Johannesburg - Delatoy Group Holdings allegedly restructured the group to limit the liability of a group entity from a Competition Commission penalty for contraventions of the Competition Act on a pipeline project, the Competition Tribunal heard yesterday.
The commission has applied to the tribunal for a declaration that Delatoy Investments, previously named Shearwater Construction, and 10 other respondents were jointly and severally liable for the payment of an administrative penalty for a loser’s fee arrangement on a closed tender and to dismiss Delatoy’s further claim that the matter had prescribed.
The case follows agreement being reached between Cycad Pipelines, Shearwater Construction and Phambili Pipelines in February 2008 to inflate their bids for a closed tender for the Thabazimbi Northam pipeline project and that the winning bidder would pay a loser’s fee to the losing bidders.
‘Puppet masters’
The project was for the construction of an about 30.4km pipeline for the Pilansburg Platinum mine at Northam.
Cycad was awarded the tender and paid a loser’s fee of about R1.14 million each to Shearwater and Phambili.
The tribunal in August last year confirmed a consent agreement between Cycad Pipelines and the commission in terms of which Cycad agreed to pay a fine of R3.39m.
The commission said that neither the Delatoy Group nor Delatoy Investments participated in the 2009 construction fast-track settlement process or took up a further offer by the commission in 2011, after a second round of investigations in the construction sector, to settle the contraventions of the Competition Act.
David Unterhalter, a counsel for the commission, said yesterday there was a scheme or strategy to avoid liability and to conceal the collusive agreement, with the loser’s fee paid to ATPD on behalf of Delatoy Investments. Unterhalter said ATPD, which in 2008 was owned equally and jointly by the PDD Family Trust of Patrick Delamere and the Andrew Toy Family Trust, issued the fraudulent and fictitious invoices on behalf of Delatoy Investments that were disguised as being for plant hire.
He referred to Delamere and Toy as the “puppet masters” of the entities in the Delatoy group and scheme to limit Delatoy Investments’ liability.
Unterhalter said Delamere’s conduct showed he knew that Delatoy Investments was party to an infringement of the Competition Act because otherwise there would not have been any reason to disguise the transaction under which payment took place.
“He (Delamere) had knowledge of unlawfulness and once he had that knowledge, as a director, he acted with that knowledge to strip out the dividends from the company to defeat any claim for administrative penalties,” he said.
Unterhalter said significant assets existed in Delatoy Investments in 2010 and 2011 but after massive dividends were paid out of R30m in 2011, a balance of only R1 000 was left in Delatoy Investments.
Depletion of assets
He said the commission was “very disturbed” this depletion of assets occurred in the face of knowledge of unlawfulness and a dividend strip to ensure the competition authorities were left with nothing.
Pierre Rossouw, a counsel for Delatoy, said Delatoy Investments had always admitted it was guilty of a restrictive practice but what was at issue was whether all the other entities in Delatoy Group Holdings could be held liable.
Rossouw stressed that only Delatoy Investments contravened the Competition Act and none of the other entities formed part of the loser’s fee arrangement or were guilty of contravening the Competition Act.
“An administrative penalty can only be imposed on Shearwater Construction, now named Delatoy Investments. There is no misuse of corporate identity,” he said.
The tribunal reserved judgment.
BUSINESS REPORT