IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
CASE NO: 5201/23
In the matter between:
ESKOM HOLDINGS SOC LIMITED Applicant
and
FRAMATOME First Respondent
PETER RAMSDEN Second Respondent
JUDGMENT DELIVERED ELECTRONICALLY ON 1 7 JULY 2025
WILLIAMS, AJ:
Introduction
[1] The applicant and the first respondent are parties to a construction contract.
For ease of reference, the applicant is also referred to as “Eskom ” or “ the
employer ” and the first respondent as “ Framatome ” or “the contractor ”.
[2] Two disputes arose which the first respondent referred to the second
respondent (“ the adjudicator ”) for determination.
[3] The adjudicator issued two decisions in the matter, the first on 15 December
2022 and the second on 18 March 2023. He also issued instru ctions and
further instructions. The applicant contends that the decisions and instructions
are invalid in the respects delineated below. It accordingly seeks four
declarators to remedy the situation.
[4] The first declarator relates to paragraphs 24.4 to 24.7 .1 of the adjudicator’s
decision given on 15 December 2022 (also referred to as “ the merits
decision ”) which the applicant contends are invalid on the following five
grounds:
4.1. It was beyond his jurisdiction1;
4.2. He failed to apply the rules of natural justice ;
4.3. He failed to take into account the applicant’s submissions;
4.4. He failed to issue a reasoned decision; and/or
4.5. He failed to decide the issues that he was required to decide.
[5] The second declarator flows from the adjudicator’s instructions and further
instruct ions respectively issued on 16 February 2023 and 7 March 2023 which
the applicant submits are invalid since they exceeded his jurisdiction.
[6] The third declarator arises from the adjudicator’s decision delivered on 18
March 2023 (“ the quantum decision ”) which the applicant submits is invalid on
seven grounds, viz:
6.1. It was beyond his jurisdiction;
6.2. He failed to apply the rules of natural justice;
6.3. He failed to receive and take into account the applicant’s response to
the first respondent’s amended claim;
6.4. He failed to take into account the applicant’s submissions;
1 This is analogous to the arguments raised in Framatome v Eskom Holdings SOC LTD 2022 (2) SA
395 (SCA) where it was also alleged that the adjudicator exceeded his powers.
6.5. He accepted the amounts in the first respondent’s amended claim
without having enquired into the supporting documents or the details of
the claim;
6.6. He failed to issue a reasoned decision; a nd/or
6.7. He failed to follow the procedure laid down by himself.
[7] The final declarator is that the above decisions are unenforceable as
contractual obligations and need not be complied with by the applicant or the
project manager.
[8] The first respondent has op posed the application and asks that it be
dismissed with costs, including the costs attendant upon the employment of
two counsel , with scale C to apply from 12 April 2024.
[9] The first respondent has also filed a counter application for payment in
accordance with the adjudicator’s decision in which it seeks the following
relief:
9.1. That the applicant is directed to make payment to the first respondent
of the following amounts:
9.1.1. €35,288,582.00, exclusive of value-added tax and subject to
the price adjustment for i nflation pursuant to secondary option
clause X1 of the contract, and pursuant to clauses 51.3 and
51.4 of the contract, interest thereon calculated at the LIBOR
rate applicable at the time for amounts due in other currencies;
and
9.1.2. ZAR 256,631,358.00, exclus ive of value-added tax and subject
to the price adjustment for inflation pursuant to secondary
option clause X1 of the contract, and pursuant to clauses 51.3
and 51.4 of the contract, interest thereon;
9.2. That the applicant pay s the costs of the counter application, including
the costs of the first respondent’s2 France -based attorneys and the
costs occasioned by the employment of senior and junior counsel.
[10] It was conceded by the applicant’s counsel that if the main application f ails,
then the relief sought in the counter application should be granted.
[11] I now turn to address the issues arising in the matter and do so under the
following headings:
11.1. The background to the dispute;
11.2. The nature and purpose of adjudication proceedings;
11.3. The dispute resolution procedure agreed upon;
11.4. The adjudicator’s decisions, instructions and further instructions;
11.5. The powers of the adjudicator and the issuing of instructions;
11.6. The timing of the quantum instructions and further instructions;
11.7. Whether the ru les of natural justice apply and , if they do, whether a
breach thereof has been shown to exist;
11.8. The assessment of the monetary claims by the adjudicator;
11.9. The adjudicator’s alleged failure to give a reasoned decision.
The background to the dispute
[12] The fac ts in this matter are largely common cause and do not require
adumbration, suffice it to state the following.
[13] On 5 September 2014 Eskom concluded a written NEC3 Engineering and
Construction Contract (third edition June 2005 which was reprinted with three
amendments in June 2006) with Areva NP for the replacement of the steam
generators at Koeberg (“ the contract ”). On 1 January 2018 Areva NP ceded
and assigned all of its rights and obligations under the contract to Framatome.
2 The reference to the applicant’s France -based attorneys in paragraph 2 of the notice of counter
application is clearly incorrect and should be a reference to Framatome’s France based attorneys ,
consistent with paragraph 2.3 on p. 521 of the record.
[14] The contract is a standar d one used in the construction industry where the
employer and the contractor amongst other things select the clauses which
govern their contractual rights and obligations.
[15] The contact consists of four parts: The agreements and contract data are
regulated in Part C1; pricing date in Part C2; scope of works in Part C3 and
information in Part C4. The parties selected as the conditions of contract the
core clauses and the clauses for option A (Priced Contract with activity
schedule); the dispute resolution op tion W1; certain secondary options (x -
clauses) and certain additional clauses (z -clauses). The term “ core clauses ”
refers to the conditions of contract that apply to all the various options under
the contract.
[16] The work under the contract included the supp ly and installation of two sets of
three replacement steam generators, one set to be installed in each of the
reactor buildings at units 1 and 2 at Koeberg during separate planned outages
of these units. The replacement of the steam generators can only be
performed during a maintenance and refuelling outage when the power station
is offline. These outages are planned in advance and around the employer’s
operational requirements. Planned outages are denoted by a 3 -digit number
where the first digit signifies the unit and the second and third digits refer to
the number of the outage.
[17] Eskom scheduled the outage dates and planned to replace the steam
generators in Unit 2 in outage 223 but then postponed it to outage 225. The
start date of outage 225 was initially planned for 3 January 2022, but was
subsequently postponed to 18 January 2022 when the outage commenced.
[18] On 3 March 2022 Eskom informed Framatome that it would not be continuing
with the steam generator replacement (“ SGR ”) work during outage 225. On 31
March 2022 Framatome notified Eskom of an event that it considered to be a
compensation event after the latter decided to postpone the steam generator
replacement works relayed in the employer’s communication (“ E/C”) 15383
and the project manager’s subsequent instruction to stop work conveyed in
E/C 15411.
[19] The project manager acknowledged that Eskom’s decision to postpone the
SGR work constituted a compensation event which was designated as
compensation event CN -CE-334.
[20] The designation of th is compe nsation event gave rise to the two disputes
which were referred to the adjudicator for determination. Dispute 118
concerned the project manager’s assessment of compensation event CN -CE-
334 and dispute 119 related to certain assumptions made by the project
manager when instructing Framatome to submit its quotation in respect of
compensation event CN -CE-334. The parties are in agreement the
adjudicator’s decision in respect of dispute 119 is not relevant to these
proceedings and nothing further is said therea nent.
[21] On 9 September 2022 the project manager assessed the contractor’s
quotation for compensation event CE -CN-334 as nil with no changes to the
key, sectional completion and completion dates. This is expressed as follows
in his letter:
“Notwithstanding th e Contractor's improved co -operation in relation to
providing further information in support of the cost build -up for CE334,
which the Project Manager appreciates, the cost substantiation remains
outside that which is required by the SSCC vis -a-vis the def inition of
Defined Cost.
Further, while the Parties have sensibly progressed the interrogation of
the Contractor's costs there is still much work to do in terms of the
delay analysis which will inform the periods of compensable delay to
which these costs m ay or may not attach.
