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[2024] ZAECMKHC 11
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Batalala Construction (Pty) Ltd v Enoch Mgijima Local Municipality Queenstown Eastern Cape and Another (3010/2021) [2024] ZAECMKHC 11 (25 January 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, MAKHANDA)
NOT REPORTABLE
Case no: 3010/2021
In
the matter between:
BATALALA
CONSTRUCTION (PTY) LTD
Applicant
(Registration
number :2011/106610/07)
and
ENOCH
MGIJIMA LOCAL MUNICIPALITY
First
Respondent
QUEENSTOWN
EASTERN CAPE
MONWABISI
SOMANA
Second
Respondent
JUDGMENT
Govindjee J
[1]
The
applicant (‘
Batalala
’)
and the first respondent (‘the municipality’), entered
into an agreement for the maintenance of surfaced roads
situated
within the boundaries of the municipality during October 2015.
[1]
Batalala, dissatisfied with an engineer’s reconciliation,
initiated an adjudication process in respect of a dispute regarding
alleged indebtedness on the part of the municipality. The appointed
adjudicator, having dismissed special pleas based on jurisdiction
and
prescription, ruled in its favour on 11 December 2020 (‘the
determination’). The present application seeks to give
effect
to the determination.
[2]
The municipality opposes the relief sought.
It claims that no payments are outstanding, that Batalala was
overpaid and that there
were several issues with the quality and
quantity of its work so that the determination ought to be set aside
and declared void
ab initio
.
As an alternative to an order dismissing the application, the
municipality’s counter-application seeks declaratory relief,
alternatively a stay of proceedings or the suspension of any judgment
pending the determination of any dispute by way of arbitration.
[3]
The main issues to be determined are
whether the determination ought to be enforced, set aside and
declared void
ab initio
or stayed pending arbitration. This involves consideration of the
following sub-issues:
(i)
Which edition of the General Conditions of
Contract (‘GCC’) is applicable to the dispute?
(ii)
Linked to that issue, whether mediation was
mandatory, also in terms of a service level agreement (‘SLA’),
so that referral
to adjudication was unlawful.
(iii)
In the event that the GCC July 2010 (‘the
2010 GCC) is applicable, whether Batalala performed in terms of the
agreement, including
the ‘Dispute and Arbitration’ clause
contained in the 2010 GCC, upon which its case is premised.
(iv)
Whether any claim against the municipality
has prescribed.
Which Edition of the
General Conditions of Contract is applicable?
[4]
There
is a dispute about whether it is the 2010 GCC or an earlier version
(‘the 2004 GCC’) that was applicable. The
applicant
maintains that the agreement was regulated inter alia by the 2010
GCC. Various documentation appended to the papers support
that
interpretation. In particular, the ‘contract document’
itself, issued by the municipality and including the tender
invitation, listed various ‘contract documents’. Those
documents expressly included the 2010 GCC. In addition, subsequent
to
Batalala’s appointment as the preferred service provider, the
parties entered into a detailed SLA, seemingly during April
2016. As
the preamble to that document explains, ‘the parties hereby
reduce in writing the terms and conditions upon which
their
relationship will be governed in terms of this Agreement’.
[2]
The SLA defines ‘GCC’ to mean the 2010 second edition. It
expressly provides:
‘
This
agreement also encompasses and includes the term and conditions set
in the documents listed as follows:
6.1 This Agreement;
6.2 The Contract, BID No.
… (Part C1 of the tender document);
6.3 The Letter of
Appointment;
6.4
The General
Conditions of Contract for Construction Works (2010, Second Edition)
;
and
6.5 Bid Document
submitted to the Lukhanji Local Municipality.’ (Own emphasis).
[5]
This position is maintained when
considering the subsequent conduct of the parties or their agents.
For example, the unsigned ‘Minutes
of a Special Site Technical
Meeting’, dated 20 September 2016, reflects that ‘claims
and disputes will be dealt with
in accordance with the “General
Conditions of Contract for Construction Works (GCC, 2
nd
Edition, 2010)”.’ It is also apparent that the
municipality failed to dispute the applicability of the 2010 GCC, or
raise the point that the 2004 GCC found application, during the
adjudication proceedings. Had it seriously considered this to be
the
position then that was the time to take the point. Instead, it
proceeded on the basis that the provisions of the 2010 GCC were
to be
applied.
[6]
The municipality’s reliance on the
2004 GCC is based on the ‘contract data’, which provides
that ‘the conditions
of contract are the General Conditions of
Contract for Construction Works (2004) published by the South African
Institution of
Civil Engineering (SAICE)’. The document
containing the ‘contract data’ was seemingly signed on 11
March 2016.
