Murray & Roberts Limited (M&R) contracted with Sasol South Africa (Pty) Ltd (Sasol) to provide structural, mechanical, electrical instrumentation and piping work at its Secunda plant in terms of the NEC3 Engineering and Construction Contract June 2005 (as amended) (the Contract). The Contract further provided for (i) the appointment of a Project Manager (the PM) to perform certain duties and functions and (ii) contained a dispute resolution procedure, comprising of the following three steps:
- The notification of a dispute; 1
- The referral of the dispute to adjudication; 2 and
- The referral of the dispute to the tribunal (arbitration in this case) if that a party is dissatisfied with the adjudicator’s decision or if the adjudicator does not notify his decision within the agreed time. 3
Finally, the Contract records that the adjudicator’s decision is final and binding on the parties unless and until revised by arbitration and is enforceable as a matter of contractual obligation between the parties.4
Various disputes arose between the parties during the execution of the Contract relating to the correctness of assessments made by the PM in respect of M&R’s payment claims. Ten of these disputes were based on an instruction by the PM, titled “PMC200”.
In the first adjudication, M&R argued that its payment claim was based on timesheets, which were signed off by Sasol, and in terms of which Sasol was contractually bound to make payment. Sasol, on the other hand, argued that the timesheets served only as a record and that the PM was entitled to deduct certain costs arising from a failure by M&R to remove resources from site.
The adjudicator rejected M&R’s claims and confirmed the PM’s assessments, ultimately finding in Sasol’s favour.
Dissatisfied with the outcome of the first adjudication, M&R referred two of the ten disputes to arbitration (disputes 1 & 2). Importantly and prior to the delivery of the
arbitral award – disputes 3, 5, 6 and 8 to 12 were referred to the same adjudicator appointed in the first adjudication who again found in favour of Sasol. The arbitrator found in favour of M&R on disputes 1 & 2 and held that the PM’s instruction, PMC200, was invalid. Having received the arbitral award in its favour, M&R requested that the PM adjusts his payment assessments for all ten disputes and not only in respect of disputes 1 & 2.
The PM, apparently on instruction from Sasol, however only implemented the terms of the arbitral award in respect of some of the disputes, resulting in a further dispute (dispute 16) being declared and referred by M&R to a second adjudication.
Sasol argued that (i) M&R was requesting that the adjudicator revisit and reconsider a decision on which he had already issued an award (the first adjudication), and (ii) that the adjudicator therefore did not have the necessary jurisdiction to deal with the matter. The arguments were rejected by the adjudicator, who proceeded to review the PM’s refusal to pay in terms of the arbitral award.
The adjudicator found in favour of M&R and held that “[…] I cannot see any reason why, if an arbitrator gives an award which overturns an adjudicator’s decision, other decisions of the adjudicator which were made on the same principle as the overturned decision, cannot be changed to conform with the arbitrator’s award, but can only be overturned in a further arbitration.” (own emphasis)
The adjudicator ordered that Sasol pay the disallowed payments for all ten payment assessments.
Given Sasol’s refusal to comply with the second adjudication award, M&R approached the High Court5, seeking to enforce as a contractual obligation the decision made by the adjudicator during the second adjudication.
The High Court granted the enforcement application for which Sasol appealed to the SCA.6
In argument before the SCA, Sasol submitted on the procedural aspects that the adjudicator (i) decided on the same matters twice, (ii) received information after the expiry of the period within which he was allowed to do so, and (iii) did not have jurisdiction over the matter by the time his decision was handed down.
Sasol argued that (i) the adjudicator erred in deciding that the terms of the arbitral award applied to all payment assessments, including those payment assessments which were considered in his previous decision, (ii) the arbitral award only applied to the disputes referred to arbitration and not to all ten disputes given the tiered nature of the dispute resolution process and (iii) if the arbitral award was applicable to all other payment assessments, the dispute resolution process would be rendered meaningless in that a disputed payment assessment would not have to be referred to adjudication as the terms of the arbitral award would automatically be applicable to that particular payment assessment.