In order to facilitate a reasonable assessment of entitlement, i.e. to
avoid a zero -based assessment, the Project Manager has requested
from the Contractor an extension to complete its assessment, which
was regrettably declined by the Contractor.
The Contractor's rejection of said request for extension places the
Employer at risk vis -à-vis the treated as accepted provisions under the
contract. Under the current circumstances, the Project Manager
therefore has no alternative but to asse ss the extension of time as well
as the quantum component of the compensation event at zero.
Accordingly, under the provisions of clause 64 [The Project Manager's
assessments] the Project Manager's own assessment of CE334 is as
follows:
1. The Prices are not to be changed; and
2. The Completion Dates and Key Dates remain unchanged.”
[22] Aggrieved by the project manager’s decision, Framatome issued dispute
notices to Eskom and the project manager in which it disputed the project
manager’s assessment.
[23] The mat ter was thereupon referred to the adjudicator where the primary
issues for determination were the following:
23.1. Whether the delays that resulted in the removal of the steam generator
replacement (“ SGR ”) work during outage 225 arose due to the fault of
(i) the employer, (ii) the contractor, or both;
23.2. Whether the five assumptions provided by the project manager on 13
April 2022 under E/C 15567 in terms of ECC3 clause 61.6 were valid
assumptions in that they were both reasonable and relevant;
23.3. Whether the contractor was entitled to compensation and if so, how
much the contractor must be compensated.
[24] The time period within which disputes are to be determined is regulated in the
contract. The parties extended this period by agreement and the adjudicator
issued his decision timeously on 15 December 2022.
[25] The adjudicator’s decision in respect of dispute 118 is set out in paragraph 24
where he found that the employer’s decision to postpone the SGR from
outage 225 and the project manager’s subsequent instruction to stop works
constituted a compensation event under clause 60.1, including core clauses
60.1(2) and 60.1(4) (paragraph 24.1) and that the key, sectional completion
and completion dates had to be changed in acco rdance with the impacted
Rev 86 submitted by the contractor and the annexures that accompanied its
referral (paragraph 24.2).
[26] The project manager who is appointed by Eskom fulfils an important role in
the context of the contact. This was described as follows in Framatome :3
“The project manager’s role is to manage the contact on behalf of the
employer. The Contract places substantia l authority on the project
manager and assumes that they have the employer’s authority to carry
out the actions and to make and decisions required of them .”
[27] The f inding that the decision to postpone the SGR from outage 225 and the
project manager’s subse quent instruction to stop work which is an
acknowledged compensation event is consonant with the SCA ’s description of
such an event in Framatome :4
“The Contract makes provision for what is called ‘compensation
events’, which allows the contractor, Framat ome, in essence, to claim
additional payment and extra time to do the work from the employer.
Compensation events are events which, should they occur, and
provided they do not arise from the contractor ’s fault, entitle the
contractor to be compensated for any effect the event has on the prices
and the contractual sectional completion date(s) or key date(s). The
assessment of a compensation event is always in respect of its effect
on the prices, the completion date and any key date(s) affected by the
relevan t compensation event in question. The Contract contains a
process whereby the assessment of a compensation event is achieved
by agreement between the parties, determined by the project manager
3 At p. 339 C, paragraph [4]. The extracts of the contract appended to the first respondent’s
answering affidavit as “AA1” also set out the r ole and responsibilities of the project manager. This
is also addressed in the guidan ce note at p. 621 of annexure “AA1”
4 At p. 399 F -H, paragraph [6].
or deemed to be approved if there is inaction on the part of th e project
manager. ”
[28] Reverting to the merits award, the adjudicator found in paragraph 24.3 that
the amounts claimed by the contractor “are based on its quotation and are not
a reliable forecast of the compensation that the Contractor is entitled to
receive , and are rejected ”. The adjudicator accordingly held:
“24.4. The Project Manager must, before 15 February 2023, make a
new assessment of the Contractor's quotation for
compensation costs due to the Contractor for “Compensation
Event CE-CN-334-Employer's decision to postpone Outage
225 and instruction to stop work, communicated in E/C 16190”,
on the following basis:
24.5. The Contractor must be compensated through a change to the
prices for the costs of the following activities:
24.5.1. costs incurred for mobilisation and implementation
activities undertaken since mobilisation in
September 2021 up until the decision date of 3
March 2022 that are sunken costs, in that these
activities are wasted or need to be redone;
24.5.2. costs incurred for SGR reversal activities incurred
after 3 March 2022;
24.5.3. costs incurred for maintenance, storage and
preservation activities beyond 3 March 2022 up until
the commencement of mobilisation for the next
Outage;
24.5.4. wher e comparable, a breakdown of contracted
amounts should be used to determine the
compensation amounts;
24.6. Compensation already awarded to the Contractor by another
adjudicator or tribunal, or previously assessed by the Project
Manager, and implemented, f or any of the above activities,
must be deducted.
24.7. If the Project Manager has not made an assessment before 15
February 2023, or if either Party is dissatisfied with the amount
assessed by the Project Manager, then that party shall express
his dissati sfaction within two weeks of the Project Manager's
assessment, or 15 February 2023, in which case:
24.7.1. Representatives of both Parties, the Project
Manager and the Adjudicator will meet in Cape
Town or at another venue agreed by the Parties
within a p eriod of three weeks after a Party had
expressed his dissatisfaction, for the Project
Manager and Contractor to present their calculations
and the Adjudicator shall settle the quantum as the
Adjudicator’s decision on the quantum of this
dispute.”
[29] Eskom gav e notice that it was dissatisfied with the adjudicator’s decision of
15 December 2023, thereby triggering the arbitration proceedings agreed
upon between the parties. Notwithstanding the filing of the notice of
dissatisfaction with the decision, the partie s proceeded with the
implementation of paragraphs 24.4 to 24.7.1 of the 15 December 2022
decision. On 20 December 2022 a meeting took place between
representatives of Eskom and Framatome during which Eskom informed
Framatome that it would forward an offici al request for information in order to
carry out the assessment. This request was not forthcoming however.
[30] On 14 February 2023 the project manager addressed correspondence to
Framatome in which he, amongst other things, referred to paragraphs 21.18
and 21. 19 of the Adjudicator’s decision which provide:
“21.18. Contracted amounts should be used rather than estimates or
actual costs to determine the costs of wasted mobilisation,
wasted implementation and restoration work where these
activities/costs are comparable. To facilitate this comparison
a breakdown of contracted amounts for Unit 2 is required to
be provided by the Contractor.
21.19. Either tendered amounts or actual provable costs supported
by evidence should be used as far as possible where
comparable contracted costs are not available, because, in
the adjudicator's opinion, the forecasts made by the
Contractor are not reliable. ”
[31] The project manager contended that since Framatome had not complied with
paragraphs 21.18 and 21.1 9, he was unable to comply with paragraph 24.2 of
the adjudicator’s decision and instructions on quantum and that he would only
be able to comply with paragraph 24.2 when Framatome provided him with
the required information.
[32] Framatome thereupon addressed c orrespondence to the adjudicator on
15 February 2023 informing him of the project manager’s l etter and his failure
to have complied with the adjudicator’s instructions.
[33] On 16 February 2023 the adjudicator issued further instructions which are
reproduced b elow in material part:
“3.2. In simple terms, the Adjudicator had, on 15 December 2022,
provided the Employer, through its Project Manager, an
opportunity to make its own assessment of the quantum by 15
February 2023.
3.3. The opportunity was given to th e Employer and its Project
Manager without conditions. No further performance was
required by the Contractor.”
[34] The adjudicator concluded that because the project manager had not made
an assessment by the due date of 15 February 2023 and no extension had
been sought, nor granted, this triggered paragraph 24.7.1 of his decision of 15
December 2022. The adjudicator directed in paragraph 5.1 of the further
instructions that the parties had to agree a date and venue within three weeks
of 16 February 2023 for bot h parties, the project manager and the adjudicator
to meet, and for the contractor to present its calculations.
