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City of Cape Town’s R429m civil damages claims against construction companies referred to arbitration

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City of Cape Town mayoral committee member for finance Ian Neilson confirmed last week that the parties involved in the collusion and bid-rigging on the Greenpoint Stadium, now Cape Town Stadium have jointly agreed to refer the matter to arbitration, with the arbitration set to take place early next year.

The city of Cape Town filed an R429.47 million civil damages claim against listed construction groups WBHO, Aveng and Stefanutti Stocks.

The claim was set down to be heard in the Gauteng North High Court earlier this year.

“The arbitration award, once made, will be made an order of court,” he said.

“Arbitration should lead to a more expeditious outcome of this long-running dispute.”

Stefanutti Stocks stated recently that the trial date for the civil damages claim had been set for the first quarter of 2020 but had been postponed and the matter would be dealt with in arbitration. “The group remains confident it can defend this claim,” it said.

Attempts to obtain comment from Aveng were unsuccessful.

WBHO previously said it did not believe the City of Cape Town had suffered any damage and would be defending the claim.

The claim was lodged in 2015 following admissions made by the construction companies in the Competition Commission’s construction fast-track settlement process – through which companies were promised leniency in exchange for coming forward to divulge details on deals in which anticompetitive practices had taken place in the tendering process to build World Cup stadia.

At the time, it was the first claim lodged following the conclusion of the commission’s construction fast-track process.

This process resulted in the Competition Tribunal in 2013 confirming that settlement agreements had been reached between the commission and 15 construction companies, including seven listed firms, in terms of which they collectively agreed to pay fines totalling R1.46 billion for bid-rigging and collusive tendering.

The Green Point Stadium was among the projects listed by WBHO and Stefanutti in a settlement that was confirmed by the tribunal.

Both companies admitted that they had reached an agreement with Group Five in December 2006 to provide a cover price for this project to ensure that Group Five did not win the tender.

Stefanutti Stocks admitted receiving a cover price from WBHO to ensure that it could submit a non-competitive bid and ensure that WBHO was awarded the tender.

The tender was awarded to the Murray & Roberts (M&R)/WBHO joint venture, and the project was completed in December 2009.

M&R previously said the group had not been cited in the civil damages claim because it did not collude on the project.

The group said it had an open book negotiation with the City of Cape Town and its proposed margin and revenue for the project was shared with the client.

The SA National Roads Agency (Sanral) subsequently in May 2016 became the second state entity to pursue civil damages claims related to the construction fast-track process, when it lodged claims with a total value of between R600 million and R700 million against WBHO, M&R, Concor (which merged with M&R in 2006), Group Five, Basil Read, Stefanutti Stocks and Raubex.

However, these six listed companies and Raubex agreed in October 2016 to collectively contribute R1.5 billion towards development projects and committed to promoting transformation and black participation and ownership in the sector in terms of the Voluntary Rebuilding Programme (VRP) agreement reached with the government.

The VRP settled the exposure of these companies to claims by Sanral plus any other potential claims from public entities arising primarily from the construction fast-track process.

However, the VRP did not settle the City of Cape Town’s civil damages claim related to the Cape Town Stadium.

Neilson confirmed last week that the City of Cape Town is pursuing the claim against WBHO, Stefanutti and Aveng and that “no party has joined Group Five to the proceedings”.

City of Cape Town media manager Luthando Tyhalibongo said in 2018 the city was then “considering its position” in regard to Group Five.

Group Five is in business rescue and the company’s listing on the JSE was removed on June 15. In terms of the business rescue plan, all of Group Five’s assets will be sold and the company will cease to exist once the business plan is fully implemented.

 

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