Relative to the argument advanced that the adjudicator decided on the same dispute twice, Sasol asserted that the previous payment assessments became “adjudicator’s decisions” by virtue of the first adjudication and were therefore contractually binding on the parties. The PM was therefore not entitled to change the payment assessments.
The SCA held that the arbitral award determined certain principles and it was these principles that the PM was obliged to apply in terms of clauses 50 and 51.3 of the Contract when assessing any payment claim. It was reasoned that the adjudicator, during the second adjudication, merely stepped into the shoes of the PM and reviewed and revised the PM’s failure by finding that he should have applied the principles determined by the arbitral award when assessing the claim for payment by M&R. If the PM had done so, he would have assessed the payment claim in the amounts set out in the arbitrator’s decision.
In relation to the second adjudication and the question of whether the PM was incorrect in withholding payment in the face of the principles described in the arbitral award, the SCA again considered clauses 50.5 and 51.3 of the Contract, which provides that:
“50.5 The Project Manager corrects any wrongly assessed amount due in a later payment certificate”.
“51.3 If an amount due is corrected in a later certificate either
- by the Project Manager in relation to a mistake or a compensation event or
- following a decision of the Adjudicator or the tribunal,
interest on the correcting amount is paid. Interest is assessed from the date when the incorrect amount was certified until the date when the correcting amount is certified and is included in the assessment which includes the correcting amount.”
The SCA held that (i) the Contract obliged the PM to consider and give due regard to the contractual entitlements determined by the arbitrator, (ii) clause W1.3(5) of the Contract empowered the adjudicator to “review and revise any action or inaction of the PM” – thus when acting under this clause, the adjudicator was not said to be reconsidering a decision but simply performing a contractual function that the PM failed to perform and (iii) Sasol’s failure to comply with the procedural requirements in challenging the adjudicator’s decision resulted in the decision remaining binding and enforceable as a matter of a contractual obligation between the parties.
Sasol’s appeal was dismissed.
An important legal principle arising from this case is a cautionary tale to all parties who agree on adjudication or arbitration proceedings – to respect and appreciate the binding nature of the decisions that stem from these proceedings. A party to a contract which contract provides for dispute resolution by means of adjudication or arbitration cannot unilaterally refuse to perform in terms of an adjudicators or arbitrator’s decision simply because that party thinks the decision is invalid
- the contractual process in challenging the adjudicator’s decision must be
Arising from this important judgment, is the application thereof to other standard form construction agreements which have similar prescribed dispute resolution procedures.
The General Conditions of Contract for Construction Works, Third Edition (2015) (the GCC)
Clauses 6.10.7, 10.2, 10.5 and 10.6 of the GCC makes provision for the following dispute resolution process:
- Any dispute arising out of the contract between the parties, which is not a dispute relating to a claim for an extension of time, shall be notified by either party by delivery of a written dissatisfaction claim to the Employer’s agent,7 to which the agent must give his adequately reasoned ruling on the dissatisfaction claim;8
- Either of the contracting parties may thereafter deliver a dispute notice, provided that such dispute arises from a rejected claim,9 which dispute shall immediately be referred to adjudication (unless amicable settlement is contemplated);10
- If referred to adjudication, the contracting parties are specifically required to “[…] implement the Adjudication Board’s decision without delay whether or not the dispute is to be referred to arbitration or court proceedings.”11
- The GCC’s provides that “The decision shall be binding on both parties unless and until it is revised by an arbitration award or court judgement…”;12
- Should any party be dissatisfied with the Adjudication Board’s decision, and if any party fails to comply with the decision, the other party may refer the failure to arbitration or court proceedings;13
- The GCC also makes specific provision for an Employer’s Agent to “[…]make any correction or modification of any previous payment certificate, which has been issued by him.”14
What we see from the above is that the GCC, like the NEC3 contract, provides for a tiered dispute resolution procedure.
