owners' contract with the engineer, the engineer lost, the owner lost and the insurance company won.

Poor chap!  

ahvincent wrote: So this is how broad this topic is. It touches on a whole range of disciplines Engineering, many areas of the Law, insurance, ethics, etc....it is like doing the tango in a mine field.

I'm one of them...trying to tango in a mine field..and without 'bullet proof vest' some more...hahaha...I hope I won't get shot! (not enough stock huh? oh yeah..the weapon scanner malfunctioned 2 years ago..only yesterday I found out after two of my chaps got shot!)

Posted: 29 October 2007 at 2:52pm | IP Logged

Let me try : (I’m trying only maaah - so corpbabes – take the following as my personal views…as I may be right and I may be wrong..all is based on experience - and you must excuse me..some of your questions may not be answered - not that I don't know  - and I'm sorry)

1. “during the warranty period, in the event of personal injury and death, the owner won’t be fully liable, but he can bring in, say the developer etc as contributory negligent?  but after the warranty period, it would be difficult to make the owner liable for any defects that comes up?”

2. “Further, on the same thread, can we then exclude design liability? It may take years to discover the defects, but say, from the owner's point of view, can we exclude liability still by contract and also contractually exclude tort after the warranty period is over?”

No. 1 - I’m sure you remember the Highland Towers Case? It was WAY after the warranty period itself BUT the designer was still being summoned by court.

http://www.lawyerment.com.my/library/doc/laws/casecode/jdgm/11082000-01-1.shtml

Within this civil suit, you can clearly see the consultant (design) consortium  (defendants) was still being called to defend itself (not necessarily being charged if proven that the onus of liability is not due to his design)

So, when a case happen, it will relate to one process to another and will start from the Design/Planning stage itself.

Of course, in the process, if the designer will argue to prove that it may or may have nothing to do with his/her design - with sufficient evidence substantiating his/her testimony – if the court is OK with it,  then definitely the developer would be the NEXT target (contract may be referred to) 

In this stage, probably the answer/onus may lie on the developer or the contractor. Certain things like ‘approving and/or making unlawful (design) deviation’ not according to the ‘approved design brief/specifications/drawings/plans’ or ‘using low-quality materials’ etc. etc.  may come into the picture.

It depends really on how the court handle the case judging by evidence submitted. You'll be surprised that the outcome may be a LOT different that what I've said here.

But, I personally think, despite that the owner said that he can bring the developer according to the contractual obligation; yet; by right, being the owner, he should know what’s happening right from the start to the end of the project .

Back to the ‘ugly reality’ the owner would usually ‘wash his hands’ and PUT other parties responsible for the ‘failure’ just because he has all the money but he doesn’t have the experience!

But he should remember that he’s the one who was responsible for appointing the developers (if not himself IS the developer) plus agreeing to the appointment of design consultants (in turnkey/design and build environment). So it would be more effective if the owner IS a technically competent person by qualifications/and/or experience.

When it comes to court’s judgement, it’s very complex to determine ‘who is wrong for what’ as the process of the law is a bit different…too many factors to be considered. Sometimes, the law doesn’t state clearly or citing the examples but there are supporting elements that can be deemed as legal – for example, standards and codes of practice regarding design.

In another situation, the right people you should also be asking would the insurance company on construction insurance – I do not know much about this one but I do know one thing, construction insurance can sometime NOT cover a ‘prototype technology/design’ without any technical documentation, codes of practice/standard, method statements, research etc. to prove that the design is SAFE even after the warranty period. So try the insurance company…

Apart from Insurance, you should also try to pose the question to these ‘guys’ who I considered ‘my e-associates’ as well :

http://pmimy.org/modules/newbb/viewtopic.php?topic_id=90&forum=2

Nevertheless, You should take this into account as well -.every warranty period has an ‘expiry date’.  In some countries, 20 years is sometimes considered ‘dilapidated’, ‘unsafe’ and possibly ‘condemned’. Notice is given and legal action can be taken…

No. 2 – It really depends on the case we’re talking about, how severe the case would be. Usually design liability cannot be excluded even after the warranty period typically ‘in the event of ‘total design or major design failure’ (I’m unsure of personal injury and death – but in Highland Towers – the main focus was the design failure as it involved ‘total structure collapse’ as the 'cause' – then, followed by 'personal injury and death' as the effect - even the effect was associated to legal action taken by immediate family of the deceased..if not, probably there would be no case)

Of course, I’m not referring in view to discover defects related to design after many years of project completion, it wouldn’t be practical (we can’t dismantle or hack what is already being installed and used)  

What I’m referring to is actually the documentation/data/forms/supervision during all stages of  construction including design data/calculation, design amendment procedures, inspection and testing ,construction methodology/method statements etc. as this should be ‘archived’ safely during the post-construction stage (final accounts) – usually kept by all parties – the client, the developer cum the consultants + the contractor. (again, some data could already be destroyed due to record retention policy...hmmm difficult isn't it?)

