By Courtney Altmuner and checked by Caitlin Wilde
Ekurhuleni West College (“the Appellant”), a public college and juristic person entered into a written building contract (“the Contract”) with Trencon Construction (Pty) Ltd (“the Second Respondent”), in terms of which the Second Respondent was to build a conference centre on the premises of the Appellant. At the practical completion stage of the construction, within the meaning of the Contract, multiple disputes arose between the Appellant and the Second Respondent.
In terms of the Contract, the Second Respondent referred the disputes between the parties to Mr Stanley Harold Segal, an adjudicator (“the First Respondent”). In terms of the contract, the rules referred to for adjudication are the JBCC Adjudication Rules (“the Rules”).
Despite there being no provisions for such in the Rules, the Appellant, submitted a written response to the Second Respondent’s replication (“the rejoinder”). The Second Respondent rejected the rejoinder, whereafter, the Appellant submitted a ‘letter of appeal’, which in essence contained an appeal to the First Respondent to accept the Appellant’s rejoinder. The Second Respondent then proceeded to submit separate written response to the rejoinder and their own ‘letter of appeal’.
Thereafter, the First Respondent informed the Appellant and the Second Respondent (collectively referred to as the “the Parties”) that the rejoinder and the submissions made in response thereto would not be considered for the purposes of the adjudication. The First Respondent then requested further specified information from the Second Respondent, as provided for in the Rules, and also informed the Parties that it would not be necessary for the First Respondent to conduct a hearing in order to arrive at a determination in respect of the dispute between the Parties. The Second Respondent submitted the additional information requested.
The First Respondent’s written determination (“the Determination”) encompassed extensive explanations for his conclusions, and which further included that R3 253 484,41 was payable by the Appellant to the Second Respondent (“the Obligation”).
In terms of the Rules, The Appellant provided notice of displeasure with the Determination and referred the disputes between the Parties to arbitration, in terms of the Contract. However, this did not preclude the Appellant from performing in terms of the Obligation which was determined by the First Respondent. However, the Appellant failed to perform in terms of the Obligation and issued an application to review and set aside the Determination (“the Review Application”). The grounds for review were (a) the Appellant attacked the Determination on the substantive merits of the claims that had been allowed by the First Respondent and (b) that the First Respondent failed to comply with the rules of natural justice by:
- refusing to have regard to the rejoinder;
- not providing the Appellant an opportunity to submit a response to the further information submitted by the Second Respondent at the request of the adjudicator; and
- failing to hold a hearing.
The High Court of South Africa, Gauteng Division, Pretoria (“the Court a quo”) dismissed the Review Application on three objective grounds:
- that the notice of dissatisfaction and pending arbitration, on its own, precluded the Review Application;
- that the rules of natural justice were not applicable to the matter and, even so, were not revealed to have been breached;
- that the First Respondent made appropriate conclusions in terms of the substantive merits of the claims.
The SCA held that, ground (1) referred to hereinabove, was dispositive of the Review Application on its own. The SCA was tasked, in this regard, with determining whether the Court a quo’s reasoning for same was in fact correct. The Court a quo’s rationale in this regard was that, by referring the disputes to arbitration, the Appellant chose to impose one of two mutually exclusive remedies, resulting in the waiver of the right to take the First Respondent’s Determination on judicial review. However, the SCA held that because the review was, inter alia, based on alleged procedural unfairness, whereas the arbitration would involve a rehearing of the merits of the Appellant’s claims in terms of the Contract, these remedies were not mutually exclusive.
The SCA held that in terms of a clause in the Contract, the arbitrator is able to revise the adjudicator’s determination as if it had not been issued or given. Thus, the Determination may be returned upon a further step in the agreed procedure for the settlement of disputes.
The SCA referred to the judgment of Wahlhaus and Others v Additional Magistrate, Johannesburg and Another, wherein the Court laid down a general rule that the power of review should only be exercised ‘in rare cases where grave injustice might otherwise result or where justice might not by other means be attained’. The SCA held that the Appellant did not place its case for the review of the First Respondent’s determination within the ambit of the principles set out hereinabove. The SCA held that the nature and purpose of the adjudication was designed to provide interim resolutions of disputes and that the First Respondent was given wide inquisitorial powers to resolve the disputes expeditiously and without great expense. However, the First Respondent’s Determination was not dispositive of the disputes, as same may have been overturned during the final stage of the dispute resolution process. The SCA held that the Appellant agreed to be bound by the First Respondent’s determination. Its next available remedy was to refer the matter to arbitration, which it did and could have pursued efficiently.
In relation to the ground (2) set out hereinabove, the SCA held that the First Respondent acted as a tribunal which was created by the Contract. Express contractual provisions regulated the procedure that the First Respondent had to follow. The Appellant did not challenge any of these provisions in the Contract as being contra public policy. As such, there was no room for the tacit importation of any rule of natural justice into the Contract between the Parties. The Appellant, therefore, ought to have shown that the express contractual provisions had been contravened. Taking into account the nature and purpose of the adjudication, the First Respondent carried out the adjudication strictly in terms of the provisions of the Contract. Therefore, the SCA held that there seemed to be no value in the Appellant’s reliance on procedural unfairness.
In relation to ground (3) as set out hereinabove, it is common cause that a judicial review is not related to the accuracy of the outcome in relation to the substantive merits of the decision in question, but rather with the fairness and regularity of the procedure by which the decision was reached. Consequently, the SCA held that the Court a quo erred in entering into and deciding upon the substantive merits of the claim and that the dismissal of the Review Application could not properly have been based on ground (3).
The SCA, therefore, dismissed the Appellant’s application with costs.
It is common cause that parties to a contract are bound by the conditions contained in said contract, including, inter alia, the dispute resolution clauses. The result of same is that, the parties often relinquish their rights to approach the courts until such time as the dispute resolution mechanisms, such as arbitration or adjudication, provided for in Contract have been exhausted. Moreover, the power of review should only be exercised ‘in rare cases where grave injustice might otherwise result or where justice might not by other means be attained’.
The SCA was tasked with an appeal wherein it had to decide whether the Court a quo’s decision to dismiss a Review Application, was correct, in circumstances where the Appellant had other dispute resolution mechanisms available to it in terms of a Contract and was obliged to exhaust those remedies before approaching a Court.
Review, procedural unfairness, arbitration, adjudication, dispute resolution, merits, contract.