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Transnet SOC Limited v Group Five Construction (Pty) Ltd and others [2015] Case no 7848 (9th February 2016)

29 March 2016

Transnet SOC Limited (the applicant) entered into an NEC3 Building and Construction Contract with Group Five Construction (Pty) Ltd and Trotech Engineering Africa (Pty) Ltd (in joint venture, being the first and second respondents) for the design, supply, erection and testing of accumulators at a specific terminal of a pipeline that form part of the so-called New Multi Products Pipeline Project (“the Contract”).

During the execution of the Contract, a dispute arose between the parties concerning the interpretation of the Contract insofar as the appointment of an adjudicator is concerned. An adjudicator had been appointed on a previous dispute under the Contract and the applicant was of the view that such appointed adjudicator remained the appointed adjudicator for the duration of the Contract. On this point, the first and second respondents differed from the applicant’s view. The applicant launched an application in the High Court of South Africa (KZN Local Division) in respect of the dispute, seeking a declaratory order from the Court that the adjudicator appointed under the Contract had been appointed for all disputes arising under or in connection with the Contract.

The main issues addressed by the Court were:

  • Whether or not it was permissible for the applicant to approach the Court for the declaratory order sought when the Contract provided for an arbitration process in respect of all disputes between the parties;
  • On a proper interpretation of the Contract, did the parties contemplate the appointment of multiple adjudicators or ad hoc adjudicators for each dispute that may arise during the execution of the Contract; and
  • Was the applicant estopped from contending that the Contract provided for the appointment of only one adjudicator because of its post-contractual conduct in actively participating in the appointment of different adjudicators.

The honourable Justice Jeffrey AJ commenced his judgement by setting out the relevant clauses of the Contract. The Parties selected Option W1, a Form relating to dispute resolution procedures, including the appointment of an adjudicator and an arbitration process in the event of a party being dissatisfied with the decision of the adjudicator.

With regards to the first issue to be determined, the point raised in limine by the first and second respondents – namely that the Court should decline to determine and should refuse the application because the applicant had not complied with the agreed arbitration process / dispute resolution process – Jeffrey AJ found in favour of the first and second respondents.

He referred to the matter of Zhongji Development Construction Engineering Co Ltd v Kamoto Copper Co[1] and, in summary, he found:

  • Where the parties have expressly agreed to an arbitration process our Courts are generally not entitled to determine the issues that fall within the province of an arbitrator in terms of that process unless an order has been granted in terms of s 3(2)(b) of the Arbitration Act No. 42 of 1965;
  • Although the principle referred to in Zhongji Development Construction Engineering Co Ltd v Kamoto Copper Co[2] is confined to an arbitration process, in his view, this applied equally to the dispute resolution process that encompasses an arbitration in its second tier;
  • The courts have consistently respected the provisions of arbitration agreement and will give effect thereto;
  • He was not entitled to depart from this principle; and
  • The applicant’s application must fail.

Jeffrey AJ went on to provide a ruling on the further issues presented by the parties, in the event that it was found that his ruling on the point in limine was wrong.

He found that on a proper interpretation of the Contract, the Contract contemplates and the parties intended that several ad hoc adjudicators may be appointed to resolve disputes that may arise. Jeffrey AJ referred to numerous decisions of the Supreme Court of Appeal[3] with regards to the modern approach to the interpretation of written documents. A summary of the points referred to in these numerous decisions are:

  • Interpretation is the process of attributing meaning to the words used in a document 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;
  • The apparent purpose of the provision and the context in which it occurs will be important guides to the correct interpretation. An interpretation will not be given that leads to impractical, un-businesslike or oppressive consequences or that will stultify the broader operation of the legislation or contract under consideration.

Applying these principles, Jeffrey AJ referred to Clause 11.W1.1 which provides that:

“The Adjudicator is – To be appointed under the NEC3 Adjudicator’s Contract (June 2005) if and when a dispute arises” 

He also referred to Clause W1.1 and W1.2(1) of Option W1 that respectively provide:

“A dispute arising under or in connection with this contract is referred to and decided by the Adjudicator”

and

 “The Parties appoint the Adjudicator under the NEC Adjudicator’s Contract current at the starting date”.

Jeffrey AJ held that although these clauses refer to the adjudicator in the singular, that the provisions of Core Clause 12.1[4] applied and that words in the singular expressly contemplate the plural as well. He also held that the words “If and when a dispute arises” may be ambiguous, but that in the context of the Contract as a whole, and given the fact that multiple disputes could arise during the execution of the Contract which may require various degrees of expertise in relation to varying disciplines, that the applicant’s interpretation of the Contract was wrong.

In reaching this decision, he further held that:

 “The intention would be sensible, practical, expeditious and businesslike and would not stultify the broader operation of the contract because it is axiomatic that the purpose of appointing an adjudicator to determine a dispute with the tight time-lines set out in the contract is to ensure as far as possible that the dispute is resolved as expeditiously as possible so that the project is not stultified by delays caused by the existence of the dispute. It is likely that the expeditious progress of a large project like this one would be jeopardised if ad hoc adjudicators were not appointed.”

Jeffrey AJ did not consider the third point raised by the first and second respondents with regards to estoppel and was left open.

The applicant’s application was dismissed with costs.

[1] SARL 2015 (1) SA 345 (SCA)

[2] Supra

[3] Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) at paragraph 18; Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk 2014 (2) SA 494 at paragraph 11; Dexgroup (Pty) Ltd v Trustco Group International (Pty) Ltd and Others 2013 (6) SA 520 (SCA) at paragraph 16; Commissioner, South African Revenue Service v Bosch and Another 2015 (2) SA 174 (SCA) at paragraph 9

[4]  “In this contract, except where the context shows otherwise, words in the singular also mean in the plural and the other way round and words in the masculine also mean in the feminine and neuter”