IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE DIVISION, MAKHANDA)
CASE NO: 985/2023
In the matter between
NLG CONSTRUCTION AND PLANT HIRE CC Applicant
and
EASTERN CAPE DEPARTMENT OF PUBLIC WORKS First Respondent
THEMELANI ATTWELL NKELE Second Respondent
___________________________________________________________________
JUDGMENT
___________________________________________________________________
KRüGER AJ
Introduction
[1] NLG Construction and Plant Hire CC (‘NLG’) and the Department of Public
Works (‘the Department’) concluded a ‘Principal Building Agreement’ on 29 April
2021, following a tender process, for the former to perform construction work at the
Uitenhage Museum to the value of R16 591 731.85.
[2] It is common cause that the parties concluded a written JBCC 2000 Principal
Building Agreement (edition 4.1, 2005) (‘the JBCC agreement’ or ‘the agreement’)
standard form contract. The agreement provides for the substitution of certain
clauses where one of the contracting parties is an organ of state.
[3] One of the substituted clauses relates to dispute resolution under the contract.
It is the applicant’s case that the parties agreed to a single form of dispute resolution,
namely, adjudication, following the substitution of the clauses. The first respondent,
the Department, disputes this. It contends that the parties agreed to adjudication as
the default form of dispute resolution, but that they reincorporated the standard form
arbitration clauses as a second -tier of dispute resolution. The Department further
argues that it had always been the parties' intention to subject adjudication
determinations to arbitration, given the nature of adjudication as a speedy, interim
dispute-resolution mechanism.
[4] It is common cause that the applicant referred a dispute to adjudication on 3
July 2024 after it had earlier cancelled the agreement. It is further common cause
that the second respondent, who was appointed as the adjudicator, handed down a
determination on 5 October 2024, dismissing the Department’s in limine points, and
that his determination on the merits was handed down on 12 December 2024 in
favour of the applicant. The determination directed the Department to make
payments totalling R7 945 975.54 to the applicant. In response thereto, the
Department filed its notice of dissatisfaction on 23 December 2024, seeking to
submit the adjudicator’s determination to arbitration. It further delivered its notice of
arbitration on 31 January 2025.
[5] NLG instituted these proceedings on 12 March 2025 to make the adjudicator's
determination an order of court. 1 It seeks orders directing the Department to make
payments to it in accordance with the adjudicator’s determination and to pay half of
the adjudicator’s fee, which the applicant had paid in full to secure its release on 12
the adjudicator’s fee, which the applicant had paid in full to secure its release on 12
December 2024. The Department opposes the application. The Department also
launched a conditional counterapplication to review and set aside the adjudicator’s
determination if it were unsuccessful in its opposition to the applicant’s claim for
relief. No relief is sought against the second respondent.
1 Based on JBCC Adjudication Rule (published January 2020) Rule 6.1.3 and 6.2.2.
[6] The Department’s opposition to the main application to resist enforcement of
the adjudicator’s determination, and its conditional counterapplication to review and
set aside the adjudicator’s determination, overlap in their grounds and arguments.
As this judgment deals with the main and the counterapplication, I engage with the
grounds and arguments where most appropriate.
The contractual terms
[7] Clause 1.8 of the JBCC contract provided that the agreement constituted the
entire contract between the parties and that its provisions bound the parties.
Amendments or variations had to be made in writing.
[8] Clause 1.9 provided for the substitution of clauses where an organ of state
was a party to the contract. Clauses marked with a hashtag (#) were substituted
with the clause of the same number contained in clause 41.
[9] Clause 40 provided for dispute settlement. It read
’40.1 Should any disagreement arise between the employer or his principal agent or agents and the
contractor as to any matter arising out of or concerning this agreement either party may give
notice to the other to resolve such disagreement.
40.2 Where such disagreement is not resolved within ten (10) working days of receipt of such
notice it shall be deemed to be a dispute and shall be submitted to:
40.2.1 # Adjudication in terms of the edition of the JBCC Rules for Adjudication current at the
time when the dispute is declared. The adjudicator shall be appointed in terms of
such Rules.
40.2.2 # No clause.
40.3 # The adjudicator’s decision shall be binding on the parties who shall give effect to it without
delay unless and until it is subsequently revised by an arbitrator in terms of 40.5. Should
notice of dissatisfaction not be given within the period in terms of 40.4, the adjudicator’s
decision shall become final and binding on the parties.
40.4 # Should either party be dissatisfied with the decision given by the adjudicator, or should no
decision be given within the period set out in the Rules, such party may give notice of
dissatisfaction to the other party and to the adjudicator within ten (10) working days of receipt
of the decision, or should no decision be given, within ten (10) working days of expiry of the
date by which the decision was required to be given.
40.5 # A dispute which is the subject of a notice of dissatisfaction shall be finally resolved by the
arbitrator as stated in the schedule. Where such person is unwilling or unable to act, or
where no person has been stated, the arbitrator shall be chosen and appointed by mutual
agreement between the parties. Where no agreement is reached within 10 (ten) working
days of such notice, the arbitrator shall be the person appointed at the request of either party
by the chairman, or his nominee, of the Associa tion of Arbitrators (Southern Africa). The
adjudicator appointed in terms of 40.2.1 shall not be eligible for appointment as the arbitrator.
40.6 The provisions of 40.2 to 40.5 shall not be construed as a waiver of the parties’ entitlement to
resolve the dispute by mediation at any time.