[35] The above instructions attracted further correspondence from Eskom to the
adjudicator dated 17 February 2023 in which it advised inter alia :
35.1. That it stood by the conduct of and correspondence sent by the project
manager to the contractor on 14 February 2023;
35.2. The above notwithstanding, it would avail itself for and, to the extent
possible, participate in the proposed meeting with the adjudicator , but
does so under protest and with the full reservation of its rights “on the
basis that the employer considers the adjudicator’s decision as not
enforceable as a contractual obligation or at all and need not be
complied with by the employer and the proj ect manager. ”
35.3. Eskom also referred to clause W1.3(8) of the contract and explained
why it considered the adjudicator to be functus officio , that he was
“acting beyond the jurisdiction afforded to the Adjudicator and any
determination flowing therefrom is, a ccordingly, not a decision
contemplated in the contract and therefore a nullity that need not be
complied with. ”
[36] A further exchange of correspondence ensued between the parties and the
adjudicator. The adjudicator informed the parties in an email dated 23
February 2023 that the most important information that he required was the
costs in the Activity Schedule for the Steam Generator Replacement in the
unit that is done first, including pre -outage establishment and work done
during the outage and post -outag e. He noted Eskom’s reservations but
pointed out amongst other things that adjudication is an informal process
where the object was to try and reach an informal decision and to avoid
wasteful and lengthy litigation.
[37] Eskom responded to the adjudicator on 2 4 February 2023 and pointed out
inter alia that actual defined costs were to be used for the work already done
and forecast defined costs in respect of work not yet done, together with the
resulting fees. The material portions of this letter relating to co sts and
procedure are reproduced hereunder:
“3.3. In the Contractor's referral the Adjudicator was called upon to
assess and determine, amongst other things, the additional costs
(if any) to which the Contractor was entitled pursuant to a
compensation event. In terms of clause W1.3(7), if the
Adjudicator's decision includes, or is to include, an assessment of
additional costs, the assessment is to be done in the way
provided for in Clause 63 in that actual Defined Costs is to be
used for th e assessment in respect of work already done and
forecast Defined Cost of the work not yet done is to be used,
together with the resulting fees on the aforesaid costs.
3.4. The Adjudicator was therefore not empowered to issue a decision
directing the Proj ect Manager to do an assessment on a basis not
contemplated in clause 63.
3.5. In terms of clause W1.3(8), the Adjudicator decides the dispute
and notifies the parties of his decision and the reasons therefore
within four weeks of the period for receiving information.
Thereafter, the Adjudicator is functus officio with regard to that
dispute and he may only correct any clerical mistake or ambiguity
within two weeks of giving his decision. The parties may then
issue notices of dissatisfaction with the decis ion and refer it to the
tribunal.
3.6. The Adjudicator was therefore not empowered to defer his final
decision to a date to be arranged should a party notify a
disagreement with the Project Manager's assessment which the
Adjudicator ordered the Project Ma nager to make. The contract
simply did not empower the Adjudicator to design and introduce
his own procedure for dealing with disputes. ”
[38] Eskom also advised in its aforementioned letter that if Framatome produced
any new information not in the possession of the project manager prior to or
during the meeting of 27/28 February resulting in it or the project manager not
having been afforded sufficient opportunity to consider such information, then
it reserved its rights, including its right to request a postpon ement of the
meeting. The letter concluded by confirming its agreement to the meeting
dates of 27 and 28 February 2023, but pointed out that this did not “in any way
constitute an acceptance or admission of the validity and/or enforceability of
the Adjudi cator’s decision, in terms of which the Project Manager and the
Employer’s rights remain strictly and expressly reserved ”.
[39] The meeting took place on 27 and 28 February 2023 and Framatome
provided calculations for its revised quotation using actual hours a nd actual
disbursements for the period ending 31 August 2022 and forecast hours for
the period 14 April until 30 September 2023. Eskom disputed this in reply but
this i s not relevant to the dispute as the monetary amounts will be finally
determined in the arbitration proceedings. The adjudicator’s assessment of
the quantum is also more fully addressed in response to Eskom’s argument
that he allegedly failed to give a reasoned decision.
[40] On 2 March 2023 Eskom addressed correspondence to the adjudicator and
Framatome in which it recorded that it would consider waiving its rights to
dispute the decision o f 15 December 2022 subject to certain conditions being
met. Eskom clarified its position in correspondence dated 3 March 2023. On
the same date Framatome rejected the conditions. On 6 March 2023
Framatome provided further calculations to the adjudicator, E skom and the
project manager.
[41] In Eskom’s letter to Framatome dated 6 March 2023 it contended inter alia
that Framatome had distanced itself from its agreement to the contractual
assessment of its real costs and was attempting to force the adjudicator to
use historic rates for past compensation event assessments which were not
currently before the adjudicator and were not agreed between the parties.
Eskom also pointed out that in the event that the adjudicator elected to rely on
the information provided at t he meeting held on 27 and 28 February, then
Eskom requested an opportunity to respond to the information.
[42] On 7 March 2023 the adjudicator issued further instructions in which Eskom
was afforded an opportunity until 20 March 2023 to review Framatome’s files
and any additional information, and to respond to Framatome’s provision of
rates that the project manager and Eskom had previously considered to be
valid benchmark rates. Thereafter, the adjudicator would determine whether a
hearing was necessary to give Eskom an opportunity to present its response
and Framatome an opportunity to rebut it. The adjudicator’s instructions in
paragraphs 21.18 and 21.19 of the decision of 15 December 2022 were
withdrawn with the agreement of the parties that the contractual pr ovision for
assessing compensation events relating to prolongation would apply.
[43] Instead of availing itself of the opportunity to respond substantively to the
adjudicator’s second set of instructions, Eskom addressed correspondence to
the adjudicator and F ramatome dated 17 March 2023 in which it set out the
background to the matter and recorded its objections. It also gave notice that
it intended applying to the high court for declaratory relief “ that the
Adjudicator’s Decision, his continuing issuing of in structions, his intention to
reconsider his decision and issue further decisions relating thereto are beyond
his jurisdiction, are not enforceable and need not be complied with by the
Employer or the Project Manager .”
[44] Eskom also made it clear that it had no intention of providing the adjudicator
with any further information or participating any further in the adjudication
process. This is manifest from the concluding paragraph of the letter which
states:
“13. Effectively any decision made outside of the c ontractually
prescribed time -period, is of no force and effect to the Parties as
the Adjudicator is functus officio. Given the foregoing and
pursuant to the contractual provisions, the Adjudicator is
required to immediately discontinue his involvement in r espect
of Dispute 118 and 119 and issue the Parties with his final
invoice as at today in this regard. In the event that the
Adjudicator does not do so his continued involvement will be at
the Adjudicator's own risk. ”
[45] The adjudicator issued the quantum de cision on 18 March 2023. On 29 March
2023 Eskom launched this application and on 13 April 2023 filed a notice of
dissatisfaction with the quantum decision.
The nature and purpose of adjudication proceedings
[46] Adjudication is a n accelerated mechanism to reso lve disputes on an interim
basis. In Radon Projects (Pty) Ltd v NV Properties (Pty) Ltd & Another5 the
Supreme Court of Appeal (“ the SCA ”) quoted with approval from Macob Civil
Engineering Ltd v Morrison Construction Ltd [1999] BLR 93 (CA) at 97 which
is cited in Keating on Building Contracts (9th ed), paragraph 18 -018, where
adjudication was described as:6
“a speedy mechanism for settling disputes [under] construction
contracts on a provisional interim basis, and requiring the decision of
adjudicators to be enforced pending the final determination of disputes
by arbitration, litigation or agreement … But Parliament has not
abolished arbitration and litigation of construction disputes. It has
merely introduced an intervening provisional stag e in the dispute
resolution process. ”
[47] Three features of the adjudicatory process bear emphasis. First, it is an
interim provisional process, second, it “ is regarded as essentially a cash flow
measure …to avoid delays in payment pending determination of li tigation ”7
and third, awards are binding on the parties and payable immediately.8
5 2013 (6) SA 345 (SCA).
