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KUALA LUMPUR, July 7 — Malaysian property developer WZR Property Sdn Bhd has won an award for US$22.8 million in a successful resolution of its bid to claim unpaid fees from a company owned by the government of island nation Maldives, and will now be asking Malaysia’s Foreign Ministry for assistance to ensure the money is paid.
WZR had been waiting for over two years to receive full payment for the work it had already carried out for a project to build a 25-storey office building for Maldives’ Ministry of Finance, having in May 2018 issued an invoice for payment for progress on the construction work it had done according to a contract with Maldives.
As part of the process to seek payment from Maldives state-owned Housing Development Corporation (HDC) after the latter ran into funding difficulties for the project, WZR had in September 2019 asked the Asian International Arbitration Centre (AIAC) to appoint an adjudicator to settle the dispute.
What the adjudication award said
In a written adjudication decision by AIAC dated July 5 (last Sunday) that was sighted by Malay Mail, London-based adjudicator John Wright ruled that WZR was entitled to seek payment of the sums due to the company under the May 2018 invoice.
Wright then ordered that Maldives’ state-owned firm HDC pay US$22,823,432.68 (or RM97.67 million by current exchange rates) to WZR within seven days of the July 5 decision.
The adjudicator also ordered HDC to pay within seven days to WZR the interest at a rate of 6.5 per cent per annum for several different sums based on different periods, namely interest on US$19,461,805 (December 1, 2018 to October 28, 2019), US$16,461,805 (October 29, 2019 to March 31, 2020) and US$22,823,432.68 (April 1, 2020 to the date of payment).
Also within seven days of the July 5 decision, HDC was ordered to pay legal costs of RM100,000, and one half of the £8427.67 adjudicator’s fee and RM212 AIAC administration fee.
What next for WZR
When contacted, WZR Property executive director Wan Nadzir Wan Mohamad told Malay Mail that the adjudication decision was favourable to the company, noting: “Good for us in WZR, since the payment pending from 2018”.
Wan Nadzir confirmed that WZR will be seeking Wisma Putra’s help to ensure that the company is paid by the Maldives state-owned company, in line with the July 5 adjudication decision.
“Yes. We need support and help from the Malaysian government, especially to bring up the matter in bilateral or through the Embassy of Maldives in KL,” he told Malay Mail.
While WZR has yet to contact Saifuddin’s successor, Wan Nadzir confirmed that the company will be asking the new Foreign Minister Datuk Seri Hishammuddin Hussein to help ensure that the July 5 adjudication decision in favour of WZR is enforced.
Wan Nadzir confirmed that the Malaysian company had stopped work on the project since it started pursuing the resolution of the payment dispute at the AIAC last year, but also confirmed that the Maldives government has not cancelled the project.
History of the case
According to the July 5 adjudication decision that had laid out the facts of the case, WZR had signed a contract worth US$122,793,608.80 (RM525 million by current exchange rate) directly with the Maldives government to design, build and finance the 25-storey office complex for Maldives’ Ministry of Finance and Treasury.
But in October 2016, the Maldives ministry wrote to inform WZR that the project site would be relocated to the country’s reclaimed island Hulhumalé, with a new contract or novation agreement entered in March 2017 between WZR and HDC to park the project under the latter as the new employer.
The total project cost under the new contract increased from the initial US$122.8 million to US$155 million (RM663.32 million), with the targeted completion date also pushed from the initial August 2018 to June 2019 and then finally to August 2020. The adjudicator noted that the project was significantly delayed due to Maldives’ difficulties in obtaining funding.
Under the new contract terms with HDC, the responsibility for financing the project fell under HDC while WZR’s role was changed to merely being required to help HDC obtain funding for the project. While WZR engaged in efforts with several entities including a Malaysian bank to help HDC obtain funding or loans for the project, such efforts did not materialise in funding for HDC as it did not manage to come to an agreement with any of these entities, the background details in the adjudication decision showed.
After having carried out 18 per cent of the overall construction work including preliminary work and some piling work, WZR on May 2, 2018 issued an invoice for around US$30 million, subsequently revising it to US$28,118,697.54 or slightly over US$28 million.
But HDC had resisted paying for the first progress payment claimed by WZR, citing a contract clause to justify the need for HDC to secure financing and complete the loan agreement process before it could pay.
WZR however argued that its contractual role was only to facilitate the securing of the project’s financing and it had introduced three entities to HDC for such purposes, while HDC was of the view that the financing had not been finalised due to conditions which it could not accept and which made the project commercially unfeasible, the adjudication decision had noted.
HDC later paid in October 2019 a sum of US$3 million, while the remaining outstanding amount that WZR was still claiming from HDC became US$25,118,697.54 (after a deduction of a 5 per cent retention money).
In the July 5 decision, the adjudicator decided that HDC could not rely on a contract clause to avoid paying WZR’s invoice for works done, as WZR had already complied with its contractual obligations to help HDC to secure funding for the project.
The adjudicator noted that securing and concluding a financial arrangement to fund the project was within HDC’s control and not within WZR’s control.
“It would therefore be incorrect to allow HDC to benefit from a state of affairs which is its own responsibility and not that of WZR,” the adjudicator had said, before giving the July 5 award of US$22.8 million to WZR after taking into account the HDC’s US$3 million payment in October 2019.