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[2010] ZAGPJHC 137
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Freeman NO and Another v Eskom Holdings limited (43346/09) [2010] ZAGPJHC 137 (24 April 2010)
SOUTH GAUTENG HIGH COURT,
JOHANNESBURG
REPORTABLE
CASE NO: 43346/09
DATE:23/04/2010
In the matter between:
FREEMAN,
AUGUST WILHELM, N.O.
.......................................
First
Applicant
MATHEBULA,
TIRHANI SITOS de SITOS, N.O.
.................
Second
Applicant
and
ESKOM
HOLDINGS
LIMITED
.........................................................
Respondent
J U D G M E N T
KATHREE-SETILOANE, AJ
:
[1] This is
an application for summary judgment. The summons which cites Eskom
Holdings Limited
(“Eskom”)
as the defendant, and the first and second applicants as the
plaintiffs, sets out two causes two causes of
action which are
pleaded in claims 1 and 2, and arise from the conclusion, on 14 May
2004, of a written engineering and construction
contract (“the
contract”), between Eskom and Transdeco GTMH (Pty) Ltd
(“Transdeco”). The first and second
applicants are cited
in their capacities as joint final liquidators of Transdeco.
[2] The
relevant terms of the contract for purposes of their claim are set
out at paragraphs 4.1 to 4.13 of the particulars of
claim:
“
4.1
It is recorded that the Parties have entered into an agreement as
evidenced by the Notification of Acceptance dated 28 November
2003,
and confirmation to commence work dated 15 March 2004 (the Contract
Date); (see Form of Agreement clause 3.1, annexure A5)
This contract between the Parties comprises the documents
entitled
Agreements
Contract Data
Conditions of Contract
Contract Prices
Works Information (including drawings as listed therein)
Site information
and all the documents, or parts of documents referred to within
any of those documents; (see Form of Agreement clause 4.1, annexure
A5)
The Employer undertakes to fulfil his obligations in terms of
this contract and in particular to pay to the Contractor the amount
due in accordance with the conditions of contract; (see Form of
Agreement clause 6.1, annexure A5);
The
assessment date is 25
th
day of each month (see Contract Data supplied by the Employer
clause 5, annexure A16);
The Project Manager certifies a payment within one week of each
assessment date (see Core clause 51.1, annexure A47);
Each certified payment is made within three weeks of the
assessment date, or if a different period is stated in the Contract
Data, within the period stated (see Core clause 51.2, annexure
A47);
The
period within which payments are made is five (5) weeks (see
Contract Data supplied by the Employer clause 5, annexure A17);
An adjudicator will be jointly appointed in the event of a
dispute; (see Form of Agreement clause 3.2, annexure A5);
The adjudicator will be appointed in accordance with the Data
provided by the Employer and in consultation with yourselves, if
the need arises; (see notification of acceptance clause 6, annexure
A10);
Any dispute arising under or in connection with this contract is
submitted to and settled by the Adjudicator … (see NEC
Engineering and Construction Contract: Core Clauses, clause 90,
annexure A57);
The decision is final and binding unless and until revised by
the tribunal; (see NEC Engineering and Construction Contract: Core
Clauses, clause 90, annexure A57);
The Adjudicator settles the dispute as independent adjudicator
and not as arbitrator. His decision is enforceable as a matter
of
contractual obligation between the Parties and not as arbitral
award; (see NEC Engineering and Construction Contract: Core
Clauses, clause 92.1, annexure A58);
The
Defects Certificate is either a list of defects that the Supervisor
has notified before the defects date which the Contractor
has not
corrected or, if there are no such defects, a statement that there
were none (see Core clause 11.2(16), annexure A39).
”
[3
]
At paragraph 5 of the plaintiffs’ particulars of claim it is
alleged that, in accordance with the terms set out in paragraphs
4.8
to 4.12 of the particulars of claim, Transdeco and Eskom appointed
Adv Gerald Farber SC (“
the
adjudicator
”)
as the adjudicator in terms of the written adjudicator’s
contract between Transdeco, Eskom, and the adjudicator.
A dispute
between Transdeco and Eskom (“
the
first dispute
”)
was submitted to the adjudicator, who issued a written decision (“
the
first decision
”)
on 3 November 2006, and a second dispute between Transdeco and Eskom
(“
the
second dispute
”)
was submitted to the adjudicator, who issued a written decision (“
the
second decision
”)
on 19 November 2006.
[3] The
applicants’ first claim which is set out at paragraphs 6 to 13
of its particulars of claim, is as follows:
“
6.