40.7 Where a dispute is submitted to mediation:
40.7.1 The parties shall agree on and appoint the mediator within ten (10) working days of
the date on which the dispute was declared.
40.7.2 The parties shall meet the mediator to decide the procedures, representation and
dates for the mediation process. Thereafter the mediator may meet the parties together or
individually to help reach a settlement.
40.7.3 Where parties reach settlement of the dispute or any part thereof, the mediator shall
record such agreement and on signing thereof the agreement shall be final and binding
unless either party issues a notice disputing the decision within ten (10) working days.
40.8 No clause.
40.9 Recording of a dispute in terms of 40.1 shall not relieve the parties from liability for the due
and timeous performance of their obligation.
40.10 The cancellation of the agreement shall not affect the validity of this clause 40.0’.
[10] The relevant state substitutions provided for in clause 41 read as follows:
’40.2.1 No clause.
40.2.2 Litigation where the employer elects so in terms of the schedule. Institution of the
action shall be commenced and process served within (1) year from the date of the existence of the
dispute, failing which the dispute shall lapse.
40.3 to 6 No clause.’
[11] The contract variables were set out in the contract's Schedule. The preamble
to the Schedule directed that spaces requiring information had to be completed or
marked as not applicable. Where choices were offered, the non -applicable items
had to be deleted. It further provided that ‘[k]ey cross reference clauses are italicised
in [ ] brackets as an aid to the user and cannot be relied upon exclusively as
indicating all related clauses.’
[12] Under the clause headed 42.7 Dispute Resolution, clause 42.7.1 provided
‘The default dispute resolution method is adjudication
[40.2.1 #] (Insert arbitration only where adjudication is not to apply).’
The word ‘adjudication’ was handwritten in the block provided at the time of the
conclusion of the agreement. The subsequent subclauses of 42.7, referring to the
conclusion of the agreement. The subsequent subclauses of 42.7, referring to the
selection or appointment of an adjudicator (42.7.2), arbitration (42.7.3) and mediation
(42.7.4) were cancelled and marked ‘not applicable’.
[13] The applicant relies on the text of the agreement, which, through substitution,
deleted clauses 40.2.1 to 40.5, and which, in the Schedule, designated adjudication
as the default and sole dispute -resolution procedure under the contract. The
applicant further highlights that the references to any other dispute resolution
processes were deliberately marked as ‘not applicable’. The applicant wants the
court to accept the text of the agreement as a complete and accurate reflection of
ADJUDICATION
the parties’ consensus, and accordingly to hold the Department thereto by enforcing
the adjudicator’s determination.
[14] In the first instance, the Department contends that, while state contracts
ordinarily excluded clauses 40.2.1 to 40.5, the parties reincorporated the clauses, as
it had always been their intention to subject adjudication determinations to revision in
arbitration, or, alternatively, by specifically cross-referencing clause 40.2.1 at 42.7.1.
[15] The latter argument can easily be disposed of. It cannot be said that the
parties cross-referenced clause 40.2.1 in the Schedule to reincorporate that clause
or any of the subsequent arbitration clauses. To hold so would be to ignore the text
completely. Clause 40.2.1 appeared on the standard form contract in printed form,
in italics and square brackets, as indicated above. The parties did not add that
clause to their agreement. They also did not explicitly cross -reference any
subsequent clauses. The preamble to the Schedule made it clear that the
references in italics and square brackets did not introduce substantive clauses into
the agreement but only served as a guide. The Department’s first line of argument
on reincorporation of the clauses must fail.
[16] The Department also argues that, by designating adjudication as the default
dispute-resolution method, the parties always intended to incorporate clause 40.2.1
and the subsequent clauses governing revision of adjudication proceedings through
arbitration. In support of this argument, the Department refers to the applicant’s
explicit reliance on clause 40.2.1 in its notice of disagreement of 13 June 2024 and
its notice of adjudication of 3 July 2024. A further argument in support of
reincorporation of the clauses relates to the nature of adjudication as a speedy
interim form of dispute resolution. I consider these arguments in what follows.
[17] In University of Johannesburg v Auckland Park Theological Seminary, 2 the
[17] In University of Johannesburg v Auckland Park Theological Seminary, 2 the
Constitutional Court confirmed that the interpretation of a contract is a unitary or
holistic exercise in which the text, context, and purpose must be considered. 3 It is
2 2021 (6) SA 1 (CC) para 63.
3 Para 65.
not only where the text is ambiguous or unclear 4 that regard can be had to context
and purpose to ascertain the intention of the parties. 5 This means that the court ‘has
to, from the onset, consider the contract’s factual matrix, its purpose, the
circumstances leading up to its conclusion, and the knowledge at the time of those
who negotiated and produced the contract’.6
[18] In that matter, the Constitutional Court further confirmed that the parol
evidence rule remains part of our law. 7 Accordingly, where an agreement has been
reduced to writing, the written contract is generally regarded as the whole
embodiment of the parties’ agreement. The Court further adopted an expansive
approach to the admissibility of extrinsic evidence to determine the context and
purpose,8 while also making it clear that a court's authority to admit extrinsic
evidence is not unlimited. In line with the integration aspect of the parol evidence
rule, evidence that is adduced to vary, contradict, or add to the agreement is not
permitted.9
[19] I rejected the Department’s first line of argument that the parties explicitly
reincorporated the additional dispute resolution clauses by cross -referencing. I did
not understand the first respondent’s argument to be that the further dispute
resolution clauses were in addition to, or to vary the agreement, but rather that the
terms were implied or tacit to the agreement, as it was contended that it was ‘always
the parties’ intention’ to include the arbitration clauses in their agreement. As such,
the extrinsic evidence supporting those contentions is admissible and could be
weighed, if and where relevant, in the determination. I consider, in the first instance,
whether the terms could be viewed as implied terms of the agreement.