6 At 348 B -C, paragraph [4].
7 Id 348 D, paragraph [5].
8 Stefanutti Stocks (Pty) Ltd v S8 Property (Pty) Ltd (20088/2013) [2013] ZAGPJHC 249 (23 October
2013) where the court gave a synopsis of the adjudication procedure at paragraphs [5] -[9] and
referred to Carillion Construction Ltd v Devonport Royal Dock Yard [2005] EWHC 778 (TCC);
Framatome 405 F, paragraph [25].
[48] The SCA recognised that an adjudicator “ is given wide inquisitorial powers
that enable disputes to be resolved summarily and expeditiously ”.9 The
powers of the adjudicato r include determining a matter on the basis of
documents submitted by the parties, or an inspection of the works, or his own
specialist knowledge. He is empowered to review any determination,
certificate or valuation related to the dispute and generally ma y adopt the
most cost - and time -effective procedures consistent with fairness to determine
the dispute.10
[49] An adjudicator’s award although interim in nature is binding on the parties who
are obliged to comply therewith pending final determination of the d ispute by
arbitration, litigation or settlement.11 Errors of procedure, fact or law by the
adjudicator do not constitute defences to the enforcement of the adjudicator’s
decision.12
[50] The enforceability of the award arises from the contact concluded betwee n the
parties where their obligations are spelled out, and not as an arbitral award.13
This is manifest from the dispute resolution option agreed upon between the
parties which I address below.
[51] The dismissal of a review came before the SCA in Ekurhuleni West College v
Segal and Another .14 The court a quo had dismissed the review on three
grounds : (a) that the notice of dissatisfaction and pending arbitration, on its
own, precluded the review application; (b) that the rules of natural justice were
not applicable to the matter and even so, were not shown to have been
breached; and (c) that the adju dicator correctly determined the substantive
merits of the claims in question. Although the SCA considered ground (a) to
be dispositive of the matter, it nonetheless expressed the following views on
grounds (b) and (c):
9 Radon at 349 E, paragraph [7].
10 Radon at 349 E -F, paragraph [7]; Framatome at 404 I -405 A, paragraph [23].
11 Framatome at 404 E -G, paragraph [22]; 405 D, paragraph [24].
12 Stefanutti at paragraph [6] where the court referred to paragraph 80 o f Carillion with approval.
13 Freeman N.O. & Another v Eskom Holdings Limited (43346/09) [2010] ZAGPJHC 29 (23 April
2010 ); [2010] JOL 25357 (GSJ), paragraph [25].
14 (1287/2018) [2020] ZASCA 32 (2 April 2020).
“[13] In respect of ground (b), th e court a quo agreed with the dictum in
Sasol Chemical Industries Limited v Odell and Another [2014] ZAFSHC
11 para 18 that an adjudication of this nature is not subject to the
common law. This led the court a quo to conclude that the rules of
natural just ice did not find application to the matter.
[14] The legal position is, however, more nuanced than this. It was
lucidly set out by Botha JA in Turner v Jockey Club of South Africa
1974 (3) SA 633 (A) at 645H -646B: ‘In the case of a statutory tribunal
its obligation to observe the elementary principles of justice derives
from the expressed or implied terms of the relevant enactment, while in
the case of a tribunal created by contract, the obligation derives from
the expressed or implied terms of the agreemen t between the persons
affected. (Maclean v. Workers’ Union, (1929) 1 Ch.D. 602 at p. 623).
The test for determining whether the fundamental principles of justice
are to be implied as tacitly included in the agreement between the
parties is the usual test f or implying a term in a contract as stated in
Mullin (Pty.) Ltd. v. Benade Ltd., 1952 (1) S.A. 211 (A.D.) at pp. 214 -5,
and the authorities there cited. The test is, of course, always subject to
the expressed terms of the agreement by which any or all of t he
fundamental principles of justice may be excluded or modified. (Marlin’s
case, supra at pp. 125 -130).’
It is clear from the context that this passage dealt with tacit terms of a
contract (the unexpressed intention of the parties) and not with implied
terms (imported into contracts by law). See Ashcor Secunda (Pty) Ltd v
Sasol Synthetic Fuels (Pty) Ltd [2011] ZASCA 158 paras 10 -11 and
authorities cited there. See also Marlin v Durban Turf Club and Others
1942 AD 112 at 127; Jockey Club of South Africa and Others v
Feldman 1942 AD 340 at 350 -351 and Lamprecht and Another v
McNeillie [1994] ZASCA 45; 1994 (3) SA 665 (A) at 668C -I.
[15] These principles impact on the present matter in the following
manner. The adjudicator operated as a tribunal created by con tract.
Express contractual provisions regulated the procedure that he had to
follow. The College did not challenge any of these provisions as being
contrary to public policy. It follows that there was no room for the tacit
importation of any rule of natura l justice into the agreement of the
parties. See Robin v Guarantee Life Assurance Co Ltd [1984] ZASCA
72; 1984 (4) SA 558 (A) at 567B -F. The College therefore had to show
that the express contractual provisions had been breached. Taking into
account the na ture and purpose of the adjudication, the adjudicator
conducted it strictly in terms of these contractual provisions. Therefore
there appears to be no merit in the College’s reliance on procedural
unfairness.
[16] As to ground (c), it is trite that a judic ial 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. Consequently the court
a quo erred in entering in to and determining the substantive merits of
the claims in question. The dismissal of the review application could not
properly have been based on ground (c).
[52] Since adjudication is a contractual mechanism, it is not subject to the common
law15 or any statu tory prescripts. A late decision is not necessarily visited with
being a nullity and unenforceable.16 Key to the matter is the interpretation of
the relevant clauses and the enforceability of the two decisions issued by the
adjudicator.
[53] While a party who is dissatisfied with an adjudicator’s award may approach a
court for relief, the circumstances in which a court will intervene are rare.
Arguments such as an adjudicator having exceeded his jurisdiction and that
the proper procedure was not follo wed were roundly rejected by the SCA in
Framatome .17
[54] The SCA made it clear that the provision that payment must be made even
before arbitration was a strong indication of the ousting of the court’s
15 Freeman N.O. v Eskom Holdings Limited [2010] JOL 25357 (GSJ), paragraph [25].
16 Freeman N.O. at paragraphs [25] -[27].
17 At 405 E, paragraph [25].
jurisdiction to review the award. The court also quoted wi th approval from
Hudson’s Building and Engineering Contracts :18
‘It should only be in rare circumstances that the court 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. ”.’
[55] I now deal with the relevant terms of the contract relating to dispute resolution.
The dispute resolution procedure agreed upon
[56] The parties selected opti on W1 as their dispute resolution procedure. In terms
of clause W1.1, a dispute arising out of and in connection with the contract is
referred to and decided by the adjudicator. Disputes are notified and referred
to the adjudicator in accordance with the a djudication table. Clause W1.3(3)
provides that the party referring the dispute to the arbitrator includes with the
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.
[57] The powers of the adjudicator are set forth in clause W1.3(5):
“(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,
18 Framatome at 407 C -D, paragraph [30].
• 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.”
[58] In terms of clause W1.3(7) if the adjudicator’s decision includes an
assessment of additional cost or delay caused to the contractor, he makes his
assessment in the same way as a compensation event is assessed.
[59] Clause W1.3(8) provides that 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.
[60] In terms of clause W1.3(10) the decision of the adjudica tor 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 in the contract that he is dissatisfied with a decision
of the adjudicator and intends to refer the matter to the Tribunal.
[61] Clause W1.3(11) provides that the adjudicator may, within two weeks of giving
his decision to th e parties, correct any clerical mistake or ambiguity.
[62] I now turn to consider the grounds upon which Eskom has challenged the
adjudication process and Framatome’s response.
The adjudicator’s decisions, instruction s and further instructions
[63] The merits decisi on only addressed a portion of the dispute and the monetary
aspects were dealt with finally in the quantum decision on 18 March 2023.
The adjudicator gave instructions on quantum in the merits decision which are
set out in paragraphs 24.4 to 24.7.1 thereof . He thereafter issued instructions
and further instructions on 16 February 2023 and 7 March 2023 respectively.