[7]
It
is necessary to have recourse to various aids to construction in
order to ascertain the intention of the parties. Various decisions
have, for example, provided pointers to interpretation of contracts
comprising more than one document. Other authorities, also
from other
jurisdictions, have considered the practice in the construction
sector specifically, and are equally useful. When construing
an
agreement comprising more than one document, one must consider all
the terms used by the parties in all the documents to determine
the
meaning thereof.
[3]
Significantly, where both parties have understood an ambiguous clause
in a particular way the court will give it that meaning.
[4]
Where a preliminary contract of any description, whether verbal or
written, is intended to be superseded by, and is in fact superseded
by, one of a superior character, then it is the latter contract that
prevails, so that stipulations in the earlier one can no longer
be
relied upon.
[5]
According to
Ramsden, in the construction sector, contracts are frequently
intended to have retrospective effect ‘…
because the
parties get on with the building project whilst the formalities are
being attended to…’
[6]
[8]
This
is borne out by what appears on the papers. The SLA was seemingly
only signed on 8 April 2016 and stamped by the municipality
on the
same day, even though the SLA reflects that Batalala’s
appointment was for work commencing on 29 October 2015. It
supersedes
the documentation relied upon by the municipality in time and, read
in its entirety, its nature is more indicative of
a comprehensive
contractual arrangement. As its preamble indicates, it constitutes
the written terms and conditions upon which
the parties agreed to
govern their contractual relationship. That agreement was
deliberately defined to mean ‘this Agreement
of … the
Municipality as set out in this document, including all appendices
hereto (if any)’. The SLA itself added
the submitted bid
document, letter of appointment, ‘the Contract, Bid No. …
(Part C1 of the tender document)’
and the 2010 GCC as
constituting the ‘extent of terms and conditions’. The
apparent conflict between the reference
to the 2004 GCC, in C1.2 of
the contract data, and the stipulated 2010 GCC, must, for all these
reasons, be resolved in favour
of the latter. Considering the
documentation as a whole, the probabilities favour this to be the
parties’ intention. The
language of the documentation
comprising the contract, read in context, favours the utilisation of
the second edition of the GCC,
which was also the more recent version
of that text.
[7]
The agreed dispute
resolution pathway
[9]
The
subsequent conduct of the parties, described above, accords with this
interpretation, and is equally decisive in resolving the
issue of
which GCC was intended to be applied.
[8]
That being the position, the next issue is to consider the agreed
mechanism for dispute resolution. The apparent conflict is between
the SLA’s reference to mediation and arbitration, and the
relevant ‘claims and disputes’ provisions detailed
in the
2010 GCC, expressly incorporated as part of the ‘extent’
of the SLA.
[10]
Again,
the conduct of both parties is indicative of the manner in which they
interpreted and construed the agreement. Batalala proceeded
in terms
of the ‘Claims and Disputes’ provision contained in the
2010 GCC. It issued a dissatisfaction claim on 5 June
2017.
[9]
No response was received. On 12 July 2017 a notice of dispute was
served, followed by a notice of adjudication on 2 August 2017.
On 2
June 2020, Batalala approached the South African Institution of Civil
Engineering, requesting that they appoint an adjudicator
to determine
the dispute. Prof McCutcheon (‘the adjudicator’) was
appointed as adjudicator on 1 July 2020 and Batalala
served its
statement of case on 29 July 2020. The municipality requested
numerous extensions in order to serve its statement of
defence. The
adjudicator granted these requests and the municipality served its
special plea on 28 September 2020.
[11]
In essence, the municipality advanced two
points: firstly, that Batalala had failed to deliver its dispute
notice timeously, in
terms of clause 10.3 of the 2010 GCC, so that
the adjudicator lacked the requisite jurisdiction to adjudicate the
matter; and secondly,
that any claims had prescribed. Batalala
responded on 9 October 2020. In response, on 21 October 2020 the
municipality persisted
with its stance ‘that the claimant’s
claim should be dismissed on any or all of the special pleas’.
[12]
It is apparent that the parties proceeded
on the basis that the 2010 GCC dispute resolution mechanisms were
applicable, to be read
with the SLA’s inclusion of arbitration
in the event of non-resolution of a dispute. This supports Batalala’s
argument
that the party referring a dispute had the discretion to
select either dispute resolution by way of adjudication or mediation,
given that the SLA did not contain any order of precedence clause. At
no stage did the municipality raise the point that the ‘disputes
and arbitration’ clause in the SLA, in so far as it provided
for mediation and arbitration, took precedence over the GCC
2010
dispute resolution pathway, or that Batalala was restricted to
pursuing mediation and arbitration in terms of the SLA, as
opposed to
adjudication followed by arbitration. The municipality did not seek
clarification from the Engineer once Batalala chose
to utilise clause
10 of the GCC 2010, suggesting that it accepted Batalala’s
entitlement to utilise this particular dispute
resolution provision.