Thus, from these documentation/data, we can ‘go back in time’, detect any possible deficiency/how the corrective/preventive actions being taken (right or wrong way)

On the question of whether there is such prescription of statutory,  I think my answer has been given in ‘BOLD’ abovementioned. That’s why we have contracts, codes of practice, design coordination, method statements, inspection and test plans etc.  – these documentation serve as the professional justifications to the law itself and to assist implementation of the law. Again I would reiterate - in any case..the law prevails.

(Which law? you can easily buy them - 3 titles recommended - Contract Law, Uniformity Building ByLaw and the Engineer's Act)

And YES, (again this is my personal view) it SHOULD be covering ALL STAGES of construction as design is not only during pre-construction – despite being approved – they are still subject to amendment and revision – why? Because of the application based on the actual site condition – there will still be deviations even during and after the construction. (But I’m not implying that the law mention all these very clearly) – Contracts are originally about ‘proclamation of I trust you and vice versa’ and they should be ‘referred’ to the law.

Here’s another unique case you should be looking into :

http://www.contractjournal.com/Articles/2007/01/31/53440/questions-of-law-and-design-liability.html

But alas, there are too many arguments on the subject that you’ve asked. I’m not surprised if some quarters may argue my opinion..so regard what I’ve said here as ‘personal views’ and not representing anyone or any party.

Posted: 27 October 2007 at 2:49pm | IP Logged

ahvincent wrote: Your question is many questions in one. Without being specific it is very difficult to answer. Firstly, if you identify a defect after the defects liability period then you don't stand much of a chance of a successful claim. If I bought an apartment from you (the owner) and I identify a defect within the warranty period, of course I will sue you. The contract of sale is between me and you. It has nothing to do with the builder who may have designed and constructed the apartments. I, the buyer do not have a contract with the builder, the owner does. The builder does not owe me a duty. I did not hire him and neither did I pay him, so how can I hold him responsible. I can only sue the owner who sold me the faulty apartment. However, the owner may join the builder as a co-defendent on the basis that as a result of his (the builder's) negligence he is now being sued and the builder should be held responsible. I guess one of your questions is "the owner has stated in the contract that he is not responsible for design and construction faults" thus trying to avoid any liability. I am afraid that attempt will fail. I, as the buyer can expect that the apartment is "fit for it's intended purpose." So, regardless of what you the owner try to do you will still be liable. Remember what I said before "you cannot contract out of the law." The law of tort will be on my side (the buyer). I have every right to enjoy my purchase. If you sold me an apartment and the roof falls down in 6 months and the walls start to crumble and the floor starts to sink, I will ask the court "what did you sell me?" I tell the court that you the owner sold me a faulty product and I want my money back !!!. You did not sell me an apartment that is fit for it's intended purpose i.e. as a place of residence. I will strongly suggest that a good lawyer for the owner will not try to get out of it by simply denying liability because the case is so obvious. He, the owner can quickly run away, change his name and go into hiding or he will quickly join the designer and constructor as co-defendants and seek proportional liability. Anyway, your questions sounds very unethical by trying to pass the buck. Forget it !!! No lawyer worth his salt will let you get away with putting such irresponsible "get-out of jail free" clauses. The text books tell us that the law is fair. Therefore you can try to be smart and put in lots of sneaky clauses but since the law is potentially fair it will rule any unreasonable clauses to be null & void and find you liable. There are plenty of fish in the sea. I always advise my clients if the other party wants everything in their favour - walk away from the deal. You don't want to do business with such unreasonable people. Unless of course he makes you an offer too good to refuse. But again - nobody gives away something for nothing.

   Good one ahvincent!!

My turn :

corpbabes wrote: Im just wondering what happens if the defects occur after the warranty period, who will be liable and is there any legislations regarding this? As for the owner of the building for example, is his liability reduced if anything happens after the warranty period is over?

That's why looking into SPA (sales and purchase agreement) is very important before signing them - (that goes to everyone..not only housebuyers but property buyers as well) we don't want to end up in sticky situations like this one. I BET no party (developers, builders, bankers, lawyers) would tell you of your RIGHTS (esp. implied ones) since their interest in ONLY to sell and attempted to their best 'intellectual' knowledge NOT to be accountable. 

These parties make you look merely into the 'expressed' terms but somehow they failed or ignore/deny your rights to know the 'implied' ones.