4 Para 66.
5 Novartis v Maphil 2016 (1) SA 518 (SCA) para 27.
6 University of Johannesburg para 66.
7 Paras 87-92.
8 Paras 67-68.
9 Para 92.
[20] An implied term is a naturalium of the contract in question; that is, a legal duty
imposed by law.10 In South African Forestry Company Ltd v York Timbers Ltd, 11 the
Supreme Court of Appeal held that
[u]nlike tacit terms which are based on the inferred intention of the parties, implied terms are imported
into contracts by law from without. Although a number of implied terms have evolved in the course of
development of our contract law, there is no numerus clausus of implied terms and the courts have
the inherent power to develop new implied terms. Our courts' approach in deciding whether a
particular term should be implied provides an illustration of the creative and informative function
performed by abstract values such as good faith and fairness in our law of contract. Indeed, our
courts have recognised explicitly that their powers of complementing or restricting the obligations of
parties to a contract by implying terms should be exercised in accordance with the requirements of
justice, reasonableness, fairness and good faith (see eg Tuckers Land and Development Corporation
(Pty) Ltd v Hovis 1980 (1) SA 645 (A) 651C-652G; A Becker & Co (Pty) Ltd v Becker and Others 1981
(3) SA 406 (A) 417F-420A; Ex Parte Sapan Trading (Pty) Ltd 1995 (1) SA 218 (W) 226I-227G). Once
an implied term has been recognised, however, it is incorporated into all contracts, if it is of general
application, or into contracts of a specific class, unless it is specifically excluded by the parties (see eg
Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) 531D-H). It
follows, in my view, that a term cannot be implied merely because it is reasonable or to promote
fairness and justice between the parties in a particular case. It can be implied only if it is considered to
be good law in general. The particular parties and set of facts can serve only as catalysts in the
process of legal development.’ (emphasis added)
process of legal development.’ (emphasis added)
[21] It would be a bridge too far to hold, as a matter of law, that every contract that
provides for adjudication as a dispute -resolution method includes an implied
provision, unless explicitly excluded, subjecting the determination to revision by
arbitration. Such a change would amount to the formulation of a new rule of law that
goes beyond the policy considerations shaping the common law of contract. 12 It
would seem that such a change requires legislative or at least regulatory
intervention.13
[22] I also do not think the strict requirements to prove the existence of a term
implied by trade usage as set in Golden Cape Fruits (Pty) Ltd v Fotoplate (Pty) Ltd,14
were met in this matter. There was no evidence before the court to support an
inference that role -players in the construction industry universally and uniformly
observe a two -tier dispute resolution mechanism involving adjudication and
arbitration.
10 1974 (3) SA 506 (A) 531G-H.
11 2005 (3) SA 323 (SCA) para 28.
12 Anglo Operations Ltd v Sandhurst Estates (Pty) Ltd 2006 (1) SA 350 (T) 374.
13 See Zingwazi Contractors CC v Eastern Cape Department of Human Settlements [2021] 4 All SA
299 (ECG) para 14-15. The evidence before the court was that the Construction Industry
Development Board, an organ of state, issued guidelines on the use of adjudication in the
construction industry, including one to apply adjudication to all categories of construction contracts.
14 1973 (2) SA 642 (C) 645G.
[23] The arbitration clauses were, accordingly, not implied terms of the agreement.
[24] In the next instance, it must be considered whether the terms could be
regarded as tacit terms of the agreement between the parties, i.e. terms inferred
from the facts. Corbett AJA in Alfred McAlpine & Son (Pty) Transvaal Provincial
Administration15 explained that such a term is
‘an unexpressed provision of the contract which derives from the common intention of the parties, as
inferred by the Court from the express terms of the contract and the surrounding circumstances. In
supplying such an implied term the Court, in truth, declares the whole contract entered into by the
parties. In this connection the concept, common intention of the parties, comprehends, it would seem,
not only the actual intention but also an imputed intention. In other words, the Court implies not only
terms which the parties must actually have had in mind but did not trouble to express but also terms
which the parties, whether or not they actually had them in mind, would have expressed if the
question, or the situation requiring the term, had been drawn to their attention’.
[25] I am thus required to determine whether the parties necessarily agreed on the
application of the JBCC Rules and a second -tier dispute -resolution mechanism at
the time the agreement was concluded, partly because of the nature of adjudication
as an interim dispute resolution mechanism. In other words, would their answer to
the officious bystander in terms of the established test have been that they ‘of
course’ agreed to revision of adjudication determinations through arbitration at the
time, given its nature. This determination requires consideration of the express
terms of the agreement, its context and purpose, the surrounding circumstances,
and the subsequent actions of the parties relevant to inferring their intention at the
time of the agreement's conclusion.16
time of the agreement's conclusion.16
[26] NLG, in the first instance, contends that the express terms of the agreement
excluded the application of the Rules and arbitration clauses. As such, it was
submitted that there was no room to infer the terms as the common intention of the
15 Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) 531H-
532A.
