Ekurhuleni West College v Segal and Trencon Construction (Pty) Limited

In Ekurhuleni West College v Segal and Trencon Construction (Pty) Limited, the Court was asked to review and set aside the first respondent’s decision acting as an adjudicator, in terms of a construction contract.

The Court first had to decide whether an adjudicator’s decision is reviewable in terms of the contract.

Generally, adjudication is an accelerated form of dispute resolution in which a neutral third party determines the dispute as an expert and not as an arbitrator, and whose determination is binding unless and until varied or overturned by an arbitration award.

Adjudication is not arbitration and therefore the provisions of the Arbitration Act do not apply. Adjudication is also not administrative action and therefore PAJA does not apply.

In Esor Africa (Pty) Ltd / Franki Africa (Pty) Ltd JV v Bombela Civils JV (Pty) Ltd

(12/7442) [2013] ZAGPJHC 407 (12 February 2013) at para 11 Spilg J held:

‘. . . [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 Sasol Chemical Industries Ltd v Odell and Another (401/2014) [2014] ZAFSHC 11 (20 February 2014) Kruger J held that adjudication is not subject to the common law.

The Court agreed with Kruger J that adjudication is not subject to the common law. This is because adjudication is simply a contractual alternative dispute resolution process. Accordingly, the rules of natural justice are not applicable.

The Court held that an adjudicator acts according to the terms of his reference, and that in the present matter the terms of reference are contractual in nature.

The court held further “When the main contract was concluded the parties foresaw the possibility that an adjudicator may come to an incorrect conclusion and for that very reason agreed that in such an event the parties shall proceed to arbitrate. The contract does not contain any provision that the adjudicator’s decision may be taken on review. The absence of such a provision clearly indicates that the parties expressed in the clearest of terms that they will comply with the adjudicator’s decision made in terms of his mandate and make immediate payment in terms of the agreement.”

The Court further held that:-

[40] In my view an adjudicator’s decision, made in terms of his mandate, does not constitute a decision that is reviewable for the following reasons:

[40.1] it does not constitute an official act but only a preliminary or intermediate step agreed by two independent contracting parties;

[40.2] the interim nature of the decision does not amount to “have an adverse  and direct effect on any of the contractual parties’ rights” as the two contracting parties explicitly declared to be bound and to give effect thereto, until finalisation of the arbitration proceedings; see Bhugwan v JSE Ltd 2010 (3) SA 335 (GSJ) para 10.

[40.3] the constitutionality principle of legality has also not been breached if effect is given to an agreement voluntarily entered into by the contracting parties, who explicitly agreed to be bound and to give effect to the adjudicator’s determination.

This does not mean that an adjudicator’s decision cannot be challenged. An adjudicator’s decision may be challenged if there is provision in the adjudication agreement for a means to challenge the decision. Usually, this is by means of notice of dissatisfaction and thereafter arbitration. It is the specific terms and conditions of the adjudication agreement which must be scrutinised in order to determine the intention of the parties.

The approach in the South African courts is that adjudication is a robust process whose purpose is to resolve disputes speedily and efficiently during the course of the construction contract and to ensure that cash flow is maintained if the contract is to be concluded without unnecessary delays. Generally and irrespective of whether a defendant is unhappy with an adjudicator’s decision, it must be complied with, even though notice of dissatisfaction may been given.

NB: Please note that this article is for informational purposes only and not for the purpose of providing legal advice. Should you require more information on this topic or any issue arising out of this please contact Allardyce & Partners on 011-234 2125 or enquiries@www.allardyce.co.za.

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