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2023
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[2023] ZAKZPHC 136
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Milling Techniks (Pty) Ltd v MEC for the Department of Transport KwaZulu-Natal and Another (6319/2022) [2023] ZAKZPHC 136 (10 November 2023)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No: 6319/2022
In
the matter between:
MILLING
TECHNIKS (PTY) LTD
APPLICANT
and
THE
MEC FOR THE DEPARTMENT OF TRANSPORT
KWAZULU-NATAL
FIRST RESPONDENT
TONY
SMITH
N.O.
SECOND RESPONDENT
ORDER
The following order is
granted:
1.
The appointment of the second respondent as the adjudicator to
determine the
dispute between the applicant and the first respondent
is declared to be valid and binding.
2.
The first respondent is directed to sign and deliver the
adjudicator’s
contract to the second respondent within five
days from the date of service of this order upon the first
respondent.
3.
In the event that the first respondent fails to comply with para 2 of
the order,
the sheriff of this court is authorised and directed to
sign the adjudication contract on behalf of the first respondent, to
serve
the original on the second respondent and to furnish a copy to
the applicant and the first respondent
4.
The first respondent is directed to pay costs of the application.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
E
Bezuidenhout J
Introduction
[1]
The applicant, Milling Techniks (Pty) Ltd, applies
inter alia
for relief against the first respondent, the MEC for the
KwaZulu-Natal Department of Transport, relating to the appointment of
the second respondent, Mr Tony Smith, as the adjudicator to determine
a dispute between the applicant and first respondent. It
seeks
inter
alia
that the appointment of the second respondent as the
adjudicator be declared valid and binding in terms of the contract
between
the parties.
[2]
It is common cause that the applicant and the first respondent
concluded an agreement
on 18 December 2018, in terms of which the
applicant was to provide management and supervisory services over
routine road maintenance
activities performed by emerging contractors
in the New Hanover and Umshwathi areas under contract number
ZNT4064/16T. The contract
is governed by the General Conditions of
Contract (the GCC).
[1]
Issues
to be determined
[3]
The main issue that requires determination is whether the applicant
timeously submitted
its dissatisfaction claim, and if not, whether
the adjudicator has the power to determine whether the applicant is
time-barred.
Additional issues arise as to whether the first
respondent is required to comply with the adjudication proceedings
instituted and
whether the second respondent (an engineer appointed
by the South African Institute of Civil Engineers (SAICE)) was
validly appointed
as an adjudicator.
Background
[4]
As mentioned above, the agreement between the parties is governed by
the GCC, which
includes a mandatory dispute resolution process by way
of adjudication, as contained in clause 10.
[5]
In terms of clause 10.2.1, its provisions shall apply to any claim
and in respect
of any matter arising out of or in connection with the
contract. The contractor or the employer shall have the right to
deliver
a written dissatisfaction claim to the employer’s
agent, supported by particulars and substantiated.
[6]
Clause 10.2.2 states that if the contractor or employer fails to
submit a claim within
28 days after the cause of dissatisfaction, it
shall have no further right to raise any dissatisfaction relating to
such matter.
[7]
In terms of clause 10.2.3, the employer’s agent shall, within
28 days after
the contractor or employer has delivered the
dissatisfaction claim to him, give effect to clause 3.2.2 and give
his adequately
reasoned ruling on the dissatisfaction claim, in
writing, to the contractor and the employer.
[8]
Clause 10.3.1 states that the contractor or the employer may deliver
to the other
party, a written notice, referred to as a ‘dispute
notice’, of any dispute arising out of or in connection with
the
contract, provided that the dispute arises from a rejected claim.
A copy of the dispute notice shall be delivered to the employer’s
agent within 28 days of the event giving rise to the dispute. Failing
such delivery, the parties shall have no further right to
dispute the
matter.
[9]
In terms of clause 10.3.2, the dispute shall immediately be referred
to adjudication
upon either party giving notice in compliance with
clause 10.3.1.