It also failed to raise the jurisdictional point with the
adjudicator.
2010 GCC Adjudication
[13]
In
cases where the ‘contract data’ does not provide for
dispute resolution by a standing Adjudication Board, the 2010
GCC
provides for the dispute to be referred to ‘ad-hoc
adjudication’.
[10]
Other
than the municipality’s averments pertaining to the
applicability of the 2004 GCC, and the submission that Batalala
failed to deliver a dispute notice timeously in terms of the 2010
GCC, there is no dispute on the papers as to the process for
the
appointment of an adjudicator or the adjudicator’s powers. The
municipality participated in the adjudication process,
serving a
special plea premised on the jurisdiction of the adjudicator and
contending Batalala’s claims had prescribed.
[14]
In
terms of the 2010 GCC Adjudication Board Rules (‘the Rules’),
the adjudicator effectively sat as an ‘Adjudication
Board’.
The Rules provide that the adjudicator may conduct proceedings in any
manner considered appropriate, subject to the
contract and the Rules,
guided by the principles of fairness and impartiality and taking the
parties wishes into account. In terms
of the Rules, the adjudicator
was not required to observe any rule of evidence, procedure or
otherwise barring ‘the rules
of natural justice’. Various
powers were afforded to the adjudicator. In particular, the Rules
provide that the adjudicator
could determine their own jurisdiction
to act and proceed with the matter if either party refused or failed
to participate in any
part of the proceedings.
[11]
[15]
The municipality’s special plea noted
a general reservation of rights ‘including, but not limited to
the right to respond
to the averments contained in the Claimant’s
Statement of Case’. It also noted, from the outset, that
Batalala had
relied on the 2010 GCC, and proceeded to engage with the
aspects it considered fatal to the claim. The adjudicator dismissed
the
municipality’s special plea, challenging the adjudicator’s
jurisdiction and raising prescription, on 16 November 2020.
He also
found that Batalala had made considerable efforts to settle the
matter amicably.
[16]
The importance of the conduct of parties in
implementing their own agreements has already been underscored. This
constitutes evidence
of the reasonable interpretation of the
agreement, in respect of dispute resolution, and is a relevant
consideration in deciding
the point. It adds to the probabilities in
favour of the construction offered by Batalala, namely that the
parties were free to
follow either the provisions of clause 10
(Claims and Disputes) of the 2010 GCC, or the provisions of clause 14
(Disputes and Arbitration)
of the SLA. Batalala made its choice and
their entitlement to do so remained unchallenged until the
municipality opposed the present
application. That opposition ignores
the fact that the SLA does not contain any indication of precedence
or hierarchy in respect
of provisions contained in the SLA, rather
than the 2010 GCC, which terms and conditions it incorporated
expressly. These considerations
combine to support the conclusion
that Batalala was entitled to proceed in terms of the 2010 GCC, as it
did.
[17]
That
finding impacts on what follows. As indicated, the contractual
arrangement was such that the adjudicator enjoyed the power
to
determine their own jurisdiction.
[12]
Importantly, the authorities confirm that the adjudicator’s
determination is not exhaustive of the dispute, because of either
party’s right to ‘disagree with any decision of the
Adjudication Board and refer the matter to arbitration or court
proceedings, whichever is applicable in terms of the Contract’.
[13]
Of crucial significance is that clause 10.6.1.1 provides that ‘the
[adjudication] decision shall be binding on both parties
unless and
until it is revised by an arbitration award or court judgment,
whichever is applicable in terms of the Contract.’
[14]
This is the case irrespective of whether the determination is
erroneous in some or other respect. The purpose of such provisions
has been described, in a comparable context, as follows:
[15]
‘
It
is plain that the purpose of adjudication 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 … Sight should not be lost of the fact that
adjudication is merely an intervening, provisional stage in the
dispute resolution process. Parties still have a right of recourse to
litigation and arbitration. Only a tribunal may revise an
adjudicator’s decision. As that decision has not been revised,
it remains binding and enforceable. Eskom cannot partially
comply
with the award and decline to give full effect to the payment portion
of the award. What Eskom is asking the Court to do
is to interrogate
the merits, an aspect which falls within the purview of the
arbitrator.’
