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[2020] ZAGPJHC 268
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Murray & Roberts Limited v SASOL South Africa (Pty) Ltd (2019/20801) [2020] ZAGPJHC 268 (16 April 2020)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 2019/20801
DATE:
16 April 2020
In
the matter between:
MURRAY
& ROBERTS LIMITED
Applicant
and
SASOL
SOUTH AFRICA (PTY) LTD
Respondent
JUDGMENT
Weiner
J
Introduction
[1]
The applicant, Murray and Roberts Ltd
(‘M&R’) and the respondent, Sasol South Africa (Pty)
Ltd (‘Sasol’),
were parties to an NEC3 Engineering and
Construction Contract related to a project at Sasol in Secunda (the
‘contract’).
The contract was concluded on 15 March 2015.
Sasol is the employer and M&R is the contractor. The contract
provided for the
nomination of a project manager (‘PM’)
who had certain prescribed functions and duties.
[2]
The
contract provided for a dispute resolution process and they opted for
Option W1
[1]
contained in the
contract. For this option, a three-step process was applicable:
2.1.
Notification
of the dispute;
[2]
2.2.
Referral
of the dispute to adjudication;
[3]
2.3.
Referral
to the tribunal (the agreed arbitrator).
[4]
[3]
M&R applied to enforce a decision on
a dispute (Dispute 16) (‘D16’) made by the adjudicator,
appointed in terms
of the contract and the Adjudicator’s
contract. Sasol counter-applied for relief that the adjudicator’s
decision on
Disputes 1-3, 5-6, 8-12 (the earlier decisions) be
enforced.
Background
[4]
On 1 March 2017, the PM issued an
instruction or request to M&R to demobilise certain resources
utilised at the construction
site in Secunda (the construction site).
This request was referred to as ‘PMC200’. During the
course of the contract,
the adjudicator, appointed by the parties,
made several decisions dealing with PMC200.
[5]
All the earlier decisions related to
PMC200. The disputes in these decisions arose in relation to the
status of the signed off timesheets.
M&R contended that these
timesheets contractually bound Sasol to payment in respect of the
hours indicated. Sasol argued that
they only served as a record of
the hours indicated. The adjudicator had, in the earlier decisions,
decided the PMC200 and timesheets
dispute in favour of Sasol. M&R
thereafter referred disputes 1 and 2, amongst others, to the
arbitrator appointed by the parties.
[6]
On 9 October 2018, the arbitrator
returned an award in favour of M&R in respect of disputes 1 and
2. The arbitrator found that
PMC200 was not valid or enforceable and
that the timesheets proffered by M&R were contractually binding.
Dispute
16
[7]
By the time the arbitration award was
handed down, the adjudicator had already issued the earlier
decisions. In view of the arbitration
award, M&R notified Sasol
and the adjudicator of D16. M&R sought a decision that the
arbitration award had to be complied
with, on the basis that the PM
and, subsequently, the adjudicator [in terms of clause W1.3(5)] are
bound by the arbitration award.
The adjudicator, in his decision,
sought to adjust the assessments in the earlier decisions in line
with the arbitrator’s
review of Disputes 1 and 2, as both the
earlier decisions and the arbitrator’s review related to PMC200
and the timesheets.
[8]
Sasol submitted that all the decisions
related to payment disputes. It contended that, although certain
factual and legal issues
were common to all the disputes, they
remained separate disputes based on distinct causes of action. The
adjudicator decided each
dispute individually, based on its
particular characteristics. The arbitrator only considered Disputes 1
and 2. The other earlier
decisions of the adjudicator had not been
revised by the arbitrator and still stand. In their
counter-application, Sasol sought
enforcement of those decisions.
[9]
M&R launched an application to have
the arbitration award made an order of court. Sasol counter-applied
to partially review
the arbitrator’s decision, in particular,
the findings related to PMC200 and the timesheets. In light of the
review application,
Sasol refused to comply with the affected
portions of the arbitration award and/or with the adjudicator’s
decision on D16.
[10]
The two applications came before Windell
J, who, on 14 January 2020, dismissed the review and made the
arbitrator’s award
an order of Court. (I am informed that the
application for leave to appeal her decision was refused by Windell J
on 12 March 2020.)
[11]
Thus, at present, the arbitrator’s
award stands. M&R contended that as PMC200 has been declared
invalid, all assessments
which were calculated on PMC200 are
incorrect. It does not matter that the timesheets related to
different assessments. The arbitrator
found that the timesheets were
contractually binding, unless and until set aside on review.
The
adjudicator’s powers
[12]
M&R contended that Sasol’s
conduct is in breach of clause W1.3(10) and clause 10.1 of the
contract. The relevant
clauses applicable to the adjudicator’s
powers are set out in the contract and the Adjudicator’s
Contract.
[13]
The relevant clauses in the contract are
the following:
13.1.
Clause W1.1: ‘A dispute arising
under or in connection with this contract is referred to and decided
by the Adjudicator.’
13.2.
Clause W1.2(2): ‘The
Adjudicator
acts impartially and decides the dispute as an independent
adjudicator and not as an arbitrator.’
13.3.
Clause W1.3(1): ‘Disputes are
notified and referred to the
Adjudicator
in accordance with the Adjudication
Table.’
AJUDICATION
TABLE
Dispute about
Which Party may refer it to the
Adjudicator?