In the scenario that the GCC governed the contractual relationship agreement between Sasol and M&R:
- and an arbitral award had determined that the Employers Agent (read PM) was required to apply certain principles;
- which principles Sasol and the PM failed to apply;
- which failure resulted in a dispute being declared by M&R; and
- an adjudicator determined that the PM was required to apply the principles determined by the arbitral award; then
- the contracting parties and the PM would have been required to implement the adjudicator’s decision without delay, even if the dispute was referred to arbitration or
Furthermore, the GCC authorises the Employer’s Agent to make any correction or modification of any previous payment certificate, which has been issued by him.15
Applying this provision, Sasol’s argument as regards the PM or adjudicator’s jurisdiction, or lack thereof, to reconsider previous payment claims would fly in the face of clause 6.10.7 of the GCC and the authority which this clause provides to the Employer’s Agent.
Armed with an adjudicator’s decision in terms of the GCC on the facts of this matter, M&R would have been awarded the same relief as granted by the High Court and the SCA.
The JBCC Principal Building Agreement (Edition 6.2, May 2018) (the JBCC PBA)
Clauses 30.1, 30.2, 30.3, 30.6.3 of the JBCC PBA
make provision for the following dispute resolution process:
- any party to the agreement may give a notice of disagreement to the other party resulting from any action or inaction by either party or the principal agent, or any other matter concerning the agreement including the validity thereof;16
- any disagreement not resolved within 10 working days will be deemed a dispute,17 and shall be referred to adjudication;18
- if an adjudicator has made a determination in relation to the dispute, it “[…] shall be immediately binding upon and implemented by the parties notwithstanding that either party may give notice to refer the dispute to arbitration.”19
The JBCC PBA goes even one step further – clauses 30.7.6 and 30.7.7 provides that parties are contractually obliged to abide by an arbitrator’s award in that:
- an arbitrator has the authority to finally determine the dispute and also has the “[…] authority to make, open up and revise any certificates, opinion, decision, determination, requisition or notice relating to the dispute.” even in the event “[…] if no such certificate, opinion, decision, determination, requisition or notice had been issued or given”20
- “The arbitrator’s award shall be final and binding on the parties”21
Similarly to NEC3 and the GCC, the JBCC PBA also provides for a tiered dispute resolution process.
In the scenario that the JBCC PBA governed the contractual relationship agreement between Sasol and M&R:
- and an arbitral award had determined that the Principal Agent (read PM) was required to apply certain principles;
- which principles Sasol and the PM failed to apply;
- which failure resulted in a dispute being declared by M&R; and
- an adjudicator determined that the PM was required to apply the principles determined by the arbitral award; then
- the contracting parties and the PM would have been required to implement the adjudicator’s decision without delay, even if the dispute was referred to
Sasol’s refusal to implement the decision because of an alleged “invalidity” would similarly not have been accepted by the courts given the binding nature and obligations to implement an adjudicator’s decision.
Thus, armed with an adjudicator’s award in terms of the JBCC PBA, M&R would have been awarded the same relief as granted by the High Court and the SCA.
1 Clause W1.3(1).
2 Clause W1.3(1).
3 Clause W1.4(2) of the Contract.
4 Clause W1.3(10) of the Contract.
5 Murray & Roberts Limited v SASOL South Africa (Pty) Ltd
(2019/20801) [2020] ZAGPJHC 268 (16 April 2020).
6 Sasol South Africa (Pty) Ltd v Murray & Roberts Limited
(Case no 425/2020) [2021] ZASCA 94 (28 June 2021).
7 Clause 10.2.1 of the GCC.
8 Clause 10.2.3 of the GCC.
9 Clause 10.3.1 of the GCC.
10 Clause 10.3.2 of the GCC.
11 Clause 10.5.4 of the GCC.
12 Clause 10.6.1.1 of the GCC.
13 Clause 10.6.2 of the GCC.
14 Clause 6.10.7 of the GCC.
15 Ibid.
16 Clause 30.1 of the JBCC PBA.
17 Clause 30.2 of the JBCC PBA.
18 Clause 30.3 of the JBCC PBA.
19 Clause 30.6.3 of the JBCC PBA.
20 Clause 30.7.6 of the JBCC PBA.
21 Clause 30.7.7 of the JBCC PBA.
