The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s contractor is being sued for allegedly failing to pay an American firm the full $7.643 million contract price for demolishing Cable Beach’s former Nassau Beach Hotel.

Court documents obtained by Tribune Business reveal that Controlled Demolition Inc (CDI) is still awaiting an alleged outstanding balance of $754,704 despite invoicing China Construction America (Bahamas) for payment more than one year ago.

The Maryland-based firm is thus suing CCA (Bahamas) for alleged breach of contract and unjust enrichment, adding to the contractor’s many headaches stemming from the ongoing impasse over the $3.5 billion Baha Mar project.

And, ironically, Controlled Demolition’s complaint raises the same allegations that CCA (Bahamas) has itself levelled against Baha Mar - namely that extra payment refused for changes in the scope of works it was required to perform.

The US company also claims that CCA (Bahamas) “inflated” the value of scrap materials from the Nassau Beach Hotel demolition, which were due to Baha Mar, for its own purposes.

Controlled Demolition’s action, filed last Friday, comes as Prime Minister Perry Christie was in New York to meet CCA’s chairman yesterday, in a bid to restart construction on the stalled Baha Mar project.

Outlining its complaint, Controlled Demolition said it was originally contracted by CCA (Bahamas) on November 25, 2011, to demolish the Nassau Beach Hotel for a price of $7.401 million.

“The demolition of the Nassau Beach Hotel was part of a larger project known as the Baha Mar development,” Controlled Demolition alleged.

The Nassau Beach was one of two resort properties (the other being the Wyndham) that Sarkis Izmirlian, Baha Mar’s principal, acquired from Philip Ruffin in 2006 to pave the way for Cable Beach’s redevelopment.

The resort’s demolition was required to make way for Baha Mar’s new resort campus and beach experience, and Controlled Demolition alleged that CCA (Bahamas) asked it “to perform work outside the scope” of the original contract.

The price was thus increased by $241,808 to $7.643 million, and Controlled Demolition alleged: “CDI fully and timely completed the work and the Change Order Work, and has performed all terms and conditions of the sub-contract that it was obligated to perform.”

But, although Controlled Demolition said it had invoiced for the full contract price, it claimed CCA (Bahamas) had only paid it $6.888 million, “leaving a balance due and owing of $754,704”.

The US company alleged: “CCA has breached the sub-contract by... failing, neglecting and refusing to fully pay CDI for the work; directing CDI to perform the Change Order Work at an agreed-upon price and then refusing to pay for it; alleging that certain final inspections are necessary for final payment and then refusing to conduct inspections; asserting false, pretextual reasons for not paying; approving invoices and then failing to pay them in full; paying approved invoice amounts in one month and then taking back monies previously paid by reducing per cent complete values on subsequent invoices.”

Controlled Demolition’s long list of allegations continued by claiming CCA “inappropriately inflated scrap values due the owner [Baha Mar] and withholding the inflated amounts from CDI’s payment without documentation of the additional claim amount of the owner’s salvage share; failing to provide specific reasons for not paying CDI withing the time required by the sub-contract or otherwise provided by law; unreasonably delaying payment of CDI’s invoices; providing CDI with false and misleading information concerning pre-suit alternative dispute resolution procedures, wrongfully causing CDI to delay enforcement of its rights under the sub-contract; asserting that CDI has no right to receive payment until CCA receives payment from other sources; and breaching the sub-contract’s implied covenant and good faith and fair dealing.”

Controlled Demolition alleged that it had sent two written invoices totalling the outstanding balance, split into $372,571 and $382,132, to CCA (Bahamas) on August 19, 2014.

It claimed that despite receiving the invoices three days later, and raising no dispute or protest over the sum claimed, CCA “has failed, refused and neglected to pay the balance of the account”.

Demanding that a 1 per cent interest penalty be added to the unpaid balance, Controlled Demolition alleged that CCA (Bahamas) would be “unjustly enriched” if it retained the benefits of its work without compensation being paid.

“Alternatively, CDI is entitled to recover $754,703 for additional work performed outside the scope of the sub-contract’s work, based on theories of unjust enrichment and breach of an implied contract,” Controlled Demolition alleged.

Its complaint is similar in nature to the allegations that CCA (Bahamas) has itself levelled against Baha Mar, namely that it was never properly compensated for more than 1,000 changes to the scope of works and nature of construction it was asked to perform.

Jun Li, a CCA (Bahamas) vice-president, alleged in a July 16 affidavit that Baha Mar had ““rejected out of hand” almost 50 certified requests for time extensions from the contractor.

The extension requests, Mr Li said, stemmed from changes to the construction design or scope of works that Baha Mar wanted CCA (Bahamas) to make.

Yet he claimed that Baha Mar “has never agreed to a single extension of time” or request for extra payment to accommodate the extra work.

“As a result of design-related issues, thousands of Constructive Change Directives (CCDs) were issued by Baha Mar directing CCA Bahamas to perform the work differently than already designed,” Mr Li had alleged.

“In violation of the terms of the contract, the CCDs did not contain an estimate of the cost and time associated with the change or any method for payment - meaning that CCA Bahamas or a Work Package Contractor would improperly be forced to fund the changed work until Baha Mar agreed to a Change Order.”

Still, the Controlled Demolition claim adds to the litigation CCA (Bahamas) and its parent, China State Construction Engineering Corporation, is facing.

Baha Mar has already filed a UK High Court claim against the latter for $192 million damages, due to its subsidiary’s alleged failure to perform under the construction contract.