In terms of Core Clause 51.1 of the contract, a payment certificate
and tax invoice was issued by the defendant and signed by
the
defendant’s project manager Antonio D’Amico and Project
Co-ordinator Masenthle Makhetha respectively on 28 and
30 November
2005.
The certificate certifies retention monies due, owing and
payable to Transdeco of R1 884 411,14, plus Value Added Tax thereon
at 14 per cent amounting to R263 817,56, totalling R2 148 228,70,
A copy of the payment certificate and tax invoice is annexed
marked C.
The
defendant failed to pay the certified sum of R2 148 228, 70.
The aforesaid non-payment was the subject of the first dispute,
referred to the adjudicator by means of a written dispute submission
dated 4 September 2006, a copy of which is annexed marked D.
The adjudicator’s written decision adjudicating the first
dispute (‘the first decision’) was issued by the
adjudicator
on 3 November 2006.
A copy of the first decision is annexed marked E.
The adjudicator’s first decision is that ‘the
supervisor is required to issue the Claimant with the ‘Defects
Certificate’ referred to in clause 11.2.(16) of the agreement
and to release the corresponding retention amounts (see annexure
E20);
In terms of Core Clauses 90 and 92.1 the adjudicator’s
first decision is final and binding and enforceable as a matter of
contractual obligation between Transdeco and the defendant.
The
defendant has issued no defects certificate containing a list of
defects, in terms of Core Clause 11.2(16);
In the premises:
12.1.1 There are no defects that the Supervisor has notified
before the defects date or at all, which the Contractor has not
corrected;
The
‘corresponding retention amount’ payable in terms of
the first decision, is R2 148 228, 70.
In the premises:
13.1 The
sum of R2 148 228, 70 has been due, owing and payable by the
defendant to Transdeco since 3 November 2006;
13.1.1 As a contractual obligation arising from the adjudicator’s
first decision;
Alternatively on the payment certificate rendered payable in
terms of the adjudicator’s first decision;
13.2 The
defendant is obliged to pay interest on R2 148 229, 70 at 15, 5 per
cent per annum from 3 November 2006 to date of payment.
”
[4] The
applicants’ second claim, which is set out at paragraphs 14 to
21.2 of the particulars of claim, is as follows:
“
14.
On or about 19 September 2006 Transdeco referred a disputed claim
for payment by the defendant (‘the second dispute’),
for
adjudication by the adjudicator by means of a written dispute
submission dated 19 September 2006, a copy of which is annexed
marked
F.
The adjudicator’s written decision adjudicating the second
dispute (‘the second decision’) was issued by the
adjudicator on 19 November 2006.
15.
1 A
copy of the second decision is annexed marked G.
16. The adjudicator’s second decision states: ‘It is
plain that the relief sought by Transdeco, as formulated in paragraph
4 of its submissions of 19 September 2006, is well grounded. In the
circumstances the relief sought in paragraphs 4.1.1.1, 4.1.1.2
and
4.1.1.3 must be acceded to.’
Transdeco’s submissions of 19 September 2006 (annexure F)
state in paragraph 4.1.1.2 thereof that Transdeco asks the
adjudicator
to ‘Instruct Eskom to effect such payments now due
and owing to us, totalling R1 992 752,08 excluding VAT as detailed
in
Appendix 1: Our notification of the dispute’ (see annexure
F8);
In terms of Core Clauses 90 and 92.1 the adjudicator’s
second decision is final and binding and enforceable as a matter of
contractual obligation between Transdeco and the defendant.
R1 992
752
,
08 plus VAT amounting to R278 985, 29, totals R2 271 737, 37.
The
defendant has failed to pay Transdeco the sum of R2 271 737
,
37.
In the premises:
21.1 The
sum of R1 992 752, 08 plus VAT amounting to R278 985, 29, totalling
R2 271 737, 37 has been due, owing and payable by
the defendant to
Transdeco since 19 November 2006 as a contractual obligation arising
from the adjudicator’s first decision;
21.2 The
defendant is obliged to pay interest on R2 271 737, 30 at 15, 5 per
cent per annum from 19 November 2006 to date of payment.
”
[
5]
In support of their application for summary judgment, the applicants
filed an affidavit deposed to by Cesare Di Giacomo which
reads as
follows:
“
3.
I was the plaintiff’s managing director at the time
coterminous with the relevant time of the subject matter of the
plaintiff’s
action. As such, I was personally involved in the
management of the entire project on site for the plaintiff, for which
reason
the facts set out in plaintiff’s particulars of claim
fall within my personal knowledge and experience. Accordingly I am
able to swear positively to the facts verifying the causes of action
pleaded in plaintiff’s claims 1 and 2.
