Mmegi Online :: Airport contractor sues govt in P43m dispute
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Last Updated
Monday 19 November 2018, 13:52 pm.
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Airport contractor sues govt in P43m dispute

A P43 million performance penalty slapped on Chinese firm Sinohydro after government terminated the company’s airport expansion contract has sparked another legal battle between the two parties with the construction company accusing the state of ignoring a verdict handed down by a dispute adjudication panel.
By Brian Benza Fri 19 Dec 2014, 10:14 am (GMT +2)
Mmegi Online :: Airport contractor sues govt in P43m dispute








Government retrieved the penalty  from the  project’s initial P433 million   contract  sum in November 2012 as a contract default penalty. This followed the termination of  Sinohydro’s Sir Seretse Khama International Airport (SSKIA) contract in July 2012 for “ failure to complete the expansion of the airport within stipulated time frames and cost estimates”.

In a matter heard by Justice  Michael Leburu last week, Sinohdryo is seeking the High Court to order government to  pay back  the P43 million, and  deposit the monies  into a mutually held account as directed by the Dispute Adjudication Board(DAB).

The performance bond , which acts as a guarantee against the failure of the other party to meet obligations specified in a contract, represents 10 percent of the initial contract sum of  P433 million before costs overruns  pushed to  amount  to P555 million. In the High Court matter, Sinohydro attorneys  Bookbinders Business Law  are seeking the courts to compel government to comply with a May 2013 decision by the DAB to deposit the P43 million into an escrow account from which any state’s claims  for remedial or  outstanding works on the incomplete airport project against the Chinese  company can be paid out from.

Bookbinder is acting on instruction from a founding affidavit by a Sinohydro executive project manager Pan Chunyu.

Following termination of the contract  in July 2012, government retrieved the P43 million bond  in November 2012 , before the matter was taken to the DAB, which declared the termination lawful. It however  also ordered that the bond funds be transferred back to an escrow account.

Representing Sinohydro,  Msiya Kindiano of Bookbinders told the court that government did not raise any objection to the DAB decision within the stipulated 28 days after the May 2013 verdict thus rendering the decision  final and binding.

“Government and Sinohydro established  a DAB  which heard representation of both parties and furnished them with a decision on May, 6, 2013.  The State did not  raise any complaint through issuance of a notice of dissatisfaction. In this regard we are seeking the court to compel government to comply to the DAB decision and deposit the P43 million sum into an escrow account to be opened under the joint names and signatories of Sinohydro and the ministry of infrastructure science and development. As ordered by the DAB,  these funds are to be utilised by solely to reimburse government for any claims against Sinohydro that are duly processesed and approved by the project engineer,” argued Kindiano.

 According to the DAB verdict, any funds  that remain after all government claims from the perfomance bonds, will be transfered to the Chinese company. While government did not contest  the DAB decision,

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Sinohydro says it disputed  the board’s decision to declare the contract termination lawful, a matter that has now been referred for arbitration before the International Chamber of Commerce (ICC) in London.

The project, which included construction of a new terminal building and the expansion of the runway, was supposed to be completed by May 2010. However it was still incomplete the time of termination in July 2012. At the time of the termination, government insisted that the project was 95 percent complete.

Apart from the P43 millon performance bond, government also retrieved P21 million from the project’s  contract sum, through a retention bond which was held with Standard Chartered bank.

The retention bond is funds that the employers retains as guarantee that the contractor carries out all the necessary work to correct structural work and other defects discovered after completion of a contract, even if full payment has been made to the contractor.  In defense, senior state counselor Charles Gulubane of the Attorney General chambers  asked Juctice Leburu to strike  out the matter on the basis that a similar case is still before a another competent court, that is the International Chamber of Commerce (ICC).

Gulubane said proceeding with the case in the local courts is tantamount  to running  a parrallel matter to the one before the ICC, which will decide  the legality of the contract termination and subsequently  determine how the perfomance bond in dispute should be handled.

Gulubane also sought to punch holes into Sinohydro’s matter, arguing that the case was at the onset  fundmentally based on a founding affidavit by an employee, Pan Chunyu,  who was not authorised by the company’s board directors to any institute legal proceedings  which can possibly expose the company to ligation costs.

According to the state attoney,  the Sinohydro case was initially filed on January 15 this year, but was not accompanied by a  company resolution, as is trite law with an application by unnatural person such as companies. “The intial application was only accompanied by the founding affidavit of a certain Pan Chunyu, who purports to be the company’s  executive project manager.

Two months later, questions were raised by the responded,  the applicant filed and served on the respondent a company resolution dated 28th January 2014 purpotedly authorising Pan  Chunyu, as of that date, to act on its behalf. It is therefore the  State’s argument that at the time of filing  of the case on the 15th of January, the respondent did not have proper authorisation from the company as nothing was filed of record  with a trace of any authority stemming from the board of directors at Sinohydro,’ he said.

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