When may it be referred to the
Adjudicator?
An action of the Project
Manager or the Supervisor
The Contractor
Between two and four weeks
after the Contractor’s notification of the dispute to the
Employer and the Project Manager,
the notification itself being
made out not more than four weeks after the Contractor becomes
aware of the action
The Project Manager or
Supervisor not having taken an action
The Contractor
Between two and four weeks
after the Contractor’s notification of the dispute to the
Employer and the Project Manager,
the notification itself being
made not more than four weeks after the Contractor becomes aware
that the action was not
taken
A quotation for a compensation
event which is treated as having been accepted
The Employer
Between two and four weeks
after the Project Manager’s notification of the dispute to
the Employer and the Contractor,
the notification itself being
made not more than four weeks after the quotation was treated as
accepted
Any other matter
Either Party
Between two and four weeks
after the notification of the dispute to the other Party and the
Project Manager
13.4.
Clause W1.3(2): ‘The times for
notifying and referring a dispute may be extended by the
Project
Manager
if the
Contractor
and the
Project
Manager
agree to the extension
before the notice or referral is due. The
Project
Manager
notifies the extension that
has been agreed to the
Contractor
.
If a disputed matter is not notified and referred within the times
set out in this contract, neither Party may subsequently refer
it to
the
Adjudicator
or the
tribunal
.’
13.5.
Clause W1.3(5): ‘
The
Adjudicator
may
· review and
revise any action or inaction of the Project Manager or Supervisor
related to the dispute and alter a quotation
which has been treated
as having been accepted,
· take the
initiative in ascertaining the facts and the law related to the
dispute,
· instruct a Party
to provide further information related to the dispute within a stated
time and
· instruct a Party
to take any other action which he considers necessary to reach his
decision and to do so within a stated
time.’
13.6.
Clause W1.3(8): ‘The Adjudicator
decides the dispute and notifies the Parties and the Project Manager
of his decision and
his reasons within four weeks of the end of the
period for receiving information. This four week period may be
extended if the
Parties agree.’
13.7.
Clause
W1.3(10): ‘The
Adjudicator's
decision
is binding on the Parties unless and until revised by
the
tribunal
and
is enforceable as a matter of contractual obligation between the
Parties and not as an arbitral award. The
Adjudicator's
decision
is final and binding if neither Party has notified the other within
the times required by this contract that he is dissatisfied
with a
decision of the
Adjudicator
and
intends to refer the matter to the
tribunal
.’
13.8.
Clause
W1.3(11): ‘The
Adjudicator
may, within two weeks of giving his decision to the Parties, correct
any clerical mistake or ambiguity.’
13.9.
Clause
W1.3(10): ‘The
Adjudicator's
decision
is binding on the Parties unless and until revised by
the
tribunal
and
is enforceable as a matter of contractual obligation between the
Parties and not as an arbitral award. The
Adjudicator's
decision
is final and binding if neither Party has notified the other within
the times required by this contract that he is dissatisfied
with a
decision of the
Adjudicator
and
intends to refer the matter to the
tribunal
.’
13.10.
Clause W1.4(1): ‘A Party does not
refer any dispute under or in connection with this contract to the
tribunal
unless it has first been referred to the
Adjudicator
in accordance with this contract.’
13.11.
Clause 10.1: ‘the employer, the
Contractor and the Project Manager and the Supervisor shall act as
stated in this contract
and in the spirit of mutual trust and
co-operation.’
[14]
The relevant clauses in the
Adjudicator’s Contract are:
14.1.
Clause 1.1: ‘The Parties and the
Adjudicator shall act as stated in this contract and in the contract
between the parties.
The Adjudicator shall act impartially.’
14.2.
Clause 1.7: ‘If a conflict arises
between this contract and the contract between the Parties then this
contract prevails.’
14.3.
Clause 2.1: ‘The Adjudicator does
not decide any dispute that is the same or substantially the same as
one that he or his
predecessor has previously decided.’
14.4.
Clause 2.2: ‘The Adjudicator
decides a dispute referred to him under the contract between the
Parties. He makes his decision
and notifies the Parties of it in
accordance with the contract between the Parties.’
14.5.
Clause 2.4: ‘The parties
co-operate with the Adjudicator and comply with any request or
direction he makes in relation to
the dispute.’
14.6.
Additional
condition 2.5: ‘The adjudicator may ask for any additional
information from the Parties to enable him to carry
out his work. The
parties provide the additional information within two weeks of the
adjudicator’s request.’
[5]
[15]
It
is common cause that, in terms of the contract, the adjudicator's
decision is binding on the parties unless and until revised
by the
tribunal; it is enforceable as a matter of contractual obligation
between the parties.
[6]
Sasol
opposed the relief sought on the basis that the decision is of no
force or effect. It reasons that, in conducting the adjudication
and
in issuing his decision, the adjudicator acted outside of his powers
because he:
15.1.
assumed the power to enforce the
arbitration award;
15.2.
sought to decide the same dispute which
he had previously decided; and
15.3.
allowed for the submission of
information and gave his decision after and outside of the time
period permitted.
[16]
In challenging the merits of the
decision, Sasol contended that the adjudicator failed to consider the
dispute before him, in particular
the timesheets; alternatively, that
Sasol was not given the opportunity to deal with the timesheets.