[18]
In
Ethekwini
Municipality v CMC Di Ravenna SC
,
[16]
(‘
Ethekwini
Municipality
’)
the SCA confirmed the usual position: in the ordinary course an
adjudicator’s decision pursuant to the 2010 GCC was
binding on
the parties to the contract from the time it was made. Ordinarily,
therefore, an adjudicator’s determination that
sums of money
were due to a contractor would be immediately enforceable. An
employer’s failure to discharge an obligation
emanating from an
adjudication determination could be met with an application to court,
the court being ‘relieved of the
usual obligation of
establishing the existence of the obligations in question [as] that
had already been done through the process
of adjudication agreed upon
by the parties in the contract.’
[17]
[19]
In
the present circumstances, it is apparent that the municipality gave
‘notice of dispute in terms of clause 10.6.1.2 of
the GCC 2010’
on 9 March 2021, through its attorneys, in the following terms:
[18]
‘
We
do hereby give notice in terms of Clause 10.6.1.2 of the General
Conditions of Contract for Construction Works, 2010 that the
our
Client (sic), the Enoch Mgijima Local Municipality, is disputing the
validity and correctness of the whole of the decision
by the
Adjudicator, including rulings on special pleas and merits.’
[20]
Significantly,
that notice did not relieve the municipality of its obligation to
make payment to Batalala without delay.
[19]
Instead, some two years later, the municipality, in replying papers
to its counterclaim, contended that ‘until such time
as the
Court has pronounced itself on the applicability of which contract
[prevails] the matter cannot be dealt with by way of
arbitration’.
As indicated above, the municipality failed to raise this issue
before the adjudicator and proceeded on the
basis that the 2010 GCC
applied, also by way of its notice of dispute in terms of clause 10.6
referencing the 2010 GCC. Considering
that clause, as well as the
‘Disputes and Arbitration’ proviso in the SLA, the
municipality effectively expressed its
intention to exercise its
right to disagree with the decision of the adjudicator by referring
the matter to arbitration. It clearly
considered this to be the
appropriate pathway to follow after the adjudicator’s decision,
in terms of clause 10.6 of the
2010 GCC.
[20]
Of relevance is that clause 10.6.1.1 confirms that ‘[t]he
decision [of the adjudicator] shall be binding on both parties
unless
and until it is revised by an arbitration award or court judgment,
whichever is applicable in terms of the Contract’.
[21]
In contracting as they did, the parties agreed to vest such power in
the adjudicator and that his decision would be binding, even
if
erroneous, until revised by an arbitration award.
[22]
In terms of clause 10.10.3 of the 2010 GCC, an arbitrator enjoys full
power to reconsider any decision by the adjudicator and neither
party
is limited to the evidence or arguments relied upon before the
adjudicator.
[21]
The
municipality’s counter-application seeks to set aside the
adjudicator’s determination and declare same void
ab
initio
,
together with alternative relief. To the extent that the affidavit
supporting the counter-application invites the court to enter
into
the substantive merits of the claims in question, this invitation
must be refused in the present circumstances.
[23]
It is trite that judicial review is not concerned with the
correctness of the result on the substantive merits of the decision
in question, but with the fairness and regularity of the procedure by
which the decision was reached. By agreeing to arbitrate
unresolved
disputes in the SLA, the parties effectively empowered an arbitrator
to revise the adjudicator’s determination,
as a further step in
the agreed procedure of the settlement of disputes.
[24]
The notice of dissatisfaction and pending arbitration, on its own,
preclude any judicial review of the adjudicator’s
determination.
[25]
It may be
added that there is no case on the papers suggesting grave injustice
or the like so as to justify intervention by setting
aside the
adjudicator’s determination absent an arbitration award.
[26]
The municipality invoked its remedy to refer the matter to
arbitration and could have pursued it expeditiously, so that there
cannot be grave injustice or irreparable harm in holding it to the
contract.
[27]
As stated in
Hudson’s
Building and Engineering Contracts:
‘
It
should only be in rare cases that the courts will interfere with the
decision of an Adjudicator, and the courts should give no
encouragement to an approach which might aptly be described as
“simply scrabbling around to find some argument, however
tenuous, to resist payment”.’
[28]
Prescription
[22]
The
municipality pleads that Batalala’s work was completed on 19
March 2017 and that any claims would have fallen due on that
day,
alternatively on a date no more than 30 days after completion. As
summons or legal proceedings were not issued, any claims
have
prescribed in terms of
s 11
of the
Prescription Act, 1969
.
