Govt wins against Sinohydro
Mpho Mokwape | Friday October 30, 2015 15:53
Yesterday the Court of Appeal (CoA) ruled in favour of the government following a 2014 decision by Lobatse High Court Justice, Michael Leburu, which required government to pay the P43m into a mutually held escrow account as directed by the Dispute Adjudication Board (DAB).
The money was to be held into the account, and thereafter be used to reimburse the government for any claims duly processed and approved against Sinohydro. The balance of these funds was to go to the Chinese company.
The dispute arose after government terminated Sinohydro’s contract for the SSKIA’s expansion in July 2012 for “failing to complete the expansion of the airport within stipulated time frame and cost estimates.”
When delivering judgement, Justice John Foxcroft upheld the state’s appeal saying the trial court had erred in a number of points.
He explained that the dispute between the two parties regarding the termination of the contract was still pending before the International Chamber of Commerce (ICC) following the finding of the Dispute Adjudication Board (DAB).
Foxcroft said the contractor intended proceeding with the ICC arbitration in order to obtain a decision and set aside the DAB decision.
“The court erred in that aspect because the contractor seemed confused as to what they wanted because in particular they wanted disputed funds returned to them and not held in an escrow account while at the same time they wanted the DAB decision to be made order of court,” he said.
He said the way the trial court reached a conclusion that the order could be made in the absence of a notice of dissatisfaction from the state was a trivial mistake.
Foxcroft maintained that there was no evidence that the state was happy with such a decision as was suggested by Sinohydro at the trial court and as such without hearing arguments on point was irregular.
He said failure by the state to issue that notice did not mean they were happy in respect to depositing the P43m into an escrow and also that it was not necessary to do as that matter had already been referred to the ICC.
“The order of the court ignored the fact that as a matter of law, Notice of Dissatisfaction served on the state amounted to a referral to the ICC where the whole decision of the DAB would be challenged, including the fate of the sums paid in the discharge of the performance bond,” he said.
He pointed out that it was clear according to the DAB decision that though the funds were to be held in an escrow account, it should remain available to the Employer and to be disbursed in terms of the contract.
On hearing of the severability and the finding that the opening of an escrow account was not pending before the ICC, Foxcroft said the court erred.
He said failure to amicably resolve issues between the parties had the effect of commencing the international arbitration proceedings.
“The judge dealt with the matter just on an equitable basis and without proper hearing he made an order which did not provide for an account to be administered as the DAB had decided and ignored the fact that the contractor was appealing the decision and as such he erred,” he said
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 at the time of termination in July 2012.
Apart from the P43m performance bond, government also retrieved P21m 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.