[64] The merits decision was challenged on five grounds in the application.19 The
following grounds were advanced in argument:
64.1. The adjudicator failed to decide the dispute within four weeks from the
end of the date for receiving information;
64.2. He had no authority to:
64.2.1. Issue instructions to the project manager;
64.2.2. Defer part of the dispute beyond the period prescribed in
clause W1.3(8) of the contact ;
64.2.3. Introduce “ the extra contractual procedure ”; and
64.2.4. Direct that Framatome’s monetary claims were to be assessed
on a basis other than that prescribed in the contract .
64.3. He breached the principles of natural justice by not inviting submissions
from the parties o n his intention to issue an instruction that
compensation is to be based on “ contracted amounts ”.
[65] The quantum decision was challenged on seven grounds in the application20
but proceeded on the following grounds in argument:
65.1. The adjudicator was functus offi cio after notifying the 15 December
2022 decision;
65.2. His authority lapsed at latest on 16 December 2022;
65.3. He breached the principles of natural justice in reaching his decision;
65.4. He failed to give a reasoned decision.
[66] Eskom’s argument is summarised below:
66.1. The adjudicator had the power to decide on the value of Framatome’s
claim for compensation and had to do so before 16 December 2022.
19 These are set out in paragraph 4 above.
20 See paragraph 6 above.
He failed to do so and was not permitted to defer the decision on part of
the dispute or to refer the matter to the project man ager with
instructions to make a new or different assessment before 15 February
2023, failing which, or if either party was dissatisfied therewith, the
parties could approach the adjudicator to settle the quantum in the
manner stated in paragraph 24.7.1 of the merits award. That part of his
decision of 15 December 2022 was therefore invalid and void;
66.2. The adjudicator was not empowered, through issuing further
instructions, to amend the contract “ by unliterally extending the
timeframe within which he was to i ssue his decision beyond the four -
week period agreed upon by the parties in clause W.1.3(8) ”;
66.3. The period in c lause W.1.3(8) can only be extended by agreement
between the parties;
66.4. The project manager was not a party to the contract and did not act as
Eskom’ s agent in making assessments. An adjudicator who is
appointed to determine a dispute between two parties does not have
any powers or authority to issue orders compelling third parties to do or
perform something. This is not authorised in terms of clause W 1.3(5).
The term “ parties ” used in clauses W.1.1 to W.1.3 is defined in clause
11.2.(11) and this is a reference to the employer and contractor, not the
project manager ;
66.5. Framatome asked the adjudicator to make an assessment, not to issue
such an instructi on to the project manager ;
66.6. Framatome’s interpretation of the relevant clause in the dispute option
selected fell to be rejected for several reasons, including:
66.6.1. Clause W.1.3(8) does not allow the adjudicator to issue
instructions;
66.6.2. The adjudicator did not instruct a party to take an action
“which he considered necessary to reach his decision ”;
66.6.3. The information provided by Framatome was not information
which had been requested or invited by the adjudicator;
66.6.4. Framatome’s interpretation of clauses W.1.3(3), W.1.3(5) and
W.1.3(8) is incorrect and ignores the express wording of
clause W.1.3(3) which provides that the period may only be
extended if the parties agree;
66.6.5. The int erpretation which Framatome has placed on the above
clauses “ leads to an unbusinesslike result which undermines
the very purpose of the dispute resolution provisions ”;
66.6.6. The only sensible and businesslike interpretation is that after
the adjudicator has rece ived the referral, he can ask any party
to provide additional information within a stipulated time which
must be within the four week period, unless the parties agree
to extend the period for additional information. Thereafter the
adjudicator must issue hi s decision within four weeks of the
end of the period for receiving information unless the parties
agree to extend this period;
66.6.7. This was the only interpretation which would avoid the
adjudicator unilaterally extending “ the period within which his
decision is to be notified, by requesting additional information
under clause W.1.3(5) beyond the periods contemplated in
clauses W.1.3(3) and W.1.3(8). The first respondent’s
proposed interpretation makes nonsense of the provision in
Clause W.1.3(3) and W.1.3(8) w hich determines the duration
of the adjudication process and allows it to be extended only if
the parties agree to do so ”;
66.6.8. Eskom relied on the authorities referenced in its heads of
argument in support of the above interpretation.21
66.7. In terms of clause W1. 4(2), if after the adjudicator notifies his decision
and a party is dissatisfied, he may notify the other party that he intends
to refer it to the tribunal. A party may not refer a dispute to the tribunal
unless this notification is given within four weeks of notification of the
21 See paragraph 41.9 and ff of Eskom’s heads of argument. These cases are Cubitt Building &
Interiors Ltd v Fleetgate Ltd [2006] EWHC 3413 (TCC), Ritchie Brothers (PWC) Ltd v David Philp
(Commercials) Ltd [2005] 1 BLR 384, Epping Electrical Company Ltd v Briggs and Forrester
(Plumbing Services) [2007] EWHC 4 (TCC) and Group Five Construction (Pty) Ltd v Transnet
SOC Limited [2019] ZAGPJHC 328. Eskom pointed out that the S CA did not f ind in Sasol South
Africa v Murray & Roberts Limited [2021] ZASCA 416 that the judgment in Group Five was
incorrect. Eskom submitted that the SCA in effect approved the judgment by distinguishing the
Sasol matter.
adjudicator’s decision. Clause W1.4(3) provides that if the adjudicator
does not notify his decision within the time provided by the contract, a
party may notify the other party that he intends to refer the dispute to
the tribunal. A party may not refer a dispute to the tribunal unless this
notification is given within four weeks of the date by which the
adjudicator should have notified his decision. After the adjudicator gave
his merits decision Eskom issued a notice of dissatisfact ion on 22
December 2022, and therefore, on the basis of clauses W1.4(2) and
W1.4(3), Eskom submits that the adjudicator was not entitled to
proceed with the adjudication process;
66.8. The adjudicator did not decide the first respondent’s monetary claim
within the time period for issuing a decision, and only issued a
“purported decision ” on the value of the claim in March 2023. He did so
after Eskom had notified him that he was acting outside the scope of
his powers. After receipt of this notice the adjudicator “suddenly,
without warning and on a Saturday, issued his purported decision. He
did so prior to the applicant having addressed him on the additional
information which had been submitted by the first respondent ”;
66.9. The adjudicator found that Framatome’s quota tion was not reliable and
stated the categories of costs for which it should be compensated. He
instructed that contracted amounts should be used rather than
estimates or actual costs to determine the costs of wasted mobilisation,
wasted implementation and restoration work, and that either tendered
amounts or actual provable costs supported by evidence should be
used where comparable “ contracted costs ” were not available;
66.10. In issuing the instructions in paragraphs 21.18 and 21.19 of the merits
decision, the adjudicator unilaterally decided that compensation should
be based on contracted amounts when Framatome did not claim
compensation based on contracted amounts and Eskom did not submit
that it should do so. The adjudicator did not request the parties to mak e
submissions in relation thereto;
66.11. The adjudicator later withdrew the instruction relating to contracted
amounts at a stage when he was already functus officio or had no
power to revise his decision or any part thereof;
66.12. Clause W.1.3(8) requires the adjudi cator to provide his decision and
his reasons within four weeks of the end of the period for receiving
information. Eskom submits that in the purported decision of 18 March
2023 the adjudicator provided no reasons why he considered the
amounts claimed by F ramatome to be justified, “ other than to baldly
state that he was satisfied that the revised calculation was a “fair
reflection” of the actual and forecast compensation required. He even
stated that the applicant’s alternative calculations would have been
valuable to him…As indicated, he was still expecting the applicant’s
response to the claim when he suddenly and in haste issued his
decision .”;
66.13. The failure to have complied with clause W.1.3(8) renders the
adjudicator’s decision invalid and unenforceable.
[67] Framatome disputes that the adjudicator exceeded his powers, that he was
functus officio after giving the merits decision, that he was precluded from
issuing instructions on quantum, that there was anything improper with the
timing thereof, that the quant um decision was not issued timeously, that the
rules of natural justice apply and, if so, that there was a breach thereof.
