By Roelf Nel (Director), Daniellé Giannico (Associate) and Pelonomi Letsholo (Candidate Attorney)
An issue that frequently rears its head when dealing with construction disputes is the issue of the various time bars in the NEC Suite of Contracts. The first hurdle you need to overcome in any dispute is ensuring that you refer your dispute to adjudication within the, often quite strict, time periods contained in the relevant contract.
Our firm has recently been involved in two separate adjudications, before two different adjudicators who made entirely different determinations of this issue. This article will therefore take a look at what arguments were advanced by both parties as well as the authorities relied on in both adjudications.
Appointment of the Adjudicator
Central to why this issue continues to repeatedly raise its head is the simple fact that the drafters of the NEC Suite of Contracts very clearly intended for the parties to appoint a standing adjudicator, rather than an ad-hoc adjudicator. The NEC Suite of Contractors envisions that parties will at the start of the contract already have appointed an adjudicator, or even a panel of adjudicators to act, when necessary, until the contract is complete. However, Parties often amend the agreement to provide for an adjudicator to be appointed when a dispute arises, rather than at the outset.
Case Study 1:
In the first adjudication, the Respondent raised a challenge on the basis that the referral to adjudication was out of time and the Claimant was therefore time barred from referring the dispute in question to adjudication. The basis for this submission being that the referral of disputes in the NEC 3 ECC is regulated by clause W1.3, being the adjudication table. The adjudication table, simply stated, provides that a dispute must be referred to the adjudicator between two and four weeks after notification of the dispute to the other party. The NEC 3 ECC further provides in clause W1.2 that “[…]Where a disputed matter is not notified and referred to within the times set out in the contract, neither party may subsequently refer it to the Adjudicator or to the tribunal.”
The argument advanced by the Respondent in favour of this interpretation is broadly that the court in Barkhuizen v Napier 2007 (5) SA 323 (CC), affirmed that time-barring provisions retain the sanctity of contract and should be applied consistently, in order to avoid the mockery of such contractual clauses. It went on to argue that the referring party bears an obligation to make certain that steps are taken to have the adjudicator appointed prior to the expiration of the applicable time periods. Where the referring party is of the opinion that there is a risk to its referral of information date, then it is required to deliver the information to the adjudicator nominating body and the Respondent.
The Claimant argued that Barkhuizen v Napier does not find relevance as the Claimant at no point suggested that the time-bar provision is either unenforceable or unconstitutional. The issue at hand is not whether or not the time-bar is enforceable or applicable, but rather when the time period contained in clause W1.3 starts to run. The Claimant submitted that the correct interpretation of when the time period begins to run only once the Adjudicator is appointed by either the parties by agreement or by the adjudication nominating body.
The contract in question was amended to provide that the Adjudicator is “appointed when a dispute arises.”. The contract refers to the Adjudicator as an identified entity, however, in this case, the Adjudicator was not identified in the agreement. What is therefore contractually required is that the submission of the referral must be made to this identified entity and not some entity yet to be identified.
The Adjudicator found that consistent with the NEC spirit of “good management of the relationship between the two parties to the contract” and co-operation, W1.2(3) places the obligation on both parties to choose an Adjudicator and either party may ask the Adjudicator Nominating Body to apppoint one. The contract, therefore, does not place any unique obligation on the Claimant in this regard and emphasised that the contract has been drafted on the premise that an Adjudicator has already been appointed and is available to accept a referral.
The nominating body is not a party to the contract and is therefore not bound by the contract. It follows that neither party should be prejudiced by the time it takes for the nominating body to choose the Adjudicator. Due to all these factors, the Adjudicator found that Claimant did company with the requirements of the Adjudication Table, the Claimant had filed its referral on time and that he did have jurisdiction to adjudicate the matter.
Case Study 2:
In the second adjudication, the Respondent (the Employer) raised the defence that the Claimant (the Consultant) had ample time between when the dispute was first notified on 17 May 2022 and when it had to be referred on 17 June 2022 to comply with the required time period. The basis of its challenge was that the Adjudication Table provides in circumstances where the Employer failed to take action, such a dispute must be referred to the Adjudicator between two and four weeks after the Claimant’s notification of the dispute, with a second requirement being that the notification of the dispute must be made within four weeks of when the Claimant became aware of the failure to take action.
The Respondent relied on the argument that our law recognises that parties can enter into an agreement which requires that a party is barred from instituting a claim if it has not complied with the time limits set out in the contract, this being confirmed in the seminal case of Barkhuizen v Napier 2007 )5) SA 323 (CC), where the Constitutional Court found that a time bar clause does not deny a party the right to seek judicial redress; it merely requires the party to seek judicial redress within a prescribed period.
The argument raised by the Claimant in response to that of the Respondent was that the adjudicator was not appointed at the conclusion of the contract as required and it further held the view that a dispute cannot be referred to an unidentified and unappointed adjudicator. A similar approach was taken as in the first case study, that in order for the contract to be applied in a business-like manner a dispute cannot be referred to the Adjudicator until such a time as one has been appointed, and therefore the time period for referral only begins to run once the Adjudicator has been appointed.
In this case the adjudicator made a finding in favour of the Respondent. He stated that the interpretation of the contractual provisions, having regard to the voluntarily concluded arrangements between the parties to a contract, is something which must be done with care so that the Adjudicator’s own individual concepts of fairness and justice is not imposed on the individual arrangements agreed upon by the parties and that the adjudicator does not make a contract which is different to the one that was in fact made.
He held firmly that the obligation falls on the referring party to ensure that it complies with the time periods in the contract irrespective of whether an adjudicator has been appointed at the start of the contract or not. The legal principles applicable require that the interpretation of the contract is limited to the words used and to guard against and resist substituting what may be reasonable, sensible or business-like.
In summary:
In order to ensure the smooth sailing of the adjudication process the parties ought to care consider and ensure compliance with the prescribed time periods set out in various clauses of the Adjudication Table. Only in exceptional circumstances can the time periods, by mutual agreement by the parties be adjusted in order to ensure correct compliance and a favourable process and more importantly an appointment of an adjudicator for the parties involved.
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