[17]
Sasol contended that M&R wanted the
adjudicator to short-circuit the agreed processes by persuading the
adjudicator to revise
his previous decisions, in direct breach of
clause 2.1 of the Adjudicator’s Contract. It submitted that the
decision was
beyond the adjudicator’s jurisdiction. The
adjudicator’s powers are limited to disputes that are not
substantially
the same as the ones he previously decided. The power
to reconsider or revise the adjudicator’s decision is limited
to the
arbitrator. Sasol thus contended that the adjudicator exceeded
his powers by assuming the power to enforce the arbitration award
relating to Disputes 1 and 2, when the contracts do not afford him
those powers.
[18]
According
to Sasol, the powers of the adjudicator do not entitle him to act as
a substitute for the PM. He acts as an adjudicator
of the actions of
the PM.
[7]
It contended
further that the adjudicator’s decision only acquires the
status of a ‘contractual obligation’,
in terms of clause
W1.3(10), only if it is a decision in terms of the contract i.e.:
18.1.
The decision is one which the
adjudicator is empowered to make;
18.2.
The procedures prescribed by the
contract were followed in reaching the decision;
18.3.
The decision was issued within the time
period allowed.
[19]
Sasol
relied on
Vidavsky
v Body Corporate of Sunhill Villas
[8]
for the submission that if the adjudicator acted outside of his
powers, his decision is a nullity and Sasol is not obligated to
comply with it.
Vidavsky
related to the powers of an arbitrator, which were expressly limited
by
s 15(2)
of the
Arbitration Act 42 of 1965
. That section is
peremptory: the arbitrator may only proceed if the opposing party has
received reasonable notice of the time and
place of the hearing.
There was no notice, thus the arbitrator had no jurisdiction and his
decision was invalid.
[20]
Arbitration
proceedings are distinct from adjudication. The former is a
quasi-judicial proceeding; the latter is not. It is a dispute
resolution mechanism, which is preliminary in nature, as described by
Dyson J in
Macob
Civil Engineering Ltd v Morrison Construction Ltd
,
[9]
a Queens Bench Decision in the Technology and Construction Court.
[21]
In
Macob
,
it was argued that when the validity of the decision was challenged,
that decision was not binding and enforceable until the validity
of
the decision had been determined. Dyson J rejected that argument and
held:
‘
It
will be seen at once that, if this argument is correct, it
substantially undermines the effectiveness of the scheme for
adjudication.
The intention of Parliament in enacting the Act was
plain. It was to introduce a speedy mechanism for settling disputes
in construction
contracts on a provisional interim basis, and
requiring the decisions of adjudicators to be enforced pending the
final determination
of disputes by arbitration, litigation or
agreement: .... The timetable for adjudication’s is very
tight.... Many would say
unreasonably tight, and likely to result in
injustice. Parliament must be taken to have been aware of this. So
far as procedure
is concerned, the adjudicator is given a fairly free
hand. It is true (but hardly surprising) that he is required to act
impartially....
He is, however, permitted to take the initiative in
ascertaining the facts and the law…. He may, therefore,
conduct an entirely
inquisitorial process, or he may, as in the
present case, invite representations from the parties. It is clear
that Parliament
intended that the adjudication should be conducted in
a manner which those familiar with the grinding detail of the
traditional
approach to the resolution of construction disputes
apparently find difficult to accept. But Parliament has not abolished
arbitration
and litigation of construction disputes. It has merely
introduced an intervening provisional stage in the dispute resolution
process.
Crucially, it has made it clear that decisions of
adjudicators are binding and are to be complied with until the
dispute is finally
resolved.’
[10]
[22]
The
purpose of adjudication is to have speedy resolution of the
dispute.
[11]
In
Esor
Africa (Pty) Ltd/ Franki Africa (Pty) Ltd Joint Venture v Bombela
Civils Joint Venture (Pty) Ltd
,
[12]
this Court, in dealing with the adjudication process, stated:
‘
the
DAB
[Dispute
Adjudication Board]
process
ensures the interim solution of an issue which requires performance
and requires that the decision is implemented. The parties’
position may be altered by the outcome of the eventual arbitration
which is a lengthier process and there may be a refund ordered
of
monies paid or an interest readjustment if too little was decided by
the DAB.’
[13]
[23]
In
Freeman
NO and Another v Eskom Holdings Limited
,
[14]
the High Court rejected the argument that because an adjudicator’s
decision had been referred to arbitration, the decisions
of the
adjudicator did not have to be complied with pending the outcome of
the arbitration. The parties had expressly agreed, in
terms of the
contract between them, that an adjudicator’s “
decision
is final and binding unless and until revised by the tribunal”.
Thus, the court found that the argument did ‘
not
constitute a bona fide defence that is good in law.’
[15]
[24]
In
another decision by the Queen’s Bench Division in the
Technology and Construction Court, the court stated that, ‘
[I]n
the short time since the Act came into force, there have been many
adjudications and a number of decisions of this Court considering
challenges to Adjudicators' decisions and applications to enforce
those decisions.’
[16]
The court endorsed a number of guiding principles on this issue,
which included the following:
i.
‘
A
decision of an adjudicator whose validity is challenged as to its
factual or legal conclusions or as to procedural error remains
a
decision that is both enforceable and should be enforced;
ii.
A decision that is erroneous,
even if the error is disclosed by the reasons, will still not
ordinarily be capable of being challenged
and should, ordinarily,
still be enforced;
iii.
