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[2023] ZAFSHC 56
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Raubex/Nodoli Construction Joint Venture v MEC: Free State Department of Police, Roads and Transport (2288/2022) [2023] ZAFSHC 56 (20 February 2023)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 2288/2022
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between:
RAUBEX/NODOLI
CONSTRUCTION JOINT VENTURE Applicant
and
THE
MEMBER OF THE EXECUTIVE COUNCIL:
FREE
STATE DEPARTEMENT OF POLICE, ROADS
AND
TRANSPORT, FREE STATE PROVINCIAL
GOVERNMENT
N.O. Respondent
JUDGMENT
BY:
C
REINDERS, J
HEARD
ON:
6
OCTOBER 2022
DELIVERED
ON:
20
FEBRUARY 2023
[1]
On 10 May 2019 the applicant and the respondent entered
into a written contract (essentially based on the New Engineering
Contract 3, April 2013- “the NEC3”) for
maintenance
of the public road between Sasolburg and Heilbron in the Free State
Province.
A dispute arose between the parties culminating in
an adjudicator hearing the dispute and handing down his decision (the
adjudication
decision/award) on 7 April 2022.
[2]
The applicant moves for relief that effect be given to the
adjudication award in the following terms:
“
1.
The respondent is forthwith to give effect to the
adjudication award handed down on 7 April 2022, a copy of which is
annexed hereto
to the founding affidavit marked “C9”;
1.1
Pursuant to the above-mentioned
adjudication award, the respondent is ordered to pay the applicant:
1.1.1
R14 280 737.40 plus VAT less
R8 222 621.10, in other words R8 200 229.91;
1.1.2
Interest on the amount of R14 280 737.40
plus VAT at the rate of 7% per annum from 26 October 2021 to 31 March
2022; and
1.1.3
Interest on the balance of the amount due
of R8 200 229.91 (inclusive of VAT) at 7% per annum from 1 April 2022
to the date of payment.
1.2
The respondent is ordered to pay the costs of this application on an
attorney and client scale.”
[3] The
respondent opposes the relief claimed by the applicant, contending
that the applicant is not entitled
to such relief until the
arbitration proceedings are finalized and “an arbitration award
is issued in its favour.”
In essence it is submitted that the
adjudication decision (including any payment) is suspended pending
the dispute being revised
by the arbitrator in terms of the dispute
resolution process agreed upon by the parties. Applicant, so the
argument goes, seeks
court to give effect to the decision of the
adjudicator not being final and binding as there is no provision in
the NEC3 that the
decision should be promptly given effect to or
without undue delay, whilst the arbitration process is still pending.
[4] A
brief factual background to the application is mostly common cause
(or not seriously disputed) and can be
summarized as follows:
4.1
The NEC3 incorporated in the contract is
a standard contract
used within the construction industry in terms of which parties can
select certain clauses to govern their rights
and obligations and
regulate the completion of a specific project
.
The
contract also envisages the appointment by the employer (the
respondent) of a project manager, with the task to manage the
contract on behalf of the employer. Included in the contract (with
the applicable portions annexed to the applicant’s founding
papers) is the dispute resolution (Option W.1) agreed upon by the
parties. Provision is also made in the contract for what is termed
‘compensation events’ allowing the contractor to claim
from the employer additional payment and extra time to do the
work.
4.2 It is not
disputed that the applicant claimed for compensation relating to the
national lockdown (Covid-19) during
the period March to May 2020, and
that the employer’s instruction on 25 March 2020 to cease work
was a compensation event
entitling the applicant to an extension of
time and compensation. The matter was referred for adjudication after
a dispute arose
between the parties. The parties duly filed their
written submissions and the adjudicator handed down his award
on
7 April 2022.
4.3 Pursuant
to the award a trial of correspondence ensued between the parties. I
do not deem it necessary to comprehensively
deal with the precise
content of these electronic mails as the content thereof is not in
dispute.
4.3.1
It suffices to say that the applicant claimed payment from the
respondent in the amount of R 8 708 861,64
on 13 April
2013. The respondent (as represented by Mr M Monyane) on even date
replied that it wished to advise the applicant that
“it is our
instructions to approach the tribunal to challenge the decision of
the Adjudicator” and “…has
four weeks to do so.”
In a further response Mr Monyane replied:
“
Yes
the decision of the adjudicator is binding and must thus be referred
to Tribunal if there is dissatisfaction.
By taking a decision to
refer it to Tribunal suspend (
sic)
the payment until final
decision is arrived at.
For now, there is no
willingness on our part to pay any amount except the one already paid
to your client.
We will wait for the
Tribunal decision.”
4.3.2
The applicant’s attorneys of record responded by stating that
referring the decision to the tribunal
does not suspend payment and
pointed Mr Monyane to Option W.1.3 (10) of the contract. On 5 May
2022 the respondent addressed an
email to the attorneys of the
applicant and the adjudicator that it “notify” the
applicant and the adjudicator of its
“…intention to
refer the matter for arbitration as it is not satisfied about the
Ruling made on the 5
th
April
2022.”
