13 November 2019 by , and Dispute Resolution Alert

“Impossibility” is no excuse! High Court enforces compliance with adjudicator’s decision

On 2 September 2019, the Johannesburg High Court handed down a judgment (Case Number 2104/18) in which it had to determine whether to enforce a decision of an adjudicator in circumstances where performance of the remedy prescribed in the decision was allegedly impossible.

Alstom S&E Africa (Pty) Ltd (Alstom) entered into a subcontract with Murray and Roberts Limited (M&R) for certain works to be done at the Kusile power station. These works included the erection of large vessels on site, referred to as absorbers. Alstom undertook to supply the steel plates to be used by M&R in the construction of the absorbers. Each steel plate supplied by Alstom was to have a marking on its surface which corresponded to a material certificate which, amongst other things, indicated the composition of the steel. The composition of the steel plates indicated the steel plates’ characteristics and whether the plates complied with the required specifications.

M&R refused to proceed with the erection of the absorbers due to certain steel plates lacking surface markings which meant that the plates could not be traced to the material certificates or were not accompanied by material certificates at all. Alstom objected to M&R’s contention and accordingly referred a dispute to a Dispute Adjudication Board (Adjudicator) for adjudication.

On 1 September 2017, the Adjudicator published his decision and decided that Alstom was obliged to provide M&R with traceability and material certificates (with authentic test records) in compliance with the EN10204 type 3.1 certification (EN Standard). Should any of the steel plates not have a material certificate or should there be no legible markings on the steel plates, Alstom would be obliged to have the materials subjected to appropriate testing to positively identify the steel plates and provide M&R with the testing records in compliance with the EN Standard.

Alstom refused to perform in terms of the Adjudicator’s decision which resulted in M&R instituting motion proceedings against Alstom in the High Court to enforce the Adjudicator’s decision. M&R argued that according to the terms of the subcontract, the Adjudicator’s decision was binding and should be given effect to unless and until the decision was revised by amicable settlement or overturned in an arbitral award.

Alstom, in its answering affidavit, contended that the Adjudicator’s decision could not be enforced as the Adjudicator’s remedy was impossible to perform in that there was no testing method which would positively identify the particular grade of steel and only the manufacturer of the steel plates could issue a certificate in line with the EN Standard.

The court acknowledged that it has a general discretion to refuse specific performance in certain instances. The court differentiated those circumstances with the facts before it due to the Adjudicator, and not the court, having already decided on an appropriate remedy. Therefore, the court did not have to determine whether specific performance, or another remedy, should be granted but had to determine whether it should exercise its discretion to enforce the remedy provided in the Adjudicator’s decision or not.

The court considered the following factors in the exercise of its discretion whether to enforce the Adjudicator’s decision, who had decided upon the remedy, in circumstances where performance was alleged to be impossible. These factors included, but were not limited to, the following:

  1. Did the adjudicator decide the dispute now raised before the court? If not, could the party contending impossibility have raised the issue before the adjudicator?

  2. Why should the party contending impossibility escape its obligations to be bound by the outcome of the adjudication, to treat it as final and give effect to it?

  3. What are the consequences of permitting a party to escape the enforcement of the decision?

  4. What are the systemic risks if agreed procedures for dispute resolution that are intended to be quick and avoid disruption to large construction projects nevertheless give rise to lengthy litigations before the courts?

  5. Is there a risk that the impossibility relied upon will indeed, if an order is made, require what cannot be done and expose the defaulting party to risk of contempt proceedings?

The court, while considering these factors, took into account the fact that in these circumstances the parties had elected to make use of a dispute resolution mechanism for the determination of their disputes. While the court enjoys a supervisory jurisdiction over the enforcement orders it makes, it should not act as a “court of appeal” by considering the merits of the decision or the decided remedy. Such interference would obviate the expedited nature of adjudication proceedings and go against the contractual mechanism agreed between the parties. Accordingly, the court should exercise its discretion to avoid depriving a successful party from benefitting from an adjudicator’s decision, unless there are compelling reasons to do so. The role of the court in this instance would be binary: To enforce the Adjudicator’s decision or, on compelling grounds, refuse to do so.

The court considered the undisputed facts on affidavit before it and held that performance of the Adjudicator’s decision was not impossible as Alstom could conduct the necessary tests in order to identify the relevant steel plates’ characteristics and Alstom could provide sufficient testing records to show compliance with the EN Standard (as opposed to producing the relevant certificate).

The court accordingly weighed up the factors and ordered compliance with the Adjudicator’s decision, finding that there was no basis for Alstom’s defence of impossibility of performance. This case illustrates that our courts are reluctant not to enforce an adjudicator’s decision where an adjudicator has considered the merits of the dispute and determined an appropriate remedy. Our courts will only do so if compelling reasons exist that warrant the successful party in the adjudication not receiving the appropriate benefit it is entitled to.

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