KwDC loses P13.6 m lawsuit

SHARE   |   Monday, 28 August 2017   |   By Ditiro Motlhabane 
KwDC chairman, Jeffery Sibisibi KwDC chairman, Jeffery Sibisibi

Broke Kweneng District Council (KwDC) will have to dig deep into its coffers to settle a mutli-million claim after suffering a major setback during the week when acting High Court judge Kabelo Lebotse ordered it to pay Estate Construction (Pty) Ltd an outstanding P13.7 million for the construction of the Molepolole Bus Terminal. Further compounding financial problems for the municipality, Justice Lebotse ordered KwDC to pay interest on the amount at the rate of 3% above the bank lending rate (which stood at around 6.5% plus in 2016) compounded monthly from 18th June 2016 to the date of final payment. The council has also been ordered to pay costs of the lawsuit. Estate Construction – a company owned by construction moghul Kegone Sebina – dragged KwDc to court after the latter refused to pay a claim for P18 million, arguing that the bus rank project was incomplete, despite issuing the contractor with a completion certificate and settling part of the bill.  The P13.7 million (P13 662 742.20) plus interest to be paid by the Council is a reduced amount from the original P18 million (P17.976 734.02) demanded by Estate after KwDC rushed to make payment of P4.3 million on March 21, 2017 just before the case was heard in June. Moving an application for a summary judgment, attorney Tshiamo Motsumi submitted that his client – Estate Construction – had met all the requirements for the request as its claim was based on a liquid document in the form of a payment certificate issued by KwDC. He also argued that the claim is for a liquidated amount – a claim whose monetary value has been ascertained. The amount demanded by Estate was certified by the project engineer BOA Consultants (Pty) Ltd, as the agent of KwDC. A payment certificate is defined by International Federation of Consulting Engineers (French acronym FIDIC) forms as a certificate issued under a contract and which states the amount which the certifier considers that the contractor is due to be paid. The parties had entered into a contract for the Molepolole Bus Terminal in terms of FIDIC forms of contract.

Justice Lebotse rejected all the arguments advanced by the lawyer representing KwDC, Ricardo Seabueng in an attempt to justify refusal and/ or negligence to pay Estate the outstanding amount. Seabueng had denied that BOA Consultants was an agent of the municipality, despite that the Council had hired the company, which reported and regularly rendered technical advice to and was paid by KwDC. "BOA Consultants played a pivotal role in the issuance of certificate of payment. Every month the contractor submits a statement to the engineer (BOA) for assessment and determination of the amount to be paid for work done. The engineer assesses the statement and certifies the amount to that the contractor is entitled to be paid. In terms of FIDIC red Book the engineer is the employer's agent. I find this denial disingenuous," ruled Justice Lebotse. In an interesting twist, during hearing Seabueng tried to impugn the amendment to the amount claimed by Estate (after KwDc paid P4.3 million, thus changing the initial figure) although he had told court that he was not opposing the application. The judge dismissed his argument as misplaced as the amendment only sought to rectify uncertainty about the amount claimed, which came about after part payment by his client thus altering the initial figure. Other arguments by Seabueng, which Justice Lebotse shot down as lacking merit and untenable, were claims that Estate did not complete the works and inflated figures on certificates, which was only uncovered in an audit by KwDC after the project was handed over as complete and a completion certificate issued. But Justice Lebotse dismissed the audit as irrelevant to the claim by Estate, saying the issuance of the completion certificate signified KwDC's satisfaction with what was delivered to them. Seabueng also failed to convince court when he suggested that it was the engineer's fault that the amounts in the claims were inflated. Lebotse ruled that the folly of BOA Consultants, who were the chosen agents appointed by KwDC, cannot be used against the contractor. Further, Justice Lebotse threw out a suggestion for a re-measurement, saying according to the FIDIC process they adopted for their contract measurement is done as part of the certification process. "(KwDC cannot issue certificates of payment and completion and then turn around and demand re-measurement. (Estate Construction) is entitled to assume that all that needed to have been done had been done and accepted and/or approved, hence the issuance of the certificate of payment and indeed that of completion," the judge observed. 

Even after Estate handed over the project in November 2016 after numerous extensions, KwDC failed to engage experts to carry out a thorough inspection, and consequently failed to identify defects they alleged in court and bring them to the attention of the contractor within the Liability Period. It was only when Estate Construction submitted a claim for the amount withheld during the Liability Period that KwDC sprang into action, trying to negotiate with the contractor to fix defects in the project. The contractor, aware that KwDC was acting out of time, declined and demanded full payment which the court finally awarded on Tuesday. Estate Construction was awarded the tender in 2012 to start the project in January 2013, scheduled for completion in December 2015. Although the initial design and construction of the Molepolole Bus Terminal and associated works was revised down from P168m to P115.6 million, the project later suffered controversial delays and incurred variations, bringing the total cost to P155 million at completion. By September 03, 2015 the project was still 95 per cent complete. As costs skyrocketed without progress in the project in 2015 numerous Government officials, among them Assistant Minister of Local Government and Rural Development, Frans van der Westhuizen and KwDC Chairman Jeffrey Sibisibi complained about the delays. At some point the Directorate of Corruption and Economic Crime (DCEC) sniffed around the project, following widespread allegations of deliberate cost escalation in procurement of construction material. The biggest culprit blamed for delays was the project engineers - BOA Consultants - fingered by Sibisibi while addressing a full council meeting in September 2015. "The major attribute that delayed the project delivery is mismanagement by the Consultant (BOA). The contractor indicated several delays by the Consultant to provide construction information, delay in determination of the claims and slow issuance of the instruction. The council has on several occasions written to the Consultant to remind him of his contractual obligation in an endeavor to meet the 30th September 2015 completion date," said Sibisibi.  

Other Estate Construction Projects

Two weeks ago Minister of Finance and Economic Development, Ontefetse Matambo, told Parliament that Estate Construction has been awarded construction tenders in different Government ministries valued at over P1.2 billion (P1.209,994,640.00) in the recent past. 

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• July 2017: A P36 million tender for resealing and road marking of the Molepolole-Lephephe road section 1 by Ministry of Transport and Communications.

• May 2017: A P104 million tender for the construction of the Platjaan Bridge by Ministry of Investment, Trade and Industry. 

• July 2016: A P361 million tender for the Thune Dam Pipeline project, which started in August 2015 and due for completion in 2018. 

• July 2016: Tender for the Kanye Sanitation at a total cost of P707 million, still ongoing

• In 2011: Tender for the Ramotswa shoulder sealing road project for P25 million by Ministry of Transport and Communications. Project completed in 2013.