[29]
The municipality adds that the adjudicator erred in deciding that
issue in the manner he did, and that ‘an engineer was not
the
correct person or expert to decide on this legal issue’.
[23]
It follows from the preceding analysis that
the adjudicator’s determination is dispositive of the point,
the adjudicator having
been vested with the power to determine their
own jurisdiction and the contractual arrangement providing that the
adjudication
outcome would remain binding unless revised by an
arbitration award. Absent any arbitration award to the contrary,
Batalala seeks
to enforce the adjudication determination issued on 11
December 2020. That being its cause of action, there is no basis for
holding
that the present application had prescribed considering that
it was issued on 23 September 2021.
[24]
In
any event, there is authority that prescription could only begin to
run once an adjudication determination had been received.
This is
because of the contractual prerequisite for a claimant to follow the
agreed dispute resolution procedure as a necessary
component of
establishing the cause of action.
[30]
For these reasons, the municipality’s prescription contention
must be rejected.
Should the enforcement
of the adjudication determination be stayed?
[25]
The municipality seeks to hold any order in
favour of Batalala in abeyance pending arbitration. This on the basis
that it will suffer
undue hardship, also considering Batalala’s
delay in proceeding with the matter, the amount being claimed, its
service delivery
obligations and concern that public money to be paid
may not be recovered.
[26]
Such
arguments have previously been given short shrift in the context of
implementation of adjudication determinations.
[31]
The primary reason for this is the contractual arrangement entered
into between the parties and the principle of pacta sunt
servanda.
[32]
It bears
emphasis that the purpose of the agreed adjudication process was to
achieve expeditious resolution of the disputes. The
arbitration
proceedings are ‘independent, separate and distinct’ and
Batalala would be unjustifiably frustrated and
prejudiced if it was
unable to enforce the determination in its favour on the scanty basis
advanced by the municipality.
[33]
Despite the invocation of the argument based on public funds, it is
certainly not against public policy to refuse to stay the enforcement
of the determination.
[34]
Part
of the reason for this is again rooted in the agreed contractual
arrangement. It is for the party resisting enforcement of
such a
contractual obligation on public policy grounds to place the relevant
facts before court, for the court to decide the point.
Had the facts
presented reflected that it would be contrary to public policy to
grant the application, the outcome would reflect
this as a matter of
course, and absent any exercise of a discretion.
[35]
The present circumstances, as with cases such as
Enza
Construction (Pty Ltd v Paarl Tissue (Pty) Ltd
and
Ethekwini
Municipality
,
do not justify this.
[36]
[27]
Ethekwini
Municipality
also
involved an application to make the decisions of an adjudicator
orders of court. On appeal, the Ethekwini Municipality (‘the
employer’) accepted the adjudicator’s decisions as
legitimate, but relied on the possibility that they may be revised
in
due course, placing emphasis on the prevalent circumstances.
[37]
Of relevance is the employer’s argument that the High Court
enjoyed a discretion whether to grant a money judgment, either
because what was sought was an order for specific performance, or
because enforcement of the adjudicator’s decisions would,
on
the facts, be contrary to public policy. The employer also claimed
that a proper exercise of discretion would have resulted
in the
dismissal of the application to enforce the adjudicator’s
decisions.
[28]
The
SCA noted that it was inappropriate to rely on Uniform
Rule 45A
as
authority for the exercise of a discretion to stay the enforcement of
the adjudicator’s determination, ‘as no question
of
execution arises until after an order for payment of money has been
granted’.
[38]
It also
grappled with the argument that specific performance should be
refused in the exercise of a judicial discretion because
to grant it
would cause ‘unreasonable and undue hardship’ upon the
employer. This even though there was ‘no alternative
or
substitute relief which could be granted in such a case, without the
court in effect rewriting the contract to create one’.
Olsen
AJA, on behalf of a unanimous bench, held that there was no good
authority for the proposition that a court enjoyed a discretion
to
refuse judgment for payment of a contractual debt on the basis that
such a claim was to be equated to a claim to enforce a contractual
obligation to perform an act.
[39]
The discretion arose when a claim
ad
factum praestandum
was
made and an alternative of awarding damages was available, and the
difficulties associated with respect to an order for performance
of
an act, which had generated the need for a discretion, did not arise
in the case of money judgments.
[40]
The result was that an order for payment of a contractual debt was
not a discretionary remedy:
[41]
‘
Allowing
courts a general discretion to refuse judgments for contractual money
debts, perhaps “in the interests of justice”
or to “avoid
undue hardship”, gets perilously close to rendering the
simplest instances of judicial enforcement dependent
on the
“idiosyncratic inferences of a few judicial minds”. The
power of a court to refuse judgment for a money claim
arising from
contract, when to grant it would be contrary to public policy, is a
sufficient brake on excesses.’