[10]
Adjudication is dealt with in clause 10.5. In terms of the contract
data, which forms part of
the agreement between the applicant and
first respondent, one adjudicator would be appointed and the dispute
would be referred
to ad-hoc adjudication as provided for in clauses
10.5.2 and 10.5.3, the latter dealing with the Adjudication Board
rules. In terms
of clause 3.2 of the Adjudication Board rules, the
referring party shall select three or more persons from the panel of
ad-hoc
adjudicators of SAICE and confirm their fees and availability
to resolve the dispute in question. The other party shall within
seven days select, from the nominees, the adjudicator as allowed for
in the contract data. Failing selection, the president of SAICE
shall
on the application of either party, nominate a person or persons as
the Adjudication Board.
[11]
The applicant alleges that the first respondent and its chief
engineer disallowed in its entirety
the applicant’s claim for a
management fee in respect of payment certificate 25. The applicant
submitted the payment certificate
on 10 August 2021, which included a
claim for a management fee.
[12]
It appears from the papers that on 11 August 2021, correspondence was
exchanged between the applicant
and the first respondent’s
engineer, Mr Vahed, in terms of which the applicant was informed that
no management fee could
be claimed. Reference was made to previous
correspondence between the chief engineer of the first respondent and
the applicant.
[13]
On 13 August 2021, the applicant requested Mr Vahed to certify the
amounts on the payment certificate
delivered to him and to make the
amendments he saw fit or was instructed to make. Mr Vahed indicated
that they would be removing
the management fee and will return the
payment certificate for invoicing purposes. The applicant again
requested him to make the
amendments and to certify the payment
certificate.
[14]
Payment certificate 25 was subsequently issued on 25 August 2021.
[15]
On 21 September 2021, the applicant submitted its dissatisfaction
claim, in terms of clause 10.2.1
of the GCC, due to the removal of
the management fee from payment certificate 25. It was a detailed
document, setting out the applicant’s
contentions and also
contained a timeline of events.
[16]
On 23 September 2021, the first respondent’s chief engineer,
Mrs Lazarova, issued a ruling
on the applicant’s
dissatisfaction claim. It was contained in an email with the subject
line referring to the contract number
and the ‘Management Fee
Dissatisfaction Claim’. It read as follows:
‘
Attached
is the letter response of your dissatisfaction claim 2 years ago.
This letter response still stands.’
Attached
to the email was a letter dated 28 June 2019, addressed to the
applicant by Mrs Lazarova (who also attested to the first
respondent’s answering affidavit). The heading of the letter
contained a description of the contract and concluded with the
words
‘Management Fee’. She was responding to a letter from the
applicant dated 26 June 2019, and addressed certain
aspects relating
to the calculation of the management fee which was apparently raised
at a site clarification meeting and which
was subsequently emailed to
each tenderer. Reference was made to item B13.06 (the management fee)
and it was stated that since
it was neither a rate nor a provisional
sum, a price was required to be included in the ‘amount’
column. If the tenderer
had omitted it, then this item would be
considered to have a nil rate or price.
[17]
It is unclear from perusing the letter of 28 June 2019 whether it
relates to a dissatisfaction
claim in respect of a payment
certificate, or to a specific enquiry relating to the claiming of a
management fee. It certainly
contains no reference to a
dissatisfaction claim or the rejection of such claim.
[18]
It is apparent from the papers that the applicant tendered a rate of
30% for the management fee
and that it subsequently included the
claim for its management fee at that rate in payment certificate 25.
[19]
On 1 October 2021, the applicant delivered a combined notice of
dispute and notice of adjudication,
in terms of clause 10.3.1 of the
GCC and clause 4.1.1 of the Adjudication Board rules, to the first
respondent. The applicant suggested
that Mr Rod Stewart be appointed
as the adjudicator as he had apparently previously dealt with a
similar dispute between another
company in the applicant’s
group, Raubex KZN (Pty) Ltd, and the first respondent. The first
respondent was asked to provide
the names of three alternative
adjudicators if it was not amenable to the appointment of Mr Stewart.
[20]
It is common cause that the first respondent failed to respond to the
applicant’s request.
The applicant subsequently approached
SAICE for an adjudicator to be appointed, which was done on 22
October 2021, when SAICE confirmed
the appointment of the second
respondent.