4.4 The
applicant hereafter launched this application to have the
adjudicator’s award enforced.
[5] The
applicability of the dispute resolution provisions of the contract
(NEC3) that governs the relationship
between the parties is not in
dispute. The main bone of contention between the parties relates to
the aforementioned clause W1.3
(10) which reads:
“
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.”
[6]
The dispute between the parties is accordingly the question whether
the adjudication award which the applicant
seeks to enforce, is
binding in the event that the award was referred for arbitration in
terms of the aforementioned dispute resolution
provisions in view of
W1.3(10). Counsel held different views and both in their heads of
argument and in submission before me, referred
me to case law in
support of such views.
[7]
Applicant placed reliance, amongst others, on the case of
Tubular
Holdings (Pty) Ltd v DBT Technologies (Pty) Ltd
[1]
where the court concluded that the notice of dissatisfaction does not
suspend the obligation to give effect to the decision. The
applicable
clause in
Tubular
Holdings
stated that the decision of the Dispute Adjudication Board is binding
on the parties and should be promptly given effect to, whereas
in
Steffanuti
Stocks (Pty) Ltd v S8 Property (Pty) Ltd
[2]
the applicable dispute resolution clause included the wording
“without undue delay.”
[8]
Counsel for respondent sought to distinguish the aforementioned case
law by submitting that reliance on such
case law is misplaced as
in
casu
clause
W1 does not contain any provision that that the adjudicator’s
decision should be given effect to “promptly”
(or without
unduly delay), but instead the clause provides that the decision is
enforceable as a contractual obligation. Relying
on, inter alia,
Britstown
Municipality v Beunderman (Pty) Ltd
[3]
and
Blue
Circle Projects (Pty) Ltd v Klerksdorp Municipality
[4]
in respect of the finality
of an arbitrator’s award, he submitted that the decision of the
adjudicator the matter at hand
is not final and binding whilst the
arbitration process is still pending. I pause to mention that
Britstown
pertains to an award made by an arbitrator, whilst
Blue
Circle Projects
dealt with the opinion of a mediator.
[9]
Recently, the Supreme Court of Appeal comprehensively dealt with the
legal principles applicable to the status
of an adjudicator’s
award in
Framatome
v Eskom Holdings SOC Ltd
[5]
(‘
Framatome’
).
The summary of the judgment reads: “Construction contract –
contract providing for dispute resolution process through
adjudication – adjudicator’s award final and binding on
the parties until and unless set aside on review – High
Court
erred in not enforcing the award.” In my view
Framatome
put this issue to bed. I find it apposite however to quote liberally
from the applicable paragraphs of the unanimous judgment penned
by
Mathopo JA on behalf of the full bench. All emphases are that of
myself.
9.1 The
appeal in
Framatome
emanated from the Gauteng South
Division and concerned a dispute that arose between the parties in
relation to whether the project
manager’s notification (and
assessment) amounted to a compensation event. The trial court had
declined an order to enforce
the award by the adjudicator. Although
the applicable edition of the NEC3 was that with amendments of June
2006, the principles
in terms of the dispute resolution process (and
more specifically clause W1.3 (10)) are identical to that of the
application that
serves before me for adjudication.
9.2 Having
set out the background to the appeal, Mathopo JA addressed in
paragraph [20] the issue whether the high court
correctly declined
the order of enforcement and referred to the judgment of
Radon
Projects (Pty) Ltd v NV Properties (Pty) Ltd & Another
,
[6]
where the process of adjudication (and its purpose) was
comprehensively dealt with and described.
9.3 Clause
W.1.3 (10) was quoted and the court concluded by holding “…It
is clear that only the arbitration
is the appropriate forum. In
argument before us, Eskom conceded that the dispute has been referred
to arbitration.”
[7]
9.4 The
arguments tendered by counsel for the respondents, were found to be
without merit. Mathopo JA held:
“
[23]
If the interpretation contended for by Eskom is correct, it will
substantially undermine the effectiveness of the
scheme of
adjudication.
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. As far as the procedure is concerned,
adjudicators are given a fairly free hand. They are required to act
impartially
and permitted to take the initiative in ascertaining the
facts and the law. 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
…”
9.5 The court
dealt with the submission by Eskom that the adjudicator exceeded his
jurisdiction and the proper procedure
had not been followed, and
found that even this aspect did not entitle Eskom not to comply with
the adjudicator’s award:
…
The
adjudicator formulated the dispute with the understanding and
appreciation of what the parties contemplated.
It is trite that if upon an application for enforcement of an
adjudication decision, it is found that the adjudicator did not have
the requisite jurisdiction, his decision will not be binding or
enforceable’.
[8]
Mathope
JA proceeded to state: “A determination of whether or not
Framatome’s quotation was valid under the Contract
and whether
the process for the deemed acceptance of that quotation requires an
analysis of the facts.