[29]
This
authority appears to be dispositive of the point in question. In any
event, to the extent that this court nonetheless has the
power to
stay these proceedings or the enforcement of the determination at
this point in the proceedings, there is, as indicated,
no apparent
basis to exercise a discretion to do so. The municipality has failed
to press its notice of dissatisfaction to arbitration
for a period of
almost three years, ostensibly on the basis of uncertainty of which
edition of the GCC was applicable. During this
time Batalala has not
enjoyed the benefit of the determination in its favour and there is
no indication that real and substantial
injustice will occur in the
event that the relief sought by Batalala is granted, which is the
order to be made.
[42]
Costs
[30]
Batalala seeks costs on a punitive scale.
The main basis for this is that the municipality has purposefully,
and unconscionably,
delayed and frustrated proceedings by raising
unmeritorious submissions and failing to advance the arbitration
proceedings.
[31]
It is trite that attorney and client costs
are not readily granted. Special considerations, arising either from
the circumstances
giving rise to the proceedings or the conduct of
the losing party, are required in order to justify such an award.
Courts have,
for example, previously refused attorney and client
costs where conduct was misguided, rather than malicious.
[32]
In the present circumstances, I am
constrained to agree with Batalala’s submissions. The
municipality, in concluding the agreement,
agreed to comply with
decisions of an adjudicator. Its subsequent conduct as an organ of
state amounted to an unwarranted refusal
to either give effect to the
determination or proceed with arbitration, in circumstances where the
suggestion that the 2004 GCC
was applicable could be nothing more
than a whimsical afterthought. Deliberately dilatory conduct of this
nature on the part of
an organ of state warrants the punitive costs
order sought.
Order
[33]
The following order is issued:
1.
The first respondent is ordered to give
effect to the Adjudicator’s Determination dated 11 December
2020 (‘the Determination’).
2.
The first respondent is ordered to:
2.1
effect payment to the applicant in the amount of R3 025 072,69
(three million twenty-five
thousand and seventy-two rand and
sixty-nine cents) exclusive of VAT;
2.2
effect payment to the applicant of simple interest in the amount of
R827 617,37 (eight hundred
and twenty-seven thousand, six
hundred and seventeen rand, and thirty-seven cents);
2.3
effect payment to the applicant in the amount of R837 150,02
(eight hundred and thirty-seven thousand,
one hundred and fifty rand
and two cents) exclusive of VAT;
2.4
effect payment to the applicant of simple interest in the amount of
R229 034,94 (two hundred and
twenty-nine thousand and
thirty-four rand and ninety-four cents);
2.5
effect payment to the applicant in the amount of R75 329,20
(seventy-five thousand, three hundred
and twenty-nine rand, and
twenty cents) exclusive of VAT;
2.6
effect payment to the applicant of simple interest in the amount of
R20 609,01 (twenty thousand,
six hundred and nine rand and one
cent);
2.7
effect payment to the applicant of the adjudicator’s costs in
the amount of R76 800,00 (seventy-six
thousand eight hundred
rand).
3.
The first respondent is to pay the costs of
suit on the attorney and client scale.
A GOVINDJEE
JUDGE OF THE HIGH
COURT
Heard:
09
November 2023
Delivered:
25
January 2024
Appearances:
Counsel
for the Applicant:
Adv
T S Miller
St
George’s Chambers, Makhanda
Instructed
by:
C
De Villiers Attorneys
Attorneys
for the Applicant
Johannesburg
Tel:
011 551 1670
C/o:
McCallum
Attorneys
Office
no. 10, Fidelity Building
87
High Street
Makhanda
Tel:
046 622 2372
Counsel
for the Respondent:
Adv
L A Roux
Chambers,
Bloemfontein
Instructed
by:
Peyper
Attorneys
Respondent’s
Attorneys
Bloemfontein
Tel:
087 073 9737
C/o:
Nettelton
Attorneys
118A
High Street
Makhanda
Tel:
046 622 7149
[1]
The
second respondent has been cited in his capacity as the
administrator of the municipality.
[2]
Clause
4 of the SLA explains the ‘statement of purpose’ of the
document as follows:
‘
a)
The contents of this document have been formally negotiated between
the Municipality and the Service Provide. Both [the] parties
must
approve this SLA. It details the service and associated service
levels to be rendered by the Service Provider.
b)
The purpose of this SLA is to establish a relationship between the
Municipality and the Service Provider in respect of the
maintenance
of surfaced roads at Sada.’
