The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s contractor allegedly “thwarted, stonewalled and misled at every turn” a US-based demolition company’s efforts to collect an outstanding $754,704 balance for work on the $3.5 billion project.

Mark Loizeaux, Controlled Demolition Inc’s (CDI) president, claimed in a November 4, 2015, affidavit that China Construction America’s (CCA) Bahamian subsidiary had led his company on a ‘merry dance’ for two-and-a-half years in its quest for payment.

Effectively accusing the British Colonial Hilton owner of ‘playing games’, Mr Loizeaux alleged that CCA Bahamas had stymied CDI’s request by failing to properly initiate arbitration proceedings, while also blaming Baha Mar and developer Sarkis Izmirlian for the non-payment.

CCA Bahamas is now demanding that CDI’s lawsuit, filed in the southern New York district court, be sent to arbitration - something that Mr Loizeaux’s affidavit suggests is ironic, given its previous alleged ‘stonewalling’.

“CDI has been severely prejudiced by CCA’s ‘bad faith’ conduct,” Mr Loizeaux alleged. “CDI completed its work more than two-and-a-half years ago, and has diligently attempted to get CCA to pay it for the work, but CCA has done nothing but thwart, mislead and cause CDI unnecessary expense.

“CCA is not looking to achieve a binding arbitration award fully resolving the parties’ dispute, but is scheming to delay indefinitely CDI’s right to a final resolution and recovery in a case without a meritorious defense.

“CDI painstakingly complied with the pre-lawsuit contractual conditions for asserting a claim for breach of contract,” Mr Loizeaux added, “only to be thwarted, stonewalled and misled by CCA at every turn.

“Moreover, CDI and CCA do not have an agreement calling for binding arbitration finally resolving any dispute. CCA’s glib declarations submitted in support of its motion omit highly material, undisputed facts which show that CCA;s motion is just its latest attempt to wrongfully obstruct CDI from receiving payment.”

CDI’s allegations and lawsuit are merely the latest controversy for CCA and its Bahamian subsidiary. Apart from being blamed by Baha Mar’s former developer for the project’s descent into insolvency, due to the failure to complete ‘on time’ and to budget, the Chinese state-owned contractor was also recently subjected to a ‘stop work’ Order at The Pointe - its $250 million development adjacent to the British Colonial Hilton.

CCA, though, is likely to resume its role as the main contractor for the Baha Mar project should the China Export-Import Bank - as seems likely - decide to finance its completion.

CDI was hired on November 25, 2011, to demolish the former Nassau Beach Hotel and towers ‘F’ and ‘J’ at the Wyndham resort - thus making way for the $3.5 billion Baha Mar campus.

Tiger Wu, CCA’s executive vice-president, allegedly signed the contract with CDI. However, Mr Loizeaux alleged in his affidavit that CDI “had difficulty” getting CCA to make due monthly payments, even though it never challenged the invoices.

CDI ultimately completed its contract, including an expanded ‘scope of works’ package, and handed over the demolition site to CCA on February 11, 2013.

The $754,704 outstanding payment hinged on CCA conducting a ‘final inspection’ and issuing a completion notice.

Mr Loizeaux, though, alleged that CCA “continually stalled” in doing this due to what was described as “a minor issue”.

He revealed that part of CDI’s contract was to crush concrete from the demolished hotel buildings so that it could be used to construct the new roadways for Baha Mar.

“CDI crushed 100 per cent of that concrete debris from the project to the size of six inches or smaller (grapefruit size), and 95 per cent of that had been further downsized to a size of one-and-a-half inches (golf ball size) before the crushing equipment broke down at the very end of the project,” Mr Loizeaux alleged.

“CDI admitted that it had not crushed the final 5 per cent of the concrete to ‘golf ball’ size, and CCA and CDI eventually settled that crushing shortfall by CDI agreeing to accept 95 per cent of the agreed-upon original value for the crushing work completed.

“But, after reaching an agreement, CCA baulked at paying, claiming that Baha Mar was not satisfied. By August 2014, CDI had learned that all of the crushed concrete had been fully used by Baha Mar to build roadways and as structural backfill material in the new resort (something that CCA had not disclosed.

“Thus, CDI learned Baha Mar was fully satisfied, and CDI was now indisputably entitled to a Notice of Final Completion, final payment and release of retainage.”

CDI submitted its request for final payment on August 19, 2014, but CCA was “completely silent” for one month.

Describing the contract’s dispute resolution terms as “confusing and inconsistent”, Mr Loizeaux noted that referral to a Disputes Resolution Board (DRB) was an option that could be exercised by CCA as construction manager.