This
is an issue which the arbitrator will deal with in due course. That
said, it is clear that the decision of the adjudicator
is binding and
enforceable.
[9]
At paragraph [29] it was held that …’In the final
analysis, the question to be asked is whether the adjudicator’s
determination is binding on the parties.
The
answer to that question turns on whether the adjudicator confined
himself to a determination of the issues that were put before
him by
the parties. If he did so, then the parties are bound by his
determination, notwithstanding that he may have fallen into
an
error
.
[10]
The respondent did not
attack the granting of the relief claimed by applicant on the basis
that the adjudicator did not confine
himself to a determination of
the issues put before him. It can thus be accepted that the
adjudicator indeed confined himself to
such issues before him and the
parties are consequently bound by his determination. Whether the
adjudicator was correct in his
findings is for the arbitrator to
decide.
[10]
Counsel for respondent pressed on me to exercise my discretion in
declining to enforce the adjudicator’s award
in view of the
fact that arbitration proceedings were pending and, as conveyed from
the bar, submissions by the parties had already
been furnished to the
arbitrator. In
Framatone
arbitration proceedings in
respect of the adjudicator’s decision was, like in this
instance, already instituted and pending.
Despite this aspect being
dealt with thoroughly as indicated in the above mentioned paragraphs
of the judgment, the court did not
apply any discretion leading to a
dismissal of the appeal. In fact, Mathopo JA concluded: … ‘To
my mind, no justifiable
reason exists for not fully giving effect to
the adjudicator’s award.
Refusing to comply with the payment
award of the adjudicator is disingenuous.
’
The
appeal was upheld, the order of the trial court was set aside and
replaced with the order as prayed for by the appellant (as
applicant)
in the trial court.
[11]
Applying the facts of this application to the principles enunciated
by and findings of the Supreme Court of Appeal in
Framatome
,
I am satisfied that the applicant has made out a proper case for the
relief claimed. Despite the able arguments proffered by counsel
for
the respondent to convince me that the application should be
dismissed in view thereof that the award of the adjudicator is
not
final (due to it being subject to review by the arbitrator) and the
application is accordingly premature, I have not been so
convinced.
Counsel for applicant submitted that a proper case for the relief
claimed was made out. I agree with her. The respondent
made payment
of only R
8 222 621.10. The notice of
motion embodies the precise wording of the adjudicator’s award
which includes a calculation
of this amount being subtracted from the
amount of R 14 280 737.40 (plus VAT), as well as interest
as set out in paragraphs
11.2 and 11.3 of the award. I was not called
upon to review the adjudicator’s award and thus refrain from
any comments in
respect of the wording of the order and the
paragraphs relating to interest.
It seemed that the respondent
did indeed make certain payments, but the amount so mentioned is
different from that which is indicated
to be subtracted in the
arbitration award that I am being requested to enforce. In my view it
would be up to the parties to calculate
the correct amounts due to
the applicant in terms of the award.
[12]
There is no reason why costs should not follow the event. Although
counsel for applicant pressed on me to award costs
on a scale as
between attorney and client. In my view the respondent, as an organ
of state holding the purse of the public, was
at liberty to defend
its view on the issues raised.
[13]
Accordingly I make the following order:
13.1
The respondent is forthwith to give effect
to the adjudication award of Adv. A Gautschi SC dated 5 April 2022
and handed down on
7 April 2022 as annexed to the applicant’s
founding affidavit and marked “CS9”.
13.2
Pursuant to the adjudication award, the
respondent is ordered to pay the applicant:
13.2.1
R14 280 737.40 plus VAT less R8 222 621.10, in
other words R8 200 229.91;
13.2.2
Interest on the amount of R14 280 737.40
plus VAT at the rate of 7% per annum from 26 October 2021 to 31 March
2022; and
13.2.3
Interest on the balance of the amount due
of R8 200 229.91 (inclusive of VAT) at 7% per annum from 1 April 2022
to the date of payment.
13.3 The respondent is
ordered to pay the costs of this application.
C
REINDERS, J
On
behalf of applicant: Ms
J Harwood
Instructed
by: Hewlett
Bunn Inc.
c/o Lovius Block
Attorneys
BLOEMFONTEIN
On
behalf of respondent: Adv
BS Mene SC
Instructed
by: State
Attorneys
BLOEMFONTEIN
[1]
2013
JDR 2441 (GSJ)
[2]
2014
(1) SA 244 (GSJ)
[3]
1967
(3) SA 154 (C)
[4]
1990
(1) SA 469 (T)
[5]
(357/2021)
[2021] ZASCA 132
(1 October 2021)
[6]
[2013]
ZASCA 83
;
[2013] 3 All SA 615
(SCA);
2013 (6) SA 345
(SCA)
(31
May 2013)
para
3-5.
[7]
At
paragraph [22].
[8]
At paragraph [25]
[9]
At
paragraph [26]
[10]
The
court referred to
Carillion
Construction Limited v Devonport Royal Dockyard Ltd
[2005]
EWHC 778
(TCC) at paragraph 63.