Framatome submitted that the quantum instructions formed part of the
process with which the adjudicator was seized. The adjudication process was
in accordance with the terms agreed upon and Eskom had misinterpreted the
contract and failed to apply the facts correctly. Framatome also joined issue
with Eskom’s assertions about the manner in which the monetary claims were
to be assessed an d the adjudicator’s alleged failure to give reasons.
[68] The following issues are in dispute:
68.1. The powers of the adjudicator and the issuing of instructions ;
68.2. The timing of the quantum instructions and further instructions ;
68.3. Whether the rules of natural justice apply and, if they do , whether a
breach thereof has been shown to exist;
68.4. The assessment of the monetary claims by the adjudicator; and
68.5. The adjudicator ’s alleged failure to give a reasoned decision.
[69] These disputes are addressed below.
The powers of the adjudicator and the issuing of instructions
[70] The adjudicator’s role is to resolve disputes in accordance with the relevant
clauses in the contract. The adjudication process is procedurally regulated in
the contract and comprises of the following steps:
70.1. First, the referral - the referring party, Framatome in casu , refers the
dispute to the adjudicator and includes in the referral the information
which the adjudicator is required to consider;22
70.2. Second, the furnishing of further information - both parties are entitled
to unilaterally furnish further information to the adjudicator within a
period of four weeks from the date of the referral;23
70.3. Third, the steps which the adjudicator is empowered to take - these are
wide-ranging and include: (1) reviewing and revising any action or
inaction of the project manager or the supervisor related to the
dispute;24 (2) altering a quotation which has been treated as having
been accepted;25 (3) taking the initiative in asce rtaining the facts and
the law related to the dispute;26 (4) instructing a party to provide further
information within a stated time;27 and (5) taking any other action which
he considers necessary to reach his decision and to do so within a
stated time.28
[71] Fourth, the adjudicator’s decision - the adjudicator decides the dispute and
notifies the parties and the project manager of his decision and his reasons
22 Clause W1.3(3).
23 Clause W1.3(3).
24 Clause W1.3(5), first bullet.
25 Clause W1.3(5), first bullet.
26 Clause W1.3(5), second bullet.
27 Clause W1.3(5), third bullet.
28 Clause W1.3(5), fourth bullet.
within four weeks of the end of the period for receiving information. The four
week period may be exte nded by agreement between the parties.29
[72] Eskom submits that the adjudicator could not issue the instructions on
quantum because they do not fall within the powers conferred upon him in
terms of clause W1.3(5).
[73] The use of the word “ any” in the first and fourth bullet points in clause W1.3(5)
connotes the conferral of wide powers on the adjudicator and is inimical to a
restrictive interpretation. This is consonant with the “ wide inquisitorial powers ”
adverted to by the SCA in Radon which facilitate dispute s being resolved
summarily and expeditiously.30 How those disputes are to be resolved has
been left to the discretion of the adjudicator. He is empowered to take any one
or more of the steps in clause W1.3(5). The final bullet point is a catch -all
provisio n which allows him to take any other action that he considers
necessary to reach his decision and to do so within a stated time.
[74] The instructions on quantum contained in paragraph 24.4. of the merits award
is clearly conduct which falls squarely within the remit of the adjudicator’s
powers as contained in clause W1.3(5). There is no room to contend in the
circumstances that the adjudicator exceeded his powers in issuing instructions
on quantum.
[75] The same considerations would apply to the deferral of part of the decision.
There is nothing in the contractual provisions that compelled him to determine
the merits and quantum simultaneously and to issue one decision. Again, the
wide powers conferred upon the adjudicator support his methodology in
determining the merits and deferring the decision on the quantum.
[76] The project manager had acknowledged that Eskom’s decision to postpone
the SGR constituted a compensation event. The dispute arose in
consequence of the project manager’s assessment of that compensation
29 Clause W1.3(8).
30 Radon at 349 E, paragraph [7].
event as nil with no alteration to the key, sectional completion and completion
dates.
[77] The adjudicator’s difficulty with the quotation provided by Framatome is
addressed in paragraph 24.3 of the merits award. Within days of the award
being notified, the part ies met on 20 December 2022 and Eskom informed
Framatome that it would forward an official request for information in order to
carry out the assessment. This was a clear acceptance of the adjudicator’s
instructions on quantum. The only assessment which had been made at that
stage was that of the project manager on 9 September 2022.
[78] The engagement and interaction between the parties and the adjudicator after
the merits decision are clear indicators that further information was required in
order to carry out the assessment.
[79] The adjudicator also specified that the action had to be taken by 15 February
2023. This accords with clause W1.3(5).
[80] It was the function of the project manager to do the assessment. Eskom’s
complaint that the adjudicator did not have the power to issue instructions to
the project manager because he was not a party to the contract is aptly
described by Framatome as being “ an incorrect literal and overly narrow
interpretation of the relevant clause ” and was raised by Eskom for the first
time in reply. The project manager is an employee of Eskom and integral to
performance in terms of the contract. The core clauses in the contract are
replete with references to the project manager where his role and
responsibilities are outlined. The guidance notes to the contract are also
relevant since they provide context to the contractual landscape.31 The first
and fourth parag raphs of the guidance notes are reproduced below:
“The Project Manager is appointed by the Employer, either from his
own staff or from outside. His role within the ECC is to manage the
31 The relevant extract of the guidance note appears from p . 621 of annexure “AA1” to the answering
affidavit.
contract for the Employer with the intention of achieving the Employer' s
objectives for the completed project.
…
The ECC places considerable authority in the hands of the Project
Manager. It assumes that he has the Employer's authority to carry out
the actions and make the decisions required of him. If his contract with
the E mployer constrains him in any way, as for example in the case of
a limit on the amount which the Project Manager may authorise as a
compensation event assessment, it is the responsibility of the Project
Manager to ensure that all the approvals are given in time to enable
him to comply with the time periods set out in the ECC. If such
approvals by the Employer are not given, the Contractor has the right
to raise the matter with the Adjudicator. It is not advisable to state limits
on the Project Manager's aut hority in the additional conditions of
contract as this will make settlement of disputes difficult .”
[81] To my mind the word “ party ” in the third bullet point of clause W1.3(5) would
of necessity include a reference to the project manager if the circumstances
so require. This is supported by clause W1.3(5) which expressly empowers
the adjudicator to review and revise any action or inaction on the part of the
project manager and is in line with the project manager’s responsibility to
carry out assessments.
[82] The project manager’s assessment on 9 September 2022 triggered the
dispute and he was clearly best placed to make a new assessment on the
basis specified in paragraphs 24.5 and 24.6 of the merits decision.
[83] The instructions to the project manager accord with th e contract and fell within
the adjudicator’s powers.
The timing of the quantum instructions and further instructions
[84] Eskom submits that the adjudicator did not have the right to “defer ” his
decision on any part of the dispute beyond the four week period prescribed in
clause W1.3(8) . According to Eskom, the a djudicator was functus officio and
no longer empowered to issue any further decisions on the referred dispute
after 16 December 2022 .
[85] Whether Eskom is correct depends upon when the four week period
contemplated in clause W1.3(8) starts to run.
[86] Eskom contends that the four week period starts to run four weeks after the
referral is made. The correct approach to the interpretation of wr itten
documents is set out by the SCA in Natal Joint Municipal Pension Fund v
Endumeni Municipality :32
“[18] … The present state of the law can be expressed as follows.
Interpretation is the process of attributing meaning to the words
used in a document, be it legislation, some other statutory
instrument, or contract, having regard to the context provided by
reading the particular provision or provisions in the light of the
document as a whole and the circumstances attendant upon its
coming into existence. Whatever the nature of the document,
consideration must be given to the language used in the light of
the ordinary rules of grammar and syntax; the context in which
the provision appears; the apparent purpose to which it is
directed and the mate rial known to those responsible for its
production. Where more than one meaning is possible each
possibility must be weighed in the light of all these factors. The
process is objective not subjective. A sensible meaning is to be
preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose of the document.
