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Group five construction (Pty) and Transnet SOC limited

23 September 2019

Case no: 45879/2018

Unreported – Handed down in the High Court of South Africa, Gauteng Local Division, Johannesburg on 25 June 2019

Short summary

The Applicant (Group Five) and the Respondent (Transnet SOC Limited) entered into agreement based on the NEC Engineering and Construction Contract (third edition, June 2005) for the provision of works. A dispute had arisen in terms of the Respondents’ issuance of a final payment certificate. The Applicant notified the Respondent of the dispute and sought to enforce the provisions of the dispute resolution clauses in resolving the matter.

During the dispute resolution process, the appointed Adjudicator requested an extension of time (based on his request for further information) for the handing down of his decision. The Respondent had refused as the Adjudicator has all the requested information in his possession already; and did not partake further in the dispute resolution process. After its refusal to agree to an extension of time, the Respondent referred the matter to Arbitration, while the Applicant agreed to the Adjudicator’s request for an extension of time. The Adjudicator proceeded, even though there was an absence of consensus, and handed down his decision in favour of the Applicant. The Applicant thereafter sought to enforce the Adjudicator’s decision and pursued an order of court directing the Respondent to comply with the decision of the Adjudicator who had determined that the Respondent make payment to the applicant in the sum of R74 940 872.82, as well as interest on said amount from date of the Adjudicator’s decision to date of payment.

Issue

The court had to determine if the decision of the Adjudicator was valid, binding and enforceable against the Respondent.

Determination

The Court considered the provisions of the agreement concluded between the parties and noted that these clauses should be interpreted in a subjective manner, taking into account the purpose of the agreement itself as well as the intention of the parties.

The Court then moved to the crucial issue for determination, that is, if the Adjudicator’s decision is binding on the Respondent. Here the Court considered the timeline of events leading to the Adjudicator’s decision. The Parties had made submissions to the Adjudicator, who then requested further documents (which were already submitted to him). The Adjudicator had four weeks (from the date of the end of the period for receiving information) to make a decision and provide reasons for same. The Respondent had argued that since the Adjudicator had requested documentation which was already in his possession (thus negating his initial request), this meant that the four-week period had already commenced, as all documentation was submitted.

The agreement between the parties provided that the issue may be referred to Arbitration- if the Adjudicator fails to make his decision within the prescribed period. The Respondent, once it had rejected the Adjudicator’s request for an extension of time for him to make an award, advised the parties of its intention to refer the matter to Arbitration; and thereafter served a notice in this regard. The agreement between the parties had catered for this, as long as the matter was referred to Arbitration within four weeks of the date by which the Adjudicator should have made his award.

The Applicant argued that the Court could not preside over matters which fell within the domain of an Adjudicator or Arbitrator. In response, the Court pointed out that is cautious in making a determination on a matter where the issue/s fall into the domain of the Arbitrator or Adjudicator as the purpose of dispute resolution clauses is to ensure that the parties follow the mechanism agreed to at inception; to ensure expeditious resolution of issues. In this instance, the Parties were entitled to rely on the dispute resolution mechanism in their agreement and refer the matter to the Adjudicator. However, this was not the issue for determination as the Court had to consider the validity of the award made by the Adjudicator and not the question of payment of the amount claimed by the Applicant.

The Court then reviewed the events leading up to the award made by the Adjudicator. The Respondent submitted that the Adjudicator had failed to publish his award within the four-week period provided for in the agreement, but that the agreement entered into between the parties did not provide that an award that was not made within the agreed timeframes was invalid. The agreement did not however, provide for the circumstance where the Parties did not reach consensus on the issue of the extension required by the Adjudicator. The Court interpreted this to mean that in the absence of consensus regarding an extension of time, the Adjudicator should have published his award on due date (being four weeks after submissions by both parties); failing which, his mandate would be terminated automatically.

The crux of the Respondent’s argument was not regarding the time period involved for the Adjudicator to make his decision, but rather the argument that once the notice to refer the matter to Arbitration was served on the parties, the mandate of the Adjudicator was extinguished immediately. In addressing this issue, the Court found that the Adjudicator had acted without a mandate as this was terminated by the Respondent providing a notice to refer the matter to Arbitration. Thus his decision was not binding as he was not entitled to make an award in the first place.

Costs and the order

The Court held that the Adjudicator’s mandate was terminated on the date that the Respondent had delivered a notice to refer the matter to Arbitration; and that the Adjudicator was thus not competent to proceed with the Adjudication nor make an order in favour of the Applicant. The application was dismissed with costs.