16 Airports Company South Africa Limited v Airport Bookshops (Pty) Ltd t/a Exclusive Books 2016 (1)
SA 473 (GJ) paras 25-33.
parties.17 It was the applicant’s view that reliance on extrinsic evidence should be
limited insofar as possible.18
[27] The Department, on the other hand, relies on the nature of adjudication as an
interim and speedy method of dispute resolution in construction agreements 19 to
provide context. It was also submitted that the agreement had to be understood in
light of the broader state injunction to resolve disputes through alternative dispute
resolution rather than litigation.
[28] The Department also submits that the applicant’s explicit references to and
reliance on clause 40.2.1 and its provision for the application of the JBCC Rules in
its 18 June 2024 notice of dissatisfaction and its 3 July 2024 notice of adjudication
demonstrated that the parties were in agreement on a tiered dispute -resolution
process, involving arbitration to review adjudication determinations.
[29] The applicant denies that the references to clause 40.2.1 constituted evidence
that it agreed to a tiered dispute mechanism at the time the agreement was
concluded. It submits that the communications were drafted long after the
agreement was concluded and that an employee erroneously included the
references. NLG also relies on the pre -adjudication agenda dated 14 August 2024
that itemised a determination of the applicable rules as a point for discussion, and
the subsequent minutes of 19 August 2024 recording the parties’ agreement that the
JBCC Rules (published in January 2020) were applicable.
[30] It is, however, noteworthy that both communications were signed
electronically by the applicant's director. More pertinently, the numbering on the
17 Reliance was placed on Pan American World Airways Inc v SA Fire and Accident Insurance Co Ltd
1965 (3) SA 150 (A) 175C.
18 Reliance was placed on KPMG Chartered Accountants (SA) v Securefin Ltd 2009 (4) SA 399 (SCA)
para 39.
19 The Department placed reliance on Radon Projects (Pty) Ltd v NV Properties (Pty) Ltd 2013 (6) SA
345 (SCA) paras 4-5; Esor Africa (Pty) Ltd/ Franki Africa (Pty) Ltd Joint Venture v Bombela Civils
Joint Venture (Pty) Ltd (12/7442) [2013] ZAGPJHC 407 (12 February 2013) paras 8, 11-14;
Ekurhuleni West College v Segal (1287/2018) [2020] ZASCA 32 (2 April 2020) para 21; Zingwazi
Contractors CC supra; Amanz'Abantu Services Pty Ltd v Coega Development Corporation Pty Ltd
(620/2022) [2022] ZAECQBHC 20 (10 August 2022) paras 8-11; Eskom Holdings SOC Limited v
Framatome [2025] 4 All SA 131 (WCC) paras 46-47.
notice of adjudication corresponds to the JBCC Rules numbering. In fact, it appears
that the notice of adjudication was provided as a template with the standard form
contract, which the applicant used. The fact that the applicant used this template
does not mean the clause was included as a tacit term by the parties, but at least
theoretically, it could be weighed in consideration.
[31] However, there is a clear barrier to inferring these terms in this instance.
Where an agreement expressly excludes a term, that same term cannot be inferred
from the facts. Nugent J (as he then was) in Kelvinator Group Services of SA (Pty)
Ltd v McCulloch 20 relied on SA Mutual Aid Society v Cape Town Chamber of
Commerce21 to explain that
‘[a] tacit term is not merely one that would have been reasonable, or convenient, for the parties to
have included in their agreement (Rapp and Maister v Aronovsky 1943 WLD 68 at 74-5), but is rather
a term which, by necessary implication, the parties must have intended would form part of their
agreement or would have so intended if they had turned their minds to the particular issue (see for
example Wilkins NO v Voges 1994 (3) SA 130 (A) at 136 -7). It follows that there can be no room for
such a term if it would be in conflict with the express provisions of the agreement.’ (emphasis added)
[32] In view of my earlier finding that the express terms of the agreement excluded
an agreement on the application of the JBCC Rules and a second tier of dispute
resolution, it is therefore not possible to infer contrary terms. While it may seem
possible to infer reincorporation of clause 40.2.1 based on the applicant’s references
thereto, it is, as a matter of law, not possible.
[33] Based on the foregoing, I must inevitably conclude that the agreement did not
provide for revision of the adjudicator’s decision by arbitration.
[34] I thus turn to consider the counterapplication and the remaining arguments
[34] I thus turn to consider the counterapplication and the remaining arguments
raised in support of or in opposition to both the main and the counterapplication.
The grounds for review
[35] The Department’s opposed counterapplication rests on three grounds:
20 1999 (4) SA 840 (W) 844A-E.
21 1962 (1) SA 598 (A) 615D. See also Wilkins v Voges NO 1994 (3) SA 130 (A) 137A-C; Nedcor
Bank Ltd v SDR Investment Holdings Co (Pty) Ltd 2008 (3) SA 544 (SCA) para 12; ABSA Bank Ltd v
South African Commercial Catering and Allied Workers Union National Provident Fund (Under
Curatorship) 2012 (3) SA 585 (SCA) para 34; Shepherd Real Estate Investments (Pty) Ltd v Roux Le
Roux Motors CC 2020 (2) SA 419 (SCA) para 24.