Judges must be alert to, and guard against, the temptation to
substitute what they regard as reasonable, sensible or
businesslike for the words actually used. To d o so in regard to a
32 2012 (4) SA 593 (SCA) . See also University of Johannesburg v Auckland Park Theological
Seminary and Another 2021 (6) SA 1 (CC) at paragraphs [64] to [66] and Capitec Bank H oldings
Ltd and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others 2022 (1) SA 100 (SCA) at
paragraph [25].
statute or statutory instrument is to cross the divide between
interpretation and legislation. In a contractual context it is to
make a contract for the parties other than the one they in fact
made. The ‘inevitable point of departure is the language of the
provision itself’, read in context and having regard to the
purpose of the provision and the background to the preparation
and production of the document. ”
[87] The SCA held In Endumeni that a sensible meaning is to be preferred to one
that leads to insensible or unbusinesslike results or undermines the apparent
purpose of the document. The interpretation which Eskom seeks to place on
the clause does not accord with the actual words used therein and gives rise
to an illogical and unbusinessl ike interpretation which is to be avoided.
[88] On Eskom's argument the end of the four week period in clause W1.3(3) must
be the same as “the end of the period for receiving information ” referred in in
clause W1.3(8).
[89] Clause W1.3(3) deals with the period with in which the parties may provide
information. Had the parties intended the start of the four week period in
clause W1.3(8) to be the same as the end of the four week period in clause
W1.3(3) the sentence would have stated “providing information ” not “receiving
information ”. The intentional use of different terminology is a clear indicator
that the end of the four week period in clause W1.3(3) differs from the end of
the period for receiving information referred in in clause W1.3(8).
[90] Framatome correctl y points out that Eskom's interpretation gives rise to the
absurdity that a party could wait until the very last day of the four week period
to provide information and then deprive the adjudicator of the opportunity to
request any further information and/o r issue any instructions . The four week
period afforded to him under clause W1.3(8) is to evaluate all the information
before him. Moreover, a n adjudicator would also not know whether a party will
be providing information until the end of the initial four week period. Signally,
the information provided potentially on the last day of the four week period
may well give rise to the need for further information to be provided or further
enqui ries to be made . Eskom fails to address how the adjudicator is to
perform his function if he is precluded from taking the steps in clause W1.3(5)
after the initial four week period.
[91] It would make the process unwieldy and result in an absurdity if the
adjudicator were to take the steps enumerated in clause W1.3(5) during the
initial four week period envisaged in clause W1.3( 3). His conduct would be
premature and precipitous. By way of example, he could hardly review and
revise any action or inaction during the initial four week period since
information relevant thereto may onl y be forthcoming on the last day thereof
or not at all. If it is not forthcoming, then he is expressly authorised to
ascertain information.
[92] Interpreting clause W1.3(5) to mean that the adjudicator must exercise his
powers within the initial four week period is wholly inconsistent with the
purpose, context and clear wording of the provision . If a party fails to submit
information in the initial four week period and the adjudicator cannot exercise
his powers in terms of clause W1.3(5) , it is unclear how exactly the
adjudicator is meant to make a determination without the relevant facts.
[93] The four week period in c lause W1.3(3) is clearly not the same as the four
week period in clause W1.3( 8). I agree with Framatome’s assertion that it
contemplates a four week window period for the adjudicator to come to grips
with the information and to decide the dispute.
[94] If the adjudicatory process is unduly delayed or protracted by the adjudicator
then the parties have remedies, including seeking a mandamus alternativel y
referring the disput e to arbitration in terms of clause W1.4(3) .
[95] Eskom relies on the judgment of Twala J in Group Five Construction (Pty) Ltd
v Transnet Soc Limited33 which concerned the enforcem ent of an adjudication
33 [2019] ZAGPJHC 328 (28 June 2019).
award issued in terms of option W1. The following features of that case are
highlighted:
95.1. Group Five was the contractor and Transnet was the employer in term s
of a contract that also incorporated the conditions of the NEC3 (third
edition 2005), option D and option W1.
95.2. The referral of the dis pute was made on 4 May 2018. Transnet filed a
response on 30 May 2018 and on 19 June 2018 the adjudicator
afforded Group Five an opportunity to respond thereto by no later than
29 June 2018.
95.3. On 19 July 2018 the adjudicator requested further information from
Group Five in the form of an electronic copy of the settlement
agreement and it was provided to him on the same day. This had also
been provided at the time of the referral.
95.4. On the 30 July 2018 the adjudicator requested that both parties a llow
him an additional seven calendar days to finalise his request for further
information where after he should be in a position to finalise his award
within four weeks.
95.5. On the 31 July 2018 Transnet refused to grant the adjudicator the
extension and on th e same date it gave notice to Group Five to refer
the dispute to the tribunal.
95.6. The adjudicator issued his decision on 18 September 2018.
95.7. Transnet subsequently argued that the adjudicator failed to publish his
decision within four weeks by 29 July 2018, this being the end of the
four week period after the information was provided on 29 June 2018.
95.8. Contrary to Eskom’s argument in the present m atter, both Group Five
and Transnet accepted that the four week period within which the
adjudicator had to give his decision was not the same as the four week
period in clause W 1.3(3). This is apparent from paragraph [4] of the
judgment where Group Five st ated that due to the further response
being required to be submitted by 29 June 2019, “ the adjudicator’s
decision was therefore due four weeks hence .” Counsel for Transnet
made a similar submission that “ the adjudicator failed to publish his
decision withi n four weeks which period was from the 29th of June 2018
to the 29th of July 2018 ”.34
95.9. Contrary to the above common cause fact, Twala J held that in terms of
the contract the adjudicator had to publish his decision within 4 weeks
from the date of the las t submission unless he obtain ed consent from
the parties to extend that period.35
95.10. In paragraph [21] of the judgment Twala J held:
“In terms of clauses W1.3.3 and W1.3.8 of the agreement
between the parties the time period for the publication of the
adjudicator's decision is 4 weeks from the date when he
receives the last submission from the parties. ”
95.11. The adjudicator's mandate in t he Group Five case was terminated by
Transnet on 31 July 2018 when Transnet refused to consent to the
extension of time as requested by the adjudicator and this was
accepted by Twala J .36
[96] The Group Five case does not support Eskom for a number of reasons ,
including:
96.1. The facts in the present matter differ toto caelo ;
96.2. It is not clear from the judgment in Group Five why the court deviated
from a common cause fact that the decision had to be given on 29 July
2018 . This was not the same date as the end of the four week period
contemplated in W1.3(3);
96.3. The judgment does not address why the four week period in clauses
W1.3(3) and W1.3(8) were conflated ;
96.4. The adjudicator in Group Five did not give his decision timeously and
his mandate was terminated;
96.5. After the merits decision was given in the present matter, the parties
met within days with a view to implementing the decision;
34 At paragraph [14].
35 At paragraph [1 7].
36 At paragraph [2 5].
96.6. In the present matter both the merits and the quantum decision were
given timeously.
[97] The case of Murray & Roberts Limited v Sasol South Africa (Pty) Ltd37 also
concerned an adjudicat or’s decision issued under option W1 where the terms
were the same as in the present matter. The adjudicator’s contract in Murray
and Roberts contained an additional clause , viz:
“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. ’” 38
[98] A dispute arose between Murray & Roberts and Sasol as to the manner in
which the period in clause W1.3(8) had to be calcula ted. Weiner J held:39
“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). ”
[99] The matter was taken on appeal to the SCA40 where clauses W1.3(3), (5) and
(8) were considered. The SCA per Zondi JA held as follows :
“[33] It was submitted by Murray & Roberts that this clause allows
both parties to provide further information or to reply to further
information until the last day of the four -week period. Only after
that day, would the adjudicator be in a final position to consider
37 2020 JDR 2233 (GJ) .