I can and
do swear positively to the facts verifying the causes of action set
out in the plaintiff’s claims 1 and 2, and
the amounts claimed
in those claims, as set out in the prayers in the notice of
application for summary judgment.
5. In my
opinion the defendant has no
bona
fide
defence to the plaintiff’s claims 1 and 2, and the defendant’s
notice of intention to defend these claims has been
delivered solely
for the purpose of delay.
”
[6] In its
affidavit resisting summary judgment, Eskom
inter
alia
sets
out the following defences to the applicants’ claim:
“
AD
CLAIM 1
The
plaintiffs’ claim 1 is for the sum of R2 148 228.70 plus
interest at the rate of 15.5 per cent per annum from 3 November
2006
to date of payment.
Claim 1 is
based on ‘a contractual obligation arising from the
adjudicator’s first decision’. In the alternative,
the
plaintiffs’ claim is based on the payment certificate rendered
payable in terms of the adjudicator’s first decision.
The first decision of the adjudicator requires that the
Supervisor issues a Certificate of Defects. Eskom is not the
Supervisor
in terms of the contract.
The
Supervisor has
not issued a Certificate of Defects. Neither has he issued a
certificate that there are no defects. It is not apparent that the
plaintiffs have called on the Supervisor to issue a Certificate of
Defects.
In the
premises, I deny that the adjudicator’s first decision
requires Eskom to issue a Certificate of Defects. Neither
does it
require that Eskom pay to the plaintiffs the amount claimed or any
amount at all.
The
adjudicator’s first decision does not in any way hold that the
defendant is required to pay the plaintiffs the sum claimed
or any
amount at all. In the result, the adjudicator’s first
decision does not create a contractual obligation for the
defendant
to pay the plaintiffs as claimed or at all.
In any event, the payment certificate on which the plaintiffs
rely for payment of the amount claimed does not reflect the sum
claimed in the particulars of claim as the amount owing by the
defendant to the plaintiffs. In the premises, the defendant is
not
indebted to the plaintiffs as claimed or at all
On 20 November 2006 Eskom notified Transdeco that it intended to
refer the first decision of the adjudication to arbitration in
terms
of the contract. The arbitration of this dispute is pending.
AD CLAIM 2
On 4
December 2006 ESKOM notified Transdeco that it was dissatisfied with
the second decision of the adjudicator and that it intended
to refer
the decision to arbitration in terms of the agreement. The
arbitration of the dispute is pending.
In the
premises, I deny that ESKOM is required or to comply with the first
and second decisions of the adjudicator pending arbitration.
REFERRAL
OF ADJUDICATOR’S DECISION
S
TO ARBITRATION
Core
Clause 93.1 of the contract provides that a party dissatisfied with
the decision of the adjudicator may refer a dispute to
the
arbitrator for final determination. On 20 November 2006 and in
accordance with Core Clause 93.1, Eskom notified Transdeco
that it
intended to refer the first decision of the adjudicator to
arbitration. … On 4 December 2006, ESKOM notified Transdeco
that it was not satisfied with the adjudicator’s second
decision and that it intended to refer the dispute to an arbitrator.
…
The parties have agreed that the adjudicator’s first and
second decisions would be referred to former Judge Mr Rex Schalkwyk
for arbitration. … The arbitration of the two disputes is
pending.
Eskom has
always maintained that it is not required or obliged to comply with
the adjudicator’s decision pending final determination
of the
dispute by the arbitrator. The contract does not stipulate that
Eskom is required to comply with the adjudicator’s
decision
pending arbitration. Neither does the decision of the adjudicator
so stipulate...
In the premises, I deny that the defendant is indebted to the
plaintiffs as claimed or at all.
NON-BINDING DECISIONS OF THE ADJUDICATOR
I am advised that the adjudicator’s decisions are only
binding on the parties if the contractual pre-conditions have been
met. One of these was that the relevant time periods were met. The
adjudicator had a period of four weeks from the end of the
period
for providing information, to notify his decisions (Core clause
91.1).
In the case of the first decision, the events and time periods
were the following:
Transdeco gave notification of the first dispute on 29 June
2006.
The adjudicator was appointed on 7 August 2006
Transdeco’s
written first dispute submission was delivered on 4 September
2006
that is four weeks after 7 August 2006.
Transdeco
delivered additional information on 2 October 2006 that is four
weeks after the written submission.
The adjudicator had until 30 October 2006 to deliver his
decisions, in order to comply with the provisions of the contract
and
to render the decision binding on the parties. He notified the
first decision on 3 November 2006.
The first decision is therefore not binding on the parties, and
the adjudicator may decide the third dispute unfettered and
untrammelled
by any previous decision.
The same
position pertains in the case of the second decision. The second
dispute submission was delivered on 20 September 2006.
