THE Covid-19 pandemic had a devastating impact on our economy and people. Melaka Gateway, a mega billion-ringgit land reclamation project, is also hit.
Unlike France, which had declared the pandemic to be a force majeure almost immediately after the Covid-19 hit the nation, Malaysia did no such thing. It was only on Oct 23 that our new Covid-19 law, known as Temporary Measures for Reducing the Impact of Coronavirus Diseases 2019 (Act 829), was gazetted into force.
The crucial provision in the act is Section 7, which states that “the inability of any party or parties to perform any contractual obligation arising from any of the categories of contracts specified in the Schedule to this Part due to the measures prescribed, made or taken under the Prevention and Control of Infectious Diseases Act 1988 (Act 342) to control or prevent the spread of Covid-19 shall not give rise to the other party or parties exercising his or their rights under the contract”.
It means if any contracting party is unable to fulfil its contractual obligations due to measures taken by the government under Act 342 to control or prevent the spread of the Covid-19 virus, it cannot be made liable for such inability by the other contracting party.
This is a brief summary. A local company, KAJ Development Sdn Bhd (the developer), was awarded a contract by the Melaka government to revitalise Pulau Melaka (then a white elephant), later to form part of the Melaka Gateway project.
On May 13, 2017, the developer signed a collaboration agreement with three Chinese companies (PowerChina International Group Ltd, Shenzhen Yantian Port Group and Rizhao Port Group) to develop three other islands to create the gateway. The dream was to create Southeast Asia’s largest private marina, containing facilities to berth four cruise ships at a time, and a deep sea port.
Sadly, on Oct 5, 2018, the newly formed Pakatan Harapan government had revoked its licence to operate a port without giving any reason. Aggrieved, the developer filed an appeal on March 13, 2019, seeking orders that the revocation be declared null and void.
Two months later, the Transport Ministry relented and restored the licence, so the project could continue.
However, due to Covid-19 restrictions, the developer could not carry out any physical work on the project.
On Nov 16, 2020, the developer was notified that its three-year agreement with the state government was terminated, on the grounds that it had failed to complete the project within the specified period.
The agreement, signed on Oct 4, 2017, had expired on Oct 3, 2020. I have not read the agreement, but I find it strange that for such a massive project, there is no provision for an extension. Most construction projects contain LAD (liquidated and damages clause) if the contractor delays beyond the original completion date. Covid-19 restrictions would certainly become reasonable grounds for the granting of extensions, without imposing LAD.
Last Friday, I watched a 10-minute video clip of KAJ Development chief executive officer Datuk Michelle Ong expressing her sadness at the termination, saying she had “a dream for Malaysia” and wanted to leave a legacy for Malaysia. That it was endorsed as a national project by two prime ministers, and her investors had expressed their commitments to her.
She failed to understand why after having spent almost a decade and more than a billion ringgit, the project was terminated. She stressed, “profit alone does not interest me” and hoped the federal and state governments would allow her to continue.
On Nov 28, Melaka Chief Minister Sulaiman Md Ali told reporters “the development will continue, but we have some technical issues that we need to fix”. However, the government would not issue any further statement with regard to the termination.
A local news portal reported on Dec 18 that the developer had filed a judicial review to “seek justice” as the Melaka government wanted the return of one of the three islands “already reclaimed”, even when the developer had “been issued land titles and made full payment of land premiums and assessment fees”.
A news portal reported that the developer, in its suit, alleged that the state government had acted in breach of Act 829. If this suit goes to full trial, it will be the first test case on our Covid-19 law.