One example - You may or may not know that even during DEFECT LIABILITY PERIOD (DFL), the purchaser/buyer has implied RIGHTS to know what's going on - otherwise, how would we know of the final quality? How 'd heck' CMGD or CF (they keep changing the terms - now they call it "Certificate of Fitness for Occupation (CFO) be issued on the first place and suddenly we buyers found out that we have been 'had' when 'leaks' are discovered in our so-called newly bought houses or buildings?

Here's another 'masterpiece' :

http://www.nst.com.my/Weekly/PropertyTimes/News/Viewpoint/20030305105233/Article/

The waiting game

Many house buyers complain of having to take over of vacant possession (VP) of their new houses when they are not ready for occupation.

One of the reasons for this is that prior to amendment, the Housing Developers Act allowed developers to hand over VP upon application for the Certificates of Fitness for Occupation (CF). Many developers exploited this tenet of the Act by rushing to hand over the properties the minute the architect declared “practical completion”.

Problems for buyers

The hand over of VP without a confirmed date for occupancy has created numerous problems for house buyers. First, the new owners would have to make all outstanding payments as stipulated in the Third Schedule of the Sale and Purchase Agreement (SPA) upon taking VP. Next, the 18-month defect liability period would start to run 14 days from the date of notification of the hand over of VP, and third, the buyers would have to take over the responsibility for the security of their properties.

This state of affairs is grossly unfair to buyers. Imagine not being able to stay in your property after you’ve made all the outstanding payments, including maintenance charges. And if you’re not able to stay in your house, how will you identify and rectify faults that may be caused by the developer? Supposing the CF is issued six months after you receive your keys; this means six months of the defect liability period would have been wasted. Another point is that if you cannot stay in your home, how can you prevent vandalism and theft of your fittings, short of hiring a security guard, which many cannot afford?

Besides these, the house Buyers Association has come across other complaints from buyers who have been shown CFs from other projects that have been presented as theirs or CFs with falsified endorsements! Some buyers have taken VP, only to find that the developers have financial difficulty in fulfilling their obligations to apply for the CF!

Developers’ responsibility

The application for CF is governed by the Building By-laws Act. As the name implies, the CF is an official document issued by the local authority to acknowledge that a building is safe for occupation.

It is the responsibility of the developer through its appointed qualified professionals, chiefly the architect, to make the application according to the Building By-laws and other conditions imposed by the appropriate authorities.

When complaints surface, both developers and the appropriate authorities point fingers at each other. As explained by Ministry of Housing and Local Government legal adviser Shamsulbahri bin Ibrahim, and advocate and solicitor Toong Gek Fong, in an article on the Malaysian Law Journal website (http://www.mlj.com.my/free/index.asp): “The crux of the problems relating to delay in issuance of CFO could be because:

1. The developer’s application for CFO is incomplete or not in compliance with all the requirements necessary for the issuance of CFO, resulting in the application being rejected by the appropriate authority. For instance, some developers fail to submit the Form E together with copies of all letters of clearance or approval (surat sokongan) from the relevant technical agencies, which are required by the appropriate authority for issuance of CFO, or

2. The delay or inefficiency of the appropriate authority issuing the CFO.”
To exonerate the local authorities from blame, the Ministry of Housing has issued directives to the effect that:
• All applications for CF submitted by developer are to be checked and confirmed to be in compliance with all requirements for issuance of CF before such applications shall be accepted by the appropriate authority;
• Upon acceptance of the Form E, the appropriate authority is to issue its written confirmation that the Form E submitted by the developer has been duly checked and accepted by the appropriate authority;
• Once such applications have been duly checked and accepted by the appropriate authority, the CF shall be issued or deemed to be issued within 14 days from the date such applications are accepted by the appropriate authority; and
• The appropriate authority will submit a written report/explanation to the Housing Ministry in respect of such cases where the CF is not issued within 14 days from the date the relevant application is accepted by the appropriate authority and in any other cases of undue delay in the issuance of the CF by the appropriate authority.

By-law 25 of the Uniform Building By-Laws 1984 was amended to provide for the issuance of the CF by the appropriate authority within 14 days from the date of acceptance of Form E, failing which the CF shall be deemed to be issued to the owner of the building.

Under the amended Housing Development Act, developers’ responsibility with regard to VP and the CF has been expanded to include the following:

1. Conditions for delivery of vacant possession
It must submit a supporting certificate signed by its architect certifying that the building has been duly constructed and completed in accordance with all relevant Acts, by-laws and regulations and that all conditions by the appropriate authority in respect of the CF have been duly complied with and a supporting letter of confirmation from the appropriate authority certifying that the Form E (the application form for CF) has been duly submitted by the developer and checked and accepted by the appropriate authority.