38 See paragraph 14 read with fn 5.
39 At paragraph [43].
40 Sasol South Africa (Pty) Ltd v Murray & Roberts Limited 2021 JDR 1328 (SCA).
whether, based on the information already received, additional
information would... enable him to carry out his work …I agree
with this submission.
[34] Clause W1.3(5), third and fourth bullet points of the conditions
of contract states:
‘The Adjudicator may...
• 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.
[35] The provision of ‘further information’ necessarily applies to
information after the four -week period in clause W1.3(3) and
places no limitation on the extent of the 'stated time. ”
[100] The above interpretation is correct and applies equally to the facts of this
case. There is no basis to suggest that the adjudicator exceeded his powers
in taking any of the steps that he did in this matter.
[101] His decisions were also issued timeously.
Whether the rules of natural justice apply and, if they do, whether a breach
thereof has been shown to exist
[102] Eskom submits that the rules of natural justice find application and that this
was breached by the adjudicator. As Framatome correctly points out however,
this is ironic in light of Eskom’s refusal to engage and provide information on
invitation from the a djudicator during the quantum phase of the adjudication.
Although this conduct is wholly inimical to a party asserting audi, I will
nonetheless deal with Eskom’s contentions in this regard. Eskom relies on the
judgment of Twala J in Group Five Construction (Pty) Ltd v Transnet SOC
Limited where it was held that the adjudicator flagrantly disregarded the audi
alteram partem principle. By implication, this principle applies to adjudications.
[103] As outlined above, t he facts of Group Five differ from the present matter. In
that case the adjudicator failed to deliver his decision within the four week
period , namely on 29 July 2018. An extension of this period was not agreed
to and it was common cause that the decision of the adjudicator was issued
late. His mandat e was terminated by Transnet and he thereafter engaged with
one party . This is not only undesirable but inherently unfair.
[104] Eskom’s submission that it was precluded from participating in the
adjudication process is wholly inconsistent with paragraph 13 of its letter of 17
March 202341 where it indicated unequivocally that it would no longer be
participating in the adjudication process.
[105] Its prevarication on this issue is to be deprecated. Eskom’s assertions on oath
as regards its continued participation in the adjudication process are also of
concern. It stated the following in paragraph 104 of the founding affidavit:
“It needs to be emphasised that the Applicant did not say that it will not
take part in the process or that it refused to respond to the issues
which it was instructed to respond to in the Second Further
Instructions. The Applicant was in the process of preparing its
response when it issued the letter on 17 March 2023 and it intended to
issue such response on 20 Ma rch 2023. It therefore made it clear in
paragraph 12 of the letter that it would respond to the aforesaid issues
to protect its rights and to ensure that the Second Respondent will not
only have the First Respondent’s calculations and submissions before
him, should he issue a further decision. ”
[107] Paragraph 12 of the letter of 17 March 2023 does not contain any indication
that submissions would be forthcoming by Eskom on 20 March 2023. It simply
records:
41 Reproduced in paragraph 44 above.
“The Employer’s continued participation is solely to ensure that the
information and submissions before the Adjudicator are not only those
furnished by the contractor. To the extent that the Adjudicator purports
to make and issue any further decision in respect of Disputes 118 and
119 the Employer places on record that any such decision would be
beyond the Adjudicator’s jurisdiction. ”
[106] The version on oath is not reconcilable with paragraphs 12 and 13 of Eskom’s
aforementioned letter. In any event, and on my reading of the relevant
contractual provisions, I am not persuaded that the rules of natural justice find
application. This accords with the SCA’s findings in paragraph 15 of
Ekurhuleni West “ that there was no room for the tacit importation of any rule of
natural justice into the agreement of the parties .”
[107] Even if the rules of natural justice did apply, Eskom has failed to show any
breach thereof.
The assessment of the monetary claims by the adjudicator
[108] Eskom submits that the reference to contracted costs in paragraph 21.19 of
the merits decision renders the extra contractual procedure void and
unenforceable.
[109] Nothing turns on this for two reasons. Firstly, t here is no challenge to
paragraph 21.19 in the notice of motion and secondly, the adjudicator
withdrew the instruction on costs.
The adjudica tor’s alleged failure to give a reasoned decision
[110] The quantum decision42 comprises 23 pages and sets out amongst other
things the relevant clauses in the contact and the assessment of
compensation as well as the applicable rates. Framatome relied on clause
42 Appended to the founding affidavit as FA20.
63.14 of the contract which provides that if the project manager and the
contractor agree, rates and lumpsums may be used to assess a
compensation event instead of a defined cost. Framatome’s submission was
supported by letters from the project manager, one dated 10 August 2022 and
another dated 9 March 2018. The rates in the latter letter applied to contract
4600055123 and the fee percentages included in part 2 of the contract data
were to be used. These ra tes had been proposed by the project manager as a
compromise. Eskom’s response was that the person who was performing the
function of project manager at the time that the rates compromise was made
had been suspended. Quite how this impacts on the validity of the
compromise reached between the project manager and the contractor is not
entirely clear.
[111] The adjudicator found that he was not empowered to reverse agreements
reached between the contractor and the previous project manager and which
were still vali d at the time of the claim giving rise to the dispute.43 The
adjudicator understood that that the compromise rates were not approved for
a specific compensation event but would apply “ on this contract for all future
compensation events .” 44
[112] Eskom’s challenge to the reasons provided in the quantum decision is
singularly lacking in merit. The purpose of inviting Eskom’s participation in the
adjudication process was to facilitate the assessment of the compensation.
The adjudicator did not merely state t hat Framatome’s revised calculation was
a “fair reflection ” of the actual and forecast compensation required. He gave a
detailed narrative on the issue of compensation and pointed out that
“[u]nusually and for whatever reason, the Employer has decided thro ughout
the process not to submit its own version of the quantum although having
been given three opportunities to do so ”.45 He also stated that he would have
valued the employer’s alternative calculations.46
43 Paragraph 6.14 of the quantum decision.
44 Id paragraph 6.15.
45 At paragraph 8.12 of the quantum decision.
46 Ibid.
[113] Framatome relied on Gillies Ramsay Diamond & Oth ers v PJW Enterprises
Limited47 and Carillion48 on the adequacy of reasons furnished with which I
agree. Eskom’s challenge to the reasons provided by the adjudicator is clearly
a distortion of the quantum decision and a stratagem to avoid having to
comply with the adjudicator’s decision. Its submissions are contrived and
unconvincing and fall to be rejected.
Conclusion
[114] There is no basis to set aside the decision s of the adjudicator which are valid
and binding. In terms of the parties’ contract Eskom was obliged to comply
therewith . The bringing of this application and the pending arbitration does not
relieve Eskom f rom complying with its contractual obligations.
[115] It follows that the relief sought in the counter application should be granted.
[116] In the result I make the following order:
116.1. The applicant’s application is dismissed with costs includ ing the costs
attend ant upon the employment of two counsel , with scale C to apply
from 12 April 2024.
116.2. The applicant is directed to make payment to the first respondent of the
following amounts:
116.2.1. €35,288,582.00, exclusive of value-added tax and subject to
the price adjustment for inflation pursuant to secondary option
clause X1 of the contract, and pursuant to clauses 51.3 and
51.4 of the contract, interest thereon calculated at the LIBOR
rate applicable at the time for amounts due in othe r
currencies; and
116.2.2. ZAR 256,631,358.00, exclusive of value-added tax and
subject to the price adjustment for inflation pursuant to
47 [2004] BLR 131, paragraph 31 .
48 At paragraph [84].
secondary option clause X1 of the contract, and pursuant to
clauses 51.3 and 51.4 of the contract, interest thereon .
116.3. The applicant is ordered to pay the costs of the counter application,
including the costs of the first respondent’s49 France -based attorneys
and the costs occasioned by the employment of senior and junior
counsel , with scale C to apply f rom 12 April 2024.
_______________ ________
R T WILLIAMS AJ
49 The reference to the applicant’s France -based attorneys in paragraph 2 of the notice of counter
application is clearly incorrect and should be a reference to Framatome’s France based attorneys
consistent with paragraph 2.3 on p. 521 of the record.