A decision may be challenged on
the ground that the adjudicator was not empowered by the Act to make
the decision, because there
was no underlying construction contract
between the parties or because he had gone outside his terms of
reference;
iv.
The
adjudication is intended to be a speedy process in which mistakes
will inevitably occur. Thus, the Court should guard against
characterising a mistaken answer to an issue, which is within an
adjudicator's jurisdiction, as being an excess of jurisdiction.
Furthermore, the Court should give a fair, natural and sensible
interpretation to the decision in the light of the disputes that
are
the subject of the reference; ….’
[17]
[25]
It is thus legally irrelevant whether
the adjudicator correctly or incorrectly came to the decision in D16.
The decision of the
adjudicator remains one that is enforceable and
should be enforced – even where it is erroneous.
[26]
A
jurisdictional challenge to an adjudicator’s decision on the
grounds stated above in paragraph [15] above were identified
by Lord
Justice Chadwick in his judgment in
Carillion
Construction Ltd v Devonport Royal Dockyard Ltd
,
a decision in the Supreme Court of Judicature: Court of Appeal (Civil
Division).
[18]
The Court of
Appeal endorsed the principles as set out by Justice Jackson in the
court a quo, which are as follows:
1.
The adjudication procedure does not involve the final determination
of anybody's rights (unless all the parties so wish).
2.
The Court of Appeal has repeatedly emphasised that adjudicators'
decisions must be enforced, even if they result from errors
of
procedure, fact or law….
3.
Where an adjudicator has acted in excess of his jurisdiction or in
serious breach of the rules of natural justice, the court
will not
enforce his decision.
4.
Judges must be astute to examine technical defences with a degree of
scepticism consonant with the policy of the 1996 Act. Errors
of law,
fact or procedure by an adjudicator must be examined critically
before the Court accepts that such errors constitute excess
of
jurisdiction or serious breaches of the rules of natural
justice….
”
[19]
[27]
The suggestion by Sasol that the
adjudicator exceeded his jurisdiction and that the proper process was
not followed, does not entitle
Sasol to not comply with the decision.
There was no failure of natural justice. Compliance is a contractual
obligation, and it
is for the arbitrator to review the process
followed by the adjudicator, and to decide whether the adjudicator
did, in fact, exceed
his jurisdiction and whether the process
followed was proper.
[28]
In
Ekurhuleni
West College v Segal and Another
,
[20]
it was held that the parties are bound by the decision of the
adjudicator and ‘…
the
tribunal has the power to reopen the dispute. Mistakes will be made
by adjudicators, but that is inherent in the scheme of adjudication.
Such mistakes can be rectified in subsequent arbitration or
litigation.
’
[29]
If a party is unhappy with the way in
which an adjudicator conducted an adjudication or arrived at the
decision, but chooses to
simply ignore the decision, because it
believes that the process and/or decision was wrong, it would render
the entire adjudication
process futile.
[30]
The
decision is binding unless and until varied, or overturned, by an
arbitration award. A court has no appellate jurisdiction over
adjudicators even in circumstances where an adjudicator is
demonstrably mistaken.
[21]
In
Carillion
Construction
[22]
it was decided that—
‘
The
objective which underlies the Act and the statutory scheme requires
the courts to respect and enforce the adjudicator’s
decision
unless it is plain that the question which he has decided was not the
question referred to him or the manner in which
he has gone about his
task is obviously unfair. It should be only in rare circumstances
that the courts will interfere with the
decision of an adjudicator.
’
[31]
The
court also warned in such case that, ‘
[I]t
is only too easy in a complex case for a party who is dissatisfied
with the decision of an adjudicator to comb through the
adjudicator’s
reasons and identify points upon which to present a challenge under
the labels “excess of jurisdiction”
or “breach of
natural justice”.’
[23]
[32]
As
stated by the court in
Ekurhuleni
West College v Segal and Another
:
[24]
‘
[Adjudication’s]
true nature is to be found in the law
of contract, whereby parties to a contract agree as an interim
solution to resolve interim
disputes through a process of
adjudication. The rules of natural justice do not find
application. The adjudicator acts according
to the terms of his
reference. The terms of reference as in the present matter is
contractual in nature and leaves very little
room for having it being
set aside on review. When the main contract was concluded the parties
foresaw the possibility that an
adjudicator may come to an incorrect
conclusion and for that very reason agreed that in such an event the
parties shall proceed
to arbitrate. The contract does not
contain any provision that the adjudicator’s decision may be
taken on review. The
absence of such a provision clearly
indicates that the parties expressed in the clearest of terms that
they will comply with the
adjudicator’s decision made in terms
of his mandate and make immediate payment in terms of the
agreement.
’
[33]
In
Radon
Projects (Pty) Ltd v NV Properties (Pty) Ltd
,
[25]
it was stated:
‘
The
adjudication rules issued by the JBCC for use with the contract
describe adjudication as
“an
accelerated form of dispute resolution in which a neutral third party
determines the dispute as an expert and not as an
arbitrator and
whose determination is binding unless and until varied or overturned
by an arbitration award.
”’
Is
it the same dispute?
[34]
M&R contended that D16 required the
adjudicator to decide whether contractually, the arbitration award
had to be complied with,
on the basis that the PM and the adjudicator
[in terms of W1.3(5)] are bound to comply with the arbitration award.