The DRB was supposed to be created under the agreement between Baha Mar and CCA. However, Mr Loizeaux said his firm was never informed whether the DRB had been established, nor who its members were.

And CDI believed the DRB was not relevant to its dispute, as its contract with CCA stipulated that the Board’s decisions were only binding upon ‘final completion’ of the project.

Despite repeated e-mails and letters, Mr Loizeaux alleged that Mr Wu and CCA failed to confirm whether the DRB had been formed. They also failed to clarify whether the Chinese contractor’s position was that the dispute had to go before the Board.

CDI then requested mediation by the American Arbitration Association (AAA) on February 13, 2015. However, Mr Wu allegedly failed to call-in to a conference to discuss the appointment of a mediator.

He refused to participate when contacted later by an AAA administrator. And, on April 17, 2015, when CCA finally participated in a conference call, its lawyer asserted that it was refusing to participate on the grounds that the CDI dispute first had to go before the DRB.

Mr Loizeaux asserted that it was only now that CCA’s attorney confirmed that the DRB had existed since the Baha Mar project started. It also submitted to CDI a copy of the Board’s operating procedures.

“Yet even under CCA’s telling, it is up to CCA to exercise an option to have a Board review CDI’s claim within 30 days after CCA denied the claim,” the CDI president alleged.

“CCA, however, more than seven months after CDI submitted its claim (and by this time it had long been evident that CCA was denying the claim) still had not opted to submit the claim to the Board.”

Mr Loizeaux added: “It thus became ever clearer that CCA was merely playing an ill-advised game where it maintains that it has an option to submit CDI’s claim to a Board for a non-binding decision, but refuses to exercise its asserted option to have the Board review the claim.

“All the while maintaining that CDI has no right to seek redress in court until Board review, followed by non-binding mediation.”

After refusing to mediate via the AAA, CCA Bahamas then wrote to CDI on May 28,2015, notifying it of its intention to submit their dispute to the DRB - more than nine months after the battle began.

Suggesting that this represented more of the alleged ‘stonewalling’ by CCA, Mr Loizeaux said: “CCA was merely notifying CDI that it ‘intends’ to submit a dispute to the DRB on some indeterminate date in the future.”

This, he implied, was far different from actually doing so. And CDI had no recourse to the DRB, as Baha Mar’s sub-contractors had no right to submit a dispute to it - with only CCA able to originate disputes.

Mr Loizeaux then sent a July 21, 2015, letter to CCA Bahamas warning that he would initiate legal action in the New York courts to recover the sums allegedly owed to CDI.

It was only when Federal Express informed him that it could not deliver his lawsuit letter, because the gates to CCA’s Bahamian offices were locked, that Mr Loizeaux learned Baha Mar had filed for Chapter 11 bankruptcy protection just over three weeks’ earlier.

After sending the letter via e-mail, Mr Loizeaux alleged that he received an e-mail from Mr Wu on July 27 this year outlining another change in tactics towards CDI by the Chinese contractor.

He added that CCA’s new position was that Baha Mar’s Chapter 11 filing prevented the start of DRB proceedings, and that the developer would need to be present.

“Wu confirmed that CCA failed to submit CDI’s claims to the DRB,” Mr Loizeaux alleged. “Indeed, Wu disavowed ever submitting CDI’s claim to a DRB.

“When I received Wu’s letter, I was not aware of any bankruptcy proceedings, nor did I understand that any such proceedings impacted CDI’s claims against CCA. I still have no understanding.

“CDI’s contract is with CCA, not Baha Mar. My counsel advises that CCA’s contention that its obligation to pay CDI is contingent on CCA obtaining payments from Baha Mar is not consistent with applicable legal principles.”

Mr Loizeaux alleged that it was “especially egregious” for Mr Wu not to inform CDI that Baha Mar had terminated CCA’s contract, as this rendered the DRB ‘null and void’.

He also suggested that Mr Wu’s failure to submit an affidavit in CDI’s action was “notable”.

“I understand that CCA is asserting that a DRB decision is only binding until Baha Mar obtains a certificate of occupancy for the entire project under the now-terminated [main] contract,” Mr Loizeaux alleged.

“CCA, however, in asking a Bahamian court to liquidate Baha Mar’s assets, plainly does not believe itself that Baha Mar, pursuant to the contract’s terms, will ever obtain a certificate of occupancy for the entire project.

“Therefore, although CCA is not being candid with the court, CCA’s position is evidently that CDI can never bring a lawsuit against CCA to recover the monies that CCA owes to CDL. CDI never agreed to that position.”