Developers of The Leonardo ordered to pay Aveng R81m

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31-05-2023
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Moneyweb
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But dispute the decision, which now goes to arbitration.

An amount of R81.4 million is payable to JSE-listed Aveng by the developers of the R2 billion multi-use high-rise development The Leonardo in Sandton in terms of an award by an adjudicator.

The adjudicator reconciled various disputes between the contractor – Aveng Africa trading as Aveng Grinaker-LTA – and Seventy Five on Maude, the developer of The Leonardo for the Legacy Group.

Aveng has issued a high court application to enforce the decision of Advocate Kevin Trisk, who reconciled the certified amount owing to Aveng Africa by Seventy Five On Maude as R81.4 million.

But Seventy Five On Maude, which concluded a building contract with Aveng Africa on 1 December 2015 for the construction of The Leonardo, is disputing Trisk’s decision and the matter has been referred to arbitration.

This emerged in a judgment and order handed down in the Johannesburg High Court by Judge Lester Adams on Friday, confirming an arbitration award by retired Judge Tom Cloete in terms of which Aveng Africa was ordered to pay Seventy Five on Maude R23.64 million plus Vat and interest as well as the costs of opposing the application.

It’s complicated …

Seventy Five On Maude terminated Aveng Africa’s contract on 6 January 2020 and subsequently called on the contract guarantee of R87 million.

The insurer paid Seventy Five on Maude the guarantee amount and issued a letter of demand claiming repayment from Aveng Africa, which in turn paid the insurer.

Judge Adams said Aveng Africa was obliged to repay Seventy Five on Maude the R23 million, which according to the arbitrator’s findings had been incorrectly ordered in the preceding adjudication to be paid to Aveng Africa (and was paid to Aveng Africa).

He said Seventy Five on Maude was seeking to make that arbitration award an order of court.

The judge also said Aveng Africa does not dispute the validity of the award and accepts liability for payment of the R23 million in terms of the award. However …

He said Aveng Africa opposed the application on the basis that Seventy Five on Maude is not entitled to an order for payment of the R23 million because this amount is no longer due and payable for three reasons.

These are that:

1. It has already been accounted for in a corrected interim payment certificate in Aveng Africa’s favour in terms of which a total sum of R417.25 million is due by Seventy Five on Maude to Aveng Africa;
2. The amounts owing to Seventy Five on Maude have been extinguished by virtue of set-off; or
3. The payment of the award should be dealt with in the final account and in the final payment certificate process, as provided for in the agreement.

Judge Adams said the issues to be considered in the application are therefore whether the grounds of opposition raised by Aveng Africa are valid and whether they preclude Seventy Five on Maude from obtaining an order to have the arbitral award made an order of court.

Who terminated the contract?

He said Aveng Africa’s opposition to Seventy Five on Maude’s application is based on facts that are, by and large, common cause.

These are that the agreement between the parties was terminated on 6 January 2020, and that the parties are in dispute about whether the termination was because of Seventy Five on Maude or Aveng Africa.

“That matter and the related disputes have been referred to arbitration before retired Justice [Brian] Southwood,” he said.

Judge Adams added that Seventy Five on Maude on 15 December 2021 – almost two years after the cancellation of the agreement – claimed damages from Aveng Africa that it allegedly suffered as a result of the termination of the contract.

Damages of R250m ‘corrected’ to R417m

He said the principal agent then issued an interim payment certificate for the recovery of these damages on 28 December 2021, which after the completion of the adjudication process before Trisk on 24 June 2022, reflected that about R417 million was payable by Seventy Five on Maude to Aveng Africa.

He said by 24 June 2022, the initial interim payment certificate (IPC) by the principal agent certified that an amount of R250 million owing to Seventy Five on Maude by Aveng Africa had been ‘corrected’ by the adjudicator to an IPC, which certified that an amount of about R417 million was owing by Seventy Five on Maude to Aveng Africa.

He said Trisk set out in his decision what the net effect of the corrected IPC was when the three previous IPCs were taken into account.

The reconciliation showed that an amount of R81 429 911.93 is payable to Aveng Africa by Seventy Five on Maude, resulting in the application to enforce the adjudication decision and dispute over this decision that has now been referred to arbitration.

However, Judge Adams said that unlike the arbitral award of retired Judge Cloete, which is final, unimpeachable and unassailable, the adjudicator’s decision in IPC50 is pending arbitration.

He said it is possible the adjudicator’s decision will be overturned in the arbitration proceedings, in which case Seventy Five on Maude would at the very least then become entitled to have the arbitrator’s award of Judge Cloete made an order of court.

“The point is simply that the arbitral award, because there is no objection to its validity, stands and will remain in force indefinitely,” he said.

“And for this reason alone, no harm will be done by it being made an order of court.

“The same cannot be said of the adjudicator’s decision, the validity of which is ardently disputed by the applicant [Seventy Five on Maude] and which is the subject of a pending arbitration.”

Range of claims

In its annual financial statements for the year to end-June 2022, Aveng said it was presently in dispute with a client, without naming Seventy Five on Maude, for various matters.

These include extension of time claims, escalation claims, claims relating to an agreed penalty-free period, a claim relating to defective workmanship, and a claim relating to basement penalties, among others.

Aveng said the various claims are in various stages of dispute resolution processes and will have an impact on the final account dispute, but the directors believe that all known liabilities have been recognised and that adequate provisions have been recognised.

Aveng in 2019 sold Grinaker-LTA, its former southern African construction and engineering business, to the black-owned and controlled Laula Consortium.