I. that the adjudicators exceeded his jurisdiction by permitting the
submission of the applicant’s statement of claim outside the permissible
timeframe set by the Rules and that he similarly delivered his
determination outside the prescribed timeframe;
II. that the adjudicator failed to apply the procedure prescribed in the JBCC
rules in that the adjudicator failed to have regard to the terms of the
agreement and the evidence submitted, thus rendering the adjudication
procedurally unfair. Enforcement of the adjudicator’s determination would,
according to the applicant, thus be contrary to public policy and would be
squandering limited public funds, and
III. that the adjudicator failed to have regard to the prescripts regulating public
procurement processes, and that he particularly denied the Department a
correction of the rate applicable to the Bill of Quantities, thus increasing
the contract sum beyond that which is permissible in terms of the legal
framework regulating public procurement processes.
[36] It is trite that review proceedings are not concerned with the correctness of
the merits of the decision under review, but rather with the fairness and the
correctness of the procedure that was followed.22
The grounds considered
[37] Ground I is premised, in part, on the Department’s interpretation regarding the
reintroduction of clause 40.2.1 at the time of the conclusion of the agreement. I have
found that interpretation to be incorrect. Clause 40.2.1 was not expressly
reintroduced by cross-referencing, and it also did not find its way into the agreement
as an implied or tacit term. Rather, it was expressly excluded from the agreement
under the substitution clauses. Accordingly, the applicant’s version that the parties
agreed to the application of the JBCC Rules at the first pre -adjudication hearing on
19 August 2024, as a matter of logic, stands. At that meeting, the parties agreed to
19 August 2024, as a matter of logic, stands. At that meeting, the parties agreed to
timelines for the exchange of statements and for further hearings, and at the further
hearings, similar agreements to extend the timelines were made. Rule 1.2 permitted
deviations from the rules by agreement. It can therefore not be said that the
22 Ekurhuleni West College v Segal (1287/2018) [2020] ZASCA 32 (2 April 2020) para 16.
adjudicator exceeded his jurisdiction by acting outside the prescribed timeframes.
Moreover, it is only where parties explicitly agree to the invalidity of an adjudication
determination delivered outside the stipulated timeframes that the Department’s
argument could hold. 23 In this instance, neither the agreement nor the Rules
included such a term. This ground is without merit.
[38] Ground II raised by the Department challenges, in the first instance, the
adjudicator's application of the rules of procedure. A second aspect of this ground is
similar to one of the grounds raised by the Department in opposition to the main
application and concerns its interpretation of the final statement of account following
the cancellation of the agreement. Woven through these aspects is the
Department’s position on the inherent nature of adjudication as an interim dispute -
resolution measure. Overall, this ground rests on the view that it would be contrary
to public policy, and squandering public funds, to enforce the adjudicator’s
determination; alternatively, that public policy considerations require the
determination to be set aside on review because of the procedural unfairness.
[39] The Department contends that the adjudicator failed to consider evidence of
payments made to the applicant in coming to his determination. As such, the
Department argues that the process fell short of the prescribed procedure, which
required the adjudicator to consider all the evidence placed before him. It
specifically raises the adjudicator’s reference to some, but not all, of the documents
submitted as proof of payment for delays in his determination. As such, its position
is that the adjudicator reached an incorrect conclusion because he failed to consider
evidence of payments made for the extension of time in 2021. In my view, the
phrasing of this argument also sets out the basis for its rejection. The challenge is
not concerned with the procedure followed, but rather with the conclusion reached.
not concerned with the procedure followed, but rather with the conclusion reached.
[40] The Department emphasises the interim nature of adjudication to resolve
disputes in ongoing contractual relationships to ensure continued performance. To
illustrate that adjudication, by its very nature, is an interim mechanism, the
23 Freeman NO v Eskom Holdings Limited (43346/09) [2010] ZAGPJHC 137 (24 April 2010) para 25.
Department place reliance on Radon Projects (Pty) Ltd v NV Properties (Pty) Ltd ,24
among others.25 Nugent JA commented on the dispute resolution mechanism in the
following terms:
‘It has now become common internationally – in some countries by legislation – for disputes to be
resolved provisionally by adjudication. In Macob Civil Engineering Ltd v Morrison Construction Ltd
adjudication was described, in the context of English legislation, as
“…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 stage in the dispute resolution process.”
The authors of Hudson’s Building and Construction Contracts observe that under New Zealand
construction legislation adjudication “is regarded as essentially a cash flow measure implementing
what has been colloquially described as a ‘quick and dirty’ exercise to avoid delays in payment
pending definitive determination of litigation”.’ (Footnotes omitted.)
