Dispute resolution by adjudication

In Zingwazi Contractors CC v Eastern Cape Department of Human Settlements and Others [2021] 4 All SA 299 (ECG), effect of a counterapplication on a determination order in a building contract dispute which provided for a binding resolution by way of settlement, adjudication, arbitration, and mediation.  

By Merilyn Rowena Kader LLB (Unisa), Legal Editor at LexisNexis South Africa.

Building contract - Dispute resolution by adjudication: In Zingwazi Contractors CC v Eastern Cape Department of Human Settlements and Others [2021] 4 All SA 299 (ECG), a building contract was concluded between Zingwazi and the first respondent (the Department), wherein Zingwazi was to provide a community centre in the Eastern Cape. The contract provided for dispute resolution by way of settlement, adjudication, arbitration, and mediation. A determination by the adjudicator would be immediately binding on and implemented by the parties. If dissatisfied with the determination, either party could give notice of dissatisfaction to the other party and to the adjudicator within ten days of receipt of the determination and refer the dispute to arbitration. The determination would remain in force and continue to be implemented until overturned by an arbitration award. The Rules of Adjudication of the eighth respondent provided in r 6.1.4, that the adjudicator’s written determination would be binding on the parties until overturned or varied through arbitration.

When a dispute arose between the parties, the tenth respondent as adjudicator, decided in favour of Zingwazi, for payment by the Department of the sum of R 12 657 815,80. The Department was dissatisfied with the determination and elected to refer the matter to arbitration and did not pay in terms of the determination. Zingwazi instituted motion proceedings against the first to seventh respondents for an order directing them to prosecute the arbitration proceedings to finality and to pay in terms of the adjudicator’s determination. An order was subsequently made by agreement in terms of which Zingwazi’s relief was granted but was suspended pending the determination and finalisation of a counterapplication by the second respondent (the MEC). If the counterapplication was dismissed, the suspension was to terminate within two days of such dismissal.

In the counterapplication, the MEC sought declarations of invalidity against two clauses in the contract and r 6.1.4. Relying on the right to a fair public hearing in terms of s 34 of the Constitution, it was argued that the impugned provisions conflicted with the rule that a judgment is usually suspended pending an appeal or review; and that the adjudication process did not adhere to the principles of natural justice.

The immediate enforceability of the adjudicator’s decision did not prevent an aggrieved party from proceeding to arbitration where a fair hearing would be afforded. Confirming the efficacy of adjudication as a dispute resolution process, the court stated that the voluntary nature thereof ensured against a contractual term being unfairly weighted in favour of only one of the parties. None of the grounds raised by the MEC in support of the contention that the Adjudication Rules conflicted with s 34 of the Constitution were found to be sustainable.

Finally, the court addressed the MEC’s contention that the Construction Industry Development Board and the Minister of Public Works should have been joined in the counterapplication. Highlighting the nature of the dispute, the court found neither of those parties to have a direct interest in the matter. The counterapplication was thus dismissed.

Merilyn Rowena Kader
Legal Editor at LexisNexis