[3]
Privest
Employee Solutions (Pty) Ltd v Vital Distribution Solutions (Pty)
Ltd
2005
(5) SA 276
(SCA). It follows that terms in a subsidiary document can
prescribe how the terms in the main document are to be construed.
[4]
Breed
v Van der Berg and Others
1932
AD 283
at 292.
[5]
Multiplex
Constructions (UK) Ltd v Cleveland Bridge UK Ltd
[2006]
EWHC 2640
(TCC) as cited in PA Ramsden
McKenzie’s
Law of Building and Engineering Contracts and Arbitration
(7
th
Ed) (2014) at 28.
[6]
Ramsden
above n 5, citing
Trollope
& Colls Limited v Atomic Power Constructions Limited
[1963] 1 WLR 333
at 339.
[7]
A
letter confirming Batalala’s appointment, dated 16 September
2015, makes reference to the following: ‘You are further
required to note that the general conditions of the contract (GCC)
are applicable, binding to the contract of this nature and
will be
strictly enforced during the implementation.’ Absent further
specification, the assumption must be that the more
recent version
of the GCC was referenced, which was confirmed upon signature of the
SLA.
[8]
Comwezi
Security Services (Pty) Ltd & Another v Cape Empowerment Trust
Ltd
[2012] ZASCA 126
para 15: ‘Now that regard is had to all
relevant context, irrespective of whether there is a perceived
ambiguity, there
is no reason not to look at the conduct of the
parties in implementing the agreement. Where it is clear that they
have both taken
the same approach to its implementation, and hence
the meaning of the provision in dispute, their conduct provides
clear evidence
of how reasonable business people situated as they
were and knowing what they knew, would construe the disputed
provision. It
is therefore relevant to an objective determination of
the meaning of the words they have used and the selection of the
appropriate
meaning from among those postulated by the parties.’
[9]
The
GCC 2010 deals with a ‘dissatisfaction claim’ as
follows:
‘
10.2.1
In respect of any matter arising out of or in connection with the
Contract, which is not required to be dealt with
in terms of Clause
10.1, the Contractor or the Employer shall have the right to deliver
a written dissatisfaction claim to the
Engineer. This written claim
shall be supported by particulars and substantiated.
10.2.2
If, in respect of any matter arising out of or in connection with
the Contract, which is not required to be
dealt with in terms of
Clause 10.1, the Contractor or the Employer fails to submit a claim
within 28 days after the cause of
dissatisfaction, he shall have no
further right to raise any dissatisfaction on such matter.
10.2.3
The Engineer shall, within 28 days after the Contractor or Employer
has delivered the dissatisfaction claim
to him, give effect to
Clause 3.1.2 and give his adequately reasoned ruling on the
dissatisfaction, in writing to the Contractor
and the Employer,
referring specifically to this Clause. The amount thereof allowed by
the Engineer, if any, shall be included
to the credit of the
Contractor or the Employer in the next payment certificate.’
In
terms of clause 10.3 of the GCC 2010, either party may deliver ‘a
dispute notice’ to the other ‘within 28
days of the
event giving rise to the dispute has arisen…’ If either
party has given notice in compliance with clause
10.3.1, ‘the
dispute shall be referred immediately to adjudication in terms of
clause 10.5, unless amicable settlement
is contemplated.’
[10]
Clause 10.5.2 of the GCC 2010.
This
is defined as ‘a procedure for the particular purpose of
reaching a fair, quick and inexpensive settlement of a dispute’:
clause 2.2 of the 2010 GCC Adjudication Board Rules (‘the
Rules’). Ad-hoc adjudication relates to ‘an Adjudication
Board which is appointed to consider a specific dispute which has
already arisen’: clause 1.2 of the Rules. ‘Adjudication
Board’ means a tribunal which issues a decision on a dispute
or disputes which has arisen between the parties to a contract.
[11]
Clauses
6.4.11 and 6.4.12 of the Rules. Cf
Qualelect
Investment Holdings (Pty) Ltd v Belo Kies Construction (Pty) Ltd
[2022] ZAGPJHC 430 (‘
Qualelect
’)
para 23.
[12]
See
Ex
Novo Limited v MPS Housing Limited
[2020] EWHC 3804
(TCC) para 20.
[13]
See
Framatome
v Eskom Holdings SOC Ltd
[2021]
ZASCA 132
(‘
Framatome
’)
para 9.
[14]
Cf
Framatome
above n 13 para 22. See
Freeman
NO and Another v Eskom Holdings Limited
[2010]
JOL 25357
(GSJ) para 17.
