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Mec, Department of Transport, KZN v Raubex KZN (Pty) Ltd and another [2021] JOL 50473 (KZP)

28 July 2021

Recently, the Pietermaritzburg High Court was approached to render a decision regarding the enforcement of clause of the General Conditions of Contract for Construction Works, third edition (2015) (“GCC2015”) in the circumstances specific to its case.

Clause of the GCC2015 provides that where a party disagrees with the outcome an adjudication, it may notify the other party and the adjudicator and the other party of such disagreement and refer the matter to court or arbitration, depending on what is selected in terms of the contract data. Such notice must be given after 28 days from the date of decision but before 56 days after the date of the decision. The applicant sought to have the enforcement of this clause and the time period contained therein declared as contra bonos mores but only in relation to its specific case, as it affects the applicant’s ability to dispute the second respondent’s decision.

In this particular case, the first respondent initiated adjudication proceedings under the contract to resolve a dispute that had arisen around the levying of a management fee in terms of a certain portion of its contract with the applicant. In this regard, when tendering for the contract, the first respondent did not include a rate at item B13.06 of the project specification for management fee in respect of subcontract work and the applicant took the view that no management fee was to be charged for this portion of the contract. The first respondent disagreed with this and contended that this view was irrational. The first respondent contended that the overall purpose of the contract was for routine road maintenance to be performed by emerging contractors and that its primary function in terms of this contract was to manage the work of the emerging contractors. Further, it contended that contract provided for a management fee to compensate the successful tenderer for the supervision of the subcontractor’s work and that while it had not included a rand value it had tendered a rate of 20% for work completed by appointed subcontractors, its tender had been accepted and therefore the applicant had accepted the first respondent’s rate.

The second respondent, in his capacity as the only member of the adjudication board contemplated by the GCC2015 found in favour of the first respondent and issued his decision. This decision was received by the applicant on 24 March 2020. Either of the parties was therefore entitled to issue notice of its disagreement with the decision between 23 April 2020 and 22 May 2020, which was the period after the 28 day “cooling off” period prescribed by clause 10.6.1 but before the 56 day cut off. The applicant did not adhere to this time period and only gave its notice on 12 August 2020. The first applicant alleged the following reasons for this:

  1. The first applicant’s attorney was murdered and the first applicant was unable to access its files as its attorney was a sole practitioner and following his death, his office was in a disarray, and therefore it was also unable to obtain legal advice concerning the decision;
  2. The first applicant was unable to appoint other attorneys until its account with its first attorney was settled;
  3. On 23 March 2020, a national lockdown was declared in response to the Covid-19 pandemic. During level 5, the applicant’s staff were unable to access their workplace or documents relevant to the matter and during level 4, employees were working on a skeleton staff basis and therefore they were inundated with a backlog of work.

The first respondent’s argument relied heavily on the fact that the applicant had agreed to the terms of the contract and were therefore aware of the time bar provisions and had agreed to those too.

The Honourable Court, in reaching its decisions considered judicial precedence in the form of inter alia Barkhuizen v Napier (1) , Sasfin v Beukes (2) and Beudica 231 CC v Trustees, Oregon Trust and others (3).

The applicant’s attorneys argued that the test set out in Barkhuizen v Napier should be applied to clause, which is a two part test as follows:

  1. Is the clause to which the objection is taken unreasonable? If not unreasonable, then
  2. Should it be enforced in view of the circumstances that prevented compliance with its provisions.

However, the applicant did not contend that the clause itself was objectionable as a whole, and as such only the second part of the test was be applied. However, the Honourable Court set out in detail why the applicant’s reasoning did not support declaring the clause as unenforceable.

The essential question that the court had to answer in this regard was whether or not the factors proffered by the applicant prohibited it from complying with the time- bar clause.

The applicant’s claim that it could not issue a notice due to a lack of representation and the national lockdown was shown to be flawed as the deponent to the applicant’s affidavit admitted that she had a “general knowledge of the law” and the Honourable Court also expressed the view that the applicant did not need to be an expert to determine that the time period was running and that a notice needed to be issued.

Further, the Covid-19 argument offered by the applicant was also not accepted by the Honourable Court and was countered by the Honourable Court supporting the view that public policy requires that parties entering into a contract freely should be bound by the terms thereof.

The applicant also, in the Honourable Court’s view did not advance any facts which could lead to the clause being declared contra bones mores. The Honourable Court therefore dismissed the applicant’s case.

The Honourable Court therefore has followed the view of many courts before it that while there may be situations where a clause in a contract cannot be enforced due to being against public policy or unfair, in order for a court to deny enforcement, the person alleging the unfairness or clause being against public policy needs to show valid reasons for this which reasons trump the view that public policy in fact requires parties to freely contract and for said contract to be upheld.

  1. 2007 (5) SA 323 (CC)
  2. 1989 (1) SA 1 (A)
  3. 2020 (5) SA 247 CC