The
first respondent’s case
[21]
The first respondent alleges that the applicant is time-barred from
proceeding to adjudication
on two fronts. Firstly, the applicant
failed to file a dissatisfaction claim after receiving Mrs Lazarova’s
letter of 28
June 2019 within the prescribed 28-day period or at all,
thereby also creating the impression that the applicant accepted what
was stated by Mrs Lazarova in that letter. From the correspondence
attached to Mrs Lazarova’s affidavit and as mentioned above,
it
appears that her letter of 28 June 2019 was in response to a letter
from the applicant dated 26 June 2019 wherein the issue
of the 30%
management fee was debated. The applicant set out its views, and
concluded its letter by expressing a willingness to
discuss the
matter further with Mrs Lazarova.
[22]
It does not appear to be framed as a particular claim or
dissatisfaction claim in respect of
a payment certificate. There is
no indication that the applicant was expecting a decision from the
engineer. The first respondent
is in essence saying that the
conclusion by Mrs Lazarova in her letter that ‘the Contractor
is not entitled to any payment
under item B13.06’ should have
been followed by the delivery of a dissatisfaction claim.
[23]
The second point raised by the first respondent relating to
time-barring, is the applicant’s
alleged failure to file its
dissatisfaction claim dated 21 September 2021 within 28 days. The
first respondent contents that the
28-day period started to run on 11
August 2021, when Mr Vahed had sent an e-mail to the applicant,
stating that it was not entitled
to claim the management fee.
According to the first respondent, the 28-day period lapsed on 9
September 2021.
[24]
The first respondent did not dispute that its engineer disallowed the
management fee from payment
certificate 25. As mentioned above, the
payment certificate was issued by the engineer on 25 August 2021,
followed by the applicant’s
dissatisfaction claim which was
submitted 27 days later on 21 September 2021.
[25]
In terms of clause 6.10.4 of the GCC, the engineer shall deliver the
payment certificate to the
contractor within seven days of receipt by
the engineer of the contractor’s statement. Any dissatisfaction
in respect of
such payment certificate shall be dealt with in terms
of clause 10.2. The amount certified by the engineer is the amount he
considers
to be due to the contractor, after taking into account the
various factors set out in clauses 6.10.1.1 to 6.10.1.8
[26]
It appears that the first respondent, whose engineer, on the face of
it, took more than seven
days to issue and deliver payment
certificate 25, is under the impression that the period of 28 days
started to run when the email
was sent by its engineer, Mr Vahed, on
11 August 2021, whereas clause 6.10.4 clearly states that any
dissatisfaction can only be
raised upon receipt of the payment
certificate.
[27]
The first respondent accused the applicant of bringing the present
application without disclosing
that its claim is time-barred. This
accusation would naturally fall away if it turns out that the claim
was not time-barred at
all.
[28]
The first respondent also alleged that the contract data only
provided for dispute resolution
by referral to ad-hoc adjudication
and that the applicant failed to comply with Adjudication Board rule
3.2. Much was made of the
applicant’s reference to rule 3.3 in
its founding affidavit, which was clearly an incorrect reference, but
the applicant
nonetheless referred to the fact that the dispute
should be referred to ad-hoc adjudication.
[29]
It is clear from the papers that the applicant invited the first
respondent to agree to the appointment
of an adjudicator and when no
response was forthcoming, it approached SAICE for the appointment of
an adjudicator. The first respondent’s
response to all these
allegations was simply to state that the correspondence referred to
by the applicant was issued after 8 September
2021, which is when the
applicant, according to the first respondent, became time-barred, and
that it therefore had no force or
effect. The first respondent, in
essence, decided that the applicant was time-barred and that was the
end of everything. Doubts
were also expressed as to whether the
applicant had informed SAICE that its dissatisfaction claim was
time-barred. The first respondent
went as far as to state that SAICE
had no power to appoint an adjudicator where the first respondent has
‘justifiably, refused
to consent to the appointment of an
adjudicator in respect of a claim that is time-barred’.
Previous
litigation
[30]
Both parties referred to a matter that came before Mossop AJ on 28
May 2021. In that matter,
[2]
another company in the applicant’s group, Raubex KZN (Pty) Ltd,
claimed a management fee similar to what was claimed by the
applicant
in the present matter, which the first respondent declined to allow.
The matter served before an adjudicator who then
ruled in favour of
Raubex KZN.
[31]
The first respondent did not accept the correctness of the ruling and
intended to refer the ruling
to arbitration. It, however, failed to
refer the dispute timeously and became time-barred. It applied to the
high court for an
order that the time-barring provisions contained in
clause 10.6.1 of the GCC be declared unenforceable insofar as it
prevented
the first respondent from challenging the adjudicator’s
decision. The application was dismissed with costs.