[15]
Framatome
above
n 13 para 23.
[16]
Ethekwini
Municipality v CMC Di Ravenna SC
2023
(6) SA 384
(SCA) (‘
Ethekwini
Municipality
’)
para 8.
[17]
Ethekwini
Municipality
above
n 16 para11.
[18]
The
clause provides as follows:
‘
A
party shall not dispute the validity or correctness of the whole or
a specified part of the decision [of the Adjudication Board]
before
28 days or after 56 days from receipt of the decision. Unless either
party shall on or after the said 28 days, or on or
before the said
56 days from receipt of the decision, give written notice to the
other party, referring to this Clause, disputing
the validity or
correctness of the whole or a specified part of the decision, he
shall have no further right to refer such a
dispute to arbitration
or court proceedings, whichever is applicable in terms of the
Contract.’ The answering affidavit
confirms the municipality’s
intention to refer its dissatisfaction with the determination to
arbitration.
[19]
Ekurhuleni
West College v Segal and Another
[2020]
ZASCA 32
(‘
Segal
’)
para 9. The prevalent practice in the construction industry is that
dissatisfied parties are required to give prompt
effect to the
decisions of adjudicators, notwithstanding notices of
dissatisfaction, which merely allow a possible revision of
these
decisions without affecting their interim binding nature:
Tubular
Holdings (Pty) Ltd v DBT Technologies (Pty) Ltd
2014
(1) SA 244
(GSJ) paras 25, 27.
[20]
See
Framatome
above n 13 para 24. For a useful, comprehensive consideration of the
proper interpretation of clause 10 of the 2010 GCC, see
the judgment
of Olivier J in
Entsha
Henra CC v The Sol Plaatje Municipality and Another
[2017] ZANCHC 61
and the judgment of Bezuidenhout AJ in
Umgungundlovu
District Municipality v MLO, New Boss and Zamisanani JV and Another
[2021] ZAKZPHC 50.
[21]
‘
Contract’
is defined to mean ‘the documentation of the agreement between
the parties in terms of the Form of Offer
and Acceptance, and such
written amendments or additions to the Contract as may be agreed to
between the parties’.
[22]
See
Thomas-Frederic’s
(Construction) Limited v Keith Wilson
[2003]
EWCA Civ 1494
para 33;
Ex
Novo Limited v MPS Housing Limited
[2020]
EWHC 3804
(TCC) para 20.
[23]
Segal
above
n 19 para 16.
[24]
See
Entsha
Henra CC v The Sol Plaatje Municipality and Another
above n 20 para 66;
Canton
Trading 17 (Pty) Ltd t/a Cube Architects v Hattingh NO
2022
(4) SA 420
(SCA) para 36.
[25]
Segal
above
n 19 paras 11, 17, 18;
Framatome
above n 13 para 22.
[26]
Segal
above
n 19 para 19 and following.
[27]
Segal
above
n 19 para 22.
[28]
R
Clay and N Dennys
Hudson’s
Building and Engineering Contracts
14
ed (2021) at 11-010.
[29]
Act
68 of 1969.
[30]
Group
Five Construction (Pty) Limited v Minister of Water Affairs and
Forestry
[2011]
JOL 26892
(SCA);
Group
Five Construction (Pty) Limited v Minister of Water Affairs and
Forestry
[2010] JOL 25414
(GNP) par 25.
[31]
See,
for example
Qualelect
above
n 11 para 41 and following.
[32]
Enza
Construction (Pty) Ltd v Paarl Tissue (Pty) Ltd
[2019]
JOL 42810
(KZP) paras 28, 29.
[33]
Qualelect
above
n 11 para 43, 44.
[34]
Ethekwini
Municipality
above
n 16 para 19.
[35]
Ethekwini
Municipality
above
n 16 para 15.
[36]
See
Ethekwini
Municipality
above n 16 para 21.
[37]
Ethekwini
Municipality
above
n 16 paras 6, 8. In that instance, absent an arbitration clause, the
disputed adjudicator’s decisions had been challenged
via
pending proceedings in the High Court.
[38]
Ethekwini
Municipality
above
n 16 para 10.
[39]
Ethekwini
Municipality
above
n 16 para 35.
[40]
Ethekwini
Municipality
above
n 16 para 36 and following.
[41]
Ethekwini
Municipality
above
n 16 paras 37, 39.
[42]
See, in the context of Uniform Rule 45A,
Contract
Core Construction CC v JLK Construction (Pty) Ltd
[2020]
ZAWCHC 167
para 30 and following.