[41] It is common cause that the applicant had cancelled the contract prior to
initiating adjudication proceedings. Therefore, the Department submits that the
rationale for ordering immediate compliance with the adjudicator’s determination had
fallen away. The line of argument further is that adjudication was not available to the
applicant at the time it delivered its notice of adjudication, as the contract provided
for the preparation of the final account to determine the contract value of the work,
time extension claims, and the final amounts due in the circumstances. On that
basis alone, the Department is of the view that the court should refuse to enforce the
adjudicator’s determination on public policy grounds. For this submission, the
adjudicator’s determination on public policy grounds. For this submission, the
Department relies on Ethekwini Municipality v Cooperativa Muratori & Cementisti -
CMC di Ravenna Societa Cooperativa 26 to highlight the unenforceability of
contractual terms that are contrary to public policy. In this matter, the Supreme
Court of Appeal held that
‘With specific reference to Barkhuizen v Napier and Botha and Another v Rich N.O. and Others , the
majority judgment in Beadica explained that the perception that there is a divergence between the
jurisprudence of the Constitutional Court and this Court on the subject of public policy in the
contractual context is misconceived. The judgment continued, at para 80, as follows: “It emerges
clearly from the discussion above that the divergence between the jurisprudence of this Court and
that of the Supreme Court of Appeal is more perceived than real. Our law has always, to a greater or
lesser extent, recognised the role of equity (encompassing the notions of good faith, fairness and
reasonableness) as a factor in assessing the terms and the enforcement of contracts. Indeed, it is
clear that these values play a profound role in our law of contract under our new constitutional
dispensation. However, a court may not refuse to enforce contractual terms on the basis that the
enforcement would, in its subjective view, be unfair, unreasonable or unduly harsh. These abstract
values have not been accorded autonomous, selfstanding status as contractual requirements. Their
24 2013 (6) SA 345 (SCA) paras 4-5.
25 See footnote 19 above.
26 2023 (6) SA 384 (SCA) paras 13, 15.
application is mediated through the rules of contract law including the rule that a court may not
enforce contractual terms where the term or its enforcement would be contrary to public policy. It is
only where a contractual term, or its enforcement, is so unfair, unreasonable or unjust that it is
contrary to public policy that a court may refuse to enforce it.”
The central thesis of the employer’s argument is that this is a case where the principle of pacta sunt
servanda (agreements are to be observed) should not apply. However, pacta sunt servanda is a
central element and feature of public policy. It was put this way in Beadica. “This court has
emphasised that the principle of pacta sunt servanda gives effect to the ‘central constitutional values
of freedom and dignity’. It has further recognised that in general public policy requires that contracting
parties honour obligations that have been freely and voluntarily undertaken. Pacta sunt servanda is
thus not a relic of our pre -constitutional common law. It continues to play a crucial role in the judicial
control of contracts through the instrument of public policy, as it gives expression to central
constitutional values.” As pointed out in Beadica that does not mean to say that pacta sunt servanda
is “the only, nor the most important principle informing the judicial control of contracts. The
requirements of public policy are informed by a wide range of constitutional values”.
The case for the employer has been presented upon the basis that Beadica, and the cases from
which it stems, establish that, even in the case of a claim for payment of money due in terms of a
contract, a court has a discretion to grant or refuse the remedy on public policy grounds. However, the
enquiry is not directed at the exercise of a judicial discretion. The party resisting enforcement of such
a contractual obligation on public policy grounds has a duty to place the relevant facts before the
court. It is for the court to decide whether on the facts the enforcement of the obligation would be
contrary to public policy. If the answer is in the affirmative, no question of a discretion arises at all.
Our courts may not enforce contractual obligations when it would be contrary to public policy to do
so.’
[42] The applicant, with reference to the same authority , submits that the
judgment, in fact, did not support the Department’s arguments regarding public
policy. In the applicant’s view the agreement between the parties, as confirmed by
the adjudicator, was similar to that in Ethekwini Municipality in that it permitted the
use of adjudication after the contract had been terminated.27
[43] In Ethekwini Municipality, the Supreme Court of Appeal had to consider
whether enforcing the adjudication determination in that matter would be contrary to
public policy.28 The Supreme Court of Appeal held that where a party seeks to resist
the enforcement of a contractual obligation on public policy grounds, it has the duty
to place the relevant facts before the court to decide on the facts where the
enforcement of the obligation would be contrary to public policy. Where those facts
justify such a finding, the obligations will not be enforced. No question of discretion
arises.29 To engage public policy, more than the mere assertion of
unreasonableness, unfairness or inequity is required.30
27 Para 17-18.
28 Para 12.
29 Para 15.
30 Para 21.
[44] In that matter, the municipality argued that it should not be bound by the
agreement to make payments in accordance with the adjudicator’s determination, as
there was a risk that the contractor would be unable to repay the amount if the
determination were revised under arbitration, given the contractor's financial distress,
even possible insolvency. Further, and not unlike the Department in the current
matter, the municipality added two considerations to its public policy argument
relating to the risk, namely that the contract had already been terminated by the time
adjudication took place, thus not serving the purpose of ensuring cash flow to the
contractor in an ongoing contractual relationship, and secondly, that it would not be
appropriate to scarce public funds to be placed at risk in the circumstances.31
[45] To address the first of these considerations, the SCA examined the terms of
the agreement between the municipality and the contractor that governed its
termination. It is therefore appropriate to examine the equivalent terms in the
agreement between NLG and the Department.
