City of Cape Town faces more legal action

Hot on the heels of losing a court case for the way it handled a beach cleaning tender and being ordered to pay legal costs of up to R1.8 million, the City of Cape Town is again facing legal action for the way it has handled one of its multimillion-rand MyCiTi contracts. Lumen Technologies, the company that was axed in February by the city because of “non-performance”, has confirmed that it is still pursuing legal action against the city, which could include a claim of R50m for damages. Lumen’s Sedicka Chilwan said the company, which was awarded the R234m contract to operate and maintain the software and hardware of the MyCiTi bus service, rejected the city’s cancellation of its contract.

The company has also accused Melissa Whitehead, the commissioner of transport for Cape Town, of misconduct. But the allegation, which was considered in-committee during last week’s controversial council meeting where the ANC were barred from attending, was reportedly dismissed by those who were present. “The complaint was dismissed by council and the commissioner of transport for Cape Town is not under investigation and has not been suspended,” Brett Herron, the mayoral committee member for transport, said on Monday. But opposition parties who were present are concerned that the allegations against Whitehead may still lead to yet another costly court battle using ratepayers’ money. One warned that the city had only recently lost its court battles against Beach Clean, at huge cost to the ratepayer.

In this case, the city refused to investigate allegations of corruption and fraud internally, despite attempts by councillors from the opposition parties to get the mayor to intervene. The city denied then that there was any basis for an investigation and Beach Clean took the matter to the high court. In Thursday’s council meeting, one of the questions raised by councillors present was whether all mediation and arbitration options were exhausted before Whitehead recommended to the city manager that Lumen’s contract should be terminated. One of the opposition parties said “decisions are first made by city management and thereafter we, as the council, must face the problems and obviously at the ratepayers’ expense”. Other councillors cautioned that the city’s appointment of a new service provider to take over from Lumen could also be open to a court challenge, as the city had failed to provide the required information to all the bidders during the briefing session.

Beach Clean expressed similar concerns about the tender process during its court applications against the city. Beach Clean’s Rogerio Viana said it had concerns about the way the tender process was handled. These included evidence suggesting that some of the other bidders had access to confidential information about his prices. Beach Clean had been cleaning the city’s beaches for 14 years before the tender was advertised in 2012. Cope’s JC Krynauw appealed to the mayor to investigate the tender process and conduct of officials involved. But the city said there was no basis for an investigation and the tender was awarded to a Port Elizabeth-based company, Khazimla Cleaning and Gardening Services. Viana took the matter to the High Court and the judge ruled that the city had to give Beach Clean an opportunity to provide the required information and that it should set aside the contract awarded to Khazimla pending a review of all the bids. The city then decided to cancel the beach cleaning tender.

Viana took the city to court again and last month Judge Karrisha Pillay ordered the city to award the contract to Beach Clean. “How many more orders (and in particular, cost orders) is our client going to have to obtain, before the city complies with the orders obtained against it, which has come at a great expense to our client and that of the ratepayer (who will end up funding the adverse cost orders obtained against the city),” Rael Gootkin, a director of Werksmans Attorneys, said. The two cost orders, plus the city’s own attorney and client cost, would be in the region of R1.5m to R1.8m. Meanwhile, the city agreed that there was some basis to the allegations of corruption and Speaker Dirk Smit has appointed KPMG to do an independent forensic investigation of the handling of the beach cleaning tender.

Lumen’s charges against Whitehead included general financial malpractice, of breaching clauses of the code of conduct for municipal staff members and the Municipal Finance Management Act. The city said it was forced to cancel the contract because of non-performance by Lumen. Whitehead said after the city announced its intention to cancel the contract that Lumen had subcontracted most of the work after winning the tender. It also failed to complete the overall finalisation of the system.