Additional
information was delivered timeously on 18 October 2006, and the
adjudicator had until 15 November 2006 to notify his
second
decision, but did so on 19 November 2006, out of time.
...
In the
premises, I pray that the court dismisses t
he
application for summary judgment and the defendant is granted leave
to defend the claim.
”
[7
] The
Eskom’s affidavit resisting summary judgment was delivered, two
days out of time, on 23 November 2009. It, therefore,
brought an
application seeking condonation for the late delivery of its
affidavit resisting summary judgment. I now turn to consider
this
application. Generally, an application for condonation will not be
granted unless it is in the interests of justice to do
so.
Two
of the key factors relevant to the interests of justice in a
condonation application will be the explanation given by the
applicant
for his or her delay, and the prospects of success on the
merits.
(Van Wyk v Unitas Hospital
[2007] ZACC 24
;
2008 (2) SA 472
(CC) at para 20; S v
Mercer
[2003] ZACC 22
;
2004 (2) SA 598
(CC) at para 4; Head of Department, Department
of Education, Limpopo Province v Settlers Agricultural High School
and Others 2003
(11) BCLR (CC) at para 11; and Brummer v Gorfil
Brothers Investments (Pty) Ltd and Others
[2000] ZACC 3
;
2000 (2) SA 837
(CC) at
para 3).
[
8] An
application for condonation must set out a full explanation for the
delay, which must cover the entire period of the delay,
and be
reasonable. I am of the view that the explanation provided by Eskom
meets these requirements. In brief Eskom’s explanation
is that
it is a huge corporation and the nature of the plaintiff’s
claim required extensive consultation with various persons
who were
involved with, and had intimate knowledge of, the facts of the
claim, but were not readily available to give instructions.
It was
also necessary to consider voluminous documents that Eskom and
Transdeco exchanged in the course of their dealings with
each other,
and in particular relating to the two decisions of the adjudicator
which formed the basis of the applicants’
two claims. In the
circumstances, it became impossible to obtain instructions and to
enable counsel to finalise the opposing affidavit,
and deliver it by
20 November 2009. Eskom, however, delivered an unsigned copy of the
affidavit to the applicants’ attorney
on 23 November 2009, with
an explanation that it was attending to signature thereof and it
would be served on the morning of 24
November 2009.
[9] I am
satisfied that Eskom’s failure to deliver its affidavit
resisting summary judgment, within the prescribed time limits,
was
not entered solely for the purpose of delay, but was rather brought
about by the various internal consultation processes, which
were
necessary. The delay of two days, in the circumstances, was so
insignificant that the applicant did not suffer any prejudice
as
result of the late delivery of Eskom’s affidavit resisting
summary judgment.
[
10]
There is, however, the other factor of the prospects of success, on
the
the merits,
which must be considered. In order to do so, I will consider
each
of the defences raised by Eskom in its affidavit resisting summary
judgment.
DEFENCES
[11
]
Eskom’s first defence is that the adjudicator’s first
decision requires the “
Supervisor
to issue a Certificate of Defects
”,
which has not been done, and that Eskom is not the supervisor in
terms of the contract. It is the applicants’ contention
that
this defence is flawed as the adjudicator’s first decision
obliges Eskom to pay the retention amount of R1 884 411,14
plus R263
817,56 Value Added Tax (“VAT”) totalling R2 148 228,70,
certified in Eskom’s payment certificate,
less the amounts set
out in the supervisor’s defects certificate. The supervisor is
the employer’s representative,
obliged to issue a defects
certificate on behalf of and for the benefit of the employer. There
is, therefore, no obligation on
Transdeco to call on the supervisor
to do so. Eskom, furthermore, did not issue a defects certificate
containing a list of defects
in terms of Core Clause 11.2(16) of the
contract. The first decision of the adjudicator, accordingly,
obliges Eskom, contractually,
to pay the retention monies without
deduction.
[12] Eskom,
however, contends that the adjudicator’s first decision does
not require it to issue a certificate of defects,
nor does it require
it to pay the applicants the amount claimed or any amount at all. Ms
Baloyi, appearing on behalf of Eskom,
argued that the first decision
of the adjudicator does not order payment in accordance with the
payment certificate and tax invoice
dated, 30 November 2005, and that
the retention amount cannot be determined until the certificate of
defects has been issued.
[13
]
I will deal with these contentions in relation to the relevant
contractual clauses and the first decision of the adjudicator.
