Construction and engineering company Aveng’s efforts to avoid paying penalties related to completing construction work on The Leonardo, a 55-floor apartment and commercial building, on time, look like they have run out of road.
The construction group had been appointed to build a large portion of the building, which was designed to be the tallest in Africa, a few years ago. However, it battled to meet each construction deadline.
Then in 2020, the hard economic lockdown halted construction and brought all kinds of challenges to The Leonardo. Potential buyers of apartments changed their minds given uncertainty around keeping jobs, receiving full salaries and being able to raise finance. The developer of The Leonardo; The Legacy Group ended up taking Aveng to court in the capacity of Seventy Five on Maude and penalties were opposed on Aveng.
By May 2022, Aveng had failed in its application before the high court in Johannesburg to set aside the arbitration award given by retired Supreme Court of Appeal judge Robert Nugent, the arbitrator, in February 2021 in favour of Seventy Five on Maude.
The arbitrator found that Seventy Five on Maude was entitled to levy a penalty from May 1 2019, when the agreed construction work was not completed. Aveng and Seventy Five on Maude’s contract had been concluded on October 25 2015 in terms of which Aveng was appointed to construct phase one of the basement of The Leonardo.
Aveng was also appointed to construct phase two of the project, which consisted of the podium and tower portion of The Leonardo.
The penalty would be R450,000 a day after the completion date had not been met. The initial agreed date for practical completion of both phases was May 14 2018. There would also be moratorium on penalties.
But, given potential risks, Seventy Five on Maude granted a number of extensions for the practical completion.
Aveng then contended that contrary to the 60-day moratorium on penalties, Seventy Five on Maude levied penalties anyway from May 1 2019 to June 29 2019 at R450,000 a day.
Seventy Five on Maude continued to levy penalties until January 6 2020 and purported to terminate the agreement.
Aveng is now arguing that the arbitrator exceeded his powers and committed a gross irregularity in the conduct of the arbitration proceedings.
The high court said the issue for determination was if the arbitrator exceeded his powers in making the award that Seventy Five on Maude was entitled to levy the agreed penalty from May 1 2019.
The high court then ruled against Aveng, saying the practical completion date for the company’s work was clearly set out by Seventy Five on Maude to be February 28 2019, which was supported by evidence before the arbitration tribunal.
“The arbitration tribunal, correctly in my view, made an award that 28 February 2019 was the practical completion date. It follows therefore that the arbitration tribunal did not exceed the scope of its authority when it gave the award that 28 February 2019 was the practical completion date,” judge Marcus Senyatsi said in his findings.