KLRCA-Novice Arbitration Mooting Competition 2016 Moot Question

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IN THE KUALA LUMPUR REGIONAL CENTRE OF ARBITRATION

ARBITRATION NO: W-7-11/2015

BETWEEN
CLAIMANT

LEXCORP PTY LTD

AND

ACE CHEMICAL CONSTRUCTION BHD

RESPONDENT

BACKGROUND FACTS

1.

Ace Chemical Construction Bhd (Ace) is a Malaysian public listed

company incorporated in accordance with the Companies Act 1965. Ace
was established in 1980 and has been involved in major construction
works in the country since its inception.

2. On November 2013, Ace was awarded a contract to construct a semisubmersible mobile offshore drilling units (MODU) off the coast of East
Malaysia, named the RigaDig Offshore Oil Platform. Given the specialist
nature of the contract, Ace opted to invite specialist contactors to bid for
the contract. Eventually Ace engaged LexCorp Pty Ltd (LexCorp) as a
sub-contractor for the purpose of building the oil platform. On its website
LexCorp claims to have expertise in constructing deep-water mobile rigs
and semi-submersible units.

KLRCA-Novice Arbitration Mooting Competition 2016 Moot Question

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3.

The RigaDig MODU Construction Contract (the Contract) was formally

entered

on 20.03.2014. Among the pertinent clauses of the Contract

include:
a. Clause 11.0 Interim Payments
i. Upon the completion of any of the stages prescribed in the
Method of Construction and upon the issuance of an Interim
Payment Claim by the Contractor, the Employer is liable to
pay the sum claimed.
ii. The Employer is only obliged to make payment after the
issuance

of

an

Interim

Payment

Certificate

by

the

Superintending Officer.
b. Clause 14.0 Design Obligations
i. The Employer is obliged to provide the main Design
specifications to construct the RigaDig MODU.
c. Clause 21.0 Late payment interest
d. Clause 45.0 Termination Clause
i. Any Notice of Termination must be not be issued
unreasonably or vexatiously.
e. Clause 46.0 Time
i. Time is of the essence.

4. LexCorp duly carried out the construction of the oil platform in May 2014.
As the construction of the platform took place, LexCorp issued the Interim
Payment Claims (IP Claims) on the following dates:

KLRCA-Novice Arbitration Mooting Competition 2016 Moot Question

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a. July 2014,
b. September 2014,
c. October 2014,
d. December 2014,
e. February 2015,
f. April 2015,
g. June 2015
h. July 2015.

5.

However Ace only issued the Interim Payment Certificates (IP

Certificates) for the IP Claims between July 2014 until February 2015
2015. Further, these payments were only made in the period between
January 2015 until July 2015.

6.

On 15.09.2015, in the course of installing the topside of the rig to the

jacket of the platform, the jacket structure suddenly gave way and caused
the entire structure to collapse. The installation crew survived the ordeal
but was not able to salvage any part of the structure.

7.

On 18.09.2015, Joint-Inspection-Body (JIB) was formed to investigate

the cause of the accident. The JIB is made up of experts from both Ace
and LexCorp, amongst others. Due to the extent of the damage caused by
the accident, the JIB was only able to produce a preliminary incident
report on 02.11.2015. The 500 page report managed to capture, amongst
others, the fact that the design of the RigaDig MODU appears to be
buildable and that the the failure of the metal piling supporting, or that
was intended to support, the structure was what most probably would
have caused the collapse .

8.

Pending the preparation of the JIB Report, LexCorp issued a Notice of

Termination on 28.10.2015, on the grounds that Ace failed to make

KLRCA-Novice Arbitration Mooting Competition 2016 Moot Question

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payments for the IP Claims that were issued within time. LexCorp further
stated in is Notice of Termination that since time is of the essence, Ace
had breached the Contract by failing to make prompt payments.

9.

Ace issued a reply to the Notice of Termination on 04.11.2015, and stated

that throughout the course of the Contract, LexCorp never objected to the
fact that payments were not made on time. Further, Ace contended that
the Notice of Termination was issued in bad faith as LexCorp is trying to
run away from facing liability on respect of the platform failure incident,
especially in view of the findings by the JIB.

10.

On 25.11.2015, LexCorp issued a Notice of Arbitration to Ace and lodged

the same with the Kuala Lumpur Regional Centre of Arbitration. The terms
stipulate that both parties agreed for the seat of the arbitration to be in
Malaysia and for Malaysian Law to govern the proceedings.

11.

Parties agreed for the following points to be bought before the arbitration
panel:

a. Whether the termination by LexCorp was unreasonable or

vexatious.

b. Whether time is of the essence.

c. Whether LexCorp was responsible for the Platform Failure Incident.

d. Whether there has been a total failure of consideration. In respect

of the Contract.

KLRCA-Novice Arbitration Mooting Competition 2016 Moot Question

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INSTRUCTIONS

1.

Clarifications on the moot question can be submitted to the following email

address:
azinuddin.karim@gmail.com

2.

The dateline for submission of clarifications:

Date : 18th January 2016
Time : 11:59 PM

3.

Clarifications are only limited to the factual matrix contained in the moot
question.

4.

The full set of clarifications (if any) will be provided through the Moot Club,
the manner of which will be informed at a later date.