[32]
Mossop AJ only made a brief observation about the first respondent’s
prospects of success,
as it was not for him to adjudicate on the
correctness of the adjudicator’s decision. The court was of the
view that the
first respondent’s prospects of success were not
strong and that a ‘business-like consideration’ of Raubex
KZN’s
tender conformed with the finding of the arbitrator.
[3]
Analysis
and discussion
[33]
Counsel for the applicant, Mr I Pillay SC, submitted in his heads of
argument that once a dispute
is deemed to exist, either party is
compelled to use the dispute resolution process if it intends to have
the dispute determined.
It was also submitted that the relief should
be granted as the GCC provides for the dispute to be determined by
adjudication, that
the first respondent’s alleged time-bar
defence is ill-conceived and that the first respondent is not
entitled to frustrate
the contractually agreed upon adjudication
process because of its stance on the time-barring issue.
[34]
In my view, a few issues are clear from the papers before me and in
particular from the provisions
of the GCC. Clause 6.10.4 of the GCC
provides that any dissatisfaction in respect of a payment certificate
shall be dealt with
in terms of clause 10.2, which in turn provides
for a dissatisfaction claim to be made within 28 days. It is common
cause that
the certified payment certificate 25 did not include the
management fee and that this is what led to the applicant delivering
its
dissatisfaction claim on 21 September 2021, as it was obliged to
do in terms of the GCC.
[35]
Counsel for the first respondent, Mr Crampton, submitted in his heads
of argument that the applicant
failed to disclose any factual basis
for its allegation that the cause of dissatisfaction occurred or
arose on or after 25 August
2021. This submission unfortunately
failed to take into account the actual dissatisfaction claim, which
was attached to the applicant’s
founding affidavit as annexure
‘F’ and which set out all the relevant particulars in
detail, including the emails received
from Mr Vahed and the fact that
the payment certificate was returned on 25 August 2021 with the
management fee removed. I am satisfied
that this is the date on which
the cause of dissatisfaction arose. It follows that I am of the view
that the applicant did in fact
submit its dissatisfaction claim
timeously. The first respondent’s submission that the 28-day
period started running from
when the emails were sent is rejected.
The applicant had submitted a payment certificate and could in my
view only take further
steps once the certified payment certificate
was returned by the engineer, as envisaged in clause 6.10.4 of the
GCC. The applicant’s
dissatisfaction was clearly directed at
the payment certificate from which the first respondent’s
engineer had deleted the
management fee.
[36]
In light of my finding that the applicant’s dissatisfaction
claim is not time-barred, I
do not deem it necessary to deal with the
question as to whether the adjudicator would be able to determine
whether a claim is
in fact time-barred. I cannot see why not, bearing
in mind the provisions of clause 10.2.1. In Norland
[4]
the adjudicator raised the issue of time-barring
mero
motu
.
The court held at para 106 that the adjudicator was not entitled to
do so, as it was not an issue which was before him for consideration.
This in my view seems to imply that an adjudicator is entitled to
consider the issue of time-barring, provided it has been placed
before him as an issue to deal with.
[5]
The first respondent held the view that because the claim was
time-barred, adjudication could not be proceeded with. Instead of
making submissions supported by authorities on this particular issue,
counsel for the first respondent in his heads of argument
simply
kicked the ball back to the applicant, submitting that it bore the
onus to prove its case. Before me it was submitted on
behalf of the
first respondent that it does not matter whether the adjudicator has
the jurisdiction to determine the time-bar issue.
What is important
to consider is whether the applicant had made out a case for the
relief it seeks - which was referred to as a
claim for specific
performance.
[37]
In respect of the first time-bar issue, namely the letters from June
2019, I am of the view that
the first respondent has failed to show
that the letter by Mrs Lazarova constituted a rejection in response
to a dissatisfaction
claim issued by the applicant. The applicant, in
its letter of 26 June 2019, refers to discussions which had taken
place, sets
out what it perceives as the current position and
concludes with a statement that it will avail itself for further
discussions.
There is in my view nothing to suggest that it was a
dissatisfaction claim of any sort. Mrs Lazarova states the position
of the
first respondent at the time but there is likewise nothing to
suggest that she issued a ruling, rejecting a dissatisfaction claim.
