The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s main contractor has lost its bid to stay a court action brought by a US-based demolition company, which is seeking to collect an outstanding $754,704 balance for work on the $3.5 billion project.

Judge John Koeltl, in an April 27, 2016, Order, denied China Construction America (CCA) Bahamas argument that its dispute with Controlled Demolition Inc (CDI) should be sent to arbitration.

Following an oral hearing where both parties were present before him, Judge Koeltl wrote: “For the reasons stated at today’s conference, the defendant’s [CCA] motion to compel arbitration and to stay this action pending arbitration is denied.”

No further reasons were given by the judge, who directed that the case be referred to a US Magistrate Judge, Kevin Nathaniel Fox, for a settlement conference at the southern New York district court.

Judge Koeltl also set out case management instructions, with all defences by both parties now due to be filed by May 27, 2016. Discovery is to wrap-up on November 4 this year, with both CCA and Controlled Demolition to be ‘ready for trial’ by January 6, 2017.

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.

It 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.

Mark Loizeaux, CDI’s president, claimed in a November 4, 2015, affidavit that CCA “continually stalled” in doing this 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.

“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 have been an unwanted controversy for CCA and its Bahamian subsidiary,given that it has been 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.

CCA Bahamas had been demanding that CDI’s lawsuit be sent to arbitration, but Wednesday’s ruling represents an emphatic rejection if its demands.

The Chinese state-owned contractor had alleged that Baha Mar “tied our hands” over resolving the payment dispute, which was placed on the back burner due to the $3.5 billion project’s “implosion”.

Pengfel Yu, CCA (Bahamas) commercial manager, alleged in a November 12, 2015, affidavit that CDI had failed to comply with its contract, and was seeking to “circumvent” the requirement to take its claim before a Disputes Resolution Board (DRB) specifically created for the Baha Mar project.

Mr Yu, denying that CCA (Bahamas) was deliberately ‘stalling’ due payment, instead alleged that CDI had failed to perform the work demanded by its Baha Mar contract.

He argued that the developer, then-headed by Sarkis Izmirlian, had refused to approve changes to CDI’s scope of works and the release of the last payment portion.

“Baha Mar never approved CDI’s claimed change orders or released retainage for CDI’s work, despite CCA Bahamas’s repeated requests for it to do so,” Mr Yu alleged, placing the blame squarely on the Cable Beach developer for the payments dispute. “CCA Bahamas was stuck in the middle and left with its hands tied.”

He then claimed that CDI’s demands for full, and final, payment in mid to late-2014 had to play ‘second fiddle’ to CCA (Bahamas) efforts to save the Baha Mar project.

Arguing that the US sub-contractor had “mischaracterised” its response to the payment demand, Mr Yu alleged: “During the time that CDI was filing its claim, CCA (Bahamas) was focusing on completing and saving a project that, due to the owner’s mismanagement, was on the verge of implosion.

“CCA (Bahamas) never acted in bad faith or inconsistently with its right to arbitrate, and instead has sought to negotiate with Baha Mar regarding CDI’s claim, all the while attempting to complete construction of the project.

“CDI ignores the fact that to the extent that there were any construction delays, they were justified. Instead, CDI chose to portray CCA (Bahamas) as purposefully stalling and ignoring CDI in bad faith.”