Chinese firm ZDA ordered to pay over $38 million to J'can company for AC Hotel works

A court has ordered Chinese firm ZDA Construction Ltd to pay over almost $38 million it wrongly withheld from Mechanical Services Ltd (MSL), a Jamaican firm subcontracted to work on the AC by Marriott Hotel in St Andrew.

It's a victory for MSL which sued the construction company in 2019. 

In ruling on May 3, Supreme Court Justice Stephane Jackson-Haisley declared that MSL was not entitled to pay any portion of the $94 million that ZDA had to pay back to Sandals Resorts International, the hotel operator, because of delays in completing the project.

ZDA entered into a construction contract with Sandals in 2017 to provide labour, materials, equipment and services in connection with the construction of the AC Hotel Kingston hotel. In March 2018, it subcontracted MSL for the plumbing and mechanical services at a contact price of approximately $311.7 million. The final amount was $308.6 million.  

MSL argued that while it received $264.6 million, ZDA failed or refused to settle the outstanding amount. It also claimed interest on the amount due at a rate of 25.75 per cent plus an additional five per cent, bringing the total interest amount to 30.75 per cent per annum.

According to MSL, it completed the works and submitted the revised final invoice to ZDA on August 5, 2019. Sandals later took possession of the hotel.

However, ZDA denied that the contract stated that the works were to be completed for the sum alleged or that MSL was entitled to the interest rate sought. It claimed that the rate was arbitrary, unfair, excessive and unjustifiable regarding MSL's alleged delay in completing the plumbing services.

Instead, ZDA claimed that the contracted sum agreed between the parties was $228 million. 

But it said MSL's alleged delays caused it to suffer loss, which was conveyed by a letter dated June 27, 2019. ZDA argued that due to the delay, liquidated damages were payable in the sum of US$25,000 for each calendar day the project was delayed.

Liquidated damages are amounts of money that parties to a contract agree upon if a breach of a contract occurs. 

Kareem Blake, an MSL supervisor, testified that from the start, MSL experienced delays caused by ZDA in executing the project. 

"The major cause of the delays had to do with the foundation not being properly compacted which had to be cleared before MSL could start the groundwork," the judgment cited from Blake. He admitted that an email was sent by the project manager stating that MSL was holding up progress.

He said MSL doubled the workmen on site after receiving the email.

MSL's Managing Director outlined the contract's details and supported Blake in contending that ZDA was responsible for the delays. He said the issues were highlighted in bi-weekly site meetings.

Head of ZDA, Xi Wang, testified, however, that MSL did not meet certain deadlines, resulting in the project being extended by six months beyond the scheduled date of completion. He said the amount due to MSL was $9.5 million.

Attorney-at-law Georgia Hamilton who represented MSL argued that her client should not be held liable for any delay when the evidence clearly showed that MSL started work on the project even before the subcontract was executed.

ZDA's case was led by attorneys Leonard Green and Nyron Wright. 

They argued further that since ZDA  had to pay back $94 million to Sandals, the sum of $16.5 million was also withheld from MSL as its portion of liquidated damages as “they are truly the reason the project was not completed on the specified deadline.”

But Justice Jackson-Haisley disagreed and ruled that ZDA did not meet the stipulated deadline for the completion of the hotel causing Sandals to withdraw the sum of $94 million from the contract. ZDA in turn sought to withdraw from payments due to MSL. 

"It is more likely than not that what happened was that the delay originated with the defendant (ZDA) and that the effect of their delay caused a knock-on effect on MSL's ability to carry out the mechanical and plumbing works within the required timeline," the judge declared. 

She also said the ZDA boss could not explain how some of the figures were arrived at and that "in a lot of instances was unable to recall important details of what transpired". 

And the judge said on Xi's account, MSL was never involved in negotiating the terms of the liquidated damages between Sandals and ZDA. 

"This was ZDA's decision to negotiate without any representation and so any disadvantage occasioned because of that would have to be absolved by ZDA and not passed on to a party which was not a party to those negotiation," Jackson-Haisley wrote, before concluding that ZDA was not entitled to claim or deduct liquidated damages from MSL's payment. 

Justice Jackson-Haisley accepted that the value of the work done by MSL was $308.6 million and the total sum paid by the defendant was $264.6 million.

She said having paid over the contractor's levy of $6.1 million, the sum of $37.8 million, inclusive of the $7.7 million retained earlier in the contract, was now owing to MSL.

ZDA will have to pay interest at a rate of 30.75 per cent on the sum of $30.7 million from the date due of May 22, 2019 to the date of payment.

Interest on the retention sum is at a rate of 30.75 per cent from June 1, 2020 to the date of payment. 

ZDA will also have to pay MSL's legal costs. 

- Barbara Gayle

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