Plans to sue construction companies are gaining momentum - Leading Construction and Building Group

CONTACT: 082 509 3022
Go to content

Main menu:

IDEAS & FAQ > Construction Articles & FAQ

Plans to sue construction companies are gaining momentum
BY AMANDA VISSER, 16 JANUARY 2014, 06:29

THE move to bring civil claims against construction firms which last year paid a collective R1.46bn fine for bid-rigging and collusion is gaining momentum.

The Competition Tribunal confirmed on Wednesday that it had received requests from the Department of Economic Development for 64 notices that will certify the prohibited conduct by construction firms.

The certificates are necessary for a party such as the department to approach the high courts for civil damages stemming from collusive tendering by the construction firms with projects undertaken for the government.

During the fast-track process introduced by the Competition Commission in 2011, 21 firms disclosed about 300 projects worth R47bn, of which 140 were eligible for settlements.

The tribunal last year issued close to 40 certificates.

Without the fast-track process companies would have been locked in litigation with the commission for years at huge financial and reputational costs, knowing that a guilty finding would inevitably enable harmed parties to proceed with civil claims.

The fast-track process assured the companies lighter administrative penalties than would otherwise have been the case.

Murray & Roberts (M&R) communications executive Ed Jardim said on Wednesday that the company was aware of the department’s intention to bring civil damage claims against certain companies. M&R had received no communication from the department, and no claim has been initiated against the firm. M&R has made no provision for any claims. Other construction companies, as well as the department did not react to questions from Business Day.

The South African Local Government Association (Salga) indicated last year that at least six municipalities were considering civil damage claims. Salga said it wanted to ensure that the R1.46bn fine was appropriate, given that projects worth R28bn were involved, of which R13bn related to projects for municipalities. It said yesterday that it had made little progress on the matters since last year, and could not say whether municipalities were continuing under their own steam.

University of the Witwatersrand law school professor Kasturi Moodaliyar said litigation for civil damages was expensive and the time before the courts long, unlike in the US where class action and damage claims are far more prevalent.

Prof Moodaliyar said that in the case of the construction damage claims, the harm done was project based, and the municipalities would have to bring separate cases. In the case of the bread and construction cartels evidence presented to the tribunal already showed that harm was done and c laimants could use that evidence and would only have to prove the quantum of the harm.

She said that because not one competition damage claim case has run its course through the South African courts, firms were reluctant to be the first.

Webber Wentzel partner Shawn van der Meulen said the hardest part of the construction cartel claims will be to quantify the value of the damages. It will require substantial analyses.

In South Africa, only Nationwide and Comair brought civil claims against South African Airways after the tribunal found the national carrier guilty of abuse of dominance. Nationwide settled out of court in one matter, but is pursuing another claim, as is Comair.

Mr van der Meulen said US courts are allowed to award treble damages if they find against a firm, which means they can order it to pay three times the value of the damages.

"That is a huge incentive for companies to press on with their claims. If successful, it is almost like winning the lottery. Our law, however, does not provide for that kind of damages.

"For our firms it is a very difficult and expensive process to try and prove a claim of which the outcome is very uncertain," Mr van der Meulen said.

Time for the big construction companies to stop making the "big" bucks and give the small and emerging contractors a seat at the table. See details of Cape based small and emerging builders and other specialised contractors
and/or Johannesburg based small and emerging builders and other specialised contractors

Back to content | Back to main menu