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Construction Industry: Moving Forward With The Movement Control Order

With the rise in the number of Covid-19 cases in Malaysia, the Government of Malaysia has invoked the Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967 in establishing the Movement Control Order on 16th March 2020 (“MCO”). The MCO is a partial “lockdown” of the country that takes effect from 18th March 2020 until 31st March 2020 (“Period”). At the time of writing, Malaysia is the country with the highest outbreak in South East Asia.

With the establishment of the MCO, the Federal Gazette has since published the Prevention and Control of Infectious Diseases (Measures within the Infected Local Areas) Regulations 2020 (“Regulations”).

In essence, the MCO and the Regulations are aimed at controlling and restricting movement within, into and out of Malaysia in the hope of containing the spread of the virus. In respect of the work force in Malaysia, unless the services rendered are “essential”, business premises are to remain closed.

What does this mean for the construction industry?

For starters, site progress for ongoing construction projects would come to a standstill for the Period. As it were, many developers and contractors were working around the clock to meet delivery deadlines so as not to be penalised with liquidated damages, additional construction costs, etc.

Since the implementation of the MCO, it has been reported that a construction firm in Kuala Lumpur has been fined RM50,000.00 for failing to cease full operations at site, whilst two others have been ordered to shut down operations immediately when they were found to be carrying out housekeeping at their respective sites.

This “lockdown” implemented in Malaysia and other nations would hinder the progress of construction works in one way or another. For example, even after the Period and it is “business as usual” in Malaysia, contractors may face difficulty in obtaining imported materials, machineries and/or equipment, thus further hindering the progress of their projects.

A further delay in project completion may mean a prolonged financing period and possibly completion of the works at higher costs due to shortage of manpower, materials, machineries, equipment, etc.

Although an event that was not foreseeable, the global pandemic that is Covid-19 may still render some contractors and the like liable for delays in respect of ongoing projects. This “frustrating” event (literally and figuratively) may lead to the breaking of contracts and potential exposure to legal actions.

Where do we go from here?

It would therefore be best to take this “just stay home” time imposed by the Government for parties to, amongst others:-

(a) carefully scrutinise their construction-related contracts to determine if a “force majeure” clause exists and if so, what is the scope of said clause and whether any written notice ought to be given to invoke said clause;

(b) communicate the potential impact on work schedules to relevant parties and to determine if any mitigation measures may be taken;

(c) consider negotiating with relevant parties to come to some form of mutual understanding as to how best to move forward in light of the global pandemic; and

(d) carefully scrutinise their insurance policies to determine if the said policies cover global pandemics.

If you have any questions or require any further assistance, please do not hesitate to contact any of us.

 

 

Lam Ko Luen

Partner

[email protected]

Nina Lai Jian Xian

Senior Associate

[email protected]

 

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