The Construction Industry Development Board prescribes the use of four standard form contracts in South Africa for state contracts. Each of these contracts contain an adjudication provision which must be followed as a contractual obligation.
The adjudication process exists as a speedy mechanism for settling disputes in construction contracts on a provisional interim basis.
Any dispute between an employer and contractor will generally have to first be referred to an adjudicator. The adjudicator bases his decision on documentation and on his own knowledge and expertise.[1] Occasionally a hearing of oral evidence will take place.
In the recent case of Ekurhuleni West College [2] the court pointed out that the very nature of the adjudication process is sui generis in the sense that the adjudication process is not governed by any statutory provision or the common law. As a result of the adjudication procedure being unregulated by statute, many cases have come before the courts regarding whether the determination of an adjudicator is binding and enforceable as an interim obligation pending the finalisation of an arbitration award.
“The courts are of the opinion that as long as the adjudicator acted generally in accordance to the usual rules of natural justice and without bias and within his terms of reference, the adjudicator’s decision should be enforceable.” [3] The Ekurhuleni West College has been referred to the Supreme Court of Appeals (SCA) where Nupen Staude de Vries is representing Trencon Construction (Pty) Ltd.
The judgment in the Ekurhuleni West College matter is supported in the case of Stefanutti Stocks (Pty) v S Property [4], clause 40 of the building agreement provided that “an adjudicators decision shall be binding on the parties who shall give effect to it without delay unless and until revised by an arbitrator…should a notice of dissatisfaction not be given the adjudicator’s decision will be final and binding.” In this case, the Respondent (S8 Property (Pty) Ltd) refused to pay the amounts owing ordered by the adjudicator on the basis that a notice of dissatisfaction was filed and the matter was not finalised because it was referred to arbitration. The court held that the adjudication decision is binding but of an interim nature (the obligation to perform in terms of the decision is final). In instances where no notice of dissatisfaction is given the decision accordingly becomes final and binding, in finality.
Similarly, in the case of Tubular Holdings (Pty) v DBT Technologies (Pty) Ltd [5], the court held that a dissatisfied party must still comply promptly with the adjudicator’s determination, notwithstanding the party’s delivery of a notice of dissatisfaction. The notice preserves the party’s right to require arbitration but does not effect the binding nature of the adjudicator’s determination.
With regard to the performance of obligations under the adjudicator’s decision the court in Esor Africa (Pty) Ltd / Franki Africa (Pty) Ltd JV v Bombela Civils JV (Pty) Ltd [6]held that “[t]he DAB decision is not final but the obligation to make payment or otherwise perform under it is. In the most elementary way, the DAB process ensures the interim solution of an issue which requires performance and requires that the decision is implemented. The parties’ position may be altered by the outcome of the eventual arbitration which is a lengthier process and there may be a refund ordered of monies paid or an interest readjustment if too little was decided by the DAB”
In the case of Bombardier Africa Alliance Consortium v Passenger Rail Agency of South Africa [7] the court made specific reference to the benchmark case of Tubular Holdings and Esor Africa in their reasoning. The court in Bombardier re-emphasised that “if the decision in the adjudication cannot be enforced pending the final determination of the matter in arbitration, the purpose of the adjudication becomes undermined.”
In relation to the jurisdiction of the adjudicator, the court in the Ekurhuleni made reference to the jurisdiction of an adjudicator and held in paragraph 35 bearing reference to the C & B Scene Concept Design [8] case that “it therefore appears that the enforcement of an adjudicator’s decision cannot be prevented whether it was caused by errors of procedure, fact, or law, unless the adjudicator has purported to decide matters which were not referred to him.”
Although there is an ongoing legal debate on this point, the courts have to date enforced the determination of an adjudicator’s decision as binding, notwithstanding the finalisation of the dispute being referred to arbitration.
There are however certain situations where a party can resist enforcement. This will be explored in a further article.
Any party looking to enforce an adjudicator’s award or resist enforcement should contact Cameron Staude or Sanjeevani Maharaj at Nupen Staude de Vries for assistance.
Authors: Sanjeevani Maharaj (Associate) & Cameron Staude (Director)
[1] McKenzie’s Law of Building and Engineering Contracts and Arbitration (Seventh Edition) at page 246.
[2] Ekurhuleni West College v Segal and Another (26624/2017) [2018] ZAGGPPHC 662.
[3] Ibid at paragraph 44.
[4] 2013 JDR 2441 (GSI).
[5] 2014(1) SA 224 (GSJ).
[6] (12/7442) [2013] ZAGPJHC 407 at paragraph 11.
[7] (65099/2017) [2018] ZAGPPHC 413 at paragraph 27.
[8] (2002) EWCA Civ 46; 2002 BLR 93 TCC.