It stated that
the dispute ‘
squarely
related to whether the PM acted correctly by disregarding portions of
the arbitrator’s award on the instructions
of Sasol. Sasol
confuses the consequences of the arbitration award on prior disputes
with the nature of the current dispute.
’
The adjudicator also found that new information, in the form of the
arbitrator’s award, had become available and this
permitted his
decision.
[35]
Sasol admitted that in D16, the
adjudicator had to decide whether the PM was correct when he ‘
refused
to comply with certain portions of the arbitration award’
and ‘
declined to apply the part
of the arbitration award that is the subject of the review
application’
. M&R
contended that the adjudicator did not decide the same disputes. He
decided that the PM is bound to the principles decided
in the
arbitration award and should have adhered to such award, when he
considered M&R’s claims for payment and assessed
M&R’s
claims. It was not in dispute that the PM was obliged, in terms of
clauses 50.5 and 51.3 of the contract, to consider
and take into
account M&R’s entitlements as determined in an arbitration
award.
[36]
Clause 50.5 provides that the PM is to
correct any wrongly assessed amount due in a later payment
certificate.
[37]
Clause 51.3 provides:
‘
If
an amount is corrected in a later certificate either
·
by the Project Manager in relation to
a mistake or a compensation event or
·
following a decision of the
adjudicator or the tribunal;
interest
on the correcting amount is paid….
’
[38]
A
principle was established in the award that PMC200 was invalid and
the timesheets were contractually binding between the parties.
This
principle extended to all the earlier decisions. Clauses 50.5 and
51.3 of the contract compel the PM to reassess earlier assessments
and amend them in accordance with the arbitrator’s award. In
the present case, Sasol admitted that the PM refused to comply
with
certain portions of the arbitration award in making his assessments
(in relation to the disputes, other than Disputes 1 and
2). M&R
submitted that such refusal constituted a dispute about ‘
[a]n
action of the PM… or… not having taken an action’
.
Once that dispute is referred to the adjudicator, he is empowered to
‘
review
and revise any action or inaction of the PM…related to the
dispute
’
in relation to the effect of the arbitration award on any prior
determination made by the adjudicator relating to the same
or similar
rights and obligations.
[26]
[39]
The adjudicator has thus not
reconsidered his earlier decisions but has reviewed and revised the
inaction of the PM in not following
the arbitrator’s award. The
PM was obliged to give effect to the arbitration award to the extent
that it corrected the earlier
decisions. This the PM failed to do.
Thus, the adjudicator reviewed and revised that inaction by assessing
M&R’s claim
correctly in line with the principles
established in the arbitration award. He decided in D16 that the PM
was wrong to contend
that ‘
certain
portions of the arbitration award…were…of no force and
effect
’. The adjudicator
stated as follows:
‘
67.
Although the Employer is correct that an adjudicator may not decide a
dispute that he has previously decided, it ignores the
fundamental
difference that an adjudicator may consider the dispute if new facts
are presented. I refer to what I have said above.
It makes no sense
that an award by the Tribunal dealing with a dispute and establishing
principles cannot be considered as a new
fact While I fully
appreciate that particular facts in a dispute referred to, unless
relevant to a later dispute. are irrelevant,
principles established
in an award must be applied until set aside.
I
do not agree with the submission that the validity or enforceability
of the arbitrator's award cannot be considered because no
dispute
about that has been referred to me. This fundamentally ignores the
hierarchy of decisions. The Tribunal, unless its award
is challenged
in Court, is the final decision-maker. Whatever the Tribunal decides
must be enforced.
’
[40]
Sasol disputed this. It contended that
the proposition that an arbitration award directly impacts on the
earlier decisions is flawed.
They contended that M&R was placing
form above substance and referred in this regard to authorities
dealing with res judicata.
This argument is ill-founded.
Applicable
time periods
[41]
Sasol
contended that the four-week period stipulated in clause W1.3(3) of
the contract can only be extended by agreement between
the
parties.
[27]
In regard to the
adjudicator being entitled to request further information, Sasol
argued that it was not the adjudicator who suggested
the required new
information; it was M&R who requested to respond to Sasol’s
submission, thus compelling the adjudicator
to make his decision
after the time period had elapsed. It submitted that the adjudicator
was bound to the strict time limits agreed
upon. If he required
further same information, same had to be provided within two weeks of
his request, in terms of the adjudicator’s
contract. The
adjudicator is bound to exercise his powers in such a manner that he
renders his decision within the agreed four-week
period.
[42]
M&R submitted that the parties
agreed to the adjudicator’s extended powers by concluding the
adjudicator’s contract
wherein these powers governed the
position. These are contained in clauses 1.7, 2.4 and additional
condition 2.5 of the Adjudicator’s
Contract.
[43]
M&R
submitted, correctly in my view, that the period provided in clause
2.5 would commence after the period stipulated in clause
W1.3(3),
that is, after Sasol had filed its opposing information in relation
to D16. M&R contended that that is the period
being regulated in
clause W1.3(3), as opposed to the period of four weeks after which
the adjudicator has the right afforded to
him in terms of clause 2.5
read with clause W1.3(5).
[28]
These clauses deal with the four-week period. Clause 2.5 provided the
adjudicator with the power thereafter, to request information
from
the parties, which would have to be delivered within two weeks.