It is
clear from a reading of the payment certificate and tax invoice,
which was issued by Eskom, on 30 November 2005, that it
certifies
retention monies due, owing and payable to Transdeco of R1 884
411,14, plus VAT thereon at 14% amounting to R263 817,56,
totalling
R2 148 228,70. The defendant’s failure to pay this amount was
the subject of the first dispute. It was referred
to the adjudicator
on 4 September 2006. The adjudicator’s written decision
adjudicating the first dispute was issued on
3 November 2006. His
decision was that “
the
supervisor is required to issue the Claimant with the ‘Defects
Certificate’ referred to in clause 11.2. (16) Of
the agreement
and to release the corresponding retention amounts
”.
Clause 11.2(16) of the contract describes a defects certificate as
follows:
“
The
Defects Certificate is either a list of Defects that the
Supervisor
has notified before the
defects
date
which the
Contractor
has not corrected or, if there are no such Defects, a statement that
there are none.
”
[14
] It
is common cause that neither a defects certificate, nor a statement
that there are none, was issued by the supervisor. The
applicants are
entitled, in the circumstances, to payment by Eskom of the retention
amounts without deductions, which is R2 148
228.70, which Eskom
failed to pay. There is accordingly no merit in Eskom’s
contention that the first decision of the
adjudicator does not order
payment in accordance with the payment certificate and tax invoice,
dated 30 November 2005, or that
the retention amount cannot be
calculated until the defects certificate has been issued.
[15] There is
likewise, no merit in Eskom’s contention that it is not the
supervisor in terms of the contract, and that it
is not required, in
terms of the adjudicator’s first decision, to issue a
certificate of defects. If one has regard to page
24 of the Contract
Data, which forms part of the contract, “the employer” is
Eskom. It also states that “
[t]he
Supervisor
is to be appointed”
.
It is common cause, in this regard, that the supervisor is Eskom’s
project manager, Antonio D’Amico, and that he
was appointed by
Eskom, thus making him a representative of Eskom. Core Clause 43 of
the contract provides:
“
43.1
The
Contractor
corrects Defects whether or not the
Supervisor
notifies him of them. The
Contractor
corrects notified Defects before the end of the
defect
correction period
.
This period begins at Completion for Defects notified before
Completion and when the Defect is notified for other Defects.
The
Supervisor
issues
the Defects Certificate at the later of the
defects
date
and the end of the last
defect
correction period
.
”
Core Clause
29.1 of the contract provides:
“
The
Contractor
obeys an instruction which is in accordance with this contract and is
given to him by the
Project
Manager
or the
Supervisor
.
”
Core Clause
14.4 of the contract provides:
“
The
Employer
may replace the
Project
Manager or Supervisor
after
he has
notified the
Contractor
of the name of the replacement.”
It is clear
from the
se
clauses of the contract that the supervisor is a representative of
the defendant, and is obliged to issue a defects certificate,
on
behalf of and, for the benefit of Eskom, who is the employer, and
that there is no obligation on Transdeco to call on the supervisor
to
issue a defects certificate, as contended for by the defendant. I am
accordingly of the view that this defence would not constitute
a
bona
fide
defence that is good in law to the plaintiffs’ claim.
[16
]
Eskom’s second defence is that, on 20 November 2006 and 4
December 2006 respectively, it notified Transdeco, that it intended
to refer the first and second decisions of the adjudicator to
arbitration, in terms of the contract and, that the arbitration of
these disputes is pending. Eskom thus denies that it is obliged to
comply with the first and second decisions of the adjudicator
pending
arbitration. I am of the view that this would not constitute a
bona
fide
defence that is good in law, as the parties expressly agreed, in
terms of Core Clause 90.2 of the contract, that an adjudicator’s
‘
decision
is final and binding unless and until revised by the tribunal
”.
[17] The
adjudicator’s decision, therefore, remains binding and
enforceable until revised in the final determination by an
arbitrator. Mr Kemack referred me to the United Kingdom case of
Bouygues
(UK) Limited v Dahl-Jensen (UK) Limited
[2000] BLR 49
[TCC] at 55, para. 35, which bears out this conclusion.
This matter, of the Queen’s Bench Division, Technology and
Construction
Court (“TCC”), concerned a dispute arising
from a sub-contract, which provided for dispute resolution by
adjudication
pursuant to the Rules of the CIC Model Adjudication
Procedure (2
nd
edition) which provided that:
“
1.
The
object of adjudication is to reach a fair, rapid and inexpensive
decision upon a dispute arising under the contract and this
procedure
shall be interpreted accordingly.
...
4. The Adjudicator’s decision shall be binding until the
dispute is finally determined by legal proceedings, by arbitration
(if the contract provides for arbitration or the parties otherwise
agree to arbitration) or by agreement.
5. The parties shall implement the Adjudicator’s decision
without delay whether or not the dispute is to be referred to legal
proceedings or arbitration.
