FIFA’s Oceania federation was ordered to pay $411,900 due on construction of its Auckland-based training facility while alleging the construction contract was tainted by fraud and corruption.
After a PwC investigation uncovered financial irregularities at Oceania, then president David Chung and secretary general Tai Nicholas both resigned. A Serious Fraud Office investigation commenced. Meanwhile, Oceania refused to make progress payments to engineering company Engineered Solutions & Systems Ltd on $3.65 million contract signed in 2017 for construction of a building intended to house Oceania offices, conference rooms, changing rooms and a gym. Engineered Solutions is owned by Mr Shakti Singh and his wife Nirmala.
The High Court was told of allegations that there had been fraudulent and/or collusive tendering by the main contractors, including Engineered Solutions, and that Engineered Solutions was party to breaches by Mr Chung and/or Mr Nicholas of fiduciary duties they owed their employer Oceania. Evidence was given of significant property dealings involving a syndicate of investors including Mr Singh, Mr Chung and Mr Nicholas after the $3.65 million contract was signed. One industry expert expressed surprise at provisions in the construction contract: a substantial up-front payment and the balance payable in ten equal instalments scheduled without the need for certification that work completed justified payment. The High Court was told investigators have found two signed contracts, with differing key terms.
Associate judge Smith ruled Oceania was required to honour ‘payment claims’ made by Engineered Solutions on its construction contract under the Constructions Contracts Act. The Act imposes a ‘pay now, argue later’ regime. Builders can enforce their contractual right to payment, with the merits of any dispute sorted out later. This rule was introduced to protect contractors’ cash flow.
Oceania said it would create a substantial injustice if ordered to pay; there was a ‘substantial dispute’ as to whether Engineered Solutions was entitled to anything. Oceania’s investigations have been underway since 2017, Judge Smith said. Engineered Solutions cannot be expected to wait indefinitely until investigations are complete. Immediate payment of the claimed amount was required, or Oceania put into liquidation. Engineered Solutions’ contract was terminated in September 2018.
Construction of Oceania’s Auckland headquarters is funded by a ten million dollar interest-free FIFA loan. Building work is incomplete, with some $1.7 million spent to date.
Oceania Football Confederation Inc v. Engineered Solutions & Systems Ltd – High Court (21.06.19)
19.119