Companies

Garden City Mall Sh606m row with contractor sucks in Equity

GARDEN

The new Garden City Mall on Thika Superhighway in Nairobi on May 28. PHOTO | FILE

Equity Bank has blamed its failure to pay the owners of Garden City Mall a $5.496 million (Sh606 million) performance bond on a court order obtained by contractor of the shopping complex, Sinohydro.

The lender says Sinohydro obtained the court order barring it from disbursing the funds before queries that it had raised regarding the mall’s demand for the amount had been answered.

Garden City has accused Equity Bank of colluding with Sinohydro to block payment of the performance bond.

The performance bond was to be cashed by the mall owners in the event they were not satisfied with Sinohydro’s work.

Garden City has raised issue with changes in some materials that were to be used in the construction, and with the delayed completion of the mall.

Equity Bank holds that Garden City’s demand was sent through the letterhead of a Mauritian company called CIM Corporate Service and not that of Garden City Retail.

CIM is one of Garden City Retail’s sister companies. Equity Bank adds that Sinohydro obtained the court order before clarifying the letterhead mix-up.

Sinohydro has sued Garden City Retail and Equity Bank stopping them from cashing the performance bond until the dispute over delays in completion have been determined by an arbiter.

“Equity Bank was duty bound to authenticate the demand and establish why the same came from a different company from Garden City Retail before paying out the sums. Equity Bank promptly wrote back to Garden City Retail and as such cannot be blamed for not paying out the monies immediately,” the bank says.

Garden City has slapped the Chinese contractor with a Sh1.2 billion counterclaim it says arose from clauses of the construction deal which provided for penalties in the event Sinohydro failed to complete the mega project in the agreed one-year period.

READ: Garden City owners now sue Chinese builder of mall

Garden City and Sinohydro have agreed to appear before an arbitrator but are at a stalemate over the performance bond, which was to be issued irrespective of a dispute between the two parties.

Sinohydro was to initially complete construction in October last year, but sought an extension to January before asking for a May 2015 deadline.

Garden City Retail’s refusal to grant the Chinese firm another extension in January has seen Sinohydro rack up the Sh1.2 billion penalty going by the clauses in the contract that are calculated on a daily basis.

Sinohydro is yet to complete the works and Garden City says it has been forced to contract another firm to take over the project.

Equity Bank has asked the High Court to strike it out of the suit, arguing that the dispute is between Garden City Retail and Sinohydro, and that it is an “innocent bystander” in the battle between developer and contractor.

Garden City Retail says it is facing potential lawsuits from tenants who had been promised a swift and timely completion. It adds that the delay has stalled a plan to customise space for some tenants like retail chain Game, which opened its first branch in Kenya at Garden City in May.

The mall owner adds that its contracts with tenants also had clauses on penalties in the event completion of the mall was delayed and that it will be forced to bear the brunt if Sinohydro is not compelled to pay the damages it is seeking.