...”
Having regard
to these Rules,
Justice
Dyson held as follows:
“
the
purpose of the scheme is to provide a speedy mechanism for settling
disputes in construction contracts on a provisional interim
basis,
and requiring the decisions of adjudicators to be enforced pending
final determination of disputes by arbitration, litigation
or
agreement, whether those decisions are wrong in point of law and
fact. It is inherent in the scheme that injustices will occur,
because from time to time, adjudicators will make mistakes. Sometimes
these mistakes will be glaringly obvious and disastrous in
their
consequences for the losing party. The victims of mistakes will
usually be able to recoup their losses by subsequent arbitration
or
litigation, and possibly even by a subsequent arbitration.”
(See also: C&B Scene Concept Design v Isobars Limited
[2002] BLR (CA) 93 at 98, para. 23
)
[18
]
The defendant’s third defence is that the adjudicator’s
decisions are only binding if given in the four week time
period
stipulated in the contract, and that because they were late, they are
not binding on the defendant. It is the applicants’
contention
that this defence is not valid in law as there is no common law
contractual basis for declaring a late adjudication
invalid,
particularly where the parties have not agreed that unless the
decision is made within a certain time it shall not be
binding or of
any effect, thereby making time of the essence of the contract.
[19] Relying
on
One
Nought Three Craighall Park (Pty) Ltd v Jayber (Pty) Ltd
1994
(4) SA 320
(W) at 323A-B, the applicants submit that a court hearing
the summary judgment application is in just as good a position as the
trial court to consider a matter of law. Following upon the approach
enunciated by Kannemeyer J in
Lovemore
v White
1978
(3) SA 254
(E), Heher J, in
One
Nought Three Craighall Park (Pty) Ltd v Jayber (Pty) Ltd
at 323A-C, stated that:
“
[
T]he
Judge who hears this matter on exception or at the trial will be in
no better position than I am to determine the issue. The
plaintiff is
entitled to his judgment now if the law and the facts are in his
favour. I shall therefore consider the validity of
the legal
contention.
”
The legal contention which Heher
J was required to decide in
One
Nought Three Craighall Park
concerned
the question of whether
Genna-Wae
Properties (Pty) Ltd v Medio-Tronics (Natal) (Pty) Ltd
1994 (1) SA 106
(D) was correct in stating that our law allows a
tenant of leased property, which is sold during the subsistence of
the lease the
right, to decide whether to continue with the lease.
Heher J concluded that the law is not as stated in
Genna-Wae
Properties (Pty) Ltd v Medio-Tronics (Natal) (Pty) Ltd
(
supra
)
as a lessee of property, transferred from his lessor to a new owner,
is bound to recognise and observe the terms of the lease
after
transfer. Heher J found that the defendant had no defence to the
plaintiff’s claim, and granted summary judgment for
the
plaintiff.
[20] However, in the matter of
Hollandia Reinsurance
Co Ltd v Nedbank Ltd
1993 (3) SA 574
(WLD) at 577G-H where Goldblatt J was asked to decide
whether the unreported decision by his brother Stegmann J was correct
and
that, unless he was of the opinion that Stegmann J was clearly
wrong, he was bound to grant summary judgment as prayed, he held
that:
“
In
my view, summary judgment proceedings are inappropriate for dealing
with clearly arguable questions of law which should properly
be dealt
with on exception
(Edwards
v Menezes
1973
(1) SA 299 (NC)
and
Shingadia v
Shingadia
1966
(3) SA 24
(R)
).
In my opinion it cannot be
said that the defendant's case is clearly unarguable. The reasoning
of the English Courts seems to me
to be both logical and in
accordance with the general scheme of the Act. If Stegmann J is
correct considerable difficulties would
occur in practice in giving
effect to s 79 of the Act where the drawer and payee of a cheque both
have accounts with the same bank,
either at the same or different
branches thereof. It is unlikely that the Legislature intended that
the protection afforded to
a drawer of a crossed cheque could only be
of application if the payee banked at a different bank to the bank
upon which the cheque
was drawn. Were it necessary for me to decide,
which it is not, whether Stegmann J's interpretation of the word
'banker' in s 79
of the Act is correct, I do not think that I would
agree with his decision. However, as stated above, I am not required
to make
a decision in this regard provided that I am satisfied that
the defendant's contentions are reasonably arguable. I am so
satisfied.
”
[21] However, in the present
matter, I am satisfied that Eskom’s legal contention, that the
adjudicator’s decisions
are invalid because he delivered them
outside of the time periods stipulated in the contract, is not
reasonably arguable. Nor do
I believe that a judge, who hears this
matter at the trial or exception, would be in a better position than
I am to decide this
matter. As stated by Heher J, in
One
Naught Three Craighall Park
,
‘
the applicants
are entitled to summary judgment now if the law is in their favour’
.