[44]
Clause
1.7 of the Adjudicator’s Contract gives precedence to the
amended powers of the adjudicator in clause 2.5 to ask
for
additional information. This would allow for him to make a decision
within four weeks after obtaining the final information
from both
parties i.e. ‘
the
end of the period for receiving information’
.
[29]
This period was extended by agreement in clause 2.5 of the
Adjudicator’s Contract. This is as opposed to the date by which
the other party has to respond with information in response to the
contractor’s referral as stipulated in clause W1.3(3)
of the
contract. The logic of this approach is demonstrated by the fact that
the responding party may wait until the initial four-week
period is
about to expire before filing its response, as happened in this case.
This would oust the right of the contractor to
reply to such
information. This process also permitted the adjudicator to give both
parties time to submit documents and information,
which demonstrated
his application of the
audi
alteram partem
rule.
[45]
Sasol
relied on the judgment of Twala J in
Group
Five Construction (Pty) Ltd v Transnet SOC Limited
,
[30]
in which it was held that, without consent, the adjudicator cannot
extend the time period beyond the four week prescribed period.
In
doing so, without such consent, it was held that the adjudicator’s
decision was invalid. M&R sought to distinguish
this decision on
the basis that the contract in
Group Five
did not contain a clause akin to clause 2.5, which extended the
adjudicator’s powers to require further information, outside
of
the four-week period. A further distinguishing feature is that the
adjudicator in
Group
Five
was already in possession of the documentation he required in the
extended period.
[46]
The events set out below, M&R
stated, demonstrated that the adjudicator acted within his powers in
extending the time periods.
46.1.
On 16 January 2019, M&R submitted
its referral of D16 to the adjudicator.
46.2.
On 11 February 2019, Sasol responded
thereto.
46.3.
On 19 February, M&R, having received
Sasol’s response, informed the adjudicator that Sasol had made
‘serious new
and unsubstantiated allegations’ which
required a response. M&R thus sought the adjudicator’s
consent to submit
a reply by 25 February 2019. Sasol refused to agree
to this, stating that the period for submissions could only be
extended by
consent in terms of clause W1.3(5) of the contract.
46.4.
On 19 February M&R responded to such
refusal, stating that the adjudicator had the discretion to allow
further submissions;
consent of Sasol was not required. It referred
in detail to the allegations it wished to deal with. The adjudicator
required Sasol’s
response to M&R’s email.
46.5.
On 21 February, Sasol responded, without
prejudice to its rights in relation to the time period. M&R
responded to that email
on the same day.
46.6.
On 27 February, the adjudicator informed
the parties that he would permit M&R to submit further
information. An opportunity
would be given to Sasol to respond.
Further additional information was required from both parties.
46.7.
On 5 March 2019, M&R submitted
further information requested by the adjudicator and suggested that
Sasol file its response by
8 March 2019. Sasol objected to the time
period and requested a lengthier period to respond in the interest of
‘natural justice’.
46.8.
On the same day, the adjudicator
indicated that 12 March 2019 seemed suitable, but required Sasol to
indicate when it could respond.
Sasol undertook to revert on this as
soon as possible. On 8 March 2019, Sasol stated it would respond by
14 March 2019, which it
did.
46.9.
On 20 March 2019, in response to the
adjudicator’s invitation, M&R motivated its need for oral
argument. Sasol rejected
this on the same day again, citing the
adjudicator’s lack of jurisdiction as the time period had
expired.
46.10.
On 22 March 2019, the adjudicator stated
that he would allow oral submissions.
46.11.
On 26 March 2019, Sasol, again citing
the time period requisites, notified M&R that, as the
adjudicator’s jurisdiction
had terminated by the effluxion of
time, it was referring D16 to the tribunal (the notice of
dissatisfaction).
46.12.
M&R rejected this contention on the
same day. It referred to clause W1.3(3), (5) and (8) as justifying
the adjudicator’s
decisions and the time periods permitted.
[47]
The
adjudicator responded on the same day stating that Sasol has
submitted its response on 11 February 2019. According to his
calculation,
four weeks from 11 February is 11 March. On 27 February
2019, he requested further information in terms of the third listed
bullet
of clause. W1.3(5), which according to Keating,
[31]
gave the adjudicator the power to extend the time period, if it was
in the interests of justice. The intention of clause W1.3(5)
is to
allow a four-week period within which the adjudicator may give
directions as to the submissions by both parties.
[48]
Neither party objected to the
adjudicator’s request, nor did either of the parties indicate
that they believed the adjudicator’s
decision was due four
weeks after Sasol’s submission, despite his extended powers.
The adjudicator thus accepted (as he was
entitled to) that he had to
hand down his decision within four weeks of the receipt of the last
information. The adjudicator also
referred the parties to Clause 10
of the contract which required the parties to act in a spirit of
mutual trust and co-operation.
The adjudicator thus refuted Sasol’s
suggestion that the time period had lapsed.
[49]
M&R contended that Sasol should have
filed the notice of dissatisfaction on 12 March 2019 if it
believed that the time
period lapsed on that day. Instead, it
requested additional time, without at that stage, reserving its
rights. It proceeded to
file lengthy submissions. Thus, M&R
submitted that Sasol had waived the right to rely on this point. The
adjudicator had the
power to accept M&R’s contention that
it was essential that it be permitted to respond to Sasol’s
submissions.
[50]
Sasol, despite its earlier objections,
then agreed, without prejudice to its rights to attend the oral
hearing on 16 April 2019.
