This article discusses the potential pitfalls of fast track dispute resolution, with reference to the case of Kathu Solar Park (RF) Ltd v Mahon and Another [2020] JOL 47418 (GJ).

Kathu Solar Park (RF) (Pty) Ltd (Kathu) and Liciastar (Pty) Ltd (Liciastar) entered into an engineering, procurement and construction contract, in terms of which Liciastar was to construct a solar powerplant. A dispute arose between the parties regarding the imposition of delay liquidated damages by Kathu. The contract included a dispute resolution clause, which included fast-track resolution by an independent expert.

Liciastar referred the dispute to fast track, in terms of which the first respondent, Terry Mahon was appointed as the independent expert who was to determine the dispute. The matter before the court was whether Mahon had the requisite jurisdiction to make a finding in the matter, with Kathu having brought an urgent application to interdict Liciastar and Mahon from proceeding with the fast-track proceedings until a determination on Mahon’s jurisdiction was made. 

Finding

After considering the contract and the fast-track provisions, the court found that the contract was clear that disputes were to be expressly referred for determination and only such referred disputes would be determinable by the independent expert by way of fast track.

The court held that Liciastar did not refer the dispute, and as such Mahon did not have the requisite authority to determine the liability dispute.

As is evident from this case, if there is ambiguity or lack of clarity in relation to the powers of the independent expert, or the nature of the dispute to be referred, then this may result in the aggrieved party approaching the courts to have the fast track process or outcome set aside. This creates significant delays, given the current court backlogs, and additional costs, which is contrary to the original intention of the parties in having a faster dispute resolution procedure in the first place.

Another important aspect for parties to carefully consider is what types of disputes are to be referred to fast track and what party is to determine the dispute. Often an independent expert (engineer), rather than a lawyer, is appointed to determine a dispute under fast track, as the types of disputes so referred are often perceived as “technical” disputes. However, all disputes arising out of a construction contract involve, to some extent, the interpretation of the relevant clauses in the contract, evidence, procedure, an award/ruling and the issue of costs. Having a non-lawyer determine these issues can be problematic and can lead to a review application to court (with attendant delay and wasted costs).

A further potential pitfall is that, in some instances, the third party that has been appointed as an independent expert is not a party to the contract and does not even know of their appointment. This can be problematic, in particular if they refuse to take the appointment.

Sometimes what is meant to be a fast track can morph into a procedure that is akin to an arbitration and the parties would have been better off simply referring the dispute to arbitration from the outset, which is a recognised and established procedure with a proper timetable and rules of evidence, with a lawyer as the arbitrator determining the matter, all of which provides for a proper ventilation of the dispute.

Another factor to consider is the status of the award/ruling of an independent expert. In particular, whether it is susceptible to challenge in a subsequent arbitration or whether it is final and binding on the parties. This is important as, depending on the nature of the dispute, the ruling could have a significant effect on the position of the parties, e.g. a case concerning the existence of a serial defect, the outcome of which would have significant consequences for both parties.

The judgment in Kathu Solar Park reinforces the principle that dispute resolution clauses should clearly and expressly set out which disputes are to be referred to fast track, the independent expert’s authority and the status of any award/ruling made in such process. These types of clauses should be carefully drafted and applied, otherwise what seemed like a fast track can turn into a slow track.