[46] The JBCC standard agreement contains several clauses governing its
cancellation. Clause 36 deals with cancellation by the employer (i.e. the
Department) in the event of default by the contractor (i.e. NLG). Clause 37 deals
with cancellation of the agreement by the employer in instances of loss or damage of
the works. Clause 38 provides for the contractor's cancellation of the agreement in
the event of the employer's default. Clause 38.1 sets out the circumstances in which
the contractor may cancel the agreement, and clause 38.2 sets out the procedure to
be followed to cancel it. Clause 38.5 outlines the procedures that follow termination
of the agreement under clause 38. It provides
’38.5 Where the contractor cancels this agreement in terms of 38.0 the following shall apply:
38.5.1 Execution of the works shall cease. The contractor shall remain responsible for the
38.5.1 Execution of the works shall cease. The contractor shall remain responsible for the
works in terms of 8.1 until possession is relinquished to the employer
38.5.2 On relinquishing possession of the works, the contractor shall remove from the site
his temporary buildings, plant and machinery without delay
38.5.3 The principal agent shall forthwith compile a report on the status of the portion of the
works executed by the contractor and shall issue such a report to the employer and the
contractor
38.5.4 The principal agent shall forthwith commence and complete the final account within
ninety (90) working days of completion of such report
31 Para 12.
38.5.5 The employer shall be liable to the contractor for the costs of materials and goods
including those ordered before such cancellation where the contractor is bound to
accept and my payment. The contractor shall deliver such materials and goods to the
employer in good order
38.5.6 The employer shall be liable to the contractor for damages resulting from such
cancellation
38.5.7 The principal agent shall continue to certify the value of the work executed by the
contractor and the value of materials and goods for payment by the employer
38.5.8 The security in terms of 14.0 shall expire and shall be returned to the contractor by
the principal agent
38.5.9 The latent defects liability period shall end in terms of 27.2.2
38.6 The contractor’s right to cancel in terms of 38.0 may not be exercised should the contractor
be in material breach of this agreement.’
[47] The Department contends that the provisions of clause 38.5 had to be
implemented after the cancellation of the agreement and that a dispute about the
final account had to be raised thereafter in accordance with clause 40 to avoid
piecemeal dispute resolution.
[48] In the applicant’s view, the Department’s contention that the final account had
to be rendered before the matter could be referred to adjudication amounted to the
Department wanting to determine its own dispute. The applicant adds that the
adjudicator rejected this argument. In the applicant’s view, the Department, by
raising this argument, was effectively seeking to revisit the adjudicator’s
determination, which was not permitted in review proceedings.
[49] The Department, in turn, relies on the provisions of the agreement that
allowed for objections to the final account and for further dispute resolution
processes thereafter, and on the applicant's actual objection to the final account on 4
December 2024. Thus, in its view, the applicant would not have been deprived of an
opportunity to contest the final account.
opportunity to contest the final account.
[50] The adjudicator rejected the Department’s submission that the applicant had
prematurely referred its dispute to adjudication and that it could do so only after the
final account was delivered. He held that clause 40.2 did not explicitly limit its own
application and that the parties would have recorded their agreement to the contrary
if that had been their intention. Accordingly, he held that any disagreement under
the agreement that had escalated to a dispute could be referred to adjudication.
[51] In my view, the Department’s reading of the agreement does not find support
in its text, which does not limit recourse to adjudication pending preparation of the
final account in any instance of cancellation. While it may be sensible to address all
disputes under the contract at once, that is not what the agreement requires, as was
the case with the agreement in Ethekiwini Municipality. Notably, clause 40.10, on
which the applicant relied, provides that the cancellation of the agreement ‘shall not
affect the validity of this clause 40.0’ (i.e., the dispute resolution clause).
[52] The Department submits that it had paid a total amount of R 17 720618.31 to
the applicant for completing 85% of the work. The total amount paid further
exceeded the original contract sum by R 1 100 000. If the requested relief were to
be granted, the Department would have to pay an additional R 7 945 975.54 to the
applicant, bringing the total payment to the applicant to roughly R 9 000 000 above
the contract sum. Enforcing the determination would, according to the Department,
be manifestly unfair and a waste of public funds and contrary to public policy.
[53] The applicant, in response, highlights the Supreme Court of Appeal rejection
of a similar submission in Ethekwini Municipality as unhelpful. 32 Olsen AJA, in
rejecting the municipality’s request to consider the public interest in preserving public
funds by denying enforcement of the high court orders giving effect to the
adjudicator’s determinations, placed reliance on Beadica 231 CC v Trustees, Oregon
Trust.33 In that matter, the Constitutional Court held
‘Moreover, contractual relations are the bedrock of economic activity and our economic development
is dependent, to a large extent, on the willingness of parties to enter into contractual relationships. If
parties are confident that contracts that they enter into will be upheld, then they will be incentivised to
contract with other parties for their mutual gain. Without this confidence, the very motivation for social
coordination is diminished. It is indeed crucial to economic development that individuals should be
able to trust that all contracting parties will be bound by obligations willingly assumed.’ (Footnotes
omitted.)
On the strength of this dictum, the learned judge continued
‘The employer asks us to privilege public funds at the cost of private entities which contract with public
ones. Whilst, given the profit motive, such an approach may not entirely disincentivise persons from
contracting with public entities, it might reasonably be expected to incentivise the charging of a
premium to public entities, to cover the risk inherent in contracting with a party which may be afforded
32 Ethekiwni Municipality para 19.
33 2020 (5) SA 247 (CC) para 84.
a privileged status by the courts in the adjudication of contractual disputes. That cannot be in the
public interest.’34
I agree. A public entity, such as the Department, cannot claim special exemption
from its contractual liabilities simply because it utilises public funds. Affording such
protection to organs of state will undermine rather than serve the public interest.
[54] What remains of the facts placed before the court to engage public policy is
the Department’s assertion that the ‘quick and dirty’ nature of adjudication, which, by
virtue of its design as an interim dispute resolution measure, should justify its release
from its obligation to make immediate payment of the adjudicator’s determinations.
