A 2014 decision not to move into a leased Cape Town building citing tender irregularities could cost the Commission for Conciliation, Mediation and Arbitration (CCMA) about R80 million if the property owner gets his way.
The R100 million 10-year lease agreement, signed in 2013 for the building that was never occupied, has been the subject of a legal wrangle between the Milestone Property Group and the CCMA.
Last week the CCMA lost its bid to have the Johannesburg High Court set aside its decision to enter into the lease agreement with Milestone, owned by Oscar Phoku. The CCMA also failed to get the court to declare the lease agreement invalid.
But the battle continues as Milestone demands the CCMA pay about R80 million in damages.
The lease drama began in 2014 when the CCMA could not move into the building at the agreed time because of allegedly incomplete renovations.
In her judgment last week, Judge Maletsatsi Mahalelo said the lease was to start on March 1 2014, but this date was shifted to September 1, when Nedbank, which lent Phoku R33 million to buy the building, confirmed to the CCMA that the space would be ready.
But a few days before it was supposed to move in the CCMA told Milestone it was “considering not taking occupation of the building and that it was also considering to apply to have the bid set aside because of the irregularities with regard to the decision to award the tender” to Phoku’s company.
In a September 2015 presentation to the parliamentary portfolio committee on labour, the CCMA told MPs that a 2014 forensic audit found irregularities with how Milestone won the tender.
The committee heard that the findings included “perceived bid evaluation committee bias in favour of Milestone” and “functionality points applied incorrectly”.
“The CCMA contends it was misled by its supply chain manager and that it would not have awarded the bid to Milestone had it known the specifications of the bid had changed; that the points have been incorrectly scored…” Mahalelo’s judgment reads.
But the judgment further noted that when it became aware of the “error” in awarding the tender, the CCMA “took no steps to review its decision to award Milestone the tender, nor did it give any indications to Milestone that there was an error in the points allocation”.
Instead, the CCMA engaged extensively with the company to get the premises ready for occupation.
Mahalelo said Milestone relied on the contract and had “incurred expenses to prepare the building for occupation”.
“Milestone sold the building to a third party, it says, at a considerable loss as the CCMA refused to pay rent and it would therefore not be in position to continue repaying the loan owing to Nedbank,” Mahlalelo found.
Phoku’s attorney Kuvashen Padayachee said the judgment “vindicates our client’s argument that there was nothing untoward in the tender process and that this is an ordinary commercial dispute that has been perverted to use our client as a scapegoat for the CCMA’s tardiness”.
Padayachee said Milestone should not bear the brunt of the CCMA employees’ “reckless conduct”, and the company “instituted an action to recover its losses”.
CCMA spokesperson Dumisani Mavundla did not respond to questions about whether it would defend Milestone’s R80 million lawsuit or appeal the judgment, only saying: “The CCMA is currently studying the judgment and will respond in due course.”