Mr Vahed, in his email of 11 August 2021, referred to ‘correspondence
previously from Mrs Lazarova’. One would have
expected Mr Vahed
to refer to a ruling in respect of a previous dissatisfaction claim,
if this was indeed the nature of the letter
of 28 June 2019, which it
clearly is not.
[38]
Counsel for the first respondent submitted that the letter by Mrs
Lazarova could have been the
subject of a dissatisfaction claim and
that the applicant, in essence, should have anticipated that what was
contained in the letter
amounted to a repudiation and/or an
anticipatory breach of the agreement, which has contractual
consequences. It was submitted
that the applicant would have been
entitled to submit a dissatisfaction claim in June 2019.
[39]
It is difficult to understand why the applicant should have taken the
step proposed by the first
respondent, when it is clear in my view
that the matter was being debated between the parties and that it did
not involve a payment
certificate or a ruling on a payment
certificate. The issue would in my view only arise when a payment
certificate was submitted
for certification. The applicant included
its management fee and only when such fee was excluded and certified
by the engineer,
could the applicant submit its dissatisfaction claim
in terms of the GCC.
[40]
In my view, the first respondent is required to comply with the
adjudication proceedings as set
out in the GCC. The applicant
requested the first respondent to suggest the names of possible
adjudicators, which is a slight deviation
from the rules but which
was clearly designed to favour the first respondent by offering it
the opportunity to choose an arbitrator.
It has not responded and
quite correctly in my view, SAICE was approached to appoint someone,
who turned out to be the second respondent.
The first respondent has
raised no objection to his appointment per se.
[41]
I am accordingly of the view that the applicant has made out a case
for the main relief it seeks.
Costs
[42]
The applicant claimed for the first respondent to pay the costs of
the application on the attorney and client scale and stated
in its
founding affidavit that it has been significantly inconvenienced and
had to bear legal expenses as a result of the first
respondent’s
attitude. It in essence asked for costs on a punitive scale. It is
trite that the question of costs falls within
the discretion of the
court. Whilst I have sympathy for the applicant, I am of the view
that such an order would not be appropriate
in the circumstances
especially bearing in mind that public funds are involved.
Order
[43]
I accordingly make the following order:
1.
The appointment of the second respondent as the adjudicator to
determine the
dispute between the applicant and the first respondent
is declared to be valid and binding.
2.
The first respondent is directed to sign and deliver the
adjudicator’s
contract to the second respondent within five
days from the date of service of this order upon the first
respondent.
3.
In the event that the first respondent fails to comply with para 2 of
the order,
the sheriff of this court is authorised and directed to
sign the adjudication contract on behalf of the first respondent, to
serve
the original on the second respondent, and to furnish a copy to
the applicant and the first respondent
4.
The first respondent is directed to pay costs of the application.
E
BEZUIDENHOUT J
Date
of hearing:
10
March 2023
Date
of judgment:
10 November 2023
Appearances:
For
the applicant:
I S
Pillay SC
DM De
Jager
Instructed
by:
Cox
Yeats
Ncondo
Chambers
Vuna
Close
Umhlanga
Ridge
Email:
dvcek@coxyeats.co.za
;
jsmit@coxyeats.co.za
Tel:
031 536 8500
c/o
Stowell and Company
295
Pietermaritz Street
Pietermaritzburg
Ref:
GJ Campbell/ S-B/Cox
For
the first respondent :
D
Crampton
Instructed
by:
GNG
Attorneys
211
Burger Street
Pietermaritzburg
E
mail: glitigation3@gngattorneys.co.za
Tel:
033 345 3427
Ref:
D 1200/50/63
[1]
The General Conditions of Contract 3 ed (2015).
[2]
MEC for
the Department of Transport, KwaZulu-Natal v Raubex KZN (Pty) Ltd
and another
[2021] ZAKZPHC 77.
[3]
Ibid
para 49.
[4]
Norland
Construction (Pty) Ltd v OR Tambo District Municipality [2017]
ZAECGHC 87
[5]
Ekurhuleni
West College v Segal and Another [2018] ZAGPPHC 662 where at paras
32 and 41 it was held that an adjudicator has to
act in accordance
with his terms of reference