Western Province Rugby Football Union (WPRFU) will have to answer to a damages claim from Flyt Property Investment, a company that reached an agreement with the Union in July 2020 to, among other things, redevelop the Newlands stadium.
WPRFU have since reneged on that deal choosing instead to forge ahead with partnership talks with MVM Holdings.
Flyt have asked WPRFU to settle the dispute with an appropriate damages offer and warned that failure to do so would result in legal action being taken.
Flyt asks WPRFU to pay damages
The rugby union approached the investment group based in Cape Town to help them avoid defaulting on loans from Remgro (R58-million) and Investec (R50-million).
WPRFU President Zelt Marais has consistently denied negotiating any deals in bad faith despite a string of boardroom resignations since last year.
The property investment group’s CEO Zane de Decker said in a statement that Flyt would be pursuing a damages claim over the alleged “repudiation and breach of the binding agreements” by WPRFU, in a statement issued on Thursday 10 December 2020.
“Today, Flyt Property Investment and an associated company Dream World Investments (‘the Flyt Group’) formally lodged a claim with the Western Province Rugby Football Union for damages,” De Decker.
“The Flyt Group’s strong balance sheet and ability to fund a deal of this magnitude without bank finance – and the associated delays – meant that it could move swiftly to consider advancing the funds that WPRFU was seeking.
“The Flyt Group and WPRFU’s legal teams and advisors worked 24/7 during June to negotiate a deal that suited both parties. It is well known that the development transaction between WPRFU and the Flyt Group that was validly concluded in July 2020 would use the WPRFU assets, including the land on which Newlands rugby stadium and Brookside rugby club are situated, more efficiently for the Union’s short-, medium- and long-term economic viability. Critically, the concluded deal would provide the WPRFU with a much-needed and sustainable financial lifeline as a 50:50 partner in all economic benefits derived from the development in the future.
“WPRFU president Zelt Marais called the successfully concluded transaction ‘the deal of the century’. It therefore comes as a surprise that the WPRFU now appears to be seeking a way out of the deal that it sought and on a land value which it determined, which was also concluded after a comprehensive and transparent approval process.
“WPRFU and the Flyt Group concluded valid agreements on 10 July 2020 after all required WPRFU forums supported the deal by an ‘overwhelming majority’. The WPRFU’s financial advisors presented a comprehensive analysis to the various decision-making bodies of the Union that approved the transaction. This included the Council on 30 June 2020, the Union on 8 July 2020, the Executive Committee on 8 July 2020, and the Trustees on 9 July 2020. The entire process was overseen and guided by the WPRFU’s legal team at STBB, its auditors BDO and its professional advisory team.
“The Flyt Group has met all requirements of the agreements to date. These include the payment of the R112-million secured loan to WPRFU; the incorporation of the Newlands and Brookside DevCos; and the appointment of a board of directors for both companies.”
Shifting the goalposts
According to Flyt, WPRFU have derailed the deal by trying to inflate the price of the agreement, six months after the original agreement was reached.
“Despite compliance by the Flyt Group with the agreements concluded, the WPRFU has inexplicably chosen to replace STBB as its legal advisors with a new litigation attorney, and has deliberately reneged on the transaction. The WPRFU has done so by now objecting to the agreed land value forming part of the substance of the transaction, and through its conduct is acting in flagrant disregard for the binding nature of the agreements.
“It is important to point out that the land value agreed on was proposed by the WPRFU, not the Flyt Group. This value has subsequently been incorporated into the Newlands and Brookside DevCo’s that are co-owned by the WPRFU and the Flyt Group. To demand that the price be increased six months after the deal has been concluded is simply outrageous,” De Decker added.
“The Flyt Group has taken comprehensive legal advice from senior counsel, and is assured of its rights under the agreements duly concluded with the WPRFU. Accordingly, the Flyt Group will now institute a claim for damages under the agreements as it is entitled to do.
“The Flyt Group is in the process of quantifying its considerable damages which, in addition to its direct costs, will include the losses sustained as a result of the lost opportunity to develop both the Newlands Stadium and Brookside property as the parties intended.
“The Flyt Group had looked forward to working with the WPRFU to co-develop the Newlands and Brookside properties and in this way support the Union’s commitment to bolstering rugby in poorer communities and ensuring a sustainable future for Western Province rugby.
“However, if WPRFU fails to compensate the Flyt Group for its damages, it will have no choice but to approach the appropriate forum for relief to compel payment. This will include calling up the secured loans that the Flyt Group holds over the Newlands stadium and other properties.”