I accordingly proceed to determine the question of law in this
application.
[22] Core Clauses 90.2 and 91 of
the contract provide for an adjudicator’s decision to be issued
within four weeks of the
end of the period for providing information,
but nowhere in the contract is it stated that a late adjudicator’s
decision
would be invalid. Core Clause 90.2 of the contract reads as
follows:
“
The
Adjudicator
settles the dispute by notifying the Parties and the
Project
Manager
of his decision
together with his reasons within the time allowed by this contract.
Unless and until there is such a settlement,
the Parties and the
Project Manager
proceed as if the action, inaction or other matter disputed were not
disputed. The decision is final and binding unless and until
revised
by the
tribunal
.
”
Core Clause 91.1, entitled “
The
adjudication
”
reads as follows:
“
The
Party submitting the dispute to the
Adjudicator
includes with his submission information to be considered by the
Adjudicator
.
Any further information from a Party to be considered by the
Adjudicator
is provided within four weeks from the submission. The
Adjudicator
notifies his decision within four weeks of the end of the period for
providing information. The four week periods in this clause
may be
extended if requested by the
Adjudicator
in view of the nature of the dispute and agreed by the Parties.
”
It is clear from a reading of
Core Clauses 90.2 and 91.1 of the contract that although they provide
for an adjudicator’s decision
to be issued within four weeks of
the end of the period for providing information, they do not state
that a late adjudicator’s
decision is invalid. I have also
been unable to find a clause in the contract which states that
‘
unless the
decision is made within a certain time it shall not be binding or of
any force and effect
’
thereby making time of the essence of the contract.
[23] It is important to bear in
mind that an adjudication is not an arbitration and it is therefore
not a subject to the common
law, or section 3 of the Arbitration Act
42 of 1965 which provides as follows:
“
The
arbitration tribunal shall, unless the arbitration agreement
otherwise provides make its award –
in the case of an award by an arbitrator or arbitrators, within
four months after the date on which such arbitrator or arbitrators
entered on the reference or the date on which such arbitrator was or
such arbitrators were called on to act by notice in writing
from any
party to the reference, whichever date be the earlier date; and
in the case of an award by an
umpire, within three months after the date on which such umpire
entered on the reference or the
date on which such umpire was called
on to act by notice in writing from any party to the reference,
whichever date be the earlier
date,
or in either case on or before
any later date to which the parties by any writing signed by them may
from time to time extend the
time for making the award: Provided
that the court may, on good cause shown, from time to time extend the
time for making any
award, whether that time has expired or not.
”
[22] In argument, Mr Kemack
referred me to Jacobs,
The
Law of Arbitration in South Africa
,
para 160, page 130 where he states as follows:
“
A
court should be hesitant to grant an extension of time if the
application is made at a late date. The fact that the parties in
the
arbitration agreement have put a limit both upon the time for making
the award and the extent to which this time may be enlarged
does not
preclude the court from ordering a further enlargement.
It would seem, however, that the parties may effectively agree that,
unless the award is made within a certain time, it shall not
be
binding or of any effect, thus making time of the essence of the
contract.
”
(own emphasis)
[23] It is clear from Core
Clause 92.1 of the contract that the adjudicator settles the dispute
as independent adjudicator and
not as arbitrator. His decision is
enforceable as a matter of contractual obligation between the Parties
and not as an arbitral
award. So, in the absence of a clause, which
makes ‘
time
of the essence
failure
by an adjudicator, to deliver his or her award in the time
stipulated in the contract, cannot be rendered as binding on
the
parties or of any force and effect. Unlike in arbitrations, there is
no statutory or common law contractual basis for declaring
the
delivery of a late adjudication award invalid, particularly where
there is no agreement between the parties that unless the
decision is
made within a certain time it shall not be binding or of any effect.
There is accordingly no basis in law for treating
a delayed
adjudicator’s award as invalid.
[24] To the contrary, Core
Clause 93.1 of the contract specifically provides for the steps to be
taken by a dissatisfied party
should the
adjudicator fail to
notify his decision within the time period stipulated in the
contract. It provides:
“
If
after the adjudicator notifies his decision or fails to do so within
the time provided by this contract and a Party is dissatisfied,
that
Party notifies the other Party of his intention to refer the matter
which he disputes to the tribunal.”
[25] As is apparent from Core
Clause 93.1 of the contract, the agreed remedy for a delayed
adjudicator’s decision is a notification
by the dissatisfied
party, to the other party, of its intention to refer the matter,
which it disputes, to the arbitration tribunal.