• Duties to the Controller of Housing:
It must inform the Controller of the handing over of VP to the buyers and submit a certified true copy of the architect’s completion certificate and that water and electricity supply are ready for connection. It must also inform the Controller if the appropriate authority has refused to accept the submission of any document relating to the issuance of the CF and submit the refusal letter from the appropriate authority.

With the amendments to the Housing Development Act and the Building By-laws, it would seem that when house buyers receive notice of hand over of VP, they can assume safely that the occupancy of the property can be confirmed within 28 days of the notice. If not, the hand over of vacant possession can be considered premature, and the house buyer has every right to challenge the notice and asked the developer to withdraw it.

With the amendments too, the HBA sees no cause for local authorities to issue temporary certificates of fitness as it is not to the house buyers’ advantage to occupy a home based on such a certificate.

We hope the Ministry of Housing is confident enough to implement further amendments of the Act, such as imposing that the delivery of VP comes with the CF. It is only right that a buyer should be able to take vacant possession of a home that is certified fit for occupation.

The National House Buyers Association is a non-profit, non-governmental, non-political organisation manned by volunteers. Our website is www.hba.org.my. E mail: info@hba.org.my

- Property Times 1st March 2003 issue -

Which also may shed the light on your next analogy

corpbabes wrote: Also, can I give an anology: Say in a high rise building in genting, a disaster happen due to a design defect ; Contractually we exclude design defects and say construction defects, in death or personal injury, therefore can we say that in this scenario that the project owner be liable? What if we have designer and builder ... To what extent can we pass the buck to them?

Perhaps I didn't understand the question. But somehow, I doubt that this clause (design defect) is excluded in the contract - again depending on which stage you're talking about but typically in the 'design and build' mode, it's very irregular if a contract exclude such clause cos' it is regulated in Uniformity Building By-Laws 1984 (+ The Engineers Act as well) Even if there is NO such clause, the law prevails over 'deficiency' of such clause in a contract.

Remember, when a contract doesn't favour the law (where the latter being the former's umbrella), then the law shall prevail - e.g. clause ambiguity, or 'something that should be included but excluded - yet the law states clearly that it should be included'

But alas, despite of my explanation here, you should know that ahvincent is talking about the 'ugly REALITY of the construction industry' (which I must admit..it's TRUE) and you should take his suggestions into account as well.

and corpbabes (what's your real name..or at least a short one) - don't have to apologise profusely or being humble, you should be proud to pose such difficult question amidst a topic that not many want to be participating.

Posted: 26 October 2007 at 6:41pm | IP Logged

Hello again!

Thanks so much for such prompt reply! Really appreciate it.  I know my questions were not really specific and vague, hence Im trying to get more information regarding that before enquiring further.

Sorry for being so ignorant, coz Im really new in this field,Im just a pupil doing a research in this area.  So forgive me if I sound so blur!

Im just wondering what happens if the defects occur after the warranty period, who will be liable and is there any legislations regarding this? As for the owner of the building for example, is his liability reduced if anything happens after the warranty period is over?

Also, can I give an anology: Say in a high rise building in genting, a disaster happen due to a design defect ; Contractually we exclude design defects and say construction defects, in death or personal injury, therefore can we say that in this scenario that the project owner be liable? What if we have designer and builder ... To what extent can we pass the buck to them?

Thanks in advance for all the assistance

Posted: 24 October 2007 at 11:21pm | IP Logged

corpbabes wrote: My question is : is there any statutory prescriptions in relation to warranty periods for construction works buildings, designs etc .

Depending on which stage that you're referring to - pre-construction, during construction and post construction? You see, different countries may adopt different practices, terminologies and timeframe. (which will affect the contract) 

If you care to delve further in this very same topic, you will see that we've been discussing 'heavily' about Defect Liability Period, Warranty Period, Developer's Warranty etc. Try to have a look, probably it would help you and us further to understand the issue. (I'm sure you've heard the Govt is planning to revise and standardize these practices - but I'm unsure when) 

corpbabes wrote: for theme park related works

Or perhaps you may be referring to 'during the theme park already in operation - if so, which target group? 'the theme park workers?'? The theme park visitors? The 'entertainment machines'? (roller coaster, merry-go-round etc.) 

corpbabes wrote: Also what if personal injury and death, can warranty period and exclusion of liability help reduce liability ?

Again, depending on which stage...and as ahvincent said - something like- this case should be mentioned in the contract to avoid future ambiguity and 'conflict'.

corpbabes wrote: I would be glad if someone can explain these issues to me. Thank you in anticipation.

Don't worry, GMN has a handful of helpful hands (3H)...ahvincent is definitely one of them...