Both Sasol and M&R were present and
filed heads of argument. Sasol was given the opportunity to respond
in full to M&R’s
submissions.
[51]
From
the aforegoing events, it is also evident that the alleged
irregularities relating to the lack of
audi
alteram partem,
cannot
be accepted. Sasol was given every opportunity to deal with M&R’s
claims, which were detailed in the referral.
It fully participated in
the proceedings (despite the objections it had raised). In its
response, Sasol elected not to deal with
the quantification of M&R’s
claims. It attempted to have such claims dismissed on a legal basis
only. It only raised
the quantification issues during the oral
hearing. Sasol cannot now rely on this as a failure by the
adjudicator to allow
audi
alteram partem
.
In any event, an irregularity in the proceedings does not mean that
the decision was incorrect. Such irregularity must relate
to the
procedure adopted, which prevented the party from having its case
fully ventilated.
[32]
The
above rendition of events demonstrates that this is not the position
here. The adjudicator considered every issue raised by
Sasol and gave
valid reasons for each finding.
[52]
In
Segal
,
[33]
De Vos J summarised the position as follows:
‘
Having
regard to the nature of the adjudication process, I accept that it is
sui generis. I further take notice of the fact that
the very nature
of the adjudication process carries with it a risk of unfairness,
either in the way the adjudication is conducted,
or in the result, or
both. The need to speedily resolve the dispute and the parties’
entitlement to an answer, increases
the risk compared to a hearing,
arbitration proceedings, and/or court proceedings. … I
also accept that our courts
are of the opinion that as long as the
adjudicator acted generally in accordance with the usual rules of
natural justice and without
bias and within his terms of reference,
his decision is likely to be enforced.
…
Enforcement
of the adjudicator’s decision is critical to the success of
adjudication as a form of alternative dispute resolution,
and
therefore our courts have adopted a robust approach in this regard;
see Transnet Soc Ltd v Group Five Construction (Pty)
Ltd and
Others (7484/2015) [2016] ZAKZDHC 3 (9 February 2016). An
adjudicator is a third-party intermediary appointed to resolve
a
dispute between parties. The decision of the adjudicator is
binding and final, unless it is later reviewed by either arbitration
or court proceedings,
whichever
the parties selected at the time of formalising the
contract
. Adjudication
is intended to be a condition precedent to either
arbitration
or
litigation. Where
the contract explicitly requires this, the parties cannot directly
approach a court of law for any
relief.
’
[53]
Sasol did not seek the review and setting aside
of the adjudicator’s decision in its counter-application.
Although Sasol has
delivered a notice of dissatisfaction, this does
not release Sasol from complying with the adjudicator’s
decision. The notice
to preserve the party’s right to require
arbitration does not affect the binding nature of the adjudicator’s
determination.
[54]
In
Tubular
Holdings (Pty) Ltd v DBT Technologies (Pty) Ltd
,
[34]
du Plessis AJ stated:
‘…
This
court has declared that a notice of dissatisfaction does not excuse
performance by the party giving such notice from giving
effect to the
decision in the interim.
The wording of the
provisions in question is entirely consistent with other forms of
contract and are indicative of a practice currently
existent in the
construction industry, to the effect that dissatisfied parties are
required to give prompt effect to the decisions
of adjudicators in
question despite their notices of dissatisfaction; those notices
merely allow a possible revision of these decisions
without affecting
their interim binding nature.’
The
dissatisfied party (Sasol) is obliged to comply promptly with the
adjudicator's determination (the decision), notwithstanding
its
delivery of a notice of dissatisfaction. The notice preserves the
party's right to require arbitration, but does not affect
the binding
nature of the adjudicator's determination.
[55]
From the papers, it appears that Sasol
has not referred the decision to the arbitrator. Until and unless the
adjudicator’s
decision has been revised by the arbitrator,
Sasol is bound to comply with such decision in terms of clause
W1.3(10) of the contract.
[56]
For the reasons stated above, Sasol’s
counter-application must fail.
In
the result the following order is granted:
1. The respondent shall
upon service of this order give immediate effect to the decision
delivered by the adjudicator on 12 May
2019 (‘the decision’).
2. In respect of the
decision the respondent shall make immediate payment to the applicant
as follows:
2.1. R130 959,39 plus
VAT;
2.2. R2 340 290,55 plus
VAT;
2.3. R10 888 833,76 plus
VAT;
2.4. R2 420 242,59 plus
VAT;
2.5. R173 938,58 plus
VAT;
2.6. R1 469 609,12 plus
VAT;
2.7. R335 400,27 plus
VAT;
2.8. R991 562,24 Plus
VAT;
2.9. R934 931,85 plus
VAT;
2.10. R102 842,50 plus
VAT;
2.11. R23 587 548,00 plus
VAT (being the unpaid awarded amount referred to in paragraph 3
below);
2.12. R1751 851,91 plus
VAT (also being the unpaid awarded amount referred to in paragraph 3
below); and
2.13. R3 868 744,99 plus
VAT (being interest up to 10 November 2018).
3. The respondent is
ordered to pay interest on the unpaid awarded amounts plus VAT set
out in paragraphs 2.11 and 2.12 above on
the amount of R25 339 399.91
from 11 November 2018 to date of payment to be calculated on a daily
basis at the interest
rate equal to the prime lending rate of ABSA
Bank, and compounded annually from the date when the incorrect amount
was certified
until the date when the corrected amount is certified,
as included in the assessment which includes the corrected amount.