It is common cause
that Eskom gave no notice of dissatisfaction on this basis, either
before or after the issuing of the adjudicator’s
decisions. I
accordingly agree with Mr Kemack that, in terms of Core Clauses 92.1
and 90.2 of the contract, even a belated decision
of the adjudicator,
i.e. one that is make after the expiry of the time provided for in
the contract, is contractually binding and
enforceable unless and
until revised by an arbitration tribunal. I am, accordingly, of the
view that this defence would not constitute
a
bona
fide
defence that is
good in law.
[26] The last defence raised by
Eskom is that it has submitted a dispute, to the adjudicator, in
which it counter-claims that
it has suffered damages as a result of
Transdeco’s defective performance on the contract (“
the
third dispute
”),
and the submission of this dispute, to the adjudicator, was made
within the period stipulated in Core Clause 90.1 of the
contract. In
this dispute Eskom claims that the foundations installed by Transdeco
were defective and this has resulted in the
collapse of certain
towers as a result of a failure of their foundations. It accordingly
seeks a finding from the adjudicator
that:
Transdeco repudiated the contract by refusing to search for defects
as instructed by the Supervisor;
As a result of Transdeco’s repudiation of the contract, Eskom
appointed another contractor to conduct the search that Transdeco
refused to conduct;
As a result of Transdeco’s
repudiation of the contract, Eskom appointed another contractor to
rectify the defective work
of Transdeco; and
As a result of Transdeco’s
defective repudiation of the contract, Eskom has suffered damages in
the sum of R16 310 199,
94.
Eskom
states further that:
“
The plaintiffs are liquidators in a company which is under
liquidation. Should Eskom succeed in its counter-claim, it is
unlikely
to recover the full amount of its counter-claim. I
respectfully submit that in the circumstances, it would be unjust to
order that
Eskom pays the amount claimed by the plaintiff when it is
at risk of not recovering all the monies claimed by it should it be
successful
with its counter-claim.”
[27] Mr Kemack, on behalf of the
applicant’s argued that the lack of
bona
fides
of Eskom’s
defence is evident from the contents of paragraphs 12.10 to 12.14 of
applicants’ answering affidavit, in
the application for
condonation of the late filing of the summary judgment opposing
affidavit, which reads as follows:
“
12.10
The defendant’s pointing out that the applicant has referred a
dispute for adjudication in which it claims an amount
in excess of
R16 million from Transdeco, is also incomplete. Both this allegation
and the contents of paragraph 23 to 25 of the
summary judgment
opposing affidavit, are misleading.
The defendant did refer a
claim for damages of R16, 310,199.94 to adjudication, based on
damages arising from Transdeco’s
alleged repudiation and the
defendant’s cancellation of the engineering and construction
contract.
The defendant has failed to
disclose, however, that a decision was issued on 29 January 2008 by
the appointed adjudicator, advocate
Walter Klevansky SC, finding
that as subsequent adjudicator his decision could not deviate from
advocate Farber’s previous
decision that Transdeco did not
repudiate the agreement, which remained of full force and effect.
12.13 …
12.14 Despite notifying
Transdeco of its intention to refer advocate Klevansky’s
decision for review by the arbitration tribunal,
since January 2007
the defendant has not proceeded with such an arbitration.
”
[22] It is abundantly clear from
a reading of Adv Klevansky SC’s decision, at paragraphs A4, C2,
D2-D4, and E1-E1.5 in particular,
that he had rejected this
counter-claim on 29 January 2008, and that it has not been referred
for review to the arbitration tribunal.
This defence would,
therefore, not constitute a
bona
fide
defence that is
good in law.
[23] There being no prospect
that any of Eskom’s defences will result in its success in the
summary judgment application,
the application for condonation must
be, and is, dismissed with costs.
[24] In the result, I am
satisfied that Eskom does not have a
bona
fide
defence that is
good in law to the applicants’ claims as set out in their
particulars of claim. I accordingly grant summary
judgment for the
applicants in the terms claimed in paragraphs 1, 2 and 3 of the
notice of application for summary judgment.
_____________________________________
F
KATHREE-SETILOANE
ACTING JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
COUNSEL
FOR APPLICANTS A KEMACK
INSTRUCTED BY LINDSAY KELLER
COUNSEL
FOR RESPONDENT S BALOYI
INSTRUCTED BY THABILE
FUHRMANN & ASSOCIATES
c/o MALULEKE MSIMANG &
ASSOCIATES
DATE
OF HEARING 11 FEBRUARY 2010
DATE
OF JUDGMENT 23 APRIL 2010