[55] In South Africa, adjudication as a form of dispute resolution is regulated by
contract. There is no industry rule or statute that prescribes its procedures or
mandates its determinations to be binding and immediately enforceable. Where
those consequences follow, they result from an agreement between the parties. For
me to find that enforcement of the adjudicator’s determinations is contrary to public
policy would be to elevate subjective views of fairness and reasonableness to self -
standing requirements for enforcing contractual terms. 35 It seems to me that the
Department, like the municipality in Ethewhini Municipality, invited the court to act on
its views that the enforcement of the determinations would be unduly harsh. 36
Where parties have agreed on contractual terms with potentially harsh outcomes for
one of them, that party cannot rely on the unfairness of the outcome to escape its
obligations. Accordingly, the second ground for review must be rejected.
[56] The third ground of review relates to the adjudicator’s failure to consider the
prescripts applicable to public procurement processes. In particular, the Department
took issue with the adjudicator’s finding that it undervalued the work when it
took issue with the adjudicator’s finding that it undervalued the work when it
unilaterally changed the rate of profit and attendant fees in the applicant’s bill of
quantities from 8% to 4%. In the Department’s view, the adjudicator failed to take
34 Ethekwini Municipality para 19
35 Ethekwini Municipality para 13; see Bredenkamp v Standard Bank of South Africa 2010 (4) SA 468
(SCA) paras 50-51.
36 Para 21.
into account that this finding would impermissibly increase the contract sum and
thereby undermine the open, transparent and fair tender process.
[57] The applicant, correctly in my view, submits that this ground sought to
question the merits of the adjudicator’s determination. A court sitting in review of a
decision of a contractually established tribunal is not at large to question the
correctness or not of its decision. Nothing in the ground as pleaded by the
Department, suggested that the adjudicator failed to apply the prescribed procedure
in coming to this decision. This ground of review must thus also be dismissed.
[58] Accordingly, the counterapplication must be dismissed and the main
application granted.
Costs
[59] The applicant seeks costs on a punitive scale against the first respondent. In
its view, such an order is warranted, as the Department was aware of its agreement
to be bound by adjudication yet sought to avoid payment through various
stratagems, ranging from denying the substitution clauses at the outset to arguing for
its reincorporation in the current proceedings. This, according to the applicant,
demonstrates the absence of bona fides in conducting the litigation, which our courts
have found to justify punitive costs. 37 The applicant highlighted that such an order
would give ‘expression of the court’s censure of reprehensible conduct of the part of
the costs debtor that cause the litigation or made the proceedings unduly
burdensome’.38
[60] In my view, this is not a case that calls for such an order. In coming to this
conclusion, I am mindful of the fact that an attorney -client costs order is an
‘extraordinary one which should not be easily resorted to, and only when by reason
of special considerations, arising either from the circumstances which gave rise to
the action or from the conduct of a party’. 39 I am not convinced that the applicant
37 Reliance was placed on Syfrets Mortgage Nominees Ltd v Cape St Francis Hotels (Pty) Ltd 1991
(3) SA 276 (SE).
38 Aircraft Completions Centre (Pty) Ltd v Rossouw 2004 (1) SA 123 (W).
39 BG Bojosinyane and Associates v Smith [2023] JOL 62111 (SCA) para 50.
established the absence of bona fides on the part of the first respondent. The
Department, like any other litigant, exercised its right to obtain a judicial decision.40
[61] The applicant is entitled to its costs in respect of both the main and
counterapplication. In view of the complexity of the matter and the value of the
claim, an award of costs on scale C, inclusive of the costs of two counsel, one of
whom being senior counsel, is appropriate.
[62] The following order issues:
1 The adjudicator’s determination handed down on 12 December 2024 in
the adjudication proceedings between the applicant and the first
respondent is made an order of court.
2 The first respondent is liable to make payment to the applicant for the sum
of R 7 945 975.54 (Seven Million Nine Hundred and Forty -Five Thousand
Nine Hundred and Seventy -Five Rand and Fifty -Four Cents) made up as
follows:
2.1 R 1 483 239.96 in respect of Claim 1.
2.2 R 652 221.51 in respect of Claim 2.
2.3 R 1 200 490.86 in respect of Claim 3.
2.4 R 4 610 033.21 in respect of Claim 4.
3 The first respondent is liable to make payment to the applicant for the sum
of R 71 045.28 (Seventy-One Thousand and Forty-Five Rand and Twenty-
Eight Cents) being the first respondent’s half share in the adjudicator’s
fees.
4 The first respondent’s conditional counterapplication is dismissed.
5 The first respondent must pay the applicant’s costs of both the application
and the counterapplication, inclusive of costs of two counsel, one counsel
being senior counsel, on scale C.
40 Ibid.
R KRüGER
ACTING JUDGE OF THE HIGH COURT
Date heard: 5 February 2026
Date delivered: 30 April 2026
APPEARANCES:
For the Applicant: Adv J Babamia SC
Adv AR Whitaker
Instructed by: Bate Chubb and Dickson Inc c/o
Whitesides, Makhanda
For the First Respondent Adv A Rawjee SC
Adv G Appels
Adv L Hesselman
Instructed by: State Attorney, Gqeberha c/o Nettletons
Attorneys, Makhanda