4. The respondent is
ordered to pay interest on the amounts set out in paragraphs 2.1 to
2.12 above plus VAT from 10 June 2019 (being
the date from which the
respondent is
in mora
of having failed to make payment to the
applicant in accordance with the decision) to date of payment to be
calculated on a daily
basis at the interest rate equal to the prime
lending rate of ABSA Bank and compounded annually.
5. The costs of this
application are to be paid by the respondent; and
6.
The
respondent’s counter-application is dismissed with costs.
_____________________________
S
E WEINER
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Date
of hearing:
20 February 2020
Date
of judgment:
16 April 2020
Appearances:
Counsel
for the Applicants:
Adv. LJ van Tonder SC
Instructing
Attorneys:
Tiefenthaler Attorneys Inc
Counsel
for the Respondents:
Adv. PHJ van Vuuren SC; Adv. HM Viljoen
Instructing
Attorneys:
Cliffe Dekker Hofmeyr Inc
[1]
The
relevant provisions are set out in para [13].
[2]
Clause
W1.3(1) of the contract.
[3]
Clause
W1.1 read with Clause W1.3(1) of the contract.
[4]
Clause
W1.4(1) of the contract.
[5]
The Adjudicator’s Contract contained ‘An additional
condition’ adding clause 2.5.
[6]
Clause W1.3(10).
[7]
Clause
W1.2(2).
[8]
Vidavsky
v Body Corporate of Sunhill Villas
2005 (5) SA 200 (SCA).
[9]
Macob
Civil Engineering Ltd v Morrison Construction Ltd
[1999] EWHC Technology 254
;
(1999) BLR 93
; Case No:1999/TCC/30.
[10]
Ibid para 14.
[11]
See
Tubular
Holdings (Pty) Ltd v DBT Technologies (Pty) Ltd
2014 (1) SA 244
(GSJ) para 27 and
Freeman
NO
and Another v Eskom Holdings Limited
(43346/09) [2010] ZAGPJHC 29 (23 April 2010). As stated in para 40
of
Ekurhuleni
West College v Segal and Another
(26624/2017) [2018] ZAGPPHC 662 (29 August 2018), ‘Both
decisions make it clear that the purpose of adjudication is to
arrive at a speedy resolution of a dispute.’
[12]
Esor
Africa (Pty) Ltd/ Franki Africa (Pty) Ltd Joint Venture v Bombela
Civils Joint Venture (Pty) Ltd
(12/7442) [2013] ZAGPJHC 407 (12 February 2013).
[13]
Ibid para 11.
[14]
Freeman
(note
11 above).
[15]
Ibid para 16.
[16]
Northern
Developments (Cumbria) Limited v J & J Nichol
[2000] EWHC Technology 176
para 23.
[17]
Ibid para 24.
[18]
Carillion
Construction Ltd v Devonport Royal Dockyard Ltd
[2005] EWCA Civ 1358.
[19]
Ibid para 52.
[20]
Segal
(note 11 above) para 40.
[21]
See
Northern
Developments (Cumbria) Ltd v J & J Nichol
(note 16 above) para 25, where the court endorsed this principle.
[22]
Carillion
Construction
(note 18 above) para 85.
[23]
Ibid para 86.
[24]
Segal
(note 11 above) para 41.
[25]
Radon
Projects (Pty) Ltd v NV Properties (Pty) Ltd & Another
2013
(6) SA 345 (SCA).
[26]
As
provided for in the first bullet point of clause W1.3(5) of the
contract.
[27]
Clause W1.3(3) provides:
‘
The
party referring the dispute to the
Adjudicator
includes
in his referral information to be considered by
the
Adjudicator
.
Any more information from a Party to be considered by
the
Adjudicator
is
provided within four weeks of the referral. This period may be
extended if the
Adjudicator
and
the parties agree.’
[28]
See para 13.5.
[29]
See
para 13.6.
[30]
Group
Five Construction (Pty) Ltd v Transnet SOC Limited
(45879/2018) [2019] ZAGPJHC 328 (28 June 2019) paras 17-25.
[31]
Keating
on Construction Contracts (10
th
ed) Third Supplement.
[32]
Ellis
v Morgan; Ellis v Dessai
1909
TS 576
at 581 ‘…an irregularity in proceedings does not
mean an incorrect judgment; it refers not to the result, but to the
methods of a trial, such as, for example, some high-handed or
mistaken action which has prevented the aggrieved party from having
his case fully and fairly determined.’
See also
Telcordia
Technologies Inc v Telkom SA Ltd
(26/05)
[2006] ZASCA 112
(22 November
2006); 2007 (3) SA 266
(SCA); paras
52-78, 85-88;
Herholdt
v Nedbank
Ltd
(701/2012)
[2013] ZASCA 97
(5 September
2013); 2013 (6) SA 224
(SCA)
para 19.
[33]
Segal
(note
11 above) paras 44-45 (original emphasis).
[34]
Tubular
Holdings (Pty) Ltd v DBT Technologies (Pty) Ltd
2014 (1) SA 244
(GSJ) paras 26-27. See also
Basil
Read (Pty) Ltd v Regent Devco (Pty) Ltd
(41108/09) [2010] ZAGPJHC 75 (9 March 2010) para 51.